(KPL) IFC, a member of the World Bank Group, is accelerating its support to the Lao government in improving the climate for investment and doing business in the country. A more predictable and transparent business environment will help attract more foreign direct investment (FDI), generate jobs, and promote inclusive economic growth.
A new advisory agreement was signed on Sep 7 between IFC and the Investment Promotion Department, Ministry of Planning and Investment, and the Customs Department, Ministry of Finance.
The agreement aims to enhance the investment policy framework, its implementation, and streamline business regulations, which will improve ease of doing business in the Lao PDR.
The Lao PDR has achieved high economic growth over the past decade, averaging at 7 per cent annually. However, FDI inflow into the country — as a percentage of gross domestic product — is still lower than half of the neighboring countries in the region, and is mainly in the natural resource sector.
A consistent and transparent business environment is critical to diversify the economy through expansion of labour-intensive non-resource sectors, and subsequently attract more investments.
“We highly appreciate IFC’s extensive technical advice on improving Lao PDR’s investment climate,” said Manothong Vonsay, Director General of the Investment Promotion Department. “We believe WBG with its global knowledge and experience on doing business reform will help us successfully implement the Prime Minister’s Order No.02, dated February 1, 2018. The aim is to have a better regulatory environment for enabling investment inflows and making it easier for doing business in Lao PDR”.
Under the agreement, over the next two years, IFC will support the government to narrow the existing discrepancy between policy and laws and actual practice of regulatory measures on the ground.
This is expected to lower the cost of business entry. Another priority is to enhance customs regulatory and procedural simplification to reduce time and cost for imports and exports as well as facilitate global supply chain integration.
“Aligning Lao PDR’s trade-related reforms with its commitments under the World Trade Organization will facilitate trading across borders and make it easier to connect with the global supply chain,” said Somboun Inthapattha, Chief of Cabinet of Ministry of Finance.
The reforms to be made under this agreement are expected to facilitate the overall investment climate in Lao PDR, and improve the country’s ranking in the WBG Doing Business report. Currently, Lao PDR ranks 141st among 190 nations across 10 indicators.
Between 2012 and 2016, IFC supported the Investment Promotion Department and the Inter-Ministerial Business Regulatory Reform Committee to implement regulatory reforms in the areas of Starting a Business, Construction Permits, and Protecting Minority Investors.
“IFC is ready to support the Lao PDR government’s commitment to improve the country’s investment climate,” said Dahlia Khalifa, Senior Manager of Investment Climate Advisory Services, IFC. “By enabling the private investment-friendly environment and making it easier to do business, Lao PDR can diversify a number of business operators and build a strong base for private sector growth.”