Lao PDR Investment Guide June 2017 World Business Advisory Center World Business Group 1
Table of Content Country and Economic Overview Key Industries and Opportunities Doing Business in Laos KASIKORNBANK s Support 2
Why Lao PDR? Laos, a country rich in natural resources and cultural heritage Its strengths 1. Strategic location for Thailand + 1 industrial development 2. Abundance of mineral resources 3. Substantial hydropower potential 4. Well balanced climate and fertile land 5. Tremendous potential for tourism 3
Table of Content Country & Economic Overview Key Industries & Opportunities Doing Business in Laos KASIKORNBANK s Support 4
Country Overview With 6.8% average growth rate in medium term, Laos is one of the fastest growing nations in ASEAN, driven by expansion in light industry and resource-based sector. Country Name: Lao People s Democratic Republic (Lao PDR) Area: 236,800 sq.km. Population: 7.2 million (2016) Government: Single party socialist republic Currency: Lao Kip GDP (Current Price): USD 13.8 billion (2016) (Equivalent to Chonburi, Thailand) GDP per capita: USD 1,925 (2016) Luang Prabang VIENTIANE Timeline and Milestone: 1970 1980 1990 2000 2010 2020 Khammouane Savannakhet 1975: Establishment of current socialist government 1988: Liberalization of Foreign Investment Law 1997: ASEAN membership 2013: WTO membership 2020 goal: Graduate from list of LDCs Pakxe 5 Data Source: IMF
Foreign Direct Investment Most FDI concentrates on mining and hydropower projects. Implementation of Thailand +1 business model leads to flourishing in light industry, especially electrical & electronics, whereas influx of tourists from neighboring countries stimulates growth in tourism sector. Approved FDI by sector, 2011-2015 Changes in Economic Composition, 2007 and 2016 Top investors 2011-15* 1 2 3 China $2.5 billion Vietnam $1.1 billion Thailand $1.0 billion Services and industry expanded rapidly, whereas agriculture shrank continuously. Services and industry flourished owing to rapid growth in light industry and tourism. 6 *Accumulate value Data Source: IPD, Worldbank, CIA
Lao Trade Overview In 2016, Laos exports of electricity and electrical equipment grow rapidly, especially export to Thailand, the major trade partner. Laos International Trade Laos-Thailand Trade Top trade partners 1) Thailand 2) China 3) Vietnam Key Import products Vehicles 15% Machinery & electric equipment 12% Fuel Product 11% Key Export products Electricity 25% Mining Product 21% Machinery & electric equipment 10% Chiang Rai - Bokeo 1 Nong Khai - Vientian Nakhon Panom - Khammouan Mukdaharn - Savannakhet 2 Ubon - Champasak 3 15% YoY growth in Thai-Laos border trade in 2016, from USD5.1 to USD5.8 billion Laos Export Product 54% Electricity 17% Electric Equipment 14% Copper and Products Laos Import Product 12% Automotive and parts 11% Fuel products 7% Iron and Steel 7 Estimated value in 2016, Data Source: Department of Foreign Trade (Thailand), International Trade Center
Data Source: Asian Development Bank Infrastructure Overview Road transport is the main mode of transportation in Laos for both freight and passenger transportation. Railway development is also under way. Due to Laos geographical characteristic, the government s primary focus is the development of land transport. Road Aviation International Airport Road transport is the primary means of transport, carrying over 80% of freight traffic and almost 100% of all domestic passenger traffic. Major roads link major cities to key border towns in neighboring countries, with routes heading north from Vientiane, the capital, the more developed and seeing most of the traffic. Laos has 3 international airports in the North, Central and Southern regions. The airports mainly handle tourist arrivals and business travelers at a lesser extent. A small amount of trade is handled at Vientiane s international airport for special niche products that require express shipment. For such cases, capacity is limited. Bohan Foreign Seaport Confirmed Rail Lines Railway Water Transport Lao Bao Laos has no rail system. However, 2 large potential projects are under way. The first is the Dansavan-Laobao Railway planned for 2018 operation and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021. Being a land-locked country, Laos does not have a sea port and either relies on Thailand s Laem Chabang Port or other sea ports in Vietnam. However, inland waterways along the Mekong river does support 18% of its freight traffic, albeit with limitaitions during the dry season. Savannaket Danang Attapeu 8
Road Network Major National Roads Route 13 1,500 km long. The backbone of Laos that runs parrallel to the Mekong River. Mostly paved and passable in all weather. It is the spine of the national road system and many major roads run off of R13, linking all of Laos major cities. Route 12 Nakhon Panom-Khammouan border. Still not a major trade route. Route 18 Runs off the R13 to Attapeu, the site of Laos third international airport. Currently, not a major route but economic growth in the Attapeu area may change that in the future. Routes 6 & 7 Enters established Laos-Vietnam borders in the north, but not yet widely used for freight transport GMS Network Roads Route 3 Part of North-South Economic Corridor Most cargo is Thailand-China trade. Most transhipment occurs manually at Boten- Bohan border between Thai and Chinese trucks. Transshipment is mostly manual. Apart from fuel tankers, most cargo is containerised. Route 9 Part of East-West Economic Corridor and key link between Thailand and Danang Port in Vietnam. Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo. Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks. Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual. 9
Railway Network While no current railways exist, future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners, China, Thailand and Vietnam. 1 Thailand-Laos Railway Project Plan: Phase II: 7.5 km track from Thanaleng-Khamsavat (near central Vientiane) Progress: Construction is set to begin in 2017 and will be completed in 2019. The line continue on from the existing 3.5 km line from Nong Khai to Thanaleng. 2 China-Laos Railway Project 415 km track from Vientiane-Boten; single 1.435-m Plan: track for 160km/hr passenger train or 120 km/hr freight train Progress: Contruction began in Luang Prabang in December 2016. Scheduled to finish in 2021. It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line. 3 Vietnam-Laos Railway Projects 4 Other Railway Projects Plan: 1) Savannakhet-Lao Bao line 220km, parallel with R9. 2) Vientiane-Thakhek-Vung Ang line, 500km Plan: 1) Thakhek-Savannakhet-Champasak 2) Champasak-Vang Tao (border to Thailand) Progress: Lao Bao line has completed feasibility study and has been approved. The line, which will enter Vietnam through the Cha Lo border is still under study by Korea s KOICA. Progress: Both projects are still under consideration. 10
Picutre Source: http://www.npr.org Water and Aviation Transport Water and air transport are not part of the government s key areas of focus for development as neither are major modes of transport with high traffic for cargo. Current Situation Water Transport Main routes still used commercially to a limited extent are in the north: beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar- China border. Capacity is limited since big boats cannot traverse the waterways, and port facilities are underdeveloped and mostly manually run. Current Situation Air Transport Laos has 3 international airports: Wattay International Airport Capacity: 1.1 million Luang Prabang International Airport Attapeu International Airport Laem Chabang Da Nang It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land. Wattay International Airpot Upgrade Now 11% complete. To be completde in 2018. Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers. The project is a collaboration between Laos and Japan, who has provided 9 billion yen in financial aid for the project. 11
Table of Content Country & Economy Overview Key Industries & Opportunities Doing Business in Laos KASIKORNBANK s Support 12
Key Industries and Opportunities With rapid improvement in logistic infrastructure, rich natural resources, ample arable land, and cultural sites, Lao PDR offers attractive opportunities for investment in light industry, hydropower, mining, agriculture and tourism sectors. Hydropower Industry Mining Light Industry Industrial Agriculture Tourism 13
Hydropower Industry 14
Hydropower - Overview Although hydropower export has surged in 2016, Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia. Actual, target and potential hydropower generation capacity Export Value of Electricity, 2012 2016 (USD million) Electricity export almost doubled in 2016 With its river network, Lao PDR is strategically located to become the Battery of Southeast Asia. Current hydropower operations only realize 25% of total potential of Lao PDR. At present, Thailand is the major importer of electricity from Lao PDR. Recently, Vietnam has begun to import electricity from Lao PDR. Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016, with a Compound Annual Growth Rate (CAGR) of 20% during 2012-2016. Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally; Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016. 15 Data Source: Ministry of Energy & Mines, Lao PDR, TRADEMAP
How to invest Hydropower Opportunities Thai construction, power generating and consulting engineering firms could explore opportunities in hydropower projects, both in the forms of fully-owned or joint venture with local and other foreign entities. Multilateral Public Private Partnership (PPP) Model Typical Hydropower Project Life Cycle Thai construction firm, power generating firms and consulting engineering. Capital investment and technology from advanced countries: Japan, Korea and Europe. Feasibility Planning Construction Electricity Generation Thai Firm International Firm private Multilateral agencies (ADB, World Bank), Bilateral (Japan, Norway) International Organization Lao local entity public Mostly stateowned entities, such as Electricite du Laos (EdL) Multilateral Consortium Thai construction / power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well 16
Mining Industry 17
Mining - Overview Laos still has rooms for mining sector to grow, due to its variety of potential mineral resources, and the government s determination to support domestic and foreign investment in the mining sector. Mineral Productions in Laos (Thousand metric tons) 2013 Did you know 942 Projects 657 Mining Firms 854 Million USD ongoing granted permission export of mining products Gold production: 6,838 kg Silver production: 29,715 kg 7%* 55%* Form of investment in mining Business cooperation by contract Joint Venture between foreign and local firm 100% foreign or domestic owned Remark: Firms could set up representative office to gather information and investigate investment opportunities. 18 *growth rate 2012-13 Data Source: U.S. Geological Minerals Yearbook 2013, Department of Mines, Lao PDR
Mining Opportunities Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations: from prospection to mining and processing. Prospection Exploration Feasibility Study Construction Mining + Processing License Duration + Renewable 2 years + 1 year 3 years + 2 years 1 year + 1 year 2 years + 1 year 20 years + 5 years Rental Fee Taxes & Regulations USD 3-12 / ha / year Key Issues USD 0.5 1 / ha / year + royalty (1-7%) Registered company Max 300 sq.km. Corporate income 25%-35% Value added 10% Rules and regulations for the Minerals Law in accordance to international standard partly missing Limited number and capacity of local workers in mining sector High number of mineral trade companies rather than professional mining operations firms. 19
Light Industry 20
Light Industry Electrical & Electronics Parts Industry Overview Laos experienced exponential growth in Electrical & Electronics (E&E) parts exports in recent years, especially to Thailand, indicating the initial formation of regional supply chain. Lao PDR s Export value of E&E Parts Products (USD million) USD Million 450 408 400 350 330 300 250 200 173 150 100 50 30 37-2012 2013 2014 2015 2016 Transmission and reception apparatus Other electrical equipment & parts Telephone sets for cellular/wireless networks E&E export proportion in 2016 Main export destination in 2016 1 Thailand: 90% 2 USA: 3% 3 Japan: 2% 4 Australia: 2% Factors contribute to this dramatic growth are: 1 ASEAN Free Trade Agreement (AFTA); ASEAN Economic Community (AEC) by end of 2015 -> freer flow of goods and capital with ASEAN. 2 Thailand shifts its focus on value added activities -> firms relocate labor intensive activities to Thailand s neighboring countries including Laos. 21
Light Industry Electrical & Electronics Parts Industry Opportunity Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations. Thailand + 1 model Product assembly Thailand Advanced infrastructure Experienced and highskilled (management level) workforce Product supply chain Laos Affordable and youthful workforce Located between Vietnam and Thailand, both with high electronics parts demand Government incentives Challenges Difficulty in getting large pool of labors due to small population Challenge in recruiting higher skilled specialists Under-developed in infrastructure in some regions Do you know Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly e.g. NIKON (digital camera), Dai-Ichi Denshi (wire harness), Nissei Mizuki (electronics parts), and Toyota boshoku (car seat cover). Suggestion Locate in major Special Economic Zones e.g. Vita Park SEZ and Savan-Seno SEZ Start operation from small scale (less than 500 labors) and gradually scale up Roll out strategic human resource plan including training and capacity building 22 Data Source: JETRO
Industrial Agriculture 23
Industrial Agriculture Overview Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese, Thai and Vietnamese) and local entrepreneurs, to a lesser extent Leading Agricultural Exports in 2016, by export value Ranking change from 2015 1 Rubber 2 USD109 million, grew 46% YoY Vegetable & Fruits USD94 million, grew 35% YoY 3 Coffee 4 Corn 5 Rice USD60 million, dropped 11% YoY USD55 million, dropped 8% YoY USD31 million, grew 6% YoY Rubber export value increased in 2016 due to rubber price recovery in China, the Laos main market. The growth was mainly driven by an increase in Thailand s demand for vegetable & Fruits, the major buyer of Laos vegetable & fruits. Bolaven Plateau in the South is the main production site of coffee. Due to unfavourable weather the production declined in 2016. Corn export value declined in 2016 due to a slump in sale to Thailand, one of Laos main markets. Laos started to export its rice to China since 2015, causing an continuous growth in export value. 24 Data Source: UN International Trade Center, Xinhuanet, Chinadaily, Asianews
Industrial Agriculture Opportunities 1 2 Agricultural Inputs and Machinery Plantation High Value Products 3 Processing and Trading limited access to improved agricultural inputs - seed - fertilizer - quality machinery ample arable fertile land low level of chemical pesticides lack of capability to process products especially to meet international standard lack of market access. Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand. Market inputs and machinery to agricultural projects. Investor can target both large scale investment and smallholder farmers High-value agricultural products, such as organic products, herbs and medical plants. Foreign investors could operate plantation via (1) contract farming, and (2) concession. Process the raw products to meet export standards; trade the products leveraging existing market channels. 25
Tourism 26
Tourism - Overview Tourist arrivals are on a steady rise in the past decade, especially tourists from Asia Pacific, with most of them visiting more developed border towns neighboring Thailand. Tourist Arrivals and Revenue from Tourism, 2005 2016(E) Top Tourist Arrivals Destinations 2015 Most top tourist destinations are the more developed towns bordering with Thailand 1 Vientiane Capital 2 Savannakhet 3 Champasak Nong Khai Mukdahan Ubon Ratchathani World Heritage sites these following city also attracted considerable number of visitors Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade. Luang Prabang Wat Pu at Champasak Most tourists come from Asia Pacific (93%), followed by Europe (5%). Most tourists are from Thailand (50%) and Vietnam (25%). 27 Data Source: Lao National Tourism Administration
Tourism - Opportunities Business Opportunities Associated to Tourism Sector 1 Hotel, Restaurant, Entertainment 2 Tour Company, Holiday Package 3 Sourvenirs 4 Transportation Service Accommodate increasing tourist arrivals Provide dining and entertainment services Develop attractive ecotourism, cultural tourism packages Produce and market souvenirs applying local arts / design and materials Provide transportation services linking major tourism sides 28
Major Cities for Business Activities by Region N ORTHERN The border towns with China and now gaining increasing attention. Louang Namtha Phongsali Luang Prabang Luang Prabang tourist destination Logistics / Trading Hydropower Luang Namtha and Phongsali Industrial agriculture Tourism C ENTRAL Border towns with Thailand are emerging with increased business interaction with Thailand VIENTIANE Khammouane Savannakhet Vientiane (Capital and Prefecture) Logistics / Trading Tourism Hydropower Industrial Agriculture Khammouane (Thakhek) Mining Tourism Industrial Agriculture Savannakhet Mining Tourism Industrial Agriculture Manufacturing S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture Pakxe S Champasak (Pakse) Logistics / Trading Tourism industry Hydropower Industrial Agriculture 29
Lao Consumer Income and Behavior Most Lao consumers have positive perception of Thai products; middle-high income groups in Lao PDR (top 20%) enjoy shopping in Thai border towns and in Bangkok. Average Monthly Income in USD, by Income Groups (2016) Lao Consumer Behavior Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening in beer garden Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series Shop at traditional markets Middle income shop at Thai border town (Nong Khai, Udon Thani) Thai and Japanese products are perceived as high quality; Chinese products are perceived as sub-standard quality and Korean products are in between 30 Data Source: K-WB Advisory Estimates
Table of Content Country & Economy Overview Key Industries & Opportunities Doing Business in Laos KASIKORNBANK s Support 31
Major Costs Labor and Utility Labor: minimum monthly wage in ASEAN 2017, USD Utility: electricity rate (2016) 0-25 kwh 348 kip/kwh 26-150 kwh 414 kip/kwh 151-300 kwh 799 kip/kwh 301-400 kwh 880 kip/kwh 401-500 kwh 965 kip/kwh more than 500 kwh 999 kip/kwh Water Price (Per Unit) for Business and Trade Units Water price for businesses is set to increase from USD 2,884 kip (USD 0.36) in 2015 to 2,971 kip (USD 0.37) per cubic meter in 2016. 32 Data Source: Jclao, Nampapalao
Tax System Corporate Taxes Personal Income Tax Types of Tax Tax rate Monthly Income (LAK) Tax Rate Profit Tax* 24% Value Added Tax (VAT) 10% Withholding Tax Dividends 10% Income tax treaties for avoidance of double taxation: Transfer of shares 10% Transfer of assets 5% Brunei China South Korea Vietnam Malaysia Myanmar Thailand Luxembourg *Note: There is no definition of residence for tax purposes in Laos. All companies registered under Lao law (including foreign law) are subject to Lao profit tax. 0 1,000,000 0% 1,000,001-3,000,000 5% 3,000,001-6,000,000 10% 6,000,001-12,000,000 12% 12,000,001-24,000,000 15% 24,000,001-40,000,000 20% Above 40,000,000 24% Source: KPMG ASEAN Tax Guide, PwC 33
Foreign Investment Regulations Foreign enterprises are subjected to foreign investment regulation in several business activities; Generally, small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors. Examples of Foreign Investment Regulations Source:JETRO Compiled by World Business Advisory Center Not Permitted to Foreigner Only for Joint Venture with Local Company 100% Foreign Ownership Allowed If registered capital is less than 4 billion Lao Kip (USD 0.5 million) Less than 3 stars hotel Cross border goods transport with less than 5 billion Lao Kip of registered capital Domestic goods transport with less than 3 billion Lao Kip of registered capital Wholesale and Retail Businesses Maximum 70% Foreign Ownership: If registered capital is 10-20 billion Lao Kip (USD 1.25 2.5 million) Maximum 50% Foreign Ownership: If registered capital is 4-10 billion Lao Kip (USD 0.5 1.25 million) Hotel and Restaurants Maximum 60% Foreign Ownership 3-5 stars hotel with minimum registered capital of 1 billion Lao Kip (USD 125,000) Logistics Maximum 49% Foreign Ownership Cross border goods transport with minimum registered capital of 5 billion Lao Kip (USD 625,000) 100% Foreign Ownership: If registered capital is 20 billion Lao Kip (USD 2.5 million) or more 100% Foreign Ownership: NOT ALLOWED 100% Foreign Ownership: Domestic goods transport with minimum registered capital of 3 billion Lao Kip (USD 375,000) 34
Types of Investment (1) General Business Besides foreign investment regulation, foreign enterprises are also subjected to the investment promotion law, classifying investment into 3 types. Types of Investment in Lao PDR 1 General 2 Business Concession Business 3 Business Related to SEZ Investment in General Business Description Register Capital Requirements o An investment in general economic activities o Activities including controlled businesses businesses that requires an additional approval process from the relevant ministries o Activities excluding concession business o At least 1 billion Lao Kip (USD 125,000) o At the day of establishment must pay 40% (agriculture business), 60% (production and processing), 80% (services), while the rest must be paid within 1 year Examples of Controlled Businesses 1. Agriculture: plantation agriculture, fishery 2. Manufacturing: petroleum products, leathers, textile & clothing, papers, printing, pesticides, pharmaceutical products 3. Businesses related to environment: eg. wastewater treatment 4. Wholesale and retails of gasoline and petroleum products 5. Transportation 6. Hotel and Restaurant 7. Media and Publication 8. Finance and insurance 9. Legal, accounting, and tax services 10. Tourism 11. Education 12. Hospital, clinic, and medical services 13. Recreation (museum and amusement park) 35 Source:JETRO Compiled by World Business Advisory Center
Types of Investment (2) Concession Business Types of Investment in Lao PDR 1 General 2 Business Concession Business 3 Business Related to SEZ Investment in Concession Business Description Register Capital Requirements o An investment that requires a concession or specific authorization from the government to use the government s property o Some concession businesses requires authorization from the central government, whereas the other requires only provincial government level of authorization, for example At least 5MW electricity generation project requires the central government authorization Less than 5MW electricity generation projects requires only provincial government authorization o Must pay at least 20% of registered capital while remaining should be paid within 2 years Examples of Concession Business 1. Mining 2. Electricity generation 3. Infrastructure Telecommunication TV and radio station Road, railway, airport, seaport, waste disposal site 4. Businesses that use the government land Shopping center Tourist attraction Public park Hotel Forestry and Logging Plantation and Livestock 36 Source:JETRO Compiled by World Business Advisory Center
Types of Investment (3) Business Related to SEZ Types of Investment in Lao PDR 1 General 2 Business Concession Business 3 Business Related to SEZ Investment in Business Related to SEZ Description High Potential SEZs in Laos o Business related to Special Economic Zone -> an investment in building infrastructure for a new town o Business related to Specific Economic Zone -> an investment in infrastructure development for specific purpose projects such as industrial zone, export zone, tourist development zone, etc o Vita Park Special Economic Zone (Vientiane) o Savan-Seno Special Economic Zone (Savannakhet) o Pakxe-Japan SME Specific Economic Zone (Champasak) Special and Specific Economic Zones 1. Boten-Daenkham Specific Economic Zone 2. Luang Prabang Special Economic Zone 3. Golden Triangle Special Economic Zone 4. Thatluang Lake Specific Economic Zone 5. Longthanh Specific Economic Zone 6. Xaysettha Specific Economic Zone 7. Vita Park Special Economic Zone 8. Dongphosy Specific Economic Zone 9. Thakhek Specific Economic Zone 10. Poukiao Specific Economic Zone 11. Savan-Seno Special Economic Zone 12. Pakxe-Japan SME Specific Economic Zone 3 1 2 4 5 6 7 8 9 10 11 12 37 Source:JETRO Compiled by World Business Advisory Center
Procedure of Investment in Lao PDR Investment approval procedure varies depending upon types of investment; Finally, all foreign investors must go through enterprise registration, tax identification number registration and application for capital importation certificate. 1 For non-controlled businesses General Business For controlled businesses, apply for approval at relevant Ministries Get Approval License 2 3 Concession Business Apply at Ministry of Planning and Investment For developer, apply at National Committee for Special Economic Zone Get Concession License Get SEZ Concession License Apply at Ministry of Industry and Commerce Get Enterprise Registration Certificate (ERC) Apply for Tax Identification Number: TIN at Tax Department, Ministry of Finance Apply for Capital Importation Certificate at Bank of Lao PDR Business related to SEZs For investor, apply at One-Stop Service Unit in each SEZ 38
Investment Tax Incentives General Zone Investment Tax Incentives in Lao PDR 1 General Zone Promotion Sector and Zone based Incentives 2 Special & Specific Economic Zone Tailor Made Incentives Profit Tax Exemption Period by Promotion Sector and Zone Profit Tax Exemption Period Level 1 Level 2 High Promotion Moderate Promotion Level 3 Low Promotion Zone 1 10 years 6 years 4 years Zone 2 6 years 4 years 2 years Zone 3 4 years 2 years 1 years Promoted sectors: Agriculture, Industrial, Handicrafts and Services Type of Tax Exemption Profit tax in next accounting year, in case of net profit is used for reinvestment (business expansion) Import duties for import of raw material, equipment, spare parts and vehicles directly used for production Export duties for general goods and products (resource-based products should follow associated laws) Permission to carry forward losses to three consecutive accounting years. 39
Investment Tax Incentives Special and Specific Economic Zone Investment Tax Incentives in Lao PDR 1 General Zone Promotion Sector and Zone based Incentives 2 Special & Specific Economic Zone Tailor Made Incentives in Each SEZ Example of Tax Incentives in Savan-Seno SEZ Sector Period of Profit Tax Exemption Profit Tax Rate After Tax Exemption Period a) Manufacturing Hi-Tech Manufacturing 10 year 8% Manufacturing that exports at least 70% of production 10 year 8% Manufacturing that exports 30% - 60% of production 7 year 8% Manufacturing that exports 0% - 29% of production 5 year 8% Other 5 year 8% b) Service Investment amount of USD 2 million or more 10 year 8% Investment amount of USD 500,000 - USD 2 million 8 year 8% Investment amount of USD 300,000 - USD 500,000 6 year 10% Investment amount of USD 150,000 - USD 300,000 4 year 10% Investment amount of USD 50,000 - USD 150,000 2 year 10% c) Commerce Export Laos products 5 year 10% International trade company 3 year 10% General trade company 2 year 10% Other Tax Incentives Personal Income Tax 5% Dividend Tax after Profit Tax Exemption Period 5% Import Duty Exemption for import of raw material, equipment, spare parts and vehicles directly used for production VAT Exemption for import products 40 Source: JETRO
Non-Tax Incentives & Trade Privileges Non-Tax Incentives Permission Foreign nationals can undertake feasibility studies Bring in foreign technicians, experts and managers if qualified Lao nationals are not available Lease land General business: up to 30 years from Lao citizen and up to 50 years from the government (renewable) Investment in SEZ: up to 75 years Concession business: upon negotiation with the government (at present, there is an example of 99 years land lease) Transfer leasehold interests and build on or make improvements or structures to a leased land. Protection Guarantee against nationalization, expropriation and requisition without compensation. Trade Privileges ASEAN WTO GSP Bilateral trade agreement (over 18 countries) o o o o o o o o o Argentina Belarus Bulgaria Cambodia China Indonesia India Korea DPR Kuwait o o o o o o o o o Malaysia Mongolia Myanmar Philippines Russian Federation Thailand Turkey USA Vietnam. 41 Source: Ministry of Planning and Investment, Lao PDR
Table of Content Country & Economy Overview Key Industries & Opportunities Doing Business in Laos KASIKORNBANK s Support 42
Foreign Currency Exchange Laos Currency: Kip (LAK) Latest FX Rate (as of April 28, 2017) USD 1 ~ LAK 8,191 EUR 1 ~ LAK 8,924 THB 1 ~ LAK 239 JPY 1 ~ LAK 73 CNY 1 ~ LAK 1,188 Remark: THB and USD are widely accepted especially in the border trade area. 43 Source: Bank of the Lao PDR
KASIKORNTHAIBANK Service in Lao PDR Retail Banking Corporate Banking Bank Accounts (LAK, THB, USD) Savings account Term deposit Remittance Bank Accounts (LAK, THB, USD) Savings account Term deposit Current deposit Lending Working capital loan Long term loan Bank guarantee Project Financing FX Services Remittance Trade Finance Letter of Credit (L/C) Standby Letter of Credit (SBLC) 44
KASIKORNTHAIBANK in Lao PDR With establishment KASIKORNTHAIBANK, the first full-scale locally incorporated institution from Thailand, is fully committed to support our clients cross-border financing and transaction for their trade and investment activities in Lao PDR. 45
KASIKORNTHAIBANK in Lao PDR Contacts Mr. Barvorn Srisangatrakul Country Director Tel: (856) (21) 410881 Mobile: (856) (20) 59888906 E-mail : barvorn.s@kasikornbank.com Ms. Piyanoot Sangsana Manager: Head Office Tel : (856) (21) 410882 Mobile: (856) (20) 59888905 E-mail : piyanoot.s@kasikornbank.com Mr. Chatuporn Boozaya-Angool Manager: Ban Ponesinuan Branch Tel : (856) (21) 410885 Mobile: (856) (20) 59888826 E-mail : chatuporn.b@kasikornbank.com KASIKORNTHAI BANK LIMITED LANE XANG HEAD OFFICE Unit 12, Lane Xang Avenue, Xiangngeun Village Chanthaboury District, Vientiane Capital, Lao PDR Tel : (856) (21) 410888 Fax: (856) (21) 410889 PONESINUAN BRANCH Ban Ponesinuan, Unit 14, Sysattanak, Vientiane Capital, Lao PDR Tel : (856) (21) 410888 Fax: (856) (21) 410889 46
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