Laos Table of Contents
Decree 20 of 1988 identifies sectors open to foreign investment under the Foreign Investment Law: these include agriculture and forestry; industry; communication, transportation, and construction; and services and tourism. Five criteria are used to judge the desirability of investment projects: whether the project uses advanced techniques, technology, and scientific management to produce goods that could compete in the world market and make efficient use of energy, raw materials, and equipment; provides export merchandise or services that generate foreign-exchange earnings and use domestic raw materials as much as possible; has low labor requirements but provides managerial and/or technical training; involves infrastructure development, especially of roads, bridges, and irrigation; and is deemed by the government to be important to economic development. Projects are discouraged if they: do not conform to economic and social development, or disturb the sovereignty, order, or security of the country; seriously damage the environment; make long-run use of imported materials and do not promote import substitution; create large debts; or are prohibited by the government.
The law spurred a steady increase in foreign direct investment. Within one year of the law's promulgation, Laos received 124 investment proposals, of which sixty were approved that same year.
As of 1992, some 109 proposals had been accepted out of a total of about 200, worth about US$231 million, of which the government share is roughly 3 percent; most are worth less than US$5 million each. Almost 50 percent of the proposals were signed with Thai companies. Most proposed investment is in foreign trade, manufacturing, handicrafts, services, tourism, and the agriculture, forestry, and mining sectors. About ten proposals were subsequently canceled, usually because of a failure to receive expected financing.
Despite the positive response of foreign investors to liberalization measures, in the early 1990s, foreign investment is still handicapped. Hindrances include the poor infrastructure, the unskilled labor force, and the lack of an intellectual property rights law, although regulations on patents and industrial property have been drafted.
Data as of July 1994