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Laos vows to keep import tariff reduction on track
Publication Date : 22-02-2013
Laos has made a strong commitment to further reduce import tariffs as it joins with other countries in the region to participate in the Asean Economic Community (AEC) in 2015.
One of the requirements of the economic grouping is for member countries to abolish import tariffs on most goods. The AEC will see the creation of a single market and production base that allows the free flow of goods within the region, which has an estimated 600 million consumers.
Standing members of the National Assembly this week approved a government plan to reduce import tariffs between now and 2015. This signals their commitment to opening up Laos' small market of less than 6.5 million consumers to imports from the other nine Asean member countries within the agreed timeframe.
According to the Ministry of Industry and Commerce, as of December 2012 Laos had named 7,252 items, or 79 per cent of all goods, on which import duty had been waived. Laos will waive the import duty on the remaining goods when the AEC comes into effect in 2015.
However, as one of the newer Asean member countries, Laos can request postponement of import tariff reduction on some items considered to be ‘sensitive' such as fuel, in order to keep government revenues stable.
At present, the government sources a large amount of its revenue from import tariffs, meaning it would incur significant losses by waiving import duty on all goods.
In a bid to compensate for this loss, the government has introduced the Value Added Tax and plans to adjust excise taxes this year to stabilise revenue collection over the next few years.
As a member of Asean, Laos is obliged to reduce import tariffs on all goods imported from China to 0-5 per cent by 2020, because China is an Asean dialogue partner. The same reduction must follow for India by 2021, for Japan by 2023, for the Republic of Korea by 2024, and for Australia and New Zealand by 2025.
The Ministry of Industry and Commerce has urged Lao businesses to boost their productivity and efficiency so they are equipped to deal with the strong competition they will face when Laos abolishes import tariffs.
The tariffs are currently a major deterrent to other Asean countries considering exporting goods to Laos.
In particular, cement makers, steel producers, motorbike assembly plants and plastic bag makers will face tough competition if they do not improve their administration and cut production costs.
Cement made in Laos is more expensive than imported cement, meaning overseas producers will easily swamp the Lao market with cheap products when the government abolishes import tariffs.
Other producers in Laos who import raw materials also risk going out of business once trade barriers are removed under the AEC.