Lao govt asks NA to consider incentives for future BOT investments

VIENTIANE (Vientiane Times/ANN) - Prime Minister Thongloun Sisoulith has asked members of the National Assembly (NA) to consider the use of incentives to entice private business investment for public infrastructure projects.  

The government wants to encourage investments for are licensed under a Build-Operate-Transfer (BOT) model in which private businesses fully invest in then mange an enterprise for a designated period of time before handing it over to be owned and operated by the government. 

Special incentives are needed to realise the approach, PM Thongloun told the NA’s 7th ongoing ordinary session last week.

The comment came in response to a question from some NA members about why the government exempted an import tariff on petrol to be used in the construction of a proposed expressway linking Vientiane with Vangvieng.

“We want to push for and realise such a mega BOT project so that we can attract similar projects in the future,” he told the biannual session.

It is estimated that the 109-km Vientiane-Vangvieng Expressway will cost more than one billion US dollars to build and incentives are often required before businesses will spend such large amounts of money.

The PM admitted that the government had failed to get approval from the NA before it negotiated the tariff exemption for the expressway that will be developed parallel to National Road No. 13 and the Laos-China railway.

“It is a weak point for the government,” Prime Minister Thongloun said, referring to his negotiations that went ahead prior to him consultating with the NA. 

“If the NA does not approve the exemption, the government will need to re-negotiate with the investors,” he said.

Another factor that led the government to offer the tariff exemption on fuel is that the company will be responsible for paying all compensation to citizens whose properties and assets will be impacted upon.

The Lao government will also hold a five percent stake in the project from the outset, despite it making no financial contribution to the expressway’s construction.

“We have made the calculations. We exempted the tariff but we will receive many other benefits in return,” he said.

“We will have a convenient road that will boost the economy and which will provide much better access to some of the country’s best tourism destinations.”

During the Q and A session with the PM, an NA member from Phongsaly province, Kongchy Yangcheu, made the observation that the exemption could be a violation of the Tax law.  He added that an exemption given on one project could set a standard for future projects, including a planned expressway linking Vientiane with Pakxe in southern Champassak province.

“Will we grant similar exemptions for other projects?” he asked. “I think it would be good to discuss and have appropriate legislation in place before making any further exemptions.”

PM Thongloun responded that he has already raised the issue of Tax Law amendments with NA president, Mrs Pany Yathotou.  He said changes could be made that would  make the parameters of incentives clear for future BOT projects.

The PM said that that the Vientiane-Vangvieng Expressway should be the last occasion that the government negotiates incentives without NA approval. “In the future, we will discuss incentives with the NA on a case by case, project by project basis,” he said.

The current NA session will continue until June 25.  Amendments to the law on tax management, a newly-drafted law on excise duties and a newly-drafted law on income tax will be discussed and voted on. Mrs Pany has called on members of the parliament to discuss potential incentives that will lead to stronger private investment in nation building projects.

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