China – the largest foreign investor in Laos

Following on from recent posts on related issues, readers may be interested that China has just dislodged Thailand as the largest investor in Laos. Since 2000, Chinese investment has totalled US$2.9 billion, compared to $2.6 billion from Thailand and $2.2 billion from Vietnam. Here is the report from the Vientiane Times:

China surpasses Thailand as biggest investor in Laos

China has replaced Thailand as the biggest foreign investor in Laos
for the first time in five years, thanks to the Lao government’s
active promotion of foreign investment in the country.

According to the latest report from the Ministry of Planning and
Investment’s Investment Promotion Department, the value of Chinese
investment in Laos has reached about US$2.9 billion since the
government began welcoming foreign investment in 2000.

Thailand was the top investor in Laos from 2005 to 2009 before losing
the position to China due to a rapid increase in Chinese investment
over the first two quarters of this year.

Chinese companies have decided to invest in 16 projects with a total
value of US$344 million over the past six months, while Thai firms
decided to invest in only 4 projects worth just US$3.7 million over
the same period.

Although Thailand has lost its top position, it remains one of the
biggest investors in its landlocked neighbour.

According to the report, Thailand is the second biggest foreign
investor in Laos with a total investment value of about US$ 2.6
billion from 2000 to 2010. Meanwhile, Vietnam takes the third spot
with investments worth about US$2.2 billion over the same period.

Deputy Director General of the department, Mr Achong Laomao said that
Chinese investment in Laos was increasing because the government was
actively encouraging foreign investors, hoping to create jobs and
income.

He said most of the Chinese investments are in the areas of mining,
hydropower, agriculture and services, which are Laos’ main investment
potential areas.

He added that the closer relationship between the two countries was
one of the main factors making Chinese investors feel confident about
investing in Laos.

The Lao government will increase efforts to encourage foreign
investment in Laos over the next five years to ensure that annual GDP
growth stays above 8 percent. It is hoped that this will enable Laos
to remove itself from the UN list of least-developed nations by 2020.

The Lao government revised the Investment Promotion Law last year,
aiming to improve the investment consideration process and offer a
number of investment incentives including tax exemptions and
reductions for companies investing in rural areas.

The revised law also allows the government to use land use rights as
an incentive to attract foreign investors to Laos.

According to Article 58 of the law, any foreign investors who have an
investment project with registered funds of more than US$500,000 can
purchase land use rights for real estate development from the
government in an allocated area.

Policy makers believe that allowing foreign investors to own property
in the country will make them feel confident about investing in Laos.
Not many countries allow foreigners to own property as the extra
competition can lead to a sharp increase in land prices.

By Ekaphone Phouthonesy
(Latest Update July 16, 2010)