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Sep 25, 2011

Doing Business in Laos: Just May be a Little More Difficult

Laos has become known as a country that attracts small investors looking to gain government concessions, licenses and the like.  These “investors,” then, sell these “rights” to more cash flush investors or sell the project to unwitting small investors.  The initial investors are usually no more than punters looking to cash-in on duping the government and other investors.
Koreans have particularly become successful in this scam.  Korean comes to Laos with pictures of themselves with noted politicians, fancy advertising material and a team of “investors.”  They often take local business people on entertainment junkets 
The government of Laos, often without experience with these type of foreign individuals, offer concessions and licenses. 
Invariably, these individuals are unable to deliver on their promises and have already “sold” the project to other unsuspecting investors.  The project fails and the government is left with a lasting negative image by other foreign investors. 
Starting in October 2011, the Laotian Government will attempt to enforce through the Laos Law of Investment Promotion the proposed project schedule through fines.  The Law will apply to both foreign and local investors.
Most projects will require the depositing of a cash “performance guarantee” with the National Treasury Bank.  This cash guarantee will only be returned to the investor after the successful completion of the initial stage of the project.  Delays could lead to deductions from the deposited sum.
We suspect that in most cases the sum will be trivial, but if the government chooses to require large sums from foreign investors, I suspect that more investors will turn from Laos to the more transparent Asian rivals.
As I always advise, have an experienced lawyer conduct a feasibility study or you will be likely wasting more than just your time. 
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SeanHayes@ipglegal.com