BOL Policy Mandates Foreign Investors to Open FDI Account

BOL Mandates Foreign Investors to Open Local Bank Accounts in Kip Currency
[FILE] this image is used only for representational purpose (photo: freepik)

Updated on 23 January at 4:40 pm

The Bank of Laos (BOL) has implemented a new regulation mandating foreign investors to open a Foreign Direct Investment Bank account (FDI) either in Lao Kip or a convertible foreign currency with a commercial bank within 15 days upon obtaining a business license.

This regulation, effective since 21 December last year, aims to facilitate and monitor capital flows while promoting direct foreign investment in Laos.

Upon transferring the funds into a commercial bank in Laos, foreign investors must apply for a Capital Importation Certificate (CIC) to the Foreign Exchange Management Department within 30 days.

Capital repatriation after business operations will only be available for those who have received the CIC from the central bank.

Foreign investors can obtain a business license or enterprise registration certificate by registering for a pre-investment account with a commercial bank. This particular account will allow them to transfer funds in preparation for their investment in Laos.

To further facilitate the business registration process, the Minister of Industry and Commerce has approved a new regulation reducing the registration time from 10 to three days, effective since 2 February. This change will allow investors to obtain their business license faster through the government’s online registration website.

Required documents for opening a pre-investment account include a document explaining objectives to invest or establish an enterprise in Laos, a business registration certificate and/or certificate of identity of a foreign legal entity, a letter of authorization for the person or representative to open a deposit account, the passport of the person who has been granted the right, among other documents deemed necessary by the Foreign Exchange Management Department and the Commercial Bank.

Laos has had economic challenges, including high inflation, depreciation of the national currency, and public debt. In January, the inflation rate, as reported by the Lao Statistics Bureau, reached 24.4 percent.

According to the International Monetary Fund (IMF), Laos’ publicly guaranteed debt was 123 percent of GDP as of 2023, with more than half owed to China for funding major infrastructure projects, including the USD 5.9 billion Laos-China Railway linking Vientiane Capital and Kunming, China.

In response, the central bank has pledged to implement a tighter monetary policy to stabilize the kip’s value. This aligns with the government’s goal of reducing inflation by 9 percent in 2024.

This new regulation by the central bank is expected to streamline the process for foreign investors looking to invest in Laos while ensuring greater transparency and accountability in capital flows.