A Land of Stunning
Beauty Awaits a
Surge in Tourism

Brief Look at the Country's History
Laos' long history dates back to the founding of its first kingdom in 1353. It was then known as Lan Xang (the land of a million elephants). It reached the period of its greatest glory and influence during the years 1633-90. Later succession struggles led Lan Xang to break into three smaller kingdoms. These weakened kingdoms then initially came under Siamese control and later French colonialism, under which system Laos suffered great neglect.

After achieving complete independence from the French in 1953, the royalist Lao regime was gradually drawn into the vortex of the U.S. war in Vietnam. The economy was greatly damaged by the war, and became extremely dependent on foreign aid. Extensive U.S. bombing of northern, north-eastern, and eastern Laos from 1965 to 1973 seriously disrupted the rural economy. The U.S. dropped 33 percent more bombs on Laos than on Nazi Germany.

On 2 December 1975, the Lao People's Democratic Republic was established, bringing an end to an extended revolutionary war. This event brought peace and independence to the country. The economy was transformed into a Soviet-style planned economy and received economic and technical assistance from other communist nations. Attempts to collectivize agriculture were abandoned rather quickly, however. In 1986, a new policy termed the New Economic Mechanism (NEM) was introduced to transform the economic system from a state-planned one into one determined by free market forces and prices. The major goal of this reform was to provide greater incentives to increase economic performance and productivity. With the collapse of the USSR in 1991, the Lao PDR opened its doors to active economic engagement with the West, in terms of both international aid and investment. The Lao PDR became a favourite target for diverse donors, and foreign aid currently represents some 20 percent of GDP. From 1991 to 1997, the Lao PDR enjoyed considerable macroeconomic success under the NEM system, with annual economic growth averaging 6.5 percent.

During the 1990s, the Lao economy became increasingly interconnected with that of Thailand, from which Laos imports many basic modern consumer products. On weekends, it is common to find many Lao families from Vientiane visiting Thailand via the Friendship Bridge and shopping for basic household items, such as various packaged foods.

Initially, it appeared that the Lao economy (with no stock market and a currency not traded internationally) would be immune to the Asian economic crisis of 1997 which shook so many Asian economies. In a somewhat delayed effect, the Lao currency went into a far steeper decline than any other Asian country. Given Laos' dependence on imports, this had an adverse effect on almost the whole country, except a small number of elite individuals connected to the dollarized economy. The Asian economic crisis also adversely affected the Lao economy by reducing foreign direct investment from other Asian countries and reducing the demand for Lao electricity exports, a major source of foreign exchange.

As it traditionally received foreign aid from the Eastern bloc countries, and in the past decade from multilateral agencies (primarily the World Bank and Asian Development Bank) and other countries, the country does have a debt burden. Total external debt in 1997 was estimated to be US$2.32 billion, and debt payments represented 4.0 percent of government expenditure in 1995-98. Many Lao loans are granted on highly concessionary terms, meaning that the interest rates are quite low over a long payment period, and thus almost amount to grants.

The major challenge currently facing the Lao PDR is to restore the sound macroeconomic performance of the early and mid-1990s and to develop its own sources of foreign exchange earnings. Hydroelectric power development on the tributaries of the Mekong, the development of light industries such as garments and textiles, marketing of natural resources such as gypsum, tin, and wood products, and tourism development are the primary economic sectors being promoted.

People
Laos' population was estimated at 6.8 million in early 2009, dispersed unevenly across the country. Most people live in valleys of the Mekong river and its tributaries. Vientiane prefecture, the capital and largest city, had about 740,010 residents in 2008. The country's population density was 27/sq. km.

About half the country's people are ethnic Lao, the principal lowland inhabitants as well as the politically and culturally dominant group. The Lao are descended from the Tai people who began migrating southward from China in the first millennium A.D. Mountain tribes of Hmong-Yao, and Tibeto-Burman (Kor and Phounoy) as well as Tai ethno-linguistic heritage are found in northern Laos. Until recently, they were known as Lao Sung or highland Lao. In the central and southern mountains, Austro Asiatic (Mon-Khmer and Viet-Muong) tribes, formerly known as Lao Theung or mid-slope Lao, predominate. Some Vietnamese and Chinese minorities remain, particularly in the towns, but many left in two waves--after partial independence in the late 1940s and again after 1975.

The predominant religion is Theravada Buddhism. Animism is common among the mountain tribes. Buddhism and spirit worship coexist easily. There also are small numbers of Christians and Muslims.

The official and dominant language is Lao, a tonal language of the Tai linguistic group. Minorities speak an assortment of Mon-Khmer, Hmong-Yao, and Tibeto-Burman languages. French, once common in government and commerce, has declined in usage, while knowledge of English--the language of the Association of Southeast Asian Nations (ASEAN)--has increased in recent years. The government is encouraging officials and students to learn English. High school students are required to take either French or English; the majority today chooses English. The government plans to introduce English at the primary school level by 2010.

Location & Overview
Laos is situated in the golden mainland of South East Asia. It is located in the centre of Indochina, sharing borders with China to the North (416 km), Myanmar to Northwest (236 km), Thailand to the West (1,835 km), Cambodia to the South (492 km) and Vietnam to the East (1,957 km). Laos is a land-locked country of stunning natural beauty, rich in culture and history, beautiful temples, and strong spiritual traditions, remaining to this day relatively unexplored.

With a total area of 236,800 sq km, around 70 percent of Laos' terrain is mountainous, reaching a maximum elevation of 2,820 meters in Xieng Khouang Province. The landscapes of northern Laos and the regions adjacent to Vietnam, in particular, are dominated by rough mountains.

The Mekong river is the main geographical feature in the west and, in fact, forms a natural border with Thailand in some areas. The Mekong flows through nearly 1,900 km of Lao territory and shapes much of the lifestyle of the people of Laos. In the south the Mekong reaches a breadth of 20 km, creating an area with thousands of islands.

Laos is a peaceful country and is a potentially lucrative tourist destination. More than 70 percent of the country is comprised of highland areas, offering great opportunities for a variety of outdoor adventures from trekking and kayaking, to cycling or caving. Pristine, lush jungles, limestone forests, rivers and waterfalls, islands on the Mekong - Laos has it all.

It is not just the beauty of the country but also the kindness, friendliness, hospitality and generosity of its people, along with their unique and attractive arts and crafts, that makes travelling to Laos an unforgettable experience. All over the country there is a multitude of traditional celebrations and festivals. In addition, Laos boasts numerous historic sites that testify to its long history.

Laos benefits from a relatively predictable and tropical climate, which does not suffer from extreme temperatures. There is a monsoon season between May and October, with a dry season from November to April. Throughout the year expect hot weather with slightly chillier climates in areas of high altitude. Lightweight cotton clothes are advised, with at least one sweater for travel to upland areas.

Places to Visit
The capital of Laos is the city of Vientiane. Situated on the banks of the Mekong, the city is home to plenty of temples, shrines, monuments and markets. The biggest tourist attraction is probably the Wat Pha Kaew, or Temple of the Emerald Buddha. This 16th century former royal temple is now a museum and houses a collection of Buddhist statues from all over Asia. The other must-see temple is the Wat Si Saket, which is the oldest temple in Vientiane.

There is also a magnificent triumphal arch, called the Anousavari Monument, which was built in 1962 to commemorate the lives of the people who died defending Laos. Also of interest is the Lao National Museum, the cultural hall and the forested enclave containing the Wat Sokpaluang temple.

The city of Luand Prabang is often described as the jewel of Laos. This tiny city houses just 16,000 inhabitants and has been virtually unaffected by the gradual creep of Western culture across Asia. Literally dozens of historic temples form the city's main tourist attractions.

The Wat Xieng Thong and Wat Wisunlat temples are particularly worth visiting. The Pak Ou caves, which contain hundreds of Buddha images, and the impressive Kuang Si waterfalls are approximately half an hour's drive south of the city.

If you are looking for something a little different, then you will no doubt be fascinated by the Laos "Plain of Jars". This area is situated in the Xieng Khuang province, and is littered with enormous stone jars in five major groupings. These jars are of unknown origin but comparison with local rock indicates that they did not originate in the area. The most accessible site is Thong Hai Hin, which is designed to deal with tourists and is also the site of the largest jar, which weighs 6.5 tonnes.

How to Get Around
There are only two methods of travel in Laos; along the river in a variety of boat tours, ranging from standard ferries to speedboats, or by road. River travel is somewhat expensive and the ferries are notoriously slow, so most travellers opt for overland travel. Buses now link all of the provinces and major cities, but the standards can vary dramatically, from converted pick-ups right through to modern coaches. Services are run by private individuals and as a result there is no real central resource for information on bus routes. The best bet is to ask for advice from your hotel or hostel staff. Many people opt to hire a car in order to get around Laos. It is not recommended to drive yourself, as the driving style of the locals can be somewhat hazardous for those not used to it.

Accommodation
Tourist accommodation is somewhat sparse in Laos. In the major cities, such as Vientiane, Luang Prabang and Vang Vieng there are a modest number of good hotels available. Elsewhere, it can be difficult to find accommodation. There is generally a selection of village hostels and guesthouses, but it is advisable to contact a tour operator with experience of Laos to help you arrange accommodation, or simply for advice.

Recently the Laos government has built "ecolodges" in Laopako, Nam Mgum and Luang Namtha in a bid to encourage eco-tourism to the country. These lodges are specially constructed to have as little impact on the environment as possible and are open to visitors all year.

Development of Tourism & Investment Incentives
Tourism has been the second largest contributor, after mining, to Laos's GDP. Laos expects tourism to be the top contributor to its economic growth, and is focusing on promoting eco-tourism to international markets. The country recorded 1.7 million tourist arrivals in 2008, which generated US$245 million, an increase of about 20 percent from 2007. The government expects tourist arrivals to reach two million in 2009, hoping the SEA Games will drive up tourist numbers and give Laos a boost amid the economic recession.

The government has made tourism development, with the focus on ecotourism, one of 11 priority sectors to help improve standards of living - a way of generating income for local people, raising awareness about environmental conservation, encouraging local production and protecting Laos' multiethnic culture and traditions.

Tax & Duty Incentives
The DDFI automatically awards all approved foreign investors an incentive tax rate of 20 percent, compared to the general tax rate of 35 percent. Unlike most other countries, this 20 percent rate applies to foreign investment in all sectors of the economy and does not depend on company or performance. Foreign investors must pay a 10 percent dividend withholding tax. Foreign investors and expatriate personnel pay a flat 10 percent personal income tax.

There is a minimum tax on all companies (unless tax holidays are granted) of 1.0 percent of turnover, i.e. foreign-owned companies pay either 20 percent tax on profits or 1.0 percent tax on turnover, whichever is greater. In special cases, primarily for hydroelectric projects or resource-based development projects, tax holidays can be negotiated.

As an incentive to all foreign investors, a duty of only 1.0 percent is charged for imports of capital equipment, spare parts, and other means of production. No duties or import turnover taxes are payable on any imported inputs for export production. Foreign investors whose products substitute for imports can negotiate incentive duties and turnover taxes on imported inputs on a case by case basis.

At present, an administrative ruling of the Minister of Finance allows all imports subject to incentive duty rates to be free of turnover tax and excise tax. Producers whose output is sold on both the domestic and export markets pay no duty on the inputs for export production, and a negotiated rate on inputs for import substituting production. This simple system obviates the necessity of instituting cumbersome duty drawback systems or creating free trade or export processing zones.

In the future, however, the government may move to a system in which foreign investors face the same tax and tariff incentives as domestic investors do. Under this system, investment in "promoted industries" would receive tax and duty reduction incentives, but investment in other sectors would pay the normal corporate profit tax, turnover tax and duty rates.

Non-tax Incentives
The government provides the following incentives to all foreign investors:
a. Permission to bring in foreign nationals to undertake investment feasibility studies.
b. Permission to bring in foreign technicians, experts, and managers if qualified Lao nationals are not available to work on investment projects.
c. Permission to lease land for up to 20 years from a Lao national and up to 50 years from the government.
d. Permission to own all improvements and structures on the leased land, transfer leases to other entities, and permission to sell or remove improvements or structures.
e. Facilitation of entry and exit visa facilities and work permits for expatriate personnel.
The government also offers guarantees against nationalization, expropriation, or requisition without compensation.

Under the FI Law, the government does not offer incentives of import protection (in the form of increasing duties or banning imports) for import substituting investments, and it does not provide measures to restrict further entry to reduce competition for current investors. The policy of not reducing market competition as an incentive for investors is not a feature of the foreign investment systems of most other countries in the region, such as Thailand and Vietnam.