A number of businesses ranging from construction firms to office equipment sellers need to revise their business plans following the government announcing its belt tightening policy, according to economists.
“Business leaders in Laos need to adjust their business plans to the reality of the situation so they can run their businesses smoothly,” the Lao National Economic Research Institute Director General, Dr Leeber Leebouapao, told Vientiane Times on Friday.
Dr Leeber made the comments amid concerns the government reigning in spending would hurt businesses’ sales, given the government is the biggest buyer in the country.
In October, the government stopped paying state employees a monthly living allowance of 760,000 kip (US$95) per person as a measure to pay off the country’s debt.
It also announced a suspension of the state investment policy, which allowed the private sector companies to invest in infrastructure projects first before collecting the debt later from the government, as a further austerity measure to avert economic crisis.
In the 2013-14 fiscal year, the government was granted approval from the National Assembly to spend 29,745 billion kip (US$3.7 billion).
But it expects to collect only 25,261 billion kip (US$3.1 billion) in revenue, according to a report from the Ministry of Planning and Investment.
The government is now facing challenges in implementing the current budget plan as it is facing difficulty collecting revenue. Over the first quarter of this fiscal year, it was able to collect only 12 percent of the annual revenue plan. The revenue shortfall also delayed government expenditure.
The businesses that economists and business leaders believe will face negative impacts from the government cutting spending are construction firms, car dealers and office equipment suppliers as policymakers may consider purchasing these types of goods unnecessary amid revenue shortfalls.
Car dealers said they would have to revise their business plans because the government would now not be spending money on new cars. They said they will instead focus sales and services on individual and private sector customers.
Dealers said despite the Lao economy slowing down they were confident it would recover over the next few years due to the construction of hydropower plants.
“We expect to sell cars to hydropower plant construction projects as they still have high purchasing power,” a car dealer on the T2 road in Vientiane said.
Dr Leeber said businesses should not worry too much because Laos remained one of the fastest growing economies in the region.
“Laos’ economy will continue to grow even if it sees a little bit of a slow down. Lao economic growth will keep purchasing power high,” he said.
Source: Vientiane Times