April 21, 2024

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Snapshot: foreign investment law and policy in Laos

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Law and policy

Policies and practices

What, in general terms, are your government’s policies and practices regarding oversight and review of foreign investment?

The general rule is that a 100 per cent foreign-owned investment is accepted under Lao law. There are no restrictions on foreign investment in Laos, except as otherwise specified. The Law on Enterprise No. 46/NA, dated 26 December 2013 (the Law on Enterprise) and the Law on Investment Promotion No. 14/NA, dated 17 November 2016 (the Law on Investment Promotion), does not set out general prohibitions for foreigners that prevent them from holding 100 per cent of the share equity in a company in Laos. However, there may be specific regulations that apply to specific industries, and that may be imposed on foreign investors, such as a requirement to partner with a Lao national.

The investment regulatory framework of Laos has suffered from a lack of predictability and transparency regarding requirements for foreign investments to be granted the appropriate licence, and in recent years, the issuance of legislation or regulations has brought welcome clarity to the foreign investment framework. However, there remains closer scrutiny from the authorities on many activities related to foreign investment, and local administration still makes a number of decisions on a discretionary basis, although there has been a real commitment from the local authorities to reduce these types of discretionary decisions.

The amended Law on Investment Promotion, which was published on 4 April 2017 in the electronic official gazette, is the main piece of legislation providing the core general rules that apply to foreign investment and domestic investment. However, this does not preclude the local authorities from adding additional requirements to foreign investment by means of specific regulations relating to investment in specific industries or sectors.

The Law on Investment Promotion organises activities in Laos into three different categories:

  • general business activities;
  • concession activities; and
  • activities to be operated within a special economic zone (SEZ).


The Law on Investment Promotion separates general business activities into two categories: (1) activities that are included in the controlled business list; and (2) activities that are not included in the list. The Law on Investment Promotion provides that business activities under the Controlled Business List are businesses that are sensitive to national security, public order and national cultural traditions, and have a socio-environmental impact. Therefore, this legitimises further screening by the relevant authorities, which may be required before a foreign investor can be granted the proper licences. This list may also be considered a means to maintain the competitiveness of Lao operators in certain business activities. Requests – especially from foreigners – to conduct these activities in Laos will be thoroughly appraised, and authorisation thereof will require assessment and approval by every authority and government agency related to the proposed activity.

Activities not deemed to be controlled activities are more open and incur less scrutiny in respect to business registration, and the incorporation process is supposedly faster. This differentiation is also important as it determines the administration that will be in charge of handling the registration of the enterprise. While for controlled activities the registration should be handled by the Ministry of Planning and Investment (MPI), registration of activities that are not included in the controlled activity list will be handled by the Ministry of Industry and Commerce (MOIC), and the registration process is governed by the Law on Enterprise.

The local authorities issued the Decree on the Endorsement of the Business Activities under the Controlled Business List and the Concession List of Laos No. 3/PM, dated 1 January 2019 (the Decree on Controlled and Concession Activities). This decree clarifies the lists of activities that are to be considered as controlled activities or concession activities, and provides some requirements and conditions for these activities to be carried out in Laos.

A concession activity is an activity for which the local government has granted land to a project developer to conduct certain activities in a specified area, such as managing an electricity-generating facility (eg, a hydropower plant), an SEZ, an airline or a telecommunications operation. The list of concession activities is non-exhaustive, and the government may change it from time to time. Concessions are granted for a maximum of 50 years, although extensions are permitted with approval from the government, the national assembly or the provincial assembly, depending on the type of investment.

Currency control and management from local authorities may also be another factor for foreign investors to consider prior to investing in Laos. Local authorities in Laos closely scrutinise foreign exchange transactions. These types of transactions are currently regulated under the Law on the Management of Foreign Currency No. 55/NA, dated 22 December 2014 (the Law on Foreign Currency), along with the Presidential Decree on the Management of Foreign Currency and Precious Metal No. 1/P, dated 17 March 2008, and the Guideline on the Implementation of the Decree on Foreign Currency no. 1/BOL. These regulations will circumscribe the use of foreign currency within the country for limited objectives only, such as payment for goods imported from abroad; repayment of foreign loans and other commercial credit; repatriation or transfer of profits, dividends, principal, interest, and other service charges of foreign investors and wages of foreigners to their home country or a third country; the transfer of funds for investment in a foreign country; and others.

Additionally, the Law on Foreign Currency provides a general prohibition for legal entities to receive and make payment for goods, services, repaying debts, paying salaries and fulfilling tax obligations to the state in a foreign currency.

Main laws

What are the main laws that directly or indirectly regulate acquisitions and investments by foreign nationals and investors on the basis of the national interest?

Scope of application

Outline the scope of application of these laws, including what kinds of investments or transactions are caught. Are minority interests caught? Are there specific sectors over which the authorities have a power to oversee and prevent foreign investment or sectors that are the subject of special scrutiny?

The type of activity to be carried out by a foreign investor will determine the relevant authority handling the registration process. If the activity falls under general business, outside of the scope of the Decree on Controlled and Concession Activities, the investor will have to submit its application to incorporate a legal entity with the MOIC or its related department. This registration process is mostly set out in the Law on Enterprise, and further detailed in the Decision on Enterprise Registration No. 0023/MOIC.ERM, dated 9 January 2019. On the other hand, if the contemplated activity is contained in the Decree on Controlled and Concession Activities, the MPI will be the single window authority for the incorporation of the legal entity. These types of activities have their registration process set out in the Law on Investment Promotion.

The MOIC and the MPI will review the incorporation process of every application. Accordingly, they have the role to review and ensure that applicants abide by regulations with regard to: foreign share equity restrictions; and additional business operating licences that may be required for the contemplated activities. Discretionary decisions can be still be made, although this becomes less and less the case, and applications may have already been rejected because of national interests, although the rejection may not have been officially based on these grounds.

Law on Investment Promotion

The Law on Investment Promotion expressly recognises the possibility of having a 100 per cent foreign-owned entity including a wholly domestic or foreign-owned investment. Accordingly, companies owned by foreign investors are formally recognised under Lao law. This same law also refers to activities that now fall under the Decree on Controlled and Concession Activities, which may set specific restrictions to foreign investment, and also see the authorisation to operate in Laos thoroughly examined and approved by the Investment Promotion and Management Committee (the Committee).

The Committee will be the pivotal authority for consideration and approval of investments, and will include representatives from the MOIC, the 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 an SEZ, is overseen by 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 life of the legal entity engaged in business activity in Laos if modifications to the initial investment or project are contemplated, such as transfer of shares, changes to the objectives of the company or the use of the concession or investment rights as a guarantee. The Committee can also suspend or cancel previously granted licences if investors do not meet requirements. Though this committee and the list of controlled and concession activities are not targeting foreign investments specifically, it aims to regulate the registration and approval process for activities that attract significant numbers of foreign investors.

The Law on Investment Promotion provides further requirements regarding specific investments, although this does not target foreign investment specifically. For instance, approval from the national assembly is required for investments that include state equity participation exceeding 20 billion kip in a public-private partnership; construction projects involving a nuclear power plant; investment in a casino business; businesses having a serious impact on the environment, nature and society, and especially relating to the diversion of natural water flow; resettlement of 500 families or more and concession of land totalling 10,000 hectares or more; and other projects as required under relevant laws. Therefore, for these activities, a high degree of discretion in the approval or rejection of a project can be expected.

For concession activities, concession agreements must be negotiated with the appropriate local authorities. Exactly which authorities are responsible depends on the nature of the activity, its size and the investment in the activity. For instance, the responsible authority for electricity projects (eg, hydropower or solar power plants) will be either at the district level, province level or central (eg, ministry) level. Although not required by law, requirements to have participation from the government may be requested. This is often the case for hydropower plant projects, and electricity generation projects in general, where the government directly or through state-owned entities may be required to be part of the shareholding structure. Similar conditions apply to sectors such as mining. These two sectors remain particularly important in the Lao investment landscape.

The Law on Enterprise

The Law on Enterprise is a set of rules relating to corporate governance, and the internal organisation of a legal entity in Laos, regardless of their activities. Some activities may also have specific internal governance rules, such as in the commercial banking and insurance sectors. This Law is also still referred to for the registration process of general businesses that are out of the scope of the Decree on Controlled and Concession Activities, although other regulations have been issued to further detail the registration process set out in the Law on Enterprise. However, these general businesses may be subject to restrictions or licensing requirements if stipulated in a specific regulation. Below is an example of general businesses that are displayed in the Decree on Controlled and Concession Activities and are subject to restrictions on foreign investment:

  • The establishment of a wholesale and retail business is open to both domestic and foreign investors. However, local regulations set out specific requirements for foreign investors. Foreign investors must have registered capital of more than 4 billion kip, while there is no such high capital requirement imposed on local investors. If a foreign investor wants to hold 100 per cent of the capital of a legal entity, registered capital of more than 20 billion kip is required. The amount of registered capital will determine how much share equity a foreign investor may hold in a retail or wholesale business. For registered capital from 10 billion kip to less than 20 billion kip, foreign equity participation can be up to 70 per cent. For registered capital from 4 billion kip to less than 10 billion kip, foreign equity participation can be up to 50 per cent.
  • While domestic transportation of goods was open to foreign investors – up to 100 per cent foreign equity – prior to August 2018, the Ministry of Public Works and Transport issued Decision No. 17582/MOPWT, dated 8 August 2018, which provides that the local government will open investment to foreign investors according to their obligation toward the WTO and the Association of Southeast Asian Nations (ASEAN), which may prevent a foreign investor from becoming a majority shareholder. Given its strategic location within ASEAN (common borders with five countries and serving as a great hub between the ASEAN region and China), transport business is viewed as a very promising industry for Laos. Preventing wholly owned foreign businesses in this sector can be seen as a way to protect this market for Lao nationals only, although there is a lack of competition locally, and heavy investment may be necessary.

 The Regulation on Management of Foreign Investors regarding the Sale and Purchase of Securities

According to this regulation, the number of shares held by foreign investors in public companies may be limited by:

  • resolution of the public company;
  • regulation of relating sectors; and
  • consideration from time to time of the Lao Stock Exchange Committee.


For instance, a decision issued by the Lao Stock Exchange Committee in August 2015 restricted foreign individuals from holding 1 per cent of shares, and foreign legal entities from holding 5 per cent of shares, in the public company Électricité du Laos. In addition, the total shares held by foreign parties may not exceed 25 per cent of the total shares issued.

Land law

Land in Laos is under the ownership of the national community and is centrally managed by the state. Lao nationals can be granted land use rights, which include: the right to protect land; the right to use land; the right of usufruct; the right to transfer land use rights; and rights relating to inheritance of land use rights. Foreigners can lease land for a limited period and own buildings on that land. However, when the lease term expires, usually the buildings are given over to state ownership along with the land. As such, the purchase of land by foreign nationals is not possible. A lease agreement can be subject to an agreement with foreign investors; similarly, a concession activity may be granted a land concession for a period of up to 50 years, which may be renewed.

The Law on Land No. 70/NA, dated 21 June 2019 and published in August 2020 in the Lao official gazette, has brought some welcome changes. One of the main changes is the possibility for foreign nationals to claim proprietorship over apartments. Previously, foreign parties were not able to own such property in Laos. The law allows some foreign investment, including the exploration and survey of land, evaluation of standards (either land or construction) and land valuation.

In addition, while purchasing and selling land is still off limits to foreign parties, the new law allows foreign nationals to claim ownership for a definite period of time and for a definite type of project development, which is termed ‘state-allocated limited land use rights’. Here, land use rights are limited in two ways: time and purpose. the maximum term is 50 years, while the purpose is limited to developing specific projects in relation to real estate. Examples might include a residential area that provides different daily services for residents, a condominium or apartment or house construction. This limitation on types of activities is what makes this state allocation of limited land use rights different from a standard land concession, which typically does not come with such restrictions. The difference may also turn out to be procedural, as the process of purchasing state-allocated land use rights may prove faster than that surrounding the grant of a land concession; however, this remains to be seen from subsequent regulations detailing the implementation of the Law on Land and addressing these specific issues. These regulations will bring further clarity on the ownership foreign legal entities may hold over these limited land use rights, in addition to further clarifying other issues that affect directly business operations of foreign entities in Laos.

For instance, the future regulations will also set out in details on how land owned by Lao nationals may be used as an in-kind contribution to the registered capital of a legal entity with foreign participation. This was not possible before, which has posed serious obstacles to potential joint ventures between Lao and foreign investors. Indeed, real estate is often the only capital that is available to Lao nationals, and this is preferred over cash. Accordingly, in many instances we have witnessed local joint-venture partners not being able to inject the required capital into the legal entity. A new regulation that is expected in the coming months should make this feasible.

Law on Business Competition

The Law on Business Competition regulates the abuse of market dominance as well as mergers whereby two or more enterprises agree to transfer all of their legitimate assets, rights, obligations and interests; and acquisition of enterprises whereby an enterprise agrees to buy a part or all of the assets of another enterprise to be under its ownership and administration.

Approval may be required when:

  • holding the market share in the relevant market over the threshold as defined by the Business Competition Commission;
  • causing any impact on the access to the market and the restraint of technological development; and
  • causing any impact on consumers, other business operators and the national socio-economic development.


Additionally, the Law on Business Competition has created the Business Competition Commission (BCC). Generally, the BCC acts as an adviser to the government on issues relating to business competition. The BCC also has the express duty to examine the merger of businesses in regard to every type of business activity in Laos.

Notification on Reserved Business for Lao People

This covers activities that would usually require only a small investment capital, such as hairdressing. Investment in these types of business may be difficult for foreigners.


How is a foreign investor or foreign investment defined in the applicable law?

The local framework is very scarce in respect to this topic. The Law on Investment Promotion defines a ‘foreign investor’, but it does not provide a definition for ‘foreign investment’. A foreign investor is defined as a foreign individual or legal entity that is investing in Laos. For foreign entities, this is usually marked by the presence of foreign shareholders, which will, in the eyes of the authorities, determine whether a company should be considered foreign or not. In this vein, there is no threshold set out in the local laws. As such, a legal entity that is locally incorporated, and that has a foreign individual or a legal entity, holding so much as one share, may be considered a foreign legal entity by the local authorities.

Special rules for SOEs and SWFs

Are there special rules for investments made by foreign state-owned enterprises (SOEs) and sovereign wealth funds (SWFs)? How is an SOE or SWF defined?

Generally, there are no special rules relating to investments made by foreign SOEs and SWFs. Therefore, these investments may follow the common rules related to investment.

Similarly, there are no express definitions provided in respect to SOEs and SWFs.

Relevant authorities

Which officials or bodies are the competent authorities to review mergers or acquisitions on national interest grounds?

Under the Law on Investment Promotion, activities relating to concession activities or on the controlled business list may require a green light from the Investment Promotion and Management Committee. The Investment Promotion and Management Committee’s role consists mainly of approving investments in the activities in the controlled business list. However, its role does not end here, as it also examines and considers applications relating to: the transfer of shares; changes to the objectives of the company; and the use of the concession or investment rights as a guarantee. The committee also has the authority to suspend or cancel licences that have been granted to investors, if the requirements are not met.

According to the Law on Business Competition, the following acts may fall under the supervision of the BCC in regard to merger controls: holding market shares in the relevant market in an amount that exceeds the threshold defined by the BCC; causing any impact on access to the market or restraints on technological development; and causing any impact on consumers, other business operators or national socio-economic development. The Law on Business Competition further provides a duty of notification, specifically to ‘large enterprises’. This notification must be made to the BCC for consideration. However, a business merger of small and medium-sized enterprises (SMEs) is exempted from this notification requirement.

However, it is difficult to assess correctly the full ambit of the Law on Business Competition in practice. Indeed, while the law provides that the BCC is responsible for providing supervision so that a merger may not result in a holding of a market share in excess of the threshold defined by the BCC, there is, to date, no threshold that has been determined or made available for public knowledge. We understand that to date, without further guidance from the authorities, the fact that a merger may impact consumers, other business operators or national socio-economic development may be construed as a review under the prism of national interest grounds.

Although the Law on Business Competition has now been in effect for almost five years, the BCC was only officially appointed and began operating following the Decision on the Appointment of the Business Competition Commission No. 67/PM, dated 4 October 2018. Therefore, the experience of the BCC remains, to date, relatively limited in respect to these types of transactions, and there has not been any information disclosed about the type of deals that have been reviewed thus far by the BCC.

Notwithstanding the above-mentioned laws and policies, how much discretion do the authorities have to approve or reject transactions on national interest grounds?

Under Lao law, there remains room for discretionary decisions, especially if national interest grounds are raised, and the discretion of the authorities is broad in approving or rejecting a project.

Law stated date

Correct on

Give the date on which the information above is accurate.

20 November 2020.

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