China has replaced Thailand as the biggest foreign investor in Laos for the first time in five years, thanks to the Lao government's active promotion of foreign investment in the country.
According to the latest report from the Ministry of Planning and Investment's Investment Promotion Department, the value of Chinese investment in Laos has reached about US$2.9 billion since the government began welcoming foreign investment in 2000.
Thailand was the top investor in Laos from 2005 to 2009 before losing the position to China due to a rapid increase in Chinese investment over the first two quarters of this year.
Chinese companies have decided to invest in 16 projects with a total value of US$344 million over the past six months, while Thai firms decided to invest in only 4 projects worth just US$3.7 million over the same period.
Although Thailand has lost its top position, it remains one of the biggest investors in its landlocked neighbour.
According to the report, Thailand is the second biggest foreign investor in Laos with a total investment value of about US$ 2.6 billion from 2000 to 2010. Meanwhile, Vietnam takes the third spot with investments worth about US$2.2 billion over the same period.
Deputy Director General of the department, Mr Achong Laomao said that Chinese investment in Laos was increasing because the government was actively encouraging foreign investors, hoping to create jobs and income.
He said most of the Chinese investments are in the areas of mining, hydropower, agriculture and services, which are Laos' main investment potential areas.
He added that the closer relationship between the two countries was one of the main factors making Chinese investors feel confident about investing in Laos.
The Lao government will increase efforts to encourage foreign investment in Laos over the next five years to ensure that annual GDP growth stays above 8 percent. It is hoped that this will enable Laos to remove itself from the UN list of least-developed nations by 2020.
The Lao government revised the Investment Promotion Law last year, aiming to improve the investment consideration process and offer a number of investment incentives including tax exemptions and reductions for companies investing in rural areas.
The revised law also allows the government to use land use rights as an incentive to attract foreign investors to Laos.
According to Article 58 of the law, any foreign investors who have an investment project with registered funds of more than US$500,000 can purchase land use rights for real estate development from the government in an allocated area.
Policy makers believe that allowing foreign investors to own property in the country will make them feel confident about investing in Laos. Not many countries allow foreigners to own property as the extra competition can lead to a sharp increase in land prices.
By Ekaphone Phouthonesy
(Latest Update July 16, 2010)
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Topic: China surpasses Thailand as biggest investor in Laos (Read 198 times)
