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Laos Cracks Down on Illegal Foreign-owned Businesses

Chinese Workers and Businesses in Laos

Laos will crack down on foreign-owned businesses operating in the country without the proper permit.

Starting A New Business In Laos? Regulated Sector List Worth Perusing

List of controlled sectors in Laos improves business and investment climate.

Engaging on a new business venture is serious and potentially stressful business at the best of times, but a new list with information on regulated sectors is set to ease the minds of more investors considering the big dive in Laos.

Seeking to facilitate more entrepreneurial activity and investment from domestic and international sources, Lao policymakers including the nation’s top leaders have been making moves to release a list of controlled sectors for investment (Lao language).

The new list makes mention of those sectors requiring extra permits under Lao laws and regulations.

 

Codification of list of regulated & controlled sectors in Laos facilitates easier investment.

Listing of regulated & controlled sectors facilitates greater investment in Laos.

Prime Minister Thongloun Sisoulith approved the list of sectors that are subject to government control by way of Prime Ministerial decree issued January 10 regarding the list of controlled and concession-based businesses.

Sectors subject to considerations of national security, social order, and environmental protection and the respective regulatory authorities are spelled out in the list.

In various sectors not listed, operators are able to proceed to apply for a business and operating license from the commerce sector without having to consult any other state agencies, provided they do not otherwise contravene Lao laws, orders, decrees and regulations.

According to the list (as translated to English from original in the Lao language), permits are required for business operations in the following sectors:

Section 1: Alcoholic and other Beverages, Tobacco, Textiles, Paper and Packaging, Chemicals, Medicines, Rubber and Plastics, Minerals and Metals, Gaming and other Equipment, Waste and Recycling.

Section 2 (Domestic Activities): Wholesale and Retail sales of automobiles and motorcycles; Wholesale of anything except automobiles and motorcycles; Retail sales of anything except automobiles and motorcycles; Real estate activities;

Section 3 (Import/Export activities): Wholesale and retail sales and repair of automobiles and motorcycles; Wholesale of anything except automobiles and motorcycles.

Businesses of types not on the list should find it easier to operate, obtain an ID and operating license.

Steps in the right direction for investment

The codification of the list and relevant sectors is considered a significant development in the campaign by the government of Laos to facilitate an improved business climate nationwide.

Until the publication of the list, it was not stated clearly in a single place which regulatory entities potential investors must contact to obtain enterprise registration certificates or operating licenses.

Local and foreign investors seeking to operate one of the types of business listed must take all measures to comply with the relevant government controls and regulations.

The list spells out special conditions business operators must be ready to follow if their operations are deemed to reside within these controlled categories.

List of controlled sectors in Laos improves business and investment climate.

List of controlled sectors in Laos improves business and investment climate.

Laotian Times reports on business matters in and affecting Laos and the Laotian community abroad.

Laos Making Efforts to Improve Ease of Doing Business

ease of doing business in Laos

The government of Laos is making efforts to improve the ease of doing business in the country by streamlining the process for business registrations.

According to the World Bank Ease of Doing Business ranking system, Laos took 141st place in 2017, dropping steadily from 134th place in 2014, and 139th in 2016.

Comparatively, Thailand boasts a ranking of 26, while Vietnam ranks 68, and Cambodia at 135.  Myanmar ranked lower than Laos, at 171.

In order to improve the ease of doing business in Laos, Prime Minister Thongloun Sisoulith issued Executive Order no. 2 in February this year, ordering ministries and other bodies to improve procedures and remove obstacles causing difficulties to investors.

Now, authorities are required to issue enterprise registration certificates for new businesses within 10 working days after an application is submitted, according to Article 17 of the Amended Law on Enterprise.

Following the issuance of the certificate, the investor must then submit an investment or business operation application to the relevant sector of the government within 90 days.

These clearer and simpler steps should expedite the registration of a business for investors.

The government has also set up a central-level Investment Promotion and Management Committee, to help accelerate consideration and approval of investment applications.

Although the procedures have been simplified and ministries ordered to comply, some investors still complain that there are too many steps involved. Many have suggested that a “single window” unit to which all documents could be submitted would significantly improve the experience for business registration, rather than having investors submit applications to various ministries in relation to their field of investment.

Source: Vientiane Times

Wonderful Indonesia Center to Open in Vientiane, Promote Business and Tourism

wonderful Indonesia center

Indonesia will begin promoting its potential as a business and travel destination to the people of Laos through the establishment of its Wonderful Indonesia Center in Vientiane.

The necessary licenses to build the culture center have been approved, and the center is expected to open soon.

“We want to spread the word that there is more to Indonesia than simply Jakarta, Borobudur, or Bali,” said A. Firman Arif W. Soepalal from the Indonesian Embassy in Laos.

The Wonderful Indonesia Center will display the local products of Indonesia, and promote tourism to the country.

“We also hope to institute some other programs, such as Indonesian language classes at the center,” said Mr Firman.

Meanwhile, Indonesia hosted a Small and Medium Enterprises Exhibition and Planetarium Walk in Laos from May 5-6 at Vientiane Center shopping complex.

Representatives from the Indonesian Embassy to Laos said that Indonesian investors should capitalize on business opportunities in Laos, and that the fair held at Vientiane Center was one way to show Indonesian investors what Laos had to offer.

So far, only a handful of Indonesian companies have been willing to invest in or develop production in Laos, citing the lack of a coastline as one major hindrance.

“We must be willing to change the mindset that Laos is a lagging country, while actually it has much potential,” said Mr Firman, stating that the Lao Foreign Minister had provided details on several forms of cooperation possible between both countries.

A number of other countries have been successful in investing in the Lao economy, such as Singapore and Malaysia.

According to Wishnu Krisnamurthi, the chief Economy Function of the Indonesian Embassy in Laos, a number of Indonesian products find their way to Laos by way of Thailand, rather than through direct exports.

The largest Indonesian investment in Laos to date is a cinema network, with majority shares being held by an Indonesian businessman, in partnership with a Thai company.

Indonesia and Laos established formal diplomatic relations in 1957. The two nations have often expressed a desire to reach further agreements in security, sports, air transport an education.

There are currently no direct flights between Indonesia and Laos.

Source: Jakarta Post

Tilleke & Gibbins Publishes 2018 Doing Business in Laos Guide

The Laos chapter of Global Guide 2018: Doing Business In…, a guide published by Practical Law in association with Lex Mundi, presents a comprehensive Q&A-style overview of doing business in Laos.

Written by members of Tilleke & Gibbins’ Vientiane office, the Laos chapter covers key recent developments that affect doing business in the jurisdiction; restrictions on foreign investment and authorizations required; grants and incentives available to investors; common forms of business vehicles; registration and reporting requirements; management structures and key liability issues; employment laws, contracts, and permits; termination and redundancy; taxes on employment, business vehicles, dividends, interest, IP royalties, groups, affiliates, and related parties, as well as customs duties, and double tax treaties; competition law; intellectual property laws; marketing agreements; and laws on e-commerce, advertising, data protection, and product liability.

To read the Laos chapter, please visit the Practical Law website or click on the link to the PDF here.

Source: Tilleke & Gibbins

Tax Collectors to Audit 200 Businesses to Boost Revenue

In an attempt to collect additional taxes before the end of the year, the Deputy Minister of Finance has announced that finance authorities are planning to audit more than 200 major companies that have been under the management mandate of central-level state bodies and Vientiane authorities.

The deputy minister, Dr Atsaphangthong Siphandone, informed members of the National Assembly (NA) at a meeting in Vientiane, that the inspections are being facilitated by six teams of finance authorities that began auditing enterprises the beginning of September and are still underway.

The objective of these audits is to ensure that companies have paid the correct amount of taxes based on their actual income, and have strictly complied with financial regulations.

The controversy is that many businesses pay taxes based on reports amassed by their own staff, which are then assessed by tax officials. NA members have previously expressed concerns that this practice had lead to loopholes for revenue leaks, as businesses are unlikely to report their true income so they can minimize the tax levied.

The maneuver is among measures initiated by the government in an effort to boost revenue collection over the last six months of this year.

The inspections are also intended to maximize revenue collection, as the government has struggled to collect revenue in line with the target for 2017.

Dr Atsaphangthong  has projected that revenue collection for 2017 was expected to reach 23,489 billion kip, accounting for 98.1 percent of the amount targeted.

During the first six months of 2017, over 10,365 billion kip was collected, accounting for just 43.29 percent of the year’s plan. Measures are being implemented to collect the remaining  13,124 billion kip before the end of the year.

In addition to the inspection of the 200 businesses, Dr Atsaphangthong emphasized that authorities will place great importance on properly collecting taxes and tariffs from major sources or products such as petrol, vehicles, construction materials and electrical equipment, as well as consumer and durable goods.

Attention would also be focused on collecting taxes and fees from small and medium enterprises as well as hydropower and mining projects.

Officials would intensify efforts to collect revenue sourced from leasing fees of state assets as well as concession fees.

Private Businesses Struggle to Find Financing

road

Business banking in Laos has taken a severe hit in the past few years as government officials have started limiting funds that have been typically granted to developers for implementing infrastructure projects in the past.

Construction of roads, mining, land concessions and various infrastructure projects have all been suspended due to companies facing financial difficulties and struggling to be approved for loans from banks.

Priority projects which have been approved by government officials have a higher likelihood of being approved for bank loans, as opposed to the private companies who seek funding.

According to the government’s latest report, the overall investments in 2016 reached 42.8 trillion kip, which was 24.2 percent more than planned, and accounted for 33.1 percent of GDP, increasing the value of bank financing from 6.7 trillion kip to 10.8 trillion kip.

Economists assert that the increase in bank credit is an indication that the Lao economy is growing, given that more money has been disbursed into the investment sector.

In an effort to ensure the effective use of the state budget in order maximize the interests of the nation, the Lao Prime Minister has signed off on Prime Ministerial Order No.9, stipulating various measures to control spending, including the suspension on all construction of public office buildings until 2020.

With a recent projection indicating that only 96 percent of the revenue targeted for 2017 will be collected, the government has planned to tighten budget expenditure by trimming its administrative budget.

State banks have been urged to supply more loans in order to promote productivity and facilitate the growth of small and medium businesses..

Laos is considered one of the least developed countries, with the value of its economy amounting to US$15.9 billion. In 2016, the Lao economy grew at a rate of 7.02 percent, driven by the industrial sector, particularly hydropower projects with GDP per capita reaching US$2,408.

Small But Steady: Lao Businesses Expanding Abroad

Lao Business

When people think of Laos, they think of a third world country that has been somewhat eclipsed by larger, surrounding nations for centuries. 

However, within the past 5 years, Laos has caught the attention of foreign investors worldwide. The untapped market and land offers ample resources and opportunities, giving venture capitalists a vision of transforming the small landlocked country into a necessary component linking ASEAN, which will boost trade and commerce for all countries involved.

The popular misconception is that because Lao people strive to be ‘humble’ they are often mistaken as ‘weak’, and due to that, many people falsely believe that the country is only capable of being invested in, and that Lao people don’t have the ingenuity or capability of conducting foreign businesses abroad. This is simply not the case.

Lao people are progressively broadening their horizons and pursuing business opportunities across borders and overseas, particularly in neighbouring countries.

The success stories that have emerged from Lao entrepreneurs venturing abroad has served as encouragement to Lao-owned companies, that they too can thrive just as other ASEAN businesses have. With proper funding, management, proficiency and human resources, Lao entrepreneurs can expand their operations both regionally and internationally, enhancing trade, investment, tourism, and transportation in other regions.

With Myanmar being touted as one of the most favorable investment destinations in the world, Ms Somsavath Khemsuliyajack, has been the first Lao national to successfully launch a business there.

After proving lucrative in her home country, the ambitious young business woman stepped out of her comfort zone into uncharted territory, looking for new opportunities in Myanmar.

In 2013, Ms Somsavath partnered up with a Thai cosmetics company to produce a high quality cosmetics line for Myanmar’s market, producing, distributing, and marketing cosmetics under the brand name ‘SK Herbal’.

SK Herbal’s line of beauty products has rapidly become a popular brand in Myanmar; garnering positive responses and reviews from consumers and has found its way into the Lao market as of last year.

In addition to her profitable beauty line, Ms Somsavath also runs a beverage company that produces a healthy herbal drink for the Myanmar market, which has plans to mobilize into neighbouring countries eventually.

Another small business success story is one that belongs to a well known Lao noodle franchise, Sep Eeli. Vientiane capital is home to eight of its locations, with three branches set to open in Luang Prabang, Champasak and Attapeu provinces shortly.

The franchise owner and founder, Ms Latsamy Vetsaphong, has voiced that many potential business partners have expressed interest in buying the franchise to operate restaurants in both Europe and the ASEAN.

Ms Latsamy is eagerly searching for opportunities to migrate into 5 other ASEAN countries over the next 10 years after successfully launching a Sep Eeli franchise in Phuket, Thailand.

The Sep Eeli brand is currently opening a branch in Myanmar, with plans to kick off in Cambodia, Malaysia and Vietnam soon after. Ms Latsamy explained, “We are in the process of quality checks of our products to make sure they are in line with international standards; we’d also like to become a supplier of instant noodles and ingredients in the future.”

In hopes of becoming a big investor in the ASEAN, Phongsavanh Bank, a major Lao private bank, also has set its sights on mobilizing its operations internationally, planning to expand its services overseas and  to having offices in 10 Asean countries within the next five years.

The Phongsavanh Group’s Chairman of the Shareholders’ Committee, Mr Somboun Phongsavanh has stated that the bank now has offices in Vietnam and Thailand, and expects to have service units and operating branches there in the very near future.

Currently the bank has business cooperation and investments with the tourism, education, medical health and property service sectors in Thailand.

An official with the Ministry of Planning and Investment’s Investment Promotion Department has stated that not only does the government not want to restrict businesses from expanding abroad but is in support of their endeavor.

Source: Vientiane Times