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Foreign Direct Investment Foreign Direct Investment Policy in the Lao PDRPolicy in the Lao PDR
Presented by Houmpheng SouralayDirector General, Department of
Investment PromotionMay 28, 2007
Bangkok, Thailand.
Themes of Presentation:Themes of Presentation: General Information on FDI in Laos Government Policies on FDI Potential Sectors with focus on
Hydropower, Mining, and Agriculture
Country’s ProfileCountry’s Profile Land Area : 236,800 sq. km Population : 5.6 Millions (2005) Population Density : 24 persons/sq km Population Growth : 2.4 percent GDP : 2.7 billion USD Per capita GDP : 491USD Labor Force : 2.9 Millions Religion : Buddhism
Some Macroeconomic Data Some Macroeconomic Data GDP (average 2001-05)% 6.2
Agriculture (3.4%); Industry (11.3%);Services (6.7%)
GDP (Expected 2006-07)% 7.5
GDP per capita (average 2001-2005) 491 GDP per capita (Expected 2006-2007) 591
Changes in Economic Changes in Economic Structure (2001-2005)Structure (2001-2005)
20012001 20052005
Open Door PolicyOpen 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 Shares of Private InvestmentInvestment
63.8%35.7%
14.2%
4.4%
59.9%22.0%
2001 2005
Foreign
DomesticPrivatePublic
$54.1
$492.0 $465.0 $533.0
$1,249.0
$2,680.0
$75.0 $93.0 $155.0$299.0
$405.0
52
84
178
131 127
158
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2001 2002 2003 2004 2005 2006 2007
Milli
ons
Dolla
rs
0
50
100
150
200
No. o
f Pro
ject
ApprovedImplementedNo. of ProjectsLine 159Line 505
Approved and Implemented FDI Approved and Implemented FDI in Lao PDRin Lao PDR
Approved Foreign Investment in Lao PDR by Approved Foreign Investment in Lao PDR by
Sector from 2000- March 2007Sector from 2000- March 2007 No Sectors Projects
Value of Investment (US$)
1 Electricity Generation 37 2,944,252,2002 Agriculture 142 711,359,2903 Mining 134 585,089,8924 Industry & Handicraft 176 443,153,9205 Trading 92 266,071,0896 Construction 23 159,686,8747 Services 154 184,188,4678 Hotel & Restaurant 57 160,409,2479 Telecom 3 39,940,00010 Wood Industry 35 29,307,15411 Banking 8 20,096,00012 Garment 25 20,285,68813 Consultant 29 7,613,252 Grand Total 919 5,572,232,808
Approved Foreign Investment in Lao PDR by Country Approved Foreign Investment in Lao PDR by Country 2001- March 20072001- March 2007
No Countries Projects Value of Investment ($US)1 Thailand 157 1,334,100,0512 China 223 763,642,4663 Vietnam 105 463,612,2124 France 53 419,081,8795 Japan 29 418,390,5836 India 3 350,200,0007 Australia 24 317,677,1968 Korea 99 274,185,7059 Singapore 19 96,235,000
10 Malaysia 30 82,050,39211 Canada 9 48,531,75012 Switzerland 5 31,050,00013 Russia 10 15,675,31014 Sweden 3 13,090,000
Total 797 5,490,268,785
LAO PDR IN THE GLOBAL ECONOMYLAO 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 From Land-Locked to Land-Linkedto Land-Linked
Lao PDR is being transformed into LAND LINKED country and Transit country in the region
On-going projectOn-going project
• Thai, ADB, China share 1/3 Thai, ADB, China share 1/3
(soft loan)(soft loan)
• Start 2004, complete 2007Start 2004, complete 2007
Jinghong
1,200 Km.1,200 Km.
Chiang Rai
Luang Namtha
Kunming
THAILANDTHAILAND
LAOSLAOS
CHINACHINA
Chiang Khong
On-going projectOn-going project
• Second Mekong Bridge Second Mekong Bridge (Mukdaharn – Savannaket)(Mukdaharn – Savannaket)
•Soft loan from JapanSoft loan from Japan
•Cost = 4,753 Mil Yen.Cost = 4,753 Mil Yen.
•Under constructionUnder construction
•Complete end 2006Complete end 2006A. Chumpae
Kon Kaen
KalasinMukdaharn/
Savannaket
Seno
Maung Pin
Dansavan/Lao Bound Dong Ha
Danang
HAI VAN PASS TUNNELSecond Mekong Int’l Bridge Project
Cambodia
Lao PDR
Vietnam
Showcase, Short-TermShowcase, Short-Term
Medium to Long-TermMedium to Long-Term
Andaman Sea Tavoy
Khon Kaen
Nakon Ratchasima
Mukdaharn
Ubon Ratchathani
Siem Reap
Stung Treng
Quy Nhon
Quang Ngai
Ca Mau
Trat
Luang Prabang
Muang Xai
Dien Bian Phu
Kanchanaburi
Three Pagoda Pass
Thaton
Payaggi
Mae Sot
Thanbuzayat
MeiktilaBagan
Lashio
Kentung
Jinghong
Bo Ten
Nan
Poipet
Ranong
Kaw Thong
Sihanouk Ville
(Road Project)
Nakhon Phanum
CT25aCT25a
CM12CM12CT56CT56
CT25bCT25b
CL14CL14
LT30LT30LT32LT32
LT29LT29
MT36MT36
LT34LT34
LM16LM16
LT28LT28
MT40MT40
MT38MT38
MT37MT37
Showcase, Short-TermShowcase, Short-Term
Medium to Long-TermMedium to Long-Term
On-going projectOn-going project
III III CL14: Stung Treng – Champasak and CL14: Stung Treng – Champasak and Preah Vihear – ChampasakPreah Vihear – Champasak
•No progress on Cambodia sideNo progress on Cambodia side
•Section in Lao PDR is completed.Section in Lao PDR is completed.
IV IV CM12: Road linkage under Asian CM12: Road linkage under Asian Highway projectHighway project
•Cambodia: Poipet –Sisophon (48 km)Cambodia: Poipet –Sisophon (48 km)
•Under ADB loanUnder ADB loan
Advantages: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
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 PolicyGovernment’s Investment Policy
Government’s Investment Policy (con.)Government’s Investment Policy (con.)
Forms of Investment:1) Business Cooperation by contract2) Joint Venture3) 100% foreign owned
Representative Office:to collect information, study investment opportunities.
Branches:Foreign Banks, Financial Institutions, Insurance Companies, Consulting firms, and Airlines.
Promoted Activities eligible for incentives:
1. Production for export; 2. Agro-processing and forestry; 3. Industrial processing; 4. Human resource development and public
health; 5. Construction of infrastructure; 6. Production of raw materials and
equipment to be supplied to key industrial activities; and
7. Development of the tourism industry and transit services.
Government’s Investment Policy (con.)
Government’s Investment Policy (con.)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 and3 years half reduction
Zone 3: 20% profit tax 2 years exemption and
2 years half reduction
Government’s Investment Policy (con.)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.)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 yearsProfit Tax: 8% and 10%Personal Income Tax: 5%Loss Carried Forward: 5 years
Special Economic ZoneSpecial Economic Zone Savannakhet-Seno SEZ
(S-S SEZ) established in 2003 by S-S SEZ Decree of the PM no. 148/PM datedSept. 29 2003.
Site A: 305 ha Site B: 20 ha
Layout of Site A
Layout of Site B
POTENTIAL SECTORSPOTENTIAL SECTORS Energy Mining Agribusiness Tourism Construction Material Light industry Service
INVESTMENT SECTORSINVESTMENT SECTORSELECTRICITY GENERATION:ELECTRICITY GENERATION:
Abundant water resources produced by tributaries of Mekong river
Estimated electricitygeneration potential: over 18,000 MW
BOT Investment in hydro-electric facilities will be substantial
Investment in ancillary support services will increase
Hydropower Development of Lao PDR
•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
Electrified Area
Long Term Development of Sub-Regional Interconnection
19Sub-Regional Interconnection Plan
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 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-FORESTRYAGRICULTURE-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-ForestMain 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 Some Major Agro-Forest Projects in Lao PDRin 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-tourismCulture-tourism• Rich in well-preserved
culture and traditions• World heritage sites
Thank you for your attention