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Investment policy review of Lao P.D.R.
Vientiane, 2016
• Introduction Investment policy and related issues Stephen Thomsen, Head of IPRs, OECD Discussion
• Investment promotion and facilitation and other policy areas Alexandre de Crombrugghe, OECD Discussion
• Responsible business conduct Tihana Bule, OECD Discussion
AGENDA
OECD Investment Policy Reviews using
the Policy Framework for Investment
OECD Investment Policy Reviews
Southeast Asia
Forthcoming 2016
• Cambodia
• Lao PDR
• Viet Nam
2009
2010
2013
2014
2016
Reviews are undertaken jointly by the OECD and the government in partnership with the ASEAN Secretariat and based on the Policy Framework for Investment
2015
April OECD mission, PFI presentation to the Taskforce
April-June Government prepares answers to PFI questionnaire
July Second OECD mission to discuss answers to questionnaire and for
further fact-finding
August-Feb. 2016 OECD prepares draft report
December Lao PDR participates in ASEAN-OECD Regional Policy Network
on Investment in Paris
2016
April OECD-MPI Seminar with ministries and stakeholders in
Vientiane to discuss draft IPR of Lao PDR
April-May Government and stakeholders provide written comments
October Presentation of IPR to OECD Inv. Committee in Paris (optional)
November Revised draft IPR circulated for final comments
December IPR of Lao PDR launched in Vientiane or in ASEAN region
Follow-up Results presented at regional or sub-regional level (including
Regional Policy Network), other activities
IPR of Lao PDR timeline
INTRODUCTION: FDI TRENDS AND PERFORMANCE
Lao PDR experienced remarkable economic
results in the past 10 to 15 years
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
100
200
300
400
500
600
700
800
900
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GDP per capita (constant 2005 USD) GDP growth (annual %) ASEAN GDP growth (average annual %)
Source: World Development Indicators
FDI has grown quickly
0
100
200
300
400
500
600
700
800
FDI inflows, 1986-2014 (USD million)
Source: UNCTAD
FDI dominated by three largest neighbours
and predominantly in natural resources
China 30%
Thailand 25%
Viet Nam 20%
Malaysia 4%
Korea 4%
France 3%
Japan 2%
Netherlands 2%
Norway 2%
Others 8%
Electricity generation
29%
Mining 23%
Agriculture 14%
Service 10%
Industry & handicraft
8%
Hotel & restaurant
4%
Construction 3%
Telecoms 3%
Others 6%
Approved FDI projects in Lao PDR by sector, 1989-2015
Approved FDI projects in Lao PDR by country of origin, 1989-2015
Source: IPD
And in relative terms Lao PDR is
outperformed by most of its regional peers
31%
79%
26%
49%
68%
527
846
329
983
2700
0
500
1000
1500
2000
2500
3000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Lao PDR Cambodia Myanmar Viet Nam ASEAN
FDI stock as a percentage of GDP FDI stock per capita (USD)
Source: UNCTAD
• FDI has significantly contributed to economic growth, export earnings and government revenues, among others
• Need to diversify into areas with opportunities for further growth in employment
• Need to ensure environmental sustainability and social inclusiveness
• With appropriate policies, benefits of FDI can be further maximised and potential costs minimised
FDI impact can be further maximised
INVESTMENT POLICY
• Law-making process and regulatory implementation
• The 2009 Law on Investment Promotion
• Protection of property rights
• Dispute settlement mechanisms
• International investment agreements
• Regulatory restrictions to FDI
• Corporate governance
Investment policy in Lao PDR
• More coherent law-making for an enabling investment policy framework needed:
– Inclusive law-making process for more buy-in for reform
– Prompt adoption of by-laws to ensure better implementation of new legislation
– Need to strengthen the leading role of MoJ in law-making process to ensure consistency of the legal framework
• Important positive step taken with the enactment of the Law on Laws:
– Yet provisions of the Law on Laws are not yet fully applied
– Need to further improve accessibility of laws and regulations
Enhancing the rule of law in law-making
process is a pressing priority
• Inconsistent and inadequate implementation is the biggest impediment to the ongoing regulatory reform process:
– Adoption of implementing decrees often delayed (i.e., IP decrees),
– Ambiguous legal language leaves room for inconsistent administrative practices;
– Lack of capacity within government, esp. at provincial level;
Implementing investment legislation
remains one of the biggest challenges
• 2009 Law on Investment Promotion covers domestic and foreign investment:
– Reflects a pro-investment stance
– Lacks investment protection guarantees.
• Priority actions for the revision of the law:
– Adopt detailed and clear legal language;
– Give particular attention to the definition of investment;
– Clarify scope and content of existing protection provisions, esp. expropriation;
– Revise ISDS provision: clarify procedural requirements and scope of the provision
– Ensure consistency with other laws and with provisions of ACIA.
Revision of the Investment Law: an opportunity for
reinforcing core investment protection guarantees
• Lao PDR is among the last AMS not to have adhered to the ICSID Convention
• No specialised courts (IP courts, land courts);
• Unclear mandate of EDRC; claimants often bypass EDRC;
• To prevent this, clarify the DS provision in the investment law;
• No right of appeal against administrative decisions (e.g. expropriation);
• Ongoing efforts to create an independent commercial arbitration body should be pursued;
• More capacity-building programmes for judges on commercial matters are needed to improve investors’ confidence in the court system.
Access to dispute settlement
mechanisms is yet to be clarified
• Enactment of new land law still pending
• Ongoing computerisation of land registration system, but no clear and updated land system yet
• Land Use Rights cannot be used as collateral
• Decentralisation of land administration is an obstacle to more consistency of administrative practices
• Impetus for modernisation is needed at central government level
Access to land
• Major legislative and institutional modernisation reforms have been achieved
• Delays in adopting implementing decrees are a major obstacle to a consistent and efficient implementation of IP law
• No specialised IP courts and unclear mandate of the IP dispute resolution division
• Further need for capacity-building and awareness raising programmes for civil servants and the civil society
Protection of Intellectual Property Rights
• Lao PDR party to 20 BITs and regional and multilateral trade and investment agreements.
• Give covered investors substantive protection and access to investor-state dispute settlement mechanisms (ISDS)
• Recent treaties concluded within the ASEAN framework reflect policy innovations:
– more specific language on key provisions to better reflect government intent
– more detailed regulation of ISDS
International Investment Agreements: a
cornerstone of Lao PDR’s investment policy
Lao PDR compares favourably vis-à-vis ASEAN peers in
terms of FDI restrictions, but remains relatively restrictive
ASEAN9²
OECD average
Non-OECD average
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Singapore Cambodia Viet Nam¹ Lao PDR¹ Malaysia Thailand Indonesia Myanmar China Philippines¹
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1)
Source: OECD FDI Regulatory Restrictiveness Index database, http://www.oecd.org/investment/fdiindex.htm. Notes: (¹) Data refer to regulatory restrictions on FDI as of end-2015. For all other countries, data refer to the regulatory regime as of end-2014; (²) ASEAN9 refers to the average scores of the nine ASEAN member states covered. It excludes Brunei Darussalam which is not covered. Data for Lao PDR, Viet Nam, Cambodia, Singapore and Thailand are preliminary; (³) The OECD FDI Regulatory Restrictiveness Index covers only statutory measures discriminating against foreign investors (e.g. foreign equity limits, screening & approval procedures, restriction on key foreign personnel, and other operational measures). Other important aspects of an investment climate (e.g. the implementation of regulations and state monopolies among other) are not considered. All 34 OECD countries and 30 non-OECD countries are covered, including all G20 members.
Some measures in place are rather unusual when
compared to the broad international experience (1/2)
1. stringency of some sector-specific restrictions
Source: OECD FDI Regulatory Restrictiveness Index database, http://www.oecd.org/investment/fdiindex.htm. Notes: (¹) ASEAN9 refers to the average scores of the nine ASEAN member states covered (all except Brunei Darussalam). Data for Lao PDR, Philippines and Viet Nam refer to regulatory restrictions as of end-2015. For the other countries, data refer to end-2014. Data for Cambodia, Singapore and Thailand are preliminary. Data covers 64 countries in total, including all OECD and G20 economies.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
OECD ASEAN9¹ LAO PDR
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1)
Some measures in place are rather unusual when
compared to the broad international experience (2/2)
2. Discriminatory minimum capital requirement
LAO
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
0 20000 40000 60000 80000 100000 120000 140000
Minimum capital requirement, current US dollar
Jordan's minimum capital requirement vs OECD and selected emerging economies
GDP per capita, PPP (current insternational $)
Lao PDR is one of the few countries that maintain a discriminatory minimum capital requirement for foreign investors, and a particularly stringent one
Source: OECD Services Trade Restrictiveness database and World Bank’s World Development Indicators. Notes: data refer to minimum capital requirement for limited liability companies and is converted at current exchange rates as of 21-04-2015. There are 25 countries within the OECD Services Trade Restrictiveness database that reported to apply minimum capital requirements for investment in limited liability companies. The database 42 countries: all 34 OECD countries and OECD accession track and key partner countries (Brazil, China, Indonesia, India and South Africa).
Usual Purpose
Main issues
• Protect consumers and creditors from risky and potentially insolvent business
• Does not take into account firms’ differences in size or risks
• Evidence: barriers to entry and negative impact on firm growth and access to finance
Evidence
Regulatory restrictions are spread among several laws and regulations
• The 2009 Law on Investment Promotion provides only a generic statement on areas where investment may be restricted (art. 4)
• Reference to a “Negative List”, but not clear if yet to be issued or refers to the list of “controlled business”
• List of “controlled business” sheds limited light on Lao PDR’s investment regime
Important legal instruments are not readily accessible online. English versions, even more scarce.
The regime provides limited transparency and predictability
with regards to market access rules and conditions
• Lao PDR has made progress in developing a sound framework for corporate governance
• Capital market remains small
• Need to continue reinforcing the organisation of the state ownership function of SOEs
• Need to strengthen the requirements for disclosure and transparency
The corporate governance framework
has improved but remains challenging
INVESTMENT PROMOTION AND FACILITATION
Core investment promotion and
facilitation measures
Investment promotion Investment facilitation
Investment generation
IPA
Tax incentives SEZs / IPs
Business linkages
Image building
Investor servicing
Aftercare
Policy advocacy
• Investment promotion and facilitation landscape dictated by the 3 existing routes to invest in Lao PDR
• Challenging business environment – especially to start a business (153rd out of 189 on Doing Business)
• Growing importance of SEZs, but still at an early stage of development and with no clear policy/strategy yet
• Important role of tax incentives in investment promotion techniques – especially tax holidays
• Few business linkages between MNEs and SMEs
• Low labour productivity
Overview of investment promotion and
facilitation in Lao PDR
• Lack of proactive FDI attraction – especially in priority sectors; no clear investment promotion strategy to support economic diversification
• Coordination of FDI attraction measures is weak; inconsistent messages are sometimes provided; competing activities do not serve the country’s overall development objectives.
• The IPD is both regulating and promoting FDI; its role as the national IPA is not strong enough (focusing on concessions or beyond?)
Marketing Lao PDR and attracting “quality
investors”
• Different entry points for investors (3 one-stop shops)
• Too much attention paid to one-stop-shops; multitude of burdensome administrative obstacles to start and operate a business
• Deadlines and fees for licensing not clear and systematic, which leaves room for discretion, unpredictability and inconsistent application of laws
• Lack of coordination between ministries
• LBF well-perceived, but dialogue with the private sector can be more systematic through aftercare and policy advocacy
Facilitating investment and reinvestment
Lack of transparency
• Basic incentives clearly stipulated in the law but those in SEZs and concessions follow different rules
• Concessions: who negotiates the master list? Are incentives easy to implement?
• No clear and standard criteria for granting incentives; too much room for discretion
Do incentives serve their purpose?
• No existing cost/benefit analysis
• High risks of revenue forgone vs. little chance of attracting FDI
Using tax incentives more cautiously
Enhancing the development impact of FDI
through business linkages
Domestic firms’ characteristics
Foreign firms’ characteristics
Government policies and institutions
Spillover potential
FDI spillovers
Absorptive capacities
Education & training
Access to finance
SME development
Trade policy
Labour market regulations
Investment policy
& promotion
IP rights
Source: OECD (adapted from Farole and Winkler (2014), and Paus and Gallagher (2008))
Local suppliers in Lao PDR and regional peers
(ranking out of 140 economies), 2015
Absorptive capacities: linkage creation depends
on the availability of domestic SMEs
0 20 40 60 80 100 120 140
Myanmar
Cambodia
Lao PDR
Viet Nam
Philippines
Thailand
China
Malaysia
Local supplier quality Local supplier quantity
Source: World Economic Forum
• SME development becomes increasingly prioritised in government plans but SMEPDO still lacks resources and capacity
• Need to develop industry-specific capacity building
• Need to facilitate information exchanges
– Information dissemination, suppliers databases
– Matchmaking events
• Increase business involvement in human resource development strategies
Absorptive capacities: SME and skills
development at the centre
• Some FDI more likely to generate spillovers and linkages; some foreign investors are more inclined to source locally
• Aftercare can help anchor investors in the local economy
• SEZs tend to generate few linkages – except if they take a cluster focus, allow local companies to participate and are subject to a well-functioning inter-agency coordination
Spillover potential: implications for FDI
attraction
OTHER POLICY AREAS
Infrastructure connectivity is key to attain the SEDP objective of
enhancing economic integration and broader economic diversification
• Lao PDR’s relatively high cost of accessing international gateways is a handicap for achieving its objectives
• Crucial to link isolated rural areas to markets, and develop the targeted agro-processing industry
• And to further develop the tourism sector:
– Lao PDR account for less than 10% of tourists arriving in GMS countries; tourism highly concentrated in Vientiane
– Insufficient last-mile transport infrastructure in secondary sites is a key impediment to more inclusive tourism activity
Source: IMF export diversification and quality database, 2014. Note: (¹) Overall Theil Index refers to the sum of the extensive (more export items) and the intensive margins (more equally spread portfolio) as of 2010. The lower the value, the more diversified the economy is. The overall Theil index is the sum of the intensive and extensive components. The extensive Theil index is calculated for each country/year pair as: TB = ∑k (Nk/N) (µk/µ) ln(µk/µ), where k represents each group (traditional, new, and non-traded), Nk is the total number of products exported in each group, and µk/µ is the relative mean of exports in each group. The intensive Theil index for each country/year pair is: TW = ∑k (Nk/N) (µk/µ) {(1/Nk ) ∑i∈Ik (xi/µk ) ln(xi/µk )}. where x represents export value.
Infrastructure connectivity is highly correlated with export diversification
0
1
2
3
4
5
6
7
0 1 2 3 4 5World Bank Logistics Performance Index, infrastructure indicator, score from 1 to 5 (best)
Export Diversification (Theil index)(lower value=more diversified)¹
While Lao PDR has enhanced infrastructure connectivity over
the last decade, upgrading the network remains necessary (1/2)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
Cambodia China Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam
World Bank Logistics Performance Index, Infrastructure indicator, score from 1 to 5 (best)
2007 2014
Source: World Bank Logistics Performance Index database.
Limited ICT infrastructure and use is likely to contribute to higher trade costs
• One of the countries with the most limited ICT availability and penetration in SEA
Access to electricity has improved considerably , but still remains relatively limited compared to regional peers
• Only ~70% have access to electricity compared to much higher levels in ASEAN peers
• access to non-solid fuels for use in day-to-day activities also remains largely restricted
Transport connectivity has also improved, but network quality is below regional standards
• Road transport concentrates most on passenger and freight activity
• Yet, only 16% of the network is paved
• Over 87% of the Asian Highway network in Lao PDR: minimum desirable standard or below (Class III or below)
• About 40% of the villages lack access to all-weather roads (particularly given Lao PDR’s vulnerability to natural disasters)
While Lao PDR has enhanced infrastructure connectivity over
the last decade, upgrading the network remains necessary (2/2)
• Nearly USD 3.3 billion needed in investments in transport (upgrade and expansion) between 2010 and 2015 to support the previous NSEDP
• Independent estimates suggest that needs amount to 12% of GDP for overall economic infrastructure over 2010-20 period
• But available resources amounted to only USD 650 million ( ~20% of estimated annual needs)
• Funds for road maintenance cover only ~40% of annual needs
• ODA has played a critical role: roughly 44% of available funds for road transport investments, including maintenance expenditures
Estimated infrastructure investment needs exceed
available funds at large
Estimated investment needs, % of 2010-2020 GDP
Sources: Battacharyay, B. N. (2010), “Estimating demand for infrastructure in energy, transport, telecommunications, water and sanitation in Asia and the Pacific: 2010-2020”, ADBI Working Paper No 248, September.; ADB (2011), Lao PDR: Transport Sector Assessment, Strategy and Road Map, 2013 update, Philippines: Asian Development Bank.
• It seeks to establish a new PPP framework partly motivated by the large capital needs for infrastructure. A conceptual framework has already been issued
• But the framework should not be motivated by fiscal considerations
– PPPs will not bridge the infrastructure gap (users or taxpayers still have to pay)
– Even the upgrade of one of the most important economic corridors (the NR 13) will likely require significant government support (e.g. upfront investment and/or availability payments)
– But, private investments in infrastructure can help to increase the efficiency of infrastructure delivery in the appropriate environment
• There is a need for improved planning and project prioritisation
– Funding allocations seem to be determined annually and are not aligned with medium-term infrastructure plans
– Need to strengthen value-for-money assessment framework to support a credible pipeline of projects (currently, no standard framework exists for preparing project proposals and feasibility studies).
The government seeks to encourage greater private
participation in infrastructure delivery through PPPs
• Reforms are in line with those in other ASEAN economies
• Currently, Lao PDR has no proper PPP legal and institutional framework in place
• The available draft Prime Minister PPP Decree (7th version) brings some key regulatory and institutional mechanisms to improve delivery capacity:
• Dedicated PPP unit within the Ministry of Planning and Investment (not a guarantee of success, but helps bring necessary resources together)
• Project Development Facility (can support government agencies in preparing and tendering projects)
• Viability Gap Funding (to projects that have strong economic returns but may not be commercially viable)
• Competitive bidding and a number of other aspects (e.g. lender’s rights)
• Yet, some issues have not been addressed or are only weakly addressed at this stage
• Draft language (English version) sometimes lacks clarity
• Relation to existing Concessions regulation under the Law on Investment
• Limited guidance is provided with regard to some critical issues for developing PPPs (risk allocation, unsolicited proposals etc.).
• These can be further clarified in regulations and guidance documents, or in model contract provisions. But the framework would benefit from more clarity on principles and rules governing such issues (details can be set at project level for flexibility)
Envisaged reforms: establishing a credible institutional and
legal framework for private participation in infrastructure
• The government recognises the importance of promoting green growth and has taken some key steps to institute a policy environment for green investment
• Basic legislation and strategies favour sustainable development and environmental protection:
– Mitigating the impact of climate change (National Strategy on Climate Change 2010)
– Enhancing energy security, incl. through renewables (Renewable Energy Development Strategy 2011)
– Using natural resources in a sustainable manner (Environmental Protection Law, Mining Law, Law on Electricity, National Forestry Strategy)
Recognition by the government of the
importance to promote green growth
• Lack of policy coordination
• Lack of institutional capacities to ensure effective implementation and monitoring of laws
• Over-reliance on ODA for green growth promotion
• No comprehensive renewable energy policy
• No independent regulatory authority for electricity tariff formulation
• Pricing mechanism for renewable energy-based electricity generation not appropriate
• Incentives not sufficiently focused on renewable and sustainable energy projects
But implementation challenges remain,
including for renewable energy development
RESPONSIBLE BUSINESS CONDUCT
Scope and importance of RBC
Relevance for policy-making
Responsible business conduct at the OECD
Global developments
Opportunities in Lao PDR
• Goes beyond philanthropy
• Focuses on addressing environmental and social impacts of business operations
• Part of core business and risk management, including in the supply chain and business relationships
• Important for all businesses
RBC – Focus on Impact
ensuring a positive contribution to overall development Responsible Business Conduct avoiding and addressing negative impacts
1
2
• Urgent need to address issues in global supply chains
• Need for inclusive and sustainable growth
• Complex issues not solvable by any one actor alone
RBC – Focus on Impact
Clothing exports of selected economies (1990 vs. 2014)
% of total world exports (1990 vs. 2014) Data source: World Trade Organisation
Mexico
Turkey China
India
Indonesia
Bangladesh
Viet Nam
Pakistan
Textile & Garment Sector Supply Chain
Yarn Spinning
Weaving, knitting
Dyeing, printing,
Finishing
Garment
Manufacturing
Brands, Buying houses,
Trading companies
Retail
Raw material
production
Textile & Garment Sector Supply Chain
Aggravating factors
Fast fashion & low
prices
Short-term contracts
Purchasing
practices Business
models
Illegal sub-
contracting
Use of temporary
workers,
homeworkers,
migrant workers
Sumangli scheme
Small holder
farmers;
Use of temporary
workers
Inflexible delivery
dates
Business models
Forced & bonded labour
Child labour
Occupational health & safety
Excessive working hours
Freedom of Association &
Collective bargaining
Wages
Chemical use & water
contamination
Example salient risks
Multi-stakeholder approach to RBC
Improving the business environment
Protecting public interest and stakeholder rights
Overcoming country risk perceptions
Social licence to operate and risk management
Compliance/ respecting stakeholder rights
Competitiveness and market access
Ensuring accountability/ respect of rights
Framework to resolve issues proactively and constructively
Shared understanding of responsibilities
Government Businesses Civil Society
RBC at the OECD
• OECD Guidelines for Multinational Enterprises – Clear role for home governments
– Accountability
– Sector Guidances
• RBC in the Policy Framework for Investment and other policy areas – Development policy and co-operation;
corporate governance; competition; taxation; finance
• Outreach and dialogue
• Most comprehensive government-backed international instrument for promoting responsible business conduct
• Recommendations from governments to businesses operating in or from adhering countries
• Purpose: to ensure business operations are in harmony with government policies; strengthen the basis of mutual confidence with the society; help improve foreign investment climate; enhance contribution to sustainable development
• Unique implementation mechanism
• Endorsed by business, trade unions and civil society organizations
OECD Guidelines for Multinational
Enterprises
Application of the Guidelines
Concepts and Principles
General Policies
Disclosure
Human Rights
Employment and Industrial Relations
Environment
Combating Bribery, Bribe Solicitation and Extortion
Consumer Interests
Science and Technology
Competition
Taxation
Scope
Implementing the Guidelines:
Shared Responsibility
Implement the Guidelines and encourage their use by businesses (domestic and foreign)
Provide a policy environment that supports and promotes responsible business conduct
Set up National Contact Points for the Guidelines
Maximise positive impacts, minimise adverse impacts
Carry out due diligence to identify, prevent and mitigate actual and potential adverse
impacts
Cover not only impacts related to own operations; but also in the
supply chain and business relationships
Responsibilities of Governments
Responsibilities of Businesses
• One of the main global non-judicial mechanisms and a significant contribution to improving access to remedy in case RBC principles and standards are not observed
• Mandate: – Help resolve practical issues through dialogue and
consensus – Promote RBC and actively engage with stakeholders – Identify areas where additional guidance for
businesses might be needed (i.e. sectors, regions, etc.) – Report on activities
Implementing the Guidelines:
National Contact Points
Implementing the Guidelines:
National Contact Points
1%
3%
3%
3%
3%
4%
4%
4%
4%
6%
6%
11%
17%
34%
Water supply; sewerage, waste management and…
Human health and social work activities
Accommodation and food service
Construction
Transportation and storage
Other
Information and communication
Other service activities
Electricity, gas, steam and air conditioning supply
Agriculture, forestry and fishing
Wholesale and retail trade
Financial and insurance activities
Mining and quarrying
Manufacturing
Percentage of cases by industry sector
1%
2%
3%
5%
6%
8%
15%
21%
24%
45%
55%
Science and technology
Taxation
Competition
Consumer interests
Concepts and principles
Combating bribery, bribe solicitation and extortion
Disclosure
Environment
Human rights
General policies
Employment and industrial relations
Percentage of cases by theme
Implementing the Guidelines:
Guidance for Business
OECD Due Diligence Guidance for Responsible Mineral Supply Chains (2011)
OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector
OECD-FAO Guidance for Responsible Agricultural Supply Chains
OECD Due Diligence Guidance for Responsible Supply Chains in the Garment & Footwear Sector (forthcoming)
Responsible Business Conduct in the Financial Sector (forthcoming)
• Convergence and coherence on RBC since 2011 – OECD Guidelines for Multinational Enterprises
– UN Guiding Principles on Business and Human Rights
– Core ILO conventions
• Sustainable Development Goals and Paris Agreement
• Integration in numerous international, regional and domestic commitments: – G7 leaders statement
– UNSC Resolutions
– Trade agreements and bilateral investment treaties
– Market access provisions
– EU CSR Strategy and new directives
– National strategies: UK Modern Slavery Act, French legislative developments, U.S. regulations/National Action Plan, Dutch agreement on textiles, Chinese guidelines
– ASEAN practice differs country to country
• Increasing integration of RBC in development finance, by investors, stock exchanges, banks, pension funds, and sovereign wealth funds
Attention to RBC Increasing Globally
Promoting and enabling RBC is an
opportunity in Lao PDR
• Awareness of RBC is not wide-spread; perceived risks are high
• Partial alignment with international principles and standards in areas related to RBC; scope for further alignment in important areas
• Primary responsibility for ensuring that investment contributes to inclusive and sustainable growth and that stakeholder rights are protected rests with the government of Lao PDR
• International investors should observe the OECD Guidelines and UN Guiding Principles
• A comprehensive strategy for how environmental and social risks of investments are addressed is needed, including ensuring that any investment incentives and concession agreements are targeted and well-designed and coupled with due consideration of their environmental and social impacts
• Broader promotion of RBC could support domestic industry development and diversification of the economy
• Role of civil society could be expanded to increase transparency and accountability
