6. Lao People’s Democratic Republic (PDR)
This chapter presents the country profile for Lao People’s Democratic Republic (PDR). It provides an overview of the current de jure requirements for the institutions, tools and processes of regulatory governance and, where possible, how these have been implemented in practice. The profile focus on three aspects of regulatory governance pertinent to the past, present and near future of regulatory reforms in the ASEAN region. The first is whole-of-government approaches to regulatory policy making, including national and international commitments to better regulation that are driving domestic reform processes. The second is the use of good regulatory practices, including regulatory impact assessments (RIAs), stakeholder engagement and ex post review. The third is approaches to digitalisation, or how countries are using digital tools to respond to regulatory challenges, and is the newest frontier for better regulation reforms in both ASEAN and OECD communities. The information contained in this and the other profiles serves as the basis for the analysis of trends in regulatory reform presented in Chapter 1.
Regional focus
Lao PDR has continued to focus on strengthening regional economic integration ties and thus promoting trade and investment through whole-of-government strategies and participation in international treaties. Lao PDR committed to implementing more trade facilitation measures with ratification of the WTO Trade Facilitation Agreement (TFA) in 2015, which took effect from February 2017. The TFA contains provisions for expediting the movement, release and clearance of goods, as well as measures for effective co-operation between customs and other appropriate authorities on trade facilitation and customs compliance issues (ASEAN, 2021[1]).
The TFA is being implemented through ASEAN Regional Integration Support from the European Union (ARISE) Plus Lao PDR, which is the Lao PDR component of the ARISE Plus 2017-2022 Regional Programme1. The project is geared towards improving the country’s overall business environment and increasing its participation in global value chains in two sectors: wood processing and coffee (ITC, n.d.[2]). This is translated to Lao PDR via three components, each with elements of better regulation embedded (ITC, n.d.[2]):
1. Increased regional economic integration: by addressing specific constraints in selected sectors implementing measures contained in the ASEAN Trade in Goods Agreement and the ASEAN Economic Community Blueprint 2025;
2. Increased awareness on trade preferences for exports: including to the EU, with greater use of Everything But Arms, and on the requirements for placing products on the EU market; advanced preparation of the Lao People's Democratic Republic to shift to a new trade preference scheme; and
3. Strengthened support services (especially for smallholders and MSMEs, with a focus on women), reduced supply-side constraints and trade and investment promotion in targeted sectors (e.g. wood processing and agro-based products).
With the support of the International Trade Centre (ITC), 2021-25 Export Roadmaps have been produced for both wood (ITC, 2021[3]) and coffee (ITC, 2021[4]). Improving the regulatory environment figures prominently in both, noting a need to improve the country’s legal, regulatory and institutional frameworks to support the outcomes envisioned from ARISE plus. These roadmaps note several enabling factors, such as predictable regulatory frameworks, better access to regulatory and market information, streamlined procedures, greater use of digital tools, and promoting public-private dialogue and transparency. They also note the deterring factors associated with permit constraints, burdensome regulations, and export and transportation costs.
Furthermore, the Ministry of Industry and Commerce (MoIC) published a Trade Facilitation Road Map (TFRM) of Lao PDR for 2017-2022, which builds on the Trade Facilitation Strategic Plan for 2011-15 (WTO, 2019[5]). The Trade Facilitation Strategic Plan 2011-2015 had recommended the following strategic measures (WTO, 2011[6]):
Simplification, harmonisation and modernisation of trade and customs procedures
Develop private sector capacity to trade efficiently in compliance with rules and regulations
Provide the right equipment and facilities to ensure the smooth and efficient administration of trade and customs procedures
The Road Map aims to integrate Lao PDR’s economy into the region by simplifying and streamlining clearance procedures as well as well as reducing the time and cost related to trade (Ministry of Industry & Commerce, 2017[7]). It recommends seven strategic measures, which include developing an institutional mechanism to improve co-ordination with line departments and strengthening the governance structure at the sub-national level (Ministry of Industry & Commerce, 2017[7]). The Road Map is currently in its last phase of implementation, which began January 2020 and ends in December 2022. Provisions regarding the exercise of the mid-term and final evaluation of the Road Map are included within the document. The mid-term evaluation of the Road Map is required to start in early 2020 while the final evaluation is required to begin towards the end of 2021 so that the findings are available by March 2022 (Ministry of Industry & Commerce, 2017[7]).
Lao PDR has successfully achieved a number of these strategic goals, including simplification of customs procedures, provision of equipment & facilities, implementation of WTO, ASEAN & GMS commitments and creation of national trade facilitation body (Ministry of Industry & Commerce, 2017[7]). Limited progress was also made in mainstreaming of trade facilitation across the line ministries and development of private sector capacity (Ministry of Industry & Commerce, 2017[7]).
Meanwhile, Lao PDR is a signatory to the Regional Comprehensive Economic Partnership (RCEP), which includes provisions on better regulation. RCEP came into force for Lao PDR in January 2022. In November 2021, a workshop for Lao PDR officials regarding rules of origin (ROO) under RCEP was held under the ERIA Capacity Building Programme, with support from the Department of Foreign Affairs and Trade, Australia (ERIA, 2021[8]). The ROO applies to businesses seeking to qualify their goods as originating for RCEP purposes and allows for increased flexibility and greater integration of supply chains across the region (Bakermckenzie, 2020[9]).
Lao PDR has also made efforts to develop and eventually integrate the Lao National Single Window (LNSW) into the ASEAN Single Window (ASW). The LNSW is still regarded as being ‘under development’ (ERIA, 2021[10]), but efforts to implement LNSW are under way under the Lao Customs agency. The Trade Facilitation Road Map of Lao PDR for 2017-2022 notes that once the Lao PDR National Window is established and functional, it should be connected quickly with the ASW (Ministry of Industry & Commerce, 2017[7]). According to the implementation plan laid out in the Trade Facilitation Road Map, the Lao PDR plans to set up an NSW with five key departments by 2019, increasing to 10 departments by 2020, and then to all line departments by 2022 (ERIA, 2021[10]).
National focus
The 9th five-year National Socio-Economic Development Plan for 2021-2025 was developed to be in line with the National Strategy on Socio-Economic Development 2016-2025 and Vision 2030 of the Lao PDR. Improvement of public governance and administration is one of the six outcomes under the Plan. Measures to improve the quality of regulation are emphasised throughout the document. These include implementing an e-government system, improving public services under the One-Door service mechanism, increasing the proportion of streamlined ministerial departments and divisions to 20% of the total, and increasing the proportion of streamlined sections, units and sub-units at the local administrative level to 30% of the total in line with the Sam Sang Directive2 (Lao PDR, 2021[11]).The emphasis on public governance and administration continues from the 8th five-year National Socio-Economic Development Plan for 2016-2020, which had set strengthening public governance and administration as a cross-cutting output to achieve socio-economic development.
Progressively updating legal and administrative frameworks to bring them in line with government policies has also been a focus in recent years for the government of Lao PDR. This includes amendments to the Law on Government to clarify laws and mandates of the administration, in line with the Sam Sang Directive, and establish new ministries, reassign functions, and/or merging existing ministries with similar functions with the aim of improving access, transparency and accountability of public service delivery at the national level. In addition, as part of the decentralisation reform efforts, the Law on Local Administration was also amended, which affects regulations at the sub-national level. Decentralisation aims to strengthen and integrate financial, administrative, and service delivery systems for the benefit of local citizens. Providing guidance regarding these sub-national functions have been assigned to local administration. Finally, progress has also been made in establishing laws and compliance mechanisms in alignment with international standards.
To implement the ASEAN Economic Community Blueprint 2025, Lao PDR created the Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED) project, with the support of the German Corporation for International Development (GIZ), to assist in the elaboration of the National Work Plan of Lao PDR 2018-2020 (GIZ, n.d.[12]). This was under the realisation that the vast majority of Lao businesses are small and medium-sized enterprises (SMEs). Strengthening SME development would therefore enable Laos to integrate more inclusively and sustainably into the AEC. RELATED aimed to (GIZ, n.d.[12]):
1. Improve AEC-related policy framework conditions in the areas of trade in goods, trade in services and investments.
2. Develop and provide demand-oriented AEC-related services for the private sector.
3. Improve the conditions for an increased competitiveness of AEC-oriented private enterprises.
The Project notes a number of results, including several with impacts for better regulations. These include supporting the identification and prioritisation of regulatory and procedural reforms to improve the business climate to be implemented by 2022, as well as amending the Lao regulatory framework for e-commerce in line with the ASEAN Agreement on Electronic Commerce (GIZ, n.d.[12]). The Project also notes strengthened regulatory frameworks for transport and logistics, the launch of the national SME Service Centre (SSC), two provincial SCCs, SCC Breakfast talks to support public-private dialogues, and one-on-one coaching for SMEs and start-ups (GIZ, n.d.[12]). Information has also been supplied, such as practice-oriented manuals for Lao coffee trade procedures to enter the ASEAN market to help reduce farmer’s dependency on traders and sell directly to markets, as well as other materials, trainings and coaching to support competitiveness (GIZ, n.d.[12]).
Efforts to improve the quality of one-stop services have also been made by the government. The 2016 Law on Investment Promotion stipulates that the Central Investment Promotion and Supervision Committee is responsible for directing the implementation of an one-stop-service to promote and attract investment (UNCTAD, 2022[13]) Following implementation of the Law, the government issued the Decree on the Establishment and Operation of the Investment Promotion and Management Committee No. 05/PMO in 2018, which provides further clarification on the establishment and operations of the Investment Promotion and Management Committee (Tilleke&Gibbins, 2018[14]). The Committee oversees investments in controlled activities, concessions and special economic zones (WTO, 2019[5]) in addition to providing One-Stop Services.
Regulatory impact assessments
RIA is governed by the Law on Making Legislation (No. 19/NA 12/7/2012) and the Decision on the Impact Assessment of Draft Legislation (No. 517/MOJ 7/7/2014). The Law (Article 29) requires analysis, public consultation, an explanatory note and impact assessments of regulatory and budgetary impacts to accompany draft legislation (OECD, 2018[15]). This information should be reported in an Impact Assessment Note (IA Note), which is required for all draft laws that go to the National Legislative Assembly (OECD, 2018[15]). RIA is mandated for all draft laws, including (OECD, 2018[15]):
Draft Government Decrees, except decrees to implement Resolutions of the National Assembly, of the Standing Committee of the National Assembly, the national socio-economic development plan and decrees on establishment and activities of a ministry or a government organisation
Draft Decisions of the Prime Minister, Ministers, Head of Government Authorities, provincial governors or Vientiane.
The Ministry of Justice (MOJ) is the legal scrutiny body, which conducts a comprehensive review and research on draft laws, particularly in regards to legal structure, and can send back comments to the drafting authority (Ministry) (OECD, 2018[15]). It can also invite the drafting committee and relevant sectors to review and edit to ensure consensus before submission to the government (OECD, 2018[15]).
In 2011, an Inter-Ministry RIA Task Force was established to guide the introduction of RIA into the pilot ministries and design the system (OECD, 2018[15]). Subsequently, a Centre for RIA was established within the MOJ in 2014 to advocate for, support and quality control the RIA system (OECD, 2018[15]). In addition, the centre also has a responsibility to inform and train line ministries as well as the public on RIA (OECD, 2018[15]). The Centre published a set of Regulatory Impact Assessment Guidelines in 2016 in partnership with the Asian Development Bank. The guidelines provide guidance to authorities making and amending legislation to (Centre for Regulatory Impact Assessment for Draft Legislation, 2016[16]):
Meet the requirements for impact assessment under the Law on Making Legislation and the MOJ Minister Decision on the Impact Assessment of Draft Legislation; and
Produce better legislation in accordance with best practice principles.
The Guidelines support the Lao PDR National Socio-Economic Development Plans and the aim of the Legal Sector Master Plan to establish a rule of law state by 2020 (Centre for Regulatory Impact Assessment for Draft Legislation, 2016[16]). The Guidelines are of general application, and they state that authorities should also consider sector and regional specific requirements when making and amending legislation.
RIA does not cover district or village regulation, resolutions, or other government decrees (e.g. to implement the resolution of the National Assembly, socio-economic development plans or strategic plans) (OECD, 2018[15]). A light form of RIA is currently used and assessed impacts must be projected for the next five years (OECD, 2018[15]). To date, over 600 training and awareness fora have been conducted on RIA but there remains limited compliance among ministries.
Stakeholder engagement
The Law on Making Legislation 2012 states that when making a draft law, the authority in charge must conduct public consultations. For all new draft regulations, there is a requirement that stakeholders should be consulted at least twice. According to the Law, upon approval from the head of the authority in charge of law making, the drafting committee must submit a draft law with focal questions to [relevant] sectors, local administrations and other concerned parties for comments that are related to matters under their jurisdiction (Lao PDR, 2012[17]).
OECD (OECD, 2018[15]) notes that the Decision on Impact Assessment underlines the importance of consultation and makes the specific minimum requirement of a 60-day consultation period for the draft Impact Assessment Note with draft legislation and draft explanatory note. The Legal Unit publishes draft documents including the Impact Assessment Note for public consultation, and also approves documents on the Official Gazette or drafting authority website (Centre for Regulatory Impact Assessment for Draft Legislation, 2016[16]). The IA Note also includes a section on comments received, which can potentially explain why inputs have been taken into account or rejected (OECD, 2018[15]). However, there is yet to be a guideline to inform ministries about the process needed to undertake this. There is limited but increasing compliance with this requirement. The Impact Assessment Note is not currently published with the final promulgated legislation.
The Lao National Chamber of Commerce and Industry (LNCCI)3 is regularly consulted on draft regulations and receives support from professional legal advisory firms to comment on them (OECD, 2018[15]). They may also funnel draft legislation to other Chambers for comment (OECD, 2018[15]). The LNCCI worked with the Ministry of Industry and Commerce (MOIC) to create the SME Service Centre (SSC), an independent organisation to support small and medium-sized enterprises in Laos to access training and information (SSC, n.d.[18]). The project, supported by several foreign development aid organisations, such as the ILO or GIZ, the SME Service Center (SSC) was officially established on 17 February 2017 with an office within the LNCCI in the capital of Vientiane (SSC, n.d.[18]). The Centre for Regulatory Impact Assessment for Draft Legislation is expected to play a role in regulatory consultation. The LNCCI hopes to use their new SME Centre as a forum for SME consultation.
The LNCCI is responsible for overall co-ordination and facilitation of the Lao Business Forum, which was launched in March 2005 as a joint initiative between the International Finance Corporation (IFC) and the Ministry of Planning and Investment (MPI) (LNCCI, n.d.[19]). Public–private consultation is conducted each year between government agencies and members of private sector working groups, with the Department of Planning and Cooperation of the Ministry of Industry and Commerce acting as the main co-ordinating body (ERIA, 2021[20]).
The public may also call hotlines to the Prime Minister’s Office and some ministries, such as the Ministry of Finance to express concerns (OECD, 2018[15]).
Burden reduction/ex post review
The 2016 Guidelines on RIA include a section on the review of laws. It states that legislation should be reviewed regularly to ensure it remains relevant and effective over time. In determining when the legislation should be reviewed, the Guidelines advise that drafting committees should consider (Centre for Regulatory Impact Assessment for Draft Legislation, 2016[16]):
1. Whether there needs to be a post-implementation review conducted to ensure that the legislation delivers the policy objective in accordance with regulatory best practice principles. For example, a post-implementation review could be very useful where the legislation was implemented urgently and the drafting committee did not have sufficient time to complete an appropriate level of consultation and analysis, or there is a high level of uncertainty with the impact assessment conducted; and
2. If no post-implementation review is necessary, then a regular review of the legislation should be conducted to ensure it is still relevant and effective.
Further efforts for burden reduction were achieved when the government amended the Investment Promotion Law No. 15/NA in 2016. By this amendment, the Central Investment Promotion and Supervision Committee, chaired by the Deputy Prime Minister, was established as an integrated control mechanism of investment promotion (KSP, n.d.[21]). In addition, One-Stop Services were improved to support the investment process and an Ombudsman system was introduced.
OECD (2017[22]) stated that these amendments align with international best practices, expecting they will have a positive impact on the effective implementation of existing policy. Previously, three different entry points for investors in Lao PDR were defined as one-stop shops by the government (OECD, 2017[22]). Consequently, three distinct one-stop shops have co-existed in the country, which the Review notes as contrary to the principle behind One Stop Shops. The newly amended Law on Investment Promotion has reduced the number of entry points for investors from three to two (OECD, 2017[22]).
To improve the investment climate and ease of doing business, Prime Minister Order No. 02/PM, 1 February 2018, for improving the effectiveness of the business registration and approval process was issued (WTO, 2019[5]). The Order focuses on addressing and minimizing difficulties in doing business within the country through the reduction of procedures and time for the issuance of authorisations by the sectors concerned to ensure speediness, transparency, effectiveness and reduced cost in the operations of the business sector.
Under the Decision on Enterprise Registration No. 0023/MOIC.DERM of January 2019, the process to obtain an Enterprise Registration Certificate (ERC) was simplified, moving from ex ante enterprise registration to an ex post system. Companies now no longer need approval from line Ministries before registering as enterprises, which has reduced the time to register a business to less than 10 working days on average (WTO, 2019[5]).
Progress has been made to develop one-stop shops within the country. This includes the review of relevant legislation and regulations related to the establishment of One-Door Service Centres (ODSCs), evaluation of the implementation of the ODSCs throughout the country, as well as research on the mechanisms, regulations and standards of new modern One-Door Service Centres (Lao PDR, 2021[11]). The purpose of ODSCs is to create a streamlined and easy-to-use interface between government and citizens, offering a number of services in one location and thus reducing unnecessary paperwork, time and effort (UNDP, 2021[23]). The Ministry of Home Affairs is responsible for strengthening the capacity of ODSCs in each district, with the goal of making them citizen-centric centres that take a strategic approach to providing good service delivery.
The government has a number of policies and regulations that are meant to support the use of digital technologies in Lao PDR. These include (E-Government Center of Lao PDR, n.d.[24]):
The E-Government Center is in charge of 1) centralisation of the government computer service; 2) managing and developing administration and service; 3) building, managing and providing services on the centralisation of government information; 4) building and providing services to increase access to information for the government, business sector and citizens; and 5) providing software training and promoting of E-Government (E-Government Center of Lao PDR, n.d.[24]).
The establishment of the e-Government portal has been completed to support the transformation towards electronic public administration and a modern digital government, with the current system now able to integrate information and services of ministries and government offices in various sectors at a basic level (Lao PDR, 2021[11]).
The Trade Facilitation Road Map 2017-2022 has as its priority measures publication of Service Charters, establishment of a National Single Window, issue of enabling regulations for digital signatures, centralisation of payments and one-stop inspections (Ministry of Industry & Commerce, 2017[7]). The Lao National Single Window (LNSW) was developed by the Ministry of Finance and the Lao Customs Department. Using Cloud computing, the portal covers all the processes between Government entities and the Laotian Trade Community, relative to trade regulations formalities in Lao PDR (LNSW, n.d.[25]). Its main objectives include:
Improving logistic chain efficiency by generalizing the use of effective IT exchange data tools between all actors,
As of 2018, the system was undergoing pilot testing with issuing e-permits by the Ministry of Industry and Commerce. It has plans to continue, in the next phase, to link Ministry of Public Work and Transport, Ministry of Agriculture and economic operators. The Customs Department was preparing to sign the MOU with the Department of Transport exchange information, through the National Single Window System, on the Certificate of Automobile Technical Specification issued by the Department of Transport (ASW, n.d.[26]).
In conjunction with development of the system, the legal framework has also been developed to support the implementation of the LNSW. In January 2019, the Minister of Finance issued an administrative decision on implementation of the LNSW such regulation serves as a legal base for government agencies to develop their own administrative instructions/guidelines on streamline and seamless procedures for issuing permit/license/certificate through the LNSW (ASW, n.d.[26]).
The Trade Facilitation Road Map also requires that line departments publish the details of documents required, fees payable and standard procedures to be followed for various services such as issuing licenses, permits, and quality approvals online, as well as on the Lao Trade Portal (LTP) (Ministry of Industry & Commerce, 2017[7]).
Use of digital tools to improve the regulatory environment has also been carried out by separate ministries. The Ministry of Technology and Communications (MTC), in partnership with the United Nations Development Programme (UNDP), launched the Digital Government Transformation project in July 2021 as a collaboration towards shaping the digital transformation agenda in Lao PDR (UNDP, 2021[27]). The project is expected to contribute to the development of Digital Government Master Plan, Standards Framework of Digital Government as well as the pilot initiatives on Digital Government services in Lao PDR, which will become a significant tool for line ministries and government organisations to digitalise their administration and services (UNDP, 2021[27]).
To implement the Government policy in promoting and attracting investment from private sectors in the social-economic development of the country, in April 2018 the Ministry of Planning and Investment established a One-Stop Service in line with the Investment Promotion Law (Amended 2016). It focuses on providing investments in the Lao PDR with more facility, transparency, and agility and is expected to bring capital, modern technologies, technical knowledge and wider market approaches into Lao PDR (Investment Promotion Department, n.d.[28]). The One-Stop Service also provides all-round services and facilities to the investors with information, consideration and approval processes of investment projects, issuance of the Investment License and other investment notices (Investment Promotion Department, n.d.[28]).
References
[29] ARISE+ (2022), ARISE+ Background, https://ariseplus.asean.org/about/ (accessed on 17 August 2022).
[1] ASEAN (2021), WTO Trade Facilitation Agreement (TFA), https://www.cambodia-ariseplus.asean.org/reports/wto-tfa.
[26] ASW (n.d.), Lao PDR General Information, https://asw.asean.org/index.php/nsw/lao-pdr/lao-pdr-general-information.
[9] Bakermckenzie (2020), Understanding the Regional Comprehensive Economic Partnership Agreement (RCEP).
[16] Centre for Regulatory Impact Assessment for Draft Legislation (2016), Regulatory Impact Assessment (RIA) Guidelines.
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[12] GIZ (n.d.), Regional Economic Integration of Laos into ASEAN, Trade and Entrepreneurship Development (RELATED), https://www.giz.de/en/worldwide/17473.html.
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[3] ITC (2021), Lao People’s Democractic Republic: Wood processing sector export roadmap (2021-25), International Trade Centre, https://www.intracen.org/uploadedFiles/intracenorg/Content/Redesign/Projects/Arise_plus_Laos/Lao%20Wood%20processing_final_web.pdf.
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Notes
← 1. ARISE Plus has three components: i) high level capacity building; ii) support to the realisation of the single market for goods; and iii) ASEAN Secretariat capacity building and was funded by a global EU contribution of 22 million (ARISE+, 2022[29]).
← 2. The Sam Sang, or “three bills,” Directive is a decentralisation policy that aims to enhance government ownership and accountability in governance and socioeconomic management of local administration, resulting in improved public service delivery (Vongxay and Yi, 2017[30]).
← 3. The LNCCI is a private sector body representing private sector interests, but with clear government involvement (OECD, 2018[15]).