1 August 2018 AEC+ Business Advisory KASIKORNBANK LAO PDR INVESTMENT GUIDE
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1
August 2018 AEC+ Business Advisory
KASIKORNBANK
LAO PDR INVESTMENT GUIDE
2
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
3
ldquoLaos a country rich in natural resources and cultural heritagerdquo
Countryrsquos strengths
bull Strategic location bridging the GMS region and China
bull Abundance of mineral resources
bull Substantial hydropower potential
bull Well-balanced climate and fertile land
bull Tremendous potential for tourism
Why Lao PDR
4
S
Luang Prabang
Tourism Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
Phongsali Louang Namtha
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
Vientiane (Capital and Prefecture)
Logistics Trading Tourism Hydropower Industrial agriculture
Khammouane (Thakhek)
Mining Tourism Industrial agriculture
Savannakhet
Mining Tourism Industrial agriculture Manufacturing
Champasak (Pakse)
Logistics Trading Tourism Hydropower Industrial agriculture
Major Cities for Business Activities by Region
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL Border towns with Thailand are seeing increased business interaction with Thailand
N ORTHERN Border towns with China and now gaining more attention
5
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
6
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 68 million (2018)
Government Single Party Socialist Republic
Currency Lao Kip
GDP (current prices) USD 183 billion (2018) (Equivalent to Samut Prakan Thailand)
GDP per capita (current prices) USD 7930 (2018)
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
2015 2020 2025 2030
Timeline and Milestone
With a 68 average growth rate in the medium term Laos is one of the fastest growing nations in ASEAN driven by foreign investments particularly from China and other ASEAN countries
2020 Graduation from least developed country (LDC) status
2013 WTO membership
2030 Goal Classified as developing country with upper-middle income and sustainable economic growth
Data Source IMF
Country Overview
2025 Transition period of LDC graduation by transforming service industry and agriculture to high-value businesses
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
2
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
3
ldquoLaos a country rich in natural resources and cultural heritagerdquo
Countryrsquos strengths
bull Strategic location bridging the GMS region and China
bull Abundance of mineral resources
bull Substantial hydropower potential
bull Well-balanced climate and fertile land
bull Tremendous potential for tourism
Why Lao PDR
4
S
Luang Prabang
Tourism Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
Phongsali Louang Namtha
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
Vientiane (Capital and Prefecture)
Logistics Trading Tourism Hydropower Industrial agriculture
Khammouane (Thakhek)
Mining Tourism Industrial agriculture
Savannakhet
Mining Tourism Industrial agriculture Manufacturing
Champasak (Pakse)
Logistics Trading Tourism Hydropower Industrial agriculture
Major Cities for Business Activities by Region
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL Border towns with Thailand are seeing increased business interaction with Thailand
N ORTHERN Border towns with China and now gaining more attention
5
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
6
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 68 million (2018)
Government Single Party Socialist Republic
Currency Lao Kip
GDP (current prices) USD 183 billion (2018) (Equivalent to Samut Prakan Thailand)
GDP per capita (current prices) USD 7930 (2018)
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
2015 2020 2025 2030
Timeline and Milestone
With a 68 average growth rate in the medium term Laos is one of the fastest growing nations in ASEAN driven by foreign investments particularly from China and other ASEAN countries
2020 Graduation from least developed country (LDC) status
2013 WTO membership
2030 Goal Classified as developing country with upper-middle income and sustainable economic growth
Data Source IMF
Country Overview
2025 Transition period of LDC graduation by transforming service industry and agriculture to high-value businesses
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
3
ldquoLaos a country rich in natural resources and cultural heritagerdquo
Countryrsquos strengths
bull Strategic location bridging the GMS region and China
bull Abundance of mineral resources
bull Substantial hydropower potential
bull Well-balanced climate and fertile land
bull Tremendous potential for tourism
Why Lao PDR
4
S
Luang Prabang
Tourism Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
Phongsali Louang Namtha
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
Vientiane (Capital and Prefecture)
Logistics Trading Tourism Hydropower Industrial agriculture
Khammouane (Thakhek)
Mining Tourism Industrial agriculture
Savannakhet
Mining Tourism Industrial agriculture Manufacturing
Champasak (Pakse)
Logistics Trading Tourism Hydropower Industrial agriculture
Major Cities for Business Activities by Region
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL Border towns with Thailand are seeing increased business interaction with Thailand
N ORTHERN Border towns with China and now gaining more attention
5
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
6
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 68 million (2018)
Government Single Party Socialist Republic
Currency Lao Kip
GDP (current prices) USD 183 billion (2018) (Equivalent to Samut Prakan Thailand)
GDP per capita (current prices) USD 7930 (2018)
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
2015 2020 2025 2030
Timeline and Milestone
With a 68 average growth rate in the medium term Laos is one of the fastest growing nations in ASEAN driven by foreign investments particularly from China and other ASEAN countries
2020 Graduation from least developed country (LDC) status
2013 WTO membership
2030 Goal Classified as developing country with upper-middle income and sustainable economic growth
Data Source IMF
Country Overview
2025 Transition period of LDC graduation by transforming service industry and agriculture to high-value businesses
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
4
S
Luang Prabang
Tourism Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
Phongsali Louang Namtha
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
Vientiane (Capital and Prefecture)
Logistics Trading Tourism Hydropower Industrial agriculture
Khammouane (Thakhek)
Mining Tourism Industrial agriculture
Savannakhet
Mining Tourism Industrial agriculture Manufacturing
Champasak (Pakse)
Logistics Trading Tourism Hydropower Industrial agriculture
Major Cities for Business Activities by Region
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL Border towns with Thailand are seeing increased business interaction with Thailand
N ORTHERN Border towns with China and now gaining more attention
5
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
6
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 68 million (2018)
Government Single Party Socialist Republic
Currency Lao Kip
GDP (current prices) USD 183 billion (2018) (Equivalent to Samut Prakan Thailand)
GDP per capita (current prices) USD 7930 (2018)
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
2015 2020 2025 2030
Timeline and Milestone
With a 68 average growth rate in the medium term Laos is one of the fastest growing nations in ASEAN driven by foreign investments particularly from China and other ASEAN countries
2020 Graduation from least developed country (LDC) status
2013 WTO membership
2030 Goal Classified as developing country with upper-middle income and sustainable economic growth
Data Source IMF
Country Overview
2025 Transition period of LDC graduation by transforming service industry and agriculture to high-value businesses
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
5
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
6
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 68 million (2018)
Government Single Party Socialist Republic
Currency Lao Kip
GDP (current prices) USD 183 billion (2018) (Equivalent to Samut Prakan Thailand)
GDP per capita (current prices) USD 7930 (2018)
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
2015 2020 2025 2030
Timeline and Milestone
With a 68 average growth rate in the medium term Laos is one of the fastest growing nations in ASEAN driven by foreign investments particularly from China and other ASEAN countries
2020 Graduation from least developed country (LDC) status
2013 WTO membership
2030 Goal Classified as developing country with upper-middle income and sustainable economic growth
Data Source IMF
Country Overview
2025 Transition period of LDC graduation by transforming service industry and agriculture to high-value businesses
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
6
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 68 million (2018)
Government Single Party Socialist Republic
Currency Lao Kip
GDP (current prices) USD 183 billion (2018) (Equivalent to Samut Prakan Thailand)
GDP per capita (current prices) USD 7930 (2018)
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
2015 2020 2025 2030
Timeline and Milestone
With a 68 average growth rate in the medium term Laos is one of the fastest growing nations in ASEAN driven by foreign investments particularly from China and other ASEAN countries
2020 Graduation from least developed country (LDC) status
2013 WTO membership
2030 Goal Classified as developing country with upper-middle income and sustainable economic growth
Data Source IMF
Country Overview
2025 Transition period of LDC graduation by transforming service industry and agriculture to high-value businesses
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
7
427
1695
2013 2014 2015 2016 2017
USD
Mill
ion
Data Source KPMG ASEANstatsorg
Foreign Direct Investment
The Belt and Road Initiative(BRI) has significantly affected Laosrsquo FDI (foreign direct investment) structure It has made China the most important foreign investor in the country their investments accounted for 87 of total FDI in 2017
Key FDI Figures Changes in Economic Composition
Service sector growth an indirect effect of FDIs The service sector in Laos including wholesale and retail trading hotels and restaurants financial services and telecommunications expanded as it began to absorb the growing number of foreign workers
China is Lao PDRrsquos major investor Their investments reached USD15 billion in 2017 growing 85 YoY
Other key investors are Malaysia Thailand and
Vietnam with investment values of USD124 million USD12 million and USD09
million respectively
Top sectors of FDIs are hydropower generation mining and agriculture
OBOR effect FDI inflows significantly increased in 2016 and 2017 after Lao PDR and Chinarsquos ground-breaking ceremony of the railroad project was held in December 2015 and construction of the whole route commenced in December 2016
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
8
Data Source nhandancomvn International Trade Center
Lao PDR Trade Overview
In 2017 Laos mainly exported electricity to its neighboring countries such as Thailand and Vietnam while imports have shifted to electronic and machinery parts for hydropower projects industrial production and infrastructure development
Trade Flows and Balance 2012-2017
Top Trading Partners 2017
Thailand
USD 53 Billion
China
USD 20 Billion
Vietnam
USD 13 Billion
Lao PDRrsquos Key Trade Products 2017
Exports Imports
Total Export Volume
USD 48 Billion
Total Import Volume
USD 60 Billion
Electrical machinery and equipment
14
Machinery amp equipment
13
Fuel products 12
Electricity 25
Mining products 13
Electrical machinery and equipment
12
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
9
Lao PDR ndash Thailand Border Trade Statistics 2017
Data Source Department of Foreign Trade (Thailand)
Lao PDR ndash Thailand Border Trade
Border trade is the main two-way trade channel between Lao PDR and Thailand
of two-way trade between Lao PDR and Thailand occurs through the border as Lao PDR is a land-locked country and its economic cities are located close to Thailandrsquos border
97 Key Official Trade Points By percentage share () 2017
31 Mukdaharn - Savannakhet
8 Ubon Ratchathani - Champasak
7 Nakhon Panom - Khammouan
30 Nong Khai - Vientiane
12 Nan - Luang Prabang
Mukdahan ndash Savannakhet Strategic border point which is located along the East-West Economic Corridor (EWEC) as well as gateway to Lao PDRrsquos most developed SEZ Savan - Seno Special Economic Zone
Nong Khai ndash Vientiane Gateway to Vientiane the countryrsquos capital city and key economic city
Total Official Trade Points
15
Trade Volume USD 61 Billion
Exports USD 23 Billion
Imports USD 38 Billion
Exports Imports
Diesel fuel (11)
Automobiles and parts (8)
Refined Oil (5)
Machinery amp equipment (7)
Electricity (52)
Copper amp materials (14)
Vegetable amp products (5)
Electronics (12)
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
10
Data Source Asian Development Bank
Lao PDR - 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 Laosrsquo geographical characteristic the governmentrsquos primary focus is the development of land transport
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 most crowded
Road
Being a land-locked country Laos does not have a sea port and either relies on Thailandrsquos 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
Water Transport Railway Laos has no rail system However 2 large potential projects are under way The first is the Dansavan-Laobao Railway planned for 2018 operation The second is the Laos-China railway running from Vientiane to the Boten-Bohan borer which is set to be completed by the end of 2021
Aviation Laos has 3 international airports with each in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers to a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment Insuch cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
11
BRI in Lao PDRrsquos Section
Route Boten to Vientiane
Distance 414 km
Construction Period 2017-2021
Investment Pattern Joint Venture ndash Lao PDR 40 and China 60
Cooperation Mechanism Government to Government (G to G)
Total Investment Cost USD 61-68 Billion
Passenger Train Speed 160-200 kmh
Stations 32
Current Status 203 completed (as of December 2017)
Data Source Reuters nationmultimediacom
Lao PDR ndash Belt and Road Initiative (BRI)
The section of the Belt and Road Initiative running through Lao PDR is a USD 6 billion high-speed railway project which will link China with Vientiane the Laotian capital and the Laos-Thailand border
Lao PDR BRI Timeline
2013 bull BRI was announced by Chinese President Xi Jinping The target of this project aims to invest in infrastructure in the central western and southern regions of Asia as well as in Africa and Europe
2016 DEC
bull The construction commenced The part of the BRI project that runs through Lao PDR runs from the Boten-Mohan border (between Laos and China) to Vientiane The project was delayed and restarted in 2017
2021 DEC
bull The project is set to be fully operational in December 2021 It will link Chinas Yunnan province the Lao capital Vientiane with the Thai border province Nong Khai
2015 DEC
bull The ground-breaking ceremony to launch the Lao PDR-China railway project was held on December 2 2015
Project Information
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
12
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
13
Key Industries and Opportunities
With rapid improvement in logistics infrastructure rich natural resources ample arable areas and cultural sites Lao PDR offers attractive opportunities for investments in the sectors of mining electronic parts and components industrial agriculture and tourism
TOURISM
ELECTRONIC PARTS AND COMPONENTS
MINING
INDUSTRIAL AGRICULTURE
HYDROPOWER
Temporarily Suspended
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
14
HYDROPOWER
Key Industries amp Opportunities
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
15
Hydropowerndash Overview
Hydropower exports in Lao PDR surged in 2017 The key destinations are Thailand Cambodia and Vietnam
Data source KResearch the Ministry of Energy and Mines
Total 29125
Magawatts
Number of Hydropower Plants
OPERATING
46
UNDER CONSTRUCTION
143
PENDING APPROVAL
246
Installed Capacities of Hydropower Plants in Lao PDR (Megawatts (MW) as of 2017)
Key Trends
Battery of Southeast Asia bull Due to Southeast Asiarsquos development toward industrialization there
remains a large demand gap for infrastructure support as well as growing demand for electricity to be met in the future
bull Thus Lao PDR with abundant natural resources for electricity generation aims to improve its energy sector to address this energy supply issue and position the country as a key exporter of energy in ASEAN
Lao PDR Electricity Exports
bull Lao PDRrsquos electricity exports have grown 15 annually since 2012
bull Electricity accounts for 24 of Lao PDR total exports
bull Thailand Cambodia and Vietnam are key export destinations with Thailand being the largest buyer
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
16
Hydropowerndash Opportunity
Lao PDR has ldquosuspendedrdquo new investment in hydropower projects and will conduct safety inspections for all existing dams due to the dam collapse incident in July
Data source laotiantimescom asianewsnetwork
The dam collapse in late July has caused Lao PDR to suspend new investment in hydropower projects in the country
bull On July 23 the ldquoSaddle Dam Drdquo part of the Xe-Pian Xe-Namnoy hydropower project in Champasak and Attapeu provinces has collapsed This disaster had affected around 5000 people in the area
bull On August 7 the government of Laos announced the suspension of new hydropower project approval and the renewed inspection of the existing dams
Key Policy Updates
2018 June
2018 August
The Lao government has suspended new investment in small-scale hydropower projects due to safety concerns
bull Lao PDR announced a temporary suspension of its authorization for investment in small-scale hydropower projects with installed capacity of lt15MW Such suspension is part of the governmentrsquos attempts to ensure the safety of hydropower dams
bull As a result the provincial and central authorities cannot approve new investment proposals for small-scale hydropower projects until concrete measures to ensure dam safety are drawn up
bull The suspension comes after construction of some projects has been found to be lower than the legally stipulated safety standards
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
17
Mining
Key Industries amp Opportunities
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
18
Mining ndash Overview
The mining Industry in Lao PDR has declined over the past several years due to fluctuations in global commodity prices and the maturity of some local mines
Data source International Trade Center worldbank
Lao PDR Mining Product Exports (USD Million 2017E)
Precious Stone Exports (USD Million 2017E)
DIAMOND
62 GOLD
1548 SILVER
54
Key Trends
Overall Lao PDRrsquos mining exports have decreased bull Exports of mining products have decreased since 2013 at an average
rate of 147 falling from USD1014 million in 2013 to USD 4575 in 2017
bull Copper and Coal experience the largest decline in export value mainly because some of the copper and coal mines have matured and global commodity prices have fallen
bull Meanwhile cement and sandstone record the highest increase in export value resulting from new investments and increasing domestic demand for these types of materials to use in the countryrsquos infrastructure development projects
Forms of investment in mining Business cooperation under contract
Joint venture between foreign and local firms
100 foreign or domestic ownership
Remark Firms could set up representative office to gather information and investigate investment opportunities
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
19
Taxes amp Regulations
Mining ndash Opportunity
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 amp Processing
2 years + 1 year
3 years + 2 years
1 year + 1 year
2 years + 1 year
20 years + 5 years
License Duration + Renewable
USD 3 -12 ha year USD 05 ndash 1 ha year + royalty (1-
7) Rental Fee
Registered company
Max 300 sqkm 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
Key Issues
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
20
Electronic Parts and Components Industry
Key Industries amp Opportunities
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
21
Electronic Parts and Components Industry - Overview
Over the recent years Laos has experienced exponential growth in its exports of electronic parts and components especially to Thailand indicating the initial formation of the regional supply chain
Lao PDR Electronic Part and Component Exports (USD Million 2017)
Increasing investments in Lao PDR Special Economic Zone (SEZ) boosts trade The presence of SEZs and attractive incentives have attracted FDI inflows into Lao PDR especially in the production of digital camera parts and telecom equipment parts Most manufacturing in these sectors is aimed at exporting intermediate products to assemblers of finished electrical and electronic products in other countries
Main Export Destinations 2017
Data source International Trade Center
Why Thailand has become the top export destination
bull ASEAN Free Trade Agreement (AFTA) ndash The agreement minimizes trade barriers and creates free flow of goods and capital within ASEAN
bull Thailand-based industries shift their focus on value added activities - firms relocate labor-intensive activities to Thailandrsquos neighboring countries including Laos
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
22
Electronic Parts and Components Industry - Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model and benefit from comparative advantages from both nations
Data source JETRO
Thailand
Product supply chain
Laos
Did you knowhellip
Challenges
Difficulty in getting large pools of labor due to small population
Underdeveloped infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Set up in major Special Economic Zones eg Vita Park SEZ and Savan-Seno SEZ
Roll out strategic human resource plan including training and capacity building
bull Advanced infrastructure
bull Experienced and high-skilled (management level) workforce
bull Affordable and youthful workforce bull Located between Vietnam and Thailand
both with high electronics parts demand bull Government incentives
Start operation from small scale (less than 500 workers) then scale up
Japanese enterprises have started implementing Thailand+1 model by relocating labor-intensive production to Laos and exporting back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Thailand + 1 Model
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
23
Industrial Agriculture
Key Industries amp Opportunities
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
24
Industrial Agriculture - Overview
Most industrial agriculture exports from Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Data source JETRO International Trade Center Produce Report USDA Foreign Agriculture Service
Leading Agricultural Exports by export value (USD Million 2016 and 2017)
A short-term drop in fruit exports in 2017 bull Exports declined because the Lao government suspended
development of large banana and other fruit plantations which typically produce to export to China and placed more stringent control on polluting farms
bull However at the end of 2017 Lao PDR and China negotiated for less stringent terms for Lao PDRrsquos fruit exports to China
Key Trends
Sugar Cane exports rocketing bull In 2017 sugar cane plantation boomed Export volume grew 121
times from 2016
bull The major reason was the relocation of sugar production from China as production costs there are very high approximately double that of Thailand
Organic fruit and vegetable becoming key economic plants bull Local and foreign investors are increasingly investing in organic
agriculture a higher value-added segment which is demanded by major countries such as Europe US Japan and China
Exports (2016)
USD 02 Million
Exports (2017)
USD 20 Million
121 times
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
25
Industrial Agriculture - Opportunity
Lao industrial agriculture sector offers opportunities for
bull Agricultural inputs andmachinery producers and distributors
bull Plantation operators
bull Processing and trading firms in Thailand
3 Processing and Trading
Key Drivers Lack of capability to process
products at international standard
Lack of market access
Opportunities Market inputs and machinery
to agricultural projects Investor can target both large scale investment
and smallholder farmers
Opportunities Produce high-value agricultural
products organic products herbs and medical plants
Foreign investors operate via (1) contract farming and (2) concession
Opportunities Process raw products to meet
export standards trade products to leverage existing market channels
Agricultural Inputs and Machinery
Key Drivers Limited access to improved
agricultural inputs - Seed - Fertilizer - Quality machinery
1 2
Key Drivers Arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
26
Tourism
Key Industries amp Opportunities
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
27
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
Data source Ministry of Tourism TRAVEL amp TOURISM ECONOMIC IMPACT 2018 LAOS
Direct Contribution of Travel amp Tourism to GDP (USD Billion 2012-2018E)
bull Both tourist arrivals and revenue from tourism have increased approximately 3 folds in the past decade
bull Most tourists come from Asia Pacific (93) particularly from from Thailand (50) and Vietnam (25) followed by Europe (5)
Top Tourist Arrivals Destinations 2017
1 Vientiane Capital
2 Savannakhet
3 Champasak
Most top tourist destinations are more developed towns bordering Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites im these following city also attract a considerable number of visitors
Luang Prabang Wat Pu at Champasak
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
28
Business Opportunities Associated to Tourism Sector
Accommodate increasing tourist arrivals
Provide dining and entertainment services
Develop attractive ecotourism cultural tourism packages
Provide transportation services linking major tourism sites
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
Tourism - Opportunity
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
29
Lao Consumer Income and Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy
spending evening in beer garden
Lao women wear sinh Follow Thai and Korean
fashion due to influence of TV series
Shop at traditional markets Middle income shop at
Thai border towns (Nong Khai Udon Thani)
Thai and Japanese products are perceived to have high quality Chinese products are perceived as sub-standard quality and Korean products are in between
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
30
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
31
Major Costs ndash Labor and Utility
Electricity Rate 2017
0 - 25 kwh 004USDkwh
26 - 150 kwh 005USDkwh
151 - 300 kwh 009USDkwh
more than 500 kwh 012USDkwh
301 - 400 kwh 010USDkwh
401 - 500 kwh 011USDkwh
Water Price (Per Unit) for Business and Trade Units
bull Water price for businesses is set to increase from USD USD 036 in 2017 to USD038 per unit this year
Labor minimum monthly wage in ASEAN 2017 USD
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
32
Tax System
Monthly Income (LAK) Tax Rate
0 ndash 1000000 0
1000001 - 3000000 5
3000001 - 6000000 10
6000001 - 12000000 12
12000001 - 24000000 15
24000001 - 40000000 20
Above 40000000 24
Types of Tax Tax rate
Profit Tax 24
Value Added Tax (VAT) 10
Withholding Tax Dividends 10
(non-residents) Transfer of shares 10
Transfer of assets 5
China
Luxembourg
Malaysia
Singapore
South Korea
Thailand
Vietnam
Income tax treaties for avoidance of double taxation
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
Personal Income Tax Corporate Taxes
Data source DFDL
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
33
Foreign Investment Regulations
Data source JETRO Compiled by World Business Advisory Center
Not Permitted to Foreigner Only for Joint Venture with Local Company 100 Foreign Ownership Allowed
Wholesale and Retail Businesses
100 Foreign Ownership bull If registered capital is 20 billion Lao Kip
(USD 25 million) or more
Maximum 70 Foreign Ownership bull If registered capital is 10 - 20 billion Lao Kip
(USD 125 ndash 25 million)
Maximum 50 Foreign Ownership bull If registered capital is 4 - 10 billion Lao Kip
(USD 05 ndash 125 million)
bull If registered capital is less than 4 billion Lao Kip (USD 05 million)
Hotel and Restaurants Maximum 60 Foreign Ownership bull 3-5 stars hotel with minimum registered capital of
1 billion Lao Kip (USD 125000)
bull Less than 3 stars hotel 100 Foreign Ownership bull NOT ALLOWED
Logistics
100 Foreign Ownership bull Domestic goods transport with minimum
registered capital of 3 billion Lao Kip (USD 375000)
Maximum 49 Foreign Ownership bull Cross border goods transport with minimum
registered capital of 5 billion Lao Kip (USD 625000)
bull Cross border goods transport with less than 5 billion Lao Kip of registered capital
bull Domestic goods transport with less than 3 billion Lao Kip of registered capital
Examples of Foreign Investment Regulations
Foreign enterprises are subject to foreign investment regulations in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
34
Types of Investment ndash (1) General Business
Data source JETRO Compiled by World Business Advisory Center
Besides foreign investment regulation foreign enterprises are also subject to the investment promotion law which classifies investment into 3 types
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Investment in General Business
Types of Investment in Lao PDR
Description
o An investment in general economic activities
o Activities including controlled businesses ndash businesses that require additional approval from relevant ministries
o Activities excluding concession business
Register Capital
Requirements
o At least 1 billion Lao Kip (USD 125000)
o At the day of establishment must pay 40 (agriculture business) 60 (production and processing) 80 (services) The remainder must be paid within 1 year
Examples of Controlled Businesses 1 Agriculture plantation agriculture fishery 2 Manufacturing petroleum products leathers textile amp 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
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
35
Types of Investment ndash (2) Concession Business
Data source JETRO Compiled by World Business Advisory Center
Investment in Concession Business
Description
o An investment that requires a concession or specific authorization from the government to use the governmentrsquos property
o Some concession businesses requires authorization from the central government whereas the other requires only provincial government level of authorization for example
bull At least 5MW electricity generation project requires the central government authorization
bull Less than 5MW electricity generation projects requires only provincial government authorization
Examples of Concession Business
1 Mining 2 Electricity generation 3 Infrastructure
bull Telecommunication bull TV and radio station bull Road railway airport seaport waste disposal site
4 Businesses that use the government land bull Shopping center bull Tourist attraction bull Public park bull Hotel bull Forestry and Logging bull Plantation and Livestock
Register Capital
Requirements
o Must pay at least 20 of registered capital while remaining should be paid within 2 years
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
36
Types of Investment ndash (3) Business Related to SEZ
Data source JETRO Compiled by World Business Advisory Center
General Business 1 Concession
Business 2 Business
Related to SEZ 3 Types of Investment in Lao PDR
Investment in Business Related to SEZ
Description
o Business related to Special Economic Zone -gt an investment in building infrastructure for a new town
o Business related to Specific Economic Zone -gt an investment in infrastructure development for specific purpose projects such as industrial zone export zone tourist development zone etc
High Potential SEZs in Laos
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
1
2
3
4
5 6
7
8
9 10
11
12
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
37
General Business
Concession Business
Business related to
SEZs
Procedure of Investment in Lao PDR
The investment approval procedure varies depending upon type of investment However all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
Apply at Ministry of Planning and
Investment
For developer apply at National Committee for Special Economic Zone
For investor apply at One-Stop Service Unit in
each SEZ
Get Concession
License
Get SEZ Concession
License
For controlled businesses apply for
approval at relevant Ministries
Get Approval License
Apply at Ministry of
Industry and Commerce
For non-controlled businesses
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
Data source JETRO Compiled by World Business Advisory Center
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
38
Investment Tax Incentives ndash General Zone
Data source JETRO Compiled by World Business Advisory Center
Investment Tax Incentives in Lao PDR
Profit Tax Exemption Period
Level 1 High Promotion
Level 2 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
Profit Tax Exemption Period by Promotion Sector and Zone
Promoted sectors Agriculture Industrial Handicrafts and Services
Type of Tax Exemption
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
Profit tax in next accounting year in case 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
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
39
Sector Period of
Profit Tax Exemption
Profit Tax Rate
After Tax Exemption Period
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
Investment amount of USD 2 million or more 10 year 8
Investment amount of USD 500000 - USD 2 million 8 year 8
Investment amount of USD 300000 - USD 500000 6 year 10
Investment amount of USD 150000 - USD 300000 4 year 10
Investment amount of USD 50000 - USD 150000 2 year 10
Export Laos products 5 year 10
International trade company 3 year 10
General trade company 2 year 10
a) Manufacturing
b) Service
c) Commerce
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
Investment Tax Incentives ndash Special and Specific Economic Zone
Data source JETRO
Investment Tax Incentives in Lao PDR
General Zone Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2 Example of Tax Incentives in Savan-Seno SEZ
Other Tax Incentives
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
40
Non-Tax Incentives amp Trade Privileges
Data source JETRO
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
Guarantee against nationalization expropriation and requisition without compensation
Protection
Trade Privileges
ASEAN WTO GSP Bilateral trade agreement (over 18 countries)
o Argentina o Belarus o Bulgaria o Cambodia o China o Indonesia o India o Korea DPR o Kuwait
o Malaysia o Mongolia o Myanmar o Philippines o Russian
Federation o Thailand o Turkey o USA o Vietnam
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
41
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Lao PDR
KASIKORNBANKrsquos Support
Table of Contents
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
42
Foreign Currency Exchange
Data source Bank of the Lao PDR
Laos Currency Kip (LAK)
Latest FX Rate (as of August 22 2018)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8507
EUR 1 ~ LAK 9851
THB 1 ~ LAK 262
JPY 1 ~ LAK 77
CNY 1 ~ LAK 1193
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
43
KASIKORNTHAIBANK Service in Lao PDR
Retail Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Current deposit
Lending
Working capital loan
Long term loan
Bank guarantee
Project Financing
FX Services
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
44
KASIKORNTHAI BANK Limited
With establishment KASIKORNTHAIBANK
the first full-scale locally incorporated institution from Thailand is fully committed to support our clientsrsquo cross-border financing and transaction for their trade and investment activities in Lao PDR
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
45
KASIKORNTHAIBANK in Lao PDR Contacts
bull HEAD OFFICE Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88905 Fax +856 21 253 336 wwwkasikornbankcomla
KASIKORNTHAI BANK Limited
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel +856 21 410 888 +856 20 598 88826 Fax +856 21 410 889
Ms Piyanoot Sangsan Branch Manager KASIKORNTHAI BANK LIMITED Lane Xang Head Office E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Branch Manager Ponesinuan Branch E-mail chatupornbkasikornbankcom
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
46
About AEC+ Business Advisory The AEC+ Business Advisory is set up by KASIKORNBANK to support businesses in their regional expansion across the ASEAN+3 market by providing local market intelligence and strategic business advice
What we do bull Offer customized and tailor-made advisory services bull Publish investment guides and industry reports bull Deliver in-depth insights via seminars bull Organize business trips to bring first-hand experience
Follow Us Visit our website at
AEC+ BUSINESS ADVISORY
Prepared by Mr Anoot Charoenkiattikul World Business Intelligence Specialist E-mail anootckasikornbankcom
httpswwwkasikornbankcominternational-businessenPagesHomeaspx
47
47
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