OCTOBER 2018 ● MSMEs CONNECTION LAO PDR

Country Update Mapping of Sector in Lao PDR: Key Figures, Structure, and the Current National Regulations

Provided by

THE LAO HANDICRAFT ASSOCIATION (LHA)

www.laohandicraftassociation.com

and streams flow through from North to South. Data & Statistics The beauties of rivers are added by rapid, waterfall especially Khone fall islands, which Key Figures and Structure of the considered as “Jewel of ”. Lao PDR is Tourism Service Sector also located in the hub of Mekong sub-region, which serves as a link and transit point to five Lao PDR owns national, culture and historical neighboring countries. tourism sites in its own characteristics. The geographical location composed of plateau, At present, there are a total of 26 international plain, and mountainous areas. The climate is checkpoints. Tourists are able get visa on tropical, warm, cool and seasonally cold with arrival along the 13 checkpoints. There are now green forest cover of 41% of the total areas. three international airports in Vientiane Capital, This includes 20 national protected and Luang Prabang and Pakse. Visa exemption has biodiversity conservation areas, provincial and been granted for fifteen countries. Following the district protected areas, Limestone Mountains, order No.15/PM dated 20/06/2006, to replace splendid stalagmite and stalactite spreading 30-day arrival visa to 15-day arrival visa. throughout many different provincial and local areas. In additions, Lao PDR is a country with However, most of international checkpoints do rich water resources. There are many rivers not have proper management and it is unclear whether those international checkpoints are

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under which organizations. The collection of Source: The 8th Five-Year National Socio-Economic service fee is not the same, and very often they Development Plan (2016-2020) mostly do not follow the Prime Minister’s order In 2014, there were a total of 1,916 tourist No.12/PM, dated on 27/11/2002 on collection of attractions, of which, 1,093 are natural fee throughout the country. This is often leading attraction sites, 541 are cultural attraction sites to corruption. and 282 are historical attraction sites. The total The Lao Government has tried to develop attraction sites, 145 have already been infrastructure to serve tourism which was surveyed, of which 24 have already future assisted by many financial institutions and development concept. There are 2 world donor countries in the forms of grants and soft heritages and 20 national heritage sites. There loan such as the construction of roads; the are 368 travel agencies, 54 affiliated construction of Mekong bridges; improvement companies, 542 hotels with 21,597 rooms, and construction of access roads to tourism 1,907 guesthouses with 26,791 rooms, 1,744 sites, airports, electricity system, water supply, restaurants and 168 entertainment centers in telephone, etc. In additions, aviation links to 2015. tourist towns of each country have been Table 2: Number of Tourist Arrivals to developed. by Category, 2016-2017

The year 2015 is another remarkable year for BORDER PASS BORDER PASS PASSPORT TOTAL DAY STAY tourism in Laos as number of tourists arrival’ CATEGORY TRIPPE OVERNIG R HT increase was higher than in 13% in 2014 In 2017 2016 2017 2016 2017 2016 2017

Grand 611,992 496,228 1,184,1 1,108,2 3,054,8 2,760,6 4,239,0 3,868,8 general, while the total number of tourist Total 51 20 96 18 47 38 arrivals increased, the market share of tourists Internatio 681,29 525,09 681,29 525,09 nal Tourist 4 9 4 9 from long haul generating countries slightly Regional 611,992 496,228 1,184,1 1,108,2 2,373,6 2,235,5 3,557,7 3,343,7 decreased: Europe 4,64% (5,03% in 2014), the Tourist 51 20 02 19 53 39 506,114 337,409 949,53 843,52 1,060,0 954,28 2,009,6 1,797,8 6 3 69 0 05 03 America 1,90% (2,07% in 2014) and Africa and 20,895 31,343 69,441 52,238 928,95 839,40 998,40 891,64 9 5 0 3 Middle East 0,23% (0,21% in 2014).Visitors 84,053 126,080 162,87 210,13 370,34 429,05 533,21 639,18 4 3 2 2 6 5 from neighboring countries (ASEAN) 930 1,396 2,300 2,326 14,232 12,782 16,532 15,108 represented the largest number of tourists in Source: Tourism Development Department, Ministry of 2015 (3,588,533) or about 77% of the total Information, Culture and Tourism tourist arrivals, an increase of 11% over 2014. In the same way, international tourists, Table 3: Revenue from Tourism by considered the most important market for Lao Category, 2017 tourism, grew from 568,844 in 2014 to 643,062 AVERAGE NUMBER OF AVERAGE EXPENDITURE REVENUE FROM TOURIST CATEGORY LENGTH OF PER PERSON TOURISM IN 2017 in 2015 or about 13% of increase. It is important ARRIVALS STAY (DAYS) PER DAY (DOLLARS) (PERSON) (DOLLARS) to notice that the market share for European Total 3,868,838 5.2 52.11 648,067,008 and markets decreased from 5,03% to 4,64% International 525,099 8.39 76.6 337,467,475 and from 2,07% to 1,90% respectively. Tourist

Regional Tourist 3,343,739 310,599,533 Table 1: Number of Tourist Arrivals and Thai (Passport) 954,280 3 52 148,867,680 Revenue from Tourism Thai (Border pass) 843,523 1 20 16,870,460 Vietnam (Passport) 839,405 3 30 75,546450 DESCRIPTION UNIT 2011 2012 2013 2014 2015 (EST.) Vietnam (Day 52,238 1 12 626,856 Number of Perso 2,723,564 3,330,072 3,779,490 4,158,719 4,684,429 Tripper) tourist n China (Passport) 429,052 3 50 64,357,800 China (Day Tripper) 210,133 1 15 3,151,995 arrivals times Cambodia (Passport) 12,782 3 30 1,150,380 Applied % 7 7.2 8.4 7.9 13 Cambodia (Border 2,326 1 12 27,912 inflation pass) rate Revenue US$ 406,184,3 506,022,5 595,909,1 641,636,5 725,365,6 38 86 27 43 81 Source: Tourism Development Department, Ministry of

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Information, Culture and Tourism 1.7%, and the country is expected to attract 3,367,000 international tourist arrivals. Provide Information about the (types of Stakeholders involved in The strategy and promotion efforts of all Lao the value chain of Tourism Sector tourism stakeholders in Laos, as well as focused skill trainings contributed to a 13% (to 2.7 Million.) increase of arrivals, a 16% (to 595 In 1989, the National Tourism Company had Million USD) increase of revenues and a 17% been established as a unique travel company (to 8.4 days)2. during the time. In 1996, a joint-venture state- private company had been established. In the Provide Information/data about the later years, many state-private, and joint venture companies have been continually share of the Tourism Sector in your established. In 2006, there were total 85 units national exports of local tourism providers. Tourism businesses are preferably reserved for Lao nationals, but Tourism is one of the eight priority programs of the VIII Congress Resolution of the fifth the socio-economic development of the Lao National Assembly Members has adopted the government. Therefore, the Ministry of Tourism laws, which permits foreign countries Information, Culture and Tourism has set up the to invest in tourism sectors. Public National Tourism Strategy for the period 2015- management towards tourism is more efficient 2925, which is in line with the government and progressive. All issue related to the policy3. establishment of business operation shall be addressed at early stages including the Table 4: Revenue form Tourism Compared collection of fee and taxes to national budget to Major Exports 2013-201. Note : (Revenue in Millions of US Dollars ) and to Tourism Promotion Fund. The increased number of tourists has encouraged Lao society 2017 2016 2015 2014 2013 PRODUCT REVEN RAN REVEN RAN REVEN RAN REVEN RAN REVEN RAN to actively invest in tourism business. For UE K UE K UE K UE K UE K Tourism 648.0 4 724.1 4 725.3 3 641.6 2 595.9 2 instance, there are more improvement of Garments 182.23 6 88.8 6 199.3 6 219.5 6 232.7 5 Electricit 1,280. 3 940.7 3 495.5 4 596.1 3 592.3 3 hotels, guesthouses, and resorts; the extension y 3 Wood 48.6 8 39.0 7 144.6 7 159.9 7 83.5 7 of restaurants and entertainment places; Products development of tourism sites; souvenir Coffee 105.1 7 59.9 8 54.7 8 48.4 8 79.7 8 Agricultu 582.5 5 584.2 5 319.8 5 238.2 4 290.1 4 production; food production; transport, etc. In ral Products 2005, there were a total of 165 hotels with 5,974 Minerals 1,390. 1 1,314. 1 1,292. 1 1,325. 1 1,982. 1 rooms, 923 guesthouses and resorts with 9,854 5 0 4 2 0 Handicraf 3.20 9 0.97 9 2.1 9 5.3 9 0.94 9 rooms1. ts Other 1,295. 2 1,312. 2 917.2 2 237.6 5 133.0 6 Industries 0 1 Visitor exports are a key component of the direct contribution of Travel & Tourism. In 2017, Source: Ministry of Industry and Commerce Laos generated LAK6,233.5bn in visitor exports. In 2018, this is expected to grow by Provide information/data about the

1 Lao PDR Tourism Strategy 2006-2020 2 Source: SME in Laos GIZ’s challenges, approaches and http://www.tourismlaos.org/files/files/Lao%20PDR%20 achievements in the business enabling environment Tourism%20Strategy%202006- 3 Statistical Report on Tourism in Laos 2017, Ministry of 2020%20in%20English.pdf Information, Culture and Tourism, Access date 11/08/18 Tourism Development Department, Tourism Research Division.

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share of the Tourism sector in total compared to 2016. But the length they stay and employment, and numbers of job how much they spend per day are important measures. Looking at the number of visitor created in the last years if available days (the number of visitors multiplied by the average length of stay), the biggest market is At present tourism related activities have still the international visitors, comprising 34% of provided direct employment to 300,000 all visitor days. Taking average expenditure into persons. Such business development, as well account, the international visitor group is even as qualitative and quantitative tourism activities more significant, accounting for 50% of all have contributed for large towns to host estimated expenditure. International conferences efficiently. Under the leadership of the National Tourism Association, China accounts for 16.6% of all visitors and Lao hotel and restaurant Association at central 11% of estimated expenditure in 2017, level, as well as service groups of tourism compared to only 6.5% of visitors and 4% of sectors in many provinces have been expenditure five years ago. Visitors from South established to support and promote tourism. Korea had grown extremely quickly up to 2015, moderated in 2016, and have fallen slightly (- Travel & Tourism generated 114,000 jobs 1.6%) in 2017. Despite this, the overall market directly in 2017 (3.5% of total employment) and share of rose to 4.4% in 2017. this is forecast to fall by 0.6% in 2018 to 113,000 (3.4% of total employment). This Seasonality is important to consider in includes employment by hotels, travel agents, marketing Laos overseas and also for Tourism airlines and other passenger transportation and Hospitality business and even Immigration services (excluding commuter services). It also to plan their staff needs5. Lao PDR relies includes, for example, the activities of the heavily upon tourism from neighboring restaurant and leisure industries directly countries that tends to be low yield due to short supported by tourists4. lengths of stay and low per diem spend. 90% of Lao PDR’s tourism demand originates from Brief analysis on the basis of the Asian source markets, which is problematic above to bring out the importance, when compared with other GMS countries. The evolution and challenges being country also suffers from significant season shifts in demand. faced by the Tourism sector The lack of skilled local labor is also a barrier In 2016, there was a fall in overall number of for private sector investment in Lao PDR visitors, but this was driven by reduction in tourism services’ sector as it is extremely numbers from Thailand (-13%) and Vietnam (- difficult to secure qualified staff with the right 16%), while all other markets showed some balance of attitude, skills and work ethic. As a growth in 2016. In fact, excluding Thailand and consequence, tourism operators are forced to Vietnam, visitor numbers increased by 4.5% in import costly skilled technicians and managers 2016.However, in 2017 we see a drop in visitors from other countries. Barriers that render from every market, with the only exception human resources in tourism a major challenge, being China, with a 17.2% increase in visitors include: poor reputation of tourism sector as a

4https://www.wttc.org/-/media/files/reports/economic- Tourism Development Department, impact-research/countries-2018/laos2018.pdf Tourism Research Division. 5 Statistical Report on Tourism in Laos 2017, Ministry of Information, Culture and Tourism,

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career path; outdated curricula and learning sector such as: platforms; limited practical experience of instructors; a shortage of English and other Law on Tourism “this Law determines the foreign language ability; and an absence of principles, regulations and measures on the culture of entrepreneurialism. establishment, activities and administration of tourism, with the aims to promoter, develop and Despite generation the lowest per visitor extend cultural, historical, and nature tourism in expenditure in the GMS, Lao PDR is sustainable ways, to transform into a modern considered expensive by leading international tourism industry, to contribute to national tour operators. This is particularly evident when protection and development, and to promote Lao PDR is featured in multi-country tour mutual understanding, peace, friendship, and packages that include other GMS countries. cooperation in international development” 7. The suspected reasons for Lao PDR being comparatively expensive include high costs of Law on Small and Medium Enterprise imports for tourism supplies such as food and Promotion “This Law defines principles, equipment, high labor costs, inefficient regulations and measures regarding the operations, weak management capacity and domestic and foreign investment promotion and sharp seasonality. administration in order to enable convenient, expeditious, transparent and proper While tourism is touted as leading source of investments, as protected by the Government, export for Lao PDR, there is a distinct lack of aiming to ensure the rights and benefits of sectoral leadership, causing ministries, investors, the state, collective and people, government departments, development enabling the regional and international partners and the private sector to operate in a integration, contributing to the continuous very compartmentalized manner. Considering growth of national social-economic the fragmented and complex nature of tourism, development in line with green direction and a multi-stakeholder approach that considers sustainability”. respective core competencies is essential. This requires leadership from the highest levels of Law on Hygiene, Disease Prevention and government that transcends real and perceived Health Promotion “This Law has the function administrative and communication barriers to determine the principles, regulations and between public sector institutions, industry and measures relating to the organization of development partners6. activities on hygiene, disease prevention and health promotion to maintain the good health, quality of life and longevity of the people thus Status of the National contributing to national preservation and Regulations for the development. Tourism Sector This set of national laws have different objectives, to support the development of the tourism sector: Lao Government has developed some laws supporting the development of the tourism Promote public and private investment for focal and complete cycle tourist product

6 Position Paper on Barriers to Tourism Development in 7 Law on Tourism () Lao PDR. Improving the Business Environment http://www.na.gov.la/files/laws/60%20ກົ ດໝາຍວ່ າດ້ ວ Through Constructive Dialogue. Lao Business Forum ຍ%20ການທ່ ອງທ່ ຽວ.pdf

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development. services to both domestic and international tourists, all hotels, eating houses, restaurants, Improve the quality of tourist sites, conduct a cafeterias and food court centers need to survey and plan tourist site redevelopment in upgrade their own infrastructure and services. line with the national tourist directions, to create The improvement process included the more investment opportunities for the public provision of clean and safe food and also and private sector. ensuring the wellness of the customers’ health as well as to upgrading the Lao food quality to Concentrate on developing and renovating meet Asian and international food standards. tourist site facilities to international standards Currently some types of food can be and to yield local uniqueness. contaminated with various types of diseases such as parasites, toxics and contamination by Broaden and promote the call for more dirty substances. Beside this, the food domestic and foreign investors to invest in the processing and food service by some tourist sector. restaurants are still below standards, which, Monitor and encourage business units to affects customers’ health and also create regularly contribute to tourism fund. negative consequences for such service and business sectors. So in order to protect the Support and promote the sectors surrounding customers and prevent or avoid such above tourism to actively contribute to and participate mentioned impacts, which might be occurred. in developing and promoting tourism. Therefore, the Department of Tourism Management, Ministry of Information, Culture Assign tourism diplomats and representatives and Tourism has created the regulation on to target countries to promote Laos tourism. “Clean and Safe Restaurants Service Standard in Lao PDR” to be Standard to identify some Raise the ’s awareness of criteria and issues on clean and safe restaurant conserving their unique and proud traditions service standards for implementation by and culture. concerned business sectors and related individual service providers. The standards are Promote local administrative authorities to designed based on ASEAN food and beverage organize functions and tourist activities, such as services standards, including the design and ethnic minorities’ cultural fairs, local traditions construction of food premises, facilities, food fairs and other important functions, to and utensils storage, food processing, food communicate their unique culture and local way disposal, health and hygiene of food handlers, of life to Lao and foreign people so that they will cleanliness, maintenance and service quality know and perceive ideas to visit various places levels and the sanitation instructions of the in Lao PDR. Ministry of Health. There are other plans and regulations The clean and safe restaurant service specific to tourism services that have been standards will be used with the food and put in place by the Lao government. As the beverage service business units, both tourism sector has grown sequentially and the individual and private sectors, throughout the number of tourists increasing continuously, the country, for instance eating houses, National Socio-economic Development Plan by restaurants, food gardens, and cafeterias with the government of Lao PDR is designed to take proper business licenses from concerned tourist activities as a priority sector for authorities which clearly identify the levels of promoting the socio-economic development of management (central and local levels) and Lao PDR to ensure provision and facilitation of hotels, entertainment venues and tourism sites

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that provides food and drinks services8. food activities and business aiming to promote and ensure the food quality, standard and Developing tourist areas for clean, beautiful safety in order to protect consumers’ health and and environmentally friendly services as well as life, facilitate fair practices and food trade; improving hotel and restaurant services; additionally, to promote the development and improve and upgrade tourist sites and tourist growth of food businesses; and to comply with guidance for better quality and diversification the requirements of international economic linked with handicraft and architecture integration framework”. production to meet tourists’ needs as well as to generate income for the people and the Decision on Shopping Centers and Department country. Stores: “This Decision determines the principles, regulations and measures on the Further regulations supporting/managing establishment, operations, and management of tourism services are as below: shopping centers and department stores in order to ensure that the operation of shopping National Food Safety Policy: “The Policy serves centers and department stores businesses is as a reference for implementing the control and consistent with the relevant laws and management of quality and safety of food in regulations with the aim of guaranteeing the fair Lao PDR, throughout the food chain, including interests of the government, business units and the growth cultivation, rearing, processing, consumers and contributing to the development service, industrial production, storage, of the national socio-economy”. purchase, transportation, importation- exportation, and distribution to the point of consumption, and international technical cooperation and scientific research. It is necessary to establish an integrated national food safety policy that is coherent with other aspects of government policy in a new period of socio-economic development”.

Ministerial Regulation on the basic Principles in the Application of Sanitary and Technical Measures for the Food Safety Management: “This Regulation stipulates the basic principles and methodologies for the application of Sanitary and Technical Measures to conduct management, inspection and monitoring of

8 Clean and Safe Restaurants Service Standard in Lao Department of Tourism Management, PDR, Ministry of Information, Culture and Tourism.

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Annex

CONTACT PERSONS/ORGANIZATIONS

1) LAO HANDICRAFT ASSOCIATION KAYSONE AVENUE, BAN PHONEPHANAO, SEYSETHA DISTRICT,VIENTIANE, LAO P.D.R. P.O.BOX: 8304, TEL: +856 21 452 956, FAX: +856 21 453 673, E-mail: [email protected], http://www.laohandicraftassociation.com

2) SME SERVICE CENTER (SSC) Kaysone Phomvihane Ave, Ban Phonphanao, Saysettha District, Vientiane Capital, Lao PDR. P.O.Box: 4596 Tel: (856-21) 416 267 Fax: (856-21) 720456 Email: [email protected]

3) MINISTRY OF INFORMATION, CULTURE AND TOURISM, TOURISM DEVELOPMENT DEPARTMENT HEAD OFFICE: LANE XANG AVENUE VIENTIANE CAPITAL, LAO PDR. P.O.BOX: 3556 TEL: (856 21) 212 251, 212 769, 252 961. FAX: (856 21) 217 910. WEBSITE: HTTP://WWW.TOURISMLAOS.ORG HTTP://WWW.ECOTOURISLAOS.COM HTTP://WWW.LAOTOURISMDEVELOPMENT.COM

4) MINISTRY OF INFORMATION, CULTURE AND TOURISM, TOURIST INFORMATION CENTER LANE XANG AVENUE, VIENTIANE TEL: (856 21) 212 248

5) MINISTRY OF COMMERCE AND INDUSTRY. PHON XAY RD, XAYSETTHA DISTRICT, VIENTIANE CAPITAL, LAOS P.O.Box 4107

Tel: +856 21 452 453

6) MINISTRY OF PLANNING AND INVESTMENT SOUPHANOUVONG AVENUE TEL: +856 21 254 826

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CUTS International, Geneva © 2018. CUTS International, Geneva.

This country update note is authored by The Lao CUTS International, Geneva is a non-profit NGO National Chamber of Commerce and Industry that catalyses the pro-trade, pro-equity voices of (LNCCI). CUTS’ country updates aim to inform the Global South in international trade and negotiators and policy makers about stakeholders’ development debates in Geneva. We and our perspectives on the ground related to a particular sister CUTS organizations in , Kenya, Zambia, issue. Readers are encouraged to quote or reproduce Vietnam, and Ghana have made our footprints in material from this paper for their own use, provided the realm of economic governance across the due acknowledgement of the source is made. developing world.

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GENEVA MSMEs CONNECTION INITIATIVE The Geneva MSMEs Connection Initiative aims to link micro, small & medium The Geneva MSMEs Connection Initiative is undertaken with enterprises (MSMEs) in South and Southeast Asia to the multilateral trading funding support from the Australian Aid agency (Australian system. Web: http://www.cuts-geneva.org/WTOForum(SSEA).html#view3 government).

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