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Private Sector Development in Laos

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The Lao PDR Constitution of 1991 protects state, collective, and private forms of ownership. During the 1990s an active legislative program laid the foundations for developing market based rules and institutions to support private sector development. Today, agricultural production and most manufacturing production are in private hands, and SOEs only cover around one percent of employment. Nearly 97 percent of manufacturing units are small (less than 10 employees). Of the medium and large units, 35 percent are privately owned by Lao PDR citizens and 55 percent are joint ventures with foreigners. The remainder is owned by government. Foreign investment inflows have increased rapidly, in both resource and non-resource sectors (mainly hydropower, mining, agriculture, processing industries, and tourism). Between 2003 and 2008, actual investments increased from US$110m to about US$770m. The main foreign investors are from Thailand, China, Vietnam, Australia, Malaysia, Singapore, South Korea, Taiwan, India, France, the Netherlands, and the United States. The National Social and Economic Development Plan recognized the need to improve the business environment and promote domestic and foreign private investments to foster growth, reduce poverty, and achieve the Millennium Development Goals.

Lao Trade Reform

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Lao PDR has been gradually integrating into the world economy through the accession to regional and multilateral trade organization such as ASEAN and WTO. The country initially applied to join the WTO in 1997, and has recently made accelerating progress. However, as its integration is still at an early stage, evidence suggests that Lao exports are less affected by the global financial crisis than initially expected. The GOL is implementing a sector-wide approach to trade-related reforms based on the 2006 DTIS/IF Action Matrix5, to help address the supply-side constraints that inhibit export competitiveness.

Foreign Direct Investment in Laos

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Foreign Direct Investment (FDI) inflows to Lao PDR are expected to fall considerably in 2009 due to the impact of the global economic crisis. As discussed above, the nominal FDI value is expected to decline from about $771 million in 2008 to $614 million in 2009 (or by about 20 percent) due to recent delays of new hydropower and mining projects, as well as slow growth in the non-resource sectors. Assuming the global economy continues to recover - Annex 1), FDI to Lao PDR is expected to rise considerably in the medium term, as large resource and non-resource projects resume, compounded with the expected recovery of regional and global demand.

Import And Export Policy In Laos

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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 a taxation and duties scheme.

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

The importers of foreign goods must be enterprises registered correctly under the relevant laws of Laos and operating in authorized business sectors.

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

Import And Export System In Laos

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Import Procedures

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 customhouse concerned. There are many possible trading methods including L/C and TT among others.

Trade Agreements Of Laos

Laos has bilateral agreements with Vietnam, Thailand, Myanmar, Cambodia, China, Mongolia, the Russian Federation and other Eastern European countries. These agreements are of a general character with the aim of further developing and strengthening in every possible way the trade relations between the countries on the principle of equality and mutual benefits.

Private Sector Participation

The government is encouraging private sector participation in the new economic system giving full support to every sector. Soon after the Lao Government adopted its move towards a market economy, private businessmen lost no time stepping into the 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 reached many thousands.

Foreign Trade Policy In Laos

Lao foreign trade policy mainly thrusts towards reducing progressively the trade deficit with foreign countries 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, the government will make every effort to achieve self-sufficiency in terms of food and certain consumer goods. That is, it will put more effort into balancing exports and imports of consumer goods, or weighing exports more heavily than imports and establish favorable conditions that will make Laos into a business and service transit route for this region in the future.

Commerce And Trade In Laos

Since 1986, when the Government of the Lao PDR adopted its new economic policy, commercial relations with foreign countries have been widely expanded in line with government policy to open up the country.

Currently, Laos has trade relations with more than 30 nations around the world. Trade volume has increased in each year by an average of 18.7%. Even so, the foreign trade deficit still increases by an average of 15.4% per year. However, trade is active as can be seen from the trend towards the balance of export and import goods for general use and consumption. The difficulty arises from imports for the construction of a basic national economic infrastructure for the development of the economy, and especially for future exports.

Economic Development Planning in Laos

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The Laos's trading policy has varied from period to period according to economic policy. During the period 1975-1985, focus was made on centralized planning of economic policy. From 1985 until 1990, there was a change in economic policy with an emphasis on the role of marketing mechanisms in the country's economic development. The latest period, 1993-2000, has seen the adoption of the current plan for the long-term economic development of Laos under the policy of complete preparation for the 21st century. The period 1975-1985 was the first time the country stepped into socialism. The leadership of the Lao PDR tried to change society rapidly to be socialist. Meanwhile, the government also tried to strengthen its power to keep the system viable. This was in accordance with the ‘two duties of military strategy’which are the erection and protection of the country's security.

Trade, Services, and Tourism in Laos

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Local Trade

Before the adoption of the "New Thinking" economic reform policy, the country's local trade was centralized. Decisions on manufacturing, wage rates and production structure were made entirely by the government.

Control over production by the agricultural sector has declined since the adoption of the policy. This led to the expansion of production. For example, livestock breeding was promoted as a new type of business.

The economy under the local trading system was encouraged. Improvements were made to the foreign exchange rate to make it more liberals. Government support was provided for certain aspects of production, and people were entitled to possess land.

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