Includes how foreign exchange is managed and implications for U.S. business;

Lao law maintains that payment for goods and services within Laos should be conducted in Lao kip.  However, companies that deal internationally have some leeway to conduct business in foreign currency as well.  Debts should not be paid in foreign currency within the Lao PDR except for cases in which the Bank of the Lao PDR has proposed the Lao government approved such a transaction.  In practice, the Lao economy is highly dollarized and Thai baht or American dollars (as well as Chinese Yuan in northern areas) are frequently used for private transactions involving imported goods.  A holder of foreign exchange who needs to make payments within the Lao PDR can exchange for kip at a commercial bank or at a foreign exchange bureau licensed by the Bank of the Lao PDR.  Those who need to use foreign exchange for any of the objectives stipulated in Lao law, such as payment for imported goods, may purchase foreign exchange at a commercial bank or a foreign exchange bureau.

In order to facilitate business transactions, foreign investors generally open commercial bank accounts in both local and foreign convertible currency at domestic and foreign banks in Laos.  Australian, Vietnamese, Thai, Cambodian, Malaysian, Chinese and French banks currently have a presence in Laos.  Bank accounts must be maintained in accordance with the Enterprise Accounting Law.

The law places no limitations on foreign investors transferring after-tax profits, income from technology transfer, initial capital, interest, wages and salaries, or other remittances to the company’s home country or third countries so long as they request approval from the Lao government.  These transactions are conducted at the official exchange rate on the day of execution, upon presentation of appropriate documentation.  Supply of foreign exchange has in the past been limited in Laos, which imposed a de facto limit on repatriation of capital.  Foreign enterprises must report on their performance annually and submit annual financial statements to MPI.

In 2017, Laos suffered fiscal and monetary difficulties which resulted in low levels of foreign reserves. In response, the Bank of Lao PDR imposed daily limits on converting funds from Lao kip into U.S. dollars and Thai baht, leading to difficulties in obtaining foreign exchange in Laos and an expanding gap between official and unofficial exchange rates that has since moderated.  The Bank of Lao PDR also imposed restrictions on loans made in U.S. dollars and baht, limiting them to businesses that generated foreign currency.  There are no recent reports of restrictions on, or difficulties in, repatriating or transferring funds associated with an investment.

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Laos Market Access Foreign Exchange