Vientiane, 26 June 2008. The 4th Lao Business Forum (LBF) took place in Vientiane on June 26 giving the private and public sectors an opportunity to dialogue on key issues affecting the private sector and hear about government plans to improve the Lao business environment and encourage investment.
In his opening address to nearly 300 business, government and donor representatives in attendance, the Minister of Planning and Investment (MPI), Mr. Soulivong Dalavong, outlined the achievements made over the past six months and highlighted the importance of the LBF as a “significant opportunity to identify the key constraints of the private sector through a transparent and constructive dialogue with the Lao government.”
Co-chaired by Mr. Patchamuthu Illangovan, the Country Manager of the World Bank, the fourth edition of the Forum sought to address private sector concerns on issues regarding land titles, wood processing industry, and specific tax concerns, as well as giving an update on progress made on issues that have been addressed in previous Forums. The Forum also featured a review of the investment climate in Laos, highlighting positive developments in the dialogue between the government and the private sector.
“One remaining constraint in furthering private sector investment in Laos is access to finance. However important achievements have been made over the years particularly the promulgation of the law on commercial banks, which has allowed international banks to enter the Lao market and create jobs and improve services. Going forward there is still a lot of work to be done, and this LBF dialogue is vital in getting us there,” said Mr. Sananh Chounlamany, Vice President of the Lao National Chamber of Commerce and Industry, when he discussed the investment climate in the country.
The way in which the Forum is structured, representatives from “Working Groups” – established to carry out ongoing discussions throughout the year – present to the government the issues that they would like to formally raise at the Forum, which have been discussed at the working group level in previous months.
The Services and Trade Working Group recommended that the government further clarify information on how land titles can be used as instruments for securing loans and improving access to finance for the private sector and requested the government to implement necessary regulations to facilitate the use of movable property, such as vehicles and equipment, as collateral. This Working Group, through its Education Sub-Working Group, also raised the issue of taxation of private sector educational institutions by requesting that proposed changes eliminating tax exemptions for private schools be reviewed and reconsidered. Meanwhile, the Manufacturing Working Group recommended that the government review a decision to require compliance on standards for wood processing, which could negatively impact small and medium-sized businesses. The Working Group also raised the issue of a unified tax rate for garment manufacturers to ensure that the same profit tax rates apply to all firms in the sector. Currently, tax rates in the sector vary depending on the tax incentives available at the time firms were established.
Government participants responded to issues raised by the private sector by stating that regulations are under preparation to facilitate the use of movable property as collateral and would hopefully be issued soon and that new regulations to address the private sector’s concern regarding standards for wood processing would be considered. Regarding the tax issue affecting private schools, the Ministry of Education emphasized the importance of supporting private education and suggested that an inter-ministerial task force be established to assess how best to support the development of private education and to look at these tax issues. Regarding the issue on unifying the tax rate for all garment manufacturers, Mr. Soulivong informed the audience that a new Law on Investment Promotion is currently being prepared by the Government that should clarify the issue of tax incentives.
Issues from previous years were also brought forward by the Working Groups, and progress was reported to all of the participants. These included an update on ongoing discussions on trade, tourism, mining and other developments in Champasak province.
Since the 3rd LBF in November 2007, a number of important achievements have been made, including the enactment of the Intellectual Property Rights Law, an increase in the deductible tax ceiling for travel expenses and the ability to treat donations as a deductible expense. The private sector also highlighted the progress made in improving enforcement of compulsory third-party bodily injury liability insurance. .
Since the inception of the LBF, the number of participants has grown on both the private and public side of the table. In fostering constructive public-private dialogue, the Lao Business Forum has played a valuable role in the drafting of the new Mining Law. The Ministry of Energy and Mines has been consulting with the private sector since the drafting process began and in May held a successful workshop with stakeholders and private sector representatives. This is an important process to foster commitment and acceptance from the private sector for ease of implementation at a later date.
In his concluding remarks, Mr. Soulivong expressed satisfaction with the number of issues resolved since the previous Forum, and expressed his hope that similar progress would be achieved before and during the next Forum, which will take place in about six months’ time.
For more information please contact:
Pascale Rouzies, Lao Business Forum Coordinator
c/o IFC-Mekong Private Sector Development Facility (IFC MPDF)
90 Phonexay Road, P.O. Box 9690
Vientiane, Lao PDR
Tel: (856-21) 450 015-17
Fax: (856-21) 450 020
Email: prouzies@ifc.org
