Laos

Laos is a country of contrasts and untouched nature, located in the center of Southeast Asia, on the Indochina peninsula. This is the most ecologically clean area, there are still places where no European has set foot. The former name of the country is Lan Xang, which translates as "the kingdom of a million elephants." Laos is a state that inherited the colonial traditions of old Europe, retained faith in Buddhism and added asceticism to the ideology of the communists.

General information

The official name of the country is the Lao People's Democratic Republic. Laos occupies 237,955 km² (81st in the world). The total population of the country is 7,599,077 people. (2023), its significant part is concentrated along the Mekong River and near the capital — the city of Vientiane. The mountainous regions in the north and east of the country are sparsely populated. 95% of the country's population lives along the border with Thailand. Despite the small population, about 70 different tribes and nationalities live in Laos. The entire multinational population of Laos is usually divided into three groups: Lao-Lum, Lao-Teng and Lao-Sung. Each group includes tribes and nationalities united by common ethnolinguistic features, place of settlement and way of life. The largest foreign group is formed by the Vietnamese and the Chinese. There are few Khmers, Indians, Burmese, Japanese and others.

Lao is the language of Lao-lum ("lowland Lao"), the official language of Laos. The vast majority of the inhabitants speak and write in the Lao language. In Laos, up to 20% of Thais are also, there are immigrants from Vietnam and China.

Along with Lao, English, Vietnamese and French are also spoken. European languages are more often used to communicate with foreigners, they are also in demand in interstate communication. 60% of the inhabitants of Laos profess Buddhism. The minority are animists and adherents of the religious concept of "phi". 1.5% of the population are representatives of European Christian denominations.

The official currency of the country is the kip.

Laos is divided into 16 provinces (khweng). There are no very large cities in the country, except for the capital Vientiane. Other relatively large cities are Luang Prabang (50 thousand), Savannakhet (since 2005 — Kayson Phomvihan) (70 thousand) and Pakse (90 thousand inhabitants). The municipality of the capital Vientiane and the Saisombun zone have special statuses.

History, geography, culture, mentality

Archaeological excavations took place on the territory of modern Laos, which showed that life was here 40 thousand years ago. In their native land, the people of Laos have gone through various stages of development in their long history. In the middle of the 14th century, King Fa Ngum united the settlements of Laos and founded the Kingdom of Lan Xang, which later turned into a prosperous state, despite the fact that foreign invaders invaded the country at various periods of history. For almost a century and a half, Laos was a vassal territory and a colony of foreign powers. In the twentieth century, after the Second World War, the People's Revolutionary Party of Laos led the heroic struggle for the liberation of the country. On December 2, 1975, the independent and sovereign Lao People's Democratic Republic was established.

Laos borders Myanmar (Burma) and China to the northwest, Vietnam to the east, Cambodia to the south, and Thailand to the west. This country has no access to the sea.

The territory of Laos is covered with dense forests, the landscape consists of low hills and mountains. The highest point in the country is Mount Bia (2830 m). The plains in Laos are located along the Mekong River, which flows through the entire country from north to south.

Laos has a rich cultural heritage. Religion and architecture form its basis. One of his most famous buildings is the Great Stupa That Luang in Vientiane. It is considered the symbol of the country. According to official data, there are about 5 thousand historical and architectural monuments in Laos. Some of them, such as the ruins of Wat Phou in Champasak, are included in the UNESCO World Heritage List.

The good nature and natural politeness of the Laotians creates an atmosphere of comfort from staying in Laos. It is noteworthy that people here practically do not argue in public and do not sort things out in a raised voice — here it is considered unworthy, and in the eyes of those around them, those who do this may “lose face”.

When greeting each other, men in Laos shake hands. It is not customary to touch a woman or shake her hand; in this case, a small bow with palms folded just below the chin can serve as a greeting.

When greeting children, in no case should you touch their head. The Laotians believe that each person has his own guardian angel, whose abode is at the top of his head. From someone else's touch, the guardian angel can be frightened and leave the child, and then, according to belief, illness and adversity can fall on the child.

Power

The current Constitution of the Lao People's Democratic Republic was adopted in August 1991. According to the country's basic law, the president is the supreme leader of the state. He is elected by the National Assembly every 5 years. The same body performs the functions of the legislature. The head of government is the prime minister, appointed by the president with the consent of the National Assembly.

Economy

Laos is a developing economy. In 2021, the country's GDP was about 19.90 billion US dollars. GDP per capita is $1,875. The basis of the economy is agriculture (about 50% of GDP), industry (40%), services (10%). Laos is mainly an agrarian country, with about 85% of the population employed in agriculture. The main agricultural crop is rice (grown on 90% of arable land). Corn, sweet potatoes, sugar cane, tobacco, cotton, tea, and peanuts are also grown.

Like the governments of other Asian communist states, the Lao government has privatized the private industrial sector. Despite the high level of economic growth, the country still has an underdeveloped infrastructure, there are also limited sources of telecommunications in the country, and there is no developed railway. The government is constantly trying to improve the road system with the assistance of Japan. Electricity is limited and only available in some urban areas.

The industry of Laos is technically insufficiently equipped. The extraction of minerals is the most developed. The main contribution to GDP is made by the extraction of oil, copper, tin, gold and gypsum. The service sector is heavily concentrated in trading activities and catering services.

Main import items:

• telecommunication equipment;
• trucks;
• metal structures;
• rolled metal products;
• hydraulic turbines.

Tourism is the fastest growing economic sector and plays a vital role in the Lao economy. The government opened Laos to the world in the 1990s and continues to be a popular tourist destination.

The Lao economic model is reminiscent of the Chinese or Vietnamese socialist market economy, combining high degrees of state ownership with openness to foreign direct investment and private ownership in a predominantly market structure.

Representatives of international financial organizations and the United Nations Development Program give a generally positive assessment of the state and prospects for the development of the Lao national economy and the government's economic policy. Crisis phenomena in the world economy had a relatively weak effect on the situation in Laos, whose main economic partners are Asian countries — primarily ASEAN members and China. Favorable conditions for this are created by rich natural resources — hydropower and mineral resources, as well as political stability. Growth was driven mainly by energy, construction, manufacturing, mining and services.

Business climate

To solve the ambitious tasks of economic modernization, the government of Laos expects, first of all, by attracting external sources of financing. The three largest investors in Laos are (by a wide margin from other countries) China, Vietnam and Thailand. They are also important trading partners. The top donor of official development assistance is Japan, followed by South Korea.

The World Bank predicts that Laos' economic growth will continue and will be mainly driven by a significant influx of foreign investment in major infrastructure projects, including the Laos-China railway. The Lao People's Democratic Republic is poised to increase its competitiveness and become a key economy in Southeast Asia, as well as to become one of the most dynamic countries in the region, offering a variety of business opportunities to both domestic and foreign investors, becoming the preferred entry into ASEAN markets.

Investment climate

Attracting foreign investment in the country's economy is one of the priority tasks implemented by the Lao PDR government. The main factors determining the development of the Laos economy are the lack of access to the sea, which makes logistics difficult, a small population and, as a result, a small domestic market, as well as a limited skilled labor force and the availability of free territories. Under these conditions, external financing becomes a necessary condition for maintaining the sustainable economic growth demonstrated by the country over the past few years at the level of 7-8% annually.

The ongoing efforts to ensure a favorable investment climate in the Lao PDR are aimed at improving the legislative and tax base, taking into account the specifics of the main sectors of economic development - mining (extraction of gold, silver, copper, zinc, bauxite, limestone, sapphires, etc.), hydropower, agriculture and forestry (coffee, rubber, sugarcane, corn, etc.), as well as the full use of such advantages of the Lao PDR as cheap labor. An important element of the investment attractiveness of Laos is domestic political stability.

Investment activities in Laos are regulated by the Labor, Customs and Tax Codes of the Lao PDR, laws on the support of foreign investment and forms of business, as well as decrees of the Prime Minister of the country and international treaties of the Lao PDR. At the same time, some legislative acts do not correspond to each other. In particular, the tax incentives and low import duties guaranteed to foreign investors under the Foreign Investment Promotion Law are not reflected in the Customs and Tax Codes.

In accordance with the Decree of the Prime Minister of the Lao PDR No. 301 of October 12, 2005, investment projects worth more than 20 million US dollars are being coordinated in the office of the Prime Minister. Projects worth between $10 million and $20 million are approved at the level of the Minister of Planning and Investment. The Deputy Minister of Planning and Investment is authorized to approve projects up to $10 million. Projects with investments up to $3 million can be approved at the provincial level without agreement with the center (for the city of Vientiane and three provinces — Luang Prabang, Champassak and Savannakhet, the approval ceiling is 5 million dollars).

Under the auspices of the Ministry of Planning and Investment (MPI), there is a “one-stop-shop” system, on the one hand, formally facilitating the procedure for “communication” between a foreign investor and the authorities (foreign investors in the Lao PDR are required to obtain a business license, an enterprise registration certificate, a tax certificate, as well as a company seal registration certificate; the validity of these documents is renewed annually).

On the other hand, the "one window" system allows you to agree on the exclusive terms of contracts for each specific investor. Income tax is levied at 20%, 15% and 10%, depending on the investment activity, areas and size of investments, exemption for up to seven years is possible. Investments in agriculture, industry and the service sector are especially encouraged, contributing to poverty reduction, employment and improvement of living conditions of the population, development of infrastructure and human resources.

A foreign investor in Laos can expect to be exempt from:

• from the tax for the reporting year of net profit directed to the expansion of entrepreneurial activity;
• from import duties on raw materials, equipment, spare parts and vehicles directly used for production;
• from export duties on products.

Investments in the construction of hospitals, kindergartens, educational institutions, research centers and public utilities are exempt from building rent or land concession for a period of three to 15 years.

However, the existing norms are optional and are negotiated in each specific case (fixed by a general agreement with the company), which obviously puts investors in the same industry in unequal conditions, leveling the principle of healthy competition. At the same time, an additional risk for investors is the provisions of the Lao PDR Law on Contracts of 1990, which establish the possibility of canceling a contract with a company if its implementation is contrary to state or public interests.

Business and investment support structures

In accordance with the Investment Promotion Law of 2016, the Prime Minister issued Regulation on the Implementation of the Investment Promotion and Management Committee No. 05/PM dated January 05, 2018 and established the Unified Service under the Ministry of Planning and Investment in August 2018 to improve the business environment and competitiveness to attract better investment in Lao PDR through a fast and transparent business process.

The Ministry of Planning and Investment (MPI) is a government agency and is responsible for:

• state and regional management planning and investment, research strategies, master plans, national socio-economic development planning (NSEDP);
• mechanisms and policies related to economic management, statistics, promotion and management of domestic and foreign private investments of the Lao PDR;
• attracting and seeking aid (Official Development Assistance: ODA);
• and international cooperation.

The development of special economic zones (SEZs) is one of the approaches to improving the economy, which the government of the Lao People's Democratic Republic (Lao PDR) has given priority since the beginning of economic liberalization.

SEZs are expected to become one of the leading driving forces for economic development and modernization of the country. Not only do they provide a favorable business environment for FDI and local private investment, but they will also stimulate cross-border cooperation with neighboring countries by offering value-added services and stimulating the creation of regional value chains.

To date, 12 SEZs have been established throughout the country.

Under the Ministry of Digital Development, Telecommunications and Mass Media of the Russian Federation, the Intergovernmental Russian-Lao Commission on Trade, Economic, Scientific and Technical Cooperation was established. Among its goals:

• development of Russian-Laotian cooperation;
• building a strategic partnership based on investment, technological, transport and energy cooperation;
• creation of favorable conditions for the development of mutually beneficial cooperation between the Russian Federation and the Lao People's Democratic Republic in the trade, economic and scientific and technical fields, based on the tasks of the socio-economic development of the Russian Federation;
• expanding the participation of Russian business structures in solving problems of cooperation between the Russian Federation and the Lao People's Democratic Republic.