Laos has amended laws relating to investment, the economy and business but this has not been enough to raise the country’s Doing Business ranking.
The International Finance Corporation (IFC), a private arm of the World Bank, ranks 183 economies worldwide according to their performance in 10 categories: starting a business, ease of obtaining a construction permit, connecting to electricity, registering property, obtaining credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.
Laos is ranked 165th in the IFC’s Doing Business ranking for 2012, dropping from 163rd in 2011, despite the government having made key economic policy reforms.
One of the issues resulting in the drop in ranking is the difficulty businesses face when seeking credit or investment funding. In the ‘Getting Credit’ ranking, Laos ranks 166th this year, down from 152nd place in 2011.
This has highlighted the problems that businesses face in accessing investment funding, despite an increase in the number of commercial banks in Laos to 24.
Most loans provided by Lao banks are for real estate, while small and medium sized enterprises, which the government has a policy to support, receive only a small proportion of the funds available.
One of the categories Doing Business identifies deals with construction permits. Laos is now ranked 180th in this category, down from 178th in 2011. Laos is also ranked 89th in starting a business, after being ranked 88th in 2011.
Another problem area is tax payment, with Laos ranked 123rd in 2012, compared to 120th in 2011.
The Resolving Insolvency and Registering Property categories remain unchanged in 2012 at 183rd and 172nd respectively.
Despite the obstacles to doing business in Laos, the IFC acknowledges the positive moves made by the country to ease barriers and improve facilities, such as connecting to the electricity grid, where the Lao ranking has improved to 138th, up from 139th in 2011.
Laos has also seen border trade grow and is now ranked 168th, up from 170th in 2011.
The Lao government has amended laws and created a ‘one-stop service’ for companies seeking investment permission and a business licence, which will become operational in October.
In addition, the laws offer investment incentives including longer tax breaks and land use rights for persons who invest US$500,000 in the country.
Laos has also amended the tax and customs laws and revised a number of economic policies as part of efforts to join the World Trade Organisation at the end of this year.
Source: Vientiane Times