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PRICE Issue #01 3 US$ 4th quarter 2013 Content

Editorial Issue #01 — 4th quarter 2013 3 ECCIL events of the president of ECCIL 3 #Tweets from Members /MWZOM*MZVIZL;PI__I[[IaQVO 4 Infrastructure \PI\®

2 ECCIL Newsletter ECCIL Events Presentation of Laos for the Nordic Business Community in Bangkok ECCIL and FinPro organized a Breakfast Seminar on Business & Investment opportunities in Lao PDR on16th October 2013 in Bangkok. During the event which was attended by about 45 people including H.E. Ms. Kirsti Westphalen, Finnish Ambassador to . Dr. Ramon Bruesseler, Executive Director of ECCIL, gave a presentation about the economic situation in Laos and the legal framework for doing business. © ECCIL Speakers and panel lists Second row (from left to right): Kai Tuorila, Director of the Thai-Finnish Chamber of Commerce; Christopher Bruton, Director for Thailand and Indochina of Dataconsult; Kirsti Westpahlen, Finnish Ambassador to Thailand; Dr. Ramon Bruesseler, Executive Director of ECCIL; Gustaf Godenhielm, Managing Director of Thai Biogas Energy. First row: Christer Nyman, Chief Technical advisor of EEP RCU; Olivier de Peyrelongue, Treasurer of ECCIL; Gerard Malledant, Project Director Essilor Lao

Seminar on the ASEAN Economic Community ECCIL organized a seminar on AEC in cooperation with the ANZBA and AMCHAM, on October 14, 2013. The event was supported by GIZ, and was attended by about 70 people.

Guy Apovy, president of ECCIL,

opens the seminar © ECCIL

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Issue # 01 3 Infrastructure

Two mega railway lines will also o"er access to Thailand’s China. The 420 km track would planned developed highway system and require burrowing 76 tunnels The Lao government plans to build nearby airports. Before laun- and construction of 152 bridges a massive 420 km high-speed ching construction the Malaysian –representing two-thirds of the railway from the Chinese border construction company Giant needs entire route– plus two extra to Vientiane, and a 220 km high- to carry out a project design study. crossings to traverse the Mekong speed railway linking Lao Bao New Zealand !nancial institution River. The project amounts 86% on the Vietnamese border with Rich Banco Berhad agreed in April of Laos’ annual $8.3 billion GDP, Savannakhet on the Thai border. to provide a U.S. $5 billion loan to estimated annual interests are Giant to fund the construction. about $3 billion (calculated by Construction of the railway, which 2% per annum compounded over runs from Savannakhet City in the Laos is currently negotiating to 30 years). east to the border town of Lao borrow U.S. $7.2 billion from China’s Laos’ current rail system consists of Bao in the west with an onward Export-Import Bank to fund a second a 3.5 km link over the Mekong River link to ’s Danang port city, planned rail line project linking the between Vientiane and Thailand’s is expected to take four years. It capital Vientiane to southwestern Nongkhai.

Two new Mekong Bridges Khai, Savannakhet/Mukdahan and 3G and Internet availability soon to be opened Thakhek/Nakhon Phanom, currently According to a government report A new 620 m bridge over the span the Mekong connecting Laos mentioned in the Vientiane Times, Mekong is connecting Xayabouri and Thailand. 3G mobile phone signal covers all and Luang Prabang Provinces. The the country’s provinces, and 110 of construction works commenced Laos requires more skilled the total 147 districts receive the in 2009, the project was made workers signal. The proceeding 3G expansion possible with loans from South The actual number of 20,000 results from competition among the Korea. workers from abroad has to be telecommunications companies. At The fourth Lao Thai Friendship more than tripled to meet the present, the four competitors Lao Bridge linking Bokeo with Chiang business requirements for a Telecom, Unitel, Enterprise of Lao Rai and China (Yunnan) has been skilled labor force. Labor Minister, Telecommunication and Beeline under construction since 2010. The Onechanh Thammavong stated, are operating. US$44.8 million-project is jointly that the country requires at least Customers complain that the funded by Laos and Thailand, with 70,000 more foreign workers. To internet signal is still weak compared China laying the !nancial basement keep up with the future domestic to 3G services in other countries. In for Laos with US$ 20 million in labor force requests and to be at 2012, 93,200 boadband internet grant aid. The two-lane bridge is eye level with competitiors, Lao subscribers were registered in Laos, 680m long and is said to open soon. workers need to gain more skills having more than doubled the 2011 Three bridges, Vientiane/Nong through education and training. !gures with 41,719 subscriptions. in Brief… THE GOVERNMENT PLANS to amend the under the conditions outlined September that due to tax incentives, existing labour law. The current in article 5 of the Guideline on the poor !nancial management and draft is signi!cantly longer than the implementation of the Executive illicit practices the government existing labour law. Controversial Decree on Management of Foreign misses out on 165 million USD in points are, among others, limits on Exchange and Precious Metal. The the !scal year 2012/13. The reason the duration foreign employees are guideline dates from April 2010. might be a remarkable shortage of hard currency. allowed to work in Laos, as well as severance payments to employees A NEW VAT LAW is in the making. It is THE AVERAGE LAO RESIDENT consumes who give in notice. not yet clear in how far the export according to a study of WHO of services will be subject to VAT. almost 7 liters of alcohol per year IN AUGUST 2013 the Bank of Lao – allegedly a record among the instructed the banks that the THE MINISTER OF FINANCE stated during ASEAN countries but a far cry from exchange of more than 20 million LAK the annual government meeting the Moldovans who down more into foreign currency is only allowed with provincial governors end of than 18 liters. 4 ECCIL Newsletter Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Together for a better Business Environment Private and public sector stakeholders join together to overcome barriers for an enabling business environment in Luang Prabang and Champassak.

As Lao companies are expanding private and the public sector. a single travel pass for all tourist signi!cantly and the country PPPD is used as an instrument sites in Luang Prabang has been integrates further into the to foster the private sector suggested and studies analysed regional and the world economy development in Lao PDR. the potential. the economic environment In the context of a successful becomes more competitive. PPPD, stakeholders from both Platforms Lao PDR’s economic context has sides, private and public jointly The PPPD sessions form the undergone profound changes discuss solutions, to tackle foundation for mutual trust- since 1986 with the beginning pressing challenges for areas, building and have numerous of the transition from a planned- where stakeholders from both bene!ts to improve communi- economy to a market-based –the public and the private side cation between the public and economy with gradual reforms. work together. Via interactive the private sector. Not only is Therefore it is essential that working groups the private it a platform to raise issues and experiences and barriers are sector stakeholders analyze, constraints to enhance the discussed, analyzed and solu- discuss, and identify common dialogue between both Public tions are found. issues and joint milestones and Private Sector, but it is before bringing them to the also a platform of exchange to Transparency and participation attention of the public sector. improve business operations To enhance the domestic eco- The local ministry departments and regulations, in particular to nomy, dialogue takes an essential have established a steering prepare for the integration of Lao role for both public and private structure and institutions for PDR into the ASEAN Economic sector. In order to do so, the the conceptual development, Community (AEC) and World GIZ-HRDME (Human Resource planning, implementation and Trade Organisation (WTO). Development for a Market evaluation of PPPD. Economy) program together The last PPPD sessions were held with the Ministry of Planning Facilitation in October 2012 in Champassak and Investment (MPI), the Lao In both Luang Prabang and Province and in January 2013 National Chamber of Commerce Champassak private sector in Luang Prabang Province. and Industry (LNCCI) and the stakeholders face similar issues Since then further discussions Provincial Chambers support concerning: tourism facilitation, have led to the formation “Provincial Public Private taxes, trade (especially with fo- of new Committees so that Dialogue (PPPD)” in two stra- reign companies) and construc- the private sector can work tegic provinces (Champassak tion. E"orts are made by both more focused on the issues and Luang Prabang). PPPD is a sides and solutions can be found concerning the relevant sectors. platform that seeks to improve within the PPPD framework. The Committees and Working the provincial business and One typical issue raised in Groups are currently discussing investment climate through the PPPD session regards the more details and are preparing a structured, transparent and restructuring and facilitation of the next PPPD sessions in both highly participatory dialogue tourist sites in order to generate provinces for November 2013. between representatives of the higher revenues. In this context KIRSTEN FOCKEN, Senior Advisor, GIZ

Issue # 01 5 World Bank Business Environment in the Lao PDR Some findings from the World Bank’s new Investment Climate Assessment.

The World Bank undertakes Most signi!cant investment climate constraints in Lao PDR periodic Investment Climate Assessments throughout deve- loping countries as part of e"orts to provide policymakers with a better understanding of how the private sector is performing in a particular country and where the principle constraints to increased private sector investment are to be found. These assessments are informed principally by enter- prise surveys that follow a standardized approach and are conducted with the objective of providing detailed information on !rm-level performance and constraints. So far, enterprise surveys have been conducted in more than 135 di"erent

countries and capturing data Source: from over 130,000 individual World Bank Enterprise Survey for Lao PDR businesses. 2009 and 2012

This article presents some high- lights from the forthcoming new Investment Climate Asses- sment for Lao PDR, based on an enterprise survey under- taken across Lao PDR for the World Bank in late 2012. The survey in 2009, allowing for the biggest constraint that survey covered nearly 400 comparisons to be made over they face (see graph). This is formal private !rms across six time. an increase from the last time provinces, including small, the survey was conducted medium-sized and large !rms. An “inadequately educated in 2009, when 16 percent Half of the businesses surveyed workforce” was ranked as of managers identi!ed were in manufacturing and the top constraint by !rms workforce education as the top half in services and the sample in Lao PDR. Some 21 percent constraint, and suggests that included both domestic and of managers interviewed skills is increasingly a binding foreign owned !rms. The during the 2012 survey said constraint to further economic survey also includes businesses that weak skills and poorly development in Lao PDR. interviewed during the previous educated workers represented 6 ECCIL Newsletter Access to !nance has been the informal sector, suggesting tax administration and other one of the top constraints to frustration with competitor regulatory requirements in business expansion in Lao PDR !rms that are able to avoid order to reduce compliance for several years, but slightly tax or other costly regulatory costs for the private sector. fewer !rms reported this requirements. Similarly, there Other key constraints iden- as being the top constraint was a large increase in 2012 tified by managers of busi- in the most recent survey in the share of !rms reporting nesses operating in Lao PDR compared to in previous years. tax administration as being a included infrastructure related In 2012, around 16 percent major constraint compared to challenges (such as cost and of managers indicated that in the 2009 survey. In contrast, reliability of transport and access to !nance was the most managers in 2012 were less electricity), regulatory costs signi!cant obstacle to business likely to report tax rates as (such as business licensing and development, a reduction on the being a key constraint, in permits), access to land and level recorded in 2009. This may line with recent reductions in corruption. well re$ect the rapid growth in corporate income tax rates. RICHARD RECORD the Lao banking sector that has Exporting !rms, particularly Senior Economist occurred over recent years with manufacturers, appear to su"er in the World Bank o"ce Vientiane large increases in the volume of from a high burden when credit extended to the domestic dealing with the transactions The new Investment Climate Assessment private sector. Nevertheless, costs of tax administration, for Lao PDR will be available to the access to longer term !nance, licensing, customs and business public by early 2014. Data from the World Bank’s enterprise particularly for SMEs, remains a regulations. This suggests survey is already available online at key concern. that the challenge for the Lao www.enterprisesurveys.org Firms also reported damaging authorities is to improve the More information competition from businesses in e%ciency and transparency of http://www.worldbank.org/en/country/lao

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Issue # 01 7 KPMG Investment Environment in Laos

The Lao People’s Democratic Republic used to be known as the Kingdom of a Million Elephants. However in recent times it would be truer to call it the Kingdom of a Million Opportunities…

With a youthful population (60% tons), 61% (206,240 ounces) Natural Resources 25 years old or younger1), largely and 15% (616,680 ounces), The Lao PDR is rich in natural untouched natural resources respectively4. Other products resources: forests, water and and a country which is working mined include limestone, minerals. Despite the growth to meet the United Nations’ potash, tin and sapphires; there noted above, these resources still Millennium Development Goals, are also deposits of zinc, lead, remain mostly untapped, giving there is much to explore. iron and manganese that remain businesses an opportunity to In the last few years, there has largely untapped. start fresh activities. However, in been considerable economic, mid-2012, the Lao government social and international deve- Agriculture issued a four-year moratorium lopment. GDP growth in the last Agroforestry contributed more for new mining projects, in decade has averaged around 7%. than 25% of the country’s GDP order to consider and resolve In the last three years, the Lao in 2012 and is also the biggest environmental and social PDR saw its !rst stock exchange employer, with more than half concerns regarding the use of start operations, was admitted of the country’s workforce5. agricultural land. to the World Trade Organization Most agriculture is subsistence (WTO), and successfully hosted farming, but there are also a Central Location the Asia-Europe Meeting. number of successful cash crops: Laos has faced di%culties in the cassava, co"ee, silk, tobacco, past as a landlocked country. The four major sectors which eucalyptus, etc. However, with the growth of have contributed to the growth communications between its of the economy are: Tourism neighbours, especially Thailand, According to the Lao National Vietnam and China, the Lao Hydropower Tourism Administration, the PDR is gradually changing into Laos has bene!ted from its number of visitors has doubled a land-linked country. Links natural resources and the rapidly since 2008, to 3.3 million in 2012. between Thailand and Vietnam, developing industrial economy These visitors contributed USD via the East-West Corridor, and of its neighbours: approximately 500 million to the economy. between Thailand and China are 70% of its total hydropower is generating increased business exported, mainly to Thailand2. Advantages of business activities; Savannakhet province In the last !ve years hydropower in the Lao PDR is becoming a hub for trade and output has grown from 3.7 to Businesses in Laos have a services in the Greater Mekong 13.8 billion kilowatt-hours3. number of inherent advantages Sub-Region. in their favour: Mining By the end of 2012 investment 2008 2009 2010 2011 2012 in the mining sector reached Number of tourist arrivals USD 271 million. The Asian 1.7 2.0 2.5 2.7 3.3 (Millions) Development Bank reported that output of copper, gold and Revenue from tourism 275.5 267.7 381.7 424.4 500 silver increased by 8%, (149,500 (USD million) 8 ECCIL Newsletter International Organisations addition, Laos is decentralized, Conclusion The Lao PDR is a member of and provincial authorities often The Lao government is aware of the ASEAN, which is scheduled have autonomy in interpreting the problems and knows that to develop a single regional laws. As a result it is common to it has to address its social and economic union, the ASEAN observe di"erent applications of economic issues and to identify Economic Community (AEC), in a a law by di"erent organizations. how best to make use of the few years. In 2012, the Lao PDR country’s natural resources. also obtained membership of Labour shortages Some steps are being taken to the WTO, which will enable the Laos is thinly populated, with clarify the legal framework but country to trade and transport only 6.5 million people in a the pace remains slow. In short, goods across borders. land area of 236,800 square the possibilities remain very kilometers7. Moreover, the attractive; but the di%culties in Challenges faced by business country is facing di%culties in making full use of them remain Whilst there are big education at all levels: although challenging. Investors need to opportunities, business also 98% of children enroll in primary take a long term view and focus have to overcome some school, only 70% complete on those sectors where there are challenges. In the most recent primary education. As a result real opportunities. Doing Business report by The there is an acute shortage of MARK JEROME World Bank and International both skilled and unskilled labour Partner KPMG Co. Ltd., Laos Finance Corporation, the Lao in the country. Disclaimer PDR was ranked 163rd out of 185 The information contained herein is of a countries6. Whilst this is a slight Infrastructure general nature and is not intended to address improvement on the previous Most of the country is the circumstances of any particular individual or entity. Although we endeavor to provide year, when it was ranked 166th, mountainous and lacks adequate accurate and timely information, there can it is the lowest ranking given in infrastructure. There is no railway be no guarantee that such information is the East Asia and Paci!c region system in the country except for accurate as of the date it is received or that apart from Timor Leste. So what a short link connecting Vientiane it will continue to be accurate in the future. No one should act on such information are the main problems facing and Thailand. The roads which without appropriate professional advice after businesses? connect the major cities have a thorough examination of the particular been improved in recent years, situation. Administration of laws but connections to remote areas Many of the laws in the Lao PDR remain poor. Furthermore, the 1.UNFPA Lao PDR, 2013 2; 3; 4; 5. ADB, 2013 follow international standards; telecommunication system 6. The World Bank and International however, there are a number of in the country operates on a Finance Corporation, 2013) gaps, especially in the guidelines limited scale and is still being 7. Government of Lao PDR on their implementation. In developed. and UN, 2013

A useful handbook & a responsive companion website

• Introduction to the Lao PDR • Legal framework summary • Business environment overview • Guide to Local networks • Information on ECCIL

• Regular updates • Useful documents • Responsive layout • Free for Guide buyers

Issue # 01 On sale at ECCIL office and selected bookshops 9 Banque Franco-Lao Access to Finance in Laos For most businesses in Lao PDR, both large and small, the thought of financing a business with a Bank Loan can be overwhelming…

You have heard rumours about more e"ective way. Businesses itself. The loan assessment piles of paperwork. But it need to build credit in order to process is mainly concentrate does not have to be a di%cult prove its creditworthiness. on detail review on the process if you prepare yourself, company past performance things can go smoothly from Who can apply for a loan? via the study of the company the start. Particularly at BFL, In Laos P.D.R, business that is !nancial statements, business our Relationship Managers formally registered in all sectors plan, the management. In any are here to assist perspective with the legitimate licensing will loan application process, our borrowers. In this article, we take be eligible to apply for the loan. Relationship Manager will visit the opportunity to outline the the customers’ business on key process and answer some Perspective customers that wish site, interviewing key senior of the most common questions to apply for loan through BFL management to gain the better our team have had dealing with would require preparing the insight of the company and the both existing and perspective main documentations as per industry. Hence, collateral such borrowers. below: as land and house which is the • Business Plan main common requirement for Do you need a loan? • Financial Statements virtually all the banks in Lao P.D.R This may seem a simple • Company Structures and is considered less signi!cant question for those who are in Details (including history) at BFL. At BFL, collateral can be need of fund to expand their • Loan Request Proposal expanded items such as inventor business. Nonetheless, for many • Collateral Proposal Details. and machinery. Nonetheless, businesses who have fund their having good business in business through retained Collateral Requirement combination with strong quality earnings/personal savings/ Collateral is considered one of collateral will result in better equity obtaining the loan in small the most factors in Laos P.D.R pricing for the loan application. scale for instance is considered banking system. However, at bene!cial, mainly for leverage BFL, collateral such as land and Loan application timeframe purpose. The need to build the house is not considered the Averagely at BFL, our loan credit history with Laos banks main requirement for the loan approval/disapproval decision is will also allow lenders (in general) application. BFL approach to averaged at 2 weeks and in case to be able to objectively assess business !nancing in Laos is to of the loans being approved, the perspectives clients in a much mainly focus on the business perspective clients would be

The Process of the Applying for Loan in Laos

Loan Initial Credit Committee Communication Application Review Review to customer • Business Licence • Customers Interview • Loan Proposal • Decision • Financial Statements • Credit Histroy Check • Review communicted to clients • Business Plan • Initial Loan Assessment • Loan decision made • Contract Preparation • Organization Structure • Internal Loan Proposal • Contract Finalization • Loan Request Proposal • Collateral Inspection • Loan Disbursed

10 ECCIL Newsletter able to draw down the loan 2 to USD/THB is lower than LAK, Maximum Loan Approval Fee 3 weeks after the decision date accordingly the pricing in USD/ 1.25% 10% to 15% LAK Max. of 5 years (this is largely depending on the THB will be lower. USD 1.25% 8% to 12% legal process). Max. of 10 years 8% to 12% It is important to note that at BFL, Pricing THB 1.25% Max. of 7 years our Relationship Manager will BFL policy in pricing is be in contact with perspective largely depending on the risk Manager that responsible clients on the regular basis to assessment process. Strong for customer’s services and ensure that perspective clients’ company !nancial performance interaction. Our corporate business are not being adversely in the growing industry combine Relationship Manager is well impacted. with the quality collateral will trained and well equipped with generally result in the lowest industry knowledge. Our Loan for brand new company interest and $exibility of the Relationship Manager is not Generally, we are looking for loan terms. Based on our loan only the main point of contact company who has !nancial portfolio the below is our but also able to advise our history of at least 3 years this average pricing in each of the perspective clients on loan include overseas company that currency loan. structuring, legal related issues has strong track record and and more importantly be at expanding the business into BFL Relationship Manager every step with our customers Laos. The key approach to our business to further build their business in in Laos is our Relationship Laos PDR. Loan in LAK or foreign currency Type of Loan This is largely depending on the clients’ income – if it is in LAK it Overdraft Short Term Long Term is highly advisable for loan to be Loan Loan in LAK. Nonetheless, for those who earn • One year Review • Maximum One Year • Up to 10 years term and Renewable Non-renewable • Interest Monthly income in foreign currencies • Interest rate • Interest paid monthly and Principle Monthly, such as USD or THB can have the paid monthly • Suitable for short term Quarterly, Semi Annual option to also take out loan in • Suitable for working project work or Yearly capital requirement • Suitable for fix corresponding currency. asset investment As the cost of funding in

Up & Coming Events

> Nov. 7 Investment Conference jointly organized by ECCIL and the European Chamber of Commerce in , Cambodia > Nov. 13 – 15 EBO Worldwide Network Meeting , > Nov. 21 – 22 Reception of Vietnamese Business Delegation, Vientiane, Lao PDR jointly organized by ECCIL and Eurocham Vietnam > Nov. 25 – 30 Les Rendez-vous de Vientiane Vientiane, Lao PDR > Dec. 13 Launch of the ECCIL Investment Guide Vientiane, Lao PDR > December * Launch of Salary Study Vientiane, Lao PDR > December * “Design Thinking” - An Introductory Workshop Vientiane, Lao PDR > January 2014 * Seminar on E!ective Communication & Presentation Skills Vientiane, Lao PDR * Further information and updates on www.eccil.org

Issue # 01 11 Business & Trade

Tourism industry crosses courses for several sectors. About exchange, product exhibitions and borders with Visa plans 85% of the foreign tourists in network meetings as well as further Laos originate from neighbouring investigation in their infrastructure Tourism is the second largest countries, !rst of all from Thailand. projects such as railway, bridges income earner after the mining Few of them are big spenders. This and roads. The trade value between industry in Laos according to a explains why the revenue per tourist Laos and Thailand was at US$ 1.78 recent tourism statistics report. is only 154 USD – a !gure which is billion in 2007 and has reached US$ Despite the global economic crisis virtually the same as 10 years before 3.9 billion in 2011. of 2008, the number of tourist and is signi!cantly lower than in arrivals in Laos continued to rise. neighbouring countries. China-Lao relationship carries In 2010, tourist arrivals reached 2.5 Five ASEAN countries Laos, forward million, before rising to 2.7 million Cambodia, Myanmar, Vietnam and The trade volume between Laos in 2011 and to 3.3 million in 2012, Thailand plan to jointly attract and China has reached US$ 1.728 generating about US$514 million international tourists and target billion in 2012 and is increasing on in the last year. to count 50 million arrivals in a year-on-year basis. During the last The government estimates that the 2015. One key aim to success is CAExpo in Nanning in September, number of tourist arrivals could simplifying the entry procedures, China has agreed to allocate more reach 3.58 million in 2014, 3.74 allowing travelers to use a single than US$ 49 million grant aid and million in 2015, and 4.5 million visa. also more than US$ 32 million in people in 2020. non-interest loans to Laos in 2013. To cope with the growing numbers New targets set for bilateral China is one of the largest foreign of tourists and to deliver adequate Cooperation with Thailand cross-industries investors in Laos. service, Laos plans to !nalize the Laos and Thailand have set bilateral upgrade of the national skills trade of US$ 5.77 billion in 2015. To standards in the tourism industry, reach this target, the two countries but it still has to develop training will continue frequent delegations Legal affairs

Labor Law enhancement signi!cant number of vacancies which will ensure e"ective and ongoing but not enough workers and in sustainable forest management. Experts from Federation of Trade particular not enough well trained The Lao Ministry of Planning Union, Lao Chamber of Commerce workers to !ll them. Among others and Investment and the German and Industry and the International it is planned to limit the maximum Ministry of Economic Cooperation Labour Organisation (ILO) revise stay of foreign workers – which and Development signed an the labour law in cooperation with might deter FDI – and forsees agreement which sees 5.8 million Lao line ministries to comply with that an employee who gives in euro (US$7.47 million) given to Laos international standards. Until now, notice has to be compensated for the support and development amendments made in 2011 by by the employer – which will put of law enforcement programmes. the Ministry of Labour and Social an unnecessary burden on the For acceptance into the Action Welfare were not implemented due companies and deter them from Plan Forest Law Enforcement, to concerns from the ILO, employers training their sta" since trained Governance and Trade (FLEGT), the and workers. The last labour law personnel might be more likely to European Union supports Laos in was put into into practice in 2006, swap jobs. consolidating governance of forest consisting of 77 articles. The new management. labour law is supposed to have Laos considers requirements extended 134 articles. Employers to adopt timber trade still worry that the planned regulations amendments will have a negative Laos is examining the conditions impact on their competitiveness necessary to enforce international and do not completely respond rules on the timber trade and to the labour situation in Laos – a the sourcing of wood products, 12 ECCIL Newsletter Finance

Limited change of currencies prices of all imports. Reversely, the million for irrigation system ran The Bank of Lao has instructed the new regulation requires people to well and targeted provinces could banks operating in Laos to limit time-consuming bank visits and reduce poverty. the sales of foreign currencies accurate budgeting. unless they meet the criteria laid Lao Stockmarket in movement out in article 5 of the Decree on the Further financial support from The Lao stock has currently two Management of Foreign Exchange World Bank and ADB listed stocks in the market: BCEL and and Precious Metals. Some banks Lao receives another US$6.5 million EDL-Generation. Lao Airlines and may exchange di"erent (lower) grants from the World Bank to two security companies Lao-China amounts The Lao government Further Support Customs and Trade Securities Co Ltd. And Lanexang wants to promote and stabilise Facilitation. The grant agreement Securities, a partnership between the national currency, goes the builds on the achievements of the Sacombank Securities and the Lao o%cial record. There are chances original International Development Development Bank are said to follow that the country is a bit short of Association grant of US$6 million, soon. foreign exchange which might which was approved in 2008, According to data from the Lao be a short term issue rather than designed to ensure full and Stock Exchange, one of the smallest a structural problem. The Lao e"ective implementation of the stock exchanges in the world, the Central Bank has eagle-eyed the new Customs Law. current playground is dominated by movement of exchange rates in Also the ADB is planning to provide foreign investors, who accounted the past. Depreciation of the kip a US$60 million low-interest loan to for 58.46 per cent of the market last especially in relation to the Thai Laos at the end of the year to help year. Baht could negatively a"ect prices reduce rural poverty and improve for consumer goods in Laos as they food security. The loan will be used are predominantly imported from to build roads in rural areas which Thailand. Currency depreciation will connect to the main transport could stimulate traders putting up routes. The last project with US$10 Economy

Economic growth on track The NERI report estimates world 23.77 trillion (US$ 3.04 billion) were According to the NERI (National economic growth increasing from mostly $owing into the Lao energy Economic Research Institute), 3.28% in 2012 to 3.62% in 2013 and sector (LAK 12.2 trillion), followed economic growth rates in Laos European economic growth from by mining (LAK 8.57 trillion) and should reach 8.3% in 2013 and –0.21% in 2012 to 0.49% in 2013. hotels and restaurants (LAK 858 continue growing with 8.2% in billion). 52 projects from local and 2014/ 2015. The capital Vientiane High inflation rate foreign investors with funds from expects 12.6% growth for this !scal The Vientiane Times reports that 12 countries were accepted. China year, to continue development and the In$ation rate reached 6.87% in invests the largest amount with expansion, more government and September, up from 6.83% in August more than LAK 10.42 trillion. foreign investment projects have to 2013, down from alarming July be implemented. !gure 7.4%. The average in$ation EU further Supports Laos plans to attract more private rate over the !rst six months of this Development in Laos investments and revise relevant !scal year was at 4.85%. The European Union plans to laws. In the new !ve-year plan set further intensify cooperation in by the Government for 2016-2020, 5% investment growth in Laos many sectors, also taking account an economic growth rate from 8.5- According to a report from of global climate change, judicial 9% and a per capita income from the Ministry of Plannning and and human rights matters. The main US$ 3200 are targeted. The highest Investment, the value of investment sectors for support are agriculture GDP per capita could reach US$ projects during the !rst 11 months and forestry, advancement in 3300 in the capital Vientiane this of the !scal year was 5.1% higher trade and business, as well as !scal year, whereas the overall GDP than in the previous !scal year. improvement in health care and per capita reaches about US$ 1.349. Investment of more than LAK education.

Issue # 01 13 Indochina Research Lao PDR: Please Don’t Rush

Growth in Laos has been consistently high for the last few years - generating more and more interest from international brands.

Indochina Research spoke to Laurent Notin, MD of Indochina What do you think about foreign consumers in Vientiane Capital Research said “consumer con#- businesses and brands coming to to !nd out how that growth is dence is key to the growth of any your country? impacting on them and the least market –without this con#dence, It helps the economy of my country to grow we can say is that con!dence consumers will not buy products. 95% Offers good products services to people is at a high with over 90% of This data shows that Laos in my country people surveyed con!dent their consumers are willing to spend and 94% !nancial situation is on the up- brands should take this opportunity It offers more jobs to people in Laos and-up. to grow their market shares.“ 92% I am looking forward to seeing more new Overall, consumers in Vientiane The increase in spending power products & services from foreign countries feel the bene!ts of economic has manifested in several ways 91% I want to buy more products from growth are !ltering down – two most noticeable are the foreign brands – giving them higher levels ownership of cars and mobile 81% of spending power. 38% of phones. In our survey, 34% of % Agree/strongly agree the adults we spoke to have a adults personally owned their household income of over $450 own car. This was even higher per month. 82% claimed they amongst 35 years at 44%. A further want better technology as their were better o" !nancially that a 19% claimed they intended to disposable income grows. year ago, and 92% believed that buy a car in the next 6 months. “Cars and phones have fast their !nancial situation would become a status product in Laos improve in the next 12 months. Ownership of mobile phones – it means a lot to be seen with the has reached saturation point latest model phone or a premium The majority feel that the in Vientiane, with 96% of car“ commented Laurent. “This economy in Laos is in a good or adults owning a mobile phone. will follow through to other excellent place (83%) – with 95% Despite this, 15% still intend to categories as a wider range of thinking the overall wealth of buy a new model in the next 6 products and services become the country would improve even months, suggesting consumers available here.“ …/… more in the next 2 years. Would you say that you (and your Personally Intend to buy Ownership and purchasing family living with you) are better own now in next 6 months o!, the same or worse o! "nancially than you were a year ago? House 67% 11% 82% 14% 4% Car 34% 19% Better off Same Worse off Computer 41% 8% 92% 7% 1% Washing machine 46% 13% In the next 12 months, do you TV 86% 3% think that you and your family will be better o!, the same or worse o! Mobile phone 96% 15% "nancially than you are now? Personal Holiday abroad NA 8%

14 ECCIL Newsletter Lao PDR: Please… The Rendez-vous de Vientiane

And consumers do want more The last week of November will Strongly rooted in a bilateral – foreign investment in Laos see a major Lao-French event, relationship, our work is supported is exciting them. Over 90% the “Rendez-vous de Vientiane”. by the Government and the City of agree they are looking forward This !rst French-Lao week will Vientiane. to new products and services combine economic, scienti!c, The list of companies or being o"ered as the economy cultural and sport events. It institutions which join us or grows, and a similar proportion is organized by a committee will take part in the event, in think this means an increase under the presidency of Mr. one way or another, is growing in availability of good quality Alain Daout. Please, read below every day: CGPME; CNCCEF; the products. They also see the excerpts of his introduction to Francophone Business Forum; bene!t of foreign investment the event: French and European Chambers – of more jobs (92%) and an even « Laos is at the crossroads of one of Commerce of Vietnam, stronger economy (95%). of the fastest growing areas of the , and Thailand; the Lao world and a gateway to the most National Chamber of Commerce Know your market – Laos is a dynamic part of the subcontinent, and Industry; the City of Paris… blossoming economy – with high the great Mekong’s region. Companies belonging to our levels of interest and demand for In order to raise the awareness economic heritage: EDF, Bred what the rest of the world has of the strong Franco-Laotian Banque Populaire, Essilor, to o"er. As the economy grows relations as well as the interest Alstom, EADS, Safran, Systra, so will the consumer spending for French economic and political SDV, Yves Rocher and President power. actors to be more present in the will join to show up the interest INDOCHINA RESEARCH TEAM, ET AL. “Land of a Million Elephants“, I took of this unique event and many the initiative with his excellency others less famous but proudly Research Design Yves Carmona, Ambassador of representing the French Savoir- Random HH F2F interviews of 200 France in Laos, and the French Faire of initiative. Moreover, respondents in Vientiane equally split between gender. Fieldwork was business community supported some territorial collectivities are conducted in September 2013. by the European Chamber of also involved like Region-Alpes, Commerce and Industry, to Cannes…» organize the #rst «Rendez-vous de Vientiane» from November 25th Further information is available under: to November 30th. www.semainedelafrance.org

Thanks to the Contributors

> The Deutsche Gesellschaft für Internationale > Banque Franco-Lao Ltd is a joint venture Zusammenarbeit (GIZ) GmbH is active in the #eld between the BRED Group (54%) – a bank of rural development and sustainable economic of BPCE Group, which is the second largest development. As a federally owned enterprise, GIZ supports banking group in France – and BCEL Public (46%), the leading the German Government in achieving its objectives in the #eld state-owned bank in Lao PDR. Banque Franco-Lao Ltd is the of international cooperation for sustainable development. only one European retail bank in Laos an deals with individual, SME, institution and corporate customers. > The World Bank is one of the world’s largest sources of development assistance. Our mission is to #ght poverty with passion and professionalism for lasting results. > Indochina Research Ltd is a market and social research company with 20 years experience of > KPMG is one of the largest professional providing innovative research solutions to multi- services #rms in the Lao PDR, providing national companies and donor organizations in the dynamic Audit, Tax, and Advisory services since 1997 and evolving markets of Indochina. with a balanced mix of international and local clients. (Please visit us at: www.facebook.com/KPMGinLao).

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