INVESTMENT POLICY & OPPORTUNITIES IN LAOS: Land of Ample Opportunities Successes Dr. Phonesay Vilaysack Investment Promotion Department Ministry of Planning and Investment
Contents Laos in Brief Why Laos? Investment Opportunities Investment Promotion Policies Investment Approval
Laos in Brief Laos Population 6,5 million (2012) Text Laos s GDP GDP Growth rate 7,9% $ 1,396 per capita GDP Land Area 236,800 sq.km Laos GDP by Sector Laos Labor Force Industrial Production growth rate 11 % (2013) Agriculture: 26,0% Industry: 31,2% Services: 37,1% 3.373 million (2013)
LAO PDR Country Snapshot
Country Snapshot The Lao government vision is to establish Laos from the Land-Locked Country to the Land- Linked Nation. At the Moment, there are several routes to connect ASEAN to China such as Road No. 3 (R3) connecting Thailand- Laos-China (called North-South Corridor), in the central there is East-West Corridor, which is Road No. 9 connecting Thailand-Laos- Vietnam. In addition, the government of Laos also established the potential of economic zones such as Savan-Seno Economic Special Zone (Savannakhet Province). Market Access Access to ASEAN market (500 million inhabitants) and neighboring China Land-link initiative: East-West Economic Corridor with Special Economic Zone in Savannakhet acting as a trade and service center. Easy regional access with regular direct flights to the major hubs of Bangkok, Hanoi, Kunming, Kuala Lumpur and Singapore
Comparative & Competitive Advantages - Political stability - High safety - Low risk from natural disasters - Low labor cost (Minimum wage: $85.7/month) Country of rich natural resources: Fertile land, Minerals, Water, and forest, giving development potential in agriculture, mining, and hydropower.
No.158 th WTO member in 2013 ASEAN Economic Community 2016 LAOS: Land of Ample Opportunity and Success
Unilateral Trade Agreements with 39 nations Bilateral Investment Treaties with 28 nations General Special Preferences (GSP) Privileges with 42 countries Normal Trade Relations (NTR) with USA (04/02/2005)
Policies Framework Lao PDR s macroeconomic framework is encapsulated within the five-year National Socio-economic Development Plans (NSEDP). The NSEDP lays out the broad goals and economic targets for five year timeframes. The 7 th NSEDP for 2011-15 sets forth the aim to achieve sustainable economic growth and reduce poverty (and inequality): The National Socio-Economic Development Plan (NSEDP) 2011-15: targets at least 8% annual GDP growth, 60% will be from private investments NSEDP: The quality of growth, sustainable land and resource use, environmental management, and increasing resource use efficiency Average GDP Growth: 8%, Av. Per Capita Income 1,700 US$ (in 2015)
One of the lowest labor cost in Asia (Daily minimum wage (US$)) Myanmar Cambodia Vietnam Indonesia/Jakarta Laos China/Shanghai Thailand/Bangkok Malaysia South Korea Japan 62.99 31.77 0.58 2.03 2.23 2.9 3 4.03 7.22 8.73 Source: http://www.nwpc.dole.gov.ph/p LAOS: Land of Ample Opportunity and Success
ASEAN Corporate Tax Rate (%) Singapore Cambodia Thailand Laos Vietnam Malaysia Indonesia 23 24 25 25 25 20 17 Singapore Cambodia Thailand Laos Vietnam Malaysia Indonesia Source: http://www.kpmg.com
Topic Rankings DB 2014 DB 2013 Starting a Business 85 82 Dealing with Construction Permits 96 92 Getting Electricity 140 137 Registering Property 76 74 Getting Credit 159 154 Protecting Investors 187 187 Paying Taxes 119 131 Trading Across Borders 161 160 Enforcing Contracts 104 104
Top 10 FDI Countries (1989-2014) No. Country Projects Value (USD million) 1 China 817 5,157 2 Vietnam 421 4,823 3 Thailand 743 4,308 4 R. Korea 291 751 5 France 224 490 6 Japan 99 437 7 Netherlands 16 434 8 Malaysia 100 365 9 Norway 6 358 10 Singapore 78 175
FDI by sector No. 1 Sector Local Shared Private Government Unit Foreign Share Mining Electricity Generation 291 1,254,617,034 41,019,900 5,437,511,353 43 544,696,979 1,278,644,260 4,665,555,420 Agriculture Service 981 656 318,958,197 404,877,156 17,483,387 94,256,873 2,432,495,319 1,873,144,949 Industry & Handicraft Hotel & Restaurant 921 429 553,139,568 263,482,208 46,852,289 121,080,521 1,264,131,087 635,950,391 Construction Telecom 150 18 171,899,386 44,210,509 21,640,000 138,962,400 632,935,309 479,515,986 9 Wood Industry 10 Banking 212 33 108,427,989 23,570,000 3,053,850 23,220,000 298,859,537 325,273,622 11 Trading 346 109 100,657,558 9,159,732 412,927 49,770 206,765,327 84,350,945 173 14 17,369,389 11,179,706 85 12,222,439 2 3 4 5 6 7 8 12 Garment 13 Consultances 14 Public Health 15 Education Total 49,589,810 53,043,030 500,000 18,253,341 4461 3,838,467,850 1,787,176,177 18,457,375,426
Investment Opportunities Agriculture Manufacturing Tourism Energy Education Healthcare Services
Lao Government halts new mining projects, land concessions for rubber and eucalyptus plantations until 2015 the Lao government to review policies and assess the effectiveness of existing projects. The government will also speed up the survey and allocation of land to identify which areas are suitable for investment, and which areas should be preserved.
Sectors Opportunities Electricity Generation: Abundant water resources produced by tributaries of Mekong river Estimated electricity generation potential: over 23,000 MW Investment in hydro-electric facilities will be substantial
Sectors Opportunities Agriculture Forestry Highest ratio of forest area Suitable land for various tree Plantation Large stands of tropical hardwoods including teak and rosewood Plenty of productive land The government is now promoting the contract farming instead of granting concession over large area of land for agriculture and tree plantation
Sectors Opportunities Manufacturing Sector Lao PDR ready to be Manufacturing Base Logistic advantages from EWEC (Linked to the Sea) Low utilities and labor cost Special Economic Zone (Located along EWEC) Export Import tax exemption SEZA in Savannakhet
Sectors Opportunities Tourism Sector 1.Eco-Tourism 2.Cultural Tourism 3.Agro-Tourism Tourism Business is now opened to FDI with Foreign Equity of up to 70% Several natural tourist sites are welcoming FDI
Thousands Millions Sectors Opportunities 1. Golden Award to Laungprabang by Wanderlust Travel Magazine in UK for 2006, 2007 and 2008; 2. No; 1 of the 53 Places to go in 2008 by the New York Times; 3. ASEAN Green Hotel Awards for 10 hotels in Laos; 4. The World best Tourist Destination for 2013. Number of Tourists Revenues 1800 1600 1400 250 200 1200 1000 800 150 100 600 400 50 200 0 2000 2005 2010* 0 2000 2005 2010*
Combined the domestic investment law and foreign direct investment law into one to create a equal playing field for both domestic and foreign investors; Shorten procedures to open new businesses; No terms of investment for promoted activities; Extended Investment incentives: Corporate income tax exemption up to 10 years, additional 5 years for Education and Health care sectors as top priorities; Foreigners can have access to local financial sources; Foreigners can invest in the real estate sector; Promotion of the development of SEZ and Industrial Park.
23 Investment Incentives MAJOR INCENTIVES PROVIDED Exemption from import duties and taxes on raw materials and capital equipment using for production Exemption from export duty on export products Incentives Tax holidays offered up to 10 years Additional tax holidays, reduced tax rates for large projects with special concession are available upon negotiation
Granting additional incentives Education & Healthcare sectors Exempt land lease or land concession Zone 1 = 15 years Zone 2 = 10 years Zone 3 = 3 years Provide additional 5 years for cooperate profit tax exempt
Investment Promotion Zoning Investment promotion zoning Zone 1: Mountainous, plateau zones with no economic infrastructure. -Zone I -Zone II -Zone III Zone II: Mountainous, plateau zones with a moderate level of economic infrastructure. Zone III: Mountainous, plateau zones with good economic infrastructure.
Special Economic Zones (existing) 1. Savan-Seno Special Economic Zone 2003 2. Boten Beautiful Land Specific Economic Zone 2003 3. Golden Triangle Special Economic Zone2007 4. Vientiane Industrial and Trade Area 2011 5. Saysetha Development Zone 2010 6. Phoukhyo Specific Economic Zone 2010 7. Thatluang Lake Specific Economic Zone 2011 8. Longthanh- Vientiane Specific Economic Zone 2012 9. Dongposy Specific Economic Zone 2012 10. Thakhek Specific Economic Zone 2012 LAOS: Land of Ample Opportunity and Success
Where to go and get the license? One Stop Services MOIC Ministry of Industry and Commerce Ministry of Planning and Investment Government s Office Lao National Committee for Special Economic Zone Enterprise Registration License for General Business Concession License & Representative Office License Investment in Specific Economic Zone Enterprise Registration License www.moic.gov.la www.investlaos.gov.la www.sncsez.gov.la LAOS: Land of Ample Opportunity and Success
Approval procedures for domestic and foreign investment in general/opened activities Investor proposes to register Ministry/Department of Industry and Commerce Business not fall into controlled list Business that fall into controlled list Issue enterprise registration certificate within 10 working days Request for comments from Ministry/Department concerned within 10 working days Issue enterprise registration certificate within 3 working days
Reject * Concession Projects Approval Investor IPD/DPI s s OSS Technical Comments from Concerning Authorities/Ministries Investment Promotion Committee (IPC) meeting Joint the meeting Government/Provinc ial Authority Approved Negotiation General Project Mining Project Hydropower Project MOU CA Prospecting & Exploration Exploration & Production MOU PDA CA 29
ຂອບໃຈ Thank you Ministry of Planning and Investment Investment Promotion Department www.investlaos.gov.la www.facebook.com/investlaos.gov.la Tel: +856-21-218379 Fax: +856-21-215491