MONGABAY.COM
Mongabay.com seeks to raise interest in and appreciation of wild lands and wildlife, while examining the impact of emerging trends in climate, technology, economics, and finance on conservation and development (more)
WEEKLY NEWSLETTER
|
|
Laos
Index
Policy
The Foreign Investment Law of July 1988 is modeled on
legislation that has already been adopted in Vietnam and
China.
Laos seeks to encourage foreign investment as a means of
facilitating economic development as called for by the New
Economic
Mechanism. The government hopes that foreign investment
projects
will help to shift the economy from a subsistence to a
commodity
production basis by improving the management skills of the
labor
force; introducing advanced technology to the
manufacturing sector;
fostering economic, scientific, and technological
cooperation with
other countries; and increasing the production of goods
for export.
The Foreign Investment Law allows investors to enter
into three
types of investment arrangements. The first type of
arrangement,
contractual or cooperative businesses, entails investment
in
existing state or private companies, or with Laotian
individuals;
in this way, the law is more liberal than comparable
legislation in
either Vietnam or China. The second type of arrangement,
joint
ventures, requires foreigners to invest a minimum of 30
percent of
total capital. In general, terms for either of these
arrangements
are not to exceed twenty years. The third type of
arrangement,
private ventures, requires foreigners to invest 30 percent
of total
capital, up to a maximum of 100 percent. Terms are
generally
limited to fifteen years. Tax exemptions or reductions for
joint
ventures and private enterprises are available for two to
six years
after the first year of profit, depending on the size of
the
investment, the volume of goods exported as a result of
the
project, the location of the project, and the sector on
which it
focuses.
Tax incentives--a reduction of 2 to 5 percent in the
profit
tax--are also used to encourage foreign investment. In
order to
qualify for the reduction, a foreign investment project
has to meet
three of the following criteria: the project will export
more than
70 percent of the goods it produces; will obtain
domestically more
than 70 percent of the raw materials it uses; will use
advanced
technology; will aim to overcome unfavorable natural or
socioeconomic conditions; will contribute to national
economic
development despite low profit margins; or will be
established
before 1995. The Foreign Investment Law allows foreign
investors to
remit profits to the countries of their choice; in
addition, it
prohibits the nationalization of their capital and
property.
Other laws also seek to facilitate foreign investment.
In early
1989, Decree 27 established the Foreign Investment
Management
Committee to centralize foreign investment approval
procedures,
thus enabling the Foreign Investment Law to be
implemented. The Lao
Chamber of Commerce was established in January 1990 to
assist in
attracting new business ventures. Private domestic and
foreign
investments have been encouraged by the gradual
improvement of the
legal environment, including the passage of laws regarding
property
rights (1990), contractual obligation (1990), inheritance
(1990),
crime (1990), civil procedures (1990), and labor (1991).
The 1991
approval of the constitution, which protects the right to
private
ownership, is also an important factor in encouraging
foreign
investment. Also, as of late 1993, an arbitration law was
being
drafted that will provide a legal mechanism for the
settlement of
disputes. There was an informal arbitration procedure, but
the lack
of a law or decree made decisions nonbinding.
Data as of July 1994
|
|