Classification: Confidential (C-3)

Laos Pitchbook

Prepared by TMB Analytics

Date: December 2016

-2-

2015 GDP size: 12.5 USD bil (Thai 395.3)

GDP growth: 7.0%(2015) 7.3%(2020F)

GDP per capita: 1,779 USD(2015) 2,285(2020F)

2014 Unemployment rate: 1.3%

Inflation: 5.3%(2015) 3.3%(2020F)

Export toLaos

Thailand 70%

China 19%

Vietnam 8%

Main Exporters Major Thai Exports(excl gold)

Oil&Gas 17%

Vehicle 12%

Foods 8%

20152015

23% 33% 44%

Agriculture

Industry

Services

Source: UN, MOC, BOI, IMF, CEIC, and TMB Analytics

General Info

Population

6.9 mil people(Thai 68.1)

Economy

GDP Component (2015)

73%

6%

21%

Labor Force (2015)3.5 mil people (51.1% of total population)

FDI (2010-14)

From..China 37%Vietnam 16%Thailand 11%In..Mining/Fuel 45%Services 16%Agri/Forestry 16%

Country Summary

Lower Middle

Used currency

Kip, USD and THB

Income Status

(As of July 2016)

Size

236,800 sq km(Thai 513,000)

Capital

Vientiane (เวยีงจนัทน์)

400

800

1,200

1,600

2,000

2,400

5

6

7

8

9

2010 2012 2014 2016E 2018F 2020F

GDP Growth (LHS)

GDP per Capita

(RHS)

0

1

2

3

4

5

6

7

8

2010 2012 2014 2016E 2018F 2020F

-3-

Economy: Laos Macroeconomic Outlook

Strong Economic Growth

Sources: IMF and TMB Analytics

Stable Inflation Outlook

Inflation Rate

IMF’s forecast

IMF’s forecast

Strong economic growth Growth slightly dropped after 2013,

but remain at high level which is

expected to be no less than 7%.

This leads to a continue rise in

GDP per capita, and purchasing power.

Inflation rate in this country,

mostly co moves with energy

price. It is expected to gradually

move up in relatively stable path.

Financial health remains

unstable. However, credit growth

from the past remains high, though

abated from 2010 - 2013 average

of 40% to 24% in 2015. Bank

balance sheets also show sign of

weaknesses with rising NPL

especially for state-owned banks,

while rising level of public and

publicly guaranteed debts, at 60% of GDP in 2015, are worrisome.

USD%

%

Stable around 3%

35

40

45

50

55

60

65

70

75

-6

-4

-2

0

2

4

6

2010 2012 2014 2016E 2018F 2020F

-3.5

-3

-2.5

-2

-1.5

-1

-0.5

0

-34

-30

-26

-22

-18

-14

-10

2010 2012 2014 2016E 2018F 2020F

-4-

Economy: Laos Stability Conditions

Sources: IMF and TMB Analytics

Fiscal Balance

(LHS)

Gross Public Debt (RHS)

%GDP %GDP

CA Balance (RHS)

CA/GDP

(LHS)

External vulnerabilities are

a concern. Current account

deficit is large, estimated to be

around 21% in 2016. International

reserve is insufficient, amounting

to only 1.2 month worth of imports,

while public and publicly

guaranteed external debts is high,

at 48.7% of GDP in 2015, together

with sizable domestic foreign-currency lending.

According to current

government policies,

increasing fiscal deficit is

expected, though not as high as

in 2013 due to the government

effort for fiscal policy tightening. If

the government does not boost

revenue and expenditure

rationalization, medium term fiscal

consolidation may be weakened further.

IMF’s forecast

IMF’s forecast

External Vulnerabilities Remain a Concern

Consolidation Effort should be Strengthened

% USD bn

-5-

Ease of Doing Business in Laos

16047

155

65

75

165146

120

88169

78

42

37

6882

27109

56

51

23

Starting a Business

Dealing with Construction Permits

Getting Electricity

Registering Property

Getting Credit

Protecting Minority Investors

Paying Taxes

Trading across Borders

Enforcing Contracts

Resolving Insolvency

Lao P.D.R. Thailand

Solving Insolvency

Sources: World Bank and TMB Analytics

Starting a Business

8 steps or 67 days Dealing with

Construction Permit

11 steps or 83 days

Getting Electricity

6 steps or 134 days

Registering Property

4 steps or 53 days

Paying Taxes

35 payments or 362 hours

Enforcing Contracts

443 days and cost 31.6%

of claim

Getting CreditDTF score 55

Protecting Minority Investors

Trading Cross Border

170

139

131

82

78

46

23

Myanmar

Lao

Cambodia

Vietnam

China

Thailand

Malaysia

Laos Ranked 131th (out of 190) in Ease of Doing BusinessRanking

!!

Note: 1) East of doing business is base on 2016 version, released on Oct 2016, ( ) refers to Doing Business in previous year

(46)

(22)

(80)

(91)

(128)

(136)

(171)

Energy, 17%

Vehicle, 12%

+

+

++

0

0

(Others 50%)

100%

100%

100%

100%

100%

Thailand70%

6.9USD bil

5 yr Outlook

• Decent economy growth and active

public investment

• 2016-20 GDP average growth

= 7.4% (Thai 3.1 )

• Part of AEC Single Market

• Most good tariff reduce to 0%

Source: Ministry of Commerce, BOI, Index Mundi, CEIC and TMB Analytics

2015

5%

201230%

20134%

20147%

Thailand export to Laos landscape

TotalEx Growth

Note: 1) Unless state otherwise, data in this slide is from 2015

2) In 2015, Thai export 214.1 USD bil, 4.2 USD bil (2.0%) went to Laos

Border Export4.2 USD bil

Est.Border Ratio

Thai Export to Laos

4.2 USD bil

We are their number one exporter in Laos (70% share) where market is growing

Currency

Settlement

40% USD

60% THB

-6-

20157%

201234%

2013-0.4%

201414%

Border Ex Growth

Nan

5% ++Chiang Rai

6% ++

SEZ Phase II

Focus Cluster

Tourism

Processing Foods

Agriproduct

Processing

Logistics

99%

Border

Nong Khai

43% +

SEZ Phase II

Focus Cluster

Tourism

Logistics Mukdahan

20% ++

SEZ Phase I

Focus Cluster

Logistics

Ubon

Ratchathani

10% -

*SEZs Phase I, began

developing in 2014

Phase II is expected to start in 2017

Elec Pts,

6%

Machinery,

7%

Foods,

8%

Share Growth

Share Growth

Share Growth

FDI landscape and opportunity for Thai Investors in Laos

Potential FDI Sectors for Thailand

• Supportive trade agreement

ASEAN 0-5% tariff rate (by 2018)

• Various tax exemption/relief on selected sectors

• Cultural similarity between Thai and Laos people

• Pro investment infra:

Two SEZ; Savan-Seno Zone and Golden Triangle and

various other Specific Economic zones

Supportive Investment Environment

45% 16% 16%

Mining/Fuel Services Agri/Forestry Others

0%

2%

4%

6%

8%

10%

12%

0

200

400

600

800

1,000

1,200

1,400

2009 2010 2011 2012 2013 2014 2015

FDI continues to grow mainly from the use

of its rich natural resources, particularly in

Energy and Hydropower.

37% 16%11%

China Vietnam Thailand

By investment countries (2010-14 avg)

By sectors (2010-14 avg)

USDmn% of GDP

FDI growth is relatively consistent

Source: BOI, CEIC and TMB Analytics

Champasak

Attapeu

Agriproduct and Processed Foods

• Rich natural resources and

supportive climate

• Lack of advanced tech

operation

Viantiane

Textile

• Abundant and

cheap labor

• Lack of major

players

Energy/ Mining

Retail

Construction/Con Mat

-8-

Regulations & Benefits for Thai Exporter

Check any quota/restriction on

good exported

General goods: Allowed

(see appendix for list of prohibited

goods and goods with quota)

Import Tax (Custom duties)

5-40% Consumption/daily use

50-150% Vehicle

60% Cigarette

80% Steel and Liquor

Declare at Custom on type, origin and

price of goods

Contact bank to facilitate

transaction

AEC Benefit

Inclusion List:

99% tariff exempted

Sensitive List:

Reduce to 5% tariff by 2017

• GSP with 42 countries

• AEC single market (AFTA)

• RCEP (in progress)

• In process of entering WTO

Goods DeliveryReceive Export Order Payment

1

Production for export

goods. Seek bank advise if

needed.

Trade amount exceeding

approx. 20 million Kib must

be approved by BOL

Market’s

Comparative Advantages

2 3

Sources: BOI, CEIC and TMB Analytics

No Specific production

requirement

Some goods are allowed to

traded in USD, see appendix

for complete list

Excise Tax

Up to 23% Fuels

Up to 50% Liquor

-9-Sources: Lao MPI/DPI and TMB Analytics

Preparation1• Obtain investment license and

enterprise registration certificate from

MPI/DPI (approval authority)

• If the investment initial amount is over

150 USD mil and/or falls in Control list,

further MPI consideration is required.

• Apply for tax registration certificate

• Corporate Income Tax = 24% (as of Jun

15)

• Apply for a company seal

Regulations for Thai Investors

Check Minimum registered capital

Determine investment and business form

(see appendix for available entities)

• 1 bil Kip (about 125,000 USD)

• No local partnership required

• See appendix for sectors that either

needs government consideration or is restricted

MPI stands for Ministry of Planning and

investment

DPI stands for Department of Public

Information

CPMI stands for Committee of Promotion & Management of investment

General Business

SEZ

• Contact MPI which will coordinate with

SEZ Administrative committee

• Obtain registration license

Concession

• Obtain concession license from CPMI

and governmental body (approval

authority)

• Sign contract for concession

agreement (minimum registered

capital = 30% of total capital)

(please see appendix for

minimum bond requirement amount)

• Request land concession

Setting Up Business3 Types of Business2

Note 1) See appendix for other investment restrictions

-10-

Benefits for Thai Investors

General Benefit

+ or

Up to 10 years tax holiday on selected

business

Up to 24% tax relief (5% tax relief in the

first 4 years for firm that is registered

with Lao Securities Exchange)

Next year tax exempted if profit is being

use for reinvestment

Import Tax exempted for raw/ cap good

that cannot be produced

domestically/sufficiently

Business in non SEZ

Business in SEZ

• 2-10 years profit tax holiday

• 8 or 10% Tax relief on selected

business revenue

• Import Tax exempted for raw mat/ cap

good for manufacture purpose• Investors and asset protection and no

intervention by Government unless under

extraordinary circumstance

• 10% Repatriation rate

• Export Tax relief on export goods except

natural resources

• Investors cannot own land but cab lease 30-

50 years period according to concession

(can be extended to max 99 years,

depending on government agreement)

• Loss carried forward for up to 3 consecutive

years

Note 1) ‘Investors’ refers to foreign investorsSources: Lao MPI/DPI and TMB Analytics

-11-

Local currency Guide: Lao Kib

Source: Bloomberg, IMF, and TMB Analytics

Currency Description

FX Regime & Performances

30.50

31.50

32.50

33.50

34.50

35.50

36.50

37.50

7,950

8,000

8,050

8,100

8,150

8,200

8,250

Sep-14 Mar-15 Sep-15 Mar-16 Sep-16

USD/LAK USD/THB

↑ LAK weaker↓ LAK stronger

↑ THB weaker

↓ THB stronger

FX movement LAK and THB against USD

Name

Regulator

Monetary Policy

Mixed Framework

The policy is a mixed between

exchange rate anchor (USD)

and monetary targeting,

currently GDP growth of >7.5% and inflation <10%

Crawl-like arrangement

Lao Kib (กบีลาว)

Bank of Laos (BOL)

The currency is soft peg US

dollar within +/-2% band. Year-

to-date, LAK gains 0.69%

against USD, strengthening less than ASEAN peers

Spot Forward Commercial banks buy/sell ±0.25%

of the daily reference rate for the

USD/LAK set by the BOL. Forward

against kib is available up to 1year

Control on Exports and Imports of

Export: Amounts exceeding 20 million

LAK must be approved by the BOL

Import: Larger amounts must be

approved by the BOL. Imports by

commercial banks require BOL approval

(average price LAK/THB is 234 LAK per 1 THB)

LAK=7730+11.3THBR^2 =0.29

THANK YOU

Disclaimer

This document is issued by TMB Analytics, a division of TMB Bank PCL. All analyses are based on information available to

the public. Although the information contained herein is believed to be gathered from reliable sources, TMB makes no

guarantee to its accuracy and completeness. TMB may have issued, and may in the future issue, other reports that are

inconsistent with, and reach different conclusions from, the information presented in this report. Opinions or predictions

expressed herein reflect the authors’ views, not that of TMB, as of date of the analysis and are subject to change without

notice. TMB shall not be responsible for the use of contents and its implication.

Appendix

Export to Laos

• Prohibited Goods list includes weapons, narcotics, psychotropic substances and hazardous chemical substances.

• Full prohibition list can be found at “Notification No. 0973, Annex1”

(http://www.laotradeportal.gov.la/index.php?r=site/display&id=20#1)

• As for animal product, it shall not be animal listed under the Convention on International Trade in Endangered Species of Wild

Fauna and Flora (CITES).

• Import goods with quota: fuels, steel, cement, rice, and vehicles

• Re-export business needs permission• Example of goods that can be traded in USD

• Foods: rice, sugar, milk produce, msg, flour etc.• Construction Material: Cement, steel, tile, PVC, paint etc.

• Fuels: Benzene, Diesel, Kerosene etc.

• Agriculture related: fertilizer, animal feed, water pump, tractor, rice miller etc.

• Consumption related: soap, cleaner etc.

• More FDI information in Laos at

• Lao PDR Trade Portal (http://www.laotradeportal.gov.la/index.php?r=site/index)

• TISIC (http://www.apecthai.org/)

Appendix

FDI in Laos (1/2)

• Available investment entity option

• Wholly foreign owned enterprise

• JV

• Business by contract

• Concession

• Available business operation option• Individual enterprise/ Sole proprietorship (วิสาหกิจส่วนบุคคล หรือกิจการเจา้ของคนเดียว)• Partnership (ห้างหุ้นส่วน)

• Company (บริษทั)

• Sectors that need further consideration by government

• Energy, mining, trading services, telecom, healthcare

• Restricted sectors

• Accounting, tourism, retail, forestry

• Concession activity in Laos includes electric power, mining, industrial plantations, telecom

• Minimum bond requirement

• Electricity Project: <5MW: USD10,000, 5-100MW: USD30,000, >100MW: USD50,000

• Land Concession Project: 2-150hectares: USD30,000, 151-1,000hectares: USD 50,000, >1,001:

USD70,000

• Mineral Concession Project: 1-300sqkm: USD50,000, 301-500sqkm: USD100,000

• Mandatory Reserve: 10% of annual net profits (capped at 50% of Registered Capital)

• Foreign Labor Restrictions: Technical experts undertaking physical labor not to exceed 15% of Lao workforce/ technical

experts engaged in mental labor not to exceed 25% of. Unskilled workforce to be 100% Lao unless special quota granted

Lao workforce

• Capital Controls: Bank of Lao PDR Approval Required

• off‐shore bank accounts

• use of foreign currency

• hedging transactions with foreign counterparts

• Investments in foreign‐issued instruments

Appendix

FDI in Laos (2/2)

• Sector specific restriction

• Retail Business

• distribution of goods must be via distributors or franchisees of Lao nationality, residing in Laos

• may invest or enter into a joint venture for the construction of new forms of modern sales establishments

reserved for trading (e.g. hypermarkets, supermarkets, shopping centers or malls); may not engage in

retail trade.

• Wholesale

• possible participation in investment with Lao investors in any type of goods in the Lao PDR (equity interest

requirements depending of type of goods)

• Tourism

• In practice, foreign ownership restricted to 49-70%

• Accommodation Services(Hotels)

• Max 60% foreign entity for hotel of less than 3 stars• Max 15 rooms capacity for guesthouse, operated by foreigners

• Land restriction: Foreigners generally cannot own land (i.e. land use rights or usufructs): must hold via lease or

concession

• Lease Terms for Foreign Investors:

• 30 years from individuals, 50 years from the Government (Concession), 99 years for embassies and

international organizations, Extendable with Government approval (Specific limits apply in electric, mining

and plantation sectors)

• More FDI information in Laos at

• Lao National Chamber of Commerce and Industry (http://www.laocci.com/)

• UNCTAD: Laos investment guide (http://unctad.org/en/Docs/diaepcb201002_en.pdf)

• Investment Promotion Department (http://www.investlaos.gov.la/)