Lat Visahakit Sanong Vatthou Techni

Lat Visahakit Sanong Vatthou Technique, Lat Visahakit Konchak Kasikam and Borisath Phalithaphanh Beton Lao. The Restructuring Unit in the Business Promotion Office has been appointed to oversee the preparation of restructuring plans (WBG, 2006, p.10).
In 2004, the revenue of the eleven largest (SOEs) (including joint ventures and excluding banks) accounted for more than 70 percent of all SOEs revenues. Among these, revenues of five SOEs fully owned by government of Lao PDR accounted for about 42 percent, revenues of six joint venture SOEs for around 31 percent, revenues of others (more than 120 SOEs) comprised less than 30 percent (WBG, 2006, p.9).
The Lao telecommunication sector has been growing fast. Ten years ago, the sector was dominated mainly by one player Lao Telecom Company. Now, there are five companies (state-owned, joint-venture and private) that provide telecommunications services in Lao PDR. A Thai Sky Telecomm Company entry in 2006 is the most recent addition to the sector. The number of internet service providers (ISP) has increased from two firms in 1990s, to about six players in early 2000 and now about ten ISPs, such as STEA, ETL Internet, Lao Telecom, Champalao Internet, Lanexang Internet, Sky Telecom, KPL, Unicom and MLL.com (the last two are developed and will go into operations soon) (WBG, 2006, p.12).
There are four authorised enterprises to provide fixed and mobile telecommunications in Laos, with all four providing mobile phones but only three providing fixed lines. All of them have some government ownership. The enterprises are as follows: Lao Telecommunications Co Ltd (LTC shareholding is government of Lao PDR (GOL) 51%, Shinawatra 49%); Enterprise des Telecommunications Lao (ETL, GOL 100%); Lao Asia Telecom (LAT, Ministry of Defense 100%); Millicom International Cellular SA (GOL 22%, Millicom 78%). The first three provide fixed line, mobile and other services, while the last one provides mobile and other services (WBG, 2006, p.12).
The entry of Millicom, the large shareholding by Shin Corp, the operations of PlaNet and the prevalence of Voice over Internet Protocol (VoIP) operators show that private investors are willing to invest in Laos under the current policy regime. However, such investment is still limited to activities in Vientiane (WBG, 2006, p.12).
The banking sector of Laos is dominated by State Owned Banks (SOBs) which are starting to become market oriented. Private domestic banks play a small role and foreign banks have made little impact in the context of market share. The small size of the private sector and foreign banks is attributed to the role of the Government in many segments of the economy (directly or indirectly). Banque Pour Le Commerce Extérieur Lao retains a dominant position, accounting for about half of total deposits and loans in the system. The Lao Development Bank, resulting from the merger of two smaller SOBs - Lao May Bank and Lane Xang Bank is smaller. Low levels of capital, significant levels of non-performing loans and the accompanying weak profitability are found at the large state owned commercial banks (SOCBs). The State-Owned Policy Bank, the Agricultural Promotion Bank which lends mainly to rural areas, suffers form the same symptoms. Another bank owned by the state are the Bank of Lao PDR (WBG, 2006, p.12).
FDI in the hydropower sector made up more than half of the total foreign investment in Lao PDR. Currently, there are three large projects under construction: Nam Theun 2 (NT2), Nam Ngeum 2 and Se Kaman 3. All three projects together are worth more than US$2 billion. They are as follows:
(1) Nam Theun 2 is the largest hydropower project in Lao PDR (US$1.2 billion, 1070 MW, in KM province) in which French EDF has 35 percent of the total share; GOL and EGCO each hold 25 percent and Italian Thai development 15 percent. The electricity produced by NT2 will be mainly for exports to Thailand.
(2) Nam Ngum 2 project (about US$800 million, 615 MW, in VTE province) is sponsored by South East Asia Energy Limited - a joint venture comprising Karnchang Public Company (28.5%), EDL (25%), Ratchaburi Electricity Generating Public Company (25%), Bangkok Expressway Public Company (12.5%), Shlapak Development Company (4%), PT Construction and Irrigation Company (4%), and TEAM Consulting Engineering and Management Company (1%). The project is mainly for exports to Thailand.
(3) The Xe Kaman 3 project (about US$360 million, 260 MW, in Attapeu province) is owned by Vietnam-Lao PDR Investment and Development Company (EDL has a 15 percent share) and the electricity is expected to export to Vietnam (WBG, 2006, p.25).
In recent years, many foreign investors have invested in SOEs in Laos and became their strategic partners. These include Lao Brewery Company (LBC, 50/50 share holding for FDI/GOL), Lao Soft Drink Company (70/30), Lao Tobacco Company (53/47), Lao Telecommunication Enterprise (LTE, 49/51), Lao Insurance Company Ltd (51/49), and a few other hotel and tourism businesses. The majority of these joint projects is profitable and have been performing well, especially the biggest two joint ventures: LTE with total investment of about $180 millions and LBC or Beer Lao – more than $30 millions in 2004. As the leader of food processing industry, LBC is planning to expand its production capacity by almost 80% in 2006-2007 by building the second brewery factory in Champasack with an estimated cost of about US$20 millions (WBG, 2006, p.25).
6. Tax and Duty Incentives in Special Promotion Zones
Since Laos implemented its open door policy in 1988, there has been a declining foreign investment levels in areas outside Vientiane. In the past ten years, tax and non-tax incentives were not promoted greatly to attract foreign investment into the SEZs. Thus, there was a lack of transparency in the promotion of foreign investment in Laos, which has resulted in declining foreign investment levels in rural areas. On April 13, 2003, the government of Laos introduced duty incentives to facilitate investors under the country’s first establishment of SEZs aimed at attracting FDI and know-how. The importance of the SEZs is to develop the border areas with China, Vietnam, Cambodia, Myanmar and Thailand. The SEZ is approximately 500km south of Vientiane and located in the province of Savannakhet along the East-West Economic Corridor (EWEC) linking Myanmar, Thailand, Laos and Vietnam (Route No.9).
One of the government policies in promoting FDI to the SEZs is to encourage foreign projects in which to develop infrastructures and grant more preferential projects. The government is implementing this policy in recognising the need to attract foreign investments to areas outside Vientiane to improve the socio-economic conditions, thereby improving the standard of living of people in rural provinces. The effects of the new decree should assist in creating job opportunities in the rural provinces, generate foreign exchange earnings and build local infrastructures.
The Lao government has divided investment promotions zones into specific activities and zones. According to the law on the Promotion of Foreign investment, the three promoted zones based on social-economic conditions and geographical locations in the zones are as follows:
Zone 1: Mountainous, plain and plateau zones with no economic infrastructure to facilitate investment.
Zone 2: Mountainous, plain and plateau zones with a moderate level of economic infrastructure suitable to
accommodate investment to some extent.
Zone 3: Mountainous, plain and plateau zones with good infrastructure to support investment.
According to Article 18 of the revised law (2004), foreign investors investing within the promoted activities and zones are entitled to the following tax incentives:
Zone 1: Investments in Zone 1 will be entitled to a profit tax exemption for 7 years and thereafter will be subject to profit tax at the rate of ten percent (10%).
Zone 2: Investments in Zone 2 will be entitled to a profit tax exemption for 5 years, and thereafter will be subject to a reduced profit tax rate of half of fifteen percent (15%) for 3 years and thereafter a profit tax rate of fifteen percent (15%).