When it comes to doing business in Southeast Asia, Spanish companies often tend to favor larger markets in terms of size and population, overlooking others that may not be as large but still offer excellent opportunities. One of these is undoubtedly Laos. Investments in Laos are appealing due to its strategic location between Cambodia, China, Myanmar, Thailand, and Vietnam, along the Mekong River; its land area of 230,800 square kilometers, larger than that of one of its aforementioned neighbors, Cambodia; its population of 7.5 million inhabitants, the majority with an average age of 24.3 years; and its continuous and gradual opening to foreign investment.
While its level of development is still limited, various socio-economic plans such as the IX (PNSEDP), in effect from 2021 to 2025, along with a significant level of legal security and political stability, have notably contributed to the growth of investments in Laos. Achieving a growth rate of 7% – 8% over the past twenty-five years and, according to all forecasts, 4.2% in 2023, makes it likely that the country, focused on achieving the Sustainable Development Goals (SDGs), will exit the list of Least Developed Countries (LDCs) in 2024 or 2026, according to United Nations projections.
That being said, what are the current investment opportunities in Laos? Which sectors may be more attractive to Spanish companies? What regional or international competition will they have to face? How to plan entry into the country? Is it advisable or necessary to have a local partner? In principle, given the level of development in the Laotian market, business opportunities cover almost all sectors. However, in selecting among them, the following sectors are likely those deserving particular attention based on each company’s strategy and local competitors:
- Agriculture (agribusiness) and forestry.
- Education.
- Energy (hydropower and, to a lesser extent, wind, solar, and thermal power, with a potential of up to 23,000 MW).
- Infrastructure.
- Logistics and transport.
- Industry (especially manufacturing activities established in Special Economic Zones along the East-West Corridor, in Vientiane, Savannakhet, or Champasak).
- Mining (tin, lead, zinc, copper, iron ore, gold, lignite).
- Health.
- Water supply and solid waste treatment.
- Tourism (ecotourism, cultural tourism, and agrotourism).
Exports are subject to prior registration with the Ministry of Industry and Commerce and are subject to corresponding tariffs (ranging from 0% to 40% of the declared value) and taxes (VAT at 7%; special taxes ranging from 5% to 90%, depending on the case). On the other hand, foreign investments in Laos are generally fully liberalized and are regulated by Law No. 14/NA of November 17, 2016, on Investment Promotion; Law No. 46/NA of December 26, 2013, on Companies; and Communication No. 1327/MOIC.ERM of July 13, 2015, on the List of Business Activities of Foreign Investors, which imposes specific stipulations on the latter in certain cases such as having a local partner.
The Investment Promotion Law regulates various forms of investment: from entirely national or foreign-owned investments to joint ventures either through corporations or contracts between nationals and foreigners or between public and private enterprises. It also covers different types of investments: general (whether controlled – affecting national security, public order, national traditions, or the environment – or uncontrolled) or concessional (for developing and operating concessions for land, special economic zones, industrial processing zones for exports, mining, electricity production, aviation, etc.).
For more detailed information on investment opportunities in Laos and how to plan your entry into the Laotian market, you can contact us through the following link: contact us. This resource provides a comprehensive overview of key considerations when investing in Laos and can be helpful in gaining a better understanding of the country’s business environment.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
