NEWS BULLETIN

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1. Introduction

In 1986 the Lao PDR adopted the New Economic Mechanism (NEM). The NEM was an economic reform package transforming economic activity from a centrally planned economy to a market economy, decentralizing economic decision making, and stimulating private sector to take an active role. An economic system based on market principle was included in the 1991 Lao PDR constitution. Key market liberalization effort include: decontrol of prices and distribution of goods and services, elimination of subsidies, establishment of a market determined exchange rate, reform of the tax and. tariff system, enactment of a new Central Bank Law, refinements in money and credit management and Foreign Investment Law passage. The government also restructured administrative authority for economic, financial and development management: the Ministry of finance manages fiscal affairs and the committee for planning and cooperation manages development.

The adjustment of the economy over the past ten years of the NEM has been facilitated by the many structural and policy changes, which have had a positive overall impact on the economy. The government recognizes the need for further adjustment for economic growth to take place and further market-based activities to develop. The government has expressed its commitment to further market based development at the February 1993 Annual ordinary session of the National Assembly. The major macroeconomics components of the government's strategy are to strive towards a stable macroeconomics environment consisting of: stabilizing domestic price and exchange rate, reduce fiscal deficit, increase and mobilize savings, strengthen financial markets, strengthen mother and child health care thus reducing population pressures, reduce government involvement in the private sector, undertake civil service reform, and further implement privatization.

Laos is geographically situated in the heart of southeast Asia; crucially in the Centre of Big Emerging Market (BEM) comprising of ASEAN countries, Myanmar, China and others.

It has no access to the sea but importantly landlink country, which can be cross-routes between the countries of Big Emerging Market, Financia1, and Commercial Centre in the future.

2. Gross Domestic Product (GDP)

Gross Domestic Product (GDP), in real terms, increased by an estimated 7.1 percent in 1995, in comparison with the previous year's high rate of growth of 8.1 percent. All sectors of the economy continued to grow throughout 1995. GDP per capita in 1990 was US$ 211; in 1993 was US$ 290; in 1994 was US$ 335 and in 1995 increased to US$ 350.

The Agricultural sector grew by only 4.9 per cent in 1995 mainly due to unfavorable conditions for paddy production due to severe floods in the country around mid-year.

As a result, paddy production declined by 9.8 per cent compared to 1994. Livestock and forestry in the agricultural sub-sectors continued to expand in 1995, though at a slightly lower rate than in 1994.

The industrial sector grew by 11.4 percent in 1995, compared to its growth of 10.7 percent in 1994, due substantially to increase in manufacturing and construction sub-sectors of 11.7 percent and 22.1 percent respectively. On the other hand mining and hydropower sub-sectors had a negative growth in 1995.

So far, most of the activities in the mining sub-sectors are at the stage of explorations and surveys, therefore its contribution to GDP has still been very small. In 1995 it is estimated to have been only 0.2 percent. But the sub-sector has a lot of potential, similarly for the energy sub-sector.

In the manufacturing sub-sector, garment industry has played very important role in the economy, since the exports of garments have steadily increased in recent year. In 1995, the total export of garments amounted to US$ 76.7 million, second only to wood products.

The construction sub-sector continued to sustain a high rate of growth for the third consecutive year, with value added in the sub-sector rising by 21.9 percent in 1995 The sustained growth in this sub-sector reflected mainly the expansion of private sector construction activities such as housing and commercial and industrial buildings. The service sector expanded by 8.5 percent in 1995, compared to the growth of 5.5 percent in 1994. Significant growth in trade, banking and utilities helped to boost this aggregate sector.

(Million of Kip)

The physical and socio-economy characteristics of the Lao PDR set out in the previous paragraphs have given rise to following development potentials and constraints.

1. Development Potentials And Constraints

Laos has:

• abundance of water resource giving vast scope for the development of hydroelectric power facilities.
• large irrigation potential which, once developed, could increase food production capacity and allow for further crop diversification.
• potential for sustained development of high-value timber, provided forest resource management and reforestation programs are approved.
• significant export potential for non-wood forest products ( such as cardamom, benzoin, sticklac and other resins )
• considerable scope for increasing the quantity of minerals already being exported, and for both mining and exporting minerals which are only now being identified.
• proximity to large external markets BIG EMERGING MARKET (BEM) which implies a potentially strategic position for entrepot trade, although until now most economic activity to be concentrated along the Mekong River and the border with Thailand.
• economic and social fragmentation since many parts of the country are physically isolated and since the population consists of a wide variety of ethnic groups.
• prevalence of subsistence farming and barter exchange among the vast majority of the population.
• insufficient physical infrastructure (such as transportation network and communications systems).
• insufficient information on the country's key physical social, economic and climatic variables, and inadequate access to information on markets, technologies and investment opportunities available abroad.
• limited domestic financial resources, necessitating dependence on external assistance to finance a large part of the Government's investment program and the balance of payment deficit.

Forests cover about 47% of the country, comprising a wide variety of commercial tree species suitable for production of saw timber, plywood, parquet, furniture, etc. The most important high value species are hardwoods belonging to the Diterocarpaceae family and rosewoods belonging to the Genera Pterocarpus, Dalbergia and Afzelia. Pines and other coniferous species are also available but in comparatively small quantities. Eighty percent of domestic energy consumption is based on fuel wood, and an estimated 300,000 hectares of forest are lost annually largely due to shifting cultivation and logging activities. In the effort to protect forest resources from unsustainable felling of trees, exportation of logs and sawwood was restricted to restructure forest management, and protective measures have been implemented to prevent depletion of forests due to shifting farming practices.

Sizable deposits of gemstones such as sapphire, zircon, amethyst, gold, iron ore and tin ore are to exist in the country. Gemstones, gold, coal and tin are estimated to have a high economic value. More geologic surveys are needed to identify location of mineral deposits that would allow their exploitation in commercial quantities. Meanwhile, exploration of potential petroleum deposits is underway. Economic exploitation of mineral resources will depend on development of the required physical infrastructures.

Its abundant water resources are probably the most important natural resource gn4owment of the country. There are only three hydroelectric plants in operation so far, of which Nam Ngum 1 is the biggest. These three plants with a combined capacity of 200 MW, reportedly realizes only less than five percent of the country's hydroelectric potential. About 90% of hydroelectric power production are exported to Thailand, constituting one of the leading exports of the Lao PDR. Plans are underway to construct a number of new hydroelectric power facilities. The government attaches high priority to hydropower in the development plan up to the year 2000 and beyond. An additional 5000 MW generating capacity is envisioned to be put in place within the next fifteen years. Within the next five years, the biggest plants envisioned to be completed is Nam THEUN 2 with generating capacity of 600 MW: NAMTHEUN-Hin boon with 210 MW, Hauay-Ho with 150 MW and etc.

2. Investment Potentials In The Transport Sector

In Lao PDR, transportation infrastructures are inadequate and are considered as a major impediment to trade, cooperation and the exploitation of rich mineral resources; particularly those located in the hinterlands.

Further major commitments are required before minimum standards can be satisfied and most of the shortcomings could only be addressed by cooperation efforts.

1. Priority should be on to the improvement and rehabilitation of existing facilities and Subregional projects on which there is already agreement among the countries directly concerned;
2. The formulation of projects should consider trade generation impacts. especially considering the economic transformation taking place in the Subregion;
3. Transport projects should be implemented in sections or stretches in order to facilitate project(s) implementation and provide immediate benefits;
4. Given financial constraints, criteria for project(s) selection will need to be established, including consideration of the subregional versus national character of the project and financial resources available.

3. Investment Potentials In The Energy Sector

Electricity requirements in the region are increasing rapidly it has been predicted that 23,958 MW of new generation will be needed between now and year 2000. Lao PDR is rich in energy resources: Hydropower, coal, oil and gas. The uneven distribution of the energy resources among the countries, particularly the hydropower resources: Countries with higher power demand have limited resources while those with limited requirement are well endowed with the hydropower resources. Lao PDR has a hydropower potential of about 15,000 MW within its territory. Up to now, slightly over 1% of the total potential has been developed with 70 to75% of the production exported to Thailand.

With the huge resources located close to the biggest power demand country in the subregion (Thailand) and the low domestic demand, the hydropower sector will continue to be one of the main foreign exchange earning of Lao PDR.

Without other financial sources than the public investment funds and the external soft loan the hydropower development would probably continue with the similar slow rate as experienced in the eighties. This would lead to a loss of opportunity for foreign exchange earning badly needed for development of other sectors.

On the basis of the above and in line with the new economic policy, the Government has begun, since the beginning of the nineties to seek participation of foreign investors far projects beyond the financial capacity of the public and soft loan investment. Within the short time frame, experiences have proven that such policy is correct and several projects with the aggregate generation capacity about 1Q times higher than the existing capacity are being implemented in 1994 and expected to be completed by the 2000.

The funds for these projects are from both the private sector (BOT schemes) for large schemes and soft loan for small/medium schemes Agreements between the Government and the developers have been signed for most of the BOT schemes of the 1994-2000 period.

4. Investment Potentials In The Mining Sector

Foreign investment is particularly sought in the Mining Sector because of its capital-intensive investment combined with scarce domestic financial resources and its high potential for export.

In 1995, the foreign investment in the sector was ranked third in terms of aggregate value (about 312,336,000 US$ or 5.59 percent of total). Fiscal regulation such royalty rate, income taxes and incentives in the Mining Sector are widely recognized as competitive by international standard. This indicates the firm commitment and strong support of the Government to pave the way for foreign investment in the sector.

Market for fossil fuel in neighboring countries is tremendous, as the country has to import about 60% of its requirements. This would be an area of high prospects for foreign investors. Recently, an agreement was signed with private investors to implement a lignite power plant project in Honsa (Northwest of Lao PDR) for exporting the electricity.

In the short-term, other minerals having high prospective export would be gemstones which require simple extraction equipment and could be easily transported.

Some medium and long-term investment opportunities, offered by the Mining Sector would be:

1. The potash production in the Vientiane province, the largest known deposits in the subregion with the estimated reserves exceeding by far those in Thailand.
2. The significant iron ore deposits in the province of Xieng Khouang, the occurrences of base metals (components needed for steel) and the planned hydropower development on the Nam Ngum river, both in the northeast of Vientiane and in Xiengkhouang Province, suggest the region could provide opportunities for both iron ore and steel export.

5. Investment Potentials In The Agro-Forestry Sector

The economic growth of the Lao PDR depends to a large extend, upon the performance of the agricultural sector which contributed in 1995 for 56% of the GDP. Coffee is by far the most promising product for export. The Lao PDR has the highest potential land/person in the Greater Mekong Subregion large and unexploited fertile land and favorable climatic conditions, particularly in the Boloven basaltic plateau. This could offer promising opportunities for low-intensive investment in the agro-processing industry for export based on annual and perennial crops.

The on-going improvement of main National Roads linking major provinces, together with the high rate of urbanization have created favorable conditions for investment in the import-substitution agro-processing industries.

It has been estimated that the Lao PDR has the highest ratio of forest to total area in ASIA. Wood products including lumber are one of the main export earning of Lao PDR. In view of the long-term sustainable development and the preservation of the environment, the Government has been implementing the policy of striking a balance between exploitation and conservation and shifting from exports of logs and lumbers towards the promotion of wood processing. Due to shortage of capital and the technical know-how in the country, the development of wood processing subsector also needs the investment and the introduction of new technology of the foreign investors.

6. Investment Potentials In Tourism & Hotel Sector

Within the region, links and networks in the tourism sector already exist Government-to-government and the commercial sector.

The common interest among all countries is to promote nature and culture types of tourism. The major problem is the gaps in most countries in the basic infrastructure and support services necessary for maximizing tourism potential. The regional cooperation will primarily focus on:

1. Promoting the Subregion as a tourism destination.
2. Establishing Subregional Tourism Forum.
3. Training the trainers in the basic craft skills of tourism.
4. Training the Resource Management in Conservation and Tourism.
5. Mekong River Tourism Promoting Study.

7. Investment Potentials In Trade 8 Services Sector

As mentioned in previous paragraphs, Lao is situated in the heart of Big Emerging Market; so Trade between these countries is crucially promising.

However, trade and investment within the region are being development steadily owing to the growing openness and revitalization of the economies, and the favorable legal and regulatory framework for local and foreign investors.

The countries in the subregion have many common problems (such as severe infrastructure shortage) and also common goals (such as outward-oriented economy and promotion of the participation of private sector) All countries recognize that the attraction of foreign investors depends to a great extend 6n the trade and investment environment.

The cooperation aiming at improving the Trade and Investment Climate in the region would enable investors to consider their own strategies in the regional context, which is more attractive than the national context.

1. Overview

The 1988 Law on Foreign Investment created the FIMC to oversee investment licensing and promotion, and setting out investment regulation.

In March 1994 the law for promotion and management of foreign investment in the Lao People's Democratic Republic was revised and adopted by National Assembly on 14 March 1994 and issued by Presidential Decree No. 23 of 21 April 1994 and coming into force on 20 June 1994.

The new investment law will set qualifications for wholly-owned foreign firms, local-foreign joint ventures, and foreign owned branches, will set a flat profit tax rate of 20 percent, set standard import duty concessions, and create a "one-stop service " with application processing time reduced to 60 days from 90 days. All sectors are open to investment. Investors are allowed full profit repatriation and expropriation protection.

2. Forms Of Foreign Investment

Foreign investors may invest in the Lao PDR in either of two forms:

1. A joint venture with one or more domestic Lao investors, or
2. A wholly foreign-owned enterprise.

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 shall 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. 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 of with Lao PDR into Lao Currency at the exchange rate then prevailing on the date of equity payment(s), as quoted by the Bank of the Lao PDR.

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 a representative office of a foreign company.

A foreign investment which is a Lao branch or a 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.

The incorporation and registration of a foreign investment shall be in conformity with the law on business operations of Lao PDR.

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 regulation of the Lao PDR. The government shall not interfere in the business management of those enterprises.

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 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.

The government of the Lao PDR shall facilitate the entry into and exit from Lao territory of foreign investors, their foreign personnel, and the immediate family members of those investors and 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.

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

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.

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.

3. Incentives For Foreign Investment

To promote and encourage foreign investment, law on foreign investment and management gives large range of incentives such as:

• Foreign investment and property of foreign investors will be protected by laws and regulations of the Lao PDR; foreign investors may lease land and transfer their leasehold interest.
• The properties of foreign investors will not be requisitioned, nationalized, etc. and this is guaranteed by constitutional law of the Lao PDR.
• Repatriation of lawful capital and profit is allowed.
• No interference by the state violating the principles of competition according to the equal and judicious market mechanism.
• Encourage and promote all initiatives from all economic sectors (private, public, etc.).
• No differentiation by race or nationality of investors.
• Allowing investor to bring in expatriate skilled workers.
• Entry and exit visa facilities.
• Special regime of taxation:
• reduced rate
• exempted from tax
• tax holiday, etc.
• profit tax only 20%
• import tax 1%
• No import tax for raw material to be processed and reexported
• No tax for export or reexport
• For big and important project, exemption or reduced rate can be negotiated and entered into agreement.

Lao PDR offers other incentives:

• stability, security and hospitality of Lao PDR
• good relationships with neighboring countries
• prospective regional and central market because of geographical strategic position; Lao PDR is the heart of billion market.
• liberalization of exchange control - low cost of labor force, energy, lands.
• huge unsurveyed and untapped natural resources.

In order to achieve the goal, to favor foreign investment in doing their investment and business in Lao PDR, the Foreign Investment Management Committee (FIMC) was established with Permanent office acting as "One stop service" at the Prime minister's office. Such Permanent office is a focal point where first contact should have to be all foreign investors. This focal point has the role of promoting, screening and monitoring all foreign investment projects.

The focal point has to Coordinate with all governmental agency or organization including provincial authorities.

The duties and powers of FIMC include:

• to scrutinize the proposal to see that it conforms with all the rules and regulations as set out in the FIL
• to check to ensure that the proposal is financially credible, economically justifiable and that the proposed technology to be used is appropriate.
• also to ensure that the proposed project is environmentally friendly.

The FIMC is also responsible for:

• granting foreign investment approval by the issuance of a license with stated terms and conditions.
• monitoring and evaluating foreign investment after approval has been given.
• giving suggestions and recommendations, where necessary.
• facilitating and promoting foreign investment.
• taking necessary and prompt action in respect of issues regarding foreign investments.

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

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

The potential investors, when the project is identified, will submit the application form for their investment to the FIMC.

Foreign investors are required to fill the application form indicating the status of the investor either physical or juridical person, their intended Capital investment, the form of investment chosen, the schedule of project implementation, They are required to present the joint venture agreement if the project is joint - venture and the article s of association of the company to be established under the Lao law and regulations; the feasibility study of the projects, financial status of entities.

The law requires 60 days for the FIMC to scrutinize the investment project.

The permanent office of FIMC makes a preliminary appraisal of the proposal. The proposal is then forwarded together with the views and comments to the FIMC. The FIMC will scrutinize the proposal from technical, financial, Commercial, Economic, social and environmental aspects within the framework of the policy objectives of the FIL. As it is already mentioned above, if the proposal meets all the requirement set out in the FIL, the FIMC will issue the license of investment with specified terms and conditions as required according to the type of business.

The FIMC is the high instance having the decision making power on investment policies and investment approval. However, some investment, because of its importance, may require the approval of the government.

In 1995, the approval of foreign investment license was the amount of US $1.218 million and up till now the total amount of foreign investment accounts for US $7.126 billion, which consists of 618 projects. Of the amount, US $1 billion is resulted from local investment. Foreign investment came from more than 30 countries such as: U.S, Hong Kong, Russia, U.K, Singapore, Japan, Germany, Canada, Italy, New Zealand, etc.

Projects approved in 1995 included those engaged in agricultural, industrial and service sectors, of which the biggest contribution of foreign investment comprises of energy sector activity.

Foreign investment by sector (as of 30 June 1996)

Since 1986 when the government of Lao PDR has adopted its new economic policy, the commercial relations with foreign countries has been widely expanded along the line of the government policy of opening up the country.

Currently Laos has trading relations with more than 30 nations of the world. Trade volume has increased in each year by an average of 18.7%. Foreign trade deficit even though there still is an averaged increase of 15.44k per year, is active and comprehensive in nature. This can be seen from the balancing trend of the export/import of goods for general use and consumption. The deficit involves the import for the construction of foundation of national economy infrastructure for the development of the economy especially for the future export.

At present the important trading partners of Lao PDR are mainly Asian and Pacific nations such as Thailand, Vietnam, Japan, China, Singapore, Hong Kong and some European nations namely France, Germany, USA, Russia, Italy, etc. The Lao PDR exporting goods are mainly timber products, electricity, gypsum, rattan products, coffee. cardamom, sesame, forest products, garments, and handicraft items.

The goods imported into Lao POR are mainly foods, fabrics, garments, equipment and machinery for construction works and agriculture, electric wares, medicine, fuels and daily consumer goods.

2. Foreign trade policy

The foreign trade policy of Lao PDR mainly thrusts toward reducing progressively trade deficit with foreign countries in order to establish a balanced or over-balanced status in the future. For the period from now until the year 2000, based on its situation and actual potential Lao PDR shall render the deficit to have more active and comprehensive character, effort to achieve self-sufficiency in terms of food and certain consumer goods, that is to put more effort to render the values of the exporting consumer to be equal or more than that of the import consumer goods, establish favorable conditions that will make Laos becoming business and service transit routes of this region in the future.

From 1986, the government has encouraged all economic sectors to participate in the business process. Only certain state owned and joint venture enterprises in some important business sectors are still owned by the state namely electricity, water supply, communication, telecommunication, bank and some other important commodities. The management of state enterprises has improved and modified. The state has given to state enterprises the right to complete autonomy, thus responsible by itself for itself for profit in doing business.

The business activities of all economic sectors are carried out on the basis of the policy of having free but legal activities which involve both competition and participation. Currently private business covers more than 80% of total business community.

At the macro-economic level, the government has negotiated, agreed and signed commercial cooperation agreements, payment and other agreements with foreign countries in order to lay the foundation for the trade relations of state and private enterprises. In addition, Lao PDR has promoted and expanded the scheme of transit trade, re-export, free trade zone, zone of production and processing for export and domestic consumption.

3. Import policy

The government regulates the import of goods by systematically classifying them into groups or types of goods like those encouraged, controlled and prohibited by the state through the use of a taxation and duties scheme.

The encouraged imported goods are machinery and equipment required for the construction of basic economic infrastructure.

The importers of foreign goods must be the enterprises registered correctly under relevant law of Lao PDR and operate in the authorized business sectors.

The goods prohibited to import under the regulation No. 482 dated 8/2/1994 of the ministry of commerce include all types of war items, all kinds of the drugs, toxic chemicals and dangerous industrial products, and all types of obscene items.

4. Export policy

Export promotion is the main task in the foreign trade policy. The government of Lao PDR encourages the production for export as follows:

• Increasingly exploiting the hidden domestic potentials, strongly promoting the production and the export and rendering them programmable, radically and systematically changing on a regular basis the procedures and mechanism that obstruct the production and the export.
• Encouraging foreign investment in the sector of production for export by all forms.
• Widening the export markets in foreign countries. The prohibited exported goods are fire arms and bullets, bombs, antique cultural items, antique, materials that contain drugs, toxic chemicals, rare wild animal. The exported goods controlled by the government through the use of quotas are timber, logs, sawn timber, tree trunks, and through the Issuance of an authorization complying with international law and practice.

5. Trade Agreements

Laos has bilateral agreements with Vietnam, Thailand, Myanmar, Cambodia, China, Mongolia, Russian Federation, and other eastern European countries. These agreements are of general character with the aim to further develop and strengthen in every possible way the trade relations between the two countries on Principle of equality and mutual benefits.

The government is encouraging private sector participation in new economic system giving full support in every sector. Soon after the government of Lao PDR has adopted its move towards market economy, private businessmen lost no time to step into new economic environment. The number of exporters, importers, business representatives, partnership firms, limited companies, foreign companies, commodity associations, joint venture corporations and chambers of commerce and industries registered with the ministries concerned up to June 1996 has come up to many thousands.

Like most developing countries Laos is mainly an exporter of agricultural and other primary products while its imports consist of manufactured goods. Main export items include wood and wood products, electricity, forest products. agricultural products, coffee, tea, minerals, garments, handicrafts and others. The major import items are capital goods, industrial raw materials, spare parts, and consumer goods. In the short term and medium term, the export and import patterns may more or less remain unchanged, but in the long term with the development of natural resource-based industries and implementation of economic reforms, it can be reasonably expected that Lao export/import patterns may become valued-added items like semi-manufactured or manufactured products.

The policy of the Lao Government is to further develop strengthen the bilateral trade relations with the neighboring countries: Vietnam, Thailand, China, Myanmar, Cambodia, using border trade as a mechanism for trade expansion.

Increasing and diversifying exports, and improving the quality of export products, are among the main objectives of the Government: A number of new items in the manufacturing and processing sectors have been introduced. The volume of exports according to the provisional data reached more than 300 millions dollars in the financial year 1994-95.

The volume of total imports in the financial year 1994-95 accounted more than 500 millions dollars. The traditional import pattern, as mentioned earlier, includes capital goods, industrial raw materials and consumer goods among others. Reflecting the trade liberalization measures, substantial changes are being taken place in the pattern of import as well. In spite of the fact that capital goods and raw materials are still taking the lion's share, there is also a sharp increase in the import of consumer goods.

Lao foreign trade is mainly with other Asian countries: Japan, Singapore, Thailand, China, Vietnam are its main trading partners. Regionally, the European Union, ranks second in importance. With the change in the pattern of trade, the direction of trade may also be changed.

6. Trade registration procedures

Lao government encourages domestic, and foreign persons, either individuals or legal entities to do business or to invest capital in all fields of lawful economic activities such as agriculture and forestry, industries, energy, mineral extraction, handicrafts, communications and transport, construction, tourism, trade, services and others.

Before commencing its operations, all enterprises (domestic, foreign, state, private, joint venture, etc.) must be registered in conformity with the Lao law on business operations in the ministry of commerce, Trade Registration Department; at provincial level, in trade registration service; at district level, in trade registration office for the enterprises situated in provinces and districts with small size investment.

Upon receipt of completed application and supporting documentation, the concerned authority shall screen them and register in short time. One supporting documentation is that if investment is in the field of agriculture, there should be notification approval from ministry of agriculture; if in manufacturing or industries there should be approval notification from ministry of industry, etc.

For foreign investment enterprises, before applying for trade registration, these enterprises must have received foreign investment license from foreign investment and management committee ( FIMC) in accordance with the law on the promotion and management of foreign investment of Lao P.D.R.

7. Import And Export System

The importation of goods requires a series of procedures ranging from the conclusion of a contract to import payments. The general import procedures include the conclusion of import contracts, the securing of import permissions, customs clearance and payments for imports. Procedures included in the optional category depend on the type of transaction and the nature of the goods to be imported.

Imported goods legally enter into Laos when shipments have arrived at the port of entry; estimated duties have been paid, and delivery of the goods has been approved by the customs house concerned. There are many possible trading methods including the VC, TT and procedures, etc.

An import contract h concluded when an offer based on a written agreement or a contact between a Lao trading agent and a foreign supplier is received, or an offer issued overseas from a foreign exporter h accepted. Imports to Laos have been liberalized extensively but are still being administered in accordance to the Foreign Exchange Regulations, the Customs law and with special reference to the Export & Import Regulation issued by the Ministry of Commerce. All items can by freely imported unless they are specifically prohibited.

An import license (permission) must be obtained directly from the Ministry of Commerce which delegates his authorities to provincial trade service, that means that import license can be obtained from provincial trade Service where importing enterprise is situated. An import license remains valid for, in principle, three months. Payment for imports, as well as customs clearance of imported goods should be completed within the term of the import permission.

A party receiving an import permission must establish an L/C through a foreign exchange bank within the effective time period. In an unavoidable circumstance, however, the period can be extended by submitting to the competent Bank an application for amendment to the L/C. When arranging the L/C, the same information as notes on the import authorization form must be used, The amount of the L/C should not exceed the authorized amount, and it must be expressed in the same currency specified in the import authorization form.

The foreign exporter having received the UC ships the goods according to conditions of the L/C and negotiates with transport documents as security. The exporter's bank then sends the transport documents to the bank which issued the UC, and after the UC opening bank has verified that the conditions of the transport documents are consistent with those of the UC, It settles the account of the import transaction and transfers the transport documents to the importers, The importer submits the bill of lading (B/L) to the shipping company and collects the import freights. If however the freight has already arrived but the transport documents have not, the importers may present a letter of guarantee (UG) to the shipping company and receive the freight in advance, after receiving from the importer's bank the L/G prepared under fixed conditions.

The importer unloads the imported freight and places it in a bonded area. Then the importer submits a report to the superintendent of the customs house. The customs clearance report can only be prepared by a consignee (importer), employing a certified customs specialist or a certified customs clearance corporation.

Upon receipt of the import report, the customs house inspector will verify that the contents of the imported merchandise correspond with that described in the import authorization form and confirms that the documentation is in order. The tariff on the merchandise is then calculated and levied, and an import approval is presented to the person reporting the import. This person may remove the imported merchandise from the bonded area. After doing so, the import procedures are complete.

Most of Lao export transactions are made under letters of credit, either in the form of at-sight drafts or issuance drafts. The exportation of goods requires also a series of procedures such as the conclusion of an export contract, the securing of export permission, the production of export goods, customs clearance and shipment, and the collection of payments. As for exports, those, subject to optional export procedures are determined by the type of transaction involved and the nature of the goods to be exported. This section focuses on the L/C method.

The initial step in the export process is the conclusion of the export contract. The exporter receives a letter of credit from the importer. After receiving a letter of credit, the exporter should, prior to obtaining export permission, obtain a recommendation from an authority concerned assigned to review the items in question. This step is necessary to determine whether or not the export items are included on the list of products restricted from export under the government's export-import Notice.

The exporter should obtain an export Permission for every export transaction he makes. This system is designed to ensure that export procedures are carried out in a lawful manner and to facilitate the collection of export bills. Authority for issuing an export permission is delegated to provincial trade service. On the application form for an export permission the exporter must include his name, the port of lading, settlement method, and period of validity, as well as specifications on the export items.

To maintain the good reputation of Lao export goods and thus enhance their international credibility, in some cases the government conducts uniform inspections of designated export items prior to shipment. Inspection procedures can be classified into four categories: quality, packaging condition, material, design and manufacturing method inspection. Export inspection is not required for all commodities but pertains only to those items designated by the government.

In order to export, the exporter must deposit the export commodities in a bonded area prior to submitting documents to the head of the customs house. The customs house inspects export commodities against invoices and export permits. If all is found to be in order, the customs house issues an export declaration for customs clearance. The required documents when applying for export declaration are:

• Five copies of the application for export declaration;
• One copy of the export permission;
• One copy of the invoice;
• One copy of the packing list;
• Other documents as required.

After obtaining an export permit from concerned trade service and the customs house, the exporter arranges with a shipping company for the vessel. Finally, the exporter will have the export commodities loaded on board of the vessel by the forwarder.

Passport: Foreigners, who wish to enter Lao PDR must hold a valid passport.

Visa: When foreigners wish to enter Lao PDR, they must apply, in principle, for a visa from a Lao embassy or consulate.

Visa exemption: Citizens of countries that concluded a visa exemption agreement with Lao PDR are allowed to enter Lao PDR without visa. In general, visa exemption under the agreement applies to short-term visitors who enter Laos not for the purpose of work or profit making but for the purpose of touring, visiting or official mission.

1. Vietnam
2. China
3. Cambodia
4. Korea DPR
5. Russian Federation
6. Eastern Europe countries
7. Malaysia
8. Thailand (Exemption only for diplomatic)

Foreigners are allowed to carry out certain activities in Laos according to their visa status. It is shown on the visa stamp. During their stay in Laos, foreigners should conduct activities in compliance with their visa status, and the duration of their stay is decided accordingly.

• For businessmen, who come to Laos for collecting information or contacting local businessmen the visa is for one month and can be extended.
• For touring or visiting, the visa is for one month.
• For foreign invested companies employees. Professionals who work in the field of management of foreign invested companies and their families are given special consideration in visa issuance and period of sejourn. In principle foreign investors can live in Laos in accordance with the duration of invested projects.

Lao international airport is Wattay airport, situated in Vientiane Capital City. This is the main gateway to Laos. But foreigner can enter Laos by either border important checkpoint.

• Lao aviation: is the only state airline company which serve domestic and international flights
• International airlines maintaining regular flights to Laos:
• Thai airway int'l (TG)
• Malaysian airlines (MH)
• Silk air, Singapore
• Vietnam airlines (VN)
• Yunna China airlines

There are many hotels in Lao major cities and tourist destinations. Facilities in most tourist hotels include one or more bars and cocktail lounges, restaurants, swimming pools, souvenir shops, laundries

The room rates, in comparison with neighboring countries are low.