Minimum Investment Requirements Eliminated On Foreign Owned Business
Source: ECCIL & Laoconnection
The Ministry of Industry and Commerce has issued the notification No.2633/cabinet/MOIC, dated 07 November 2017 to all Industry and Commerce offices in Vientiane Municipality, provinces and districts to strictly implement the abolishment of the minimum registered capital requirement for foreign investment in the activities under the General Business list such as manufacturing factory, training provider, real estate, restaurant etc. (a minimum registered capital is still required for certain activities under Controlled Business List which are governed by specific sector regulations). For more information visit: https://www.erm.gov.la/index.php/en/about-us
This enforcement is the first step forward to enforce the implementation of the Investment Law (amendment) No. 14/NA, dated 17/11/2016. The old Investment law of 2009 required foreign investors to bring up a minimum registered capital of 1 billion kip or around 120,000 USD to establish a business in General Business. This has been eliminated by the new Investment Law 2016.
In April 2016, the Organisation for Economic Co-operation and Development (OECD) advised the Lao government to reduce or eliminate the minimum investment capital of 1 billion kip on foreign owned businesses in what it described as discriminatory and a deterrent for investors, as well as, not serving its original purpose. A formal recommendation to amend the Law on Investment to rescind the minimum was then submitted to the National Assembly that same year.
The governing body agreed and it was duly noted in Amendment No. 14/NA dated November 17, 2016. However, the change was not well known or highly publicized.
To address this, on November 7, 2017, the Lao Ministry of Industry and Commerce issued a formal notice, No.2633/MOIC, to all its offices across the country to fully recognize and abolish the capital requirement foreign owned general businesses.
The notice appears to have been needed to help clarify the issue on the requirement and to lay to rest any doubts that foreign investors may have had on the issue. Moreover, it was a clear signal to those who may have still been enforcing the now defunct requirement to cease the practice.
Of note, there are still restrictions in specific industries and sectors of the economy that foreign companies are not permitted to operate in. Additionally, some industries maintained their minimum investment capital requirements, such as in mining. The amendment discussed here refers to “general businesses” only.