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FEATURE ..
.. .. .. by Jee Say
Hai
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LAOS
- TOWARDS INDUSTRIALIZATION AND
MODERNIZATION |
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Introduction
Laos is located in the
center of Indo-China. It has a
population of about 5.5 million (2002) with
633,100 people in Vientiane, the capital city of
Laos. About 80%
of the people are Buddhists. The GDP
per capita for Laos is US$315 (2002). The 1997
financial crisis hit Laos badly. The
exchange rate for Kip (Lao currency) against the
US$ depreciated 11 folds between 1996 and
2004.
In 1893
Laos became a French colony. Laos fell under the
Japanese rule during the second World War. It
returned to French colonial rule in 1945 and
gained independence from French in 1954.
Before the
relocation of Vientiane as the capital city of
Laos, Luang Prabang was the main political,
cultural and economic centre for Laos. This
ancient capital city, located north of Vientiane
is the seat of Lao history and culture and a world
cultural heritage site. |
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Climate
Laos has a
tropical climate with two distinct seasons: the
rainy season from May to September and the dry
season from October to April.
Temperature varies according to
altitude.
In Vientiane the highest temperature may
rise to 38 degree Celsius in April. The lowest
is in January dropping as low as 15 degree
Celsius. |
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Mekong River
The Mekong River, starting
from Tibetan Plateau, China and ending in the
South China Sea, is the longest and most important
water route in Laos with 2030 km flowing within
her territory. 60 percent
of the Mekong River water originates in Laos.
The river passes through six countries, namely Cambodia,
China, Laos, Myanmar, Thailand and Vietnam. |
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The
Mekong River was one of the world's most
untamed waterways. Although the six
countries share the river, war and mutual
suspicion since early history have restricted
development. Before the completion of the
Thai-Laos Friendship Bridge (see photo below) in
1994 not
a single span crossed its entire length.
Except in Vietnam's Mekong Delta, there are no
large cities or industrial zones anywhere along
its banks. Now that peace has come
hydroelectric and navigation potential are being
tapped. The Mekong Committee, under the
United Nations auspices, is responsible to
coordinate the development of irrigation,
electricity, flood control and navigation.
During the high-water season (July to November)
barges from China bring machinery downriver to
Huay Xai (border town with Thailand near Golden
Triangle) and carry timber back to
China. |
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A good
transport system is always the pre-requisite of
economic advancement. Goods
and passengers can now move freely between Laos
and neighboring countries since the opening of
the Friendship Bridge in 1994 (photo right). This indeed is a
great break through. A plan is
underway to construct a rail linking Vientiane
city and Nong Khai alongside the Bridge. In fact Thailand
has completed the railway track up to the
middle span of the Bridge and we are
awaiting Laos to complete the track in its
territory.
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The
widest of the Mekong River is at the stretch 50 km
north of the border with Cambodia. During the
rainy season it reaches a width of 14 km. When the
river recedes during the dry season hundreds, if
the sand banks are included, thousand of islands
and islets appear. The Phone
Pha Pheng waterfall, dubbed as the Niagara Fall of
the East, is known as the most beautiful waterfall
in South-east Asia. The river
dolphins inhabits in this part of the
river |
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< < Landing point at
Savannakhet (Laos) - regular ferry services
carry passengers and goods across the Mekong
River from here to Mukdahan (Thailand) about 3
km on the opposite side. The journey takes
about 20 minutes and the fare is 13,000
Kips. These two points are international
crossing and exit passport fee on Laos
side is 5,000
Kips. |
Ferry
hours-from Laos : 0900, 1000, 1100, 1330,
1430, 1630 hours |
Ferry
hour-from Thai : 0915, 1015, 1115, 1330, 1430,
1600 hours |
Saturday:
0930, 1100, 1430, 1600 hours |
Sunday:
1030, 1500 hours | | |
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A BREAK THROUGH IN
ISOLATION
Faced with
decades of isolation Laos is making a slow but
sure recovery with the opening up of many border
crossings. Laos is
strategically located sharing common borders with
five nations, namely Cambodia, China, Myanmar,
Thailand and Vietnam. It has six
border crossings with Vietnam, another six with
Thailand, two with China. Laos has one
local border crossing with Cambodia and one with
Myanmar. One can
also enter Laos by air at Vientiane and Luang
Prabang. The third international airport at Pakse
takes only passengers to and from
Cambodia. A forth international airport, upgraded
from the existing domestic one, is being
considered at Savannakhet city. |
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< <
To further intensify the economic
development program a new Bridge spanning across
Mekong River at Savannakhet (in Laos) and
Mukdahan (in Thailand) is under construction. It
is scheduled to complete in December 2006. The total
cost of construction is about US$31 million and
is funded by a Japanese consortium. The Bridge
when completed will enhance the road linkage
system between Bangkok (about 600 km away) and
Danang (500 km away). The Bridge will further
bring about more traffic flow into the Special
Economic Zone township of Savannakhet and
Seno. The SEZ was first conceived in
September 2003 and is now becoming a reality | | | |
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SPECIAL ECONOMIC ZONE: AFTA – The Prime
Mover
AFTA (ASEAN
Free Trade Area) is committed to reduce the tariff
among member countries to 0-5%. By 2010
the 6 older ASEAN nations will further reduce the
tariff to zero percent. Laos will
join the other three new ASEAN members (Cambodia,
Myanmar and Vietnam) to reduce the tariff to zero
percent by 2015. This means
that ASEAN is an economy zone in which goods can
flow freely with no internal import tariffs. This will
bring about a lower production cost as raw
materials, components and accessories can be
easily and efficiently sourced within the AFTA
region.
Besides it offers a significantly larger
market with 500 million people. The days are
numbered for those production activities where
identical products are carried out in different
ASEAN countries. In place
thereof investors have to consolidate their
operation in those areas to service the regional
market efficiently and competitively.
The
harmonization of incentives, organization of
investment seminars, signing of investment
agreements and the establishment of ASEAN
Investment Area are significant achievement by
Laos to enhance her economic
activities. |
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First Special Economic
Zone
The EWEC and Road No. 13 meet at
Savannakhet city. In order to gain the greatest
advantage and benefit from this strategic
position, the Lao government has decided to
establish its first Special Economic Zone (SEZ) in
this part of the country. The SEZ,
known as Savan-Seno Special Economic Zone is the
most ideal choice. This
junction of the Corridor and Road No. 13 links a
population of more than 1.5 billion people. The
SEZ comprises two separate sites. Site A
(about 300 ha) is located near to the new Bridge
and Site B (about 20 ha) is located in Seno, about
30 km east of Site A. This SEZ
is expect to become a hub for trade, services and
manufacturing activities for the six Mekong
riparian countries in particular and other ASEAN
members in general. |
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The Natural Linkage The six
Mekong River riparian countries, namely Cambodia,
China, Laos, Myanmar, Thailand and Vietnam are
putting joint effort to exploit the Mekong River
social and economic potential. Called the
Great Mekong Sub-region (GMS), it aims to develop
this region through the establishment of the East
West Economic Corridor (EWEC). The
Corridor links Danang seaport (South China Sea),
Savannakhet, Mukdahan and Mawlamyine (Andaman Sea)
from east to west. Laos National Road No. 13,
which has been upgraded, connects Kunming (China),
Vientiane, Savannakhet, Phom Penh (Cambodian) and
Ho Chih Minh City (Vietnam) from north to
south.
The main objectives
of the Special Economic Zone: |
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To make use of the strategic location to
attract and |
promote investment |
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To create jobs for and upgrade know-how
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skill of the people of Laos |
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To develop bases for the industrialization
and |
modernization of Laos |
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To develop the SEZ as a trade and service hub
of |
the EWEC |
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Savan-Seno Special Economic
Zone |
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Distance
from major
cities/facilities: |
- about 460
km south from Vientiane capital city
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international
airport |
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about 240 km north from Pakse city /
international |
airport |
- about 500
km from Danang port (Vietnam) |
- about 600
km from Bangkok sea port /
international |
airport |
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( Source - Savan-Seno Special Economic
Zone Authority
) | |
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INVESTMENT INCENTIVES
Investment
incentives for this SEZ include exemption of
turnover tax, consumption tax and minimum tax.
Other
incentives include tax holiday (ranging from 2
years to 10 years) and reduced profit tax after
the tax holiday period (ranging from 8% to 10%)
and reduced Dividend
Tax and Personal Income Tax rate at 5 % for both,
loss carried forward for 5 years and import
tariffs exemption for all raw materials,
construction materials, production machineries,
and vehicles.
The
following are some of the promoted products and
services which qualify for the various
incentives:
Industrial sector:
1.
Wood processing (assembled or makeup
furniture, wooden semi-products, parquet,
flooring, wooden parts)
2.
Agro processing (coffee, pickles, cooking
oil, rice noodles)
3.
Garments and related accessories, footwear,
electronic components, computer and electrical
products assembly, construction materials,
herbs
4.
Handicraft (Lao cotton and silk products),
bamboo and rattan products, paper
production
Service sector:
1.
Warehouses including low-temperature
warehouses, cargo terminal, standard
processing factories,
transportation, forwarder
2.
Vehicles garages
3.
Tourism related operation (hotels,
convention halls, travel agency, tour operation,
car rental)
4.
Sporting facilities and amusement related
industries
5.
Office buildings, living quarters and
apartment
6.
Banks, insurance companies, vocational
schools, hospital
Trade sector:
1.
Whole sales of imported goods for
re-export
2.
Whole sales of Lao made goods (handicraft,
incense woods, gemstones)
3.
Trade agents for export and re-export
promotion
4.
Duty free shops |
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LABOUR COST
Labour cost
is comparative low. The minimum monthly wage for a
labourer is US$25.00 (250,000 Kip in Lao currency)
The monthly salary range for other positions is as
follow:
US$
Senior Manager
400.00 – 700.00
Junior Manager
300.00 – 500.00
Accountant
100.00 – 300.00
Messenger
100.00 – 350.00
Secretary/Clerk 40.00 –
200.00
Worker 35.00
–
40.00 |
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<
< Courtesy call on Dr BouaKham
Thiphavong (seated centre), Deputy
Director, Department of Planning and
Investment - the approval authority
for investment within Vientiane
Capital. The top three investors
approved in 1988 -2004 are Thailand,
Malaysia and China in that
order. The highest capital
inflow was in 2001 with US$408
million. The DPI is
empowered to approve investment of
US$5 million and below and approval
status will be known within 15 days.
DPI also offers one stop service
on all matters incidental to the
investment. |
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Photo
from left : Jee Say Hai, Hoo Cheng Hong, Dr
Thiphavong, Mrs Limmany and Saysomphone Limmany |
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(Left)
: Don Chan Place hotel built along side the
Mekong River, a project by Malaysian investors,
the first five-star international hotel in Laos
and one of the venues chosen for the 10th ASEAN
Summit held on 29-30 November 2004. |
(Centre)
: A delegate led by Mr Jee Say Hai called on Mr
Latsanivong Amarathithada (centre), Director,
Department of Agriculture and Forestry, Vientiane
City to exchange view on agro-based project. The
delegate also put on a video presentation on fruit
farming in Malaysia. |
(Right)
: Dear farming is not about rearing of dears
for their meat but has turned into a promising
industry, an agro-tourism resort-cum-farm which
can boast one of the most interesting collections
of fruits, vegetables and animals. |
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Basic
data profile of Laos
(2002): |
- Area:
236,800 square km |
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Population: 5.5 million (female: 50.6%; male:
49.4%) |
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Population density: 23.3 persons per square
km |
- Capital
city: Vientiane (633,100
people) |
- GDP per
Capita: US$315 |
- GDP
growth rate: 5.7% |
- Major
industries: garment, electricity
generation, |
wood- based
industries and other light
industries |
- Major
exports: coffee, electricity, clothing, wood
and |
forest products,
gypsum, lignite and tin |
- Major
imports: industrial machineries,
electrical |
machineries and
parts, chemicals, iron and
steel |
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Major trading partners: European Union,
Thailand, |
USA, China, Japan,
Vietnam and other Asean |
countries |
- Top 4
investors in all business sectors: China,
South |
Korea, Malaysia,
Thailand |
- Top 4
investors in manufacturing sectors:
China, |
Thailand, France,
Malaysia |
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Flooring brick
manufacturing |
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Wood
based furniture manufacturing |
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OBSERVATION
Laos being a land-locked country
with major part being mountainous and forest was
isolated, neglected and almost forgotten for
decades.
With the free flow of people, products,
knowledge and information Laos is not isolated
now.
It is seeing the lights at the end of the
tunnel since the government open it market to the
outside world in 1987. The setting up of the SEZ
is a bold step destined to enhance and speed up
the process to bring about a brighter and more
prosperous future with improved standard of living
for her people. |
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ODE
Management Services Sdn. Bhd. (105806-W) P.O.Box 157,
10710 PENANG, MALAYSIA | |
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