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Service Sector in Lao PDR

Service Sector in Lao PDR. Prepared by: Ms. Thiphaphone Phetmany Enterprise and Development Consultants, Laos Prepared for: The study meeting on Expansion and Development of the Service Industry in

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Service Sector in Lao PDR

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  1. Service Sector in Lao PDR Prepared by: Ms. Thiphaphone Phetmany Enterprise and Development Consultants, Laos Prepared for: The study meeting on Expansion and Development of the Service Industry in Asia, 17 to 20 June 2008, Seoul, Republic of Korea

  2. Contents A. Definition of service B. Composition of service in Lao PDR C. Status of service sector in Lao PDR D. Government Policies, Plans and Regulations related to service sector E. Country-specific problems in the service sector

  3. A. Definition of service • Intangible, • customer-oriented, business oriented • physical, intellectual, …

  4. B. Composition of service in Lao PDR • Wholesale and retail trade - 37.2 percent (formal and informal composed largely sales of agricultural products) • Transportation, communications, and postal services - 23 percent • Rental of dwellings - 12.1 percent • Public service (education, post, social welfare) - 11.6 percent • Hotels and restaurants -7.6 percent • Other – 8.5 percent

  5. C. Status of service sector in Lao PDR • The service sector expanded at 6.6% annual rate in 1990 (2004 • It represented 26 percent of the Lao economy (2004) and employed roughly 10 percent of the work-force (1999) • The service components that are increasingly become important are: banking and tourism • Banking: Many new foreign banks have set up office in the Vientiane area, most of which were established in the 1990s • Tourism: The tourist infrastructure was also improved substantially • tourism generated revenue of almost $120 million in 2004 and $ 233 million in 2007.

  6. D. Government Policies, Plans and Regulations related to Service sector • Banking + The new Law on Commercial Banking passed in December 2006, provides new procedures for the establishment, management and auditing of commercial banks and removes the geographic restrictions on bank operations • Legal - Foreign attorneys are not permitted to represent clients in Lao courts

  7. D. Government Policies, Plans and Regulations related to Service sector (cont.) • Education + Tax exemption for private education schools - Foreign entities are technically prohibited from teaching in Laos. The Ministry of Education maintains a close watch over the ideological content of curricula

  8. D. Government Policies, Plans and Regulations Related to Service sector (cont.) • Telecommunications + The most open and competitive services sector in Laos (Although it is listed as a sector of strategic and national security interest) • Tourism + The Government has maintained a $30, with longer duration, 30-day visa on arrival and at the Lao PDR embassies. + The extensions of tourist visas can be obtained not only in Vientiane (like before).

  9. E. Country-specific problems in the service sector 1) Lack of adequate infrastructure and resources • Electricity, its cost a greater concern than its access, is a critical obstacle. Access to electricity is particularly difficult outside the main cities of Vientiane and Luang Prabang • In terms of cost, Électricité du Laos (EdL) has a multi-tiered system that allows residential customers to be cross-subsidized by certain businesses paying higher rates (esp. Entertainment establishments) • The transportation policy, including both domestic air transport and land transport, scarcity of landline telecommunications facilities and their reliability

  10. E. Country-specific problems in the service sector(cont.) 2) Skills and education constraints cut across all strata of workers, from all positions 3) Tax rates 4)Macroeconomic uncertainty raises concern about the future of the economy for private firms in Lao PDR due to their sensitivity to macroeconomic volatility. For example, the tourism segment is sensitive to exchange rate fluctuations because they receive part of their revenue in foreign currency

  11. E. Country-specific problems in the service sector(cont.) 5) Regulatory uncertainty is an obstacle to doing business in the Lao PDR and hinders growth 6) Access to financing is a fundamental constraint, especially, for the micro and small firms (household businesses) in the service sector.

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