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Doing Business 2020Lao PDREconomy ProfileLao PDRPage 1
Doing Business 2020Lao PDREconomy Profile of Lao PDRDoing Business 2020 Indicators(in order of appearance in the document)Starting a businessProcedures, time, cost and paid-in minimum capital to start a limited liability companyDealing with construction permitsProcedures, time and cost to complete all formalities to build a warehouse and the quality control and safetymechanisms in the construction permitting systemGetting electricityProcedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and thetransparency of tariffsRegistering propertyProcedures, time and cost to transfer a property and the quality of the land administration systemGetting creditMovable collateral laws and credit information systemsProtecting minority investorsMinority shareholders’ rights in related-party transactions and in corporate governancePaying taxesPayments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfilingprocessesTrading across bordersTime and cost to export the product of comparative advantage and import auto partsEnforcing contractsTime and cost to resolve a commercial dispute and the quality of judicial processesResolving insolvencyTime, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework forinsolvencyEmploying workersFlexibility in employment regulation and redundancy costPage 2
Doing Business 2020Lao PDRAbout Doing BusinessThe Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational andregional level.The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their lifecycle.Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation forstarting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading acrossborders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankingsof economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it doespresent the data for these indicators.By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourageseconomies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sectorresearchers and others interested in the business climate of each economy.In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation.These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selectedcities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked.The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Mostindicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013(Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected datafor the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited fromfeedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving theregulatory environment for business around the world.To learn more about Doing Business please visit doingbusiness.orgPage 3
Doing Business 2020Lao PDREase of Doing Business inLao PDRRegionEast Asia & PacificIncome CategoryLower middle incomePopulation7,061,507City CoveredVientianeDB RANKDB SCORE50.8154Rankings on Doing Business topics - Lao tsResolvingInsolvencyTopic Scores62.768.358.064.960.020.0Starting a Business (rank)181Getting Credit (rank)Score of starting a business (0-100)62.7Score of getting credit (0-100)Procedures (number)78.18060.042.0Trading across Borders (rank)Score of trading across borders (0-100)0.07878.1Strength of legal rights index (0-12)6Time to exportTime (days)173Depth of credit information index (0-8)6Documentary compliance (hours)Cost (number)4.6Credit registry coverage (% of adults)19.8Paid-in min. capital (% of income per capita)0.0Credit bureau coverage (% of adults)0.0Documentary compliance (USD)235Dealing with Construction Permits (rank)99Protecting Minority Investors (rank)179Border compliance (USD)140Score of protecting minority investors (0-100)20.0Time to exportScore of dealing with construction permits (0-100)954.268.3Border compliance (hours)609Cost to exportProcedures (number)12Extent of disclosure index (0-10)6.0Documentary compliance (hours)60Time (days)92Extent of director liability index (0-10)1.0Border compliance (hours)11Cost (% of warehouse value)4.6Ease of shareholder suits index (0-10)3.0Cost to exportBuilding quality control index (0-15)6.5Extent of shareholder rights index (0-6)0.0Documentary compliance (USD)115Extent of ownership and control index (0-7)0.0Border compliance (USD)224Extent of corporate transparency index (0-7)0.0Enforcing Contracts (rank)161Paying Taxes (rank)157Score of enforcing contracts (0-100)42.0Score of paying taxes (0-100)54.2Time (days)828Cost (% of claim value)31.6Getting Electricity (rank)144Score of getting electricity (0-100)58.0Procedures (number)Time (days)Cost (% of income per capita)Reliability of supply and transparency of tariff index (0-8)Registering Property (rank)Score of registering property (0-100)Procedures (number)787705.238864.96Time (days)28Cost (% of property value)3.1Quality of the land administration index (0-30)10.5Payments (number per year)35Time (hours per year)362Total tax and contribution rate (% of profit)24.1Postfiling index (0-100)18.6Quality of judicial processes index (0-18)3.5Resolving Insolvency (rank)168Score of resolving insolvency (0-100)0.0Recovery rate (cents on the dollar)NoPracticeTime (years)NoPracticeCost (% of estate)NoPracticeOutcome (0 as piecemeal sale and 1 asgoing concern)Strength of insolvency framework index (016)0NoPracticePage 4
Doing Business 2020Lao PDRStarting a BusinessThis topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up andformally operate in each economy’s largest business city.To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement ofoperations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that onecompany is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting theirscores for starting a business. These scores are the simple average of the scores for each of the component indicators.The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.What the indicators measureProcedures to legally start and formally operate a company(number) Preregistration (for example, name verification or reservation,notarization) Registration in the economy’s largest business city Postregistration (for example, social security registration,company seal) Obtaining approval from spouse to start a business or to leavethe home to register the company Obtaining any gender specific document for companyregistration and operation or national identification cardTime required to complete each procedure (calendar days) Does not include time spent gathering information Each procedure starts on a separate day (2 procedures cannotstart on the same day) Procedures fully completed online are recorded as ½ day Procedure is considered completed once final document isreceived No prior contact with officialsCost required to complete each procedure (% of income percapita) Official costs only, no bribes No professional fees unless services required by law orcommonly used in practicePaid-in minimum capital (% of income per capita) Funds deposited in a bank or with third party before registrationor up to 3 months after incorporationCase study assumptionsTo make the data comparable across economies, several assumptions about the business and theprocedures are used. It is assumed that any required information is readily available and that theentrepreneur will pay no bribes.The business:-Is a limited liability company (or its legal equivalent). If there is more than one type of limitedliability company in the economy, the limited liability form most common among domestic firms ischosen. Information on the most common form is obtained from incorporation lawyers or thestatistical office.-Operates in the economy’s largest business city. For 11 economies the data are also collected forthe second largest business city.-Performs general industrial or commercial activities such as the production or sale to the public ofgoods or services. The business does not perform foreign trade activities and does not handleproducts subject to a special tax regime, for example, liquor or tobacco. It is not using heavilypolluting production processes.-Does not qualify for investment incentives or any special benefits.-Is 100% domestically owned.-Has five business owners, none of whom is a legal entity. One business owner holds 30% of thecompany shares, two owners have 20% of shares each, and two owners have 15% of shareseach.-Is managed by one local director.-Has between 10 and 50 employees one month after the commencement of operations, all of themdomestic nationals.-Has start-up capital of 10 times income per capita.-Has an estimated turnover of at least 100 times income per capita.-Leases the commercial plant or offices and is not a proprietor of real estate.-Has an annual lease for the office space equivalent to one income per capita.-Is in an office space of approximately 929 square meters (10,000 square feet).-Has a company deed that is 10 pages long.The owners:-Have reached the legal age of majority and are capable of making decisions as an adult. If thereis no legal age of majority, they are assumed to be 30 years old.-Are in good health and have no criminal record.-Are married, the marriage is monogamous and registered with the authorities.-Where the answer differs according to the legal system applicable to the woman or man inquestion (as may be the case in economies where there is legal plurality), the answer used will bethe one that applies to the majority of the population.Page 5
Doing Business 2020Lao PDRStarting a Business - Lao PDRStandardized CompanyLegal formPrivate Limited Liability CompanyPaid-in minimum capital requirementLAK 7,000City CoveredVientianeIndicatorLao PDREast Asia &PacificOECD highincomeBest RegulatoryPerformanceProcedure – Men (number)96.54.91 (2 Economies)Time – Men (days)17325.69.20.5 (New Zealand)Cost – Men (% of income per capita)4.617.43.00.0 (2 Economies)Procedure – Women (number)96.64.91 (2 Economies)Time – Women (days)17325.79.20.5 (New Zealand)Cost – Women (% of income per capita)4.617.43.00.0 (2 Economies)Paid-in min. capital (% of income per capita)0.03.57.60.0 (120 Economies)Figure – Starting a Business in Lao PDR – Score52.90.097.7100.0ProceduresTimeCostPaid-in min. capitalFigure – Starting a Business in Lao PDR and comparator economies – Ranking and ScoreDB 2020 Starting a Business Score010092.4: Thailand (Rank: 47)85.1: Vietnam (Rank: 115)83.9: Regional Average (East Asia & Pacific)83.3: Malaysia (Rank: 126)62.7: Lao PDR (Rank: 181)52.4: Cambodia (Rank: 187)Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average ofthe scores for each of the component indicators.Page 6
Doing Business 2020Lao PDRFigure – Starting a Business in Lao PDR – Procedure, Time and CostTime (days)Cost (% of income per capita)3.531402.5Time (days)1201002801.560140Cost (% of income per capita)1600.520001234*567*8*9Procedures (number)* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows thetime for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the proceduresreflected here, see the summary below.Page 7
Doing Business 2020Lao PDRDetails – Starting a Business in Lao PDR – Procedure, Time and CostNo.1ProceduresObtain the Enterprise Registration Certificate (ERC)Agency : Department of Industry and Commerce Vientiane CapitalApplicants apply for the Enterprise Registration Certificate (ERC) at the Department of Industryand Commerce Vientiane Capital. The unique application form used for the name reservation andthe ERC must list three potential names for the company to be established. A signed Contract ofIncorporation (if there are multiple shareholders) in the format approved by the Ministry of Industryand Commerce (MOIC) must be submitted to obtain the ERC. The approved format can bedownloaded at the MOIC website. Founders shall complete the application form for the ERC in theMOIC standard application form attaching the following required documents:Time to Complete2-3 monthsAssociated CostsLAK 30,000 (Incorporationform) LAK 60,000(Application form) LAK500,000 (Registrationservice fee for companieswith registered capital ofLAK 100,000,000400,000,000)(i) 3 copies of the Contract of Incorporation,(ii) 3 original copies of the signed Articles of Association in the MOIC standard template,(iii) 3 copies of the resolution of founders of the company,(iv) 3 copies of the Power of Attorney in the MOIC standard template (if another person isassigned to submit the application),(v) 3 copies of ID card/passport of founders (only for foreigners) or business licenses for entities,(vi) Office location certificate and the Map signed and sealed by the village chief,(vii) 6 photos size 3cmx4cm of the nominated Managing Director,(viii) Compliance letter stating that the founders of this company will comply with the rules of law.When issuing the ERC, the Department of Industry and Commerce Vientiane Capital issues (1) aletter for the tax office to register for a Tax ID and (2) a letter of approval for the Public SecurityOffice for the company seal.Presidential Order N 003, of December 26, 2012 regulates the fees related to obtaining the ERC.23Register the Articles of AssociationAgency : State Asset Management Office, Ministry of FinanceOnce the company obtains the Enterprise Registration Certificate, it shall thereafter register itsArticles of Association with the State Assets Management Department (SAMD), Ministry ofFinance. For registration the following are required: letter request, the original signed Articles ofAssociation, and copy of ERC.1 weekApply for Tax Registration CertificateAgency : Tax DepartmentEnterprises operating in the Lao PDR are subject to direct and indirect taxes. You need to submitthe following documents:about 1 monthLAK 40,000 (registration ofAOA) LAK 40,000(Contract of Incorporation) LAK 10,000 (Servicefee)LAK 25,000 (Registrationform for taxes) LAK100,000 (Tax certificate)1. Application form2. Resident certificate of managers3. List of assets4. List of employees and estimates salaries5. Copy of lease agreement6. Office location certificate and Map signed and sealed by the village chief8. 2 photos 3x4 of the managing directors9. Copy of the resolution of formation10. Copy of the ERC11. Copy of ID cards12. Registered AOA45Attend to a Tax Orientation meeting and obtain Tax Identification Number (TIN)Agency : Tax DivisionOnce The Tax Certificate is issued, the Tax Division will arrange for a Tax Orientation meeting toexplain all the different taxes that a company will have to pay, how to calculate them and how tokeep your books in order. This is to ensure that companies prepare their tax return properly andpay the correct amount. After the Tax Orientation meeting, the Tax Division will start processingthe TIN number. After the Tax Orientation meeting, the Tax Department prepares the TaxIdentification Number (TIN) for the newly registered company.about 1 monthno chargeCarve a company sealAgency : Ministry of Industry and Commerce and Ministry of Public SecurityAfter the Enterprise Registry Office issued the ERC, entrepreneur need to submit a color copy ofERC at the Seal Carving Unit within the Ministry of Public Security. Once the seal is carved, aletter for registration the seal is issued by the Seal Carving Unit. The company needs to register itwith the Department of Public Security in order to use it.2 weeks (simultaneousLAK 10,000 (applicationwith previous procedure)form for making thecompany seal) LAK60,000 (the certificateauthorizing the design) LAK 50,000 (carving of aseal in Lao language only)or LAK 53,000 (the carvingof a seal in Lao and inanother language)6Register company seal at the department of public securityAgency : Department of Public SecurityAfter the seal is carved, the company needs to register it at the Department of Public Security inorder to use it.1 to 2 weeksno chargePage 8
Doing Business 2020789Lao PDRObtain Approval of Content on the Company SignageAgency : Ministry of Information Culture and TourismIt is no longer required by law to obtain the content approval of the signage; however, majority ofentrepreneurs continue to obtain it due to the local officers of Information Culture and Tourism,advice them to do that.For the content approval application, the company must complete the application form in MICTand provide the following: (i) the name of the company in Lao, enterprise code provided under theenterprise registration certificate, office location and contact detail of the company; (ii) the color inred for the letters, and yellow for the background (these colors applied to domestic companies);and (ii) the size shall not exceed 2mx4m.1 to 2 weeksLAK 10,000Register the workers for social securityAgency : Social Security OfficeThe application form to register workers for social security insurance is available at the agency incharge of registration. Employees and employers must participate in the compulsory socialsecurity regime. They may not enter into mutual agreements to avoid participation in the socialsecurity regime. The social security regime for company employees is established on the principleof state-guaranteed insurance. Contributions to the social security regime are paid by both theemployers and employees: 6.0% of gross salary is to be contributed for social security by theemployer and another 5.5%, by the employee. The maximum ceiling for calculating thesecontributions is LAK 2,000,000 (6% and 5.5% of LAK 2,000,000).1 week (simultaneousno chargeRegister for VATAgency : Tax authorityAs per Article 9 of Law of Value added tax of 26 December 2006, all companies with a turnoverhigher than 400,000,000 Kip are are subject to value-added tax registration with the tax authority.3 weeks (simultaneouswith previous procedure)no chargewith previous procedure)Takes place simultaneously with previous procedure.Page 9
Doing Business 2020Lao PDRDealing with Construction PermitsThis topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications,requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the buildingquality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professionalcertification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more informationWhat the indicators measureProcedures to legally build a warehouse (number) Submitting all relevant documents and obtaining all necessaryclearances, licenses, permits and certificates Submitting all required notifications and receiving all necessaryinspections Obtaining utility connections for water and sewerage Registering and selling the warehouse after its completionTime required to complete each procedure (calendar days) Does not include time spent gathering information Each procedure starts on a separate day—though proceduresthat can be fully completed online are an exception to this rule Procedure is considered completed once final document isreceived No prior contact with officialsCost required to complete each procedure (% of income percapita) Official costs only, no bribesBuilding quality control index (0-15) Quality of building regulations (0-2) Quality control before construction (0-1) Quality control during construction (0-3) Quality control after construction (0-3) Liability and insurance regimes (0-2) Professional certifications (0-4)Case study assumptionsTo make the data comparable across economies, several assumptions about the constructioncompany, the warehouse project and the utility connections are used.The construction company (BuildCo):- Is a limited liability company (or its legal equivalent) and operates in the economy’s largestbusiness city. For 11 economies the data are also collected for the second largest business city.- Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has alicensed architect and a licensed engineer, both registered with the local association of architectsor engineers. BuildCo is not assumed to have any other employees who are technical or licensedexperts, such as geological or topographical experts.- Owns the land on which the warehouse will be built and will sell the warehouse upon itscompletion.The warehouse:- Will be used for general storage activities, such as storage of books or stationery.- Will have two stories, both above ground, with a total constructed area of approximately 1,300.6square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will belocated on a land plot of approximately 929 square meters (10,000 square feet) that is 100%owned by BuildCo, and the warehouse is valued at 50 times income per capita.- Will have complete architectural and technical plans prepared by a licensed architect. Ifpreparation of the plans requires such steps as obtaining further documentation or getting priorapprovals from external agencies, these are counted as procedures.- Will take 30 weeks to construct (excluding all delays due to administrative and regulatoryrequirements).The water and sewerage connections:- Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no waterdelivery infrastructure in the economy, a borehole will be dug. If there is no sewerageinfrastructure, a septic tank in the smallest size available will be installed or built.- Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flowof 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day anda peak wastewater flow of 1,136 liters (300 gallons) a day.- Will have a constant level of water demand and wastewater flow throughout the year; will be 1inch in diameter for the water connection and 4 inches in diameter for the sewerage connection.Page 10
Doing Business 2020Lao PDRDealing with Construction Permits - Lao PDRStandardized WarehouseEstimated value of warehouseLAK 1,027,162,351.60City CoveredVientianeIndicatorLao PDREast Asia &PacificOECD highincomeBest RegulatoryPerformanceProcedures (number)1214.812.7None in 2018/19Time (days)92132.3152.3None in 2018/19Cost (% of warehouse value)4.63.21.5None in 2018/19Building quality control index (0-15)6.59.411.615.0 (6 Economies)Figure – Dealing with Construction Permits in Lao PDR – Score72.081.076.843.3ProceduresTimeCostBuilding quality control indexFigure – Dealing with Construction Permits in Lao PDR and comparator economies – Ranking and ScoreDB 2020 Dealing with Construction Permits Score010089.9: Malaysia (Rank: 2)79.3: Vietnam (Rank: 25)77.3: Thailand (Rank: 34)70.0: Regional Average (East Asia & Pacific)68.3: Lao PDR (Rank: 99)44.6: Cambodia (Rank: 178)Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scoresare the simple average of the scores for each of the component indicators.Page 11
Doing Business 2020Lao PDRFigure – Dealing with Construction Permits in Lao PDR – Procedure, Time and CostTime (days)Cost (% of warehouse value)802Time (days)70601.5504013020Cost (% of warehouse value)2.5900.510001*2*34567891011* 12Procedures (number)* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows thetime for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the proceduresreflected here, see the summary below.Page 12
Doing Business 2020Lao PDRFigure – Dealing with Construction Permits in Lao PDR and comparator economies – Measure of Quality13.014Index siaThailandVietnamEastAsia&PacificDetails – Dealing with Construction Permits in Lao PDR – Procedure, Time and CostNo.1ProceduresTime to CompleteAssociated CostsObtain a Soil Test from the State EnterpriseAgency : State EnterpriseSoil test is obtained a part of the pre-construction and design phase and is often required bysupervising engineers who conduct inspections during construction phase.11 daysLAK 18,451,9482Obtain Neighbors Consent for ConstructionAgency : Village Chief AuthorityObtaining the consent of neighbors is mandatory in practice. A document reporting thatconsultations were made with neighbors is attached to the request for a building permit.5 daysno charge3Hire an external engineer to conduct building inspectionAgency : External EngineerAny building of more than 1000 square meters requires an external engineer who is responsiblefor inspecting the process of construction. The Vientiane capital Ministry of Works and Transportswill verify that the engineer undertook regular inspections when the final report is submitted at theend of the construction process.1 dayLAK 22,860,4294Purchase the application forms for a building permitAgency : Vientiane Capital Department of Public Works and TransportsBuildCo can either download the application forms free of charge or may purchase the applicationforms for a small fee to apply for a building permit from the Vientiane Capital department of PublicWorks and Transports. The Vientiane Capital is divided into nine districts, which are furthersubdivided into 481 villages.The forms are a complete set of documents which also provide the listof requirements and the costs associated with the building permitting process.1 dayLAK 25,0005Request and obtain residence certificate from Village ChiefAgency : Village ChiefBuildCo must obtain 3 copies of a residence certificate certifying that the applicant (the company'smanager) has a permanent address. The certificates are should be stamped and signed by theVillage Chief who checks the history of the land and location. Costs may vary by village and are atthe discretion of the Village Chiefs.1 dayLAK 30,0006Submit building permit application to the District Construction DivisionAgency : District Construction DivisionBuildCo must submit the application for a building permit, along with the following documents:structural and architectural plans, electrical and sewer plans, a location plan certified by theVilleage Chird, a copy of the ownership certificate and 2 copies of the land title. When theapplicant deposits all the required documentation at the one stop service window, all documentsare checked for completeness. The documents are then bound into one file and reviewed by anengineer at the Ministry of Public Works. The engineer will sign and stamp the cover letter toindicate his approval if the submission meets all technical requirements.1 dayno charge7Receive setting-out inspection from Department of Urban Planning & EnvironmentAgency : Vientiane Capital Depart
Economy Profile of Lao PDR Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company
