Transcript Slide 1

Foreign Direct Investment
Policy in the Lao PDR
Presented by Houmpheng Souralay
Director General, Department of
Investment Promotion
May 28, 2007
Bangkok, Thailand.
Themes of Presentation:
General Information on FDI in Laos
 Government Policies on FDI
 Potential Sectors with focus on
Hydropower, Mining, and Agriculture

Country’s Profile








Land Area
Population
Population Density
Population Growth
GDP
Per capita GDP
Labor Force
Religion
:
:
:
:
:
:
:
:
236,800 sq. km
5.6 Millions (2005)
24 persons/sq km
2.4 percent
2.7 billion USD
491USD
2.9 Millions
Buddhism
Some Macroeconomic Data

GDP
(average 2001-05)%
6.2
 Agriculture
(3.4%); Industry (11.3%);
Services (6.7%)

GDP

GDP per capita
(average 2001-2005)
491

GDP per capita
(Expected 2006-2007)
591
(Expected 2006-07)%
7.5
Changes in Economic
Structure (2001-2005)
2001
2005
Open Door Policy
• New Economic Mechanism:
1986: Shifting from planned economy to
a market oriented economy
• Privatization of state
enterprises
• Open for FDI
Shares of Private Investment
22.0%
14.2%
Foreign
Domestic
Private
63.8%
59.9%
4.4%
Public
35.7%
2001
2005
Approved and Implemented FDI
in Lao PDR
200
178
Approved
$2,680.0
158
Implemented
$2,500
No. of Projects 131
Millions Dollars
$2,000
Line 159
Line
84 505
$1,500
$1,000
150
127
100
$1,249.0
52
$492.0
$500
$465.0
$533.0
$299.0
$75.0
$54.1
$93.0
50
$405.0
$155.0
$0
0
2001
2002
2003
2004
2005
2006
2007
No. of Project
$3,000
Approved Foreign Investment in Lao PDR by
Sector from 2000- March 2007
No
Sectors
Projects
Value of Investment
(US$)
1
Electricity Generation
37
2,944,252,200
2
Agriculture
142
711,359,290
3
Mining
134
585,089,892
4
Industry & Handicraft
176
443,153,920
5
Trading
92
266,071,089
6
Construction
23
159,686,874
7
Services
154
184,188,467
8
Hotel & Restaurant
57
160,409,247
9
Telecom
3
39,940,000
10
Wood Industry
35
29,307,154
11
Banking
8
20,096,000
12
Garment
25
20,285,688
13
Consultant
29
7,613,252
Grand Total
919
5,572,232,808
Approved Foreign Investment in Lao PDR by Country
2001- March 2007
No
Countries
Projects
1
Thailand
157
1,334,100,051
2
China
223
763,642,466
3
Vietnam
105
463,612,212
4
France
53
419,081,879
5
Japan
29
418,390,583
6
India
3
350,200,000
7
Australia
24
317,677,196
8
Korea
99
274,185,705
9
Singapore
19
96,235,000
10
Malaysia
30
82,050,392
11
Canada
9
48,531,750
12
Switzerland
5
31,050,000
13
Russia
10
15,675,310
14
Sweden
3
13,090,000
Total
797
Value of Investment ($US)
5,490,268,785
LAO PDR IN THE GLOBAL ECONOMY

Member of international organization ( MIGA,
ASEAN, ASEAN-Japan Centre, WORLD BANK,
ADB, IMF…)

GSP Privileges : 42 countries ( EU, JAPAN,
CANADA, CHINA, … )

NTR with USA (04/02/2005)

Bilateral Investment Treaties with 23 countries
(Investment Promotion and Protection)

In process of joining WTO
From Land-Locked
to Land-Linked
Lao PDR is being transformed into
LAND LINKED country and Transit
country in the region
On-going project
Kunming
CHINA
• Thai, ADB, China share 1/3
(soft loan)
• Start 2004, complete 2007
1,200 Km.
Jinghong
Luang Namtha
LAOS
Chiang Khong
THAILAND
Chiang Rai
On-going project
Second Mekong Int’l
Bridge Project
HAI VAN PASS TUNNEL
• Second Mekong Bridge
(Mukdaharn – Savannaket)
•Soft loan from Japan
Seno
Dansavan/
Lao Bound
•Cost = 4,753 Mil Yen.
Dong Ha
•Under construction
Kon Kaen
A. Chumpae
Mukdaharn/
Maung Pin
Danang
Kalasin
Savannaket
Lao PDR
Vietnam
Cambodia
•Complete end 2006
(Road Project)
On-going project
III CL14: Stung Treng – Champasak and
Preah Vihear – Champasak
Lashio
Jinghong
•No progress on Cambodia side
Dien Bian
Kentung
Bagan
LM16
Meiktila
MT36
LT34
Bo Ten Phu
Muang Xai
LT28
Luang
Prabang
•Section in Lao PDR is completed.
LT29
Nan
Payagg
i
MT37
MT38
Thanbuzayat
Andaman Sea
Nakhon
PhanumLT30
Thaton
Mae
Sot
Three Pagoda
Pass
MT40
LT32
Khon Mukdaharn
Kaen Ubon
Ratchathani
Nakon
Ratchasima
CT56
CM12
Poipet
Tavoy
Kanchanaburi
Trat
Quang
Ngai
CT25b
CL14
Stung
Treng
Siem
Reap
Quy
Nhon
CT25a
Kaw
Thong
Ranong
Sihanouk
Ville
Ca
Mau
Showcase,
Showcase,Short-Term
Short-Term
Medium
Mediumto
toLong-Term
Long-Term
IV CM12: Road linkage under Asian
Highway project
•Cambodia: Poipet –Sisophon (48 km)
•Under ADB loan
Advantages:
 Comparative
Advantages:
 Rich Natural Resources
 Large Area of Fertile Agricultural Land
 Varieties of Tourism Development Sites
 Virtually no damaging natural disaster
 Competitive
Advantages:
 One of the most Politically Stable Country in the Region
 Socio-Economic and Financial Stability
 High Security (Low Crime Rate)
 Low Labor Costs
 GSP Privileges given from 42 countries
 Liberal Laws and Regulations creating favorable
business and investment environments
Government’s Investment Policy

Law on the Promotion of Foreign Investment no.11/NA
(2004) and its Implementing Decree no. 301/PM (2005)

Welcome every business sector and activity not
detrimental to national security, environment, and public
health and safety

All investment is guaranteed against expropriation
and nationalisation without compensation

Remittance of dividends an profits back home or to
third countries is allowed through banking system

Long Investment term and land lease (50-75 years)
Government’s Investment Policy (con.)
 Forms
of Investment:
1) Business Cooperation by contract
2) Joint Venture
3) 100% foreign owned
 Representative
Office:
to collect information, study investment
opportunities.
 Branches:
Foreign Banks, Financial Institutions, Insurance
Companies, Consulting firms, and Airlines.
Government’s Investment Policy (con.)

Promoted Activities eligible for incentives:
1.
Production for export;
Agro-processing and forestry;
Industrial processing;
Human resource development and public
health;
Construction of infrastructure;
Production of raw materials and
equipment to be supplied to key industrial
activities; and
Development of the tourism industry and
transit services.
2.
3.
4.
5.
6.
7.
Government’s Investment Policy (con.)

Investment Incentives:

Profit Tax:
 Zone 1: 10% profit tax
7 years exemption
 Zone 2: 15% profit tax
5 years exemption and
3 years half reduction
 Zone 3: 20% profit tax
2 years exemption and
2 years half reduction
Government’s Investment Policy (con.)

Other incentives:
 Exemption
of import duties and taxes on raw
materials and capital equipment;
 Exemption
of export duty on export products;
 10%
personal income tax on expatriate
employees;
 Additional
tax holidays, reduced tax rates for
large projects with special concession are
available upon negotiation
Special Economic Zone (con.)
S-S SEZ located in the middle of EWEC
 Savannakhet is the most populated
province with potential workforce
 Road no. 9 and 2nd Mekong Friendship
Bridge provides access to seaports in
Vietnam (500km) and Thailand (600km)
 Tax Incentives:

 Tax
Holidays: 2-10 years
 Profit Tax: 8% and 10%
 Personal Income Tax: 5%
 Loss Carried Forward: 5 years
Special Economic Zone

Savannakhet-Seno SEZ
(S-S SEZ) established in
2003 by S-S SEZ
Decree of the PM
no. 148/PM dated
Sept. 29 2003.
Site A: 305 ha
 Site B:
20 ha

Layout of Site A
Layout of Site B
POTENTIAL SECTORS
 Energy
 Mining
 Agribusiness
 Tourism
 Construction
Material
 Light industry
 Service
INVESTMENT SECTORS
ELECTRICITY GENERATION:




Abundant water resources
produced by tributaries
of Mekong river
Estimated electricity
generation potential:
over 18,000 MW
BOT Investment in hydroelectric facilities will be
substantial
Investment in ancillary support
services will increase
Hydropower Development of Lao
PDR
Electrified Area
•Today total installed capacity of
700 MW
•Electricity export representing
30% of total country’s export
revenues
•Population electrified app. 46%
and the rest under electrification
•Industry growth of about 7% per
annum
•Neighboring countries:
•electricity demand growth
in neighboring countries
notable
•price of fueled energy
subject to fluctuation of fuel
price in the world market
•Need of diversification of
energy sources
Long Term Development of SubRegional Interconnection
500kv Transmission Line
Facilities
(Jinghong) China-(Luang Namtha)
Laos-Thailand
(Hating) Vietnam-Nam Theun 2
(Laos)-Thailand
(Pleiku) Vietnam-Ban Sok
/Sananakhet (Laos)-Thailand
Long Term Development of Regional
500-kv Interconnection
MINING SECTOR:
 Mining
industry is under
developed
 Mining sector presents numerous
potential opportunities for investment and
development
 Mineral deposits : tin, lead, zinc, iron ore,
cooper, gold, gypsum,
lignite, sapphires, …
 Concessions granted to
foreign investors
AGRICULTURE-FORESTRY:
Highest ratio of forest area
 Large stands of tropical hardwoods
including teak and rosewood
 Suitable land for various tree Plantation
 Plenty of productive land
 Long term land lease
(50-75 years)

Main Issues in Agro-Forest

Land approved level:
 <10.000 ha by MAF with approval from GOL;
 >10.000 ha by GOL with adoption from NA;
 Fees rate between 6 -9 US$/ha/year.
 Profit tax exemption period starts from the date
of making profit
Some Major Agro-Forest Projects
in Lao PDR








Oji Lao Plantation (Japan): 50.000 ha
= 49 m USD
Daklak Rubber (Vietnam): 10.000 ha
= 30 m USD
Viet-Lao Joint Stock Rubber(Vietnam):10.000 ha=22 m USD
Paksong Highland (Thailand): 26.000 ha
= 8 m USD
Agarwood Lao Group (Thai/Lao):
= 10 m USD
Mitr Lao Sugar Co. Ltd. (Thailand)
= 22.5 m USD
Savannakhet Sugar Corp. (Thailand)
= 10 m USD
Birla Lao Pulp & Plantations Co. Ltd. (India):50,000 ha= 350 m USD
Culture-tourism
• Rich in well-preserved
culture and traditions
• World heritage sites
Thank you for your attention