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Services by Sector: Distribution services
A. OVERVIEW OF THE DISTRIBUTION SERVICES SECTOR IN THE LAO PDR
Background Information
The distribution services sector engages a wide range of stakeholder groupings including those who participate in wholesaling and retailing activities, franchising, sales and supply of goods and commission agents services, among others. Given the importance of this services sector in connecting producers and consumers, both within and across borders, this sector is of significant importance to economic activity expansion, investment promotion and private sector development in the Lao PDR.
The greater the efficiency of the distribution services sector, the more positively would consumers benefit from lower prices, increased competition and a wider variety and choices of goods. The Government of the Lao PDR has invested in improvement of the road connectivity networks, particularly the Construction on a railway line that will link Kunming in China’s Yunnan Province with Vientiane; as mentioned in the 2018 report Lao Government agency, the project is 46 percent complete and appears on track to open in 2021. The Lao and Vietnamese governments have also agreed in principle to develop an expressway and railway line to link Vientiane with a seaport at Vung Ang in Vietnam[1]
Given the dynamism with which the sector is changing, the Government of Lao PDR is committed to improving its competitiveness in this services sector by leveraging Information, Communication Technology (ICT) to remain both relevant and promote the economic sustainability of the sector.
It is important to note that the distribution of goods under the Controlled List of the Ministry of Industry of Commerce of the Lao PDR are excluded from commitments, which include arms, ammunition, explosives and explosive substances, highly toxic chemicals, narcotics, cultural items, books, newspapers and magazines, precious metals and stones, medicines and medical equipment, endangered species, gambling machines, money printing machines, processed oil and crude oil, alcohols, tobacco products and rice.
B. KEY IMPERATIVES AND INFORMATION FOR SERVICE PROVIDERS AND INVESTORS
I. Legal and Regulatory Environment of the Distribution Services Sector
The legal and regulatory environment governing the distribution services sector in the Lao PDR, seeks to ensure that all sector participants maintain order. Further this regulatory framework assures the requisite oversight is provided for industry participants and partners.
Service providers and investors desirous of outlaying capital into this and related sectors will be required to have an understanding of the main dimensions of the legal and regulatory environment of this services sector. These dimensions include:
- Relevant primary and secondary legislation
- The Regulatory agency/agencies and related associations
- Service sector commitments that the Lao PDR has signed on to in bilateral, multilateral and plurilateral arrangements, where they exist, including in the WTO.
II. Regulatory Entities governing the Distribution Services Sector
The Ministry of Industry and Commerce is primarily responsible for the regulation of the distribution services sector. Within the Ministry, various departments possess responsibility for different areas of sector regulations. These entities include the:
- Internal Trade Department;
- Investment Promotion Department;
- Inspection Department; and
- Provincial divisions and district offices of the Ministry of Industry and Commerce.
III. Legislation (Laws and Regulations) governing the Distribution Services Sector
Relevant legislation which impact the Distribution services sector include:
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SECONDARY LEGISLATION |
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Decrees |
Decision |
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Decree on Goods Distribution 206/PM
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Decision on the Wholesale and Retail Business1005/MOIC.ITD
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Decision on the Shopping Malls and Department Stores 1950/MOIC.ITD |
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International and Regional Commitments in respect of the Distribution Services Sector
Key agreements for which Lao PDR made commitments in respect of the distribution services sector are:
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WTO General Agreement on Trade in Services (GATS)
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ASEAN Framework Agreement on Services (9TH Package of Commitments)
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Agreement on the Movement of Natural Persons
WTO General Agreement on Trade in Services (GATS)
The distribution of goods under the Controlled List of the Ministry of Industry of Commerce includes arms, ammunition, explosives and explosive substances, highly toxic chemicals, narcotics, cultural items, books, newspapers and magazines, precious metals and stones, medicines and medical equipment, endangered species, gambling machines, money printing machines, processed oil and crude oil, alcohols, tobacco products, rice; these are therefore excluded from commitments.
Under the WTO General Agreement on Trade in Services, distribution services are classified under the following:
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Wholesale trade services (part of CPC 61111, 6113, 6121)
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Retailing services (part of CPC 61112, 6113, 6121)
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Franchising (part of CPC 8929)
For wholesale trade services, Lao PDR placed no limitations on market access for modes 1 and 2, cross border supply of services and consumption abroad respectively. In relation to mode 3 the establishment of a commercial presence, Lao PDR is unbound for 7 years after the date of accession. Thereafter, foreign equity participation limited to 49%. Subject to meeting economic need tests. Lao PDR is also unbound under mode 4, movement of natural persons, except for executives and managers as indicated in the horizontal section.
In respect of national treatment, Lao PDR placed no limitations under modes 1 and 2 and is unbound under mode 3. Under mode 4, Lao PDR is unbound except for executives and managers as per conditions in the horizontal section.
In respect of retailing services (part of CPC 61112, 6113, 6121), Lao PDR is unbound in relation to modes 1 and 2 as it relates to limitations on market access. In respect of mode 3, Lao PDR is also unbound for 7 years after the date of accession. Thereafter, foreign equity participation limited to 49%. In addition, it is subject to meeting economic need tests. In respect of mode 4, Lao PDR is also unbound, except for executives and managers as per conditions in the horizontal section.
Specific to national treatment, Lao PDR is unbound under modes 1, 2 and 3. As it relates to mode 4, Lao PDR is unbound, except for executives and managers as indicated in the horizontal section.
For franchising services (part of CPC 8929), Lao PDR placed no limitations on market access for both modes 1 and 2 and is unbound for 7 years after the date of accession in respect of mode 3. Thereafter, foreign equity participation is limited to 49% and is subject to economic need tests. In relation to mode 4, Lao PDR is unbound, except for executives and managers as per conditions in the horizontal section.
In relation to limitations on national treatment, Lao PDR placed no limitations on modes 1 and 2 and is unbound for mode 3. In relation to mode 4, Lao PDR is also unbound, except for executives and managers as per conditions in the horizontal section.
ASEAN Framework Agreement on Services (9TH Package of Commitments)
Under this Agreement, the core distribution services sectors of focus for Lao PDR are:
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Commission agents’ services
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Franchising included only for textiles, clothing and footwear (Part of CPC 8929)
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Wholesale Trade services - Wholesale trade services on a fee or contract basis of textiles, clothing and footwear (Part of CPC 622)
For Commission agents’ services and Franchising included only for textiles, clothing and footwear (Part of CPC 8929), Lao PDR has placed no limitations on market access and national treatment for modes 1 and 2 (cross border supply and consumption abroad respectively). In relation to the provision of these services under mode 3, a limitation is placed in respect of national treatment; foreigners need to use a local agent for distribution. In relation to limitations on market access, there are none, except subject to economic needs test. In addition, foreigners need to use a local agent for distribution.
In relation to Wholesale trade services - Wholesale trade services on a fee or contract basis of textiles, clothing and footwear (Part of CPC 622), Lao PDR placed no limitations on market access and national treatment in respect of modes 1 and 2 (cross border supply and consumption abroad respectively). For the provision of these services through the establishment of a commercial presence, Lao PDR requires joint venture with Lao services for market access. In addition, foreign equity participation is limited to 49 % and economic needs test must also be undertaken. In relation to limitations on national treatment, Lao PDR made no commitments for the provision of services through the establishment of a commercial presence.
Agreement on the Movement of Natural Persons
Under the Agreement on the Movement of Natural Persons, the following distribution sub-sectors are covered:
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Commission agents' services (CPC 621)
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Sale on a fee or contract basis of textiles, clothing and footwear (Part of CPC 621)
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Wholesale trade services (CPC 622)
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Wholesale trade services on a fee or contract basis of textiles, clothing and footwear (6223 (Part of CPC 622)
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Franchising (CPC 8929), included only for textiles, clothing and footwear (Part of CPC 8929)
For this sub sector, Lao PDR made no commitments in respect of any of these.
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