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DE RUEHVN #0149/01 0640130
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FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC 1883
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
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UNCLAS VIENTIANE 000149 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS BESTIC 
STATE FOR EEB/IFD/OIA 
STATE PASS USTR FOR BISBEE 
COMMERCE FOR HP PHO 
 
E.O. 12958: N/A 
TAGS: ECON EINV OPIC USTR KTDB LA
SUBJECT: INVESTMENT CLIMATE STATEMENT FOR LAOS 
 
REF: 07 STATE 158802 
 
OPENNESS TO FOREIGN INVESTMENT 
The Lao government is open to foreign investment as a matter 
of policy.  It allows 100% foreign ownership of investments. 
The overall investment climate is poor but improving.  Laos 
rates very low in international indices of transparency and 
ease of doing business. 
The economic reforms adopted in 1988 and Decree No. 73/PO, 
dated October 22, 2004, purport to promote foreign direct 
investment as a means of boosting development and economic 
growth.  Under the 2004 Law on the Promotion of Foreign 
Investment, foreign investors may invest in all business 
sectors and zones of investment in the Lao People,s 
Democratic Republic, except in business activities which are 
detrimental to national security, have a negative impact on 
the environment, or are regarded as detrimental to health or 
national traditions.  In recent years Laos has seen a 
significant increase in FDI, especially in mining, 
hydropower, and plantation agriculture.  Major foreign 
investors are Thailand, China, and Australia. 
When bidding for the right to large contracts, companies 
frequently offer the government the &option8 of purchasing 
part of the company at a later date, often with money 
borrowed from the investor or multilateral institutions.  The 
investment term of a foreign investment enterprise depends on 
the nature, size, and conditions of the business project but 
normally cannot exceed fifty years. Under special 
circumstances, foreign investment enterprises may be extended 
with the approval of the government. However, foreign 
enterprises that receive extension approval from the 
government may not exceed a total investment term of 
seventy-five years. 
Foreign investors seeking to establish operations in Laos 
must submit project proposals to the Department for Promotion 
and Management of Domestic and Foreign Investment (DDFI), 
Ministry for Planning and Investment (MPI).  The proposal is 
then screened by the relevant line ministries and adjudicated 
by the Prime Minister,s Office.  Under Prime Minister Decree 
No 301, dated October 12, 2005, proposals for projects worth 
US $20 million or more require the approval of the Prime 
Minister. The President and Vice President of the Department 
of Domestic and Foreign Investment can approve investments of 
less than $10 million USD.  FDI equal to or less than $3 
million USD can be approved at the provincial level by all 
provinces, and in large provinces the ceiling for provincial 
level approval is $5 million. 
Foreign investors in a joint venture must contribute at least 
thirty percent (30%) of the venture,s registered capital. 
Capital contributed in foreign currency must be converted 
into kip based on the exchange rate of the Bank of the Lao 
People,s Democratic Republic on the day of the capital 
contribution.  Wholly foreign-owned companies may either be a 
new company or a branch office of an existing foreign 
company. Throughout the period of operation of a foreign 
investment enterprise, the assets of the enterprise must not 
be less than its registered capital. The screening process at 
the Department for Promotion and Management of Domestic and 
Foreign Investment (DDFI) in the Ministry of Planning and 
Investment (MPI) takes into account the financial and 
technical feasibility of the project, input from relevant 
line ministries, and whether the proposed project conflicts 
with government policy.  Upon receipt of an application, the 
MPI must coordinate with relevant sectors and local 
authorities to consider and respond in writing to the foreign 
investor. Responses to projects, depending on project type, 
are supposed to be forthcoming within 15 ) 45 working days. 
Foreign investors are required to obtain a foreign investment 
license, an enterprise registration certificate, and a tax 
registration certificate from the MPI office nearest the 
place where the foreign investors are licensed. Thereafter 
they shall be considered as enterprises established in 
conformity with the laws of the Lao People,s Democratic 
Republic.  Within 90 days from the date of receipt of an 
investment license the foreign investment enterprise must 
commence business activities.  If the investors fail to do 
so, the foreign investment license is subject to termination. 
In addition to the investment license, foreign investors are 
required to obtain other permits.  These include a business 
registration which must be annually renewed from the Ministry 
of Industry and Commerce, a tax registration from the tax 
department in the Ministry of Finance, a business logo 
registration from the Ministry of Public Security, permits 
from each line ministry related to the investment (i.e., 
Ministry of Industry and Commerce for manufacturing; Ministry 
of Public Works and Transportation, etc.), appropriate 
permits from local authorities, and an import-export license, 
if needed.  Obtaining the necessary permits can pose a 
challenge to foreign investors, especially in areas outside 
the capital.  The recent creation of a &one-stop shop8 for 
many permits within the Ministry of Planning and Investment 
should help ease permitting difficulties in the future. 
Lao law provides for contracts.  The following link is for a 
translation of the Lao contract law. 
http://www.undplao.org/whatwedo/bgresource/go v laolaws.php 
 
However, since Laos is a communist one-party state, the 
sanctity of contracts is subject both to political 
interference and a number of socialist principles enshrined 
in the law.  For example, according to the contract law: 
     A contract can be voided if it is disadvantageous to 
one party, and 
     A voidable contract can be declared void by the 
disadvantaged party. 
Although a commercial court system exists, in practice most 
judges adjudicating commercial disputes have little training 
in commercial law.  Those considering doing business in Laos 
are strongly urged to contact a reputable law firm for 
additional advice on contracts. 
In 2006 the Lao government ceased imposing import 
restrictions on trading companies, whether foreign or 
domestic, in an effort to let the market respond to actual 
demand.  The Lao government no longer requires companies to 
file an annual import plan for approval by the Ministry of 
Commerce.  The main exception is the fuel industry, where 
individual companies are still required to file an annual 
import plan.  The government controls the retail price and 
profit margins of gasoline and diesel.  A large American oil 
company announced in late 2007 it was leaving the Lao market 
to focus on more profitable countries within Asia. Government 
documents articulating the restrictions and explaining the 
policy are difficult to obtain.  Goods that are always 
prohibited for import and export range from explosives and 
weapons, to literature that presents a negative view of the 
Lao government, to certain forestry products and wildlife. 
For a detailed list of import & export restrictions please 
visit http://www.moc.gov.la/default.asp. 
Agriculture production and most manufacturing production is 
private. State-owned enterprises (SOEs) currently account for 
only one percent of total employment. Approximately 97 
percent of manufacturing units are small (fewer than 10 
employees).  Among the medium and large units, 35 percent are 
privately owned by Lao citizens and 55 percent are joint 
ventures with foreigners.  The rest are owned by the 
government (including provincial governments).  Foreign 
companies interested in acquiring SOE,s should apply through 
the Department for Promotion and Management of Domestic and 
Foreign Investment (DDFI) in the Ministry of Planning and 
Investment (MPI).  Equity in medium and large-sized SOE,s 
can be obtained through a joint venture with the Lao 
government. 
CONVERSION AND TRANSFER POLICIES 
In order to facilitate business transactions foreign 
investors generally open commercial bank accounts in both 
local and foreign convertible currency at domestic and 
foreign banks in Laos.  Australian, Vietnamese, Thai, and 
Malaysian banks currently have a presence in Laos.  Bank 
accounts must be maintained in accordance with the Enterprise 
Accounting Law.  The law places no limitations on foreign 
investors transferring after-tax profits, income from 
technology transfer, initial capital, interest, wages and 
salaries, or other remittances to the company,s home country 
or third countries so long as they request approval from the 
Lao government. These transactions are conducted at the 
official exchange rate on the day of execution, upon 
presentation of appropriate documentation.  Supply of foreign 
exchange has in the past been limited in Laos, which imposed 
a de facto limit on repatriation of capital.  Foreign 
currency inflows in recent years, however, have reportedly 
solved this problem and large multinationals in Laos report 
no problems with access to foreign exchange.  Foreign 
enterprises must report on their performance annually and 
submit annual financial statements to the Ministry of 
Planning and Investment (MPI). 
 
EXPROPRIATION AND COMPENSATION 
Foreign assets and investments in Laos are protected by laws 
and regulations against seizure, confiscation, or 
nationalization except when this is deemed necessary for a 
public purpose, in which case foreign investors are to be 
compensated.  While there have been no expropriations, the 
Lao Government has revoked the foreign investment license of 
companies in a less than transparent process.  Revocation of 
an investment license cannot be appealed to an independent 
body, and companies whose licenses are revoked must then 
liquidate their assets relatively rapidly.  A company that 
fails to begin conducting business within ninety days of 
registering could be dissolved, if it does not have a 
reasonable explanation. 
DISPUTE SETTLEMENT 
According to the Foreign Investment Law, investors involved 
in investment disputes must seek arbitration before taking 
legal action.  If arbitration does not result in an amicable 
settlement, litigants may submit their claims to the economic 
arbitration authority of Laos, or that of the investor,s 
country, or an international organization agreed on by both 
parties.  In practice, there are no adequate independent 
arbitration venues in Laos.  Foreign investors are therefore 
generally advised to seek arbitration outside the country, 
since Laos, nascent domestic arbitration authority lacks 
enforcement powers.  Laos is not a member of the 
International Center for the Settlement of Investment 
Disputes.  It became a party to the New York Convention of 
1958 on the Recognition and Enforcement of Foreign Arbitral 
Awards on September 15, 1998, but Laos has never been asked 
to enforce a foreign arbitral award.  Laos is a member of the 
United Nations Convention on International Trade Law. 
In disputes involving the Ministry of Planning and 
Investment, decisions can only be appealed back to the 
Ministry itself.  There is no independent body.  Thus a 
company which feels it is receiving unfair treatment from the 
government has no independent recourse.  In 2007 two 
U.S.-owned small companies were involved in disputes with the 
Lao government.  One company had its investment license 
revoked and the U.S. owners were given no option other than 
to liquidate their assets.  Another is still working with Lao 
authorities to resolve the issue.  The Lao government has 
cooperated with the Embassy in addressing the disputes. 
 
Laos, legal system is evolving, but remains incomplete in 
many regards. Laws sometimes contradict each other and often 
lack implementing regulations.  For example, tax exemptions 
and low import duties guaranteed to foreign investors under 
the foreign investment law are not reflected in customs or 
tax law.  Supported by the Japan International Cooperation 
Agency (JICA), Singapore, and the United Nations Development 
Program (UNDP), some laws have been officially translated 
into English.  These include the business, tax, bankruptcy, 
customs, and secured transaction laws. Implementing 
regulations for the Foreign Investment Law, which are crucial 
to enforcement, were approved on October 10, 2005.  The 
reliability of unofficial translations varies considerably, 
which can create an environment of uncertainty and ambiguity 
among foreign investors.  Application of Lao law remains 
inconsistent and knowledge of the laws themselves is often 
limited (especially outside the capital).  The existence of a 
large number of government decrees, sometimes unpublished, 
further complicates the situation.  While the trend under the 
current government is towards more openness and more 
accountability, investors are cautioned to recognize that 
economic and legal reform remain a work in progress. 
Projects funded by the Australian government, the EU, the 
U.S., and the UN Development Program to assist Lao accession 
to the World Trade Organization (WTO) include components 
aimed at bringing Lao commercial law into conformity with WTO 
standards.  A commercial court was established during 2003, 
and began to hear cases in 2005.  The Lao Bar Association was 
set-up in 2007. 
 
Laos has no anti-trust statutes.  The bankruptcy law permits 
either the business or creditor the right to petition the 
court for a bankruptcy judgment, and allows businesses the 
right to request mediation.  There is no record of 
foreign-owned enterprises, whether as debtors or as 
creditors, petitioning the courts for a bankruptcy judgment. 
PERFORMANCE REQUIREMENTS AND INCENTIVES 
Laos does not impose performance requirements per se. 
Foreign investors are encouraged to give priority to Lao 
citizens in recruiting and hiring. According to the foreign 
investment law, foreign personnel can be hired, although they 
may not exceed ten percent (10%) of the enterprise,s total 
labor force.  In the case of skilled labor, or politically 
important projects, the Ministry of Planning and Investment 
has confirmed that enterprises can hire over 10% foreign 
labor if necessary.  Before bringing in foreign labor, the 
enterprise must apply for work permits from the Ministry of 
Labor and Social Welfare.  A foreign personnel list must also 
be submitted to the Planning, Monitoring and Evaluation 
Division of the Department for Promotion and Management of 
Domestic and Foreign Investment (DDFI). 
Incentives for Foreign Investment: Laos grants incentives for 
foreign investment depending on the sectors and zones of 
investment promotion. The government defines promoted 
activities under Article 16 as follows: 
 
1) production for export; 
2) activities relating to agriculture or forestry, and 
agricultural, forestry and handicraft processing activities; 
3) activities relating to industrial processing, industrial 
activities using modern techniques and technology, research 
and development, and activities relating to the protection of 
the environment and biodiversity; 
4) human resource development, skills 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. 
 
The Law on the Promotion of Foreign Investment: 
 
http://www.undplao.org/whatwedo/bgresource/go v laolaws.php 
 
describes geographical and tax incentives in articles 17 and 
¶18. 
 
Foreigners employed in Laos, including foreign investors, 
must pay an income tax of 10 percent of their total income to 
the Lao Government, unless they are citizens of a country 
with which the Lao Government has signed a double taxation 
agreement.  The United States has no such agreement with 
Laos.  The turnover tax is scheduled to be replaced in 2009 
with a Value Added Tax (VAT). 
Foreign investors are not required to pay import duty on 
equipment, spare parts and other materials used in the 
operation of their enterprises.  Raw materials and 
intermediate goods imported for the purpose of processing and 
re-export are exempt from import duties.  Raw materials and 
intermediate goods imported for the purpose of import 
substitution are also eligible for import duty reductions on 
a case-by-case basis.  On an individual basis, foreign 
investors are also eligible for profit tax and import duty 
reductions or exemptions, if the investment is significantly 
large or determined to have a significant benefit to Laos, 
socio-economic development.  To date the Lao Government 
appears to have honored its incentives. 
 
Annual business license renewal is contingent upon 
certification that corporate income taxes have been paid. 
The tax code was streamlined and simplified in April 2005, 
but some investors still report significant difficulties in 
obtaining tax certifications in a timely manner. 
The Foreign Investment Law stipulates that foreign investors 
and their families, including foreign professionals and 
foreign employees of an enterprise, shall be facilitated by 
issue of multiple entry visas and, if approved by the 
government, long term residence in the Lao PDR.  They also, 
in theory, have the right to apply for Lao nationality in 
accordance with the Law on Nationality. 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
The government recognizes the right of private enterprise 
ownership, and foreigners may transfer shares of a 
foreign-invested company without prior government approval. 
However, the business law requires that all shareholders be 
listed in the articles of association, and changes in the 
articles of association of a foreign-invested company must be 
approved by DDFI-Ministry of Planning and Investment (MPI) , 
per the Enterprise Law http://www.moc.gov.la/default.asp. 
Thus, transferring shares in a foreign-invested company 
registered in Laos does require the indirect approval of the 
government (DDFI-MPI). 
PROTECTION OF PROPERTY RIGHTS 
Foreign investors are not permitted to own land.  The 
government grants long-term leases, and allows the ownership 
of leases and the right to transfer and improve leasehold 
interests.  Government approval is not required to transfer 
property interests, but the transfer must be registered and a 
registration fee paid.  This includes mortgage leases. 
Secured interests in property are inadequately covered by the 
Secured Transactions Law of 1994.  Because the law offers no 
instructions for the creditor to enforce security rights (the 
creditor, for example, can only request repayment from the 
debtor), the law favors the debtor.  Moreover, since the 
Ministry of Finance,s registry system is not computerized, 
and cannot cross-reference records, it is difficult to 
determine if a piece of property is encumbered.  Enforcement 
of a mortgage is further complicated by the legal protection 
given mortgagees against forfeiture of their sole place of 
residence. 
Laos issued a trademark decree in January 1995.  The National 
Science and Technology Organization (NSTO), part of the Prime 
Minister,s Office, controls the issuance of trademarks on a 
first-come, first-register basis. Applicants do not have to 
demonstrate prior use.  There are currently over 15,854 
trademarks registered in Laos. 
Laos became a member of the ASEAN Common Filing System on 
patents in 2000 but lacks adequate personnel qualified to 
serve as patent examiners.  A draft decree on patents was 
sent to the Prime Minister in February 2000 for approval and 
in 2002 the Prime Minister,s Office issued patent 
regulations.  Since Thailand and Laos have a bilateral 
Intellectual Property Rights (IPR) agreement, in principle a 
patent issued in Thailand would also be recognized in Laos. 
Currently, no system exists to issue copyrights in Laos. 
Laos became a member of the World Intellectual Property 
Organization (WIPO) Convention in January 1995 and the Paris 
Convention on the Protection of Industrial Property in 
October 1998; it has not yet joined the Bern Convention on 
Copyrights.  Although WIPO began to assist Laos in drafting 
an intellectual property law in 1996, a WTO-compliant law has 
not yet been implemented.  In December 2007 the National 
Assembly approved a law the Lao government claims will cover 
its U.S. Bilateral Trade Agreement (BTA) responsibilities, as 
well as be WTO compliant.  The law is currently being 
rewritten to accommodate additional suggestions from the 
National Assembly, and will then need approval by the 
President before coming into effect.  Overall, there is 
currently little protection for intellectual property rights 
in Laos, although the authorities have taken steps to crack 
down on some pirated goods. 
TRANSPARENCY OF THE REGULATORY SYSTEM 
The principal laws, regulations, decrees and guidelines 
governing   international trade and investment, as well as 
the current protection of intellectual property, are 
available to the public, although not all have been 
officially translated into English.  Laws and their schedules 
for implementation are customarily published in Lao daily 
newspapers, and relevant line ministries are beginning to put 
laws and regulations on websites.  The website for UNDP Laos 
maintains a partial list of translated Lao laws: 
http://www.undplao.org/whatwedo/bgresource/go v laolaws.php 
The Enterprise Law No 11/NA, Vientiane, dated 9 November 
2005, and the Business Law No 005/94, 18 July 1994 have been 
approved and are awaiting final implementation decrees.  The 
lack of clear decrees has slowed implementation of the laws. 
 These laws can find on the following websites: 
http://www.na.gov.la/eng/hethong.htm; 
http://www.poweringprogress.org/energy sector/legislation.htm 
http://www.moc.gov.la/gioithieuAP.asp 
In addition, implementation of the budget law commenced with 
the restructuring of the Ministry of Finance (MoF) via Prime 
Ministerial Decree Number 80 of February 28, 2007.  In 
September 2007 the Prime Minister issued Order No 35 
instructing the MoF to move ahead with centralization of 
customs, tax and treasury departments. 
 A lack of transparency in a centralized decision-making 
process, as well as the difficulty encountered in obtaining 
information, augment the perception of the regulatory 
framework as arbitrary and inscrutable.  There have been 
reports that the government has recently begun discussing 
some proposed laws and regulations with the business 
community, and acted upon the advice given, before making 
final decisions.  The Lao Tourist Association has repeatedly 
urged the Lao government at the &Lao Business Forum,8 a 
business-government meeting sponsored by the Lao government 
and the International Finance Corporation (IFC), to discuss 
proposed laws with industry prior to implementation. 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
Laos does not have a developed capital market.  Three-month 
treasury bills are occasionally offered for sale when there 
is a need to absorb excess liquidity in the economy.  The 
largest denomination of currency is 50,000 kip (about US $5). 
 Credit is not available on the local market for large 
capital investments, although letters of credit for export 
can sometimes be obtained locally.  International reserves 
fluctuate, with the latest available 2007 data showing 
sufficient coverage for 5 months of imports and numbering 
$485 million. 
The banking system is under the supervision of the Bank of 
Lao PDR, and includes: 
     three state-owned commercial banks: Banque pour Le 
Commerce Exterior Lao (BCEL), Lao Development Bank and 
Agriculture Promotion Bank; 
     two joint-venture banks: Joint Development Bank and 
Lao-Viet Bank; 
     five Thai banks: Bangkok, Siam Commercial, Krungthai, 
Thai Military and Ayoudhiya Banks whose activities are mainly 
limited to providing services to local Thai businesses; 
     three private banks (2 foreign and one domestic): 
Malaysia - Public Bank (Berhad); ANZ Vientiane Commercial 
Bank Limited and Domestic Phongsavanh Bank; and 
     one representative office: Standard Chartered Bank. 
 
A new banking law passed in 2006 allows private foreign banks 
to establish branches in all provinces of Laos.  (Previously, 
foreign banks were permitted to establish branches only in 
Vientiane.)  The Commercial Bank law is available on the Bank 
of Lao PDR (BOL) website:http://www.bol.gov.la/index1.php. 
However, implementing regulations have not yet been 
published.  BCEL has correspondence arrangements with the 
following banks (US dollars): 
 
     JP Morgan Chase Bank, New York 
     Citibank, New York 
     Wachovia Bank, New York 
     American Express Bank, Ltd., New York 
     HSBC Bank, New York 
     Standard Chartered Bank, New York 
     Barclays Bank Plc., London 
     Credit Suisse First Boston, Zurich 
     Bank of Tokyo-Mitsubishi, Ltd, Tokyo 
     Natexis Banque Populaires, Singapore 
     Standard Chartered Bank, Singapore 
     Bank for Foreign Trade of Vietnam, Hanoi 
     TMB, Bank Public Co, Ltd, Bangkok 
     Bank Thai Public Co. Ltd. Bangkok 
     Calyon, Bangkok 
     Sumitomo Mitsui Banking Corporation, Tokyo 
 
The Lao banking sector is in flux, with new private and 
foreign banks opening to provide modern banking options to 
Lao and foreign businesses. While continuing to receive 
outside assistance, central bank supervision of the sector 
remains somewhat weak and state-owned commercial banks (SCBs) 
carry a heavy burden of past non-performing loans due to 
directed lending and poor credit standards.  The two major 
SCBs, BCEL and the Lao Development Bank, carry non-performing 
loan ratios of about 60 percent of loans, according to the 
IMF.  Although the SCBs were recapitalized as recently as 
2003, and are supposed to receive two more infusions of funds 
from the sale of government recapitalization bonds, the bonds 
have not yet been issued.  The Asian Development Bank has 
provided both program loans and technical assistance to 
Laos, financial sector, as have the World Bank and the IMF. 
These programs have not succeeded in eliciting significant 
reforms.  In 2007 several agreements between Lao banks and 
their Chinese and Vietnamese counterparts, aimed at 
increasing the technical and human resource capacity of the 
Lao banking system, came into effect.  The results of these 
agreements are not yet evident. 
The Government of Laos is planning to open a stock exchange 
in 2010, with technical assistance provided from the South 
Korean government. 
 
 
POLITICAL VIOLENCE 
Laos is generally a peaceful and politically stable country. 
The remnants of an insurgency occasionally carry out 
small-scale attacks on government personnel and civilians. 
Foreign persons are not deliberately targeted, and visitors 
are advised to use caution when traveling in remote 
districts. 
CORRUPTION 
The Prime Minister,s Office has made combating corruption a 
priority, including issuance of an anticorruption decree in 
November 1999, but corruption remains a problem.  Although 
the 1999 decree specifically notes the responsibility of the 
state-owned mass media in publicizing corruption cases, there 
has been no reporting on this issue.  In 2005 an 
anti-corruption law was passed by the National Assembly.  To 
date there have been no implementing regulations and no 
prosecutions.  Laos is not a signatory to the OECD Convention 
on Combating Bribery.  The Counter-Corruption Committee in 
the Prime Minister,s Office is the Lao government agency 
responsible for combating corruption.  Both giving and 
accepting bribes are criminal acts punishable by fine and/or 
imprisonment.  Besides bribes to low-level officials for the 
purpose of expediting time-sensitive applications, such as 
business licenses, importation of perishable items, customs, 
etc., anecdotal evidence of more pervasive corruption is 
growing.  The State Inspection Authority in the Prime 
Minister,s Office analyses corruption at the national level 
and serves as a central office for gathering details and 
evidence of suspected corruption.  Additionally, the State 
Inspection Departments in each Ministry is responsible for a 
ministry,s internal problems. 
Generally, the government tends to deal with corruption 
problems by forcing corrupt officials to retire or move to a 
new position. 
 
BILATERAL INVESTMENT AGREEMENTS 
Laos has bilateral investment agreements with the following 
countries: 
Country     Date Signed Date Entered Into force Duration (in 
years) 
Australia   4/6/94      4/8/95      10 
China 1/31/93     6/01/93     10 
Cuba  4/28/97     6/10/98     10 
Denmark     9/28/98     5/9/99      10 
DPRK  8/20/97     8/22/98     10 
France      12/12/89    3/8/91      10 
Germany     8/9/96      3/24/99     10 
Holland     5/23/03     -     10 
India 11/09/00    1/6/03      10 
Indonesia   10/18/94    10/14/95    10 
Malaysia    12/8/92     3/25/93     10 
Mongolia    3/3/94      10/29/94    10 
Myanmar     5/5/03      8/28/07     - 
Netherland  5/16/03     -     - 
Pakistan    4/23/04     3/19/07     - 
Philippines          6/8/07       - 10 
Rep of Korea      5/15/96     6/14/96     15 
Russia      12/6/96     22/03/06    15 
Singapore   3/24/97     3/25/98     10 
Sweden      8/29/96     1/1/97      20 
Switzerland 12/4/96     12/4/96     10 
Thailand    22/08/90    07/12/90    10 
United Kingdom    6/1/95      6/1/95      10 
Vietnam     1/14/96     6/22/96     10 
 
 
On February 1, 2005 a Bilateral Trade Agreement (BTA) came 
into force between the U.S. and the Government of Laos.  Laos 
and the United States do not have a bilateral taxation 
treaty. 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
The United States and Laos signed an Overseas Private 
Investment Cooperation (OPIC) agreement in March 1996.  In 
1998 Laos signed an agreement with the Multilateral 
Investment Guarantee Agency (MIGA).  EXIMBANK does not 
currently operate in Laos. 
The kip, while not an internationally traded currency, has 
been appreciating against the U.S. dollar over the past year, 
thanks in part to being pegged to the Thai baht.  As large 
amounts of dollars continue to enter Laos it is unlikely the 
kip will depreciate against the dollar barring a significant 
economic downturn. 
 
LABOR 
Over 70 percent of Laos, work force of 2.6 million is 
engaged in subsistence agriculture.  The Lao government 
estimated the total non-agricultural work force in 2007 to 
number 483,560 people, roughly 25,000 of whom were employed 
in garment manufacturing.  The total labor force is expected 
to increase by more than 30 percent over the next ten years. 
The Labor Law passed in 1994 provides for the formation of 
trade unions; specifies working hours and compensation 
standards; allows for maternity leave and benefits; workers, 
compensation and retirement benefits; and establishes 
procedures for labor dispute resolution.  The Lao government 
raised the official minimum wage to 200,000 kip per month 
(about $20 USD) in 2007.  Wages for unskilled labor at 
garment factories, including bonuses and lunch, now run about 
290,000 kip or about US $30 monthly. Labor unions can be 
formed in private enterprises, but they must operate within 
the framework of the Lao Federation of Trade Unions (LFTU), 
which is controlled by the Lao People,s Revolutionary Party. 
 In 2007, there were 3,042 trade unions nationwide, and 
membership in the LFTU numbered 112,557.  Strikes are not 
prohibited by law, but a government ban on subversive 
activities or destabilizing demonstrations makes them 
unlikely. 
Laos has significant human resource deficiencies in virtually 
all sectors. English is not widely spoken.  In 2006, about 31 
percent of the population age 15 and above remained 
illiterate.  The shortage of skilled labor is particularly 
acute in high-tech sectors.  The country has a few technical 
colleges, one scientific research facility--the National 
Institute of Hygiene and Epidemiology--and almost no 
effective post-graduate degree programs.  The Lao Government 
has dedicated very few of its own resources to improve the 
country,s education system and tends to rely heavily on 
international donors for support; there are a few state 
training programs and some foreign-funded programs. 
Potential investors should note the need to dedicate 
substantial resources, both human and capital, to train 
employees.  It is not unusual for foreign investors to bring 
in Thai managers due to a lack of skilled local personnel. 
FOREIGN TRADE ZONES/FREE PORTS 
The Foreign Investment Law allows for the establishment of 
free trade zones as an investment incentive.  A zone in 
southern Savannakhet province, which borders both Vietnam and 
Thailand, is such a Special Economic Zone.  Lao laws 
pertaining to trade are supposedly applied uniformly across 
the entire customs territory of Laos, including all 
sub-central authorities, special economic zones and border 
trade regions.  In reality, however, customs practices vary 
widely at ports of entry in the provinces.  The recent 
centralization of customs collection with the central 
government could lead to more uniform practices and increase 
the flow of customs revenue to the central government by an 
estimated fifty to seventy percent. 
FOREIGN DIRECT INVESTMENT STATISTICS 
GOL investment figures significantly overstate actual 
investment, as they include all approved projects regardless 
of whether the investment actually takes place.  Both the 
World Bank and the IMF have lower estimates than Lao 
government figures.  During 2007 the GOL approved $1.1 
billion worth of foreign investment projects.  Hydropower 
schemes account for about 31.7 percent of that amount. 
Foreign investment figures fluctuate widely from year to year 
due to the prevalence of large-scale investments in the 
hydropower and mining sectors.  Foreign direct investment 
figures from the Bank of Lao PDR for recent years follows 
below: 
Real FDI inflow through Bank of Lao PDR (in Million of US $) 
2000  2001  2002  2003  2004  2005    2006 
33.9  23.9  4.5   19.5  16.9  27.7      187.3 
FDI approved (in Million of US $) 
2000  2001  2002  2003  2004  2005 2006      2007 
20.4  42    493.8       550   533   1,245 2,699.7   1,136 
 
                              Between 2000 and 2007, DDFI 
approved approximately $6.27 billion in investment projects. 
According to DDFI figures, 23 &U.S.8 projects were approved 
between 2000 and 2007, including 6 projects worth a total of 
$4.52 million in 2007.  Foreign investment now comes 
primarily from other Asian countries, particularly Thailand 
(traditionally Laos, largest trade and investment partner), 
China, Vietnam, France, Japan, India, Australia, and Korea. 
 
Foreign Investment Licensed in the Lao PDR by countries of 
origin, from 2000 through September 2007, in U.S. Dollars. 
(Source: Department for Promotion and Management of Domestic 
and Foreign Investment (DDFI), Ministry of Planning and 
Investment (MPI). 
Rank  Country     Number of Projects      Capital 
1     Thailand    169   1,355.704,001 
2     China 237   1,138,881,152 
3     Vietnam     120   535,707,572 
4     France      58    428,277,679 
5     Japan       33    420,376,553 
6     India       3     350,200,000 
7     Australia   27    330,897,196 
8     Korea       105   294,435,705 
9     Malaysia    33    135,260,392 
10    Singapore   22    100,260,392 
11    Canada      9     48,561,750 
12    Switzerland       5     31,561,750 
13    England     14    17,396,500 
14    Russia 
      10    16,375,310 
15    Norway      1     12,800,000 
16    Taiwan      8     12,600,000 
17    USA   23    12,137,226 
18    Poland      1     5,000,000 
19    Germany     14    4,181,508 
20    Italy       3     3,600,000 
21    Peru  1     3,000,000 
22    Cambodia    4     2,069,500 
23    Panama      1     1,750,000 
24    Holland     2     1,300,000 
25    Myanmar     4     1,180,000 
26    Island      2     1,100,000 
27    Israel      1     1,020,000 
28    Indonesia   1     1,000,000 
29    Sweden      4     995,135 
30    Belgium     4     900,000 
31    Sri Lanka   1     200,000 
32    Cuba  1     185,000 
33    Portugal    1     100,000 
34    Turkey      1     100,000 
35    Nepal       1     100,000 
36    Philippines 1     100,000 
37    Spain       1     28,125 
 
Foreign Investment Licensed in Lao PDR by Sector, from 2000 
through September 2007, in US Dollars. (Source: Department 
for Promotion and Management of Domestic and Foreign 
Investment (DDFI, Ministry of Planning and Investment.) 
Ranks       Sector      No. of Projects   Capital 
1     Electricity 40    3.294,791,585 
2     Agriculture 157   785,340,225 
3     Mining      139   624,853,829 
4     Industry & Handicraft   187   450,988,772 
5     Service     171   318,888,580 
6     Trading     98    271,641,554 
7     Hotel and Restaurant    59    160,661,245 
8     Construction      23    159,686,874 
9     Wood industry     38    84,207,154 
10    Banking     10    45,096,000 
11    Telecom     3     39,940,000 
12    Garment     33    24,156,688 
13    Consultancies     30    7,913,252 
Total       988   6,268,174,758 
 
In 2007, the Lao PDR continued to experience rapid growth of 
FDI.  Actual FDI is expected to increase by about 24.5 
percent, from roughly $319 million in 2006 to about $785 
million in 2007.  The rapid growth has been driven by large 
investments in industry, especially hydropower, agriculture 
and mining. 
 
Huso