Laos is offering both tax and non-tax incentives to foreign investors, believing that they will intensify investment to tap the country's rich resources, a local senior official told Xinhua in an exclusive interview on Tuesday.

"Laos amended the Law on Foreign Investment Promotion in October 2004, under which investors enjoy a wide range of incentives such as profit tax exemption and employment of foreigners," said Khamlien Pholsena, Director General of the Department for Promotion and Management of Domestic and Foreign Department under the Committee for Planning and Investment.

Depending on geographical location and socio-economic situation there, foreign investors shall be entitled to profit tax exemption for up to seven years and thereafter to the 10-percent rate. "The profit used for the expansion of licensed business activities shall be exempted from profit tax during the accounting year," he noted.

Foreign investors also enjoy exemption from import duties and taxes on equipment, spare parts and vehicles directly used for production, on raw materials which do not exist domestically or which exist but are insufficient, and on semi-finished products imported for processing or assembly for the purpose of export.

"Foreign investors are allowed to use foreign employees at a maximum rate of 10 percent of their business' workforce," the director general said, noting that they can bring foreign technicians, experts and managers if qualified Lao nationals are not available to work on investment projects.

Besides the investor-friendly policies, the richness of natural resources in Laos makes the country "more attractive to foreign investors or more competitive than some other nations" in terms of foreign investment attraction, he stated.

Laos has large reserves of gold, copper, tin, zinc and precious stone, and potential electricity capacity of more than 23,000 MW, he said, noting that the country, home to many hydroelectric sources, has the ambition to become a regional battery. The thick cover of tropical forests, especially hardwoods, also gives Laos a comparative advantage in logging, lumber and forest products.

"We're luring more and more investors in such fields as mining, hydroelectricity, and agro-processing," the official said, noting that Laos is building a giant hydroelectric plant named Nam Theun 2 with involvement of Lao, French and Thai companies.

"Thanks to the implementation of Nam Theun 2, we've lured up to 1.3 billion US dollars worth of foreign direct investment this fiscal year (lasting from Oct. 1, 2004 to Sept. 30, 2005). Last year's figure was only US$500 million," the official noted, noting that biggest investors were from China, Vietnam, Thailand and France.

The 1,070-MW hydroelectric plant on the Nam Theun river in central Laos is scheduled to become operational in 2009. About 93 percent of the electricity generated by the plant would be exported to Thailand, and the remaining 7 percent would be available for domestic consumption.

Nam Theun 2 is a major milestone in the economic development of Laos, as the total cost of the project is equivalent to over 85 percent of the country's annual gross domestic product, according to the project's owner. It will be the largest economic asset and the largest foreign currency earner in the country, as well as the largest single contributor to the state budget.

Laos, whose gross domestic product (GDP) growth stood at the annual average of 6.2 percent between 2001 and 2005, is further tapping both internal and external sources to foster economic growth in a sustainable way in the coming years.

Statistics released by the ASEAN (Association of Southeast Asian Nations) Finance and Macroeconomic Surveillance Unit show that GDP per capita of Laos, which now has a population of 5.6 million, increased to US$362 in 2003 from US$285 in 1999. The respective figures of the country's neighbor, Vietnam, were US$481 and US$374.

(Xinhua News Agency September 28, 2005)