wg1（transparency and predictability of laws and policies

ＷＧ１（Transparency and Predictability of Laws and Policies）

●Clarification of definition of foreign companies

Background: The agreement of MOIC on wholesale and retails (No.0891/MOIC.DT, dated on 7 May 2012) prescribes as follows; domestically-funded enterprises are defined as 50% or above of equity ratio by Lao investors. Foreign companies are defined as registered in foreign countries, or 51% or above of equity ratio by foreign investors and registered in Laos.

- How dose the investment promotion law defines foreign companies?

- Is a company which foreign investors has 51 or above of its company’s equity ratio a foreign company?

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Discussion results

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○ Currently there is no law/regulation on the definition of foreign companies. The investment promotion law does not define foreign companies.

○ For example, a company which Japanese investors hold 51 or above of its company’s equity ratio is called as not a foreign company but a joint company.

○ To establish a joint company, at least 10% investment by a foreign investor is required.

●Clarification of restriction on foreign investment

Background: MOIC reserves some business sectors only for domestic investors with the notice No.1327/ERM, dated on 13 July 2015) but it seems that the notice’s information does not cover all information on restricted business sectors.

- Please summarize information on all restricted business sectors, and provide a comprehensive list on restricted business sectors for foreign investors.

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Discussion results

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○ The reserved list of business sector for domestic investors is prescribed in PM decree No.68 dated 28 April 2008. The business sectors which are not listed in the list can be invested 100% by foreign investors.

○ It is difficult to share the comprehensive reserved list because other related ministries make restrictions in specific sectors.

○ MOIC is requesting each ministry to share information on the reserved sectors. If the reserved list does not cover all sectors, please inform MOIC so that MOIC will be able to consider a way to improve this issue cooperated with line ministries.

○ In a case that MOIC revises the reserved list, the list is published on MPI’s web site but the list was not translated from Lao to English. If possible, it would be appreciated if staff of Japanese companies who can read Lao could check the web site.


●Deregulation of foreign investment

Background: Although the restriction on foreign investment to wholesale and retail was eased, there are still many restrictions in the service sector. As an activity of ASEAN Economic Community, 70% of 128 sub-sectors in the service sector (total 155 sub-sectors) need to be liberalized. In Laos its liberalization’s progress seems not to be well.

- Japan side would like to request liberalization on logistic and construction sub-sectors which are primary interest areas of Japanese investors

- Health and Education sub-sectors also interest Japanese investors therefore explanation about regulations on such sub-sectors would be appreciated.

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Discussion results

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○ The logistic sector is not possible to be eased because of CBTA（Cross Border Transportation Agreement) in the GMS（Greater Mekong Sub region）..

○ Foreign investment in the construction sector is possible depending on the amount of registered capital; less than 240 billion kip of the registered capital is for 49% foreign investment and 240 billion kip or more than that of the registered capital is for 100% foreign investment.


●Renewal of the license of representative offices

Background: According to the discussion last year, Japan side understands that MPI is positively considering lifting restriction on renewal of the license of representative offices. In fact, Japanese representative offices have been renewed over the limit of the number of renewal which is prescribed in the regulation. The regulation became a dead letter.

- Japan side would like to request to amend the regulation so that the offices will be able to renew their license without any limit of the number of renewal.

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Discussion results

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○ Currently the Lao Government is amending the investment promotion law and this issue will be prescribed in the law as “prescribed separately”. In the process of the separate regulation, Lao side would like to consider Japan side’s request.

○ Establishment of branch offices which are currently approved only for finance, health, international consulting and airline companies is under discussion to be liberalized for other sectors.

○ Generally Japanese companies need decision of the headquarter in Japan for establishment of head offices. If establishment of branch offices is possible, business operation of Japanese trading companies would be easy because it is possible to establish branch offices with only decision of a regional head quarter.


ＷＧ２（Taxation）

●VAT refund

Background: About 20 Japanese companies have applied for VAT refund since 2013 however process of the refund is not completed. If VAT refund is not be completed, it would have negative effects on their business operation. As the result, the Lao economy would also be affected negatively such as decrease of FDI, foreign reserve and so on. If VAT is refunded, their business operation would be smooth, and it would promote further FDI and increase foreign reserve. It makes Win-Win situation between the private sector and the Government.

- Japan side would like to request the Lao Government for further activities for proper VAT refund within one month as prescribed in the VAT law.

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Discussion results

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○ VAT will be refunded if companies follows the following steps; submission of a yearly financial report (Jan-Dec)

in January – March, receiving an examination by the authority, (if no problem on the submitted documents)

reporting by the tax department to Minister, Minister’s approval for VAT refund.

○ As for the delay of VAT refund process, please submit the documents which clearly specify company name, submission date, etc. to the director general of Tax department of MOF.


●Process of issuance of Tax payment certificate

Background: Delay of Tax payment certificate issuance causes Japanese companies’ business operation such as import, export, various license procedures negatively.

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Discussion results

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○ One of the reasons of delay of Tax payment certificate issuance is a flood of application for issuance. Tax department has to deal with more than 100,000 applications.

○ Tax department would like to discuss with MOIC and Customs department whether a document which probes under application could be an alternative document of Tax payment certificate. At a later date, Lao side would like to share the result of the discussion.

○ It would be appreciated if Japan side could share a list that clearly shows which tax offices’ procedure of issuance is being delayed.


●Approval of Master list which exceeds the amount of the registered capital

Background: In Savannakhet, the authority has not been approve Master list (a plan of raw material import) which exceeds the amount of the registered capital of a company. A company might lose competitiveness with other countries.

- Japan side would like to request the Lao authority to investigate this issue in Savannakhet and to amend the

regulation so that companies will be able to get approval about Master list which exceeds the amount of the

registered capital.

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Discussion results

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○ There might be a case before time that small companies tried to import huge amount of goods then the authority established such regulation. Japan side’s advice how to handle this issue would be appreciated.

○ Explanation by Japan’s side would be appreciated on how this regulation have negative impacts on Japanese companies concretely.


●VAT impose on equipment registered in the master list

Background: When a Japanese company imported machines for its factory in September 2016, 10% VAT was imposed on the machines in spite of the fact that the machines are not available in Laos and registered in the master list.

- According to the article 16.2 of the VAT law, the equipment which are not available in Laos and registered in Master list shall be applied for VAT 0%. What’s the reason VAT 10% was imposed?

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Discussion results

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○ Equipment in Master List is not always tax-free .

○ All related documents need to be checked to make sure whether the procedure was correct.

○ Please inform Customs department if tax exemption at the border is not implemented based on Master List.

ＷＧ３（Logistics and, Approval and License Procedures ）

●Agreement on mutual entering of trucks with Thailand

Background: Although Thai trucks can enter Laos, Lao trucks are not allowed to enter bonded areas at airports and

ports in Thailand. Therefore, in a case of land transport from/to airports or ports in Thailand, Thai trucks must

be used and it causes one of the business obstructions for the private sector in Laos. In addition, although

Thai nationals can drive with a Thai driving license in Laos, Lao drivers are not allowed to drive through in

some provinces in Thailand with a Lao driving license. Therefore, Lao drivers of a Japanese company

obtained the international driving license to enter Thailand.

- Please request Thai authority so that Lao trucks will able to enter bonded areas at airports and ports in

Thailand.

- Please request Thai authority so that Thai police will not intern Lao drivers holding only the Lao driving license.

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Discussion results

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＜Agreement on mutual entering of trucks ＞

○ This issue is recognized as a problem by not only Japanese companies but also Lao companies.

○ The Lao Government requested a meeting for Transport Ministry in Thailand in the beginning of 2016, and the meeting was held in July. It turns out that there is a regulation in Thailand that foreign trucks have to follow several conditions including payment of deposit but only a part of the conditions were shared with the Lao Government by the Thai authority in spite of the request by the Lao Government.

○ It would be appreciated if Japanese companies could collect information about actual operation at bonded areas managed by Thai companies and share with the Lao authorities ion order to discuss together to solve this issue.

＜Issue of driving license＞

○ The Lao driving license is written in Lao and French. It may take time to change a system and add English description in the license.

○ In a case of a normal car, a driver can drive in Thailand with the Lao license.


●Customs clearance procedure

Background: Internet speed of the ASYCUDA at the customs office at Vantao is too slow and it hinders smooth paperwork

- Japan side requests to address this problem.

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Discussion results

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○ Ministry of posts and telecommunications would like to discuss with Customs department of MOF to improve this issue.

○ It needs to make sure whether communication capacity or a system affects slow communication speed.

○ There is an internet center which established for the ASEAN summit. If possible, there might be a way to use the center for ASYCUDA but this decision needs to be done by Ministry of Finance.


●Logistic parks

Background: Japan side welcomes the Lao Government’s activities to reduce transport costs such as establishment of ICD (Inland Container Depot) in Savannhakhet.

- It is important to make a mechanism to operate logistics centers in terms of both hardware and software. Japan side would like to request to establish distribution systems including Vientiane Logistics Park.

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Discussion results

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○ With increase of inland depots, Customs Department is working with a JICA expert on 3 issues; human resource development, simplifying procedure and modernization of equipment. e.g. as for human resource development, Customs Department is dispatching officials to the Customs office near SEZs such as Seno in Savannakhet.

○ Recently, LIFFA and MPWT established a vocational school for human resource development but its scale is small.

○ WCO（World Customs Organization） with supports of Japanese Government held a workshop for Customs Department and ICD companies on smooth Customs procedure at ICD in Laos. Also, JICA together with Customs Department and Lao Logistics Company is supporting to improve Customs procedure and Public-Private coordination for establishment of Logistic Parks based on result of the WCO work shop.

○ With looking ahead to establishment of Vientiane Logistic Park, inland custom clearance process and procedure for bonded transportation which are not prescribed in the current Lao domestic law are under discussion.

○ The inland container depot in Savan-Seno has ASYCUDA, and a system to manage tax payment in real time and land administration. This system will be expanded to 12 SEZs. Currently the system was introduced in 5 SEZs.


●National Single Window System

Background: Japan side welcomes the issuance of “the Decision on Implementation of Lao National Single Window” by MOF (No. 2109/MOF) and progress of the trade promotion policy of the Lao Government based on AEC and CBTA.

- Japan side would like to hear the current situation and future plan.

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Discussion results

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○ Currently basic test on a system of certificate of origin at MOIC was completed and activities of the national single window will expand.

○ It is quite important to develop a system to connect ASYCUDA of Customs department and expand activities of the national single window.

○ On the other hand, it turns our that there is a technical challenge to connect ASYCUDA and the issuance system of certificate of origin at MOIC. Currently, the Lao Government is trying to approach UNCTAD to get both financial and technical support to address this issue.


●Government services at the border

Background: In a case that an officer at the reception counter of the border is absent for a business trip or a meeting, other alternate officer needs to cover but such system does not work well and it hinders smooth procedure.

- Japan side requests to improve environment for smooth administrative procedure at the border.

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Discussion results

○ There are many authorities working together at the border and each authority follows each authority’s rule.

○ It depends on congestion and situation but if the issue is related to my ministry (Ministry of Finance), I would like to report my boss for improvement.

○ Please identify specific authorities which need to be improved.


●Simplifying of issuance of work permit

- Japan side would like to request to simplify the issuance process of work permit.

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Discussion results

○ Before applying work permit, a company needs to apply for quota of foreign workers to Ministry of Labor and Social Welfare.

○ Depending on the number of workers and the situation of inadequate documentation, time would be different but generally it takes about four weeks; two weeks for quota issuance, one week for preparation for work permit application, and one week for issuance of work permit.

○ Ministry of Labor and Social Welfare accepts application for quota but application destination of work permit is the Vientiane capital city. In a case of application in other provinces, the labor and social welfare department of each province accepts application for work permit.


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Discussion results

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○ The celling amount of 30,000 USD was stipulated by the investment promotion law in 2009.

○ Currently the investment promotion law is under discussion at National Assembly. This issue will be amended according to Japan side’s request.

●Celling amount of emergency import

Background: Prime Minister’s decree related to the investment promotion law stipulates the celling amount of emergency import as 30,000 USD.

- Japan side requests the Lao Government to allow emergency import which exceeds the limit amount if there is a legitimate reason.


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Discussion results

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○ Lao side requested Japan side to specify which Lao authorities need to be targeted.

●Improvement of the Government services at the reception counter

Background: For example, there was a case that there was no officer at the reception counter for issuance of certificate of origin duet to some internal meetings. There was no information about when the meetings would finish. Such a case is an obstacle for smooth business operation.

- Japan side hopes that MPI as an authority to promote foreign investment will share this issue with other Lao authorities and work together with us to come up with remedial measures

wg1（transparency and predictability of laws and policies

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