LAO BUSINESS FORUM BRIEF Improving the Business Environment Through Constructive Dialogue VOL. 2 | SUMMER 2018 IN THIS ISSUE: Background and Context Transport & Logistics and the LBF - Issue Analysis Transport & Logistics – International Perspectives Gender Dimension of Transport & Logistics Post-LBF Update and Next Steps This brief is published by the Secretariat of the Lao Business Forum, based at the Lao National Chamber of Commerce & Industry (LNCCI) The LBF Brief provides a summary and analysis of a specific business issue that was highlighted as a priority during the annual LBF process and which significantly impacts the Lao PDR business environment. The views expressed in the LBF Brief reflect the opinions and perspectives held by relevant stakeholders. Transport & Logistics in Lao PDR Lao PDR’s persistently high transportation and logistics costs pose a significant threat to the country’s impressive run of economic growth by reducing the competitiveness of the country’s exports and increasing the cost of imported goods. The value of Lao PDR’s imports and exports has increased at an annual average rate of 24%. Despite these growth rates, the fact that Lao PDR is landlocked increases its international trade costs by up to 50%. The country’s transportation and logistics costs are among the highest in the region. This situation is exacerbated by Lao PDR’s limited domestic transport and logistics infrastructure and capacity. I. Background and Context Image Source: Pixabay Image Source: Pixabay 1 2
Transcript
LAO BUSINESS FORUM BRIEFImproving the Business Environment Through Constructive Dialogue
VOL. 2 | SUMMER 2018
IN THIS ISSUE:
Background and Context
Transport & Logistics and the LBF - Issue
Analysis
Transport & Logistics – International
Perspectives
Gender Dimension of Transport &
Logistics
Post-LBF Update and Next Steps
This brief is published by the Secretariat of
the Lao Business Forum, based at the Lao
National Chamber of Commerce & Industry
(LNCCI)
The LBF Brief provides a summary and
analysis of a specific business issue that was
highlighted as a priority during the annual
LBF process and which significantly impacts
the Lao PDR business environment. The
views expressed in the LBF Brief reflect the
opinions and perspectives held by relevant
stakeholders.
Transport & Logistics in Lao PDR
Lao PDR’s persistently high transportation and logisticscosts pose a significant threat to the country’s impressiverun of economic growth by reducing the competitivenessof the country’s exports and increasing the cost ofimported goods. The value of Lao PDR’s imports andexports has increased at an annual average rate of 24%. Despite these growth rates, the fact that Lao PDR islandlocked increases its international trade costs by upto 50%. The country’s transportation and logistics costsare among the highest in the region. This situation isexacerbated by Lao PDR’s limited domestic transportand logistics infrastructure and capacity.
I. Background and Context
Image Source: Pixabay
Image Source: Pixabay
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For example, it costs twice as much to ship a 40-foot container from Vientiane to Yokohama, Japancompared to Phnom Penh, Cambodia and two anda half times more than a similar shipment fromHanoi, Vietnam. A 2016 survey by the JapaneseExternal Trade Organization (JETRO) revealedthat the per kilometer cost to transport goodsdomestically in Lao PDR is twice as high asThailand. In the World Bank’s 2018 DoingBusiness Report, Lao PDR ranked 124th among190 countries in the Trading Across Bordersindicator.
Transport and logistics issues were a priority agenda item during LBF 10 in 2016-2017. Most of theissues were not resolved and they were revisited by the LBF Transport Sector Working Group during LBF11 in 2017-2018. The following section highlights the key issues identified and recommendations madeduring the LBF dialogue process.
II. Transport and Logistics and the LBF – Issue Analysis
This indicator measures the time and costsrelated to exporting or importing a shipment ofgoods. Lao PDR is located in the heart of what isarguably the world’s most economically dynamicregion. The country is therefore well-positionedto leverage its proximity to large markets such asChina, Vietnam and Thailand. A focused andsustained effort to streamline transport andlogistics-related regulations and procedures,reduce costs and increase transparency has thepotential to generate significant economicbenefits to Lao PDR.
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1. Cumbersome and time-consuming procedures for the importation of tax-exempt goods andraw materials for production
2. High domestic and international transportation costs
Image Source: Pixabay
5. Restrictions on the list of goods in transit
4. Restricted opening hours for customs clearance at major international border checkpoints
3. Lack of procedural clarity related to the import and export of commercial goods throughborders
According to the 2018 World Bank Logistics Performance Index (LPI), a tool that measures countries inseveral aspects of logistics including border clearance efficiency and trade and transport infrastructure,Lao PDR was ranked 82nd, a significant improvement from its rank of 153rd in the previous survey in2016. The table below from the LPI illustrates Laos’ performance on the index relative to its fiveneighbors: China, Thailand, Cambodia, Myanmar and Vietnam.
A recent World Bank Enterprise Survey for Lao PDRsuggested that transportation issues were not aparticularly significant issue for women-ownedbusinesses involved in cross-border trade. Indeed,only 17% of survey respondents highlightedtransportation issues as a serious impediment todoing business. However, a deeper analysis ofwomen-owned companies that conduct cross-bordertrade would be warranted. Toward that end, anexercise to apply a “gender lens” to trade andtransport facilitation in Lao PDR would be a usefulfuture initiative to be undertaken by the LBF. The World Bank’s International Trade Departmenthas outlined a practical and straightforwardapproach to obtaining deeper insights intothe challenges faced by women-owned companiesinvolved in trade and logistics. Indicative tasks wouldinclude the following:
III. Transport & Logistics - International Perspectives
IV. Gender Dimension ofTransport & Logistics
Comparison of Laos and Neighboring States World Bank Logistics Performance Index (LPI) – 2018
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Conduct Desk Research: Conduct a detailedreview of existing research and analysis on issuesfaced by women-owned business involved incross-border trade and logistics Conduct Stakeholder interviews: Review thegender composition of staff in government entitiesinvolved in cross-border trade and conductdetailed interviews and focus group meetings withwomen-owned freight forwarding, custom brokerand transport companies Prepare Preliminary Report: Prepare an initialreport of findings, which details gender-specificissues in the transport and logistics sector in LaoPDR along with a set of remedial measures toaddress these issues. The findings can bepresented in a workshop/roundtable
During the July 5, 2018 LBF 11 plenary meeting,private sector stakeholders in the trade andlogistics sector – represented by a member of theLao Garment Association and a member of the LaoFreight Forwarders Association – provided asummary of the key proposals outlined earlier insection 2 of this brief to government authorities. Responses from various ministerialrepresentatives are detailed below.
Response from the Deputy Minister, Ministry ofPlanning and Investment (MPI)
Response from the Deputy Minister, Ministry ofPlanning and Investment (MPI)
Following the issuance of a notification by theMPI to the MoF to cancel Instruction No.3578/MoF on customs and tax policy dated 19December 2012, the quota restricting importsto levels at or below a company’s initialregistered capital has been removed
MoF will collaborate with local authoritiesto assess the effectiveness of AnnouncementNo. 4115 of 12 December 2016, whichrestricts cross-border trade to non-commercial goods such as personal andhousehold goods With regard to goods transiting through LaoPDR, the country will need to ratify theASEAN Framework Agreement on theFacilitation of Goods in Transit. By the endof 2018, the Customs Department will pilotthe ASEAN Customs Transit System (ACTS)and Lao PDR will implement the GMS Cross-Border Transport Agreement
Following the construction of Lao PDR’sfirst dry port in Savannakhet, the MPWT ispreparing a feasibility study to developadditional dry ports in Vientiane Capital,Khammuan, Champasack and LuangNamtha The MPWT is expanding the Thanalaeng-Vientiane railway. In addition, theconstruction of the Boten-Vientiane railwayis underway and it will be an importanttransport link to China and ASEAN membercountries Four international airports and a boat canalin northern Laos have been upgraded. Inaddition, a feasibility study is beingprepared for the construction of threeadditional ports in Luang Namtha, LuangPrabang and Bokeo provinces Lao PDR has entered into numerousbilateral, trilateral and multilateraltransport agreements, including the GreaterMekong Subregion (GMS), ASEAN and theUN Transport Agreement
The MoF has transferred responsibility foroversight of goods under customs and taxexemption regimes to the MPI, effective early2018 The MoF issued Notification no. 420/MoF,dated 14 February 2018, which detailed theinternal MoF departmental approach toaccelerating processes and eliminatingburdensome and duplicative steps The Tax Department has completed theinstallation of the ASYCUDA system and hasbegun to implement it across all internationalborder posts in Lao PDR The Customs Department issued Notificationno. 03516/TD, dated 31 May 2017, tostreamline the departmental documentationprocess related to the approval of MasterLists as well as the issuance of official letters tointernational organizations, foreign
Response from the Minister, Ministry of PublicWorks and Transportation (MPWT)
V. Post-LBF Update andNext Steps
embassies and development organizationsfor the import of equipment, machinery andmaterials. The Tax Department will berequired to process request within 5business days if documentation is complete
MPS has reiterated its compliance with thepresidential decree on official fees, which arerequired to be consistent across Lao PDR MPS acknowledges the issue of traffic policesetting up unauthorized checkpoints andconduction random inspections of vehicles onmajor roads throughout the country. Accordingly, the Traffic Police Departmenthas publicly disseminated Instruction No.06/MPS which officially eliminates allcheckpoints throughout Lao PDR The MPS will work with local authorities toidentify unauthorized checkpoints andremove them
Response from the Vice Minister, Ministry of PublicSecurity (MPS)
Response from the Vice Minister, Ministry ofIndustry and Commerce (MoIC)
Post-LBF interviews were conducted with twologistics companies – one Lao and the otherinternational – and a member of the LaoGarment Association in order to assess theiroverall view of the forum as well as thegovernment’s responses to the keyrecommendations presented. The local logistics company representativehighlighted the following issues:
The central issue in terms of transportand logistics costs is the discrepancy inprocedures and costs between VientianeCapital and the provinces On balance, Lao PD government agenciesare taking steps to streamline processesand procedures; they should be givengood marks
Information on import-export regulations andprocedures has been circulated through theLao Trade Portal The MoIC has been working with various lineagencies to streamline import and exportprocedures at the central and provincial levels The MoIC has developed an online system forissuing certificates of origin The MoIC is preparing legislation to eliminateimport license requirements for steel andcement, as well as both import and exportlicensing requirements for rice
Post-LBF Assessment from Private SectorParticipants
Future ministerial plans include: 1) finalizationof a decree on international border operationsto ensure a consistency across the country; 2)implementation of a one-stop-shop for servicefee collection; 3) an assessment of the need formultiple agencies at international borderposts; 4) negotiations with Thailand’s nationalrailway to facilitate transport of cargo to theThanalaeng warehouse
Future plans of the MoIC include: 1)continued collaboration with variousgovernment departments to assess theimpact of import licenses for 8 products; 2)setting a target of 50% for the reduction ofprocedures related to the import andexport of minerals and vehicle spare parts;3) tracking progress of legislation relatedto e-signatures as part of the effort toimplement the Lao National SingleWindow System by 2019; 4) working withthe Customs Department to improvemanagement and sharing of import andexport data across government agencies;5) ongoing collaboration with theInvestment Promotion Department andother government entities on reformingregulations associated with approval ofMaster Lists.
o ASYCUDA has had a positive impact to date o Customs Authority has made considerable progress in the area of manifest clearance
The Ministry of Finance’s response tothe transport & logistics LBFpresentations was out of step with theprivate sector’s recommendations Some government officials have notbeen pleased with the pressure placedon them by the private sector The Prime Minister’s message duringLBF was clear – the public and privatesectors must work together. Thegovernment must play a facilitative rolefor the private sector The LBF response of the representativefrom the Ministry of Public Works andTransportation (MPWT) was not alignedwith the topics under discussion The response of the Ministry of PublicSecurity was not clear. They need togenerate revenue; hence, they still needto collect fees The MoIC has been the most supportiveto the business community among allgovernment agencies
The representative from the Lao GarmentAssociation had the following observations:
The foreign logistics company representative madethe following points with regard to LBF and theresponses from the ministerial representatives:
In terms of the recommendations related tohigh cost of international and domestictransport, he believes that the presidentialdecree (Decree No. 003/President) whichstipulates the precise service fees related tocross-border and customs activities is goodin principle. In practice, fees are inconsistentand much higher He has a positive view of the LBF as aplatform for dialogue and believes that thegovernment is committed to reform;however, he believes that the private sectorneeds to be more forceful in making its caseto the government. Since the LBF ended on July 5, 2018, therehave been no significant developments He believes that sustained follow up with thegovernment on transport and logisticspriorities is essential
The LBF Secretariat will review and synthesize the minutes of the July 5, 2018 LBF meeting andliaise with the MoIC to conduct follow up consultations with relevant government agencies onprogress in reform implementation.
The Prime Minister and his team are clearlycommitted to reform and public-privatedialogue The local logistics company owner alsohighlighted the results of the most recent WorldBank Logistics Performance Index 2018(released in August 2018) in which the countryimproved its 2016 ranking from 153rd to 82nd
Source: J Spence Photography
The Lao Business Forum is a public-private dialogue platform that was launched in March 2005. The objectives of the LBF
are to: 1) facilitate public and private sector dialogue, including participation by the broadest range of private sector
companies, from domestic SMEs to foreign investors; 2) ensure consistent enforcement and transparent interpretation of
laws and regulations; 3) remove the bureaucratic impediments that businesses encounter in entry and exit processes and
provide feedback on business-related policies, laws and regulations that impact the private sector; and, 4) provide feedback
on draft government laws and regulations that could potentially impact the business community and assist the Lao
government in private sector-related policy development.
