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On 7 November 2017, the Ministry of Industry and Commerce ("MOIC") issued Notification No. 2633/Cabinet/MOIC ("Notification") abolishing the minimum registered capital requirement for foreign investors in general business companies. This follows the enactment on 19 April 2017 of the new Law on Investment Promotion (No. 14/NA, dated 17 November 2016) ("new LIP"), which amended the previous Law on Investment Promotion (No. 2/NA, dated 8 July 2009) ("previous LIP"). The new LIP introduced a number of amendments to facilitate foreign investment in Laos, including providing a seamless process for business applications and issuance of licenses, as well as granting various incentives for certain business activities. It did not, however, provide clarification on the minimum registered capital requirement for foreign investors, which, pursuant to the previous LIP, was set at US$120,000 (about LAK 1 billion). MOIC released the Notification to address this issue.
Pursuant to the Notification, the minimum registered capital requirement for foreign investments in general business companies such as manufacturing companies, training providers and real estate companies, is abolished. Instead, they will be required to meet a certain minimum registered capital threshold prescribed by MOIC.
Business activities governed by specific sector regulations are not affected by the Notification. These include business activities of the wholesale and retail trade, repair of motor vehicles and motorcycles, and short-term accommodation and food service sectors. Companies that belong to these sectors are still required to adhere to the minimum registered capital requirements applicable to their respective industries.
The Government of Lao PDR allows foreign institutions, corporations, and associations, which exist in legal form in other countries, to establish a Representative Office in Lao PDR in accordance with Decree No. 119/PM, dated 20 April 2011 regarding the implementation of the new Law Investment Promotion in Lao PDR ("Decree"). The establishment of a Representative Office in Lao PDR enables foreign investors to conduct studies and gather information that are necessary for future direct investments. All activities of a Representative Office must be in compliance with Article 13 of the Decree.
On 24 November 2017, the Ministry of Planning and Investment ("MOPI") issued the Draft Decision on the Establishment and Management of Representative Office of foreign entities in Laos ("Draft Decision"). This follows the issuance of the Decree on the organisation and operation of Ministry of Planning and Investment, reference no. 201/PM, dated 30 June 2017 and the new Law on Investment Promotion (No. 14/NA, dated 17 November 2016) ("new LIP"). (Please see related story above.)
The Draft Decision defines the principles, regulations and measures regarding the operation, organisation and management of a Representative Office of foreign entities in Lao PDR in order for the latter to comply with relevant laws and regulations of the country. Consistent with the new LIP, the Draft Decision aims to promote investment in Lao PDR pursuant to the policies of the national socio-economic development.
The Draft Decision provides that the Representative Office shall serve as the focal point of the parent company in the country to facilitate communication and coordinate activities that the parent company intends to implement in the country. The Representative Office will also monitor the implementation of the Memorandum of Agreement / agreement that is executed by the parent company and the Government in relation to concession activities (but not those relating to construction contracts, aid agreements and other business agreements).
The Draft Decision prescribes the minimum registered capital requirement for a Representative Office of a foreign entity to be US$50,000. The public consultation on the Draft Decision runs from 24 November 2017 until the assembly meeting day.
The Government of Laos PDR issued a new Decree on The Entertainment (No. 315/Gov, dated 2 October 2017) ("Decree"), which prohibits business establishments from putting up entertainment places near identified places. It also prohibits persons under the age of 18 from entering entertainment places. The Decree was issued to protect and monitor the entertainment business in the country and harmonise its standards across the whole country. The Decree covers disco houses, night clubs, pubs, snack bars, karaoke joints and concert places, as well as beer shops named as restaurants or general outdoor entertainment places.
The Decree defines the general standards that must be observed in the entertainment places, including their locations, the size of the parking areas, interior decorations, safety, and the services to be provided. It is stipulated that the entertainment places should be located at least 500 meters away from schools, hospitals, state organisations, international organisations, Buddha places, caves and other important national places. Additionally, these entertainment places, as well as the entertainment places in the hotels, resorts and restaurants shall have a parking area of over 600 square meters. For safety and security purposes, the Decree mandates that the entertainment places must have security guards, security warning systems, fire escapes, and other security protection equipment.
The Decree mandates that businesses must obtain permits from the Public Works and Transportation Department prior to the construction of entertainment places. The materials used for the construction should be durable and safe.
The Laos Government has presented the Draft Law on Economic Dispute Regulation (Amended) ("Draft Law") to the National Assembly. The Draft Law sets out the principles, regulations and measures regarding the organisation, practice, management and inspection of the economic dispute resolution task. This is to provide the means for the internal and external investors to resolve economic disputes peacefully, foster international integration, and ensure the expansion of businesses in the country.
From the wording of the Draft Law, some provisions of the current Law on Economic Dispute Resolution ("Applicable Law") will be amended and redrafted to be more comprehensive and thorough.
One such example is Section 16 on the types of economic disputes that falls within the purview of the law. The Applicable Law provides that the disputes that may be brought and considered for resolution are those that relate to economics or trade. The Draft Law seeks to clarify this by stating that these economic disputes, to be covered by the Draft Law, must be "breaches of contracts…related to business activities" and "disputes related to business activities".
The Draft Law is awaiting approval.
The Laos Government has presented the draft Law on Technology Transfer to the National Assembly. It seeks to regulate technology transfer in various sectors in the country, through the enactment of regulations to facilitate research and development, inventions, and use of innovation. The draft Law also proposes to encourage use of technologies that result in environmentally-friendly production, and enhanced economic value of plants and animal fertility.
The Draft Law is awaiting approval.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only
intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.
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