Lao PDR has met the criteria for graduation from Least Developed Country (LDC) status and is currently in the transition period leading to its official graduation from the LDC list in 2026. The 10-year strategy (2026–2035) sets the goal of transforming Lao PDR into an upper-middle-income country by 2035, with Gross National Income (GNI) per capita reaching USD 5,300. The strategy also aims to achieve an annual Gross Domestic Product (GDP) growth rate of 6–7%. At the same time, Lao PDR seeks to increase Foreign Direct Investment (FDI) in priority sectors with strong potential, guided by the principles of selectivity, quality, and sustainability. This will be supported through comprehensive improvements to the investment environment and business climate.

Foreign Investment (Controlled Business and Concession) in Lao PDR by Source Country (2021-2025)

Investment by Sectors 2021-2025

The Government of Lao PDR has committed to improving the business environment by streamlining procedures, reducing time and costs, and enhancing transparency and efficiency in the issuance of business and investment licenses. The reform efforts were reflected in the implementation of the Prime Minister’s Order No. 002/PM, dated 01 February 2018, on improving regulations and coordinating mechanisms to enhance the Ease of Doing Business in Lao PDR. Key achievements under this reform include the reduction of the enterprise registration process to two steps, the digitalization of enterprise registration, and the modernization of the online tax payment system. In addition, investment promotion and management under the Investment Promotion and Management Committee (IPMC) have been streamlined, reducing the investment approval process from 10 steps to just 4.

Furthermore, several important laws and regulations have been introduced and revised to provide clearer provisions and institutionalized mechanisms, ensuring consistency and alignment across ministries and local governments, such as: Law on Investment Promotion (2024), Law on Vehicles (2021), Law on Judgement Enforcement (2021), Law on Enterprises (2022), and Law on Rehabilitation and Bankruptcy of Enterprises (2019).

In 2025, the government undertook a major organizational restructuring to become more compact, streamlined, and efficient, reducing the number of ministries from 17 to 13. The Ministry of Planning and Investment was integrated into the Ministry of Finance, while the Ministry of Energy and Mines merged with the Ministry of Industry and Commerce. Likewise, the Ministry of Natural Resources and Environment combined with the Ministry of Agriculture and Forestry to form the Ministry of Agriculture and Environment. The Ministry of Home Affairs was dissolved, with its responsibilities distributed among various entities. Meanwhile, the Ministry of Information, Culture, and Tourism was restructured: its information sector was transferred to the Party Central Committee’s Propaganda and Training Board, and the ministry was renamed the Ministry of Culture and Tourism.

Investment Incentives

The Law on Investment Promotion (2024) offers a comprehensive incentive framework to attract quality investments aligned with the national socio-economic development plan along a green and sustainable pathway, combining sector‑based with zone‑based incentives in strategic areas. Incentives include profit tax holidays, income tax reductions for experts, customs duty and VAT exemptions, and preferential land lease rates. Additional facilitation measures include supporting foreign investors along with their family members, foreign specialists, or experts to obtain residence permits and multiple-entry business visa.

Sectors Eligible for Incentives

Incentives on Profit Tax and Land Use

Remark: Education sector shall enjoy a profit tax exemption throughout the entire investment period.

Incentive on Custom Duty, Income Tax and Value-Added Tax

1. The importation of materials not available domestically, to be used in creating fixed assets as well as machinery and vehicles that are directly applied in connection with the manufacturing processes is to enjoy a customs duty exemption.
2. An importation of raw materials, minerals, materials, equipment, and spare parts to be used in manufacturing for exports shall enjoy a custom duty exemption.
3. The importation of raw materials, minerals, materials, equipment, and spare parts to be used in manufacturing for import substitutes for domestic distribution shall enjoy a custom duty exemption.
4. An exportation of produced, cultivated or raised agricultural products, ready-made industrial goods which have gone through manufacturing or development processes, handicraft products shall enjoy a customs export duty exemption,
5. Specialists working in promoted sectors shall enjoy a personal income tax incentive at a rate of five percent (5%).
6. Value-added tax incentives shall observe the Law on Value-Added Tax

Lao PDR has established 21 Special Economic Zones (SEZs) to create new opportunities and drive stronger growth. SEZs play a vital role in driving economic growth by creating clusters of new and emerging industries, fostering innovation, and stimulating consumption in line with globalization and regional integration. They serve as magnets for both local and foreign direct investment, while establishing robust infrastructure networks that support operations and facilitate exports. In addition, SEZs strengthen supply chain linkages and provide access to neighboring markets, all while focusing on the development of talent to sustain and enhance business competitiveness.

Since the introduction of the first SEZ in 2003 to 2025, the SEZs have brought in investments of up to US$41.7 billion, contributed US$78,831,322 in government revenue and increased the value of exports by US$3.97 billion. As of 2025, there were almost 1999 foreign and domestic companies registered in the SEZs nationwide. Majority are from China (1312 businesses), Thailand (73), Malaysia (47) and Japan (41), representing companies like Essilor, Nikon, and ISUZU among others.

The government has set up One-Stop-Service (OSS) within SEZs to provide on-site approvals of permits and licenses as well as facilitate other investment procedures.

Key service offerings at OSS Centers:

• Address investor queries and assist in identifying the best investment platform.
• Provide latest information on promotions, policy, and regulatory changes.
• Issue enterprise registration certificate, land use right lease license, import-export certificate, and tax payment.
• Facilitate the permit and certificate related to labor management, construction, and environmental assessment.
• Fast-track application processes and facilitate business-related barriers.
• Centralized comprehensive information on incentives and tax reforms; and
• Provide aftercare services.

Lao PDR’s engine of growth continues to be powered by its abundant natural resources, with agriculture, minerals, hydropower-based electricity, and tourism remaining the country’s key pillars.

• Lao PDR is also creating future-oriented education and training programmes that will ensure young people are equipped with the right skill sets and knowledge to support growth, seize opportunities in the job market and reduce poverty.
• In driving the country’s socio-economic transformation agenda, it has already achieved poverty-related Millennium Development Goals (MDG) by halving its poverty rate by 2015.
• Recognizing the importance of building a solid foundation for future generations, Lao PDR has also undertaken the Health Sector Strategy 2020, National Nutrition Strategy (2015 – 2023) and Plan of Action (2016 – 2020) to improve healthcare, and is gearing up to implement universal health coverage with support from development partners.