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A Practical Guide to Doing Business in Laos

Laos, the second smallest ASEAN country after Brunei, has grown strongly since 2000 with average GDP growth hovering above 7%. Phenomenal growth has arisen primarily as the result of pro-investment policies aimed at accelerating inwards foreign direct investment (FDI). Laos is abundant in natural resources and it has recently become an emerging hydropower supplier in the region. The IMF’s World Economic Outlook, October 2017 expects Laos to remain one of the fastest growing economies in the East Asia and Pacific region with projected GDP growth of about 7% in 2018 and in the lead up to 2022. Increased ASEAN integration is seen as opening up more investment opportunities in many economic sectors, particularly in industrial estates, energy, transport and manufacturing industries. However, the IMF has cautioned that Laos’s external position remains vulnerable in light of rising foreign debt (mostly due to Thailand and China), which could be worsened if the Laos currency depreciates.

Laos is considered one of the most challenging countries to do business in ASEAN – it is ranked 98th out of 138 economies in the World Economic Forum’s Global Competitiveness Report 2017-18 and 141st out of 190 economies in the World Bank’s Doing Business 2018 report. Within ASEAN, Laos is the second most challenging country after Myanmar according to the World Bank’s ease of doing business rankings. Both reports highlight many challenges, which include the following: 

  • Starting a business – Laos is ranked 164th out of 190 economies by the World Bank, with the process considered highly time consuming compared to most countries in the East Asia and Pacific region.
  • Workforce – As the third least-populous ASEAN country with less than seven million people along with a small workforce, Laos is among the poorest in terms of per capita income, while most people work in the agriculture sector.
  • Infrastructure – National and regional infrastructure and logistics links are poor in general and need to be developed.
  • Corruption and bureaucracy – There is extensive red tape to gain access to certain business permits and licences.

Despite these challenges, Laos offers many business opportunities for potential investors. Whilst being a landlocked country, Laos borders China, its largest trading partner, and the four ASEAN countries of Thailand, Vietnam, Cambodia and Myanmar. It has a vast range of natural resources and there are significant FDI opportunities to develop resources-intensive industries. Meanwhile, Laos is diversifying its economy to lower its reliance on resources and hydropower exports, developing the manufacturing and real estate sectors. Besides, tourism has become a new economic driver, with rapid growth in arrivals and receipts. The country has introduced several reform packages to improve its business and investment environment. In the Eighth National Social Economic Development Plan (NSEDP), 2016-2020, Laos aims to develop the skill sets of its workforce and support the development of SMEs.

Hong Kong companies will find many investment opportunities in Laos in light of the strong demand for expertise and investment in all major sectors. This business guide provides practical information for Hong Kong companies on investing and doing business in Laos.

 

  1. Regulatory Environment
  2. Establishing a Presence
  3. Intellectual Property Protection
  4. Staff Recruitment
  5. Tax Considerations
  6. Import/Export Procedures
  7. Further Information


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Content provided by Picture: HKTDC Research
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