LAO PEOPLE'S DEMOCRATIC REPUBLIC

FOREIGN INVESTMENT MANAGEMENT COMMITTEE

THE COUNTRY

Lao People's Democratic Republic is a centrally located Southeast Asian country with a land area of 236,800 square kilometers. It is bordered on the North by China, on the West by Thailand, on the South by Cambodia, and on the East by Vietnam. About 75% of its area is mountainous, and 25% lowlands adjacent to the Mekong River, which runs for 1,800 kilometers along and within the Republic's western border. The estimated population was 4.5 million in 1995. 15% of these citizens reside in cities and towns. The remainder are widely dispersed in rural areas. Although the country is richly endowed with natural resources, its economy is principally agricultural (56.4% of GDP in 1994). Services account for 23.7%, industry 17.8% and import duties 2.1% respectively. GDP/capita is approximately US$ 350.

Lao PDR enjoys a stable Government in place for 20 years, which maintains good relations with neighboring countries. The Republic is a member of the major international development institutions, including among others, the World Bank (IRBD) and the International Finance Corporation (IFC), the Asian Development Bank (ADB) and the United Nations Development Programme (UNDP).

THE ECONOMIC AND INVESTMENT ENVIRONMENT

In 1986, the Lao Government launched a dramatic New Economic Mechanism, expanding its economy from central planning to a mixed system which encourages market mechanisms. Milestones in this accelerating campaign have included the giving of increased managerial and financial autonomy to State-owned Enterprises, the liberalization of prices, and the encouragement of private sector development. In response, the economy has revived dynamically, achieving real GDP growth rate of 8.1% in 1994. To stimulate private-sector activity in general and to attract private-sector investment in particular, an entire new legal framework is being constructed. New laws have been enacted to promote and guide foreign investment, contracts, private property, inheritance, state banking, accounting, insurance and labor relationships. Additional statutes facilitating commerce and business are currently being finalized.

To support this commercially oriented legal framework, the National Assembly adopted a new Constitution in August 1991 which guarantees fundamental private investment and property rights. Simultaneously, the Government is rapidly implementing the privatization of state-owned Enterprises, which are open to foreign and domestic acquisition. Together, these changes confirm an unequivocal Governmental commitment to a central role for private-sector economic activity.

KEY SECTORS FOR PRIVATE INVESTMENT

Lao PDR offers propective investors a comparative advantage in a wide range of economic sectors and activities.

Mining: The Republic has substantial potential and proven reserves of metalliforous ores (gold, tin, lead and zinc), precious stones (sapphires), coal, iron, limestone, and gypsum, among others.

Energy: Lao PDR's potential for large-scale generation of hydro power from Mekong tributaries is widely acknowledged. These resources can support the low-cost electricity throughout Southeast Asia. Probable commercial-scale reserves of oil and gas have also been identified.

Agribusiness: Extensive plateaus exist throughout the country, with suitable soil and climatic conditions for plantation agriculture. Palm oil, coffee, cotton, sugar, fruits, vegetables and flowers are all viable crops. Improving road transport infrastructure will soon make economical the export of commodities and processed agriculture products.

Wood-based Industries: Much of the country's land area remains forested, with large stands of tropical hardwoods. Marked potential is apparent for domestic processing and export of the products of environmental sound forestry.