Investment projects and opportunities in Laos

Laos is a developing economy in the heart of Southeast Asia, bordered by Burma, Cambodia, China, Thailand and Vietnam. Laos' economic growth has averaged just under 8% over the past decade, placing Laos among the fastest-growing economies in the world.

Over the past 30 years, Laos has made slow but steady progress in implementing the reforms and institutions needed for a market economy, culminating with its accession to the World Trade Organization (WTO) in February 2013. The government's commitment to WTO accession and the creation of the ASEAN Economic Community (AEC) in 2015 led to major economic policy and regulatory reforms to improve Laos' business and investment environment. The Laotian government is increasingly linking its economic development to ASEAN economic integration and export-led development, and is prioritizing the digital economy, logistics, green growth, and continuing to develop agriculture and mining.

Compared to other countries in the region, foreign direct investment (FDI) inflows into Laos have been relatively stable, mainly due to infrastructure construction and energy projects.

Natural resource exploitation and hydropower development have fueled rapid economic growth over the past decade, with both sectors largely led by foreign investors. However, as growth opportunities in these industries are limited and employ few people, the Lao government has begun to prioritize and expand the development of higher value agriculture, light industry and tourism, while continuing to develop energy resources and associated transmission capacity for export to neighboring countries.

The Laotian government hopes to use its long land borders with Burma, Cambodia, China, Thailand and Vietnam to transform Laos from a "landlocked" "land-linked", thereby further integrating the Laotian economy with the larger economies of its neighbors.

The government is committed to increasing exports of agricultural products, manufactured goods and electricity to neighboring countries and expects significant growth opportunities through infrastructure development.

China-Laos Railway

The US$6 billion China-Laos Railway began operations on December 3, 2021, connecting Kunming, the capital of Yunnan, with Vientiane. The Boten-Vientiane railway section is an electrified high-speed railway with a length of 414 km. It runs between Vientiane and the town of Boten on the border of Laos and China, reducing travel time from 15 hours by car to 3 hours. The next section, 595 km long, from Boten ends in Kunming. Regular trains will travel at speeds of up to 120 km/h between Vientiane and Boten, a border town. Travelers can also take advantage of high-speed trains between the two cities, reaching speeds of up to 160 km/h, with additional trains added during Chinese and Laotian holidays.

Eight high-speed trains and two regular ones are planned to run daily in Laos, and in China — 36 high-speed trains.

Over the next 2-4 years, the line south of Vientiane will connect to Bangkok. This will transform the country into a land hub, connecting it to a large number of regions in Southeast Asia, while significantly reducing logistics costs.

The Lancang-Mekong Express freight train has shipped more than 1 million e-commerce products through this service. The line carries cargo destined for more than 10 countries and regions, including Thailand, Myanmar, Laos, Malaysia, Cambodia and Singapore. The cargo range has expanded to more than 100 categories, including rubber, fertilizers, electronics, automobiles and flowers.

Tanaleng Dry Port (TDP) and Vientiane Logistics Park (VLP)

On 4 December 2021, the Tanaleng Dry Port (TDP) and Vientiane Logistics Park (VLP) in Laos were inaugurated, marking the start of streamlining services to simplify and reduce transport and associated costs.

Constructed on 382 hectares of land, the US$727 million TDP and VLP project will offer comprehensive freight and cross-border transport logistics capabilities. The project, which includes a 50-year concession period, is being developed entirely by Vientiane Logistics Park Co Ltd. Construction of the dry port and logistics hub began in December 2020, and the project is expected to be fully completed in the coming years.

Vientiane-Vang Vieng Expressway

Vientiane-Vang Vieng Expressway, the first expressway in Vietnam, jointly developed by Yunnan Construction and Investment Holding Group (YCIH) and the Laotian government. She is the first "smart" expressway in Laos with Huawei technology. The expressway is approximately 110 km long and is designed as a two-way, four-lane expressway with a design speed of 80–100 km/h.

Huawei, in collaboration with its Chinese partners, has built a secure, stable and intelligent ICT platform for this smart expressway based on world-leading ICT, cloud computing, Internet of Things and safety management system. Huawei data communications equipment deployed along the route creates digital perception, interaction, transmission and integration.  This technology enables big data analysis and other technical tools to implement comprehensive solutions such as intelligent real-time monitoring, smart charging, emergency response and decision analysis.

Huawei Laos

In December 2020, Huawei established its wholly owned subsidiary Huawei Technologies (Laos) Sole Co., Ltd. 1998. It employs 150 employees, 70% of whom — Laotians. Serving 75% of the population, Huawei plays an important role in transforming Laos from a landlocked to a landlocked country.

The emergence of light manufacturing has begun to help Laos integrate into regional supply chains, and improved infrastructure should aid this process, making Laos a legitimate destination for regional manufacturers looking to diversify from existing production bases in Thailand, Vietnam and China.

Government policy is aimed at creating special economic zones and special economic zones (both called SEZs) in Laos. Special economic zones are designed to support the development of new infrastructure and commercial facilities and include incentives for investment. Specific economic zones are designed to develop existing infrastructure and facilities and provide a lower level of incentives and support than special economic zones.

SEZs are expected to become one of the leading driving forces of economic development and modernization in the country. It will not only provide an enabling business environment for foreign direct investment and local private investment, but will also stimulate cross-border cooperation with neighboring countries, offering value-added services and stimulating the creation of regional value chains. Laos has announced plans to build up to 40 special and special zones, but as of 2022, 23 have been created. Some of these, such as the Sawan Seno SEZ in Savannakhet and the Vientiane Industrial and Trade Zone SEZ, or VITA Park, in Vientiane, have successfully attracted foreign investors.

Advantages of investing in Laos

• Abundant natural resources with untapped deposits
• Large area of fertile agricultural land
• Varieties of places for tourism development
• Almost no destructive natural disasters

Competitive advantages

• One of the most politically stable countries in the region
• Socio-economic and financial stability
• High level of security (low crime rate)
• Low labor costs compared to neighboring countries
• GSP privileges provided from 42 countries

The government provides the following incentives to all foreign investors:

• Permission to attract foreign citizens to conduct a feasibility study of investments
• Permission to hire foreign technical specialists, experts and managers if qualified Lao citizens are unable to work on investment projects
• Permission to rent land for up to 20 years from a Laotian citizen and up to 50 years from the government
• Permission to own and lease all improvements and structures on the leased land, as well as permission to sell or remove improvements or structures
• Simplification of entry and exit visas and work permits for foreign personnel
• Guarantees against nationalization, expropriation or requisition without compensation. Under the Intellectual Property Law, the government does not offer import protection incentives (in the form of increased tariffs or import bans) for import-substituting investments and does not provide measures to limit further entry to reduce competition for current investors.

Tax incentives

1. Income tax for investors: exemption for a period of 6 to 17 years. After the end of the income tax exemption period, investors must pay 35% of the current income tax rate for the next 5 years (depending on the investment sector).
2. Construction of factories and infrastructure: Plant for 100% export products: 0% VAT for infrastructure; reduction of 50% VAT on electricity and water supply.
3. Other industriesentitle you to a 50% VAT reduction for infrastructure construction.
4. Non-tax benefits: long-term land lease (up to 50 years), multiple entry visas for 10 years initially for foreigners purchasing real estate worth more than $100,000.
5. Income tax: from 0 to 24% and value added tax: from 0 to 10%.