Lax Investment Law Enforcement in Laos Brings Flood of Small Chinese Businesses

2018-11-21
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Laotians stand beside a small Chinese-run business in Laos' capital Vientiane, October 2016.
Laotians stand beside a small Chinese-run business in Laos' capital Vientiane, October 2016.
RFA

The Lao government’s failure to strictly enforce foreign investment laws is allowing a growing number of Chinese entrepreneurs to dodge investment rules and avoid paying taxes while operating shops and restaurants in the Southeast Asian country, an official from the Ministry of Planning and Investment told RFA’s Lao Service.

The number of Chinese merchants and small business operators has increased in many provinces of Laos, sources report, though there are no official figures indicating the exact number of Chinese-run small businesses in the country. Retail, electronic, and convenience stores, restaurants, and even prostitution rings run by the Chinese can be found in many Lao cities.

Laos’ investment promotion and tourism laws specify that foreigners who want to do business in the country must form a company or joint venture with a minimum investment of U.S. $120,000. The business entity must be approved by the Ministry of Industry and Commerce and Ministry of Information, Cultural and Tourism.

The investment law also prohibits foreigners from operating businesses valued at less than 300 million kip (U.S. $35,000), reserving this right only for Lao citizens.

But many small-scale Chinese businesspeople in Laos prefer to deal with local agents to set up businesses to circumvent required initial amounts of investment capital and to avoid paying higher taxes, said the official, who requested anonymity out of concern for his safety.

They also usually bribe local officials so they can get their enterprises underway, he said.

“The building and restaurant owners are Lao, [but] when the Chinese rent their properties or businesses, it is difficult to control and inspect them,” the official said. “The law on foreign investment has not been fully implemented. Therefore, it makes management difficult.”

Chinese small business owners directly rent buildings or guesthouses from Lao owners because they want to avoid paying higher taxes, leading to a loss of income for state and local governments, the official said.

A huge problem is the officials themselves who have failed to fully enforce the law among foreigners who run businesses, he said.

District tax officials in many provinces often accept bribes from the Chinese to not conduct required inspections or to overlook violations, he said.

They ‘take away our jobs’

A Lao small business owner from Phongsaly province in the extreme north of the country told RFA that she and others cannot compete with the Chinese.

“The Chinese take away [our] jobs,” said the woman who declined to be named out of fear of retribution.

“They are retailers,” she said. “The government allows them to run retail stores. It makes Laotians poor, and [we] are unable to sell goods and make money.”

A Lao resident in northwestern Laos’ Luang Namtha province agreed.

“When the Chinese come to Laos to operate restaurant businesses, Lao local restaurants get fewer customers, and some of them cannot thrive and finally must shut down,” said the man who declined to be named.

“Now most restaurants, hotels, and retail stores belong to Chinese,” said an official from the Information, Culture and Tourism Office in Luang Namtha’s Sing district, who declined to be named, citing safety concerns.

“Most Chinese businesses provide services to Chinese people because Sing district is a border district,” he said. “When their relatives come, they will stay in their hotels and eat in their restaurants. Now only one restaurant and three guesthouses are owned by Laotians.”

Reported by RFA’s Lao Service. Translated by Phouvong. Written in English by Roseanne Gerin.

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CH. 2: VIETNAMESE | BURMESE | KOREAN

CH. 3: KHMER | LAO | UYGHUR

CH. 4: TIBETAN

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