WT/ACC/SPEC/LAO/5/Rev.2
Page 101
Organization / RESTRICTED
WT/ACC/SPEC/LAO/5/Rev.2
28August2012
(124668)
Working Party on the
Accession of Lao PDR
DRAFT REPORT OF THE WORKING PARTY ON
THE accession of lao pdr TO THE
WORLD TRADE ORGANIZATION
Revision
WT/ACC/SPEC/LAO/5/Rev.2
Page 101
TABLE OF CONTENTS
I. INTRODUCTION 1
DOCUMENTATION PROVIDED 1
INTRODUCTORY STATEMENTS 2
II. ECONOMIC POLICIES 3
- Monetary and Fiscal Policy 3
- Foreign Exchange and Payments 5
- Investment Regime 7
- State Ownership, Privatization and State-trading Entities 11
- Pricing Policies 14
- Competition Policy 15
III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES 15
- Powers of Executive, Legislative and Judicial Branches of Government 15
- Authority of Sub-Central Governments 19
IV. POLICIES AFFECTING TRADE IN GOODS 19
- Trading Rights 19
A. IMPORT REGULATIONS 21
- Ordinary customs duties 21
- Other duties and charges 22
- Tariff rate quotas, tariff exemptions 22
- Fees and charges for services rendered 23
- Application of internal taxes to imports 23
- Quantitative import restrictions, including prohibitions, quotas and licensing systems 24
- Customs valuation 28
- Rules of origin 32
- Other customs formalities 33
- Pre-shipment inspection 33
- Anti-dumping, countervailing duties, safeguard regimes 34
B. EXPORT REGULATIONS 34
- Customs tariffs, fees and charges for services rendered, application of internal taxes to exports 34
- Export restrictions 35
- Export subsidies 36
C. INTERNAL POLICIES AFFECTING FOREIGN TRADE IN GOODS 37
- Industrial policy, including subsidies 37
- Technical barriers to trade, standards and certification 40
- Sanitary and phytosanitary measures 44
- Trade-related investment measures 54
- Free zones, special economic areas 55
- Government procurement 57
- Transit 58
- Agricultural policies 59
(a) Imports 59
(b) Exports 59
(c) Internal policies 60
- Trade in civil aircraft 61
- Textiles regime 61
V. TRADE-RELATED INTELLECTUAL PROPERTY REGIME 61
- GENERAL 61
- Industrial property protection 61
- Responsible agencies for policy formulation and implementation 62
- Participation in international intellectual propertyagreements 63
- Application of national and MFN treatment to foreign nationals 63
- Fees and taxes 64
- SUBSTANTIVE STANDARDS OF PROTECTION, INCLUDING PROCEDURES FOR THE ACQUISITION AND MAINTENANCE OF INTELLECTUAL PROPERTY RIGHTS 64
- Copyright and related rights 64
- Trademarks, including service marks 67
- Geographical indications, including appellations of origin 68
- Industrial designs 70
- Patents 71
- Plant variety protection 72
- Layout designs of integrated circuits 72
- Requirements on undisclosed information, including trade secrets and test data 73
- MEASURES TO CONTROL ABUSE OF INTELLECTUAL PROPERTY RIGHTS 73
- ENFORCEMENT 73
- Civil judicial procedures and remedies 74
- Provisional measures 75
- Administrative procedures and remedies 75
- Special border measures 76
- Criminal procedures 77
VI. POLICIES AFFECTING TRADE IN SERVICES 80
VII. TRANSPARENCY 85
- Publication of information on trade 85
- Notifications 86
VIII. TRADEAGREEMENTS 86
CONCLUSIONS 87
ANNEX 89
APPENDIX 124
WT/ACC/SPEC/LAO/5/Rev.2
Page 101
I. INTRODUCTION
1. The Government of the Lao People's Democratic Republic (LaoPDR) applied for accession to the World Trade Organization (WTO) in July 1997. At its meeting on 19 February 1998, the General Council established a Working Party to examine the application of the Government of LaoPDR to accede to the World Trade Organization under ArticleXII of the MarrakeshAgreement establishing the WTO. The terms of reference and the membership of the Working Party are reproduced in document WT/ACC/LAO/2/Rev.12.
2. The Working Party met on 28 October 2004 under the Chairmanship of H.E. Mr.T.Groser (New Zealand); on 30 November 2006, 15 November 2007, and 4 July 2008 under the Chairmanship of H.E.Mr.B.Gosper (Australia); on 14 July 2009, 24 September 2010, and 29 June 2011 under the Chairmanship of Mr. Zhang Xiangchen (China); and on 16 March 2012 and 12 July 2012 under the Chairmanship of H.E. Mr. Yi Xiaozhun (China).
DOCUMENTATION PROVIDED
3. The Working Party had before it, to serve as a basis for its discussions, a Memorandum on the Foreign Trade Regime of LaoPDR (WT/ACC/LAO/3), the questions submitted by Members on the foreign trade regime of LaoPDR, together with the replies thereto, and other information provided by the authorities of LaoPDR (WT/ACC/LAO/4, WT/ACC/LAO/5, WT/ACC/LAO/6, WT/ACC/LAO/6/Rev.1, WT/ACC/LAO/6/Rev.2, WT/ACC/LAO/6/Rev.3, and WT/ACC/LAO/6/Rev.4, WT/ACC/LAO/7, WT/ACC/LAO/7/Rev.1 and WT/ACC/LAO/7/Rev.2, WT/ACC/LAO/8, WT/ACC/LAO/9, WT/ACC/LAO/9/Rev.1, WT/ACC/LAO/9/Rev.2, WT/ACC/LAO/9/Rev.3, WT/ACC/LAO/9/Rev.4, WT/ACC/LAO/9/Rev.5, WT/ACC/LAO/9/Rev.6 and WT/ACC/LAO/9/Rev.7, WT/ACC/LAO/11, WT/ACC/LAO/12, WT/ACC/LAO/12/Rev.1, WT/ACC/LAO/12/Rev.2, WT/ACC/LAO/12/Rev.3, WT/ACC/LAO/12/Rev.4 and WT/ACC/LAO/12/Rev.5, WT/ACC/LAO/13, WT/ACC/LAO/13/Rev.1, WT/ACC/LAO/13/Rev.2, WT/ACC/LAO/13/Rev.3, WT/ACC/LAO/13/Rev.4, WT/ACC/LAO/13/Rev.5 and WT/ACC/LAO/13/Rev.6, WT/ACC/LAO/14, WT/ACC/LAO/14/Rev.1, WT/ACC/LAO/14/Rev.2, WT/ACC/LAO/14/Rev.3, WT/ACC/LAO/14/Rev.4, WT/ACC/LAO/14/Rev.5 and WT/ACC/LAO/14/Rev.6, WT/ACC/LAO/15, WT/ACC/LAO/15/Rev.1, WT/ACC/LAO/15/Rev.2, WT/ACC/LAO/15/Rev.3, WT/ACC/LAO/15/Rev.4, WT/ACC/LAO/15/Rev.5 and WT/ACC/LAO/15/Rev.6, WT/ACC/LAO/16, WT/ACC/LAO/17, WT/ACC/LAO/18, WT/ACC/LAO/19, WT/ACC/LAO/20, WT/ACC/LAO/24, WT/ACC/LAO/25 and WT/ACC/LAO/25/Rev.1, WT/ACC/LAO/36, WT/ACC/LAO/41, and WT/ACC/LAO/43), including the legislative texts and other documentation listed in Annex I.
INTRODUCTORY STATEMENTS
4. The representative of LaoPDR said that his Government had implemented a comprehensive reform programme since the mid-1980s to transform the economy from central planning towards a market-oriented system. LaoPDR had joined the Asia Pacific TradeAgreement in 1975 and the Association of South East Asian Nations (ASEAN) in 1997, with the aim to establish an ASEAN Economic Community by 2015, and was negotiating regional tradeagreements with dialogue partners of the ASEAN. LaoPDR was thereby gradually integrating into a regional forum consistent with WTO rules and procedures. However, the institutional base for a market economy remained weak in LaoPDR, principally due to landlockedness and underdeveloped infrastructure. Notwithstanding these challenges, his Government remained committed to economic integration as the foundation for long-term socio-economic development. In this context, WTO Membership would complement propoor domestic economic and trade reforms in response to increasing competition in the global economy.
5. LaoPDR was pursuing an open trade regime consistently and was keen to ensure widespread confidence in it. The trade policy regime was being reformed to enhance transparency and secure an enabling trade environment. Over a period of ten years, his Government had been transforming the legal regime from a framework based on decrees to a system essentially based on laws passed by the National Assembly. However, as a land-locked LDC, LaoPDR was vulnerable and continued to face structural challenges. He therefore called upon Members to be sympathetic to his country's needs and flexible with respect to the terms and conditions whereby LaoPDR would be implementing its accession obligations. His Government would seek to benefit from the special and differential treatment provisions and the flexibilities granted to LDCs, including the transitional periods and technical assistance foreseen in the WTOAgreements, and the General Council's Decision on Guidelines for LDCs Accession (document WT/L/508). Trading rights, sanitary and phytosanitary measures, technical barriers to trade, trade-related investment measures, industrial subsidies, agricultural export subsidies, transparency and intellectual property rights were areas in which his Government required particular flexibility and assistance.
6. Members welcomed LaoPDR's application to join the WTO and pledged to work constructively to advance and conclude LaoPDR's accession on appropriate terms. Whileappreciating the domestic reforms already undertaken, some Members noted that further work was needed to achieve compliance with WTO rules and disciplines. Several Members indicated that they would continue to extend technical assistance to facilitate LaoPDR's accession to the WTO. LaoPDR was a beneficiary of the Enhanced Integrated Framework. The country's status as an LDC was recognized, and in keeping with WTO Ministerial Declarations, Decisions and the Guidelines for LDCs Accession, this would be a relevant factor in establishing the terms of accession for LaoPDR.
7. The Working Party reviewed the economic policies and foreign trade regime of LaoPDR and the possible terms of a draft Protocol of Accession to the WTO. The views expressed by Members of the Working Party on the various aspects of LaoPDR's foreign trade regime, and on the terms and conditions of LaoPDR 's accession to the WTO, are summarized below in paragraphs 8 to 247.
II. ECONOMIC POLICIES
- Monetary and Fiscal Policy
8. The representative of LaoPDR said that controlling inflation and maintaining exchange rate stability were the main aims of monetary policy. The central bank - the Bank of LaoPDR (BOL) - was in charge of monetary policy and supervised the banking sector pursuant to Law No.05/95 "Onthe Bank of LaoPDR" of 14October 1995 with amendments of 14October1999. Money supply expansion was calibrated to meet inflation and growth targets. Although the Asian financial crisis had pushed annual inflation to 129 per cent in 1999, the economy had stabilized once again, and inflation had returned to the single-digit level of the 1990s. The recent global financial crisis had little direct impact on the economy of Lao PDR. The rate of inflation in 2010 was 5.9 per cent due to price hikes on fuel and food. It rose again to 8.2 per cent in 2011.
9. The BOL regulated the monetary system through indirect monetary policy instruments such as mandatory reserve requirements, the issuance of bonds, overdraft facilities for commercial bank borrowing, and discount facilities for loans secured against treasury bills and BOL bonds; and, when necessary, with direct monetary policy interventions, including credit/deposit ratios, direct sale of foreign exchange to the market, and moral suasion to limit the credit expansion or to smooth transitory fluctuations in the exchange rate. The BOL had so far been successful in implementing its monetary policy framework with a view to maintaining low inflation and a stable exchange rate within a managed float exchange rate system. In 2009, the BOL had reduced the short-term interest rate from 7 to 4 per cent; maintained the mandatory reserve requirement ratio at 5 per cent for deposits in local currency, and at 10 per cent for foreign currency deposits; continued to facilitate open-market-operations; and issued BOL bonds to mobilize funds for infrastructure development. The short-term interest rate was readjusted from 4 to 5 per cent in 2010.
10. The banking sector in LaoPDR comprised the BOL, three State-owned commercial banks, two joint venture commercial banks, eight privately-owned banks and 13 branches of foreign banks. Banking activities permitted in LaoPDR were stipulated in Law No.03/NA "On Commercial Banks" of 26 December 2006, replacing Decree Law No.02/NA of 22March 2000. Implementing Decree No. 275/PM to the new law was adopted on 25 September 2009. A financial sector strategy was adopted by Prime Minister's Decree No. 273/PM, dated 22 September 2009 and Decision of the Governor No. 276/BOL, dated 20 April 2010.
11. Since 1988, public finances in LaoPDR had been overhauled with emphasis on improving the tax system and controlling government expenditures for fiscal balance and sustainability. However, with increased outlays for health, education and basic infrastructure in the 1990s, public expenditure had outpaced government revenue. Over the period 1994 to 1998, expenditure had accounted for 21to 27per cent of GDP, and revenue between 11 and 13 per cent of GDP. The fiscal deficit in 1998 had amounted to 12.8 per cent of GDP. Helped by tax reforms, revenue had been higher than expected since the fiscal year 2005/06, while expenditures had been in line with established targets. Over the period 2004/05 to 2009/10, the revenue to GDP ratio had ranged from 12.1 to 22.3 per cent, while the expenditure ratio had been in the 19 to 24.6 per cent range. Net domestic financing had continued to decline.
12. Tax Law No.04/95/NA of 14 October 1995 (with amendments of 1998 and then of 2005) had brought about improvements in the tax system by reducing the profit tax rates, enlarging the income tax base, and enhancing the role of excise taxes. The tax regime had been transformed further with the promulgation of the Tax Law No.05/NA of 20 December 2011 (superseding the Tax Law No.04/NA of 19February2005). LaoPDR was aiming to broaden its direct and indirect tax bases, improve tax efficiency, increase revenues from domestic taxes, and reduce the dependence on border duties. Abreakdown of government revenue from 2004/05 to 2009/10 is presented in Table 1.
Table 1: Government Revenue
Government revenue (KN billion) /Fiscal year / 2004/05 / 2005/06 / 2006/07 / 2007/08 / 2008/09 / 2009/10
Tax revenue / 2,803.1 / 3,641.1 / 4,721 / 5,627.1 / 6,207.6 / 7,502.6
Profit tax / 307.2 / 458.9 / 918.6 / 1,321.6 / 1,303.0 / 1,125.0
Income tax / 214.9 / 234.2 / 251.8 / 333.1 / 424.7 / 462.4
Land tax / 27.6 / 30.1 / 46.6.8 / 78.0 / 63.9 / 77.6
Business licenses / 2.2 / 6.1 / 1.5 / 2.5 / 3.7 / 2.5
Minimum tax / 12.8 / 22.2 / 19.3 / 21.5 / 29.2 / 33.2
Turnover tax / 673.5 / 887.1 / 1,045.99 / 1,228.5 / 1,401.0 / 1,868.7
Excise tax / 522.8 / 800.3 / 998.7 / 1,190.0 / 1,432.5 / 1,686.7
Tax on foreign trade / 472.0 / 567.6 / 598.5 / 696.5 / 775.0 / 890.8
- Import duties / 428.6 / 514.5 / 572.6 / 674.2 / 726.2 / 832.0
- Export duties / 43.4 / 53.1 / 25.9 / 22.3 / 48.8 / 58.9
Registration fees / 17.6 / 24.7 / 49.0 / 13.9 / 26.7 / 44.6
Other fees / 211.2 / 162.6 / 261.62 / 263.4 / 372.6 / 702
Natural resource taxes / 94.8 / 217.6 / 273.8 / 316.5 / 219.5 / 450.6
Timber royalties / 189.4 / 172.5 / 212.3 / 105.2 / 78.1 / 49.3
Hydro royalties / 57.1 / 57.2 / 43.0 / 56.4 / 77.7 / 109.3
Non-tax revenue / 584.3 / 624.9 / 620.3 / 812.0 / 822.8 / 1,036.0
Leasing income / 44.2 / 36.1 / 29.9 / 27.2 / 41.1 / 38.0
Concessions / 8.1 / 7.4 / 8.7 / 17.9 / 30.7 / 37.6
Fines / 15.3 / 23.8 / 33.1 / 31.4 / 25.3 / 29.8
Administrative fees / 69.2 / 89.2 / 94.9 / 100.9 / 76.0 / 122.5
Dividends / 177.8 / 174.8 / 156.7 / 293.3 / 338.4 / 419.0
Interest / 47.9 / 65.0 / 65.9 / 105.3 / 94.7 / 147.2
Over flight charges / 221.8 / 228.6 / 231.2 / 235.4 / 203.4 / 222.4
Total Revenue / 3,387.4 / 4,266.0 / 5,341.0 / 6,439.1 / 7,030.4 / 8,538.3
- Foreign Exchange and Payments
13. Some Members noted that the national currency of LaoPDR - the kip (KN) - was not convertible, and that the IMF had conducted an analysis to determine what restrictions remained that prevented LaoPDR from accepting the obligations of ArticleVIII of the IMF's Articles ofAgreement, including the elimination of foreign exchange restrictions on the making of payments and transfers for current international transactions. LaoPDR was requested to describe its existing foreign exchange regime, indicate how work was proceeding to enable LaoPDR to accept the obligations of IMF ArticleVIII, and provide a timetable for the elimination of restrictions such as the repatriation, surrender, and tax certificate requirements.