The location of Laos in the center of Indochina is a factor conducive to the development of investment. Intra-regional economic ties already connect all countries bordering on Laos. Laos is a member of the Mekong countries association, and since 1997 is an active member of ASEAN. The region of Laos with its closest countries has a total population of over 250 million inhabitants.
The foreign investment system in Laos is administered by the Ministry of Planning and Investment.
The advantages of investing in Laos:
political stability of the state
membership in ASEAN and the association of the Mekong basin countries – easier access to the region’s markets
support from the Lao Government for foreign investment, legal regulations and security guarantees that support investors
extensive investment opportunities in many sectors of the economy, including mining industry, energy, production, trade, agribusiness, tourism, services, logistics, health care and education
the wealth of natural resources
relatively low production costs
country predicted by ASEAN countries as the main transit country of the region and electricity supplier for the countries of the region
the need for financial lobbying at every level of the hierarchy
lack of precise legal regulations, not fully predictable time of official procedures
Forms of foreign investments:
business cooperation based on a contract (agreement between a local enterprise and a foreign entity represented by a local representative office)
foreign-Laotan company (joint venture)
a Lao company with a majority share of a foreign entity
New Prime Minister’s decree offers tax breaks for investors in Lao SEZs – Latest Update July 17, 2018
Domestic and foreign investors will be granted a number of tax breaks under a new amended decree related to specific and special economic zones (SEZs) issued recently by the government.
The new decree highlights the government’s policy on SEZ development, requirements for their establishment, incentives granted to investors, one-stop service delivery, and the obligations of developers to train and hire Lao workers.
The 18-page decree signed by Prime Minister Thongloun Sisoulith stated that SEZ developers engaged in road construction, electricity and water supply and drainage systems will be awarded value-added tax (VAT) exception.
Other construction activities are obliged to pay 50 percent of the VAT rates as stipulated in the VAT law.
Those investing in sectors related to industrial production, tourism industry, services, health, education and real estate will enjoy a 16-year profit tax exemption in “zone 1” locations and eight-year profit tax exemption in “zone 2” locations. After that, they will have to pay 35 percent of profit tax rates as stipulated in the taxation law.
Factories that aim to produce for 100-percent export will enjoy VAT exception and pay 50 percent of VAT rates as stipulated in the laws.
Developers are obliged to use land plots and transfer land rights to other entrepreneurs within the concession periods as approved by the government.
People who own real estate in the SEZs can use these properties or sell it to others, but they need to hand over their rights and ownership to the government after the concession period is over. A foreigner, his wife and children who buy properties in the zone, amounting to US$100,000 or more, will enjoy multiple entry visas that can last for 10 years and can be extended.
Those who rent apartments in the zones will be granted multiple entry visas that can last for three months.
The decree restricts investors to develop only 80 percent of their concession land plot, and the rest can be used as public spaces, including public parks and green areas.
The most attractive investment directions currently:
Mekong inflows all over the country are a great source of electricity. The electricity generation sector plays an important role in Laos’ economic development. Almost all existing and planned sources of electricity are hydropower. The energy sector also includes transmission lines, substation construction, and modernization of existing infrastructure. This is related to the need for specialized equipment and equipment, hence the prospects for foreign investors. Each energy project has agreements guaranteeing the repurchase of electricity produced by the state.
Laos is an exporter of electricity to neighboring countries. The constantly growing demand for electricity from Laos causes a systematic increase in investment needs in this area. Laos is typed by ASEAN as a source of energy for the countries of the Association.
Current number of operating power plants: 42 with an installed total capacity of 6,391 MW. They generate approximately 33.822 GWh per year, mainly contracted for export.
The 15 existing power plants with a total capacity of 738.5 MW are managed by government energy companies (EDL and EDL-GEN). 27 power plants with a total capacity of 5.652.5 MW are managed by independent producers of electricity.
12 more power plants have been completed in 2017 (expected installed capacity 468.45 MW, planned production of about 1,872 GWh per year).
The number of new hydroelectric power plants completed or in the construction phase by 2020 is recorded in the development plan of the power grid – 53 power plants with a total capacity of over 7,000 MW.
Investments in energy in the vast majority are carried out with the participation of foreign capital.
Laos has a significant, only about 30% recognized, geological potential (no practically any deep exploratory drilling). Rich deposits of gold, copper, bauxite, tin, zinc, iron ore, hard and brown coal and gypsum are confirmed throughout the country.
The low cost of exploitation is possible due to favorable geological conditions, in particular largely surface deposits (eg copper and gold from 20-30 m deep). Based on geological data, the position of Laos in terms of mineral resources is comparable in the region with the resources of the Philippines, Papua New Guinea and Indonesia. Mining is becoming one of the most important sources of Laos GDP. Laos does not have modern mining technologies and equipment, hence exploitation of deposits is only possible in cooperation with foreign companies. The favorable climate for investors is systematically improving both in terms of facilitating the investment process and the security of the investments themselves. The Ministry of Planning and Investment deals with the supervision and supervision of investments in Laos, whereas the Ministry of Energy and Mining is responsible for substantive supervision over the mining industry. In Laos, there are currently 157 active mining projects, 133 projects at the Feasibility Study stage and over 200 projects at exploration and exploration stages.
Active investors come from: Australia (the two largest mines in the country), China, Laos, Vietnam, Malaysia, Korea, Taiwan, USA, UK, Thailand, Peru, Russia, Canada, and Japan.