PRISTINE: I have heard anecdotes of how the court system in Lao PDR (better known as Laos) can descend into a bidding war where parties to a law suit ‘pay to win’ the case.
Whoever who pays more will be favoured to come out smiling from the court room. However, let that not deter you from investing in Laos. A number of Malaysian companies have already set up shop in Laos long before it was discovered by the international community in recent times.
Some of them included a small casino outside of Vientiane, the capital of Laos and Vientiane’s first five star hotel along the Mekong. Last month, Maybank opened its first branch in Vientiane signalling its confidence in the country.
Although rated as one of the poorest countries in the world, in many parts of Laos, especially Vientiane and Luang Prabang, which is a United Nations heritage site, the ambience is reminiscent of a small French village thanks to its French colonial heritage.
Most of the estimated 5 million population comprising 49 ethnic groups are involved in agriculture with the main crop being rice followed by vegetables and fruits. Although less than 5 per cent of the land is suitable for subsistence agriculture, it nevertheless provides around 80 per cent of employment.
As a result of its closed-door policy for years prior to its opening up, the country was virtually “virgin territory” in the truest sense of the word. Its people were in many ways ‘green’ to the wily ways of the world but more importantly its vast jungle and natural resources were practically untouched by tourism and extraction activities. Had you been there when it first opened, you would have marvelled at the gracefulness, politeness and simplicity of the people where the older generation still speak French and young girls blush when speaking to “falang” (foreigners).
Fast forward to 2005 and things were moving faster in the Land of a Million Elephants (although ‘fast’ in Laos is relative and probably considered slow in more developed countries like Malaysia). The Lao government has implemented gradual economic and business reforms to liberalise its domestic markets. The opening of Lao stock exchange in 2011 with two listed companies as part of a tentative move towards capitalism is perhaps a milestone that captured the new spirit of entrepreneurship that is gripping Laos now among its people and foreigners wanting a piece of the action. It heralded a new era where policies were formulated to attract investors and make the commercial scene more business-friendly and vibrant.
Word of Laos being a country full of opportunities spread fast and soon the whole world was looking at this landlocked and mountainous land and wondering how to get in.
The hotel business started booming since 2006 especially in key tourist spots like Vientiane and Luang Prabang. It used to be easy to get a hotel or guesthouse room where you just walk in and there would be a room available. This is no longer the case.
Real estate prices rose in tandem with increasing demand for space while the services sector benefited from higher wholesale and trade volumes and growth in tourism, transport and telecommunications. The manufacturing sector also benefitted from the growing demand for cement, construction materials, food, and beverages.
One of the biggest advantages setting up in Laos compared to other countries at a similar level of development is the abundance of electricity supply. Laos produces a surplus that is sold to Thailand. It is blessed with abundant natural resources, low labour costs, preferential access into Europe and the United States, and good infrastructure including rail links to China. Indeed last year, its economy grew at a rapid 7.9 per cent which is one of the highest GDP growth rates in the world.
Special Economic Zones
The expanding opportunities are not lost on the Lao government which in recent times have come up with the idea of setting up special economic zones to attract foreign investments. The latest reports indicate that the government has approved the setting up of 25 Special Economic Zones in various parts of the country.
One such zone is the Savan Park, strategically located along Route No 9, which is part of the EWEC (East West Economic Corridor) that runs horizontally across Thailand from Myanmar to Vietnam, passing Savannakhet along the way. The first industrial and commercial special economic zone in Savannakhet Province, the zone is about 2 km away from the Second Friendship Bridge with Thailand.
The zone, which is developed by a Malaysian company, Pacifica Streams Development Company Sdn Bhd offers investors many incentives including a 10-year tax holiday starting from the initial profit year, according to Ong Chin Chai of Savan Pacifica Development Co. Ltd, Laos.
There are many areas still untapped in Laos which present vast opportunities for the investors. Some industries that Malaysians can participate in include tourism, banking, lottery, casino, rubber plantation and manufacturing, according to Koh Seetiang, Secretary-General of Malaysian Exporters Association.
When investing long-term in a country, the investor may want to buy land. In Laos as in most of Indochina, in general, foreigners are prohibited from owning land and can only lease with maximum lease tenure (extendable) ranging from 30–99 years depending on usage. For special economic zones, the maximum tenure is 75 years which can be sub-leased or extended.
In conclusion, despite some of the ‘hardships’ of doing business in Laos, the rewards might be worth it. As in all ventures however, enter with your eyes open especially if you are going to part with lots of money.