Property Investment Opportunities in Laos

Posted on June 20, 2010 in Investors, Laos | 1 comment

Are there any property investment opportunities in Laos, yes there are, but one warning it is definitely not for the fainthearted!

A relaxed atmosphere, very friendly people (more so than the Thais), good, cheap food. Almost all tourists have a good time. Very much like Thailand, thirty years ago. This is the general impression of Laos, but it’s likely only a superficial one.

Vientiane. Arch. Laos

Geography
Laos has three distinct geographical features:
heavily forested mountains extending from north to southeast;
the narrow floodplains of the Mekong River, traversing Laos’s entire north-south length;
three strategically situated high plateaus: the Plain of Jars in the north, the Khammouan Plateau in the centre, and the Bolovens Plateau in the south.
Being landlocked, Laos is heavily dependent on the Mekong River System. The river is navigable for most of its course in Laos and still serves as an important artery of transportation and communication.

Culture
Laos has a population of almost six million, with a population density of 25 people per sq.km (65 per sq.mi). About 25% of Laos population live in mountainous regions. The rest live in upland valleys, or on the flood plains of the Mekong. Just over 75% of the population live in rural areas, though urban migration is steadily increasing.

In 1975, the Communist Pathet Lao took over the government, ending a six-century-old monarchy and instituted a strict socialist regime. In 1986, there was a gradual return to private enterprise and the beginning of the liberalization of foreign investment laws.

Laos does not have a developed social welfare program. In rural areas, the country’s bountiful climate ensures that no one starves. At times, people do experience real hardship and poverty with no government relief. The large majority of Lao still engage in subsistence agriculture. Industry is limited to small-scale manufacturing of consumer products, with clothing and textile products the main export.

Income-wise: GDP – per capita – $1,800 p.y., whilst 40% (2002 est.) of the population live below the poverty line. By 2000, the literacy rate stood at 64.8%.

Living in Vientiane
Vientiane is a remarkably peaceful and laid-back city. While much of the activity goes on behind the scenes, with global capitalists and aid workers laboring away, on the surface all is a calm; a seductive snapshot of how the rest of Asia once was. Even the roads are eerily empty. For one foreigner, however, life was not so rosy. He was fined $600 for living illegally with his Lao girlfriend i.e. before they were married.

Best shopping: The two-story Talat Sao market, on Lane Xang Avenue, is a vast Aladdin’s cave, selling everything from fridges to friezes, silks shot through with tiny silver elephants to jewelery, butchers’ cuts to fancy hats, pineapples to ponchos. There is a brand new air-conditioned shopping mall presently just being finished off that will add to a more pleasant shopping experience.

Health
Malaria is widespread in Laos, as are many other diseases, parasites, and intestinal disorders, such as diarrhea. There is, also, Avian Flu. The health infrastructure remains inadequate, with only one doctor per every 5,400 people, despite an increase in the number of health-care professionals.

Government attitude towards foreign investment
At the Second Lao Business Forum (March 15, 2007), the Committee for Planning and Investment (CPI) recommended improving laws, regulations and procedures to accelerate investment and sustainable private sector growth.

Foreign investors may invest in the Lao PDR in either of two forms:

• a Joint Venture with one or more domestic Lao investors or
• a Wholly Foreign-Owned Enterprise

Extracts from The Law on the Promotion and Management of Foreign Investment in the Lao People’s Democratic Republic.

• a better standardization achieved, and a better system of tax incentives created.
• Important for investors: the transfer of benefits or funds generated in the Lao PDR to their own country or to a third county is not restricted.
• Planned joint ventures must be approved by the Foreign Investment Management Committee (FIMC), the swift processing of which is guaranteed by law.
• Disputes between foreigners and a Lao partner will be solved by a special Arbitration Committee.

Article 1: The Government of the Lao PDR encourages foreign persons to invest capital in the Lao People’s Democratic Republic.

Foreign investors shall be free to operate their enterprises within the limits of the laws and regulations of the Lao PDR. The Government shall not interfere in the business management of those enterprises.

Article 10: The Government of the Lao PDR shall protect foreign investments and the property of foreign investors. Foreign investors may lease land within the Lao PDR and transfer their leasehold interests; and they may own improvements on land and other movable property and transfer those ownership interests.

Raw materials and intermediate components imported for the purpose of processing and then re-exported shall be exempt from import duties. All exported finished products shall also be exempted from export duties.

Property in Laos
As in Thailand, foreigners cannot own property in Laos, although leasehold is possible.

A decent piece of land on the outskirts of Vientiane can be had for about 200,000 Baht or US$6,000, a new house for around 400,000 Baht or US$12,000. However, the thing that strikes you most is the distinct lack of Lao property advertised on the internet. Not reassuring.

A sophisticated legal system hardly exists. There is a lack of courts, especially a Court of Appeals and qualified judges to preside over it. No laws for mortgages exist.

Warning by a disgruntled farang investor:

• be prepared to lose everything you invest;
• be prepared to leave the country on short notice, leaving everything behind;
• don’t think you have any rights, this is NOT a Western society;
• be prepared to deal with scams, double pricing and kickbacks.

Renting: Apartments: US$250 per month, houses US$1,000 in up-market Luang Prabang
Apartments: nice two room apartment (2,500 Baht or US$75.00/month), Vientiane

Hotels
Settha Palace Hotel, French colonial mansion. Deluxe rooms from US$155Beau Rivage: air-conditioning, IDD phones, wireless internet access from US$31-$45.

If you are prepared to undergo bureaucratic delays, trials and tribulations, but most of all possess a pioneering instinct, then investment in Lao may be for you; where, doubtless, there are bargains to be had. But take heed of The Property Investor Magazine which declared recently: the Laos property is currently not recommended for foreign Property Investment due to Laos’ legal, political and/or economic situation.

As someone who has been to Laos twice recently, and meeting foreign business people there I can say that foreign investment is definitely happening in the capital, both small time and with large mining companies. Nice quality restaurants and bars are starting to spring up financed and run by either foreigners, or in a foreign/Lao partnership. Fixed tax % are set by the government on foreign investors for 5 years. Some Thai banks have branches in the capital, and ATM’s are now appearing. Commercial property is secured on long term leases of a minimum10 years, and more usually 20 years+.

Quality serviced apartments are also now starting to spring up at $2,000 per month or more. There has also been a couple of real estate brokers setting up shop, but this market is very young and is usually only for rentals. I met with an Australian man who has been there for 10 years and still there. He is a director in an advertising and graphic design company. He was very upbeat about the future of Laos. But as the writer says, Laos is not for the faint hearted. It is very much virgin territory!!!

Courtesy | Thailand Real Estate and Property Guide