Laos, officially the Lao People’s Democratic Republic (Lao PDR), is a rapidly growing developing economy at the heart of Southeast Asia, bordered by Burma, Cambodia, China, Thailand, and Vietnam. Laos’ economic growth over the last decade averaged just below eight percent, placing Laos amongst the fastest growing economies in the world. In 2018, GDP growth decreased slightly from prior years to just under seven percent. Over the last 30 years, Laos has made slow but steady progress in implementing reforms and building the institutions necessary for a market economy, culminating in accession to the World Trade Organization (WTO) in February 2013. The Lao government’s commitment to WTO accession and the creation of the ASEAN Economic Community (AEC) in 2015 led to major reforms of economic policies and regulations aimed at improving the business and investment environment. The Lao government is increasingly tying its economic fortunes to the economic integration of ASEAN and export-led development.
The exploitation of natural resources and development of hydropower drove the rapid economic growth over the last decade, with both sectors largely led by foreign investors. However, the Lao government recognizes that growth opportunities in these industries are finite and employ few people, and has therefore recently began prioritizing the development of high-value agriculture, light manufacturing, and tourism, while continuing to develop energy resources and related electrical transmission capacity to export to neighboring countries.
The Lao government hopes to leverage its lengthy land borders with Burma, China, Thailand, and Vietnam to transform Laos from “land-locked” to “land-linked,” thereby further integrating the Lao economy with the larger economies of the countries along its borders. The government hopes to increase exports of agriculture, manufactured goods, and electricity to its more industrialized neighbors, and sees significant growth opportunities resulting from the China-Laos Railway, which will connect Kunming in Yunnan Province with Vientiane, Laos. The railway is expected to be completed and operational by 2021. Some businesses and international investors are beginning to use Laos as a low-cost export base to sell goods within the region and to the United States and Europe. The emergence of light manufacturing has begun to help Laos integrate into regional supply chains, and improving infrastructure should facilitate this process, making Laos a legitimate locale for regional manufacturers seeking to diversify from existing production bases in Thailand, Vietnam, and China. New Special Economic Zones (SEZs) in Vientiane and Savannakhet have attracted major manufacturers from Europe, North America, and Japan.
Economic progress and trade expansion in Laos remain hampered by a shortage of workers with technical skills, weak education and health care systems, and poor—although improving—transportation infrastructure. Institutions, especially in the justice sector, remain highly underdeveloped and regulatory capacity is low. Despite recent efforts and some improvements, corruption is rampant and is a major obstacle for foreign investors.
Corruption, policy and regulatory ambiguity, and the uneven application of law are disincentives to further foreign investment in the country. The Lao government, under the administration of the new Prime Minister Thongloun Sisoulith is making efforts to improve the business environment. Its current five-year plan directs the government to formulate “policies that would attract investments” and to “begin to implement public investment and investment promotion laws.” The Prime Minister’s publicly-stated goal is to see Laos improve its World Bank Ease of Doing Business ranking (Laos is currently ranked #154), and in February 2018, he issued a Prime Minister order laying out specific steps ministries were to take in order to improve the business environment. These efforts are having some impact – for example, it now takes to less than 40 days to obtain a business license, whereas just 4 years ago it took 174 days. The current administration is also more active in firing or disciplining corrupt officials, with the government and National Assembly disciplining over 1,000 officials in 2018 for corruption-related offenses. Despite these efforts, the Laos’ Ease of Doing Business ranking has fallen from 139 in 2016 to 154 in 2019. Furthermore, the multiple ministries, laws, and regulations affecting foreign investment into Laos create confusion, and thus, require many potential investors engage either local partners or law firms to navigate the confusing bureaucracy, or turn their efforts entirely toward other countries in the region.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||132 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2019||154 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||Not Ranked||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2018||No Data Available||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||$ 2,270||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Toward Foreign Direct Investment
The Lao government officially welcomes both domestic and foreign investment as it seeks to keep growth rates high and graduate from Least Developed Country status by 2024. The pace of foreign investment has increased over the last several years. According to Lao government statistics, mining and hydropower account for 56 percent of Foreign Direct Investment (FDI), and agriculture accounts for 40 percent of FDI. China, Vietnam, Thailand, Korea, France, and Japan are the largest sources of foreign investment, with China accounting for 77.5 percent of all FDI in 2017, according to the United Nations Conference on Trade and Development (UNCTAD). The government’s Investment Promotion Department encourages investment through its website , and holds an annual dialogue with the private sector and foreign business chambers though the Lao Business Forum process.
The 2009 Law on Investment promotion was amended in November 2016, 32 new articles were introduced and 59 existing articles were revised. Notably, the new law, an English version of which can be found at , clarifies investment incentives, transfers responsibility for SEZs from the Prime Minister’s office to the Ministry of Planning and Investment, and removes strict registered capital requirements for opening a business, deferring instead to the relevant ministry. Foreigners may invest in any sector or business except in cases where the government deems the investment to be detrimental to national security, health, or national traditions, or that have a negative impact on the natural environment. Nevertheless, even in cases where full foreign ownership is permitted, many foreign companies seek a local partner. Companies involved in large FDI projects, especially in mining and hydropower, often either find it advantageous or are required to give the government partial ownership.
Foreign investors are typically required to go through several procedural steps prior to commencing operations. Many foreign business owners and potential investors claim the process is overly complex and regulations are erratically applied, particularly to foreigner investors. Investors also express confusion about the roles of different ministries, as multiple ministries become involved in the approval process. In the case of general investment licenses (as opposed to concessionary licenses, which are issued by Ministry of Planning and Investment), foreign investors are required to obtain multiple permits, including an annual business registration from the Ministry of Industry and Commerce (MOIC), a tax registration from the Ministry of Finance, a business logo registration from the Ministry of Public Security, permits from each line ministry related to the investment (i.e., MOIC for manufacturing, and Ministry of Energy and Mines for power sector development), appropriate permits from local authorities, and an import-export license, if applicable. Obtaining the necessary permits can be challenging and time consuming, especially in areas outside the capital.
There are several possible vehicles for foreign investment. Foreign partners in a joint venture must contribute at least 30 percent of the company’s registered capital. Wholly foreign-owned companies may be entirely new or a branch of an existing foreign enterprise. Equity in medium and large-sized SOEs can be obtained through a joint venture with the Lao government.
Although reliable statistics are difficult to obtain, there is no question that foreign investment has increased dramatically over the last several years. According to UNCTAD, USD 1.7 billion in FDI entered Laos in 2017, a 54 percent increase over 2016. Laos received around USD 1.3 billion in FDI from China in 2017. Total FDI stock in Laos almost doubled between 2014 and 2017, reaching USD 6.5 billion.
Limits on Foreign Control and Right to Private Ownership and Establishment
As discussed above, despite the fact that foreigners may invest in any sector or business (except in cases where the government deems the investment to be detrimental to national security, health, or national traditions, or to have a negative impact on the natural environment), many foreign companies seek a local partner in order to navigate byzantine official and unofficial processes. Companies involved in large FDI projects, especially in mining and hydropower, often either find it advantageous or are required to give the government partial ownership.
Other Investment Policy Reviews
Laos does not have a central business registration website yet, but the Ministry of Industry and Commerce (MOIC) is planning to improve its online enterprise registration site to accelerate the registration process. As discussed above, over the last four years the total time for business registration has been reduced from 174 days to 40 days. The timelines and the different government agencies involved in the process can still vary considerably, however. As a result, many investors and even locals often hire consultancies or law firms to shepherd the labor-intensive registration process.
The Lao government has attempted to streamline business registration through the use of a one-stop shop model. For general business activities, this service is located in the MOIC. For activities requiring a government concession, the service is located in the Ministry of Planning and Investment. For SEZs, one-stop registration is run through the Ministry of Planning and Investment or in special one-stop service offices within the SEZs themselves (under the authority of the Ministry of Planning and Investment), as is the case at Savan Seno SEZ.
Business owners give the one-stop shop concept mixed reviews. Many acknowledge that it is an improvement, but describe it as an incomplete reform with several additional steps that must still be taken outside of the single stop. Businesses also complain that there are often different registration requirements at the central and provincial levels.
The Lao government does not actively promote, incentivize, or restrict outward investment.
2. Bilateral Investment Agreements and Taxation Treaties
According to the United Nations Conference on Trade and Development (UNCTAD), Laos has bilateral investment agreements with Australia, Belarus, Cambodia, China, Cuba, Denmark, France, Germany, India, Indonesia, Japan, Republic of Korea, Kuwait, Malaysia, Mongolia, Myanmar, Netherlands, Pakistan, Russia Federation, Singapore, Sweden, Switzerland, Thailand, the United Kingdom, and Vietnam. On February 1, 2005, a Bilateral Trade Agreement (BTA) entered into force between the United States and the Government of Laos that contains some investment provisions. The original BTA is available on MOIC’s website.
Laos and the United States do not have a bilateral taxation treaty.
4. Industrial Policies
Laos offers a range of investment incentives depending on the investment vehicle, with particular focus on government concessions and Special Economic Zones. Many of these incentives can be found at and are generally governed by the Investment Promotion Law.
Foreign Trade Zones/Free Ports/Trade Facilitation
The new Foreign Investment Law allows for the establishment of Special Economic Zones and Specific Economic Zones (both referred to as SEZs). Special Economic Zones are intended to support development of new infrastructure and commercial facilities, and include incentives for investment. Specific Economic Zones are intended for the development of existing infrastructure and facilities, and provide a lower level of incentives and support than Special Economic Zones. Laos has announced plans to construct as many as 40 special and specific zones, but as of 2019, it has only established 12. Some, such as Savan Seno SEZ in Savannakhet and Vientiane Industry and Trade Area SEZ, or VITA Park, in Vientiane, have successfully attracted foreign investors. Others are accused of harboring illegal activities, such as the Golden Triangle SEZ in Bokeo Province that houses the Kings Roman Casino. The Department of Treasury Office of Foreign Assets Control in early 2018 designated the Kings Roman Casino and its owners a Transnational Criminal Organization for engaging in drug trafficking, human trafficking, money laundering, bribery, and wildlife trafficking. More Chinese-invested SEZs are expected to open in the coming years, especially along the China-Laos Railway line. Thai companies are also exploring new SEZ-style industrial parks in Laos.
Generally, the Lao government places a high priority on trade facilitation measures in international fora, particularly as it relies upon trade across its neighboring countries in order to reach seaports. Nonetheless, Laos has struggled to harmonize its own internal processes. Cross-border trade laws and regulations should be applied uniformly across the entire customs territory of Laos. In reality, however, customs practices vary widely at different ports of entry. With assistance from Japan, the Lao government instituted a new system for electronic collection of customs fees at several major border crossings in 2016, which has been a significant improvement, and in early 2019 the Department of Customs introduced electronic customs payments at the Lao – Thai Friendship Bridge for passengers. On several border crossings with Vietnam, Lao and Vietnamese officials jointly conduct inspections to facilitate movement of goods.
Performance and Data Localization Requirements
Laos does not have performance requirements. Requirements relating to foreign hiring are governed by the 2014 Labor Law, but in practice, large investors have been able to extract additional government concessions on use of foreign labor. Some foreign-owned businesses have criticized labor regulations for strict requirements that foreign employees not travel abroad during the first months of their Lao residency.
Laos does not currently have enacted laws or regulations on domestic data storage or localization requirements.
5. Protection of Property Rights
The government continues to consider changes to its existing land policy, although progress has been slow; and is complicated by sensitive issues including community-held land rights, traditional land rights, slash-and-burn or shifting cultivation, and a history of expropriation for infrastructure, mining, and power projects. A draft revision to the Law on Land Rights has been previewed at multiple National Assembly sessions, but continues to be delayed because of the numerous sensitivities.
Foreign investors are not currently permitted to own land. However, Article 16 of the 2016 Law on Investment Promotion allows investors to obtain land for use through long-term leases or as concessions, and allows the ownership of leases and the right to transfer and improve leasehold interests. Government approval is not required to transfer property interests, but the transfer must be registered and a registration fee paid.
Under existing law, a creditor may enforce security rights against a debtor and the concept of a mortgage does exist. The Lao government is currently engaged in a land parceling and titling project, but it remains difficult to determine if a piece of property is encumbered in Laos. Enforcement of mortgages is complicated by the legal protection given mortgagees against forfeiture of their sole place of residence.
Laos provides for secured interests in moveable and non-moveable property under the 2005 Law on Secured Transactions and a 2011 implementing decree from the Prime Minister. In 2013, the State Assets Management Authority at the Ministry of Finance launched a new Secured Transaction Registry (STR), intended to expand access to credit for individuals and smaller firms. The STR allows for registration of movable assets such as vehicles and equipment so that they may be easily verified by financial institutions and used as collateral for loans.
Outside of urban areas, land rights can be even more complex. Titles and ownership are not clear, and some areas practice communal titling.
Intellectual Property Rights
Intellectual property protection in Laos is weak, but steadily improving. The USAID-funded Lao PDR-U.S. International and ASEAN Integration (USAID LUNA II) project assisted the Lao government’s efforts to increase its capacity in the area of IPR and to progress on the IPR-related commitments undertaken as a part of Laos’ 2013 WTO accession package. USAID LUNA II worked with the Ministry of Science and Technology’s Department of Intellectual Property to establish an online portal that provides detailed information regarding the registration of copyrights and trademarks. Interested individuals can use the portal to complete the application forms online. The portal officially launched in February 2019. Additionally, USAID LUNA II provided technical support to the Lao government in amending the Law on Intellectual Property.
Government reorganization in 2011 created the Ministry of Science and Technology, which controls the issuance of patents, copyrights, and trademarks. Laos is a member of the ASEAN Common Filing System on patents but lacks qualified patent examiners. The bilateral Intellectual Property Rights (IPR) agreement between Thailand and Laos dictates that a patent issued in Thailand also be recognized in Laos.
Laos is a member of the World Intellectual Property Organization (WIPO) Convention and the Paris Convention on the Protection of Industrial Property but has not yet joined the Berne Convention on Copyrights.
In 2011 the National Assembly passed a comprehensive revision of the Law on Intellectual Property which brings it into compliance with WIPO and Trade-Related Aspects of Intellectual Property standards (TRIPS). Amendments to the 2011 Law on Intellectual Property were made public in May 2018. The consolidation of responsibility for IPR under the Ministry of Science and Technology is a positive development, but the Ministry lacks enforcement capacity.
Laos is not listed in USTR’s Special 301 Report or the Notorious Markets report.
6. Financial Sector
Capital Markets and Portfolio Investment
Laos does not have a well-developed capital market, although government policies increasingly support the formation of capital and free flow of financial resources. The Lao Securities Exchange (LSX) began operations in 2011 with two stocks listed, both of them state-owned – the Banque Pour l’Commerce Exterieur (BCEL), and the power generation arm of the electrical utility, Electricite du Laos – Generation (EDL-Gen). In 2012, the Lao government increased the proportion of shares that foreigners can hold on the LSX from 10 to 20 percent. As of March 2019, there are nine companies listed on the LSX: BCEL, EDL-Gen, Petroleum Trading Laos (fuel stations), Lao World (property development and management), and Souvanny Home Center (home goods retail), Phousy Construction and Development (Construction and real estate development), Lao Cement (LCC), Mahathuen Leasing (leasing), and Lao Agrotech (palm oil plantation and extraction factory). News and information about the LSX is available at
Businesses report that they are often unable to exchange kip into foreign currencies through central or local banks. Analysts suggest that concerns about dollar reserves may have led to temporary problems in the convertibility of the national currency. Private banks allege that the Bank of Lao PDR withholds dollar reserves. The Bank of Lao PDR alleges that the private banks already hold sizable reserves and have been reluctant to give foreign exchange to their customers in order to maintain unreasonably high reserves. The tightness in the forex market led to a temporary 5-10 percent divergence between official and gray-market currency rates in late 2017, and since 2017 the Lao kip has depreciated against the dollar and Thai baht.
Lao and foreign companies alike, and especially small- and medium-sized enterprises (SMEs), note the lack of long-term credit in the domestic market. Loans repayable over more than five years are very rare, and the choice of credit instruments in the local market is limited. The Credit Information Bureau, developed to help inject more credit into markets, still has very little information and has not yet succeeded in mitigating lender concerns about risk.
Money and Banking System
The banking system is under the supervision of the Bank of Lao PDR, the nation’s central bank, and includes more than 40 banks, most of them commercial. Private foreign banks can establish branches in all provinces of Laos. ATMs have become ubiquitous in urban centers. Technical assistance to Laos’ financial sector has led to some reforms and significant improvements to Laos’ regulatory regime on anti-money laundering and countering the financing of terrorism, but overall capacity within the financial governance structure remains poor.
The banking system is dominated by large, government-owned banks. The health of the banking sector is difficult to determine given the lack of reliable data, though banks are widely believed to be poorly regulated and there is broad concern about bad debts and non-performing loans that have yet to be fully reconciled by the state-run banks, in particular. The IMF and others have encouraged the Bank of Lao PDR to facilitate recapitalization of the state-owned banks to improve the resilience of the sector.
While publicly available data is difficult to find, non-performing loans are widely believed to be a major concern in the financial sector, fueled in part by years of rapid growth in private lending. The government’s fiscal difficulties in 2013 and 2014 led to non-payment on government infrastructure projects. The construction companies implementing the projects in turn could not pay back loans for capital used in construction. Many analysts believe the full effects of the government’s fiscal difficulties have not yet worked their way through the economy. In recent years Laos is projected to continue running a budget deficit of 4-5 percent, which coupled with rising public or publicly held debt estimated over 60 percent of GDP, add to concerns about Laos’ fiscal outlook. In 2018 Laos passed a new law on Public Debt Management aimed at reducing the debt-to-GDP ratio in the coming years.
Foreign Exchange and Remittances
There are no published, formal restrictions on foreign exchange conversion, though restrictions have previously been reported, and because the market for Lao kip is relatively small, the currency is rarely convertible outside the immediate region. Laos persistently maintains low levels of foreign reserves, which are estimated to cover only 1.1 months’ worth of total imports. The reserve buffer is expected to remain relatively low due to structurally weak export growth in the non-resource sector and debt service payments. The decline in reserves was due to a drawdown of government deposits primarily for external debt service payments, some intervention in the foreign exchange market to manage the volatility of the currency (notwithstanding a more flexible currency), and financing the continuing current account deficit. The Bank of the Lao PDR (BOL) occasionally imposes daily limits on converting funds from Lao kip into U.S. dollars and Thai baht, or restricts the sectors able to convert Lao kip into dollars, sometimes leading to difficulties in obtaining foreign exchange in Laos.
In order to facilitate business transactions, foreign investors generally open commercial bank accounts in both local and foreign convertible currency at domestic and foreign banks in Laos. The Enterprise Accounting Law places no limitations on foreign investors transferring after-tax profits, income from technology transfer, initial capital, interest, wages and salaries, or other remittances to the company’s home country or third countries provided that they request approval from the Lao government. Foreign enterprises must report on their performance annually and submit annual financial statements to the Ministry of Planning and Investment (MPI).
According to the World Bank, increasing pressure on the local currency has led to an upward shift in the exchange rate band, resulting in a depreciation of the exchange rate in 2018. The official nominal kip/U.S. dollar reference rate depreciated by almost 2 percent yoy in 2018, while the kip/baht exchange rate depreciated by 7.8 percent. Similarly, based on available information, the real effective exchange rate for the first seven months in 2018 also depreciated by 5.6 percent.
There have been no recent changes to remittance law or policy in Laos. Formally, all remittances abroad, transfers into Laos, foreign loans, and payments not denominated in Lao kip must be approved by the BOL. In practice, many remittances are understood to flow into Laos informally, and relatively easily, from a sizeable Lao workforce based in Thailand. Remittance-related rules can be vague and official practice is reportedly inconsistent.
Sovereign Wealth Funds
There are no known sovereign wealth funds in Laos.
7. State-Owned Enterprises
The Lao government maintains ownership stakes in key sectors of the economy such as telecommunications, energy, finance, airlines, and mining. Where state interests conflict with private ownership, the state is in a position of advantage.
There is no centralized, publicly available list of Lao State-Owned Enterprises (SOEs). The Lao government’s most recent figures report that there are now more than 187 SOEs in Lao PDR. 133 SOEs are 51 – 100percent State owned. The registered capital was more than USD 26 billion. At the end of 2017 the total assets of 60 SOEs managed by State Property Management Department of Ministry of Finance was more than USD 13 billion (80.51percent of GDP). The net profit from SOEs was around USD 156 million of which USD 105 million was the Government dividends. The government occasionally floats the idea of increasing private ownership in SOEs such as Lao Airlines through partial listings on the LSX, or spinning off parts of larger enterprises, such as the state electrical utility, EDL.
The government has not specified a code or policy for its management of SOEs and has not adopted OECD guidelines for Corporate Governance of SOEs. There is no single government body that oversees SOEs. Several separate government entities exercise SOE ownership in different industries. SOE senior management does not uniformly report to a line minister. Comprehensive information on boards of directors or their independence is not publicly available. While there is scant evidence one way or the other, private businesses generally assume that court decisions would favor an SOE over another party in an investment dispute.
There is no formal SOE privatization program, though Prime Minister Thongloun has openly discussed subjecting some SOEs to greater competition and possible privatization, and the government has over the past several years occasionally floated ideas for increasing private ownership in some SOEs through partial listings on the LSX, or through spinning off and privatizing parts of others.
8. Responsible Business Conduct
There is low general awareness of responsible business conduct (RBC) and corporate social responsibility (CSR). There is no systematic government or NGO monitoring of RBC. RBC is not generally included in the government’s investment policy formulations.
Corruption is a serious problem in Laos that affects all levels of the economy. The Lao government has developed several anti-corruption laws but enforcement remains weak. Since assuming office in early 2016, Prime Minister Thongloun Sisoulith has put a renewed focus on government anti-corruption efforts, and Lao media and the National Assembly now regularly report on corruption challenge and the sacking of disciplining of corrupt officials. In September 2009, Laos ratified the United Nations Convention against Corruption.
Domestic and international firms have repeatedly identified corruption as a problem in the business environment and a major detractor for international firms exploring investment or business activities in the local market.
The Lao State Inspection and Anti-Corruption Authority (SIAA), an independent, ministry-level body, is charged with analyzing corruption at the national level and serves as a central office for gathering details and evidence of suspected corruption. Additionally, each ministry and province contains an SIAA office independent from the organization in which it is housed. These SIAA offices feed into the SIAA’s central system.
According to Lao law, both giving and accepting bribes are criminal acts punishable by fine and/or imprisonment. Nonetheless, foreign businesses frequently cite corruption as an obstacle to operating in Laos. Often characterized as a fee for urgent service, officials commonly accept bribes for the purpose of approving or expediting applications. Laos is not a signatory to the OECD Convention on Combating Bribery.
In 2014, an asset declaration regime entered into force for government officials, which required them to declare income, assets and debts for themselves and their family members; this was further strengthened in 2017 and 2018. Officials are now required to file a declaration of any assets valued over USD 2,500, including land, structures, vehicles and equipment, as well as cash, gold, and financial instruments. These declarations are reportedly held privately and securely by the government. If a corruption complaint is made against an official, the SIAA can compare the sealed declaration with the official’s current wealth. Whether this program has worked or is working remains unclear.
Resources to Report Corruption
Contact at government agency or agencies are responsible for combating corruption:
Mr. Viengkeo PhonAsa, Director General
Anti-Corruption Department, State Inspection and Anti-Corruption Authority
Sivilay Village, Xaythany District, Vientiane Capital, 13th South Road
Telephone: office:, 021 715032; Fax: 021 715006; cell: 020 2222 5432
10. Political and Security Environment
Laos is generally a peaceful and politically stable country. The risk of political violence directed at foreign enterprises or businesspersons is low. There was a string of unexplained attacks on vehicles traveling in the area of Xaysomboun province in late 2015 and 2016, caused several diplomatic missions to issue warnings to their citizens, but such incidents have decreased dramatically in recent years. There has been little-to-no political violence in the last decade, and Laos’ political stability is an attractive feature for foreign investors.
11. Labor Policies and Practices
Despite Laos’ young population, approximately 62 percent of which are 30 years of age or younger, the labor market remains tight with employers reporting shortages of labor at all levels, especially skilled labor, reflecting the relatively low level of educational attainment within Laos. The World Bank reported in 2014 that nearly half of advertisements for low-skilled workers in Laos receive no applications.
The government enacted a new labor law in late 2014 that established many new protections for workers. It also contained provisions aimed at increasing the skills of the Lao labor force and established stricter provisions on the hiring of foreign workers.
The new law also authorized independent worker’s groups to elect their own leaders and to represent their interests and engage in collective bargaining on their behalf. The Lao Federation of Trade Unions (LFTU), which is associated with the ruling Lao People’s Revolutionary Party, is the primary representative of labor and represents workers in tripartite processes. Laos’ National Assembly passed a new Trade Union Law in November 2017 but the impact of the new law on the labor market and foreign investors has yet to be determined. No official English translations of the final Trade Union Law are publicly available.
Child labor is outlawed except under very strict, limited conditions that ensure no interference with the child’s education or physical wellbeing. The 2014 law outlaws several forms of employment discrimination and provides standards for work hours. The minimum wage is set by separate regulation, and in recent years has seen annual increases after a tri-partite negotiation among LFTU, the Ministry of Labor and Social Welfare, and the Lao National Chamber of Commerce and Industry. The 2014 law also established occupational health and safety standards, but inspections remain inconsistent. An International Labor Organization project undertaken in 2015 and 2016 trained labor inspectors in basic practices, with particular focus on the garment industry.
Foreign investors using a concession as the investment vehicle are reportedly able to negotiate the percentage of foreign labor to be used in the investment. However, labor standards such as minimum wage and health and safety standards should apply uniformly regardless of investment vehicle or use of a special economic zone. In 2018, the minimum wage was approximately USD130 per month.
The new labor law authorizes strikes if several steps of dispute resolution fail; however, there is no record of strikes occurring in Laos. A cultural distaste for open confrontation and the general shortage of labor continue to make strikes highly unlikely.
Employment contracts are required under the labor law, but are rarely used in practice. In February 2018, the government promulgated a new decree on labor dispute resolution.
Collective bargaining is typically undertaken by representatives of the Lao Federation of Trade Unions, though the 2014 labor law also provides the elected representative of independent worker’s groups the ability to negotiate their own collective bargaining agreements with employers. Basic and subsistence agriculture, informal businesses, and small family businesses make up the vast majority of employment, thus collective bargaining is relatively rare in the overall economy and unfamiliar to many.
12. OPIC and Other Investment Insurance Programs
The U.S. Overseas Private Investment Corporation (OPIC) and Laos signed a bilateral agreement in 1996. OPIC currently has no exposure in Laos, but the organization is actively exploring options for programing in the country.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Economic and Commercial Specialist
U.S. Embassy, Km 9, Tha Deua Rd, Vientiane Laos
Telephone: (+856) 21 487-000