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Services by Sector: Construction and Related Engineering Services

 

A. OVERVIEW OF THE CONSTRUCTION AND RELATED ENGINEERING SERVICES SECTOR IN THE LAO PDR

Background Information

Within the realm of the Multilateral Trading System, the World Trade Organisation (WTO), the Construction services sector is paired and classified jointly under the heading “Construction and related Engineering Services”. The WTO classification for this services sector covers services inclusive of those rendered for:

  • General construction work for buildings;
  • General construction work for civil engineering;
  • Installation and assembly work; and
  • Building completion and finishing work.

It is important to differentiate between Construction and related engineering services and Architectural and engineering services; architecture and engineering services are classified under “professional services”, while the other areas above-noted are classified under construction and related engineering services.

Internationally, the construction and related engineering services sector accounts for approximately one tenth of global Gross Domestic Product and an average of seven (7) percent of employment. [1] Within the Lao PDR, the construction industry moderately contributes to the GDP of the nation and is economically interlinked with other key growth sectors and capital development projects. Some of the key strengths associated with the Lao Construction Sector include the low cost of construction resulting from the methods utilized and the increased interest and the existing scope for expansion due to increased investment opportunities and interest in developing the industry by Japan, China and the Asian Development Bank.[2]

Given the interlinkages with other key sectors, the construction sector creates a multiplier effect on other economic industries including transportation and logistics, agriculture and manufacturing, among others. Lao PDR witnessed 6.8% economic growth in 2016[3] , which can in part be attributed to increased activity in the construction sector.

B. KEY IMPERATIVES AND INFORMATION FOR SERVICE PROVIDERS AND INVESTORS

I. Legal and Regulatory Environment of the Construction and related engineering services sector

The construction and related engineering services sector is regulated through the implementation of laws and the institutionalisation of key regulatory entities to govern the operations of key sector participants.

II. Regulatory Entities governing the Construction Services Sector

The Ministry of Public Works and Transport is the principal Governmental entity which regulates the Construction services sector. Other agencies and entities which support the monitoring, regulation and overall oversight of the construction industry include:

  • Construction Activities Management Organization
  • Public Works and Transportation Division in Provinces
  • Public Works and Transportation Office in Districts and Municipalities
  • Economic Arbitration Committee

III. Construction Services Sector Associations

The Professional Association on Construction represents one of the principal construction services sector associations and interacts with other associated associations in relation to engineering related services.

IV. Legislation (Laws and Regulations) governing the Construction and related engineering services sector

Relevant legislations which impact the Construction and related engineering services sector include:

PRIMARY LEGISLATION

SECONDARY LEGISLATION

Decisions

Instructions

Regulations

Other

Law on Construction No. 05/NA

 

Ministerial Decision on Management of Property Construction No.7681/MCTPC

The Prime Minister's Additional Instruction on House Construction and Residential/Village Development No.13/PM

 

Regulation on Setting Up and Operation of Building Design and Inspection Business No.8908/MTCPC

Draft Report on Investment Sectors under Ministry of Public Works and Transport that conditionally open for Foreign Investors No.___/MPWT

 

Law on Urban Planning No.03/99/NA

 

 

 

 

 

 


Lao PDR Commitments in Construction Services under Regional and International Agreements

 

Relevant regional and international agreements associated with the Construction and related engineering services include:

  • WTO General Agreement on Trade in Services (GATS)

  • ASEAN Framework Agreement on Services (9TH Package of Commitments)

  • ASEAN Agreementon the Movement of Natural Persons

  • ASEAN Australia/New Zealand Free Trade Agreement

  • ASEAN – China Free Trade Agreement on Trade in Services

  • ASEAN – India Agreement on Trade in Services

  1. WTO General Agreement on Trade in Services (GATS)

     

Construction and related engineering services are categorized under:

  • General construction work for buildings (CPC 512)

  • General construction work for civil engineering (CPC 513)

  • Installation and assembly work (CPC 514+516)

  • Building completion and finishing work (CPC 517)

  • Other: (CPC 511+515+518)

 

For these services, in relation to limitations on market access, Lao PDR is unbound in respect of providing services under mode 1, cross border supply of services, while they have placed no limitations on mode 2, consumption abroad. In relation to mode 3, establishment of a commercial presence foreign equity participation is limited to 70%. In relation to mode 4, Lao PDR is unbound, except as indicated in the horizontal section.

Specific to limitations on national treatment, Lao PDR is unbound for mode 1, but placed no limitations in respect of modes 2 and 3 and is unbound under mode 4, except as indicated in the horizontal section.

 

  1. ASEAN Framework Agreement on Services (9TH Package of Commitments)

     

 The scope of the Agreement covers the following construction and related engineering sub-sector services:

  • Construction Work for Buildings (CPC 512)

  • Construction Work for Civil Engineering (CPC 513)

  • Assembly and Erection of Prefabricated Constructions (CPC 514)

  • Installation Work (CPC 516)

  • Building Completion and Finishing Work (CPC 517)

  • Pre-erection Work at Construction Site (CPC 511)

  • Special Trade Construction (CPC515)

  • Rental services related to equipment for construction or demolition of buildings works with operator (CPC 518)

Lao PDR placed no limitations on market access and national treatment for modes 1, 2 and 3 (cross border supply, consumption abroad and commercial presence).

  1. ASEAN Agreement on the Movement of Natural Persons

     

Under the Agreement on the Movement of Natural Persons, the construction and related engineering activities are classified as follows:

 

  • General construction work for buildings (CPC 512)

  • General construction work for civil engineering (CPC 513)

  • Installation and assembly work (CPC 514+516)

    • Assembly and Erection of Prefabricated Constructions (CPC 514)

    • Installation Work (CPC 516)

  • Building completion and finishing work (CPC 517)

  • Other (CPC 511+515+518)

  • Pre-erection Work at Construction Site (CPC 511)

  • Special Trade Construction (CPC515)

  • Rental services related to equipment for construction or demolition of buildings works with operator (CPC 518)

 

For the services provided under the following sub sectors:

  • General construction work for buildings (CPC 512)

  • General construction work for civil engineering (CPC 513)

  • Installation and assembly work (CPC 514+516)

    • Assembly and Erection of Prefabricated Constructions (CPC 514)

    • Installation Work (CPC 516); and

  • Building completion and finishing work (CPC 517),

Lao PDR has limited market access requiring that these services be provided through the movement of natural persons in compliance with the Labour Law and the Law on Promotion and Management of Foreign Investment. In relation to limitations on national treatment, movement of natural persons must also be undertaken in compliance with the Labour Law, the Law on Promotion and Management of Foreign Investment and the Law on Taxation.

For other construction services, which comprise:

  • Other (CPC 511+515+518)

  • Pre-erection Work at Construction Site (CPC 511)

  • Special Trade Construction (CPC515)

  • Rental services related to equipment for construction or demolition of buildings works with operator (CPC 518),

Lao PDR made no sector specific commitments in relation to limitations on market access for these sub sector services, except in relation to intra-cooperate transfer. In addition, horizontal commitments apply.  Specific to national treatment, the same applies with the added requirement of compliance with the Law on Taxation.

 

  1. ASEAN Australia/New Zealand Free Trade Agreement

 

The ASEAN Australia/New Zealand Free Trade Agreement, covers the following construction services:

 

  • Construction Services:

  • Construction work for buildings (CPC 512)

  • Construction work for civil engineering (CPC 513)

  • Assembly and erection of prefabricated construction (CPC 514)

  • Installation work (CPC 516)

  • Building completion and finishing work (CPC 517)

    • Rental services related to equipment for construction or demolition of buildings works with operator (CPC 518)

  • Other Services

  • Pre-erection work at construction site (CPC 511)

  • Special trade construction (CPC 515)

     

For the main construction services, which include:

  • Construction work for buildings (CPC 512)

  • Construction work for civil engineering (CPC 513)

  • Assembly and erection of prefabricated construction (CPC 514)

  • Installation work (CPC 516)

  • Building completion and finishing work (CPC 517)

  • Rental services related to equipment for construction or demolition of buildings works with operator (CPC 518),

Lao PDR placed no limitations on national treatment and market access for modes 1, 2 and 3 (cross border supply of services, consumption abroad and the establishment of commercial presence respectively).

In respect of other construction services which include the pre-erection work at construction site services and Special trade construction services, Lao PDR placed no limitations on market access for the provision of these services under modes 1, 2 and 3. No limitations were placed in respect of national treatment for modes 1 and 2. In relation to mode 3, however, no sub sector specific commitments were made in this regard. 

  1. ASEAN – China Free Trade Agreement on Trade in Services

This agreement covers the following sub sectors:

  • Pre-erection work at construction site (CPC 511)

  • General construction work for buildings (CPC 512)

  • General construction work for civil engineering (CPC 513)

  • Assembly and erection of pre-fabricated constructions (CPC 514)

  • Special trade construction (CPC 515)

  • Installation work (CPC 516)

  • Building completion and finishing work (CPC 517)

  • Rental services related to equipment for construction or demolition of building or civil engineering works, with operator (CPC 518)

 

For the above referenced sub sectors, Lao PDR has made no commitments for the provision of these services under mode 1, both in respect of limitations on market access and national treatment.  No limitations have been placed in respect of mode 2, both in relation to market access and national treatment.  The limitation on market access in respect of mode 3 requires that foreign equity participation be limited to 70%, but no commitments have been made in relation to national treatment for this mode, except those that are applied in the horizontal section.

In relation to mode 4, no sector specific commitments were made in respect of limitations on market access and national treatment, although the limitations as stipulated in the horizontal section apply.

  1. ASEAN – India Agreement on Trade in Services

This agreement covers the following sub sectors:

  • Construction Work for Buildings (CPC 512)

  • Construction Work for Civil Engineering (CPC 513)

  • Assembly and Erection of Prefabricated Constructions (CPC 514)

  • Installation Work (CPC 516)

  • Building Completion and Finishing Work (CPC 517)

  • Pre-erection Work at Construction Site(CPC 511)

  • Special Trade Construction (CPC 515)

  • Renting Services Related Equipment for Construction or Demolition of Building or Civil Engineering Works with Operator (CPC 518)

In respect of:

  • Construction Work for Buildings (CPC 512)

  • Construction Work for Civil Engineering (CPC 513)

  • Assembly and Erection of Prefabricated Constructions (CPC 514)

  • Installation Work (CPC 516)

  • Building Completion and Finishing Work (CPC 517)

Lao PDR placed no limitations on market access and national treatment for modes 1 and 2. Horizontal commitments are the only commitments that apply in respect of mode 3, both in relation to limitations on national treatment and market access. Limitations to be applied in respect of market access for mode 4 are to be consistent with the Labour Law and Law on the Promotion and management of the Foreign Investment. The same applies in respect of limitations on national treatment, with the added requirement that the limitations also be consistent with the Law on Taxation.

In relation to:

  • Pre-erection Work at Construction Site(CPC 511)

  • Special Trade Construction (CPC 515)

  • Renting Services Related Equipment for Construction or Demolition of Building or Civil Engineering Works with Operator (CPC 518)

Lao PDR placed no limitations on market access and national treatment for modes 1 and 2.  In respect of providing these services under mode 3, horizontal commitments apply both in respect of market access and national treatment. In relation to providing these services under mode 4, no sector specific commitments have been made, except in relation to intra cooperate transfer and the horizontal commitments also apply; this is in relation to limitations on market access. Specific to limitations on national treatment, the same as applied to market access holds and in addition, these limitations must be compliant with the Law on Taxation.