Laos streamlining investment rules

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Laos streamlining investment rules 
Bangkok Post: 27 Sep 2010
Rolling out the red carpet
Laos has revised incentives to attract much-needed inflows to help lift its people out of poverty.

Laos is streamlining its investment promotion law to attract more foreign investment in its drive to shed least developed country (LDC) status by 2020.

The new Investment promotion law launched in July last year has given equal rights to foreign and domestic investors, whereas the previous law offered incentives only to domestic businesses, explained Thamma Phetvixay, the deputy director-general of the Investment Promotion Department of the Ministry of Planning and Investment.

"The new one has no discrimination between foreign and domestic investors, especially in investment incentives," said Mrs Thamma.

As well, the new law will not fix the terms of investment for general business activities. But investments requiring concessions, such as land leasing or the construction of hydropower and telecommunication projects; airline businesses; and insurance and financial institutions, will have investment terms of up to 99 years, she said.

The approval time for new investment will also be shorter, from 45 working days previously to 13 days.

Mrs Thamma said her government had set up a one-stop service system for investors who inquire about investment information, and offered a single licence for all investments instead of three separate licences as in the past.

"The government also strongly encourages investors to work in special economic zones, export processing zones, industrial parks, tourism, duty-free, and ICT (information and communication technology) zones," she said, adding that investors would get special offers if they choose these zones.

To add benefits, the Laotian government will grant the investors rights to purchase land for residential purposes if they have registered capital in cash of at least US$500,000, she said.

Mrs Thamma said both foreign and domestic investors could seek credit at commercial banks and financial institutions both in Laos and abroad.

The new law has also allowed investors to transfer profits from their businesses to their own countries after paying taxes in Laos.

Vientiane has set up three zones for investors with different incentives.

For example, if the investors invest in agriculture and services in Zone I, which covers mountainous and plateau areas with no infrastructure, they will be entitled to a corporate profit tax exemption for 10 years.

If they engage in the same activities in Zone 2, which are also in mountainous and/or plateau zones but with a moderate amount of infrastructure, they will enjoy eight years of corporate profit tax holidays.

On the other hand, if they invest in Zone 3, which are in mountainous and/or plateau areas with good infrastructure, they will be exempted from taxes for four years.

"The reason we set these zones is to [help us] get rid of poverty and bring in development to all areas of the country. Promotional activities will be determined by the government in three different levels based on priority activities of the government and activities related to poverty reduction," said Mrs Thamma.

The investments that the government supports include agro-processing businesses, industrial processing such as innovation or high-technology products, human resources development and public health, infrastructure development and services.

She said her government also emphasised the education and health care sectors. If the investors are interested in these two sectors, they will get additional incentives.

For example, the government will exempt land lease and land concession fees for 15 years in Zone 1, 10 years in Zone 2 and three years in Zone 3. The investors will also enjoy an additional five years of corporate profit tax exemptions, said Mrs Thamma.

The potential sectors for investors are energy, mining, agribusiness, tourism, construction materials, light industry and services.

She also urged foreign investors to study the laws, regulations and culture of Laos in remote areas to win co-operation from local people, and warned about brokerages.

Vientiane's ambassador to Thailand, Ouan Phommachack, said there were 161 foreign investment projects in Laos from 2006-10 worth about US$10 billion.

In the next five years under the socio-economic development plan from 2011-15, he estimated there would be about 200 megaprojects in Laos worth US$40 billion in total.

"These projects include the construction of a railway system to China, expansion of the national electricity grid, building of national highways and 14 hydropower plants, as well as mining projects," said Mr Ouan.

Kissana Vongsay of the Lao National Chamber of Commerce and Industry said that in the near future, Laos would have land links to other countries in the region.

"Thai businessmen will benefit from the planned investments in Laos over the next five years because they are close to Laos and the languages are similar," said Mr Kissana, adding that Thai investors should be aware of these advantages and hasten their investment decisions.

Earlier in the year, Vientaine had said that it was planning to upgrade its investment climate to achieve annual economic growth of more than 8% over the next five years. Prime Minister Bouasone Bouphavanh had stated that from 2011-15, the growth would be achieved while at the same time the stability would be maintained.

Laos offers lots of potential for entrepreneurs looking to tap the various sectors the government is promoting. Mr Bouasone said that despite the past year's global economic upheaval and the political problems in neighbouring Thailand, the country's gross domestic product grew by 7.6% in 2009.

The global economic crisis had not destroyed Asian economies, he said. On the contrary, the region has now managed to put itself in a key position in the world markets. The region's rising global clout also means that trade and investments between Asian countries are likely to continue to rise. Countries such as Laos need to tap these opportunities as much as possible and Vientiane was looking to make legal amendments so it can devise better incentives to attract foreign investors, he said.

http://www.bangkokpost.com/business/economics/198358/rolling-out-the-red-carpet