The Foreign Investment Law of July 1988 is modeled on legislation that has already been adopted in Vietnam and China. Laos seeks to encourage foreign investment as a means of facilitating economic development as called for by the New Economic Mechanism. The government hopes that foreign investment projects will help to shift the economy from a subsistence to a commodity production basis by improving the management skills of the labor force, introducing advanced technology to the manufacturing sector, fostering economic, scientific, and technological cooperation with other countries, and increasing the production of goods for export.
Foreign investors will be able to invest and do business in Laos when written approval received from Foreign Investment Management Cabinet (FIMC) and the company registered with the Ministry of industry and trade. At present, Laos has established full service finish at one point (One-Stop-Service) to facilitate foreign investors to facilitate foreign investors, can apply for an investment license for businesses registered in Laos and registered with the Ministry of Industry and Trade along the Ministry of Industry and Trade. The project has a value less than $1 million will know the results in 3-week, project that is worth $1-5 million will know the results within four weeks, and the project is worth $5 - 50 million will know the results within 12 days.
The Foreign Investment Law allows investors to enter into three types of investment arrangements. The first type of arrangement, contractual or cooperative businesses, entails investment in existing state or private companies, or with Laotian individuals; in this way, the law is more liberal than comparable legislation in either Vietnam or China. The second type of arrangement, joint ventures, requires foreigners to invest a minimum of 30 percent of total capital. In general, terms for either of these arrangements are not to exceed twenty years. The third type of arrangement, private ventures, requires foreigners to invest 30 percent of total capital, up to a maximum of 100 percent. Terms are generally limited to fifteen years. Tax exemptions or reductions for joint ventures and private enterprises are available for two to six years after the first year of profit, depending on the size of the investment, the volume of goods exported as a result of the project, the location of the project, and the sector on which it focuses.
All investment projects of foreign enterprises are promoting investment. In the following ways:
∝ Profit enterprises to business expansion granted will be exempt from elimination of profit in the fiscal year.
∝ Foreign enterprises can deliver profits and other income back to their country or third country through banks located in Laos after follow the official bond taxation and fees in accordance with legal regulations.
∝ Import tax exemptions and exemption of import from the storage device, vehicle parts, manufacturing machines, directly to raw materials that do not exist within Loas or there is not enough capacity, or semi-finished input to processing or assembling products for export.
∝ Exemption of export duty for the export product.
Tax incentives--a reduction of 2 to 5 percent in the profit tax--are also used to encourage foreign investment. In order to qualify for the reduction, a foreign investment project has to meet three of the following criteria: the project will export more than 70 percent of the goods it produces, will obtain domestically more than 70 percent of the raw materials it uses, will use advanced technology, will aim to overcome unfavorable natural or socioeconomic conditions, will contribute to national economic development despite low profit margins or will be established before 1995. The Foreign Investment Law allows foreign investors to remit profits to the countries of their choice. In addition, it prohibits the nationalization of their capital and property.
According to the law on investment promotion of Laos is to identify patterns in promoting investment in Laos, in order to attract foreign investors to come to invest in Laos increases (which in this case means that foreign investors, including individuals and legal entities of foreign invested business in Laos. Whether it is the policy of tax privileges, such as exemption of income tax collection, tax exemption import or rental store, with the exception of the State's land concession. But in terms that relate to the tenancy in Laos, it is treated as an investment promotion policies by granting land use lead foreign investors themselves. The foreign investors who have invested in the development of various projects in Laos will ask to be released from the land use rights of Loas Government, the following conditions exist:
1. Projects of foreign investors must have a registered capital of more than 500000 US dollar. The value must be certified by the import of capital such amount from Laos.
2. Foreign investors have the right to use the land from a State that has already been scheduled for only san and land use, it will do no more than 800 square meters.
3. Foreign investors must use such land for the purpose of building a residential or office use in their business operations.
4. For foreign investors will be allowed to purchase land use rights from the State only once per legal entity only. Regardless of whether these entities will have how many branches in Laos.
This is an organization of local land protection to legal entity it is located will be considered and granted rights to use the land for foreign investors. They are the deed, as well as foreign investment, which in the deed, it will assign a name to an individual or a legal entity and determine the age of the land use right in that deed.
Other laws also seek to facilitate foreign investment. In early 1989, Decree 27 established the Foreign Investment Management Committee to centralize foreign investment approval procedures, thus enabling the Foreign Investment Law to be implemented. The Lao Chamber of Commerce was established in January 1990 to assist in attracting new business ventures. Private domestic and foreign investments have been encouraged by the gradual improvement of the legal environment, including the passage of laws regarding property rights (1990), contractual obligation (1990), inheritance (1990), crime (1990), civil procedures (1990), and labor (1991). The 1991 approval of the constitution, which protects the right to private ownership, is also an important factor in encouraging foreign investment. Also, as of late 1993, an arbitration law was being drafted that will provide a legal mechanism for the settlement of disputes. There was an informal arbitration procedure, but the lack of a law or decree made decisions nonbinding.