HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements…Laos

# 					2023 Investment Climate Statements: Laos			

 In this section										/

													EXECUTIVE SUMMARY											

                -  EXECUTIVE SUMMARY 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                    -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange 
                    -  Remittance Policies 
                  -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct 
                -  9. Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs 
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics 
                -  14. Contact for More Information 

## EXECUTIVE SUMMARY

Laos, officially the Lao People’s Democratic Republic (Lao PDR), is a developing economy at the heart of Southeast Asia, bordered by Burma, Cambodia, China, Thailand, and Vietnam. Laos’ economic growth over the last decade, prior to the COVID-19 pandemic, averaged just below eight percent, placing Laos amongst the fastest growing economies in the world. Over the last 30 years, Laos has made slow but steady progress in implementing reforms and building the institutions necessary for a market economy, culminating in accession to the World Trade Organization (WTO) in February 2013. The government’s commitment to WTO accession and the creation of the ASEAN Economic Community (AEC) in 2015 led to major reforms of economic policies and regulations with the aim to improve Laos’ business and investment environment. However, international companies continue to report significant hurdles navigating Laos’ business environment. The Lao government is increasingly tying its economic fortunes to the economic integration of ASEAN and export-led development and has prioritized the digital economy, logistics, green growth, and more sustainable development, in addition to continuing to develop the agricultural and resource extraction.

Although Laos reopened borders in 2022, the World Bank lowered Laos’ 2022 economic growth rate to 2.5 percent from its initial prediction of 3.6 percent. Limited fiscal and foreign currency buffers have posed a challenge to the government’s ability to mitigate the economic impacts of COVID-19 and by global economic disruptions, including Russia’s war in Ukraine. The Lao currency, the *kip*, depreciated more than 45 percent against the U.S. dollar at one point during 2022, according to the Economist Intelligence Unit, and year-on-year inflation exceeded 40 percent in December 2022. These factors have exacerbated the country’s macroeconomic vulnerabilities. Compared to other countries in the region, foreign direct investment (FDI) inflows to Laos have been relatively stable, driven primarily by infrastructure construction and power projects. In 2023, international and Lao economists project GDP growth will reach almost four percent, primarily due to the resumption of tourism and the reopening of China.

The exploitation of natural resources and the development of hydropower has driven rapid economic growth over the last decade, with both sectors largely led by foreign investors. However, because growth opportunities in these industries are finite and employ few people, the Lao government has recently begun prioritizing and expanding the development of higher-value agriculture, light manufacturing, and tourism, while continuing to develop energy resources and related electrical transmission capacity for export to neighboring countries.

The Lao government hopes to leverage its lengthy land borders with Burma, Cambodia, China, Thailand, and Vietnam to transform Laos from “land-locked” to “land-linked,” thereby further integrating the Lao economy with the larger economies of its neighbors. The government hopes to increase exports of agriculture, manufactured goods, and electricity to its neighbors, and sees significant growth opportunities resulting from the Laos-China Railway, which opened in December 2021 and connects Kunming in Yunnan Province, China with Laos’ capital city, Vientiane. A small number of businesses and international investors are beginning to use Laos as a low-cost export base to sell goods within the region and to the United States and Europe. The emergence of light manufacturing has begun to help Laos integrate into regional supply chains, and improving infrastructure should facilitate this process, making Laos a legitimate locale for regional manufacturers seeking to diversify from existing production bases in Thailand, Vietnam, and China. New special economic zones (SEZs) in Vientiane and Savannakhet have attracted manufacturers from Europe, North America, and Japan, and Chinese and Thai interests also have plans for additional SEZ projects. Investors should be aware, however, that some SEZs in Laos are associated with transnational organized crime and one, the Golden Triangle SEZ, is affiliated with entities subject to U.S. Treasury sanctions.

Economic progress and trade expansion in Laos remain hampered by a shortage of workers with technical skills, weak education and health care systems, and poor—although improving—transportation infrastructure. Institutions, especially in the justice sector, lack independence, often operate without transparency, remain highly underdeveloped and have low regulatory capacity. Despite recent efforts and some improvements, corruption is rampant and is a major obstacle for foreign investors.

Corruption, policy and regulatory ambiguity, and uneven application of laws are disincentives to further foreign investment. The multiple ministries, laws, and regulations affecting foreign investment in Laos creates confusion, and requires potential investors to engage either local partners or law firms to navigate an opaque and cumbersome bureaucracy.

The government is making efforts to improve the business environment. In 2021, the former prime minister assumed leadership of a new administration with a stated focus on economic issues. Laos’ current development plan, the 9th NSEDP (2021-2025) focuses on graduating Laos from Least Developed Country (LDC) status by 2026. To achieve this goal, the government continues to prioritize diversifying the economy and improving the investment climate to encourage domestic and foreign investment to boost growth. Starting with the 8th five-year National Socio-Economic Development Plan (NSEDP) (2016-2020), the government has sought to formulate “policies that would attract investments” and to “begin to implement public investment and investment promotion laws.” In February 2018, and again in January 2020, the Office of the Prime Minister issued orders laying out specific steps ministries were to take to improve the business environment. These efforts have borne fruit; for example, due to streamlining of application processes, it now takes to less than 17 days to obtain a business license, compared to 174 days on average a few years ago.

The government is focused on a post-COVID economic recovery through policies to achieve macro-economic stability, connectivity through improved infrastructure, and green, sustainable growth initiatives. The draft 9th NSEDP plan prioritizes sectors such as agriculture, natural resource development, and tourism.

							1. Openness To, and Restrictions Upon, Foreign Investment					

### Policies Towards Foreign Direct Investment

The Lao government officially welcomes both domestic and foreign investment as it seeks to keep growth rates high and graduate from Least Developed Country status by 2026. The pace of foreign investment has increased over the last several years. According to Lao government statistics, mining and hydropower account for 95.7 percent of Foreign Direct Investment (FDI), and agriculture accounted for only 2 percent of FDI in 2019. China, Thailand, France, Vietnam, and Japan are the largest sources of foreign investment. The government’s Investment Promotion Department encourages investment through its website www.investlaos.gov.la, and the government is attempting to further improve the business environment by facilitating a constructive dialogue annually with the private sector and foreign business chambers through the Lao Business Forum, which is managed by the Lao National Chamber of Commerce and Industry LNCCI).

The 2009 Law on Investment Promotion was amended in November 2016, with 32 new articles introduced and 59 existing articles revised. The new law, an English version of which can be found at www.investlaos.gov.la,notably clarifies investment incentives, transfers responsibility for SEZs from the Prime Minister’s office to the Ministry of Planning and Investment (MPI), and removes strict registered capital requirements for opening a business, deferring instead to the relevant ministry. Foreigners may invest in any sector or business except in cases where the government deems the investment to be detrimental to national security, health, or national traditions, or that have a negative impact on the natural environment. In December 2021, Laos amended the value-added tax (VAT) law following Presidential Decree no. 231/P, which reduced the VAT rate from 10 to 7 percent as part of the government’s effort to promote economic recovery. The decree also aims to provide a mechanism to facilitate investment towards activities that enable production and export. More importantly, the amended law indicates that more activities are exempted from VAT, while certain mineral and electricity-related activities are subject to a specific basis for VAT calculation. Nevertheless, even in cases where full foreign ownership is permitted, many foreign companies seek a local partner. Companies involved in large FDI projects in strategic sectors, especially in mining and hydropower, often find it advantageous to give the government partial ownership.

Foreign investors are typically required to go through several procedural steps prior to commencing operations. Many foreign business owners and potential investors say the process is overly complex, and regulations are erratically applied. Foreign investors also express confusion about the roles of different ministries, as multiple ministries become involved in the approval process. In the case of general investment licenses (as opposed to concessionary licenses, which are issued by MPI, foreign investors are required to obtain multiple permits, including an annual business registration from the Ministry of Industry and Commerce (MOIC), a tax registration from 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., MOIC for manufacturing, and Ministry of Energy and Mines for power sector development), appropriate permits from local authorities, and an import-export license, if applicable. Obtaining the necessary permits can be challenging and time consuming, especially in areas outside the capital.

There are several possible vehicles for foreign investment. Foreign partners in a joint venture must contribute at least 30 percent of the company’s registered capital. Wholly foreign-owned companies may be entirely new or a branch of an existing foreign enterprise. Equity in medium and large-sized SOEs can be obtained through a joint venture with the Lao government.

Reliable statistics are difficult to obtain, however the trend of Foreign Direct Investment (FDI) shows an increase in recent years, mainly driven by large infrastructure projects. Total FDI in Laos increased from $5.7 billion in 2016 to $10 billion in 2019.

### Limits on Foreign Control and Right to Private Ownership and Establishment

As discussed above, even though foreigners may invest in most sectors or businesses (subject to previously noted exceptions), many foreign companies seek a local partner to navigate complicated official and unofficial processes. Companies involved in large FDI projects, especially in mining and hydropower, often find it advantageous to give the government partial ownership.

### Other Investment Policy Reviews

The OECD released its most recent investment policy review of Laos on July 11, 2017. More details can be found at http://www.oecd.org/daf/inv/investment-policy/oecd-investment-policy-reviews-lao-pdr-2017-9789264276055-en.htm

### Business Facilitation

Laos does not have a central business registration website yet, but the Ministry of Industry and Commerce (MOIC) has improved its online enterprise registration site, http://www.erm.gov.la, to accelerate the registration process. Due to the government’s effort in supporting the ease of doing business, investors recently reported needing less than 17 days to attain an Enterprise Registration Certificate for general business activities, compared to 174 days on average in the past. Nonetheless, the timeline and process for controlled and concession activities (see https://www.laotradeportal.gov.la/kcfinder/upload/files/Legal_1571216364.pdf for a list) can vary considerably, as they require the engagement of different government agencies to issue an operating license. As a result, many investors and even locals often hire consultancies or law firms to shepherd the labor-intensive registration process.

The Lao government has attempted to streamline business registration using a one-stop shop model. Registration for general business activities can be done at the Department of Enterprise Registration and Management offices, MOIC (see http://www.erm.gov.la for more details), while the service for activities requiring a government concession is through the Ministry of Planning and Investment (MPI). For investment in special economic zones (SEZ), one-stop registration is run through the MPI or in special one-stop service offices within the SEZs themselves (under the authority of the MPI).

To promote and facilitate domestic and foreign investment, the Prime Minister’s Office issued Order 02 and Order 03 in 2018 and 2019 respectively to reform the ease of doing business and improve services on investment and operational licenses. This includes the improvement of the One Stop Service system and conducting business implementation associated with transparency in a uniform and timely manner. The government also encouraged the participation of both domestic and foreign investors to develop infrastructure and public services delivery projects by issuing a public-private partnership (PPP) decree in 2020 aiming to boost economic growth.

So far, business owners give the one-stop shop concept mixed reviews. Many acknowledge that it is an improvement but describe it as an incomplete reform with several additional steps that must still be taken outside of the single stop. Businesses also complain that there are often different registration requirements at the central and provincial levels.

### Outward Investment

The Lao government does not actively promote, incentivize, or restrict outward investment.

							2. Bilateral Investment and Taxation Treaties					

According to the United Nations Conference on Trade and Development (UNCTAD), Laos has bilateral investment agreements with Australia, Belarus, Cambodia (not in force), China, Cuba, Denmark, France, Germany, Japan, Republic of Korea, Kuwait, Malaysia (not in force), Mongolia, Myanmar, Netherlands, Pakistan, Russia Federation, Singapore, Sweden, Switzerland, Thailand, the United Kingdom, and Vietnam. On February 1, 2005, a Bilateral Trade Agreement (BTA) entered into force between the United States and the Government of Laos that contains some investment provisions.

Laos and the United States do not have a bilateral taxation treaty.

							3. Legal Regime					

### Transparency of the Regulatory System

Regulations in Laos can be vague and conflicting, a subject that the private sector raises regularly with the government, including through official fora such as the Lao Business Forum. The 2013 Law on Making Legislation mandated that all laws be available online at the official gazette website, www.laoofficialgazette.gov.la. Draft bills are also available for public comment through the official gazette website, although not all bills are posted for comment or in the official gazette, and the provinces seldom post their local legislation. Although the situation continues to improve, the realities of doing business in Laos can fail to correspond with existing legislation and regulation. Implementation and enforcement often do not strictly follow the letter of the law, and vague or contradictory clauses in laws and regulations provide for widely varying interpretations. Regulations at the national and provincial levels can often diverge, overlap, or contradict one another. Many local firms still complain about informal or gray competition from firms that offer lower costs by flaunting formal registration requirements and operating outside of government regulatory structures.

The nascent legal, regulatory, and accounting systems are not particularly conducive to a transparent, competitive business environment. International accounting norms apply, and major international firms are present in the market, though understanding and adherence to these norms is limited to a small section of the business community. Eleven companies are listed on the Lao stock exchange. Regulations dictate that companies listed on the exchange must be held to accounting standards, but the government’s capacity to enforce those standards is low.

The government now publicly releases the enacted budget, which includes the total amount of domestic and external debt obligations for the whole country.

### International Regulatory Considerations

Laos is a member of the ASEAN Economic Community (AEC) and is seeking to implement all AEC-agreed standards domestically. However, the local capacity to develop regulatory standards is weak, while enforcement of technical regulations is weaker still. The Lao government has been diligent at notifying draft technical regulations – such as its new law on standards – to the WTO committee on Technical Barriers to Trade (TBT).

### Legal System and Judicial Independence

Laos currently has a poorly developed legal sector. The government adopted the Legal Sector Master Plan with an aim to become a rule of law state by 2020.The plan is now complete, but justice institutions continue to suffer from corruption, lack of capacity, and a lack of independence. To improve the country’s legal system, the government has pledged to continue working with development partners on comprehensive legal sector reform. From 1975 to 1991, Laos did not have a constitution, and government decrees issued by various ministries and officials only exacerbated the country’s poor legal framework. While there have been dramatic improvements in the legal system over the last decade, Laos has a dearth of lawyers, many judges lack formal training and experience, and laws often remain vague and subject to broad interpretation.

The existing system incorporates some major elements of the French civil law system but is also influenced by the legal systems of the former Soviet Union and regional neighbors’ systems. Court decisions are neither widely published, nor do they necessarily affect future decisions. Despite being bureaucratically independent of the government cabinet, the Lao judiciary is still subject to government and political interference.

Contract law in Laos is lacking in many areas important to trade and commerce. The law provides for the sanctity of contracts, but in practice, contracts are subject to political interference and patronage. Businesses report that contracts can be voided if they are found to be disadvantageous to one party, or if they conflict with state or public interests. Foreign businessmen describe contracts in Laos as being “a framework for negotiation” rather than a binding agreement, and even when faced with a judgment, enforcement is weak and subject to the influence of corruption. Although a commercial court system exists, 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 2019, under the leadership of the Ministry of Industry and Commerce (MOIC), Laos became the 92nd State Party to join the United Nations Convention on Contracts for the International Sale of Goods.

### Laws and Regulations on Foreign Direct Investment

As discussed above, the 2009 Law on Investment promotion was amended in November 2016. The new law provides more transparency regarding regulations and procedures and provides greater detail about what specific responsibilities fall under the Ministry of Planning and Investment. The 2016 Law on Investment Promotion introduced uniform business registration requirements and tax incentives that apply equally to foreign and domestic investors. As noted above, foreigners may invest in any sector or business except in cases where the government deems the investment to be detrimental to national security, health, or national traditions, or to have a negative impact on the natural environment. Aside from these sectors, there are no statutory limits on foreign ownership or control of commercial enterprises. For reasons discussed above, despite changes in the law, many companies continue to seek a local partner.

Most laws of interest to investors are featured on the Lao Trade Portal website, http://www.laotradeportal.gov.la, with many laws and regulations translated into English, or the Lao Official Gazette, http://laoofficialgazette.gov.la, or the official website of the Investment Promotion Department (MPI),www.investlaos.gov.la, or the newly created “Lao Law” App.

In sum, neither the government’s investment bureaucracy nor the commercial court system is well developed, although the former is improving and reforming. Investors have experienced government practices that deviate significantly from publicly available laws and regulations. Some investors decry the courts’ limited ability to handle commercial disputes and vulnerability to corruption. The Lao government has repeatedly underscored its commitment to increasing predictability in the investment environment, but in practice, with some exceptions in the creation and operation of SEZs, and investments by larger companies, foreign investors describe inconsistent application of laws and regulations.

### Competition and Antitrust Laws

There have been no updates since 2017. A new competition law was approved in 2015 that applies to both foreign and domestic individuals and entities. The law was drafted with the assistance of the German government and other donors. The competition law was one of the Lao government’s policy efforts to implement the ASEAN Economic Community, or AEC, before 2016. The law established two new government entities, the Business Competition Control (BCC) Commission and the BCC Secretariat. The BCC Commission is the senior body, and its membership is decided by the Prime Minister with the advice of the Minister of Industry and Commerce (MOIC). According to the legislation, it should include senior officials from multiple ministries as well as businesspeople, economists, and lawyers. The BCC Commission can draft regulations, approve mergers, levy penalties, and provide overall guidance on government competition policy and regulation. The BCC Secretariat, a lower-level institution equivalent to a MOIC department or division, can hear complaints, conduct investigations, and conduct research and reporting at the request of the Commission.

### Expropriation and Compensation

According to law, foreign assets and investments in Laos are protected against seizure, confiscation, or nationalization except when deemed necessary for a public purpose. Public purpose can be broadly defined, however, and land grabs are feared by Lao nationals and expatriates alike. In the event of a government expropriation, the Lao government is supposed to provide fair market compensation. Nevertheless, a business relying on a specific parcel of land may lose its investment license if the land is in dispute. Revocation of an investment license cannot be appealed to an independent body, and companies whose licenses are revoked must quickly liquidate their assets. Small landholdings, land with unclear title, or land on which taxes have not been paid are at particular risk of expropriation.

### Dispute Settlement

#### ICSID Convention and New York Convention

The Decree on the Establishment of Private Economic Dispute Resolution as specified under Article 4 of the Law on Economic Dispute Resolution No.51/NA, (2018) provides for private arbitration bodies in Lao PDR. However, the regulatory framework to enable the private sector to establish an alternative channel for business arbitration is still under development with assistance from international donors such as USAID.**Laos is not a member state to the International Center for the Settlement of Investment Disputes (ICSID Convention). It is, however, a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

#### Investor-State Dispute Settlement

**According to the Law on Investment Promotion, resolution of a dispute resolution should proceed through the following process: mediation, administrative dispute resolution, dispute resolution by the Committee for Economic Dispute Resolution, and finally, litigation. However, due to the underdeveloped state of the Lao legal system, foreign investors are generally advised to seek arbitration outside of the country. There are few publicly available records on international investment disputes. According to the 2016 investment promotion law, Article 96 on Dispute Resolution by the Office for Economic Dispute Resolution in the Lao PDR or international organization to which Lao PDR is a party states: “When there is an investment-related dispute, either party thereto shall have the rights to request the Office for Economic Dispute Resolution for resolution within the Lao PDR or abroad as agreed by the parties of the dispute. The Lao PDR recognizes and enforces the award of foreign or international arbitration subject to certification by the people’s court of Lao PDR.” However, in practice, the Embassy is not aware of this new article being successfully exercised by a foreign investor.**

#### International Commercial Arbitration and Foreign Courts

**Beyond those listed above, there are no formal Alternative Dispute Resolution mechanisms provided in Lao law but based on the amended Investment Promotion Law and the law on Investment Resolution dated June 22, 2018, both parties can decide if they would like to have arbitration in Laos or abroad as mentioned in the contract. There is no known history of Laos enforcing foreign commercial arbitral decisions.

### Bankruptcy Regulations

The 1994 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. The law also authorizes liquidation of assets based upon the request of a debtor or creditor. However, there is no record of a foreign-owned enterprise, whether as debtor or as creditor, petitioning the courts for a bankruptcy judgment.

							4. Industrial Policies					

### Investment Incentives

Laos offers a range of investment incentives depending on the investment vehicle, with particular focus on government concessions and special economic zones. Many of these incentives can be found at www.investlaos.gov.la and are generally governed by the Investment Promotion Law.

### Foreign Trade Zones/Free Ports/Trade Facilitation

The new Foreign Investment Law allows for the establishment of special economic zones and specific economic zones (both referred to as SEZs). Special economic zones are intended to support development of new infrastructure and commercial facilities and include incentives for investment. Specific economic zones are intended for the development of existing infrastructure and facilities and provide a lower level of incentives and support than special economic zones. Laos has announced plans to construct as many as 40 special and specific zones, but as of 2022, it has established 23. Some, such as Savan Seno SEZ in Savannakhet and the Vientiane Industry and Trade Area SEZ, or VITA Park, in Vientiane, have successfully attracted foreign investors. Others are accused of harboring illegal activities, such as the Golden Triangle SEZ in Bokeo province that houses the Kings Roman Casino. The Department of Treasury Office of Foreign Assets Control in early 2018 designated the Kings Roman Casino and its owners a Transnational Criminal Organization for engaging in drug trafficking, human trafficking, money laundering, bribery, and wildlife trafficking. More Chinese-invested SEZs are expected to open in the coming years, especially along the Laos-China Railway line. Thai companies are also exploring new SEZ-style industrial parks in Laos.

The Lao government generally places a high priority on trade facilitation measures in international fora, particularly as Laos relies upon trade moving across its neighboring countries to reach seaports. Since 2012, customs management has been modernized through the implementation of the Automated System for Customs Data (ASYCUDA) system assisted by the United Nations and the World Bank to operate customs declarations and border inspections across international check points, including airports and SEZs. The government has also developed a National Single Window to facilitate requests and issue permits for the import, export, and transit of all goods. These approaches reduced the use of paperwork and time involving customs’ clearance from two days in the past to less than eight hours in 2020.

With assistance from Japan, the Lao government instituted a new system for electronic collection of customs fees at several major border crossings in 2016, which was a significant improvement, and in early 2019 the Department of Customs introduced electronic customs payments at the Lao – Thai Friendship Bridge. On several border crossings with Vietnam, Lao and Vietnamese officials jointly conduct inspections to facilitate movement of goods.

On top of these actions, the government published a new version of the Tax Law (No. 81/NA) in late 2020 focusing on trade facilitation rather than revenue collection by eliminating required approvals by some agencies in the approval process. Nonetheless, Laos has struggled to harmonize its own internal processes. For example, customs practices vary widely at different ports of entry.

### Performance and Data Localization Requirements

Laos does not have performance requirements. Requirements relating to foreign hiring are governed by the Labor Law, but in practice, large investors have been able to extract additional government concessions on use of foreign labor. Some foreign-owned businesses have criticized labor regulations for strict requirements that foreign employees not travel abroad during the first months of their Lao residency.

Laos does not currently have enacted laws or regulations on domestic data storage or localization requirements.

							5. Protection of Property Rights					

### Real Property

In 2020, the government published the revised Law on Land, which is available at https://www.laoofficialgazette.gov.la/index.php?r=site/index. While restriction on the ownership rights of foreigners towards land remains unchanged, the revised law allows immovable properties to be owned and invested in by foreign nationals. This significant change in the regulatory framework is expected to accelerate development of the Lao PDR’s real estate sector. Laos hopes for an inflow of investment and foreigners because of the Lao-China railway which opened in December 2021.

Apart from the Land Law, Article 16 of the 2016 Law on Investment Promotion allows investors to obtain land for use through long-term leases or as concessions and allows for the ownership of leases, the right to transfer leases, and to improve leasehold interests. Government approval is not required to transfer property interests, but the transfer must be registered, and a registration fee paid.

Under existing law, a creditor may enforce security rights against a debtor and the concept of a mortgage does exist. The Lao government is currently engaged in a land parceling and titling project, but it remains difficult to determine if a piece of property is encumbered in Laos. Enforcement of mortgages is complicated by the legal protection given mortgagees against forfeiture of their sole place of residence.

Laos provides for secured interests in moveable and non-moveable property under the 2005 Law on Secured Transactions and a 2011 implementing decree from the Prime Minister’s office. In 2013, the State Assets Management Authority at the Ministry of Finance launched a new Secured Transaction Registry (STR), intended to expand access to credit for individuals and smaller firms. The STR allows for registration of movable assets such as vehicles and equipment so that they may be easily verified by financial institutions and used as collateral for loans.

Outside of urban areas, land rights can be even more complex. Titles and ownership are not clear, and some areas practice communal titling.

### Intellectual Property Rights

Laos is not listed in USTR’s Special 301 Report or the Notorious Markets report.

Intellectual property protection in Laos is weak, but steadily improving. The USAID-funded Lao PDR-U.S. International and ASEAN Integration (USAID LUNA II) project assisted the Lao government’s efforts to increase its capacity for IPR protection and to progress on the IPR-related commitments undertaken as a part of Laos’ 2013 WTO accession package. USAID LUNA II worked with the Ministry of Science and Technology’s Department of Intellectual Property to establish an online portal that provides detailed information regarding the registration of copyrights, trademarks, Geographic Indicators, and Plant Varieties at https://dip.gov.la. Interested individuals can use the portal to complete the application forms online. The portal officially launched in February 2019. Additionally, the USAID LUNA II project provided technical support to the Lao government in amending the Law on Intellectual Property.

The government announced the dissolution of the Ministry of Science and Technology in February 2021. Consequently, the MOIC is now responsible for the issuance of patents, copyrights, and trademarks. There is insufficient understanding of the copyright principles among the public. The MOIC has recently assigned administrative duties to relevant agencies attempting to ensure intellectual property rights are respected by individuals and businesses. Laos is a member of the ASEAN Common Filing System on patents but lacks qualified patent examiners. The bilateral Intellectual Property Rights (IPR) agreement between Thailand and Laos dictates that a patent issued in Thailand also be recognized in Laos.

Laos is a member of the World Intellectual Property Organization (WIPO) Convention and the Paris Convention on the Protection of Industrial Property but has not yet joined the Berne Convention on Copyrights.

In 2011 the National Assembly passed a comprehensive revision of the Law on Intellectual Property which brings it into compliance with WIPO and Trade-Related Aspects of Intellectual Property Standards (TRIPS). Amendments to the 2011 Law on Intellectual Property were made public in May 2018.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

							6. Financial Sector					

### Capital Markets and Portfolio Investment

Laos does not have a well-developed capital market, although government policies increasingly support the formation of capital and free flow of financial resources. The Lao Securities Exchange (LSX) began operations in 2011 with two stocks listed, both state-owned – the Banque Pour l’Commerce Exterieur (BCEL), and the power generation arm of the electrical utility, Electricite du Laos – Generation (EDL-Gen). In 2012, the Lao government increased the proportion of shares that foreigners can hold on the LSX from 10 to 20 percent. As of March 2023, there are eleven companies listed on the LSX: BCEL, EDL-Gen, Petroleum Trading Laos (fuel stations), Lao World (property development and management), Souvanny Home Center (home goods retail), Phousy Construction and Development (Construction and real estate development), Lao Cement (LCC), Mahathuen Leasing (leasing), Lao Agrotech (palm oil plantation and extraction factory), Vientiane Center (property development and management), and Lao ASEAN Leasing (LALCO) (financing and leasing). News and information about the LSX are available at http://www.lsx.com.la/.

Businesses report that they are often unable to exchange kip into foreign currencies through central or local banks, particularly at times when the kip is depreciating against international currencies. Analysts suggest that concerns about dollar reserves may have led to temporary problems in the convertibility of the national currency. Private banks allege that the Bank of Lao PDR (BOL) withholds dollar reserves. The Bank of Lao PDR alleges that private banks already hold sizable reserves and have been reluctant to give foreign exchange to their customers to maintain unreasonably high reserves. Lao and foreign companies alike, and especially small- and medium-sized enterprises (SMEs), note the lack of long-term credit in the domestic market. Loans repayable over more than five years are very rare, and the choice of credit instruments in the local market is limited. The Credit Information Bureau, developed to help inject more credit into markets, still has very little information and has not yet succeeded in mitigating lender concerns about risk.

### Money and Banking System

The banking system is under the supervision of the Bank of Lao PDR, the nation’s central bank, and includes 38 banks, most of them commercial. Private foreign banks can establish branches in all provinces of Laos. ATMs have become ubiquitous in urban centers. Technical assistance to Laos’ financial sector has led to some reforms and significant improvements to Laos’ regulatory regime on anti-money laundering and countering the financing of terrorism, but overall capacity within the financial governance structure remains poor.

The banking system is dominated by large, government-owned banks. The health of the banking sector is difficult to determine given the lack of reliable data, though banks are widely believed to be poorly regulated and there is broad concern about bad debts and non-performing loans that have yet to be fully reconciled by the state-run banks. The IMF and others have encouraged the Bank of Lao PDR to facilitate recapitalization of state-owned banks to improve the resilience of the sector. Several banks operate digital payment services, which has facilitated domestic transactions, but also introduced new digital crime risks.

While publicly available data is difficult to find, non-performing loans are widely believed to be a major concern in the financial sector, fueled in part by years of rapid growth in private lending. The government’s fiscal difficulties in 2013 and 2014 led to non-payment on government infrastructure projects. The construction companies implementing the projects in turn could not pay back loans for capital used in construction. Many analysts believe the full effects of the government’s fiscal difficulties have not yet worked their way through the economy. In 2022, Laos’ fiscal deficit is estimated to be about 1 percent of GDP higher because of lower spending and the absence of debt payment deferral. Total public and publicly guaranteed debt were estimated to surpass 100 percent of GDP which adds to concerns about Laos’ fiscal outlook and macroeconomic stability. In 2018 Laos passed a new law on Public Debt Management aimed at reducing Laos’ debt-to-GDP ratio, but most economic analysts anticipate Laos’s debt-to-GDP ratio will likely increase as the country navigates an economic recovery from the COVID-19 pandemic.

### Foreign Exchange and Remittances

#### Foreign Exchange

**There are published, formal restrictions on foreign exchange conversion and because the market for Lao kip is relatively small, the currency is rarely convertible outside the immediate region. Laos persistently maintains low levels of foreign reserves, which are estimated to cover approximately two months’ worth of total imports. The reserve buffer is expected to remain relatively low due to structurally weak export growth in the non-resource sector and to debt service payments. The decline in reserves was due to a drawdown of government deposits primarily for external debt service payments, some intervention in the foreign exchange market to manage the volatility of the currency, and financing the continuing current account deficit. The Bank of the Lao PDR (BOL) occasionally imposes daily limits on converting funds from the Lao kip into U.S. dollars and Thai baht or restricts the sectors able to convert Lao kip into dollars. This can sometimes result in difficulties obtaining foreign exchange in Laos. The BOL issued Notice no.1026/BOL in December 2022 to order the closure of currency exchanges business associated with commercial banks response to the Lao kip’s depreciation against foreign currencies. This aims to regulate currency circulation and allow commercial banks to take lead in determining rates and policies aligned with BOL policies. Such effort significantly reduces the gap between official and gray-market currency rates. Though the gap is narrowing down to two percent, the current value of Lao kip against the dollar and Thai baht is still far below pre-Covid-19 rates.

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. The Enterprise Accounting 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 if they request approval from the Lao government. Foreign enterprises must report on their performance annually and submit annual financial statements to the Ministry of Planning and Investment (MPI).

According to a recent report from Laos’ Lao Academy of Social and Economic Sciences (LASES), the increasing demand for dollars and Thai baht for the import of capital equipment for projects and consumer goods, coupled with growing demand for foreign currency to pay off foreign debts has resulted in a continued depreciation of the exchange rate in 2022. The official nominal kip/U.S. dollar reference rate depreciated by 32.04 percent year-on-year in February 2023, while the kip/baht exchange rate depreciated by 29.83 percent.

#### Remittance Policies

**There have been no recent changes to remittance law or policy in Laos. Formally, all remittances abroad, transfers into Laos, foreign loans, and payments not denominated in Lao kip must be approved by the BOL. In practice, many remittances are understood to flow into Laos informally, and relatively easily, from a sizeable Lao workforce based in Thailand. Remittance-related rules can be vague and official practice is reportedly inconsistent.

### Sovereign Wealth Funds

There are no known sovereign wealth funds in Laos.

							7. State-Owned Enterprises					

The Lao government maintains ownership stakes in key sectors of the economy such as telecommunications, energy, finance, airlines, and mining. Where state interests’ conflict with private ownership, the state is in a position of advantage.

There is no centralized, publicly available list of Lao State-Owned Enterprises (SOEs). The Lao government’s most recent figures report that there are approximately 152 SOEs in Lao PDR. 133 SOEs are 51-100percent owned by the state with registered capital at more than $26 billion. At the end of 2017 the total assets of 60 SOEs managed by the State Property Management Department of the Ministry of Finance was more than $13 billion (80.51percent of GDP). The net profit from SOEs was around $156 million of which $105 million was in government dividends. In 2021, the government announced SOE reform to address non-transparent issues related to executives and management methods. This reform also aims to evaluate state assets, identify strategic enterprises and underperforming ones, and identify which SOEs are economically inviable and need full reform.

The government has not specified a code or policy for its management of SOEs and has not adopted OECD guidelines for Corporate Governance of SOEs. There is no single government body that oversees all SOEs. Several separate government entities exercise SOE ownership in different industries. SOE senior management does not uniformly report to a line minister. Comprehensive information on boards of directors or their independence is not publicly available. While there is scant evidence one way or the other, private businesses generally assume that court decisions would favor an SOE over another party in an investment dispute.

### Privatization Program

There is no formal SOE privatization program, though successive prime ministers have openly discussed subjecting some SOEs to greater competition and possible privatization. The government occasionally floats ideas for increasing private ownership in some SOEs through partial listings on the LSX, or through spinning off and privatizing parts of others.

							8. Responsible Business Conduct					

There is low general awareness of responsible business conduct (RBC) and corporate social responsibility (CSR). There is no systematic government or NGO monitoring of RBC. RBC is not generally included in the government’s investment policy formulations. No concerns regarding human rights and their relation to RBC have been reported so far, however there are ongoing concerns about various forms of trafficking and labor abuse in the Golden Triangle Special Economic Zone.

***Additional Resources***

Department of State
                    - Country Reports on Human Rights Practices ;
                    - Trafficking in Persons Report ;
                    - Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ;
                    - U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises ; and;
                    - Xinjiang Supply Chain Business Advisory 

Department of the Treasury
                    - OFAC Recent Actions

Department of Labor
                    - Findings on the Worst Forms of Child Labor Report ;
                    - List of Goods Produced by Child Labor or Forced Labor ;
                    - Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
                    - Comply Chain .

Department of Commerce
                    - Country Commercial Guide for Laos

							9. Corruption					

Corruption is a serious problem in Laos that affects all levels of the economy. The Lao government has developed several anti-corruption laws, but enforcement remains weak. When he assumed office in early 2016, then Prime Minister Thongloun Sisoulith focused on government anti-corruption efforts. Lao media and the National Assembly now report on corruption challenges and the sacking or disciplining of corrupt officials with some regularity. In September 2009, Laos ratified the United Nations Convention against Corruption. In March 2021, Thongloun was named President of the Lao PDR and stated that he would continue to prioritize good governance. Laos is ranked 126th out of 180 countries on Transparency International’s 2022 Corruption Perceptions Index (CPI), advancing eight spots since 2020.

Domestic and international firms have repeatedly identified corruption as a problem in the business environment and a major detractor for international firms exploring investment or business activities in the local market.

The Lao State Inspection and Anti-Corruption Authority (SIAA), a ministry-level body, oversees analyzing corruption at the national level and serves as a central office for gathering evidence of suspected corruption. Additionally, each ministry and province have a SIAA office that does not report to the organization in which it is housed. These SIAA offices feed into the SIAA’s central system.

According to Lao law, both giving and accepting bribes are criminal acts punishable by fine and/or imprisonment. Nonetheless, foreign businesses frequently cite corruption as an obstacle to operating in Laos. Often characterized as a fee for urgent service, officials commonly accept bribes for the purpose of approving or expediting applications. Laos is not a signatory to the OECD Convention on Combating Bribery.

In 2014, an asset declaration regime entered into force for government officials, which required them to declare income, assets, and debts for themselves and their family members; this was further strengthened in 2017 and 2018. Officials are now required to file a declaration on any assets valued over $2,500, including land, structures, vehicles, and equipment, as well as cash, gold, and financial instruments. These declarations are reportedly held privately and securely by the government. If a corruption complaint is made against an official, the SIAA can compare the sealed declaration with the official’s current wealth. To what extent this program has worked or is working remains unclear.

***Resources to Report Corruption***

Contact at government agency or agencies responsible for combating corruption:

Mr. Sithone SouliyavongDirector GeneralInspection and Anti-Corruption Department, State Inspection and Anti-Corruption AuthoritySivilay Village, Xaythany District, Vientiane Capital, 13th South RoadTel: office: 021 715032; Fax: 021 715006; cell: 020 5957 7771

							10. Political and Security Environment					

Laos is generally a peaceful and politically stable country. In 2021, Laos once again had an orderly change of administration under its one-party system. The risk of political violence directed at foreign enterprises or businesspersons is low. There has been little-to-no political violence in the last decade and Laos’ political stability is an attractive feature for foreign investors.

							11. Labor Policies and Practices					

Despite Laos’ young population— the median age is 25 years old— employers report extensive labor shortages, particularly for skilled workers. Relatively low levels of education disqualify many workers from higher-skilled jobs and wages for all skill levels remain low. Economic migration to neighboring countries also limits the pool of available labor remaining.

In late 2013, the government enacted a labor law containing new protections for workers, including provisions to increase the skills of the Lao labor force and stricter rules for the hiring of foreign workers.

The Lao Federation of Trade Unions (LFTU), which is associated with the ruling Lao People’s Revolutionary Party, is the primary representative of labor and represents workers in tripartite processes. Laos’ National Assembly passed a new Trade Union Law in November 2017 but the impact of the new law on the labor market and foreign investors has been gradual. No official English translations of the final Trade Union Law are publicly available.

According to the Labor Law, labor units comprising ten or more employees must have an employee representative or trade union. Both government-employed LFTU representatives and other employee representatives may bargain collectively with employers on matters including working conditions, recruitment, wages, welfare, and other benefits. Collective bargaining is typically undertaken by representatives of the LFTU, though the Labor Law authorizes independent worker’s groups to elect their own leaders and to represent their interests and engage in collective bargaining on their behalf. The Labor Law authorizes strikes if several steps of dispute resolution fail; however, there is no record of strikes occurring in Laos.

Child labor is outlawed except under very strict, limited conditions that ensure no interference with the child’s education or physical wellbeing. The Labor Law outlaws several forms of employment discrimination and provides standards for work hours. The law also established occupational health and safety standards, but inspections remain inconsistent. An International Labor Organization project undertaken in 2015 and 2016 trained labor inspectors in basic practices, with particular focus on the garment industry.

The minimum wage is set by separate regulation, and in recent years has seen annual increases after a tripartite negotiation among LFTU, the Ministry of Labor and Social Welfare, and the Lao National Chamber of Commerce and Industry. In recent years, the minimum has seen some increases after tripartite negotiations among LFTU, the Ministry of Labor and Social Welfare, and the Lao National Chamber of Commerce and Industry. In 2022, the minimum wage was raised to approximately $69 per month (1,200,000 *kip*). The minimum wage is scheduled to rise again to $75 per month (1,300,000 *k**ip*) in May 2023 but local press reports suggest delays are likely.

Employment contracts are required under the labor law but are not uniformly adopted in practice. In February 2018, the government promulgated the Decree on Labor Dispute Resolution No. 76, detailing four processes for employers and employees to resolve labor disputes and establishing the Committee for Labor Dispute Resolution (CLDR). The CLDR operates on both the central and provincial level to address disputes that cannot be resolved through compromise or administrative remedies. Claims brought to the central level CLDR that cannot be resolved, may be referred to the Lao People’s Court at the request of one of the involved parties.

Foreign investors using a concession as an investment vehicle are reportedly able to negotiate the percentage of foreign labor to be used in the investment. However, labor standards such as minimum wage and health and safety standards should apply uniformly regardless of the investment vehicle or use of a special economic zone. In February and March of 2022, the government announced new labor regulations for SEZs to combat labor exploitation. The 2022 regulations mandated regular monitoring and reporting of work and living conditions to the SEZ management office as well as contracts for all workers be written and signed in the worker’s native language. The regulations explicitly forbid forced labor inside Laos’ SEZs, though enforcement remains a challenge.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

The U.S. International Development Finance Corporation (DFC), in its previous iteration known as the Overseas Private Investment Corporation (OPIC), and Laos signed a bilateral agreement in 1996. The DFC currently has no exposure in Laos, but the organization is actively exploring options for programming in the country.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics