1 Lao PDR Investment Guide June 2017 World Business Advisory Center World Business Group
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1
Lao PDR Investment Guide
June 2017
World Business Advisory Center
World Business Group
2
Country and Economic Overview
Key Industries and Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
3
Why Lao PDR
ldquoLaos a country rich in natural resources and
cultural heritagerdquo
Its strengths
1 Strategic location for Thailand + 1 industrial development
2 Abundance of mineral resources
3 Substantial hydropower potential
4 Well balanced climate and fertile land
5 Tremendous potential for tourism
4
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
5
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 72 million (2016)
Government Single party socialist republic
Currency Lao Kip
GDP (Current Price) USD 138 billion (2016) (Equivalent to Chonburi Thailand)
GDP per capita USD 1925 (2016)
Country Overview
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
1970 1990 2000 2010 2020 1980
Timeline and Milestone
With 68 average growth rate in medium term Laos is one of the fastest growing nations in ASEAN driven by expansion in light industry and resource-based sector
1975 Establishment of current socialist government
1988 Liberalization of Foreign Investment Law
1997 ASEAN membership
2013 WTO membership
2020 goal Graduate from list of LDCs
Data Source IMF
6
Approved FDI by sector 2011 -2015
Top investors 2011-15
China $25 billion 1
Vietnam $11 billion 2
Thailand $10 billion 3
Changes in Economic Composition 2007 and 2016
Data Source IPD Worldbank CIA
Services and industry expanded rapidly whereas agriculture shrank continuously
Services and industry flourished owing to rapid growth in light industry and tourism
Foreign Direct Investment
Most FDI concentrates on mining and hydropower projects Implementation of Thailand +1 business model leads to flourishing in light industry especially electrical amp electronics whereas influx of tourists from neighboring countries stimulates growth in tourism sector
Accumulate value
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
2
Country and Economic Overview
Key Industries and Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
3
Why Lao PDR
ldquoLaos a country rich in natural resources and
cultural heritagerdquo
Its strengths
1 Strategic location for Thailand + 1 industrial development
2 Abundance of mineral resources
3 Substantial hydropower potential
4 Well balanced climate and fertile land
5 Tremendous potential for tourism
4
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
5
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 72 million (2016)
Government Single party socialist republic
Currency Lao Kip
GDP (Current Price) USD 138 billion (2016) (Equivalent to Chonburi Thailand)
GDP per capita USD 1925 (2016)
Country Overview
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
1970 1990 2000 2010 2020 1980
Timeline and Milestone
With 68 average growth rate in medium term Laos is one of the fastest growing nations in ASEAN driven by expansion in light industry and resource-based sector
1975 Establishment of current socialist government
1988 Liberalization of Foreign Investment Law
1997 ASEAN membership
2013 WTO membership
2020 goal Graduate from list of LDCs
Data Source IMF
6
Approved FDI by sector 2011 -2015
Top investors 2011-15
China $25 billion 1
Vietnam $11 billion 2
Thailand $10 billion 3
Changes in Economic Composition 2007 and 2016
Data Source IPD Worldbank CIA
Services and industry expanded rapidly whereas agriculture shrank continuously
Services and industry flourished owing to rapid growth in light industry and tourism
Foreign Direct Investment
Most FDI concentrates on mining and hydropower projects Implementation of Thailand +1 business model leads to flourishing in light industry especially electrical amp electronics whereas influx of tourists from neighboring countries stimulates growth in tourism sector
Accumulate value
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
3
Why Lao PDR
ldquoLaos a country rich in natural resources and
cultural heritagerdquo
Its strengths
1 Strategic location for Thailand + 1 industrial development
2 Abundance of mineral resources
3 Substantial hydropower potential
4 Well balanced climate and fertile land
5 Tremendous potential for tourism
4
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
5
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 72 million (2016)
Government Single party socialist republic
Currency Lao Kip
GDP (Current Price) USD 138 billion (2016) (Equivalent to Chonburi Thailand)
GDP per capita USD 1925 (2016)
Country Overview
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
1970 1990 2000 2010 2020 1980
Timeline and Milestone
With 68 average growth rate in medium term Laos is one of the fastest growing nations in ASEAN driven by expansion in light industry and resource-based sector
1975 Establishment of current socialist government
1988 Liberalization of Foreign Investment Law
1997 ASEAN membership
2013 WTO membership
2020 goal Graduate from list of LDCs
Data Source IMF
6
Approved FDI by sector 2011 -2015
Top investors 2011-15
China $25 billion 1
Vietnam $11 billion 2
Thailand $10 billion 3
Changes in Economic Composition 2007 and 2016
Data Source IPD Worldbank CIA
Services and industry expanded rapidly whereas agriculture shrank continuously
Services and industry flourished owing to rapid growth in light industry and tourism
Foreign Direct Investment
Most FDI concentrates on mining and hydropower projects Implementation of Thailand +1 business model leads to flourishing in light industry especially electrical amp electronics whereas influx of tourists from neighboring countries stimulates growth in tourism sector
Accumulate value
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
4
Country amp Economic Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
5
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 72 million (2016)
Government Single party socialist republic
Currency Lao Kip
GDP (Current Price) USD 138 billion (2016) (Equivalent to Chonburi Thailand)
GDP per capita USD 1925 (2016)
Country Overview
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
1970 1990 2000 2010 2020 1980
Timeline and Milestone
With 68 average growth rate in medium term Laos is one of the fastest growing nations in ASEAN driven by expansion in light industry and resource-based sector
1975 Establishment of current socialist government
1988 Liberalization of Foreign Investment Law
1997 ASEAN membership
2013 WTO membership
2020 goal Graduate from list of LDCs
Data Source IMF
6
Approved FDI by sector 2011 -2015
Top investors 2011-15
China $25 billion 1
Vietnam $11 billion 2
Thailand $10 billion 3
Changes in Economic Composition 2007 and 2016
Data Source IPD Worldbank CIA
Services and industry expanded rapidly whereas agriculture shrank continuously
Services and industry flourished owing to rapid growth in light industry and tourism
Foreign Direct Investment
Most FDI concentrates on mining and hydropower projects Implementation of Thailand +1 business model leads to flourishing in light industry especially electrical amp electronics whereas influx of tourists from neighboring countries stimulates growth in tourism sector
Accumulate value
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
5
Country Name Lao Peoplersquos Democratic Republic (Lao PDR)
Area 236800 sqkm
Population 72 million (2016)
Government Single party socialist republic
Currency Lao Kip
GDP (Current Price) USD 138 billion (2016) (Equivalent to Chonburi Thailand)
GDP per capita USD 1925 (2016)
Country Overview
Luang Prabang
Khammouane
Savannakhet
Pakxe
VIENTIANE
1970 1990 2000 2010 2020 1980
Timeline and Milestone
With 68 average growth rate in medium term Laos is one of the fastest growing nations in ASEAN driven by expansion in light industry and resource-based sector
1975 Establishment of current socialist government
1988 Liberalization of Foreign Investment Law
1997 ASEAN membership
2013 WTO membership
2020 goal Graduate from list of LDCs
Data Source IMF
6
Approved FDI by sector 2011 -2015
Top investors 2011-15
China $25 billion 1
Vietnam $11 billion 2
Thailand $10 billion 3
Changes in Economic Composition 2007 and 2016
Data Source IPD Worldbank CIA
Services and industry expanded rapidly whereas agriculture shrank continuously
Services and industry flourished owing to rapid growth in light industry and tourism
Foreign Direct Investment
Most FDI concentrates on mining and hydropower projects Implementation of Thailand +1 business model leads to flourishing in light industry especially electrical amp electronics whereas influx of tourists from neighboring countries stimulates growth in tourism sector
Accumulate value
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
6
Approved FDI by sector 2011 -2015
Top investors 2011-15
China $25 billion 1
Vietnam $11 billion 2
Thailand $10 billion 3
Changes in Economic Composition 2007 and 2016
Data Source IPD Worldbank CIA
Services and industry expanded rapidly whereas agriculture shrank continuously
Services and industry flourished owing to rapid growth in light industry and tourism
Foreign Direct Investment
Most FDI concentrates on mining and hydropower projects Implementation of Thailand +1 business model leads to flourishing in light industry especially electrical amp electronics whereas influx of tourists from neighboring countries stimulates growth in tourism sector
Accumulate value
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
7
Lao Trade Overview
Chiang Rai - Bokeo
Nakhon Panom - Khammouan
YoY growth in Thai-Laos border trade in 2016 from
USD51 to USD58 billion 15
Laos Import Product
12 Automotive and parts 11 Fuel products 7 Iron and Steel
Nong Khai - Vientian 1
Mukdaharn - Savannakhet
2
Ubon - Champasak
3
Laos International Trade Laos-Thailand Trade
Top trade partners
1) Thailand 2) China 3) Vietnam
Key Import products
Machinery amp electric equipment
12
Fuel Product
11
Vehicles
15
Key Export products
Data Source Department of Foreign Trade (Thailand) International Trade Center
Estimated value in 2016
Electricity
25
Mining Product 21
Laos Export Product
54 Electricity 17 Electric Equipment 14 Copper and Products
In 2016 Laos exports of electricity and electrical equipment grow rapidly especially export to Thailand the major trade partner
Machinery amp electric equipment
10
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
8
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
Data Source Asian Development Bank
Road transport is the primary means of transport carrying over 80 of freight traffic and almost 100 of all domestic passenger traffic Major roads link major cities to key border towns in neighboring countries with routes heading north from Vientiane the capital the more developed and seeing most of the traffic
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 and the so-called Laos-China railway runing from Vientiane to the Boten-Bohan borer is set to be completed by the end of 2021
Aviation Laos has 3 international airports in the North Central and Southern regions The airports mainly handle tourist arrivals and business travelers at a lesser extent A small amount of trade is handled at Vientianersquos international airport for special niche products that require express shipment For such cases capacity is limited
Attapeu
International Airport
Danang
Foreign Seaport
Savannaket
Confirmed Rail Lines
Lao Bao
Bohan
Infrastructure ndash Overview
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
9
GMS Network Roads
Route 3 bull Part of North-South Economic Corridor bull Most cargo is Thailand-China trade Most
transhipment occurs manually at Boten-Bohan border between Thai and Chinese trucks
bull Transshipment is mostly manual bull Apart from fuel tankers most cargo is
containerised
Route 9 bull Part of East-West Economic Corridor and
key link between Thailand and Danang Port in Vietnam
bull Majority of traffic is China-bound cargo from Thailand and some Vietnam-bound cargo Most transshipment is at Mukdahan border where cranes are available onto Vietnamese trucks
bull Cargo is rarely swapped at Dansavanh-Lao Bao since facilities are less developed and work is often manual Routes 6 amp 7
bull Enters established Laos-Vietnam borders in the north but not yet widely used for freight transport
Major National Roads
Route 13 bull 1500 km long The backbone of Laos that
runs parrallel to the Mekong River Mostly paved and passable in all weather
bull It is the spine of the national road system and many major roads run off of R13 linking all of Laosrsquo major cities
Route 12 bull Nakhon Panom-Khammouan border bull Still not a major trade route
Route 18 bull Runs off the R13 to Attapeu the site of Laosrsquo
third international airport Currently not a major route but economic growth in the Attapeu area may change that in the future
Road Network
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
10
While no current railways exist future plans are in place to develop a railway network connecting Laos and its neighboring countries and key business partners China Thailand and Vietnam
4 Other Railway Projects
1) Thakhek-Savannakhet-Champasak
2) Champasak-Vang Tao (border to Thailand) Plan
1 Thailand-Laos Railway Project
Phase II 75 km track from Thanaleng-Khamsavat (near central Vientiane) Plan
Progress bull Construction is set to begin in 2017 and will be completed in 2019
bull The line continue on from the existing 35 km line from Nong Khai to Thanaleng
2 China-Laos Railway Project
415 km track from Vientiane-Boten single 1435-m track for 160kmhr passenger train or 120 kmhr freight train
Plan
Progress bull Contruction began in Luang Prabang in December 2016 Scheduled to finish in 2021
bull It will be connected to the Thailand-Laos line and become part of Kunming-Singapore line
3 Vietnam-Laos Railway Projects
1) Savannakhet-Lao Bao line 220km parallel with R9
2) Vientiane-Thakhek-Vung Ang line 500km Plan
Progress bull Lao Bao line has completed feasibility study and has been approved
bull The line which will enter Vietnam through the Cha Lo border is still under study by Korearsquos KOICA
Progress bull Both projects are still under consideration
Railway Network
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
11
Water and air transport are not part of the governmentrsquos key areas of focus for development as neither are major modes of transport with high traffic for cargo
Water Transport Air Transport
Current Situation
bull Main routes still used commercially to a limited extent are in the north beween Huay Xai and Luang Prabang and Huay Xai and Laos-Myanmar-China border
bull Capacity is limited since big boats cannot traverse the waterways and port facilities are underdeveloped and mostly manually run
Da Nang
Laem Chabang
It is more common for goods to arrive through Laem Chabang port in Thailand or Da Nang port in Vietnam and enter Laos through land
Picutre Source httpwwwnprorg
Current Situation
bull Laos has 3 international airports bull Wattay International Airport ndash Capacity 11 million bull Luang Prabang International Airport bull Attapeu International Airport
Wattay International Airpot Upgrade
Now 11 complete To be completde in 2018
Upgrades include enlarging the passenger service facilities to handle up to 2-3 million passengers
The project is a collaboration between Laos and Japan who has provided 9 billion yen in financial aid for the project
Water and Aviation Transport
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
12
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
13
Key Industries and Opportunities
With rapid improvement in logistic infrastructure rich natural resources ample arable land and cultural sites Lao PDR offers attractive opportunities for investment in light industry hydropower mining agriculture and tourism sectors
Hydropower
Industry Mining Light Industry
Industrial Agriculture Tourism
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
14
Hydropower Industry
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
15
Hydropower - Overview
Actual target and potential hydropower generation capacity Export Value of Electricity 2012 ndash 2016 (USD million)
With its river network Lao PDR is strategically located to become the ldquoBatteryrdquo of Southeast Asia
Current hydropower operations only realize 25 of total potential of Lao PDR
At present Thailand is the major importer of electricity from Lao PDR Recently Vietnam has begun to import electricity from Lao PDR
Electricity export (mostly from hydropower) in Lao PDR almost doubled in 2016 with a Compound Annual Growth Rate (CAGR) of 20 during 2012 - 2016
Laos hydropower sector is aiming to meet the growing energy demand domestically and regionally Laos exported almost USD 1 billion to Thailand and USD 34 million to Vietnam in 2016
Although hydropower export has surged in 2016 Lao PDR still has fulfilled only a quarter of its full potential as the battery of Southeast Asia
Data Source Ministry of Energy amp Mines Lao PDR TRADEMAP
Electricity export almost
doubled in 2016
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
16
Hydropower ndash Opportunities
bullMostly state-owned entities such as Electricite du Laos (EdL)
bullMultilateral agencies (ADB World Bank) Bilateral (Japan Norway)
bullCapital investment and technology from advanced countries Japan Korea and Europe
bullThai construction firm power generating firms and consulting engineering
Thai Firm International Firm
Lao local entity
International Organization
Multilateral Public Private Partnership (PPP) Model
private
public
Typical Hydropower Project Life Cycle
ldquoMultilateral Consortiumrdquo
Thai construction power generation firms join venture with international firms and Lao local entity but wholly foreign and domestic projects are allowed as well
Ho
w t
o in
vest
Feasibility Planning Construction Electricity Generation
Thai construction power generating and consulting engineering firms could explore opportunities in hydropower projects both in the forms of fully-owned or joint venture with local and other foreign entities
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
17
Mining Industry
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
18
Mining - Overview
Mineral Productions in Laos (Thousand metric tons) 2013
Gold production 6838 kg
Data Source US Geological Minerals Yearbook 2013 Department of Mines Lao PDR
Did you knowhellip
Form of investment in mining
Business cooperation by contract
Joint Venture between foreign and local firm
100 foreign or domestic owned
Remark Firms could set up representative office to gather information and investigate investment opportunities
657 Mining Firms
granted permission
942 Projects
ongoing
Laos still has rooms for mining sector to grow due to its variety of potential mineral resources and the governmentrsquos determination to support domestic and foreign investment in the mining sector
Silver production 29715 kg
7
55
growth rate 2012-13
854 Million USD
export of mining products
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
19
Mining ndash Opportunities
Prospection Exploration Feasibility
Study Construction Mining +
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
Key Issues
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
Taxes amp Regulations
Mineral resources in Lao PDR offer opportunities to firms with expertise in mining operations from prospection to mining and processing
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
20
Light Industry
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
21
Light Industry ndash Electrical amp Electronics Parts Industry Overview
Lao PDRrsquos Export value of EampE Parts Products (USD million)
30 37
173
330
408
-
50
100
150
200
250
300
350
400
450
2012 2013 2014 2015 2016
USD Million
Transmission and reception apparatus Telephone sets for cellularwireless networks
Other electrical equipment amp parts
EampE export proportion in 2016 Main export destination in 2016
1 Thailand 90
2 USA 3
3 Japan 2
4 Australia 2
Factors contribute to this dramatic growth are
1 ASEAN Free Trade Agreement (AFTA) ASEAN Economic Community (AEC) by end of 2015 -gt freer flow of goods and capital with ASEAN
2 Thailand shifts its focus on value added activities -gt firms relocate labor intensive activities to Thailandrsquos neighboring countries including Laos
Laos experienced exponential growth in Electrical amp Electronics (EampE) parts exports in recent years especially to Thailand indicating the initial formation of regional supply chain
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
22
Thailand + 1 model
Light Industry ndash Electrical amp Electronics Parts Industry Opportunity
Industrial development in Laos offers opportunities for firms to form the regional supply chain model to benefit from comparative advantages from both nations
Data Source JETRO
Product assembly
bull Thailand
Product supply chain
bull Laos
Japanese enterprises have started implementing Thailand+1 model by relocating some labor intensive parts to Laos and export back to Thailand to complete product assembly eg NIKON (digital camera) Dai-Ichi Denshi (wire harness) Nissei Mizuki (electronics parts) and Toyota boshoku (car seat cover)
Do you knowhellip
Challenges
Difficulty in getting large pool of labors due to small population
Under-developed in infrastructure in some regions
Challenge in recruiting higher skilled specialists
Suggestion Locate 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 labors) and gradually scale up
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
23
Industrial Agriculture
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
24
Data Source UN International Trade Center Xinhuanet Chinadaily Asianews
Industrial Agriculture ndash Overview
Leading Agricultural Exports in 2016 by export value
USD109 million grew 46 YoY Rubber 1
USD60 million dropped 11 YoY Coffee 3 USD55 million dropped 8 YoY Corn 4
USD94 million grew 35 YoY Vegetable amp Fruits 2
USD31 million grew 6 YoY Rice 5
Ranking change from 2015
Most industrial agriculture exports of Lao PDR are produced by foreign investors (Chinese Thai and Vietnamese) and local entrepreneurs to a lesser extent
Rubber export value increased in 2016 due to rubber price recovery in China the Laosrsquo main market
The growth was mainly driven by an increase in Thailandrsquos demand for vegetable amp Fruits the major buyer of Laosrsquo vegetable amp fruits
Bolaven Plateau in the South is the main production site of coffee Due to unfavourable weather the production declined in 2016
Laos started to export its rice to China since 2015 causing an continuous growth in export value
Corn export value declined in 2016 due to a slump in sale to Thailand one of Laosrsquo main markets
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
25
Industrial Agriculture ndash Opportunities
Lao industrial agriculture sector offers opportunities for (1) agricultural inputs and machinery producers and distributors (2) plantation operators (3) processing and trading firms in Thailand
3 Processing and Trading
lack of capability to process products especially to meet international standard
lack of market access
Market inputs and machinery to agricultural projects Investor can target both large scale investment
and smallholder farmers
High-value agricultural products such as organic products herbs and medical plants
Foreign investors could operate plantation via (1) contract farming and (2) concession
Process the raw products to meet export standards trade the products leveraging existing market channels
Agricultural Inputs and Machinery
limited access to improved agricultural inputs - seed - fertilizer - quality machinery
1 2
ample arable fertile land
low level of chemical pesticides
Plantation ndash High Value Products
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
26
Tourism
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
27
Tourism - Overview
Tourist Arrivals and Revenue from Tourism 2005 ndash 2016(E)
Both tourist arrivals and revenue from tourism have increased 4 folds in the past decade
Most tourists come from Asia Pacific (93) followed by Europe (5) Most tourists are from Thailand (50) and Vietnam (25)
Data Source Lao National Tourism Administration
1 Vientiane Capital
2 Savannakhet
3 Champasak
Top Tourist Arrivals Destinations 2015
Most top tourist destinations are the more developed towns bordering with Thailand
Nong Khai
Mukdahan
Ubon Ratchathani
World Heritage sites these following city also attracted considerable number of visitors
Luang Prabang Wat Pu at Champasak
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
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
28
Tourism - Opportunities
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 sides
Produce and market souvenirs applying local arts design and materials
1 Hotel Restaurant Entertainment
2 Tour Company Holiday Package
3 Sourvenirs
4 Transportation Service
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
29
S OUTHERN Happening Southern town with high potential in tourism and industrial agriculture
C ENTRAL
Border towns with Thailand are emerging with increased business interaction with Thailand
Major Cities for Business Activities by Region
S
Luang Prabang
tourist destination Logistics Trading Hydropower
Luang Namtha and Phongsali
Industrial agriculture Tourism
N ORTHERN The border towns with China and now gaining increasing attention
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 industry Hydropower Industrial Agriculture
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
30
Lao Consumer Income and Behavior
Most Lao consumers have positive perception of Thai products middle-high income groups in Lao PDR (top 20) enjoy shopping in Thai border towns and in Bangkok
Average Monthly Income in USD by Income Groups (2016)
Data Source K-WB Advisory Estimates
Lao Consumer Behavior
Prefer to cook at home Enjoy drinking alcohol Middle income enjoy spending evening
in beer garden
Laos women wear sinh Follow Thai and Korean fashion due to influence of TV series
Shop at traditional markets Middle income shop at Thai border town
(Nong Khai Udon Thani)
Thai and Japanese products are perceived as high quality Chinese products are perceived as sub-standard quality and Korean products are in between
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
31
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
32
Water price for businesses is set to increase from USD 2884 kip (USD 036) in 2015 to 2971 kip (USD 037) per cubic meter in 2016
Major Costs ndash Labor and Utility
Labor minimum monthly wage in ASEAN 2017 USD
Utility electricity rate (2016)
Water Price (Per Unit) for Business and Trade Units
Data Source Jclao Nampapalao
0 - 25 kwh 348 kipkwh
26 - 150 kwh 414 kipkwh
151 - 300 kwh 799 kipkwh
more than 500 kwh 999 kipkwh
301 - 400 kwh 880 kipkwh
401 - 500 kwh 965 kipkwh
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
33
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
Transfer of shares 10
Transfer of assets 5
Brunei
China
South Korea
Malaysia
Myanmar
Thailand
Vietnam
Luxembourg
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 Source KPMG ASEAN Tax Guide PwC
Tax System
Personal Income Tax Corporate Taxes
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
34
Foreign Investment Regulations
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
Foreign enterprises are subjected to foreign investment regulation in several business activities Generally small businesses are preserved for Lao enterprises whereas large businesses with certain investment conditions are opened for foreign investors
Examples of Foreign Investment Regulations SourceJETRO Compiled by World Business Advisory Center
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
35
Types of Investment ndash (1) General Business
General Business 1 2 Concession
Business
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 requires an additional approval process from the 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) while the rest 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)
Besides foreign investment regulation foreign enterprises are also subjected to the investment promotion law classifying investment into 3 types
SourceJETRO Compiled by World Business Advisory Center
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
36
Types of Investment ndash (2) Concession Business
General Business 1 2 Concession
Business
Business
Related to SEZ 3
Types of Investment in Lao PDR
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
SourceJETRO Compiled by World Business Advisory Center
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
37
Types of Investment ndash (3) Business Related to SEZ
General Business 1 2 Concession
Business
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
SourceJETRO Compiled by World Business Advisory Center
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
38
Procedure of Investment in Lao PDR
General Business
Concession Business
Business related to SEZs
1
2
3
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
Investment approval procedure varies depending upon types of investment Finally all foreign investors must go through enterprise registration tax identification number registration and application for capital importation certificate
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
39
Investment Tax Incentives ndash General Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives 2
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
Profit tax in next accounting year in
case of net profit is used for reinvestment (business
expansion)
Import duties for import of raw material equipment spare parts and
vehicles directly used for production
Export duties for general goods and
products (resource-based products should follow
associated laws)
Permission to carry forward losses to
three consecutive accounting years
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
40
Investment Tax Incentives ndash Special and Specific Economic Zone
Investment Tax Incentives in Lao PDR
General Zone
Promotion Sector and Zone based Incentives 1 Special amp Specific Economic Zone
Tailor Made Incentives in Each SEZ 2 Example of Tax Incentives in Savan-Seno SEZ
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
Source JETRO
Other Tax Incentives
Personal Income Tax 5
Import Duty Exemption for import of raw material equipment spare parts and
vehicles directly used for production
VAT Exemption for import products
Dividend Tax after Profit Tax Exemption Period
5
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
41
Non-Tax Incentives
Source Ministry of Planning and Investment Lao PDR
Non-Tax Incentives amp Trade Privileges
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
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
42
Country amp Economy Overview
Key Industries amp Opportunities
Doing Business in Laos
KASIKORNBANKrsquos Support
Table of Content
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
43
Foreign Currency Exchange
Laos Currency Kip (LAK)
Latest FX Rate (as of April 28 2017)
Remark THB and USD are widely accepted especially in the border trade area
USD 1 ~ LAK 8191
EUR 1 ~ LAK 8924
THB 1 ~ LAK 239
JPY 1 ~ LAK 73
CNY 1 ~ LAK 1188
Source Bank of the Lao PDR
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
44
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
KASIKORNTHAIBANK Service in Lao PDR
Corporate Banking
Bank Accounts (LAK THB USD)
Savings account
Term deposit
Remittance
Remittance
Trade Finance Letter of Credit (LC) Standby Letter of Credit (SBLC)
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
45
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
KASIKORNTHAIBANK in Lao PDR
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
46
bull HEAD OFFICE
Unit 12 Lane Xang Avenue Xiangngeun Village Chanthaboury District Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
KASIKORNTHAIBANK in Lao PDR Contacts
Mr Barvorn Srisangatrakul Country Director Tel (856) (21) 410881 Mobile (856) (20) 59888906 E-mail barvornskasikornbankcom
KASIKORNTHAI BANK LIMITED LANE XANG
bull PONESINUAN BRANCH
Ban Ponesinuan Unit 14 Sysattanak Vientiane Capital Lao PDR Tel (856) (21) 410888 Fax (856) (21) 410889
Ms Piyanoot Sangsana Manager Head Office Tel (856) (21) 410882 Mobile (856) (20) 59888905 E-mail piyanootskasikornbankcom
Mr Chatuporn Boozaya-Angool Manager Ban Ponesinuan Branch Tel (856) (21) 410885 Mobile (856) (20) 59888826 E-mail chatupornbkasikornbankcom
47
47
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