Transcript Leeber Leebouapao, Lao P D R

Preliminary Country Paper
on
Competition Scenario
in the Lao PDR
By Dr. Leeber Leebouapao
NERI, Lao PDR
Table of Content
I.
General Background
II.
Social and Economic Policy Affecting Competition
III.
Nature of Market/Competition
IV.
Sectoral Policy
V.
Anti-Competitive Pratices
VI.
Consumer Movement
VII.
Conclusion/Recommendation
I.
GENERAL BACKGROUND
Characteristics of the Country:
 Landlocked and mountainous country
Economic System:
 1986: Shifting from a centrally planed economy to a
market oriented economy ( NEM )
Economic Integration:
 1997: Member of ASEAN
 Currently: Preparation for Joining WTO
GDP Growth Rate 1992-2003 in %
%
8
6.9
5.9
7.3
6.9
5.8
5.7
5.7
2002
7
7.5
2001
7.7
2000
6
4
6
4
Year
2003
1999
1998
1997
1996
1995
1994
1993
0
1992
2
US$
400
GDP per capita 1996-2003 in US$
394.58
360.35
361.34
332.21 328.33 328.81
350
284.55
300
258.59
250
200
150
100
2003
2002
2001
2000
1999
1998
1997
0
1996
50
Share in GDP by Sectors in 2003
27%
49%
24%
Agriculture
Industry
Services
Inflation Rate 1995-2003
%
160
140
120
100
80
60
40
20
0
134
61.38
16
2003
2002
7.84 10.6
2001
2000
1999
1998
1997
1996
1995
14.35 18.8 14.2
26.98
Exchange Rate Kip/US$ 1995-2003
12000
10,060 10,000
10000
8,871
8000
7,103
6000
4000
3,296
2003
2002
2001
2000
1999
1,260
1998
926
1996
1995
819
1997
2000
0
7,864
Export and Import Value between 1992-2003
in million US$
800
600
500
Export
Import
400
300
200
100
2002
2000
1998
1996
1994
0
1992
million USS$
700
1500
20.4
42
2000
2001
550
116.8
1999
2003
122.3
1998
493.8
138.78
1997
2002
129.65
1996
804.9
2500
2,598.30
3000
1995
1994
347.8
0
1993
500
335.1
1000
1992
Registered FDI Capital 1992-2003 in million US$
2000
Registered FDI Capital by Sectors 2002
2.8% 2.8% 2.6% 3.0%
3.3%
12.2%
73.3%
Electricity
Industry/Handicraft
Services
Agriculture-Forestry
Construction
Telecommunication and Transportation
Others
II. Social and Economic Policy
Affecting Competition
The New Economic Mechanism ( NEM )
Shifting from a centrally planed economy to a
market oriented economy in 1986
Industry Policy
Industry Development Plan(1996-2005):
 Processing industry,
 Cottage and handicraft industries,
 Power generation,
 Mining,
 Agro-forestry industry,
 Textiles and construction materials industry
Industry Policy(Cont.)
Priority of Industrialisation and Modernisation
Strategy:





Electricity,
Agro-processing industry,
Tourism,
Mining,
Construction material industry
Trade Policy
• Six Tax Rates: 5%, 10%, 15%, 20%, 30% and 40%.
• Import tax exemptions: Raw materials for the manufacture
of exports and import substitutes, production materials and
spare parts for FDI and for the imports by Government and
donor funded activities.
• Excise tax rates: Range from 25-104% for automobiles, 024% for petroleum products, 50% for motorcycles, beer and
cigarettes, 10% for electronic equipment, and 50-60% for
alcoholic beverages.
•Turnover tax rate: 5% for essential goods, agriculture
inputs machinery and equipment, fabric and cotton thread.
10% for other products (e.g. motor vehicles and electronic
equipment). Turnover tax exemption for rice fertilizer,
breeding animals, forest inputs, livestock medicines etc…
Trade Policy(Cont.)
• Export taxes: electricity (20%), coffee and livestock (5%),
semi-finished wood products (30%), and finished wood
products such as plywood (3%). Royalties are charged on
timber and other natural resources.
• Export Incentives:
Temporary importation, or duty exemption: no duty is paid on
raw materials that are to be incorporated into exports, but the
exporter must provide evidence to the customs department that
the products are eventually exported.
Duty drawbacks: duty is initially paid, but the exporters can
apply for a refund of duty by demonstrating that the products
have been exported.
Trade Policy(Cont.)
• Export Incentive(Cont.)
Free trade zones: firms located in the zones can engage in
both import and export trade with foreign countries free of
duty. Their sales to the domestic market are subject to
customs duty, although concessional treatment is common.
• Liberalization of Export License and Simplifying of the
System of Import Licensing in 2001
• AFTA Commitment by 2008: CEPT rates on IL items to
0-5 %
Foreign Direct Investment
•No limitation on the percentage of foreign ownership
• Incentives:
Exemption from import duties on raw materials
and equipment for export oriented production.
 Exemption from export duties for export finish
products.
 Freedom to employ necessary foreign expatriates.
 Freedom to repatriate profit and capital and
individual income to their home countries or to third
country after income tax has been paid.
III. The Nature of Market/Competition
Nature of Market/Competition
Market Based Economy:
Price liberalization, privatization, private sector
development support including private land ownership
and open door policy
Level of Competitiveness of the Local Firm:
Comparative advantages:
- - Low wages
- Low cost of domestic based raw material
- - Investment incentive in local areas, tax exemption for
export and imported investment capital
Nature of Market/Competition(Cont.)
Barriers to competition:
 Low education and skill levels of the labor force
 High transport costs
 Small-scale of private enterprise
 Marketing problems
 Low level of urbanization
 Low labor productivity
 Poor financial services
 Lack of a formal property system
IV. SECTORAL POLICIES
SECTORAL POLICIES
Electric Power:
 Increase power supply for domestic industries
and consumption
 Promote power generation for export to meet
Government’s revenue objectives
 In 2000: 3,313 million KW
In 2006: 24,468 million KW
SECTORAL POLICIES(Cont.)
Telecommunication Services:
1997: 29,626 telephone lines
1998: 35,303 telephone lines
4 Mobile operators: Lao telecom, ETL, Lao Asia
Telcom (LAT, owned by the army), and Tango
The Telecom plan 2000: Expansion of network,
Separation between the international and
long distance exchanges, development of CSC optic
fiber project, Introduction of a service system
for subscribers, improvement of training
SECTORAL POLICIES(Cont.)
Telecommunication Services(Cont.):
Internet Services:
Services Companies:
- Globe Communications Electronic
- Lao Telecom
Internet users have increased rapidly since 1998
Internet cafes are available in many cities
SECTORAL POLICIES(Cont.)
Transportation:
• Transport sector: road, river, and air transportation,
no rail way
• Road transportation: more than 90% of freight traffic
and 85 % of passenger traffic and 75 percent of freight
traffic (2001)
•Domestic air transport: most remaining passenger
traffic.
•Only about 18 % of the total lengths of the road
system are paved.
SECTORAL POLICIES(Cont.)
Transportation(Cont.):
Investment: Largest share of public investment and
ODA to the transport sector
Public Investment by Sectors
2003-2004
Infrastructure
Agriculture
4%
1%
3% 3%
7%
8%
Education
45%
Health
Labor and Social
Welfaire
Information and Culture
14%
15%
Industry
Trade
Other Administration
Agencies
SECTORAL POLICIES(Cont.)
Financial Services:
• Insurance and insurance-related services
– The insurance sector is governed by Law No. 11/90/PSA of 18
December 1990 and a related Decree No 01/PMO of 23 January
1992).
– The market is open to foreign investment and competition.
– Insurance company: the Assurance Generale de Laos (AGL), a
joint venture between the Government of the Lao PDR and the AGF
of France.
• Banking and Other Financial Services
– Central Bank: Monetary Policy and Supervision of Commercial Banks
– Commercial Banks
SECTORAL POLICIES(Cont.)
•Banking and Other Financial Services(Cont.)
- Commercial banks are authorized to mobilize
deposits of different types such as demand deposits,
savings deposits, and other types of deposits, including
sales of Treasury Bills and Central Bank Bills to the
public.
- They include acceptance of deposits in kip, US
dollars and in Thai baht.
- Commercial banks may determine their own interest
rates on deposits within the general guidelines issued
periodically by the central bank.
SECTORAL POLICIES(Cont.)
Health Related And Social Services:
Public system of hospitals: a central university
hospital and five regional hospitals, 13 provincial
and 150 small district hospitals and health posts.
Private investment, including foreign, is not
restricted in the area of hospital services since
1998, but still no hospitals have been opened to
date.
V. Anti-Competitive Practices
Anti-Competitive Practices
 Monopoly in some business activities
- By law and regulation(copy right, patens,
concessions, economic strategy(SOE) )
 Limited service suppliers by nature
 Policy implementation by some officials is
sometimes inconsistent
 Approval procedure takes times
VI. Consumer Movement
Consumer Movement
No formal consumer movement against anticompetitive practices, but complaining and
asking for opening up more competitive practices
VII. Conclusion and Recommendation
CONCLUSION
Lao PDR is moving forwards to a market based economy
by promoting private sector development, however, it is
still facing numerous internal challenges to market
mechanism in particular to business competition in the
country particularly lack of a comprehensive regulatory
framework including competition law or anti-monopoly
law etc. In addition, there are numerous constraints to
competition namely lack of skilled human resources,
poor infrastructure system, limited financial services,
low purchasing power in the country due to high poverty
incidences, weakness in macroeconomic management
leading to relatively macroeconomic instability etc.
RECOMMENDATION
 Strengthen market mechanism
 Simplify and clarify the policy and regulatory framework for
private sector enterprise and investment
 Improve Productivity
 Strengthen competitiveness through human resource development
 Clarify the supportive role of government
 Promote and facilitate substantive dialogue with the business
community
 Strengthen infrastructure development
 Strengthen macroeconomic stability
 Strengthen trade access to neighboring country markets
 Mobilize financial resources and facilitate access to credit