Laos Market Entry

Laos Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

With regard to local customs, it is clearly advisable to recommend the use of local representatives who know the domestic market and environment for the sale of Czech goods (or services). As part of the process of gradual liberalization of trade in Laos, a partner of Czech companies can be a private or a state-owned Lao company, as well as a joint venture with foreign participation.

For the entry of Czech companies into the Lao market, it is possible to warmly recommend cooperation especially with Thai companies that are already established in Laos, have rich historical experience and functional business contacts.

All export and import operations are governed by the rules of the Ministry of Industry and Trade for export and import (Export and Import Regulation), the Customs Act and the rules for currency and foreign exchange operations. All business operations (export, import, investment) can only be carried out by companies registered under the Business Operations Act. Every export and import operation requires the granting of an export or import permit. For export operations, the state carries out export inspection in some special cases. An import permit (license) is usually valid for three months.

According to cheeroutdoor.com, Lao legislation distinguishes three groups of imported/exported goods: promoted, controlled and prohibited.

Imported goods:

  1. Supported imported goods are machinery and equipment for the construction of basic economic infrastructure and production equipment.
  2. Controlled imported goods are practically all goods not falling into categories “1” and “3”.
  3. Prohibited imported goods are, according to the decree of the Ministry of Industry and Trade, all goods subordinate to the categories of military equipment, drugs, toxic chemicals, dangerous industrial products and objects with offensive content.

Balanced goods:

The export ban applies to weapons, ammunition, explosives, antiques, drugs, toxic chemicals, rare wild animals. The export of certain types of goods is controlled through export quotas and authorizations. This is primarily wood (construction, lumber, logs).

During customs clearance for both export and import, the goods must be placed in a customs warehouse until all formalities are completed. The Ministry of Finance and its Customs Department are responsible for determining and collecting customs duties and fees.

More detailed information on the import and export of goods from Laos can be obtained on the website of the Lao Customs Administration.

Forms and conditions of operation on the market

In accordance with the Investment Promotion Law, a foreign investor may establish in Laos:

  1. a) joint venture with a Lao entity (state or private, where the foreign partner must have a share of at least 30% of the entire investment)
  2. b) an enterprise fully owned by a foreign investor (a completely new company, a branch of the parent company = so-called branch office, representative office).

The memorandum of association must have a clause on compliance with Lao law and must be approved by the Foreign Investment Management Committee (FIMC). He will issue a license within 60 days of receiving the application to establish a business; the foreign investor must then register the company within 90 days after the license is issued. FIMC coordinates the approval process with other Lao institutions (eg Ministry of Commerce, Agriculture, etc.).

A foreign investor is allowed to lease land, the state does not influence the management of the company and guarantees that foreign investments cannot be nationalized or confiscated in the public interest (however, this could change following the considered changes in the Land Act). A foreign investor is allowed to employ foreign skilled labor and is allowed to remit income and profits abroad (through Lao banks). Profit tax is paid to the Lao authorities according to the applicable tax law.

In 1994, the Business Law was approved, which applies to both Laotian and foreign enterprises. The law distinguishes 4 types of enterprises: private, state, collective and joint enterprises (Lao state with private or foreign and Lao state or private enterprises). The state controls business in some areas with regard to the country’s security and economic interests. These are petrochemicals, electricity production, water supply, telecommunications, wood processing industry, mining industry, food industry, healthcare, chemical production and alcohol and cigarette production. A special regulation establishes areas of business exclusively for Lao nationals.

In addition to state and collective (ie de facto cooperative) enterprises, there are private enterprises in Laos. Private enterprises can take the following forms: 1) a sole trade enterprise (sole trade enterprise, it can be created by one person, the minimum registered capital is 1 million LAK) and 2) a company in the form of: partnership, limited liability company or public company (this form requires at least 7 shareholders).

Marketing and communication

The development of this service sector is not at a level comparable to, for example, Thailand or other more developed countries in Southeast Asia. For promotional and advertising purposes, it is possible to use advertising in the local press or advertising shots on television and radio.

Since most of those who own a TV in Laos watch Thai TV programs, it is also worth considering a TV advertising campaign in Thailand to promote products in Laos.

Contacts for the main Lao publications that can be used for product promotion:

Vientiane Times (in English, French)

The Laotian Times (in English)

Pasaxon (in Lao)

Lao News Agency (in English, French)

Issues of intellectual property protection

As in other poorer developing countries, it is to be expected that the enforcement rate in the area of ​​intellectual property will be low and will require a lengthy and costly legal process.

Public procurement market

According to the law, all public contracts must go through a public tender. Tenders are usually published in the local press or available from the relevant line ministries.

Payment terms, payment ethics and resolution of commercial disputes

The local legislative system is used to resolve commercial disputes. The Law on Investment Promotion allows for the possibility of settling a dispute by arbitration in the country of the foreign investor or at an independent international institution. The law has been amended several times in the past. Information on investment opportunities in Laos can also be found on the official website of the Lao Ministry of Planning and Investment.

Economic cooperation with Laos is greatly affected by the lack of liquid funds. The private sector favors the creation of joint ventures, where the foreign partner contributes technology and capital and the Lao partner contributes land, buildings, etc. The practical enforcement of law is very complex and it is a long-term and demanding process.

The usual terms of payment include a letter of credit. Due to the difficult economic situation in the country and the insolvency of both the private and often also the state business sphere, it is necessary to recommend caution when negotiating payment terms and to demand the greatest possible protection in terms of certainty of payment.

Laos Market Entry