Laos ICSI INTERNATIONAL CHAMBER FOR SERVICE INDUSTRY

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1 Laos Laos, officially the Lao People's Democratic Republic (LPDR), is a landlocked country in Southeast Asia, bordered by Burma and the People'sRepublicofChina to the northwest, Vietnam to the east, Cambodia to the south, and Thailand to the west. Since 1975, it has been ruled by a Marxist and communist government. Its population was estimated to be around 6.8 million in July In 2013, Laos ranked in 138th place (tied with Cambodia) on the Human Development Index (HDI), indicating that Laos has lower medium to low development. According to the Global Hunger Index (2013), Laos ranks as the 25th hungriest nation in the world out of the list of the 56 nations with the worst hunger situation(s). Laos has had a poor human rights record most particularly dealing with the nation's acts of genocide being committed towards its Hmong population. Laos traces its history to the kingdom of Lan Xang, which existed from the 14th to the 18th century when it split into three kingdoms. In 1893, it became a French protectorate, with the three kingdoms Luang Phrabang, Vientiane and Champak uniting to form what are now known as Laos. It briefly gained independence in 1945 after Japanese occupation, but returned to French rule until it was granted autonomy in Laos became independent in 1953, with a constitutional monarchy under Sisavang Vong. Shortly after independence, a long civil war ended the monarchy, when the Communist Pathet Lao movement came to power in Laos is a single-party socialist republic. It espouses Marxism and is governed by a single party communist politburo dominated by military generals. The Socialist Republic of Vietnam and the Vietnam People's Army continue to have significant influence in Laos. The capital city is Vientiane. Other large cities include Luang Prabang, Savannakhet, and Pakse. The official language is Lao. Laos is a multiethnic country with the politically and culturally dominant Lao people making up approximately 60% of the population, mostly in the lowlands. Mon-Khmer groups, the Hmong, and other indigenous hill tribes, accounting for 40% of the population, live in the foothills and mountains. Laos' strategy for development is based on generating electricity from its rivers and selling the power to its neighbor s, namely Thailand, China, and Vietnam. Its economy is accelerating rapidly with the demands for its metals. It is a member of the Asia-Pacific Trade Agreement (APTA), Association of Southeast Asian Nations (ASEAN), East Asia Summit and LA. Laos applied for membership of the World Trade Organization (WTO) in 1997;on 2 February 2013, it was granted full membership. 1

2 Laos traces its history to the kingdom of Lan Xang (Million Elephants), founded in the 14th century, by a Lao prince Fa Ngum, who with 10,000 Khmer troops, took over Vientiane. Ngum was descended from a long line of Lao kings, tracing back to Khoun Boulom. He made Theravada Buddhism the state religion and Lan Xang prospered. Within 20 years of its formation, the kingdom expanded eastward to Champa and along the Anna mite mountains in Vietnam. His ministers, unable to tolerate his ruthlessness, forced him into exile to the present-day Thai province of Nan in 1373, where he died. Fa Ngum's eldest son, Oun Heuan, came to the throne under the name Samsenthai and reigned for 43 years. During his reign, Lan Xang became an important trade center. After his death in 1421, Lan Xang collapsed into warring factions for the next 100 years. Economy Laos' economy is heavily dependent on capital-intensive natural resource exports. The labor force, however, still relies on agriculture, dominated by rice cultivation in lowland areas, which accounts for about 25% of GDP and 73% of total employment. About 80% of the Laotian population practices subsistence agriculture. The Lao economy depends heavily on investment and trade with its neighbor s, Thailand, Vietnam, and, especially in the north, China.Pakxe has also experienced 2

3 growth based on cross-border trade with Thailand and Vietnam. In 2009, despite the fact that the government is still officially communist, the Obama administration in the US declared Laos was no longer a Marxist Leninist state and lifted bans on Laotian companies receiving financing from the US Export Import Bank. In 2011, the Lao Securities Exchange began trading. In 2012, the government initiated the creation of the Laos Trade Portal, a website incorporating all information traders need to import and export goods into the country. Subsistence agriculture still accounts for half of the GDP and provides 80% of employment. Only 4.01% of the country is arable land, and a mere 0.34% used as permanent crop land, the lowest percentage in the Greater Mekong Sub region. Rice dominates agriculture; with about 80% of the arable land area used for growing rice. Approximately 77% of Lao farm households are self-sufficient in rice. Through the development, release and widespread adoption of improved rice varieties, and through economic reforms, production has increased by an annual rate of 5% between 1990 and 2005, and Lao PDR achieved a net balance of rice imports and exports for the first time in 1999.Lao PDR may have the greatest number of rice varieties in the Greater Mekong Sub region. Since 1995 the Lao government has been working with the International of the Philippines to collect seed samples of each of the thousands of rice varieties found in Laos. Morning Market in Vientiane The economy receives development aid from the IMF, ADB, and other international sources; and also foreign direct investment for development of the society, industry, hydropower and mining (most notably of copper and gold). Tourism is the fastest-growing industry in the country. Economic development in Laos has been hampered by brain drain, with a skilled emigration rate of 37.4% in

4 Laos is rich in mineral resources and imports petroleum and gas. Metallurgy is an important industry, and the government hopes to attract foreign investment to develop the substantial deposits of coal, gold, bauxite, tin, copper, and other valuable metals. In addition, the country's plentiful water resources and mountainous terrain enable it to produce and export large quantities of hydroelectric energy. Of the potential capacity of approximately 18,000 megawatts, around 8,000 megawatts have been committed for exporting to Thailand and Vietnam. The country's most widely recognized product may well be Beerlao which is exported to a number of countries including neighbor s Cambodia and Vietnam. It is produced by the Lao Brewery Company. The economy of the Lao Peoples' Democratic Republic is rapidly growing, as the government began to decentralize control and encourage private enterprise in 1986.Currently, the economy grows at 8% a year, and the government is pursuing poverty reduction and education for all children as key goals. The country opened a stock exchange, the Lao Securities Exchange in 2011, and has become a rising regional player in its role as a hydroelectric power supplier to neighbors such as China, Vietnam and Thailand. Laos remains one of the poorest countries in Southeast Asia.A landlocked country, it has inadequate infrastructure and a largely unskilled work force. The country's per capita income in 2009 was estimated to be $2,700 on a purchasing power parity-basis. GDP: Purchasing Power Parity - $14.2 billion (2009 est.) Exchange rate - kips (LAK) per US dollar - 8, (2009), 8, (2008), 9,658 (2007), 10,235 (2006), 10,820 (2005) Oil - production: 0 bbl/d (2009 est.) Oil - consumption: 3,000 bbl/d (480 m 3 /d) (2009 est.) Oil - exports: 0 bbl/d (2007 est.) Oil - imports: 3,080 bbl/d (490 m 3 /d) (2007 est.) 4

5 Of the total foreign investment in Laos in 2012, the mining industry got 27% followed by electricity generation which has 25% share 5

6 The government of Laos, one of the few remaining one-party communist states, began decentralizing control and encouraging private enterprise in The results, starting from an extremely low base, were striking - growth averaged 6% per year from except during the short-lived drop caused by the Asian financial crisis that began in Laos' growth exceeded 7% per year during Despite this high growth rate, Laos remains a country with an underdeveloped infrastructure, particularly in rural areas. It has a basic, but improving, road system, and limited external and internal land-line telecommunications. Electricity is available in 83 % of the country. Laos' economy is heavily dependent on capital-intensive natural resource exports. The labor force, however, still relies on agriculture, dominated by rice cultivation in lowland areas, which accounts for about 25% of GDP and 73% of total 6

7 employment. Economic growth has reduced official poverty rates from 46% in 1992 to 26% in The economy also has benefited from high-profile foreign direct investment in hydropower, copper and gold mining, logging, and construction though some projects in these industries have drawn criticism for their environmental impacts. Laos gained Normal Trade Relations status with the US in 2004 and applied for Generalized System of Preferences trade benefits in 2013 after being admitted to the World Trade Organization earlier in the year. Laos is in the process of implementing a value-added tax system. Simplified investment procedures and expanded bank credits for small farmers and small entrepreneurs will improve Laos' economic prospects. The government appears committed to raising the country's profile among investors, but suffered through a fiscal crisis in 2013 brought about by public sector wage increases, fiscal mismanagement, and revenue shortfalls. The World Bank has declared that Laos' goal of graduating from the UN Development Program's list of least-developed countries by 2020 is achievable, and the country is preparing to enter the ASEAN Economic Community in FOREIGN DIRECT INVESTMENT (FDI) Laos has been attracting more and more foreign investments over the past few years. FDI inflows sharply rose from US$27.7 million in 2005 to US$323.5 million in Yearly investment since then has been around US$300 million. Laos investment comes majorly from outside of ASEAN countries such as China and Korea. 7

8 FDI net inflows (US$ millions) Education System in Laos: Laos Education has gone through a number of stages, from being the weakest sector to the improvements seen in recent times. The Buddhist way of teaching was the first form of education in Laos. The country of Laos has seen the French form of education system and the form of education implemented by the government of Laos. The ethnic group of Lao Loum had a formal system of education. They were the 8

9 only group to have a written script. The Buddhist education system imparted knowledge to the boys and youth of the villages in schools called watts. The knowledge was the basic one of scripts, arithmetic, religious and social subjects. The colonial empire saw the setting up of the French system of education in Laos. The system was not specially meant for the common masses and was not very popular among them. It was a time when Laos Education was only meant for the people belonging to the upper classes. The system implemented after 1975 tried to improve the conditions of Laos Education. The governments tried for the betterment of the infrastructure and improve the rate of enrollment in schools. However the major problem of Laos Education is the dearth of efficient and trained teachers. The teachers are not paid well and thus good teachers migrate to other places for better job opportunities. The education system of Laos is divided into pre-school education, primary school education, and lower secondary and upper secondary education. The system of higher education in Laos is under the National University of Laos founded in Things have started to improve with the setting up of private schools and colleges. Lao PDR has a formal education structure that has been in place since Primary school has an official entry age of six and duration of five grades. Secondary school is divided into two cycles: lower secondary consists of grades 6-9, and upper secondary consists of grades Basic education consists of primary and lower secondary education. In principle, primary school is free and compulsory. Students sit for the primary achievement examination at the end of grade 5, the lower secondary achievement examination at the end of grade 9, and the upper secondary achievement examination at the end of grade 12.The duration of the school year is 33 weeks. Prior to the 2010 academic year, lower secondary and upper secondary each lasted three years. Under the current system, an additional year has been added to lower secondary education. Schools are more prevalent in urban areas with children enrolled in primary schools. But, drop-out rates are very high at the secondary level. 9

10 Most of the pupils that complete the secondary level of education are children planning to attend tertiary education. Aside from traditions of drop-out rates and unequal access, the greatest problem that the Laotian educational system faces is an extreme lack of teachers. Teachers are not paid well in Laos. In 2013, the entire country experienced budget cuts to avoid plummeting into a dangerous nationwide financial crisis. Teachers were no exception. We don t know what we will get for the month. We haven t seen it yet, said an anonymous teacher. For crying out loud, we haven t gotten paid for almost three months. Many trained teachers choose to move out of Laos for better pay and more suitable teaching environments. Under the constantly evolving educational system, the teaching situation is improving. In 2000, 76.7 percent of the teachers working in Laos were adequately trained. In 2010, the percentage rose to 95.6.The quality of education is also rising with the establishment of more private schools and colleges. The National University of Laos was established in 1996 and is still the only national university in the country. The Ministry of Education and Sports hopes that the educational system in Laos will continue to change for the better. By seeking teachers trained at the primary level, especially those trained to teach English, the ministry hopes to improve the quality of education.most Lao children go to primary school. Enrollment is higher in urban areas than rural farming communities where children are expected to help out in farming or other livelihood activities. Secondary education is concentrated in the provincial capitals and some district centers. Very few children go on to secondary schools.68.7% of the population (age 15 and above) can read and write (2001 est.). However, many newly literate adults lose much of their proficiency after a few years because few reading materials are available, especially in the rural areas. Although more school texts and general magazines are being printed, poor distribution systems and budgetary constraints limit their availability throughout the country. 10

11 Primary Education The Laotian government has universal education in mind for all its citizens, and has embarked on a national program for building primary schools where pupils learn for 6 years. The quality of the facilities (and of the teachers too) may still leave much to be desired in certain rural areas though, which is encouraging the continuance of a two-tier society. Secondary Education Cultural and language minorities are under-represented at secondary schools, as are girls too. This is perpetuating a self-fulfilling prophesy of structural discrimination. The secondary education program comprises two periods of 3 years each, with an additional year added in Generally speaking, only students going on to tertiary education complete the second phase. 11

12 Tertiary Education The French colonial government built an education system on the foundations created by traditional temple teaching. Later the Laos government extended the system considerably in the hope of achieving education for all. The University of Laos was established in 1996 as a re-grouping of a number of existing colleges and institutes. Its faculties include education, literature, social science, economics & management, agriculture, forestry, architecture, engineering, science, medical sciences, and law & political science. Employment in Laos: In January 2014, the new Labor Law (2013) was formally approved, replacing the Labor Law (2006). The new law is the result of extensive discussions between the various Lao authorities, private sector entities and development organizations, and introduces a number of changes to the basic rules of employment in Laos, including the employment of foreign workers. Because the area of employment law is quite vast, this is only a brief discussion of the main topics under the new Labor Law. General principles and employer obligations The employer is obliged to: provide training to develop employees skills and knowledge; ensure working conditions are safe, and ensure there is appropriate lighting, supply of drinking water and washing water, showers, toilets etc., a storage room for the storage of toxic substances and other measures 12

13 against electric shocks and fire.; Facilitate medical examinations of employees once a year and provide a first aid kit on site. Internal employment conditions (Work Rules) Hours of work Overtime *Weekly rest and public holidays Sick leave Annual leave *Personal leave The workplace must have its own Internal Regulations, and they must not conflict with the Labor Law. They must be approved by the Labor Administration Authority. The Labor Administration Authority has a template of the Internal Regulations that companies are encouraged to use. Normal hours of work are 6 days a week, no longer than 8 hours a day or 48 hours a week. The employer may request the employee to work overtime. When overtime is necessary for more than 45 hours per month or 3 hours per day, the employer must request a particular authorization from the Labor Administration Agency and either the trade union, worker s representative or the majority of employees in the labor unit. Overtime cannot be worked for more than 4 consecutive days (except in the case of natural disaster). Workers have the right to at least one day s rest a week. Lao employees must be given 6 public holiday days as listed in the Labour Law, with foreign workers additionally entitled to the national day of their country. Workers paid on a monthly basis have the right to sick leave with full pay for 30 days a year, on presentation of a medical certificate. Workers employed under an employment contract made for an indefinite period or for a definite period of one year or more, who have already worked for one full year shall be entitled to 15 days of annual leave, at full pay. If the employee is unable to take their annual leave days by fault of the employer, the employee shall receive full pay for such day/s. In additional to Annual Leave, employees have the right to request (from the employer) paid Personal Leave of not less than 3 days in the event: any members of the employee s immediate family are injured and hospitalized and nobody else can care for them; 13

14 the employee s immediate family pass away; the employee gets married; the employee s wife gives birth or miscarries; the employee is affected by a natural disaster. *Employment of foreign workers *Employment of women *Employment of children Employment contracts Employers have a duty to give priority to Lao nationals, -approval must be obtained from the Ministry of Labor and Social Welfare to employ foreign workers. Foreigners undertaking manual labor can make up no more than 15% of the total number of Lao employees, and no more than 25% of the Lao workforce for professionals with specialized skills. Foreign workers must hold a valid business visa and work permit. Foreign workers can enter into employment agreements for a period of 12 months, renewable for another 12 months. The total working period for foreigner workers in Laos cannot exceed 5 years. Employers can however submit a request to the Labour Administration Authority for a foreign employee to continue working in Laos for an additional period (up to 5 years) based on the expertise of the employee and the requirements of the business/organization of the employer. An employer cannot require a pregnant woman or woman with a child under 1 year of age to carry heavy loads, stand for long periods, undertake dangerous work or work at night, work overtime or on a day of rest. If necessary, the employer shall temporarily assign the employee to more suitable work during this period, but pay her the normal salary. Children of the ages of years may be employed provided they do not work overtime. Children of ages 12 and 13 may be employed for light work provided they shall not be required to undertake work that is unsafe, interferes with their schooling or vocational training or is dangerous to their body, psychology or mind. An employment contract must be in writing between the employer and employee. The contract can either be for a fixed term or an indefinite period. If a fixed term contract, including any 14

15 extensions, is longer than 3 years, the contract will be deemed to be an indefinite employment contract. If the parties wish to extend the term of a fixed term employment contract they must notify each other 15 days before its expiry, with the extension commencing within 60 days of the date of expiration of the contract. The contract must stipulate the place of work, the work to be performed, the level of wages, the duration of the contract, commencement date, expiry date and any probationary period, workings days, rest days and holidays, any welfare entitlements of the worker, the benefits the employee will receive at the expiration of the employment contract and any other matters agreed between the parties. Probationary period Termination of an employment contract Termination of an employment contract by the The employer has the right to impose a probationary period on the employee. In the case of manual labour, the period will not exceed 30 days. In the case of specialized skills, the period will not exceed 60 days. The probationary period cannot be extended. During the period of probation, each party has the right to terminate the employment. 3 days notice is required for manual labor and 5 days notice is required for specialized fields. If the employment is terminated during probation, the employee is entitled to receive salary or wages and other entitlements under the law, calculated from when he began work to when he stopped. 7 days before the end of the probationary period, the employer shall inform the worker in writing whether or not his or her employment will be confirmed. An employment contract for a fixed term will terminate upon expiration or may be terminated by mutual agreement or for reasons of breach by one of the parties. An employment contract made for an indefinite period may be terminated any time by either party, with 30 days notice for manual work and 45 days notice for specialized skills. An employer can dismiss an employee where the employee lacks specialized skills, where the worker is not in good health and cannot continue work, or the 15

16 employer Limits on employer s right to terminate an employment contract Termination due to acts of the Employee Unlawful termination of employment contract business needs of the company require a reduction in staff. The employer must notify the Labour Administration Authority in writing when an employee is dismissed for reasons of redundancy. Where an employment contract is terminated by the employer, the employer shall pay a termination allowance according to their period of work. An employer cannot, without prior approval from the Labour Administration Authority, terminate the employment of an employee if the employee is sick, suffering a disaster such as fire or flooding, is a female employee who is pregnant or within a year of giving birth, on annual leave or leave approved by the employer, still performing work at another workplace on assignment from the employer, filing a complaint or claim against the employer in relation to the Labour Law, or carrying out activities as a worker s representative. The employer may terminate an employee s employment in the following circumstances with no payment of a termination allowance or notification to the Labour Administration Authority: Deliberately causing damage to the employer (where there is evidence of same); Violating Internal Regulations in spite of previous warnings from the employer; Abandoning work for 4 consecutive days without a valid reason; Being sentenced to prison by a court; Violating the rights of other employees having already been warned by the employer. Termination of an employment contract by the employer is unjustified if the employer: Terminates the employment contract without a valid reason; Abuses their power (i.e. directly or indirectly forces the employee to terminate the employment contract); Violates the fundamental rights of the employee; or Acts in breach of its contractual obligations. In such cases, the employee then has the right to request 16

17 reinstatement. If the employer does not reinstate the employee, the employer is required to pay a termination allowance. Severance pay Salary and payment of wages Compulsory social security Maternity leave and maternity allowance If employment contracts are terminated unilaterally, either by the employee or by the employer (for justified reasons) the employee will be entitled to a severance payment of 10% of the monthly salary before termination for each month of work. Where an employment contract is terminated by the employer for unjustified reasons, the employee is entitled to compensation of 15% of the employee s monthly salary for the whole period of working. The employer must pay at least the minimum wage set by the government. The minimum wage is currently 626,000 kip / month. Wages are to be paid at the beginning or end of the month. Deductions from an employee s salary are permissible to compensate for damage to the property of the employer to the value of the item damaged. If the employee is not able to repay the amount owing, the compensation must be deducted from his salary or wage but not exceeding 20% of his salary or wage. The employer has the duty to declare the income which is paid to the employee to the Tax Department in order to deduct personal income tax. Every workplace shall make payments to the National Social Security System with respect to their employees in accordance with the new Social Security Law governs social security payments. A woman is entitled to at least 105 calendar days of fully paid maternity leave, at least 45 days of which must be after the birth. During the year after birth, the woman is entitled to have one hour a day of rest in order to feed and take care of the child. If a woman suffers a miscarriage, she is entitled to leave on full pay for a period as determined by a doctor. On 17

18 the birth of a baby, a woman is entitled to an allowance as specified in the Social Security Law. Calculation of overtime Overtime is calculated as follows: On a regular working day, 150% of the regular hourly rate for each hour; Overtime at night on a regular working day, 200% of the regular hourly rate for each hour; Overtime worked on a weekly rest day or holiday, 250% of the regular hourly rate for each hour; Overtime worked from 4:00pm to 8:00pm on a weekly rest day or holiday, 300% of the hourly wage of a regular working day for each hour; Overtime worked from 10:00pm to 6:00am on a weekly rest day or holiday, 350% of the hourly wage of a regular working day for each hour worked. Specific payments for night work or shift work shall be paid at no less than 15% of the hourly wage of a regular working day for each hour worked. Employment to population ratio total (%) in Laos Employment to population ratio; 15+; total (%) in Laos was last measured at in 2011, according to the World Bank. Employment to population ratio is the proportion of a country's population that is employed. Ages 15 and older are generally considered the working-age population. This page has the latest values, historical data, forecasts, charts, statistics, an economic calendar and news for Employment to population ratio total (%) in Laos. 18

19 Employment Labeled the poorest country in South East Asia, Laos is a developing country whose people are very much integrated into traditional values of living and hospitality. Most who travel to this country in a gap year or otherwise generally do not do so with the intention of finding work. Employment is hard to come by and is unlikely to pay very well. Instead, people take part in the development process as 19

20 volunteers teaching English, or go to Laos simply for the environment. Laos is a mountainous country and neighbored by Vietnam and China, many expedition organizations lead treks through these countries. Paid Work If you do find any paid employment in Laos it will be as an English teacher. Hourly rates can be as much as $7 (approx.4.22), remember that there is a low cost of living in Laos. Teachers are often required to have a degree and TEFL qualification, so this type of work is not always suitable for those on a gap year before university. The main area to find such work as this is Vientiane where many colleges and schools employ English teachers. Volunteering Most teaching opportunities in Laos are more likely to be voluntary than paid as is the case in many developing countries. A lot of volunteer organizations operate throughout Asia offering teaching positions, but given Laos' low population, it is often missed out by such schemes. Nevertheless, asking around schools in Vientiane will very likely find you teaching work and although it is unpaid it is often very rewarding. Try Nita Kindergarten and Primary School, Lao International College, and JM International College, all in Vientiane. Most schools will provide you with food and very often accommodation. Gaining a TEFL qualification before you leave the UK will also be very much to your advantage. 20