Laos Establishes Investment Promotion And Management Committee.
Legal News & Analysis - Asia Pacific - Laos - FDI
26 March, 2018
Over the past several months, the Lao government has been introducing a number of measures aimed at promoting foreign investment, from implementing Notification No. 2633/Cabinet/MOIC to abolish minimum registered capital requirements for certain foreign investors, to enacting the new Law on Investment Promotion No. 14/NA (LIP) to facilitate investments among both domestic and international private investors, to promoting the Ministry of Planning and Investment’s One-Stop Service Unit and the Ministry of Industry and Commerce’s Lao Services Portal.
Recently, with the circulation of World Bank Group’s Doing Business Report 2018, which showed that Laos had fallen two places in the report’s ease of doing business rankings since 2017, the government seems to be putting renewed effort into addressing business challenges in the country. The government’s latest measure was the issuance of the Decree on the Establishment and Operation of the Investment Promotion and Management Committee No. 05/PMO, dated January 5, 2018 (the Decree), which provides further clarification on the establishment and operations of the Investment Promotion and Management Committee (the Committee), one of the main approval authorities envisioned under the new LIP.
Investment Approval Authority
The Committee is entrusted to act as one of the main approval authorities in Laos, and will also provide One-Stop Services, serving as the primary point of interaction between the Lao government and private investors of all nationalities.
To better understand the Committee’s role, one must consider that the registration of a legal entity and investment approval in Laos consists of two coexisting processes.
Applications will either be handled by:
- the Ministry of Industry and Commerce (MOIC), or its related department at the local level (i.e., municipal or provincial levels), for general business activities; or
- the Ministry of Planning and Investment (MPI), or its related department at the local level, for general business activities that are considered to be controlled activities, and concession activities.
Controlled activities include those which may have an effect on the stability of the country, or its order and organization, and the social environment and nature. Requests to conduct such activities in Laos are thoroughly appraised by relevant authorities and government agencies. Controlled activities are currently enumerated under a list that may be subject to wide interpretation by authorities. However, a new list, which may provide better clarity, is expected to be issued during the course of the year.
Concession activities are investments for which the government grants a land concession for the development of a specific project. These may include the development of a special economic zone or industrial zone, the exploitation of natural resources such as a mine or power plant, airline companies, or activities that are operated in the telecommunications sector.
The Committee will be the pivotal authority for consideration and approval of investments, and will include representatives from the MOIC, MPI, and other relevant government agencies. Two different levels of the Committee may be involved in the approval process, the Central Committee or Provincial Committees, depending on the nature and amount of the investment. Consideration and approval for controlled activities and concession activities that may have an adverse impact, as well as approval for the development of a special economic zone, will remain under the ambit of the Central Committee only.
The Committee’s role does not end once investment approval has been granted, and subsequent approvals will be required during the course of the investment and throughout the existence of the legal entity conducting the business activity in Laos if modifications to the initial investment/project are contemplated, such as: (1) transfer of shares; (2) changes to the objectives of the company; or (3) use of the concession/investment rights as a guarantee. The Committee also has the authority to suspend or cancel licenses granted to investors if requirements are not met.
Promotion of Investment Climate in Laos
The Committee also has the role of supporting the central and local governments in the following investment promotion duties, including:
- assisting in the research and drafting of policies, strategic plans, or regulations to support and manage investment from the private sector;
- proposing amendments to laws and regulations to the central or local government;
- monitoring the adoption and implementation of policies, plans, and resolutions by the central and local governments;
- researching and drafting policies, strategic plans, and regulations to promote further investment from the private sector, before submitting these to the central and/or local government for consideration; and
- seeking arbitration from the central government on issues or projects on which the Committee cannot reach a consensus.
Both the Central and Provincial Committees will share the duty of managing and improving the efficiency of the One-Stop Service in Laos. Although the system aims to facilitate communication within different government agencies to enable them to provide uniform services to investors, it has attracted criticism from both local and foreign investors over the past few years for failing to have a single point of contact when, for instance, the consideration of an application involves different ministries.
The One-Stop Service units at the central and provincial levels can be considered as permanent offices of the Central Committee and Provincial Committees, respectively. At the Central Committee level, the One-Stop Service will be based out of the Department of Investment Promotion, Ministry of Planning and Investment, and will include a representative from the relevant government agency, who will be tasked with considering different investment requests. At the provincial level, the One-Stop Service will be based out of the Division of Promotion Investment, Department of Investment Promotion of each province, and will also include a representative from the relevant government agency.
The Decree stresses that the Committee has the duty of facilitating private sector investment and easing the difficulties investors may face during the different stages of their business operation in Laos. Thus, private investors may notify the Committees about problems that they are facing during their investment. However, mechanisms for the Committee to receive and provide responses to comments from investors, and the exact issues they will be tasked with responding to, remain in the process of being determined.
Additionally, the Central Committee will be able to organize meetings with domestic and international investors to inform them about new regulations or policies that may impact the local investment climate, and to discuss obstacles encountered by investors to seek solutions to accommodate investments in Laos.
Although not expressly mentioned, the Decree may also help to promote and facilitate harmonious interpretation and implementation of laws in Laos, where the application of laws can vary from one province to another. It is hoped that this issue can be addressed through regular communications and exchanges between the Central Committee and Provincial Committees, such as through the organization of at least one meeting per year.
Committee Structures and Meetings
The Central Committee will be comprised of the following members:
- The Deputy Prime Minister, serving as the committee president;
- The Minister of Planning and Investment, serving as the committee vice president and permanent committee member;
- The Minister of Industry and Commerce, serving as the committee vice president;
- The Vice-Minister of Planning and Investment;
- The Vice-Minister of Finance;
- The Vice-Minister of Natural Resources and Environment;
- The Vice-Minister of Energy and Mines;
- The Vice-Minister of Agriculture and Forestry;
- The Vice-Minister of Labor and Social Welfare;
- The Vice-Minister of Public Works and Transport;
- The Vice-Minister of Information, Culture and Tourism; and
- The Vice-Minister of Public Security.
The Provincial Committees will be comprised of officials from their respective provinces and administration, as follows:
- The governor, serving as the president;
- The deputy governor, serving as the vice president;
- The head of the Department of Investment Promotion, serving as a permanent committee member;
- The head of the Department of Industry and Commerce, serving as the committee vice president;
- The head of the Department of Finance;
- The head of the Department of Natural Resources and Environment;
- The head of the Department of Energy and Mines;
- The head of the Department of Agriculture and Forestry;
- The head of the Department of Labor and Social Welfare;
- The head of the Department of Public Works and Transport;
- The head of the Department of Information, Culture and Tourism; and
- The head of the Department of Public Security.
The Committee must meet at least twice a month, and may be convened more frequently if necessary. The Decree provides that a quorum is met when at least 50 percent of the members of the Committee join the meeting, and when the members who represent the relevant government agency or have expertise in issues that will be considered during the meeting, are present. To avoid absence, the Decree provides members with the possibility of appointing a representative, or a proxy, to attend the meeting of the Committee on their behalf, whereby the representative should be from the same government agency as the member who is not able to attend.
Budget and Responsibility
The budget to run the Central Committee is directly linked to the Ministry of Planning and Investment’s budget, while the budget of each Provincial Committee is linked to each province’s Department of Investment Promotion, which is the counterpart of the Ministry of Planning and Investment at the provincial level.
The Decree empowers the two Committees to undertake and fulfill duties and obligations assigned to them by the government, and they have at their disposal their own seal to act and decide on both routine tasks and matters of greater importance. The Decree also expressly sets out that both levels of the Committee may enact Decisions (i.e., a legal instrument used by the head of an administration, such as a ministry, to frame their own duties and obligations, better organize the services of their administration, or elaborate and implement higher government legislation), relating to the establishment and operations of the One-Stop Service and its staff.
The Decree and the Committees it establishes send a positive signal for the investment climate in Laos, and are expected to play a key role in harmonizing investment laws and practices across the country, while expediting investment approvals and other essential processes for investors.
For further information, please contact:
Dino Santaniello, Tilleke & Gibbins