The government has designated an area in the Savan-Xeno Special Economic Zone in the central province of Savannakhet for sole use by Japanese factories after learning that many firms are looking for new production bases.
“We have designated Area B in the Special Economic Zone for Japanese investment only,” Mr Somchit Inthamith told local media last week during a field trip to the planned location of the Don Sahong Hydropower Project in Khong district, Champassak province.
He said the government was developing infrastructure in Area B and it would soon be supplied with electricity and water, roads and other essential facilities so that it would be ready for Japanese investors.
Mr Somchit said he was confident the Japanese would invest in the zone due to its location, which borders on the centre of Thailand and Vietnam, which are emerging markets in the region. The Japanese government has been helping the Lao government to build up the Savan-Xeno special economic zone since 2010. It has also provided financial assistance for Laos to build Road No 9 in Savannakhet province, which provides a link between Thailand and Vietnam.
Mr Somchit also said a number of Japanese investors were looking to expand into other Asean member countries ahead of the coming into being of the Asean Economic Community at the end of 2015, which will turn the region into a single market and production base.
Ongoing political turmoil and flooding in Thailand have also encouraged Japanese businesses to look at Laos in a bid to reduce risk, he said.
“We have seen a 150 percent increase in Japanese investment,” he said, adding that this was a strong indication that Laos will become a new investment destination for Japanese firms.
Mr Somchit also said the business climate in Laos had improved in recent years, adding that one of its major achievements in economic and business reform was accession to the World Trade Organisation.
However, Laos needs to work harder to attract foreign investment, especially Japanese companies, he added.
He said Laos needs to improve its business laws and enforce them effectively, adding that Japanese firms expect to see strict law enforcement in Laos.
“The Japanese government gives us a lot of financial assistance but why don’t their businesses invest in Laos? One of the main reasons is that if Laos is not ready to strictly enforce laws, Japanese firms won’t come here.”
Mr Somchit said Japan provides about US$100 million a year to Laos in the form of Official Development Assistance. This is aimed at helping Laos to improve its legislation and infrastructure to prepare for foreign investment when the Asean Economic Community takes effect in 2015.
Source: Vientiane Times