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Financial, Information, Communication and Technology (ICT) and other

Services in Lao PDR

Conference Paper · October 2019

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Vanxay Sayavong
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 Financial, Information, Communication and Technology (ICT)
and other Services in Lao PDR
Vanxay Sayavong

National Institute for Economic Research (NIER), Vientiane, Lao PDR

Email: sai_vanxay48@yahoo.com

October, 2019

Abstract

This report shows that the contribution of service sector is significantly crucial for Lao economic
development in terms of GDP growth, employment and facilitation for other industries. At the
same time, services especially financial & insurance, Information, Communication and
Technology (ICT), professional, and transport had not only strong growth in previous years but
also potential growth in the future because of linkage to the planned construction of investment
projects especially infrastructure and energy development. The service industry, as a component
of the supply chain for both domestic and international trade and production, is very crucial to be
more competitive (provision of high quality and low service charged) in order to enhance the
competitiveness of other industries such as agriculture, manufacturing industries and Lao
economy as a whole. More importantly, the service sector in Lao PDR is likely assessed to be
less competitive at the international trade. This is because there are few service enterprises
exporting or engaging their service to foreign market. Therefore, encouraging the involvement of
service sector in the international trade or global supply chain would improve their
competitiveness.

Keywords: Lao PDR, Service and Global Value Chain,

This report is prepared for the International Seminar on ‘Strengthening of Regional GVC and
Economic Cooperation among Korea-Myanmar-Laos & Comparing to KHM and VNM” in
Phnom Penh, Cambodia on 25th October 2019. This seminar will be hosted by Korea Institute
for Industrial Economics & Trade (KEIT), and organized by Ajou University and Cambodia
Development Center.

Acknowledgement: This report received the support from Korea Institute for Industrial
Economics & Trade (KEIT) project. Therefore, the author would like to acknowledge the
support from KEIT project. All views expressed in this report are those of the author which not
represent the views of NIER or KEIT

1
1. Background
The Lao PDR is the only land-locked developing economy (LLDC) in the Association of Southeast
Asian Nations (ASEAN) who has the small population of around 6.9 million people when
compared with its neighbors such as Cambodia (16.3 million), Myanmar (53.9 million), Thailand
(69.2 million), and Vietnam (96.7 million). The total land area of the Lao PDR is 236,800 km2
where more than half is identified as mountainous areas. Worse than that, one third of total land is
being contaminated with the unexplored ordinance (UXO) from the Indochina wars. So far, less
than 10% of such contaminated land has been cleared only. Therefore, this poses a challenge to
expand economic activity in the Lao PDR, especially farm activities. Nevertheless, the Lao PDR
has enjoyed high and stable economic growth of around 7% since the 2000s although it faced
setbacks during the 1997-1998 Asian Financial Crisis (AFC) and the 2008-2009 Global Financial
Crisis (GFC). As result, its income per capita increased from 200 USD in 1990 to 2,585 USD in
2018 with annual growth rate of 10.2% as one of the fastest countries in the region.
Figure 1: Real GDP Growth in 2018

Source: ASEAN Macro-economic Database

Lao macroeconomic development performs pretty well in the region of ASEAN. The economic
growth of Lao PDR, for instance, was relatively high in 2018 along with other ASEAN developing
countries such as Cambodia, Myanmar and Vietnam (Figure 1). Nevertheless, the domestic market
is small as a share of its GDP was less than 1% of ASEAN’s GDP or 17 billion USD in 2018.
When compared with its neighbors such as Thailand and Vietnam, the size of Lao economy
comprises of 4% and 8% only. The regional or global integration of Lao economy is relatively
high compared to the countries of Cambodia, Myanmar, Indonesia and Philippines. As a ratio to
GDP in 2018, total trade, export and import was 62.9%, 30.6%, and 32.3% of GDP respectively.
For the export in good, the products was dominantly from the natural resource sector and primary
agriculture products such as gold, copper, electricity, wood product, coffee, banana and other
agricultural products. Whereas the import products are considered as higher technological products
and heavy machines for investment projects especially electrical machinery, equipment of

2
machinery, mechanical appliances, and vehicles. Regarding to the export in service, the tourism
and transportation are the majority. Meanwhile, the import in service is more diversified which
includes the travel, transport, construction and insurance. In 2018, the value of export in service
was 921 million USD or shared around 19.7% of total export whereas the value of import in service
was 1,154 million USD or 19.3% of total import value. The growth of trade in service was pretty
strong in last decade (Figure 2). This indicates the gradual role of service sector in Lao economic
development, global value chain and regional economic integration. Therefore, exploring service
sectors as well as its connection with the global value chain as well as constraints might shed light
the potential growth of service industries and attract more investment into this sector which is the
primary aim of this study. The structure of this study is proceeded as follows. The background of
Lao economy is presented in the first section. Section 2 reveals the contribution of service sector
and its linkage in Lao economy and global trade. The study in section 3 explores the recent
investment in service industries and related regulation. Selected sectors in service sector are
investigated in section 4. Section 5 is the conclusion.
Figure 2: Export and import in service of Lao PDR, unit: million USD
1,400
1,200
1,000
800
600
400
200
0
2010 2011 2012 2013 2014 2015 2016 2017 2018

Export in service Import in service

Source: ASEAN Statistics

2. The role of service sector in Lao economy
Lao economy is largely characterized by few economic sectors such as service and natural resource
sector especially mining and hydropower electricity which plays dominantly in the headline areas
of production, investment and exports but not much on employment. Resource industries as part
of the industrial sector are among the fastest sectors driving the Lao PDR’s economic growth since
the early 2000s leading to a change of economic structure towards more intense of the resource
based economy. It contributed to total economic growth of 1.44% or 20% of total during 2013-
2018. However, the service sector plays greater where it contributed to the total growth of 2.8%
or 40% of total which was higher than any other industries. The share of service is also dominant
with the upward trend steadily although the industry sector tried to catch up in recent years (Figure
3). It indicates that the industry sector because of the strong support of resource sector has
dramatically increased from 15.2% in 1990 to 35.5% of GDP in 2018. Meanwhile, the share of
another manufacturing sector is likely remained constant over time at around 7.5% which is lower
than its neighbors such as Cambodia (16.2%), Myanmar (23.7%), and Vietnam (15.3%). The major
manufacturing industries (non-resource sector) includes garment, part & equipment of electrical
machinery, wood products, and beverage & tobacco. The share of agriculture to GDP even
declined sharply, however; the majority of population (66%) is still engaged in this sector. Rice,

3
maize, cassava, coffee and sugarcane are the main agriculture production shared more than 90%
of total agricultural land. For service sector, it had a strong growth of 7.66% during the last three
decades, slightly higher than the GDP growth (7.4%). As a result, its share to GDP increased from
31.7% in 1990 to 46.8% in 2018. The active services include wholesale & retail, real estate,
accommodation, and food service. Besides, the service generated 701,024 employment or 20.2%
of total employment in 2015 (LSB 2015b).
Figure 3: Economic sector by share of GDP in 2018
100%

80%

60%

40%

20%

0%
2000
1990
1992
1994
1996
1998

2002
2004
2006
2008
2010
2012
2014
2016
Agriculture Industry Service 2018

Source: Lao Bureau Statistics (LSB), Lao PDR. Note that the reference of based year was in
2002
Service industry not only the contribute to the economic growth and employment, but also play an
important part in the supply chain as a facilitator for other industries such as manufacturing,
agriculture and international trade. Table 1 illustrates the share of domestic service in the supply
value chain in Lao economy. As expected, the service sector plays a smaller function in the
agriculture and industry sectors taking less than 30% of total intermediate consumption. For
agriculture, the linkage of domestic service sector is more for fishing industry and a little bit more
on the livestock compared with the crops. For the industry, the industries such tobacco, beverage,
furniture, water supply, construction, and other manufacturing has fairly high linkage with the
domestic service sector. Accordingly, if Lao PDR would like to promote the agriculture and
manufacturing industries, it suggests that the service should play more role in their supply chain
to assist the potential growth of agriculture and industry as well as generating domestic
employment. On the other hand, it clearly indicate that it plays more in the supply value chain
within its self-service sector especially in sub-sectors of accommodation & food service,
information & communication, financial & insurance, and real estate respectively.
Table 1: Domestic service sector in the domestic supply value chain in 2012, share (%)
Service in Total
Share
Sector the value Intermediate
(%)
chain consumption
Agriculture 49 812 6.1%
Agricultural Cropping 21 388 5.3%
Livestock and Livestock Products 16 225 7.0%
Forestry and Logging 0 158 0.0%
Fishing 13 42 31.6%
Industry 1,123 3,824 29.4%

4
 Mining and Quarrying 3 213 1.2%
Manufacture of Food Products 114 333 34.3%
Manufacture of Beverages and Tobacco 92 94 97.3%
Manufacture of Textiles, Clothing, Footwear, and Leather Goods 14 133 10.3%
Manufacture of Wood, Paper, and Related Products; and Printing 62 173 36.0%
Manufacture of Petroleum, Chemical, Rubber, and Plastic Products 408 1,096 37.2%
Manufacture of Nonmetallic Mineral Products 13 378 3.4%
Manufacture of Metal Products, Machinery, and Equipment 208 892 23.3%
Manufacture of Furniture and Other Goods; Repair & Installation 14 34 43.0%
Electricity 81 254 32.0%
Water Supply; Sewerage, Waste Management, Remediation Activities 34 66 51.8%
Construction 81 159 51.1%
Service 799 1,056 75.6%

Source: Author’s calculation by the share of service in intermediate consumption by all industries
based on the supply and use table sourced from (LSB 2018).
To see the linkage of service sector in Lao PDR with the global value chain or foreign trade, Table
2 might give some hinds as the available data from international source is limited. It shows that
less than 2% of total enterprises were linked to the activities of international trade on the way
around. Financial and insurance enterprises are the most active than other services, followed by
information & communication, administrative & support service, and transportation & storage.
However, when investigating the service firms who provides service to foreign market, the number
is even smaller with less than 0.5% of total enterprises or 339 companies. The number of financial
& insurance was also low (Figure 4). This could indicate there were more service firms using the
service or import from abroad rather than export their services to other countries. In other word,
the service sector in Lao PDR was less competitive at the international trade. If the data is available
and updated, the picture of service sector in Lao PDR in domestic and global supply chain would
be clearer or more understood.
Table 2: Service enterprises engaged with international trade in 2013
No Services Yes Total Share
1 Wholesale & Retail Trade 564 77,532 0.73%
2 Transportation & Storage 183 3,402 5.38%
3 Accommodation & Food Service 279 14,367 1.94%
4 Information & Communications 45 365 12.33%
5 Financial & Insurance 104 512 20.31%
6 Real Estate Activities 8 705 1.13%
7 Professional, Scientific & Technical 15 399 3.76%
8 Administrative & support service 69 844 8.18%
9 Public administration & defense; social security 2 15 13.33%
10 Education 6 392 1.53%
11 Human Health & Social Work Activities 6 407 1.47%
12 Art, Entertainment and Recreation 8 843 0.95%
13 Other services 19 4,747 0.40%
Total 1,308 104,530 1.25%
Source: (LSB 2015a)

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Figure 4: Service enterprises with export, share (%)

Total 0.33%
Other services 0.26%
Art, Entertainment and Recreation 0.12%
Human Health & Social Work Activities 0.00%
Education 0.00%
Public administration & defence; social… 0.00%
Administrative & support service 0.61%
Professional, Scientific & Technical 0.77%
Real Estate Activities 0.00%
Financial & Insurance 1.03%
Information & Communications 1.41%
Accommodation & Food Service 0.19%
Transportation & Storage 0.60%
Wholesale & Retail Trade; 0.34%
0.00%0.20%0.40%0.60%0.80%1.00%1.20%1.40%1.60%

Source: (LSB 2015a)

3. Investment in service sector and policies
During 2010-2018, the approved investment by Lao authorities in the service sector has been
outstanding with the annual growth rate of 56.1%. The investment value was 3.38 billion USD in
2010 USD increased to 67.6 billion USD in 2018 or 78.2% of total approved investment which
was more than four times of nominal GDP and larger than the investment in industry and
agriculture. Also, the trend is likely to continue in 2019 as the proposed investment of 68.1 billion
USD during January – July was already approved. The majority of proposed investment flew into
the areas of (1) wholesale and retail trade; repair of motor vehicles and motorcycles, (2)
accommodation and food service activities, and (3) construction. All shared almost 70% of total
approved investment value during 2008-2019 (Figure 5). However, the service of (1) financial and
insurance activities, (2) professional, scientific and technical activities, (3) information and
communication, and (4) transportation and storage are recently becoming popular attracting more
foreign investment. For instance, at the constant price, the growth rate of financial and insurance
sector was high as 12% per year during 2013-2018. Similarly, the service of professional,
information & communication and transport & storage are among robust services. The prospect of
these services are largely backed up by the large inflow of foreign direct investment (FDI) in
resource sectors such as energy, agriculture, and mega infrastructure development projects in
previous years.

6
Figure 5: Approval investment in service sector by sector and country during 2008-2019
Korea, Others,
Financial and Vietnam, 3.3%
1.5%
insurance Thailand, 3.3%
activities Others Wholesale and
15%
3.7%
5% retail trade;
repair of motor China,
Real estate vehicles and 9.2%
activities motorcycles
7% 41% Laos, 79.0%

Professional, Accommodation and

scientific and food service activities
technical 24%
activities…

By sector By Country

Source: Ministry of Industry and Commerce (MoIC), Lao PDR

In terms of the foreign investment ownership, major investors in service sector are from China,
Thailand, Vietnam and Korea respectively. For Chinese investment, the flow is largely into the
service areas of (1) wholesale and retail, (2) professional, scientific and tech, (3) accommodation,
food and real estate. For Thai investment in service sector, the major areas are (1) wholesale and
retail, (2) financial & insurance, (3) professional, scientific and technology. Similarly, Vietnam
mainly invested in the sector of (1) wholesale and retail, (2) financial & insurance, (3)
accommodation & food. The investment in the wholesale and retail, and accommodation & food
are the most popular for Korean investors.
Figure 6: Total number of registered enterprises during 2008-2019

Wholesale & retail trade 197,467

Water supply; sewerage, waste management 340
Transportation & storage 35,452
Real estate 2,587
Public administration & defence; social security 87
Professional, scientific & technical 5,746
Other service activities 11,363
Information&d communication 6,217
Human health & social work activities 1,352
Financial & insurance 1,658
Electricity, gas, steam & air supply 688
Education 2,788
Arts, entertainment & recreation 3,552
Administrative & support service 9,064
Activities of households as employers 442
Accommodation & food 26,007
(40,000) 10,000 60,000 110,000 160,000 210,000

Source: Ministry of Industry and Commerce (MoIC), Lao PDR. Note: (1) this information based
on centralized National ERM Database records. Some district data may not be up to date, (2)
enterprises that have ceased trading are not included in these statistics, and (3) enterprises may
operate in more than one sector. The 'by sector' report may show them in both sectors and will
attribute the full amount invested to both sectors.

7
Since 2008 up to now, there are more than 300,000 service enterprises in total already registered
and operating in Lao PDR. In which, more than 190,000 firms operate in the wholesale & retail
trade and less than 70,000 enterprises run business in the accommodation & food; professional,
scientific & technology; real estate; and financial & insurance (Figure 6). Most of these enterprises
are sized as small and medium or 99% of total (enterprises with less than 100 employees), based
on (LSB 2015a). Meanwhile, new shopping malls, telecommunications and financial institutions
are among the large scale enterprises but are predominantly located in the capital cities such as
Vientiane Capital. Since there are many players in the wholesale and retails, the competition in
this sector should be the most intense.
- Investment procedure and policies in Lao PDR
This sector totally follows the information or instruction provided by the Investment Promotion
Department at the Ministry of Planning and Investment (MPI)1, Lao PDR. Generally, there are
three types of investment in Lao PDR where the interested investors have to submit the
applications to different organizations to gain the business licenses. They are (1) general business,
(2) concession business, and (3) business in the special economic zones or other specific zones
(Table 3). Note that (1) general business is an investment in the general business sector including
businesses defined in the list of controlled businesses and it is not a concession business, (2)
concession business refers to investment activities authorized by the Government to utilize
ownership and other rights of the Government in conformity with regulations, for the purpose of
developing and conducting business operations; these include rights on land concession, minerals,
electric power, airlines, telecommunication, insurance and financial institutions, (3) activities in
the development of special economic zones are investment for the purpose of construction of
complete infrastructure and new city development. Due to the low global ranking of doing business
in Lao PDR, the prime minster tries to improve the business environment by ordering the decree
no. 02/PM in 2016 as a policy guideline for the implementation of related government agencies.
In 2019, Lao PDR ranked at 154 out of 1990 countries (World Bank Group 2019). As a result,
several initiatives are under consideration and implementation. Easing the investment procedure
is one of the initiatives. The process of applying for the investment of general business in Lao
PDR, for instance, is demonstrated in Figure 7. Firstly, to register a business in the Lao PDR, the
investors need to know the classification of their business activities, as defined by International
Standard Industry Classification (LSIC) code. Certain business activities are subjected to special
control - these business activities are known as the negative list (a list of activities that require
additional checks by the government). Business activities on the negative list will be subject to
additional registration requirements which may prolong the time taken for registration. The
registration process should normally take no longer than 10 working days. If the business is for an
activity on the Negative List, the registration process will include submission of the application to
the relevant agency.

1
For more details, please visit the website http://www.investlaos.gov.la/ and
http://www.erm.gov.la/index.php/en/registration/registration-process.

8
Table 3: Forms and Terms of Investment in Lao PDR

No Typed of Investment Responsible Actor Note

1 General business Ministry of Industry and Issue the business

Commerce license

2 Concession business Ministry of Planning and Issue the concession

Investment (MPI) license

3 Business in special Secretariat to National Issue the license

economic zones and Committee for Special
specific zones Economic Zones

Source: Investment promotion department (IPD), Ministry of Planning and Investment (MPI).

Figure 7: Approval Procedures for General Activities

Source: (Investment Promotion Department 2014, P.11)

In addition, the Lao government provides some incentives for domestic and foreign investors could
enjoy. There are 3 basic categories for investment incentives namely (1) incentive by business
sector, (2) incentives by zones, and (3) other incentives. Table 4 highlights the incentives for
investment in each category. For instance, if investing in the prioritized economic sectors including
service business, for instance, firms will be given a tax holiday with 3-5 years. Also, the investors
would gain the tax holiday (0%) from 4 to 10 years if they invested in the incentive zone 1 and
zone 2. The tax holiday is even double when they invest in the incentive business sectors in the
incentive zones. The tax holiday for investment in Lao PDR is more attractive than its neighbors
as it takes longer. For instance, the period of tax holiday in Thailand is up to 8 years, Cambodia (8
years) and Vietnam (4 years) respectively. Besides this, the duty and value added tax are also lifted

9
 for exports, and the import of materials and machines used for production. These benefits granted
to investors are strong incentives. Moreover, Lao PDR is one of developing countries who is
granted the trade preferences by developed countries. These trade preferences include General
Special Preference (GSP) privileges with 42 countries, Normal Trade Relation (NTR) with USA
since 2005, Bilateral Investment Treaties with 26 countries, and Member of World Trade
Organization (WTO). More details on the Multilateral Free Trade Agreements of Lao PDR is
reported on Table 5 in the Appendix.

Table 4: Incentive policies for investment in Lao PDR

No Tax Holiday Additional Tax Holiday
By Business sector 3-5 years
1. High and modern technology Business
2. Clean Agriculture 4-10 years if in the Incentive Zone 1 &
3. Agro and Forestry Processing industry Zone 2
4. Tourism development industry
5. Education
6. Healthcare
7. Infrastructure
8. Banking, Micro-Finance
9. Modern commercial, Trading centers

By Incentive Zones

Zone 1: poor zone, remote zone with socio-

economic infrastructure unfavorable to
investment 10 years 3-5 years with promoted business sectors

Zone 2: zone with socio-economic

infrastructure favorable to investment 4 years 3-5 years with promoted business sectors

Zone 3: Special Economic Zones Specified in One stop service unit and tax incentives
SEZs

Other Major Incentives - Value-Added Tax and duty incentives with zero percent
for the import of materials and equipment to form fixed
assets and used in production for export. Use of domestic
raw materials which are not natural resources for producing
finished and semi-finished products for export shall pay
value-added tax at the rate of zero percent.
Source: (Investment Promotion Department 2019), Ministry of Planning and Investment (MPI),
Lao PDR

4. Selected Service Sector

4.1. Financial Sector
Financial sector was the strongest growth among services in recent years with the growth rate of
more than 10% annually during 2013-2018. In particular, banks rather than non-banks

10
(microfinance, insurance, security exchange and leasing) are the most important and play a great
role in financial sector as well as Lao economy in terms of the provision of financial transactions,
saving, credit lending and among others for household, private and public agencies in domestic
and across the border. As a result, the prospect of banking sector follows the growth of Lao
economy especially other services such as trade, commerce, construction and manufacturing
industries. Still, there is a potential growth especially SMEs business including start-up business
that has been promoted and supported intensely by NGOs and government agencies in the last few
years. Therefore, according to the Bank of Lao PDR, the credit growth from banks was 18.5%
annually as on average during 2013-2018 (Figure 8). In terms of value, the banks’ credit was 8.09
billion USD or 45.3% of GDP in 2018. The credit was lent for firms operating in the industry and
commerce the most sharing more than 45% of total. The state own banks are the largest credit
providers, followed by private and foreign bank branches.
Figure 8: Credit and Deposit in banking system during 2012-2018, unit: billion USD

10.0 8.68.1
8.17.9
8.0 7.37.2
6.5
5.6 5.8
6.0 4.34.3 4.9
3.63.1
4.0
2.0
0.0
2012 2013 2014 2015 2016 2017 2018
Deposit Credit

Source: the Bank of Lao PDR. Note the exchange rate is also sourced from the Bank of Lao PDR
Figure 9: Bank’s credit to economic sectors in 2018, unit: share %

Others, 17%

Industry , 28%
Handicrafts,
2%
Services, 10%

Transport, 2% Construction,
Commerce, 12%
20%
Materials &
Agriculture & Supplies, 1%
Forestry, 9%

Source: the Bank of Lao PDR

As mentioned earlier, banks play dominantly in the financial sector while the non-banks are much
less significant. In recent years, the number of banks increased steadily especially foreign branches
and subsidiaries which allows the number of overall banks reached 43 banks in 2018 increased
from 26 banks in 2010. The large inflow of foreign branches and subsidiaries is largely influenced

11
by inflow of FDI from the origin of FDI. For instance, the entrance of Chinese branches and
subsidiaries such as Industrial and Commercial Bank of China (ICBC) Bank Vientiane branch and
Bank of China Limited Vientiane branch in Lao PDR since 2017 is due to the rapid inflow of
Chinese investment especially the large investment projects under the Belt and Road Initiative
(BRI). This pattern is similar to Vietnamese, Thai and Japanese banks where they came to Lao
PDR to purposely provide the financial service to their countries’ investors. For Korea, there are
two banks so far named Indochina Bank established in 2009 and Booyoung Lao Bank Ltd in 2009
(the list of all banks is reported in Table 6, Appendix). Overall, the banking sector is more
diversified than before or since after the liberalization of financial regulation in 2007 that allows
the entrance of single private investment. With this regard, more competition could be observed
because there are different players from different countries such as Vietnam, Thailand, Malaysia,
Cambodia, Japan, China, and France, Canada as well as the international banks providing the
service. Nonetheless, the state own banks are still dominant in the financial sector. The statistics
from the bank of Lao PDR shows that, by August 2019, the state own banks had the largest asset
(43.6% of total) in the banking sector although the trend has declined from previous years because
the asset of foreign banks is on the upward trend.
Table 7: Number of Banks in 2018
No Commercial Banks 2010 2011 2012 2013 2014 2015 2016 2017 2018
1 Foreign Branches 11 8 16 16 17 18 19 19 19
2 Joint venture Bank 2 2 2 2 3 3 3 3 3
3 Private Bank 8 6 7 7 7 7 7 7 8
4 Representative Office 1 2 0 0 0 0 0 0 0
5 Specialized Bank 0 0 0 0 0 1 1 1 1
6 State-Owned Commercial Bank 4 4 4 3 4 3 3 3 3
7 Subsidiary Bank 0 3 3 3 6 9 9 9 9
Total 26 25 32 31 37 41 42 42 43
Source: The Bank of Laos
Besides banks, there are 206 non-banks also providing financial services in Lao PDR. Figure 10
demonstrates the total number of non-banks running business in Lao PDR for 2018. Here, the
majority of non-bank is the microfinance institution, followed by saving & credit union, leasing
companies, pawn shop and insurance. Unlike the banks, these non-banks except the security
exchange or stock exchange are mostly in the small or medium companies owned by domestic
investors. However, their services cover across the countries including rural areas where the clients
are mostly SMEs and individuals with low or middle income. The security exchange namely Lao
Securities Exchange (LSX) was established in the end of 2010. It is the first capital market in Lao
PDR as a place for private or public corporates to raise the long-term fund or capital for investment.
LSX is the joined investment by the Bank of Lao PDR (51%) and Korean Exchange (49%) (Lao
Securities Exchange 2019). Currently, according to the website of LSX, more companies of 11
firms in total are listed in the LSX increased from only 2 companies in the beginning.

12
Figure 10: number of non-banks in 2018

Saving and credit union 30

Insurance 22
Security exchange 1
Leasing companies 29
Pawn shop 27
Microfinance institution 97
0 20 40 60 80 100 120

Source: the Bank of Lao PDR

For the Investment procedure in the financial sector, besides from the general application
submitted to MPI or MoIC, there are some specific requirements regulated by the Bank of Lao
PDR. The specific requirements based on the banking law (National Assembly 2018) and (The
Bank of Lao PDR 2011) include:
 Capital requirements: the registered capital of commercial banks shall maintain at least
500 billion kips or 56.6 million USD2. For the branches of a foreign commercial bank, it
requires no less than 300 billion kips or 34 USD of registered capital for each branch.
 Fee for Establishment:
o Commercial bank (headquarter): 80,000,000 kip or 9,066 USD
o Branch of foreign bank: 60,000,000 kip or 6,800 USD
o Branch of domestic bank: 20,000,000 kip or 2,267 USD
 Fee for certificate of business license:
o Commercial bank (headquarter): 20,000,000 kip or 2,267 USD
o Branch of foreign bank: 10,000,000 kip or 1,133 USD
o Branch of domestic bank: 10,000,000 kip or 1,133 USD
 Annual fee payment for annual management: 0.0002% of total asset and with the
minimum requirement of 50,000,000 kip or 5,666 USD
4.2. Information, Communications and Technology (ICT)
As the technological development is considered as an emerging issue in Lao PDR, the accessibility
to technologies by public and private sectors is still low while the ICT suppliers are less
competitive. Accordingly, Lao ICT Development Index (IDI) stood at 139th out of 176 countries
in the global ranking in 2017 that was poorer than other neighboring economies (Figure 11). On
the other hand, the services charged are high in comparison to other ASEAN countries. This is
because the spending or investment in the information, communication and technology by the
public, household and private sectors is still low. As a result, the use of Internet stood at 47% of
total household in 2018 only, the lowest level among ASEAN countries. Singapore, Brunei and
Malaysia are the most competitive in ICT industries in the region.

2
The exchange rate (selling rate) is 8,824 kip/$, sourced BCEL daily exchange on 14 th October 2019

13
Figure 11: Information and Communication Technology (ICT) Development Index by Global
Ranking in 2017

Singapore 18
Brunei 53
Malaysia 63
Thailand 78
Philippines 101
Vietnam 108
Indonesia 111
Cambodia 128
Myanmar 135
Lao PDR 139
0 50 100 150
Global Ranking

Source: International Telecommunication Union (ITU). https://www.itu.int/net4/ITU-

D/idi/2017/index.html#idi2017rank-tab
Figure 12: Key ICT indicators in Lao PDR
8,000,000

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0
2014 2015 2016 2017 2018

Active number by fixed telephone Active number by mobile phone

Internet subcribers Total population

Source: (Department of Planning and Cooperation 2019)

The market demand in Lao PDR for ICT increased in line with the trend of other countries in the
region. In particular, the Internet and free-Wi-Fi access in hotels, coffee shops and major tourist
destinations increase rapidly in major cities such as Vientiane Capital but limited in other areas.
Too, the use of internet via smartphones online data is outstanding in the most recent years. This
is because the large-scale launch of 4 and 4.5 G services by telecommunication companies has
expanded the usage of the Internet either via mobile phones or fixed-broadband penetration over
the last five years. Accordingly, the mobile network stations expanded to 7,805 stations which

14
covers 95% of all villages. As a result, the number of Internet subscribers was rising steadily
reached about 3 million users in 2018 or 43% of population (Figure 12). Nevertheless, the
development of broadband internet networks in the Lao PDR estimated by International
Telecommunication Union (ITU) is still low when compared to other ASEAN countries as only a
few large telecom companies, which are state owned enterprises (SOEs), dominate the domestic
market. As a result, the percentage of internet usage of Lao PDR is lower than any other countries
in ASEAN (Figure 13). Yet, the local competition index for the Lao PDR is poor as it ranks 129
out of 137 during 2017-2018. For this reason, the Internet service charges in the Lao PDR are more
costly than other developing countries.
Figure 13: Use of the Internet in ASEAN in 2017, Unit: % of Individuals

100 94.9
90 80.1 84.4
80
70 60.1 58.1
60 52.9
50
40 32.4 32.3 30.7
25.5
30
20
10
0

Source: International Telecommunication Union, ITU World Telecommunication/ICT Indicators

(June 2017 edition)
In the other hand, computer access as another indicator, the percentage of households possessing
a computer has jumped in the last decade though the rate is still low. In 2018, the percentage of
computer held by household was 26% increased from 10.5% of total in 2015. Such increase is
much influenced by the higher level of household’s income and the development of ICT industries.
Similarly, the current use of computer by private companies should be much higher than before.
In particular, education institutions such as universities, colleges and high schools are among high
demand for the use of computer. Such increase of computer usage should benefit the household
and students to gain their improvement of computer literacy skills such as Microsoft Office (word
and excel). It is interesting to know that, though the data is likely out of date, the level of computer
used by private corporates was only 6.2% of total, 3.4% of total with internet access, and 0.4% of
total with website in 2015 LSB (2015a). In fact, this information should not be surprised because
most of private companies are small enterprises who are not able to afford or maybe it is not
necessary to have ICT system. Among all industries, wholesale-retail, hotel and restaurant,
financial, and manufacturing sectors were the most active users of ICT such as the Internet and
websites in the Lao PDR.
There are 4 major players in the ICT industries listed in Table 8. They are mostly the state owned
enterprises where the Lao government shares the most or more than half of total investment except
ETL Company limited. The history of each player is briefly presented. First, Lao
Telecommunication Limited Company (LTC) was established in 1996. The Lao government
shares 51% of total investment whereas 49 % is possessed by Shin Corporation (Thailand).

15
Second, Enterprise Telecommunication Lao (ETL) Public Company operates since 2000 with
100% of Lao government investment. However, Jiafu Holdings (a wholly-owned subsidiary of
Chinese Comba Telecom) purchased 51% of total share from the government since 2017. Third,
Beeline (Formerly Tigo) used to be the private dominant (78%) by VEON (formerly VimpelCom)
from the Netherlands since 2002, however; the government took over in 2017. Fourth, Star
Telecom or Unitel, established in 2008, is the joined venture company between Lao government
(51%) and a Vietnamese state owned enterprise (Viettel Global) (49%). Lastly, the Sky Telecom
is a 100% government owned company operates since 2014. These companies provide the
communication service such as phone, mobile phone, broadband and Wifi internet. Regarding to
the market share for mobile phone subscriber penetration, Unitel and Lao Telecom dominate the
market with the market share of 47% and 39% respectively. In the end of 2019, these two
companies as leading companies are preparing to test and launch the 5G technology network (high-
speed fifth generation communication network). This 5G technology is expected to provide the
smarter, faster and more efficient service than 4G.
Table 8: Telecommunication Operators
No Name Type of Service Ownership
1 ETL Company Limited PSTN 49% Lao government
2.5 G (GSM 900/1800, GPRS) 51% Jiafu (China)
3 G (GSM 2.1 Ghz)
ISP (XDL, HIL, VPN, FTTX)
2 Lao Telecom Company PSTN 51% Lao government
(LTC) 2.5 G (GSM 900/1800, GPRS) 49% Shennington
3 G/4G (GSM) (Thailand)
ISP (XDL, IP Star)
3 Star Telecom (UNITEL) PSTN 51% Lao government
2.5 G (GSM 900/1800, GPRS) 49% VietTel
3 G (GSM) (Vietnam)
ISP (XDL, FTTX)
4 Beeline 2.5 G (GSM 900/1800, Edge) 100% Lao
Wimax, 3 G, FTTX government

5 Sky Telecom Fiber, FTTx, WiFi & Quad Play 100% Lao
DPLC, IPLC, Dark Fiber government
IPTV, VOIP, IDC, BISS & SI
Mobile Broadband (BB-WiFi, BB
Mobile 3G/4G)
Source: Statistics Year Book 2018, Ministry of Post and Telecommunications, Lao PDR
Besides the big telecommunication players, the number of SMEs for ICT business also increase
dramatically during 2015-2018 as reported in Table 9. Their businesses related ICT include
internet café, ICT consultancy and training, software development, wholesale & retail and ICT
installation. Accordingly, there are more than 2,000 players in the ICT service sector rose from
less 1,000 enterprises in 2015. This indicates a robust growth of ICT market in Lao PDR especially
internet café, ICT wholesale & retail, installation and repairing. As a result, the competition in
such services becomes getting tough. An increase of demand towards ICT service by households,

16
government and privates including education institutions should secure the market for this service
industry.
Table 9: Numbers of Firm/Shops in ICT Service Industry
No List 2015 2016 2017 2018
1 Registered Internet Café 421 454 671 772
2 Digital Content 4 26 9 12
3 ICT Consultancy 3 10 23 15
4 ICT Training Service 3 3 8 14
5 Software Development 17 30 48 51
6 ICT wholesale and retail 234 170 733 831
7 ICT installation and repairing 99 391 118 602
Total 781 1,084 1,610 2,297
Source: (Department of Planning and Cooperation 2019).
4.3. Accommodation and Food Service
Tourism is one of the most important sector for Lao economy and also the largest trade in service.
Therefore, the tourism sector particularly hotels and restaurants contributes significantly to GDP
growth, employment and income distribution. In 2018, the tourism generated 755.3 million USD
or 4.95 % of GDP for Lao PDR. Similarly, more than 46,000 people are employed in hotels and
restaurants in 2017. As the number of tourist increases, its contribution is anticipated further in the
future. For instance, the number of tourists visiting Laos has increased every year reached 4.2
million persons in 2018 (Figure 14). Most of tourists come from ASEAN region especially
Thailand and Vietnam shared 66.8% of total. However, these tourists visit Lao PDR for a short
time period such as one or two days-trip for holiday. For this reason, the earning from regional
tourist is not much as expected. Unlike, the number of tourist from China and Korea is outstanding
in previous years with longer holiday trips. In 2018, the numbers of Chinese and Korean tourist
visiting Lao PDR were 805,833 persons and 174,405 persons respectively. Meanwhile, the tourists
from Western such as Europe and USA are likely constant but slightly declined in the last few
years due to the slowdown of global economy. The regional tourists such as Thailand, Vietnam
and China mainly visit Lao PDR via cross-border assisted by travel or tour agents while the
Western, Korean and Japan come to Lao PDR via air transport at the international airport. The top
tourism destinations in Lao PDR are few and concentrate in the some places such as Vientiane
Capital, VangVieng city in Vientiane province, and Lungprabang province. Therefore, the tourism
development as well as the marketing of Lao PDR is not well developed. This is because Lao PDR
is principally a small part (or supplementary) of regional tourism destinations. Therefore, the
number of tourists visiting Lao PDR is relatively small compared with other countries in the region
or shared 3.1% of total only in 2017, according to ASEAN statistics3. In fact, the main destinations
of tourism are Thailand (28.3%), Malaysia (20.6%) and Singapore (13.9%) while Vietnam (10.3%)
is getting more popular among tourists. Hence, the cooperation with these countries is necessary
for Lao PDR to promote its tourism development and attract more tourists. Likewise, the
introduction of technologies such as online-payment and electronic-passport or electronic-visa
should further encourage the inflow of tourists.

3
For more information, please visit the website: https://www.aseanstats.org/

17
Figure 14: Number of tourists (million people) in Lao PDR during 2010-2018

5.00 4.6
4.2 4.2 3.9 4.2
3.8
4.00
3.3 0.51
2.7 0.42 0.55 0.81
3.00 2.5 0.25 1.19 0.64
0.20 1.11
0.71 0.87 1.00 0.87
2.00 0.16 0.15 0.89
0.43 0.56
1.00 1.94 2.06 2.04 2.32 2.01 1.93
1.52 1.58 1.80
0.00
2010 2011 2012 2013 2014 2015 2016 2017 2018
Thailand Vietnam China Korea
Europe Others ALL

Source: Tourism Development Department, Ministry of Information, Culture and Tourism, Lao
PDR
The development of the tourism sites or places are not well developed although the numbers are
on the rise steadily. Also, the transportation especially land transport connecting to these tourism
sites are also poor. According to Lao Tourism Development Department, Lao PDR has 2,208
tourism sites comprising of natural, cultural and historical sites in total but only 37% of total is in
operation while the remains are just registered and under-developed. Therefore, there are more
spaces to improve the tourism sector but this should require a large amount of fund for
development. Across the sector, several players are involved in the business which include hotel
and resort, restaurant, entertainment, and travel agent. In total, there are around 6,000 enterprises
providing services for the tourists. Table 10 shows that more players are in the business of
guesthouse and restaurant. However, they are mainly SMEs enterprises owned by domestic
investors. Foreign investments are more active in the business of hotel and resort that requires
more fund and high quality of service to serve the international tourists or domestic tourists with
high income. China, America, England, Thailand, Malaysia, Korea and Vietnam are the major
foreign investors in hotels, resorts and restaurants. Therefore, there are more international hotel
brands in Lao PDR especially in Vientiane Capital such as ibis, Best Western and Crawne Plaza
hotel. In addition, the first luxury hotel called InterContinental Vientiane with more than 400
rooms invested by InterContinental Hotels Group (IHG) is under construction planned to provide
the service in the year of 2021. The increasing inflow of foreign investment into the
accommodations and restaurants are largely influenced by the infrastructure development such as
Laos-China railway, highway and air transportation aimed to enhance the regional connectivity
(people, trade and investment). Such development of infrastructure is totally driven by the
governments’ policies. Nevertheless, Lao PDR has a high potential to attract more tourists since it
has more than 2,000 tourism sites particularly the natural sites if they are well developed with a
good transport service. In addition, the numerous events such as traditional festivals are held
throughout the year could be one of the attraction for tourists.

18
Table 10: Key indicators of tourism sector in Lao PDR
Year 2012 2013 2014 2015 2016 2017 2018
Hotel 468 491 515 542 545 569 679
Guest House and Resort 1,562 1,868 1,911 1,907 2,452 2,165 2,432
Restaurant 1,380 1,744 1,269 1,664 2,969 2,360 2,646
Entertainment 283 168 164 164 365 249 305
Rooms 35,857 37,808 44,714 48,386 46,513 50,600 56,825
Travel agents 275 290 342 368 381 422 503
Natural Sites 849 1,093 1,145 1,145 1,194 1,184 1,318
Cultural Sites 435 541 539 534 628 632 596
Historical Sites 209 282 278 278 282 278 294
Source: Tourism Development Department, Ministry of Information, Culture and Tourism, Lao
PDR

5. Conclusion
This report aims to understand the service industries and policies related in Lao PDR. The
primary methodology is the desk research where the secondary data and information are applied.
This study shows that the contribution of service sector is significantly crucial for Lao economic
development in terms of GDP growth, employment and facilitation for other industries. At the
same time, services especially financial & insurance, Information, Communication and
Technology (ICT), professional, and transport had not only strong growth in previous years but
also potential growth in the future because of planned construction of investment projects
especially infrastructure and energy development. Currently, there are many players in some
service sectors such as banking, ICT except telecommunication, and accommodation
(guesthouse). As a component of the supply chain, it is very crucial for the service sector to be
more competitive to enhance the competitiveness of agriculture, manufacturing industries and
Lao economy as a whole through high quality service and low charged. More importantly, the
service sector in Lao PDR is likely less competitive at the international trade. This is because
there are few service enterprises exporting their service to foreign market. At the same time,
more service firms import the service from abroad. Therefore, encouraging the involvement of
service sector in the international trade or global supply chain would improve their
competitiveness. Meanwhile, the Lao PDR provides several incentives for investment including
service sector. Trade preferences that Lao PDR receives from developed countries should be
taken into account to attract more investment in the service sector.

19
References

Department of Planning and Cooperation. 2019. “Post, Telecommunication and Communication

Statistics Year Book 2018.” Vientiane, Laos: Ministry of Post and Telecommunication.
Investment Promotion Department. 2014. “Investemet Guide Book.” Ministry of Planning and
Investment.
http://www.investlaos.gov.la/images/sampledata/pdf_sample/Investment_Guide_Book_2014.pdf
.
———. 2019. “Land of Ample Opportunities and Success.” September.
Lao Securities Exchange. 2019. “Perfromance Report 2018.” Lao Securities Exchange (LSX).
www.lsx.com.la/about/annual/listPosts.do?lang=en.
LSB. 2015a. “Economic Census II, 2013.” Vientiane, Laos: Lao Statistics Bureau.
———. 2015b. “Results of Population and Housing Census 2015.” Lao Statistics Bureau.
———. 2018. “Supply and Use Tables: Lao People’s Democratic Republic.” Asia Development
Bank/ERCD. https://data.adb.org/dataset/supply-and-use-tables-lao-peoples-democratic-republic.
National Assembly. 2018. “Commercial Bank Law.” https://www.bol.gov.la/fileupload/24-06-
2019_1561341677.pdf.
The Bank of Lao PDR. 2011. “Decree on the Requirement of Fee Payment for the Establishment
Certificate and Annual Management by the Commercial Banks.”
World Bank Group. 2019. “Doing Business 2019: Training for Reform.” Washington DC 20433:
The World Bank. https://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-
Reports/English/DB2019-report_web-version.pdf.

20
Appendix

Table 5: Major Multilateral Free Trade Agreements for the Lao PDR

No List
1 Lao PDR became the 158th WTO member on February 2, 2013.
2 Association of South East Asian Nations (ASEAN): The ASEAN Free Trade Area (AFTA) is a
trade bloc agreement supporting local manufacturing in all ASEAN countries. Laos benefits from
increased regional integration and tariff liberalization that includes the elimination of import
duties in various sectors and classes of goods and maximum tariffs of up to 5% between
members. These factors will help reduce input costs for businesses and will increase the country's
exporting capacity and industrial base in the long term. The 10 member states are Brunei,
Indonesia, Malaysia, Philippines, Singapore, Thailand, Myanmar, Cambodia, Laos and Vietnam.
Exports from Laos destined to these markets are subject to 0% tariff rates for most agricultural
and industrial products, except for those under the General Exception List (GEL) as well as under
the Sensitive List (SL) exporting to newer ASEAN members (Cambodia, Myanmar and Vietnam),
which will be cut to a 0% rate by the end of 2018. Being a member of ASEAN also opens the
economy to other significant trade agreements with key regional markets, such as China and
India.
3 Thailand-Laos Partial Scope Agreement: Laos benefits from a preferential trade agreement in
terms of tariff exemption or reduction under the Laos-Thailand Preferential Trading Arrangement.
Thailand is an important market for Laos, serving as the country's second-largest export
destination, and largest import source.
4 ASEAN-China Free Trade Agreement (ACFTA): Trade relations between Laos and China benefit
from trade preference in terms of tariff exemption or reduction under ACFTA. China is an
important market for Laos; it is the country's major trading partner and an important source of
investment. There are also ongoing negotiations about the Regional Comprehensive Economic
Partnership (RCEP), which is a regional economic agreement being negotiated between the
ASEAN governments and their six FTA partners: Australia, China, India, Japan, New Zealand
and South Korea. The RCEP would lower tariffs and other barriers to the trade of goods among
the 16 countries that are in, or have existing trade deals with the ASEAN. Unlike the TPP and
other US-led trade deals, however, the RCEP wouldn't require its members to take steps to
liberalize their economies, protect labor rights and environmental standards and protect
intellectual property.
5 ASEAN-Japan Free Trade Agreement (AJFTA): Trade relations between Laos and Japan benefit
from trade preference in terms of tariff exemption or reduction under the AJFTA. Japan is a large
developed market and one of Laos' major trade partners.
6 ASEAN-Korea Free Trade Agreement (AKFTA): Laos benefits from trade preference in terms of
tariff exemption or reduction under the ASEAN-Korea Free Trade Agreement (AKFTA), which is
a trade bloc agreement between South Korea and ASEAN.
7 ASEAN-India Free Trade Agreement (AIFTA): Laos benefits from trade preference in terms of
tariff exemption or reduction under the AIFTA, which is a trade bloc agreement between India
and ASEAN; this will help Laos in terms of trade growth and diversification given the size and
performance of the Indian economy and other ASEAN member states.
8 Laos-Vietnam Border Trade Agreement: Apart from ASEAN, Laos also benefits from reciprocal
access under the trade agreement between Laos and Vietnam for 32 tariff lines with 50% of the
AFTA rate, while all other products are 0% rate, except for 155 tariff lines which fall under the
GEL of Vietnam. Vietnam is a high-growth developing market and Laos' third highest import
source and export destination.

21
 9 ASEAN-Australia-New Zealand Free Trade Agreement and Economic Integration Agreement
(Effective date: January 2010): The Agreement aims to eliminate tariffs on 99% of exports to key
ASEAN markets by 2020.
Source: Hong Kong Trade Development Council (HKTDC), see the links:
https://beltandroad.hktdc.com/en/country-profiles/laos.

Table 6: List of Commercial Banks in 2018

NO Name of Banks Type of Banks

1 Banque Pour Le Commerce Exterieur Lao Public State-Owned Commercial Bank
2 Lao Development Bank State-Owned Commercial Bank
3 Agricultural Promotion Bank State-Owned Commercial Bank
4 Nayoby Bank Specialized Bank
5 Lao-Viet Bank Joint State Commercial Bank
6 Banque Franco-Lao Ltd Joint State Commercial Bank
7 Lao China Bank Ltd Joint State Commercial Bank
8 Joint Development Bank Private Bank
9 Phongsavanh Bank Ltd Private Bank
10 ST Bank Ltd Private Bank
11 Indochina Bank Ltd Private Bank
12 Booyoung Lao Bank Ltd Private Bank
13 Lao Construction Bank Ltd Private Bank
14 Maruhan Japan Bank Lao Ltd Private Bank
15 Vietcom Bank Lao Ltd Private Bank
16 ANZ Bank (Lao) Limited Subsidiary Bank
17 ACLEDA Bank Lao Ltd Subsidiary Bank
18 International Commercial Bank Lao Limited Subsidiary Bank
19 RHB Bank Lao Limited Subsidiary Bank
20 Kasikornthai bank Subsidiary Bank
21 Sacom Bank Lao Branch Subsidiary Bank
22 Vietin Bank Vientiane Branch Subsidiary Bank
23 Canadia Bank Lao Ltd Subsidiary Bank
Saigon-Hanoi Commercial Joint Stock Bank Lao
24 Subsidiary Bank
Branch
25 Bangkok Bank, Vientiane Branch Foreign Branches
26 Krung Thai Bank, Vientiane Branch Foreign Branches
27 Ayudhya Bank, Vientiane Branch Foreign Branches
28 Thai Military Bank, Vientiane Branch Foreign Branches
29 Siam Commercial Bank, Vientiane Branch Foreign Branches
30 Public Berhad Bank, Vientiane Branch Foreign Branches
31 Public Berhad Bank, Sikhai Branch Foreign Branches
32 Public Berhad Bank, Savanakhet Branch Foreign Branches
33 Ayudhya Bank, Savanakhet Branch Foreign Branches
34 Military Commercial Joint Stock Bank-Lao Branch Foreign Branches
35 ICBC Bank Vientiane Branch Foreign Branches

22
 36 Public Berhad Bank, Pakse Branch Foreign Branches
37 May Bank Lao Branch Foreign Branches
38 CIMB Thai Bank Vientiane Branch Foreign Branches
39 Cathay united bank Vientiane Capital Branch Foreign Branches
40 Bank of China Limited Vientiane branch Foreign Branches
41 First Commercial Bank LTD, Vientiane Branch Foreign Branches
42 Bangkok Bank, Pakse Branch Foreign Branches
43 Malayan Banking Berhad Nongduang Branch Foreign Branches

Source: The Bank of Lao PDR

Table 7: Business sector for tax investment incentive

No Business sector
1 High and modern technology application, scientific research, research and development, use of
innovative, environmental-friendly [technology] application, and efficient use of natural resource
and energy;
2 Clean, toxic-free agriculture, planting seed production, animal breeding, industrial plantation,
forestry development, protection of environment and bio-diversity, activities promoting rural
development and poverty reduction;
3 Environmental-friendly agricultural processing industry, national traditional and unique
handicraft processing industry;
4 Environmental-friendly and sustainable natural, cultural and historical tourism development
industry;
5 Education, sports, human resource development and labor skill development, vocational training
institutions or centers, production of educational and sports equipment;
6 Construction of modern hospitals, pharmaceutical and medical equipment factory, production of
and treatment by traditional medicine;
7 Investment, service provision and development of public infrastructure for urban traffic
congestion reduction and residence facilities, infrastructure development for agricultural and
industrial production, transportation services of goods, transit services and international linkage;
8 Policy banks and micro-finance institutions, focusing on poverty reduction for people and
communities who have less access to a bank;
9 Modern commercial centers promoting domestic products and world-renowned brands, exhibition
centers, fairs for domestic industrial, handicraft and agricultural products.

Source: (Investment Promotion Department 2019), Ministry of Planning and Investment (MPI),
Lao PDR

Table 8: Investment Incentives in Special Economic Zones (SEZs)

No Incentives Inside SEZ Outside SEZ
(Savanh Park based on PM’s Decree177)
1 Profit Tax Holiday period 6 – 17 years (Starting from profit Depend on Zone 1 and Zone 2 of the
making year) Investment Promotion Law 2016
2 Rate of Profit Tax after Tax Holiday period 35% (5 years after Tax Holiday Max 24%
period)
3 Personal Income Tax 5% 0%- 24%
(Expatriate & Foreign citizen & Lao citizen) (Progressive Rate)
4 Rate of Dividend Tax after Tax Holiday 5% 10%

23
5 Value add Tax (VAT) 0%-10% 10%
6 Regular Import Customs Duty Rates 0% 3% - 40%

Source: (Investment Promotion Department 2019), Ministry of Planning and Investment (MPI),
Lao PDR

Figure 15: Investment zones for tax incentives

Source: (Investment Promotion Department 2014). Note that the information is out of date
because currently there are only 2 zones, namely, zone 1 and zone 2.

24
 Figure 16: Map of Special Economic Zones in Lao PDR

Source: (Investment Promotion Department 2019)

25

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