Investment incentives for sustainable development: The case of Lao PDR

The document examines the current investment incentive mix in Lao PDR, highlighting a 'double subsidy' of tax holidays and low-cost land concessions. It argues that these incentives provide minimal returns in tax revenue, job creation, or technology transfer, and recommends replacing them with a uniform corporate tax rate and targeted incentives for green infrastructure, public services, and human capital development.

• Lao PDR currently employs an incentive mix consisting of income tax holidays ranging from one to 10 years, exemptions from import and export duties, and the ability to carry balance sheet losses forward for five to 10 years.
• The report identifies a 'double subsidy' in Lao PDR where investors receive both tax holidays and land concessions at very low or no cost, which the author argues should be eliminated to increase domestic capital for sustainable development.
• In the hydropower sector, the Department of Energy Promotion and Development provides extensive incentives, including free land access, waivers on land conversion fees (US$15,000 per hectare), and extended concession periods of 25-30 years.
• The mining sector in Lao PDR has seen high levels of speculative investment due to low land concession fees, with some exploration licenses resulting in no collected tax or royalty payments.
• The author suggests that Lao PDR should transition to a uniform corporate income tax rate for both domestic and foreign investors, noting that a proposed rate of 25 per cent would replace the current split where foreign investors are taxed at 25 per cent and domestic investors at 35 per cent.
• To promote sustainable development, the report recommends introducing tax deductions for investments in public services and capital assets, as well as tax credits or financial assistance for green buildings and infrastructure.
• The report proposes linking investment incentives to the development of human capital, such as co-funding research chairs and providing tax credits for the training of skilled professionals to facilitate technology transfer.

APA

Perera, O. (2011). Investment incentives for sustainable development: The case of Lao PDR. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/lao_PDR_investment_incentives.pdf

Chicago

Perera, Oshani. Investment incentives for sustainable development: The case of Lao PDR. International Institute for Sustainable Development, 2011. https://www.iisd.org/system/files/publications/lao_PDR_investment_incentives.pdf.

Wikipedia

{{cite report |last1=Perera |first1=Oshani |title=Investment incentives for sustainable development: The case of Lao PDR |publisher=International Institute for Sustainable Development |date=February 2011 |url=https://www.iisd.org/system/files/publications/lao_PDR_investment_incentives.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{perera2011investment, author = {Perera, Oshani}, title = {{Investment incentives for sustainable development: The case of Lao PDR}}, institution = {International Institute for Sustainable Development}, year = {2011}, month = feb, url = {https://www.iisd.org/system/files/publications/lao_PDR_investment_incentives.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }