Investment Law

 

Law on Promotion of Foreign Investment in LAO PDR

 

 

page 1 | page 2 | page 3 | page 4 | page 5 | page 6 | page 7

Decree 64

 

 

 

 

 

Page 1

LAW 

ON THE PROMOTION AND MANAGEMENT 

OF FOREIGN INVESTMENT 

IN THE LAO PEOPLE'S DEMOCRATIC REPUBLIC 

 

 

Article 1:
The Government of the Lao People's Democratic Republic encourages foreign persons, either individuals or legal entities, to invest capital in the Lao People's Democratic Republic (hereinafter "the Lao PDR") on the basis of mutual benefit and observance of the Laws and regulations of the Lao PDR. Such persons hereinafter shall be referred to as "foreign investors."


Article 2:
Foreign investors may invest in and operate enterprises in all fields of lawful economic activity such as agriculture and forestry, manufacturing, energy, mineral extraction, handicrafts, communications and transport, construction, tourism, trade, services and others.

Foreign investors may not invest in or operate enterprises which are detrimental to national security, the natural environment, public health, the natural culture, or which violate the laws and regulations of the Lao PDR.


Article 3:
The property and investment in the Lao PDR of foreign investors shall be fully protected by the Laws and regulations of the Lao PDR. Such property and investments may not be requisitioned, confiscated or nationalized except for a public use purpose and upon payment of prompt, adequate and effective compensation.

 

back to top

 

Page 2

SECTION II: FORMS OF FOREIGN INVESTMENT

 

Article 4:
Foreign investors may invest in the Lao PDR in either of the following forms:
(1) A Joint Venture with one or more domestic Lao investors; or
(2) A Wholly Foreign-Owned Enterprise.

Article 5 : 
A Joint Venture is a foreign investment established and registered under the laws and regulations of the Lao PDR which is jointly owned and operated by one or more foreign investors and by one or more domestic Lao investors. The organization, management and activities of the Joint Venture and the relationship between its parties shll be governed by the contract between its parties and the Joint Venture's Articles of Association, in accordance with the laws and regulations of the Lao PDR.  

Article 6 : 
Foreign investors who invest in a Joint Venture must contribute a minimum portion of thirty percent (30%) of the total equity investment in that Venture. The contribution of the Venture's foreign party or parties shall be converted in accordance with the laws and regulations of the Lao PDR into Lao currency at the exchange rate then prevailing on the date of the equity payment(s), as quoted by the Bank of the Lao PDR. 

Article 7 : 
A wholly Foreign-Owned Enterprise is a foreign investment registered under the laws and regulations of the Lao PDR by one or more foreign investors without the participation of domestic Lao investors. The Enterprise established in the LAO PDR may be either a new company or a branch or representative office of a foreign company. 

Article 8 : 
A foreign investment which is a Lao branch or representative office of a foreign company shall have Articles of Association which shall be consistent with the laws and regulations of the Lao PDR and subject to the approval of the Foreign Investment Management Committee of the Lao PDR. 

Article 9 : 
The incorporation and registration of a foreign investment shall be in conformity with the Enterprise Decree of the Lao PDR. 

 

SECTION THREE : BENEFITS, RIGHTS AND OBLIGATIONS OF

FOREIGN INVESTORS

 

Article 10 : 
The Government of the Lao PDR shall protect foreign investments and the property of foreign investors in accordance with the laws and regulations of the Lao PDR. Foreign investors may lease land within the Lao PDR and transfer their leasehold interests; and they may own improvements on land and other moveable property and transfer those ownership interests. Foreign investors shall  be free to operate their enterprises within the limits of the laws and regulations of the Lao PDR. The Government shall not interfere in the business management of those enterprises.

back to top 

 

Page 3

Article 11 : 
Foreign investors shall give priority to Lao citizens in recruiting and hiring their employees. However, such enterprises have the right to employ skilled and expert foreign personnel when necessary and with the approval of the competent authority of the Government of the Lao PDR. Foreign investors have an obligation to upgrade the skills of their Lao employees , through such techniques as training within the Lao PDR or abroad.  

Article 12 : 
The Government of the Lao PDR shall facilitate the entry into, travel within, stay within, and exit from Lao territory of foreign investors, their foreign personnel, and the immediate family members of those investors and those personnel. All such persons are subject to and must obey the laws and regulations of the Lao PDR while they are on Lao territory. Foreign investors and their foreign personnel working within the Lao PDR shall pay to the Lao government personal income tax at a flat rate of ten percent (10 %) of their income earned in the Lao PDR . 

Article 13 : 
Foreign investors shall open accounts both in Lao currency and in foreign convertible currency with a Lao bank or foreign bank established in the Lao PDR. 

Article 14 : 
In the management of their enterprises, foreign investors shall utilize the national system of financial accounting of the Lao PDR. Their accounts shall be subject to periodic audit by the Government's financial authorities in conformity with the applicable Lao accounting regulations. 

Article 15 : 
In conformity with the law and regulations governing the management of foreign exchange and precious metals, foreign investors may repatriate earnings and capital from their foreign investments to their own home countries or to third countries through a Lao bank or foreign bank established in the Lao PDR at the exchange rate prevailing on the date of repatriation as quoted by the Bank of the Lao PDR. Foreign personnel of foreign investments may also repatriate their earnings, after payment of Lao personal income taxes and all other taxes due. 

  

back to top 

 

 

 

 

 

Page 4

 Article 16 : 
Foreign investments subject to this law shall pay a Lao PDR annual profit tax at a uniform flat rate of twenty percent (20%) , calculated in accordance with the provisions of the applicable laws and regulations of the Lao PDR. Other Lao taxes, duties and fees shall be payable in accordance with the applicable laws and regulations of the Lao PDR. For foreign investments involving natural resources exploitation and energy generation, sector-specific taxes and royalties shall be prescribed in project agreements entered into between the investors and the Lao Government. 

Article 17 : 
Foreign investments shall pay a Lao PDR import duty on equipment, means of production, spare parts and other materials used in the operation of their investment projects or in their productive enterprises at a uniform flat rate of one percent (1%) of their imported value. Raw materials and intermediate components imported for the purpose of processing and then re-exported shall be exempt from such import duties. All exported finished products shall also be exempted from export duties. Raw materials and intermediate components imported for the purpose of achieving import substitution shall be eligible for special duty reductions in accordance with the Government's applicable incentive policies.  

Article 18 : 
In highly exceptional cases and by specific decision of the Government of the Lao PDR, foreign investors may be granted special privileges and benefits which may possibly include a reduction in or exemption from the profit-tax rate prescribed by Article 16 and/or a reduction in or exemption from the import-duty rate prescribed by Article 17, because of the large size of their investments and the significant positive impact which those investments are expected to have upon the socio-economic development of the Lao PDR. In the event of the establishment of one or more Free Zones or Investment Promotion Zones, the Government shall issue area-specific or general regulations or resolutions. 

 

back to top 

 

 

 

 

 

 

 

 

Page 5

 Article 19 : 
After payment of its annual profit tax, a foreign investor shall devote a portion of its profit each year to various reserve funds necessary for the operation and development of the enterprise in order to continuously improve the enterprise's efficiency, in accordance with the policies and the Articles of Association of the enterprise. 

Article 20 : 
Foreign investments approved under this law shall at all times be operated in accordance with the laws and regulations of the Lao PDR. In particular, foreign investors shall take all measures necessary and appropriate to ensure that their investments' facilities, factories and activities protect the natural environment and the health and safety of the workers and the public at large, and that their investments contribute to the social insurance and welfare programs for their workers in conformity with the policy and the laws and regulations of the Lao PDR. 

Article 21 : 
In the event of disputes between foreign parties within a foreign investment, or between foreign investors and Lao parties , the disputants should first seek to settle their differences through consultation or mediation. In the event that they fail to resolve the matter , they shall then submit their dispute to the economic arbitration authority of the Lao PDR or to any other mechanism for dispute resolution of the Lao PDR, a foreign country or an appropriate international organization which the disputants can agree upon. 

 

SECTION FOUR : THE ORGANIZATION OF

FOREIGN INVESTMENT MANAGEMENT

 

Article 22 : 
The Government of the Lao PDR has established a State organization to promote and to manage foreign investment within the Lao PDR titled the Foreign Investment Management Committee (hereinafter called "the DDFI"). [ NOTE: The DDFI now conducts business under the name DDFI ]. The DDFI is responsible for administration of this law and for the protection and promotion of foreign investment within the Lao PDR. 

 

 

back to top 

 

 

 

 

 

 

 

 

Page 6

 

Article 23 : 
All foreign investments established within the Lao PDR shall be assisted, licensed and monitored through the " one-stop-service " of the DDFI,  acting as the central focal point for all Government interactions with the investors, with the collaboration of the concerned ministries and the relevant provincial authorities. 

Article 24 : 
A foreign investment shall be considered to be legally established within the Lao PDR only upon the investment's receipt of a written foreign investment license granted by the DDFI. 

 Article 25 : 
A foreign investor which seeks a license for a foreign investment shall submit to the DDFI an application and such supporting documentation as the DDFI may prescribe by regulation. The DDFI may grant preliminary approval-in-principle for investment projects being specially promoted by the Government.  

Article 26 : 
Upon receipt of a completed application and supporting documentation, the DDFI shall screen them, make a foreign-investment licensing decision and notify the applicant of that decision within 60 days of the application's submission date. Within this same overall 60-day period, concerned ministries and provincial authorities consulted by the DDFI for their views shall have a maximum of 20 days in which to reply. 

 Article 27 : 
Within 90 days of receiving its foreign investment license from the DDFI, a foreign investor shall register that license and commence operation of its investment in conformity with the implementation schedule contained in the investment's feasibility study and with the terms and conditions of the license granted by the DDFI, and in accordance with the laws and regulations of the Lao PDR. 

Article 28 : 
The DDFI has responsibility to coordinate with other concerned ministries and provincial authorities in monitoring and enforcing the implementation of a foreign investment in conformity with the investment's feasibility study and with the terms and conditions of the investment license, and in accordance with the laws and regulations of the Lao PDR.  The concerned ministries and provincial authorities have the responsibility to perform their respective monitoring and enforcement obligations.

 

back to top 

 

 

 

 

 

 

 

 

 

 

 

Page 7

Article 29 :

If a foreign investor violates the agreement and the terms and conditions of its foreign investment license or the laws and regulations of the Lao PDR, the investor shall be notified of the detected violation and shall be instructed to promptly desist. In the event the investor fails to desist or in case of a serious violation, the investor's foreign investment license may be suspended or revoked and the investor may additionally be subject to other sanctions under the applicable laws and regulations of the Lao PDR.

 

SECTION FIVE: FINAL PROVISIONS

 

Article 30 :

This law shall come into force 60 days after its ratification. Upon the entry into force of the present law, the foreign investment law of the Lao people's Democratic Republic No. 07/PSA dated 19 April 1988 shall cease to have effect, without prejudice to the rights and privileges granted to, and the obligations imposed upon, foreign investments under the law. No. 07/PSA. Notwithstanding this provision, a foreign investor which received its license under the prior law may elect to petition the DDFI in writing, within 120 days of the coming into force of this law, to become subject to the terms of this law. The DDFI may grant such petitions at its discretion. For a foreign investor whose petition is granted, the rights and benefits previously granted and the obligations previously imposed under the law No. 07/PSA shall thereafter prospectively cease to have effect.

 

Article 31 : The Government of the Lao PDR shall, by decree, issue detailed regulations for the implementation of this law.

 

Vientiane, 14 March 1994

President of the National Assembly

Signed : Saman VIYAKET

back to top

 

 

 

 

 

Decentralization of Foreign Investment Management Power

  After more than 15 years of experience in promoting and managing foreign direct investment, the Lao Government decided to decentralize foreign investment management power, giving local authorities opportunities to attract investment to their governed territories as seen appropriate.

  On the 23rd of April 2003, the Prime Minister signed Decree No. 64/PM on the Roles, Responsibilities and Rights of the Committee for Investment Management, Foreign Cooperation and Domestic Investment at Central and Local Levels.

  According to the newly released decree, the Committee for Investment and Cooperation (CIC) comprises two levels of organizational structure: Central CIC and Local CIC. Central CIC shall be chaired by chairman of the Committee for Planning and Cooperation (CPC). Vice-chairman of the CPC directly in charge of investment affairs and foreign cooperation shall also be the vice-chairman of Central CIC. Other vice-chairmen of the CPC should be members of the board of Central CIC. At local level, governors of provinces, municipalities and special zones are chairmen of CICs in those areas. Vice-governors of the provinces, municipalities and special zones who are directly in charge of economic affairs are vice-chairmen of the local CICs. Other vice-governors of the provinces, municipalities and special zones are members of boards of the local CICs.

  The CIC has supporting organizations as follows:

At Central Level: 1) The Department for Promotion and Management of Domestic and Foreign Investment; 2) The Department for Foreign Economic Cooperation; and 3) the Cabinet of the CPC as the Secretariat of the Central CIC.

At Local Level: Departments for Planning and Cooperation of provinces, municipalities and special zones as secretariats of local CICs.

  Some rights of each CIC level and rights of concerned ministries/agencies:

Central CIC has some rights as follows:

1)      To consider every matter concerning domestic and foreign investment and foreign economic cooperation nationwide;

2)      To approve: 

3)      To sign investment projects:

after the projects have been considered and approved by a Central CIC meeting:

-         Chairman of Central CIC has the right to sign investment projects with capitals of equal or higher than 5,000,000 USD (five million US dollars);

-         Vice-chairman of Central CIC has the right to sign investment projects with capitals of less than 5,000,000 USD (five million US dollars)

 Local CICs have some rights as follows:

1)   To approve: - foreign investment projects under the promoted activities (as specified in Prime Minister’s Decree No. 46/PM, dated 23rd March 2001) with capitals of equal or less than 1,000,000 USD (one million US dollars); and issue certificates for incentives to domestic investments with capitals of equal or less than 10,000,000,000 kips (ten billion kips).

                  - CIC chairmen of Vientiane Municipality, Savannakhet, Champasack and Luang Prabang Provinces have the rights to approve foreign investment projects under the promoted activities with capitals of equal or less than 2,000,000 USD (two million US dollars) and the rights to issue certificates for incentives to domestic investments with capitals of equal or less than 20,000,000,000 kips (twenty billion kips)

2)      Chairmen of local CICs have the rights to sign investment licenses and issue certificates for incentives in the amounts of capitals as mentioned above, after which a copy of each investment license/certificate for incentives shall be sent to Central CIC within five working days.

3)      To directly manage foreign and domestic investment projects and foreign cooperation within their administrative territories and regularly report to Central CIC.

4)      To study and comment on investment projects to be established in their administrative territories, which do not fall under their approval rights.

 Concerned ministries/agencies have some rights as follows:

1)      To study possible strategies to attract investment and cooperation within their fields in order report to CIC for consideration and approval;

2)      To cooperate and provide technical comments on projects to CIC for consideration and approval or rejection of proposed investment projects;

3)      To encourage, promote and attract more investment and cooperation into their sectors.

This decree is to replace Decision No. 28/PM dated 18th of August 2000 and Decision No. 013/PM, dated 27th February 2002, and will be effective after 30 days from the date of signature onward.

back to top