Chapter 5. Lao PDR

Regulatory reform in Lao PDR in recent years has been accelerated by the country’s accession to the World Trade Organization in 2013 and by ongoing regulatory developments in the Association of Southeast Asian Nations (ASEAN) Economic Community. Lao PDR has already adopted a number of good regulatory practices, including mandatory regulatory impact assessments and stakeholder engagement in the development of new regulations. The government also recognises the importance of reviewing existing regulations on a regular basis, as stipulated in its regulatory impact assessment (RIA) guidelines. In order to align Lao’s regulatory processes with regional single market objectives and to facilitate greater Lao participation in global value chains, a significant amount of new regulations is expected to be developed in the coming years. This offers opportunities for Lao PDR to introduce regulatory policies and processes that complement or comply with regional and international standards.


Regulatory context

Small and medium-sized enterprise (SME) development is a national priority in Lao PDR. Several government plans and strategies explicitly address the need to support the growth of SMEs (Box 5.1), with support from the highest political level. The Prime Minister personally attends the full biannual meetings of the Lao Business Forum and has made SMEs and access to finance a strong focus for Lao PDR’s ASEAN Chairmanship in 2016.

Box 5.1. National plans emphasising SME development in Lao PDR

The 8th Five-Year Plan for National Socio-Economic Development (2016-20) marks the promotion of SMEs as a key output, with activities to (UNDP, 2016[1]):

  • Create production chains between large enterprises and SMEs.

  • Improve taxation procedures for SMEs, including developing detailed guidelines on lump-sum tax payments and a simple accounting system.

  • Improve and utilise the SME promotion fund.

  • Provide business development support to SMEs.

10 Year Development Strategy to 2025

There have also been three SME Development Plans in Lao PDR, each setting out policy priorities for a five-year period. The first development plan focused on setting up an enabling environment for businesses to grow in both the domestic and international market through regulatory and administrative reforms and encouraging entrepreneurial attitudes and characteristics within the society. The second development plan focused on building on the achievements and progress from the last development plan while rolling out new services to provide support to a growing SME base. This includes enhancing business linkages between large enterprises and SMEs and upgrading the quality, standards and level of productivity among SMEs.

  • The current and third SME Development Plan (2016-20) aims to:

  • Promote productivity, technology and innovation.

  • Enhance access to finance.

  • Enhance access to business development service (BDS).

  • Enhance SME accession to expanding domestic and international market.

  • Create and develop entrepreneurs.

  • Create an enabling environment for the establishment and operation of SME business.

  • Policy on customs-taxation and finance.

Source: UNDP (2016), The 8th Five-Year National Socio-Economic Development Plan 2016-2020,

Lao PDR has been described as a “deal-based” rather than a “rules-based” economy. For example, it is common for fees to be negotiated between businesses or between businesses and the relevant ministry. A number of well-drafted laws and regulations exist, including in the English language, although their delivery and oversight are less consistent. Regulatory reform is underway, however, and the government recognises the need to establish clearer, more robust regulatory frameworks, as well as improve their enforcement.

The ASEAN Economic Community (AEC) Blueprint is shaping the direction of Lao policy and regulatory development, which aims towards regional convergence. Lao progress in regulatory development has also been accelerated by its accession to the World Trade Organization (WTO). The next WTO review for Lao PDR will be in 2019. A large inflow of new regulations will be a significant challenge for businesses – and SMEs in particular. Enforcement will also be a major challenge for the state.

The government is currently working with many development partners to implement SME regulatory support programmes. Key players include the World Bank, Asian Development Bank (ADB) and the ASEAN Secretariat.

Regulatory governance

Institutional and regulatory setup

Table 5.1. Institutional and regulatory setup in Lao PDR


State structure

Single Party Socialist Republic

Head of sate



The executive power in Lao PDR is vested in the President. The President appoints the Prime Minister and the Council of Ministers, with approval from the National Assembly.

● The Government is headed by the Prime Minister. It is responsible for implementing the Constitution as well as laws and resolutions of the National Assembly, Presidential edicts and decrees. It can submit draft laws to the National Assembly, draft Presidential Edicts to the National Assembly Standing Committee, and draft Presidential Decrees to the President. It may also issue decrees and resolutions on state administration and management in various governance areas including defence, security, foreign affairs, natural resources, science and technology. The government may propose to the National Assembly the creation of abolishment of ministries and ministry-equivalent organisations as well as definitions the boundaries of provinces and cities and may suspend or cancel decisions or instructions of ministry or ministry-equivalent organisations if they contradict other laws and legislation. (Article 70, 2015 Constitution of Lao PDR).

Line Ministries are responsible for initiating and drafting law and regulation proposals. They also oversee the implementation of regulations in their fields of competence.

Ministry of Justice (MOJ) is in responsible for quality control of all laws and regulations. A Centre for Regulatory Impact Assessment is established within the MOJ.


Unicameral legislature

The legislative power in Lao PDR is vested in the National Assembly, which is responsible for making decisions on national affairs, national plans and strategies, adopting or amending constitutions and laws (including cancelling legislation), and monitoring their implementation. It may also elect or remove the President, Vice President, and members of its Standing Committee.

Legal system

● The Supreme Court is the highest judiciary power. It presides over the decisions of the peoples’ courts and military courts.

● Three levels of People’s Courts exist below the Supreme Court; 1) area or district courts of first instance; 2) provincial or city courts of first instance; 3) regional appellate courts in the north, middle and south of Lao PDR for decisions adjudicated by provincial or city courts. Regional courts can also issue orders, judgments and final decisions to law enforcement authorities for implementation.

Central Military Tribunal adjudicates criminal cases relating to military matters or occurring within military compounds.

Labour chamber rules over disputes arising from labour contracts, occupational health and safety, and salary and wage claims.

Commercial chamber rules over disputes arising from commercial contracts, payment instruments, intellectual property, bankruptcy and liquidations, partnerships, loan and financing, insurance, and international trade.

Administrative-territorial structure

17 provinces and one prefecture

Ministry or agency responsible for SMEs or SME-related issues

Department for Small and Medium Enterprise Promotion (DOSMEP) under the Ministry of Industry and Commerce

Other support structures within government on regulatory policy

Investment Promotion and Management Committee is a cross-cutting committee headed by the Deputy Prime Minister with representatives from ten ministries that approve and oversee all investment in controlled business sectors and areas.

Department of Standardization and Metrology (DOSM) is the national standardisation agency, and also represents Lao PDR in the International Standards Organization (ISO).

National Chamber of Commerce and Industry (LNCCI) is a private sector body representing private sector interests, but with clear government involvement. LNCCI is regularly consulted by government on draft regulations. An SME Service Centre exists in the LNCCI.

Lao National Business Committee issues Certificates of Origin (C/O) for some trade agreements that are not issued by the Ministry of Industry and Commerce.

Lao PDR’s legislative process

Figure 5.1. Overview of the legislative process in Lao PDR

Note: Draft laws may be proposed by the following: President; National Assembly Standing Committee; Government; Office of the Supreme Public Prosecutor, People’s Supreme Court, State Audit Organisation; Lao Front for National Construction and other major central agencies (Article 59, 2015 Constitution of the Lao PDR). Decisions of the Prime Minister or Minister have the same steps of impact assessment and consultation. Some but not all Prime Minister decisions go on to Cabinet.

Line ministries are responsible for initiating law and regulation proposals, drafting them and having the laws, regulations processed through the lawmaking process required by the Law on Making Legislation 2012 (Box 5.2).

Box 5.2. Law on making legislation in Lao PDR, 2012

Brief extract of roles and responsibilities (Article 28):

The authority in charge of law making – the relevant ministry – shall (Government of Lao PDR, 2012[2]):

  • develop a lawmaking and amendment plan, with budget

  • set up a legal unit (responsible to the ministry)

  • appoint a law drafting committee, chaired by a Vice-Minister or Deputy Head of Authority

  • provide policy guidelines to the law drafting committee

  • propose the draft law and unsolved issues to the government

  • propose to the Prime Minister to appoint a draft law defending committee to present to the National Assembly

  • assess the implementation of laws in their area of responsibility

  • collect and analyse information

  • conduct public consultation, direct consultation with concerned sectors and parties and ask for comments from domestic and foreign experts

  • prepare explanatory note (background and problem, objectives, rationale and needs, explanation of important articles, resources, mechanisms and implementing authority, expected outcomes) and impact assessment.

The Ministry of Justice shall:

  • conduct comprehensive review and research of draft law, particularly legal structure

  • send comments back to drafting authority (ministry)

  • invite the drafting committee and relevant sectors to review and edit to ensure consensus before submission to the government.*

Cabinet consideration:

  • representatives of the National Assembly committees and other relevant parties may attend the meeting considering the draft law

  • focuses on issues raised by the government office.

* The Drafting Authority retains responsibility of the proposed law; however, in practice, it tends to adopt the opinion of the Ministry of Justice.

Source: Government of Lao PDR (2012), Law on Making Legislation (Unofficial translation),

Regulatory process for business-related laws

In the case of business-related laws, the main responsible ministries are the Ministry of Industry and Commerce and the Ministry of Planning and Investment.

An Investment and Promotion Management Committee established under the Amended Investment Promotion Law approves and overseas investments in controlled business sectors, concessionary businesses and special economic zones (SEZs). This committee is headed by the Deputy Prime Minister and features representatives from ten ministries.

Laws and regulations relevant for SMEs

Regulatory policies for businesses in Lao PDR are generally the same for all enterprises regardless of their size. Almost all businesses in Lao PDR are SMEs; out of some 80 000 companies in Lao PDR, more than 97% are SMEs. SMEs accounted for roughly 82% of employment in Lao PDR in 2013 (GIZ, 2014[3]).

There is, however, a dedicated Law No. 11/NA on the Promotion of SMEs which sets out a number of SME promotion activities aimed at creating an enabling environment for SMEs, including building on and improving existing regulations to be more transparent and improving the efficiency of government administrative services (Government of Lao PDR, 2011[4]). There is also specific mention of enhancing co-operation between SME and large enterprises as well as foreign investment enterprises by enacting the relevant legislation and measures.

SMEs are categorised into production, trade and service sectors in order to recognise the different assets and turnover scales in the respective sectors (Table 5.2). There is no standard difference for the regulation of SMEs in different sectors. However, there is a difference in taxation threshold and procedure according to SME size.

Table 5.2. Definition of SMEs in Lao PDR



Assets (LAK)

Annual turnover (LAK)



Micro-enterprise - production


< 100 million

<400 million

Micro-enterprise - trade


<150 million

<400 million

Micro-enterprise - services


<200 million

<400 million

Small enterprise

Small enterprise - production


up to 1 billion

up to 2 billion

Small enterprise - trade


1 billion

3 billion

Small enterprise - services


1.5 billion

1.5 billion

Medium enterprise

Medium enterprise - production


up to 4 billion

up to 4 billion

Medium enterprise - trade


4 billion

6 billion

Medium enterprise - services


6 billion

4 billion

Source: Phaophongsavath, P. (2017), “Decree on Classifying SME categories”, Small and Medium Enterprises Development in Laos, PowerPoint presentation,

The Investment Promotion Law (amended in 2017) provides tax incentives to businesses of all sizes investing in “promoted sectors” depending on where the investment is located. Agriculture, industry, handicrafts and services are designated as promoted sectors.

Highlights of regulatory opportunities and challenges to support SMEs

Regulatory clarity

A dedicated SME Promotion Strategy includes indicators and targets for specific policy areas (Table 5.3) (OECD, forthcoming[5]). However, the procedures to achieve them are not clear.

Table 5.3. Policies and targets in the promotion of SMEs (Prime Minister’s Decree 42)


List of seven policies



Promote productivity, technology and innovation

The average annual productivity must increase from USD 9 000/person to USD 12 000/person.


Enhance access to finance

The percentage of SMEs access to finance increase from 20% in 2016 to 30% in 2020.


Enhance access to business development service (BDS)

Increasing the ratio of SMEs who have received business development service from experts increase from 4.28% in 2013 to 30% in 2020.


Enhance SME accession to expanding domestic and international markets

The value of SMEs export increase from 12.91% of total export value in 2016 to 20% by 2020.


Create and develop entrepreneurs

The business population increase from 2% in 2013 to 4% in 2020. The employment from SMEs sector increase from 82.18% in 2013 to 85% in 2020.


Create an enabling environment for the establishment and operation of SME businesses

The time required to start a business (days) have to decrease from 67 days in 2016 to 25 days by 2020. The cost of starting a business decrease from 4.6% of per capita gross domestic product (GDP) in 2016 to 4% by 2020.


Policy on customs-taxation and finance

The percentage of SMEs who have a profit increase from 41% in 2013 to 60% by 2020. The number of SMEs using computers for business management increase from 6.2% in 2013 to 15% by 2020.

Source: OECD (forthcoming), ASEAN SME Policy Index 2018: Boosting Competitiveness and Inclusive Growth in ASEAN, OECD Publishing, Paris.

SMEs are expected to comply with a number of licences, permit, and inspection requirements. Confusion over or complexity (or perceived complexity) of regulatory processes contributes to weak or non-compliance.

Regulatory delivery

Regulatory compliance

Compliance with regulations is generally weak. According to the Ministry of Agriculture and Forestry, the dissemination of policies, laws and regulations has not been widely spread to local and production areas, resulting in poor implementation and compliance (Ministry of Agriculture and Fisheries, 2016[6]). Even where SMEs are aware of regulations, compliance usually remains low. Some fines exist for regulatory non-compliance although, in practice, sanctions are rarely imposed on SMEs.

There is no policy on inspection authorities, although every ministry section (including the Department for Small and Medium Sized Enterprise Promotion, or DOSMEP) has an internal inspection department whose function is to check internal procedures and activities.

Compliance with product or service standards

The Department of Standardization and Metrology (DOSM) established under the Ministry of Science and Technology (Ministerial Decree No. 826/MST, 21 December 2011) is the national standardisation agency. It supports the development of national standards, accreditation, conformity assessments and other related activities. DOSM is the representative agency of Lao PDR in the International Standards Organization (ISO).

There are currently no mandatory national standards in Lao PDR. There are however 250 voluntary Lao national standards for various products, issued by various ministries. These voluntary standards may be applied according to the Law on Standardization and the PM Decree to Implement the Law on Standardization (Government of Lao PDR, 2014[7]). For meeting standards in other countries, third-party certification from Thailand is sometimes used, where applicable.

Meeting sanitary and phytosanitary (SPS) requirements of other countries is a challenge. For example, ASEAN SPS requirements are not harmonised, which adds to the difficulty of knowing the rules for each trading partner. There is a specific objective in the 8th Five-Year National Socio-Economic Development Plan to “formulate and improve legislation on sanitation and phytosanitation as a commitment and action toward international treaties” (Ministry of Planning and Investment, 2016[8]). Developing an SPS system and production standard system in Lao PDR is also a “first priority activity” for the Ministry of Agriculture and Fisheries (2016[6]).

There is an intention to harmonise regulatory and procedural frameworks for trade and investment with ASEAN through a programme called the Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED). The RELATED programme is intended to support the government in managing the process of regional economic integration, translate ASEAN agreements into Lao legislation and align their implementation. The overall objective of the RELATED programme is to help Lao enterprises improve their competitiveness as well as access to markets in the broader ASEAN Economic Community (AEC) (GIZ, 2018[9]).

Administrative simplification

The principle of regulatory simplification is endorsed in the 8th NSEDP and the SME development plans. However, there is no explicit policy for regulatory simplification in Lao PDR, although specific areas such as business registration and customs clearance are subject to review and may have dedicated programmes for this purpose.

There is an ongoing review of business licensing promoted by the Department for SME Promotion (DOSMEP) and supported by the World Bank. The review is supporting the Ministry of Industry and Commerce in: 1) reviewing and reforming of the business registration process; 2) preparing an inventory of all business licences and permits; 3) assessing and reforming of a subset of the processes with the highest administrative burden using the Standard Cost Model methodology. The final outcome will be a clear and business-friendly inventory of all licences and a streamlined business registration process.

The Department of Enterprise Registration and Management is currently consulting with the Department of Tax and the Office of Public Security on reducing business registration procedures.

The “one-stop shop” idea is known and is used in SEZs. It is called the “Small Administrative-Wider Society Office” (Box 5.3). “One-stop” customs inspections are also being piloted in Lao PDR. So far there has been a pilot joint clearance with Savannakhet–Mukdahan in 2013, a single window one-stop clearance inspection node between Dansawan Savannakhet (Laos), Lao Bao and Quan Tri (Viet Nam) and a Thailand-Laos-Viet Nam transitional Customs Transit System (CTS), which will eventually be replaced by ASEAN system.

Box 5.3. One-stop service in Lao PDR’s special economic zones

The Small Administrative-Wider Society Office (One-Stop Service) is the service centre used in Lao PDR’s special economic zones (SEZs). It provides a wide range of services including receiving documents or proposals from investors, supporting the documentation process, approving and returning the document to entrepreneurs. Types of documents supported by the office include (Ministry of Planning and Investment, 2018[11]):

  • Land title deed.

  • Enterprise registration certificate.

  • Import-export (raw materials, machinery, construction materials, goods, etc.) permission.

  • Licence on labour import (identity card and labour card).

  • Tax and customs collection (salary and VAT).

  • Licence on the construction of office buildings, service centres, supermarkets and factory.

  • Environmental licence.

Source: Ministry of Planning and Investment (2018), Special Economic

Regulatory quality management

Regulatory impact assessment

RIA is governed by the Law on Making Legislation (No. 19/NA 12/7/2012) and the Decision on the Impact Assessment of Draft Legislation (No. 517/MOJ 7/7/2014). The Law (Article 29) requires analysis, public consultation, explanatory note and impact assessment of regulatory and budgetary impacts to accompany draft legislation. This information should be reported in an Impact Assessment Note (IA Note). All draft laws that go to the National Legislative Assembly require an IA Note to be completed.

In 2011, an Inter-Ministry RIA Task Force was established to guide the introduction of RIA into the pilot ministries and design the system. Subsequently, a Centre for RIA was established within the Ministry of Justice (MOJ) in 2014. The role of the centre is to advocate for, support and quality control the RIA system, which is not specific to SMEs. The Centre sits alongside the MOJ’s other responsibility to review the legal quality of draft laws and regulations. The centre also has a responsibility to inform and train line ministries as well as the public on RIA. In 2016, the centre issued a set of guidelines for ministries in conducting ex ante assessments.

RIA is done for all draft laws, including:

  • Draft Laws.

  • Draft Presidential Ordinances.

  • Draft Government Decrees, except decrees to implement Resolutions of the National Assembly, of the Standing Committee of the National Assembly, the national socio-economic development plan and decrees on establishment and activities of a ministry or a government organisation.

  • Draft Decisions of the Prime Minister, Ministers, Head of Government Authorities, provincial governors or Vientiane.

RIA does not cover: district or village regulation, resolutions, or other government decrees (e.g. to implement the resolution of the National Assembly, socio-economic development plans or strategic plans).

A light form of RIA is currently used and assessed impacts must be projected for the next five years. To date, over 600 training and awareness fora have been conducted on RIA but there remains limited compliance among ministries.

Ex post evaluation

There is no routine evaluation or survey to assess SME regulations or regulatory policies for their efficiency in meeting their goals. However, the new Impact Assessment (IA) Note includes a section on ‘post-implementation review’ which outlines timelines, responsible parties, and particular areas for review. These guidelines should be periodically reviewed for relevance and effectiveness over time.


Many laws and regulations are available on the Lao Trade Portal, which serves as a single point access to information about trade regulations. Some drafts of regulations and standards are also published online at the Lao Trade Portal for consultation, although this practice is not yet widespread.

As of 2015, the Ministry of Justice has also launched a one-stop website that provides a range of legal information for legal practitioners as well as the general public (UNDP, 2015[12]). Information is provided on legal aid, laws, international treaties to which Lao PDR is party and judiciary processes.

The Laos National Single Window (NSW) Steering Committee has completed a legal gap analysis, national operating agreement, as well as supplementary agreements and joint ventures between 2011 and 2013. The NSW was due for completion by the end 2016 but remains in progress as of the end of 2017.

Various e-government projects including e-treasury, e-procurement, e-post, e-tax, e-inventory and control have been prepared and are at various stages of progress (Inthara, 2016[13]; Luanglath, 2010[14]). Lao is in the process of linking customs with the Automated System for Customs Data (ASYCUDA).

Stakeholder engagement

For all new draft regulations, there is a requirement that stakeholders should be consulted at least twice. Law on Making Legislation 2012 contains many articles about consultation. The Decision on Impact Assessment underlines the importance of consultation and makes the specific minimum requirement of a 60-day consultation period for the draft Impact Assessment Note with draft legislation and draft explanatory note. The Impact Assessment Note also includes a section on comments received, which can potentially explain why inputs have been taken into account or rejected. However, there is no existing guideline to inform ministries of the process they need to undertake this. There is limited but increasing compliance with this requirement. The Impact Assessment Note is not currently published with the final promulgated legislation.

The Lao National Chamber of Commerce and Industry (LNCCI) is a private sector body representing private sector interests, but with clear government involvement. The LNCCI has a particular interest to represent SMEs. The LNCCI is regularly consulted on draft regulations and receive support from professional legal advisory firms to comment on them. They may also funnel draft legislation to other Chambers for comment. The DOSMEP is collaborating to support the SME Service Centre within the LNCCI. The centre is expected to play a role in regulatory consultation. The LNCCI hopes to use their new SME Centre as a forum for SME consultation. The LNCCI is headquartered in Vientiane but has plans to establish an office in each region soon.

The public may also call hotlines to the Prime Minister’s Office and some ministries, such as the Ministry of Finance to express concerns (Laotian Times, 2017[15]).


Regulatory appeal options are very limited for SMEs in Lao PDR. For example, there is no mechanism for a domestic investor to appeal a decision by the Ministry of Planning and Investment. Administrative decisions cannot be challenged before a court. As a result, local SMEs are highly unlikely to challenge regulatory decisions. In practice, regulatory disputes are rather more frequently settled by negotiation or submission. An example of an explicit arrangement for an appeal is set out in the Decision of Food Inspection No. 297 (Ministry of Public Health, 2012[16]).

Box 5.4. Appeal process in the decision on food inspection No. 297/MOH 24/02/2012

Article 35 on Appeals:

Where a person or legal entity is aggrieved by a decision of an inspector, he or she has the right to file an administrative appeal to the director of the Food and Drug Department (FDD), stating the grounds for the claim. The director shall submit his or her decision regarding the claim within 30 days of receipt of the appeal. Where the person is still not satisfied, he or she may make an administrative appeal to the minister within 45 days of receipt of the Director General’s submission. The minister shall render his or her decision within 60 days or receipt of the appeal.

Where the person is still not satisfied, he or she has the right to take the action to court in accordance with relevant Lao PDR legislations (Ministry of Public Health, 2012[16]).

Source: Ministry of Public Health (2012), Decision on Food Inspection No. 297/MOH

The Law on Judgment Enforcement provides for the execution of final, legally effective and proper court instructions, orders, decisions at first instance, decisions on appeal, decisions on cassation, and other juridical acts. The law gives the executive branch, through the MOJ, strong powers to issue orders to enforce court judgments, including the seizure of assets. Judgment enforcement officers may issue orders to confiscate, seize or move property, subject to notice to the asset owner or debtor. Before being sold at auction to pay off the debt, the assets must be evaluated by an evaluation committee and the evaluation result published. Fines and other measures are applicable to persons or entities that do not comply with enforceable court judgments.

SME linkage policies

The Law on the Promotion of SMEs encourages co-operation between SMEs and large size enterprises and foreign investment enterprises. It includes a number of policy objectives and some measures for their achievement as follows:

  • Increasing productivity.

  • Accessing and expanding markets.

  • Business clustering.

  • Allocating business location.

  • Promoting advanced technology utilisation.

  • Using and protecting intellectual property (IP): also facilitating SMEs on registration, managing and protecting IP.

  • Providing and accessing information.

The Government of Lao PDR, in collaboration with a third party, provides infrastructure, training and business-matching services for SMEs to connect with foreign investors through the Lao SME programme.

The Amended Investment Promotion Law 2016 has increased government scrutiny of domestic investors conducting business outside the Lao PDR - now subject to approval by the One-Stop Service Office of the Ministry of Planning and Investment (MPI) (Box 5.5).

Special economic zones

Lao has been developing special economic zones (SEZs) since the early 2000s. To date, ten SEZs have been established, of which two are fully operational. The first SEZ, Savan-Seno, successfully attracts investors from many different economic sectors and helps diversifies the Lao’s economy, which is otherwise heavily dependent on natural resource extraction. The Lao government is currently preparing an SEZ law that will require SEZs to have their own regulatory framework, according to international practice (OECD, forthcoming[17]).

Responsible business conduct

Lao PDR aims to improve its regulatory framework for responsible business conduct (RBC). The Law on Investment Promotion of Lao PDR includes a detailed section of responsible business obligations (Art. 69) for investors, and also features a section (Art. 70) on environmental obligations. Lao PDR is also considering establishing a focal point for RBC within the government. The inclusion of extensive investor obligations in its Investment Law is an innovative legal practice that aims to strike a better balance between investors’ rights and obligations (OECD, forthcoming[17]).

Box 5.5. Criteria for investing outside of Lao PDR

Article 65 (New) conditions for overseas investment

Domestic investors going to invest overseas shall fulfil the following conditions:

  • Have investment target overseas.

  • Have the financial reports for the last two financial years as certified by financial authority or independent audit firm.

  • Have fulfilled financial obligations due to the Government of Lao PDR in compliance with laws.

  • Be in compliance with regulations of the Bank of the Lao PDR, other relevant laws and regulations of Lao PDR.

Article 66 (New) rights and obligations of domestic investors investing overseas

Domestic investors investing overseas shall have the following rights:

  • Bring money and assets to invest overseas and bring them back to the home country after fulfilling their obligations under the laws and regulations of the host country.

  • Bring the profits and other incomes generated by their business operation to the home country.

  • Obtain facilitation and incentives as per laws and regulations of Lao PDR.

  • Employ Lao labour in their overseas-invested enterprise in compliance with Lao PDR laws and regulations and those of the host country.

Domestic investors investing overseas shall also have the following obligations:

  • Comply with laws and regulations of the host country.

  • Perform reporting regime on financial aspect and operation to the investment one-stop service office in order to inform the Ministry of Finance and Bank of the Lao PDR.

After the end of their overseas investment, the investor may bring back capital and assets to the home country according to the relevant laws (DFDL, 2017[18]).

Sources: Lao Legal Update: Lao Government Makes Significant Reforms to Investment Promotion Law,


  • Clarify the specific processes required to achieve policy targets and develop indicators and measures as appropriate to track their progress. For example, the SME Promotion Strategy sets out policy priorities and indicators to track their achievement but does not include the procedures that need to be taken.

  • Develop national standards that are aligned with international standards for goods and services. Given that Lao PDR has not yet developed national standards for its products and services, it is an opportunity to begin introducing standards that can be compliant with regional and international trading partners. Harmonise the definition of SMEs across ministries to reduce confusion or inconsistent applications of regulatory policies to SMEs by different ministries.

  • Develop a framework for dealing with regulatory non-compliance, which should be consistently applied. For example, through a risk-based system.

  • Develop a guideline for conducting stakeholder consultation to help ministries fulfil this requirement effectively in the introduction of new draft regulations.

  • Impact Assessment Notes that are required for all new regulations, and which include a section on comments received, should be published along with the final promulgated legislation.


[18] DFDL (2017), Lao Legal Update: Lao Government Makes Significant Reforms to Investment Promotion Law,

[9] GIZ (2018), Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED),

[3] GIZ (2014), SMEs in Laos,

[7] Government of Lao PDR (2014), Standard Law (Amended) No. 49,

[2] Government of Lao PDR (2012), Law on Making Legislation (Unofficial translation),

[4] Government of Lao PDR (2011), Law on the Promotion of Small- and Medium-Sized Enterprises (unofficial translation),

[13] Inthara, K. (2016), E-Government Status of Laos,

[15] Laotian Times (2017), Ministry of Finance Opens Hotline for Public,

[14] Luanglath, C. (2010), Lao National E-Government Project,

[6] Ministry of Agriculture and Fisheries (2016), Agriculture Development Strategy to 2025 and Vision to the Year 2030,

[11] Ministry of Planning and Investment (2018), Special Economic Zone,

[8] Ministry of Planning and Investment (2016), 8th Five-Year National Socio-Economic Development Plan 2016-2020,

[16] Ministry of Public Health (2012), Decision on Food Inspection No. 297/MOH,

[10] OECD (2017), OECD Investment Policy Reviews: Lao PDR, OECD Investment Policy Reviews, OECD Publishing, Paris,

[5] OECD (forthcoming), ASEAN SME Policy Index 2018: Boosting Competitiveness and Inclusive Growth in ASEAN, OECD Publishing, Paris.

[17] OECD (forthcoming), Inclusive Investments in GVCs: Opportunities for ASEAN SMEs, OECD Publishing, Paris.

[19] Phaophongsavath, P. (2017), “Decree on classifying SME categories, PowerPoint presentation”, Small and Medium Enterprises Development in Laos,

[1] UNDP (2016), The 8th Five Year National Socio-Economic Development Plan 2016-2020,

[12] UNDP (2015), Ministry of Justice Goes Digital and Strives for More Inclusive Participation in Law-making,