Non-Tariff Barriers Facing Lao Exporters

NTM Workshop, World Bank 4-5 May 2006, Krabi, Thailand

Background

Necessary to bear in mind the characteristics of Laos as a landlocked country.

Dealt not only of NTBs imposed by trading country partners but also of mechanisms within Laos or the lack of these that limit exporters.

Lao Export Profile

In the 1990’s, export growth was around 15% per year;

In first 6 months of 2004, this increased by 22%

Mainly driven by garments, electricity, mining and coffee.

Composition of Lao Export Goods

Highly concentrated to 3 product categories:

Wood and wood products Garments Coffee

Cont:

These products account for 96% of total exports of merchandise goods (electricity not included).

Almost 80% of exports are directed to EU and Thailand.

Cont:

Insufficiently exploited export potential include:

Secondary wood processing products;

Knitted garments; footwear; Livestock-based products; and Light manufacturing

Major Export Product Categories

GARMENT o Accounts for 25% (equal to

electricity) of the total exports;o EU is the biggest recipient

country/region, 88% in 2000 and increased to 91% in 2003.

Cont:

WOOD AND WOOD PRODUCTSo From 2001-2003, this accounted

for 17% of the total exportso Main destinations were Thailand

(76%), Japan (14%), China (12%) and

Taiwan (3%)

Cont:

COFFEEo From 2001-2003, coffee products

accounted for 3% of the total exports.

o Since 1995, EU has emerged as the dominating recipient country accounting for 50-60% of the Lao coffee exports.

Other export products TEXTILE HANDICRAFTSo Estimated total export value as a

whole was approximately 12 M dollars in 2002-2003.

o Though having the benefits of GSP, destinations are mainly to EU countries, Singapore, Japan, and USA. Informal border trade to Thailand occurs.

Cont:

OTHER AGRICULTURAL PRODUCTS AND NON-TIMBER FOREST PRODUCTS (NTFPs)

o These include commercialized products such as cardamom, broom grass, sticklac, mulberry and resin

o Industrial crops such as: soybeans, job tears, sesame seeds, ground nuts.

Cont:

o Trading partners are neighboring countries like Thailand, Vietnam and China using border trades with a few cases of exports to EU like France.

o Data indicates quite fluctuated export figures: 6.6 USD in 2000-01, 8.2 USD in 2001-02 and 5.7 USD in 2002-03.

Main Products affected by NTMs

Internal restrictions: Wood (timber, natural wood)

External barriers: Garments (textile, cloth materials) Handicrafts (silk woven products)

Types of NTMs

Internal measures that affect export:

Unclear and changing regulations and procedures.

Restrictive practices: Administrative procedures where too many steps and paper works are required to get ones’ products approved

Cont:

Irregular amounts that have to be paid.

Extra expenses paid (“to make the process faster”) which cannot be declared as there are no receipts issued for these.

Customs valuation in which charges are not standard or the same.

Cont:

External Measures Most prohibitive were transport

costs due to monopoly in Thailand Third country transit costs and

paper works on Thai side Customs services and procedures

both in Thailand and in Lao side

Cont:

Pre-shipment inspection: Double checking that cause delay and extra charges both on the Lao and Thai side

Technical barriers; technical regulations and standards.

Cont:

Strict requirements set and additional costs to testing in other countries.

Lack of laboratories in Laos for testing that can be accepted internationally.

Countries Most Constraining

Thailand EU Japan

Laos

SABAIDEE,

KOP CHAI LAI LAI

Summary NTBs (external)Sector/product affected 1

Country applying barriers 2

Nature of barrier 3

Garment:1. T-shirts2. T-shirts3. Imported raw materials4. Imported raw fabrics5. T-shirts (knitted and woven)

EUUSAThailandChina as against PakistanThailand

Prescriptive requirement by trading countryMarking requirementsSlow paper works and asks for extra chargesThe use of Certificate of Origin is not the same for all countries. China uses CO that allows it to impose taxes.Transportation cost is high

Wood and wood products:1. Carved seats2. Knock down furniture3. Wood wares: tables, chairs, furniture set4. Semi-processed wood: flooring5. Table tops, table legs, doors, frames

ThailandThailandThailandThailandThailand

Does not allow to enter the market, technical regulations and standardsChanging enforcement of customs rules, delays related to short and changing operating hours, expenses to obtain customs clearance, expenses paid to get cargo transported, Checking/control of goods in Nong Khai (border of Thailand)Administrative costs (both in Lao and Thai side)Costly transportation and uncertain charges

Coffee:1. Raw coffee beans2. Raw coffee beans

ThailandEU (France)

High cost of transit cargo in BangkokThere is strict requirement for toxin analysis

Handicrafts (silk products)1. Scarf, blouses, pillow case, curtains

Japan and EU Certification or strict testing requirements (e.g. consistency of fine fabric used, dyeing ingredients), labeling or marking or packaging requirements of trading partners

Agricultural products/NTFPs:1. Gums and resins, medicinal herbs2. Job tears

Thailand Cargo handling and port procedures, monopoly of transportation service

Internal Factors Inventory Category 1

Nature of Barrier 2

Sector/products affected 3

Part (I) Government Participation in Trade and Practices Tolerated by the Lao Government (GoL)1.Lack of publications and changing/unclear implementation of rules related to trade2.Restrictive practices 3.Absence of standard procedures and guidelines

Bidding processes, logging quotas, and shipment ; lack of publications on export procedures,duties and shipmentMutiple authorities who inspect and approve the productsDifferent calculation of taxes from province to province depending on how one district sets up its own method

WoodHandicraftBarrier affecting all sectors including coffee exporters in provincesNTFPs

Part (II) Customs and Administrative Entry Procedures1.Customs services (time and charges)2.Pre-shipment inspection3.Customs classification4.Customs formalities5.Rules of Origin6.Import license

There are fees charged at the border or port ; terminal handling charges, delivery fee, port gate fee, customs guard fee, third risk premium, returning fee of the empty truck, and unloading fee.Double inspectionTyping mistakes and classifying the itemsForms change whenever there is a new Customs staffFor fabrics which exporters have to deal with restrictions imposed within and outside of the country It took 45 days to get a license to import raw materials for wood manufacturing

All sectors affected with varying degrees Garments Handicraft Garments Textile Wood

Cont:Part (III) Technical Barriers to Trade 1. Testing and certification arrangements

Lacks laboratory facilities for testing the chemicals for the colors.

Textile handicrafts

Part (IV) Sanitary and Phyto-sanitary Measures 1. Testing, certification and other conformity assessment (including chemical residue limits, freedom from diseases and level of humidity)

Absence of laboratories specially in provinces where these are planted; extra costs and time for bringing to Vientiane,and not recognized internationally

Industrial crops face this barrier the most

Part (V) Specific Limitations1.Quantitative restrictions2.Exchange control3.Export restraints 4. Export taxes

Uncertain allocation of timber by GoL and thus cannot predict the raw input that they can use.Exporters are allowed to withdraw only a maximum of 5,000 USD/dayDuplicated administrative work between border points; province to province Several duties being levied

WoodWoodWood and NTFPsAll sectors

Part (VI) Charges on imports1.Export license/investment certificate (validity, services and requirements)2.Profit tax3.Restrictions on imports

Export certificate is required for each export shipment and takes 2 days to processA 450kip/kg is paid for each export regarded as “advanced profit tax”.Economic Police inspects without notice

Handicrafts, coffee, for wood, (license is valid for 1 year only)Coffee beansGarments

Part (VII) Others1.Intellectual property issues2.Others

Permit required for “internal transit of garments inputs” when sub-contracting

Garments