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Benefits From Integration Elude Laos

Source: The Nation

Although the Asean Economic Community has resulted in increased economic activity between Laos and other countries in the regional bloc, the nation still must overcome numerous challenges to benefit from regional economic integration.

Independent economist Dr Mana Southichak has highlighted several challenges Laos needs to address promptly so it can continue to benefit from the AEC.

As a landlocked country, Laos has a very small and relatively fragmented domestic market with poor infrastructure, Mana said. The poor infrastructure, notably roads, places Laos in a disadvantageous position as it delays transportation of goods and makes the cost of transport relatively higher.

“Another thing I don’t understand is that I’ve seen many large Thai trucks carrying goods to Laos, but Laotian trucks cannot enter Thai territory. Laotian goods need to be transferred to Thai trucks when being transported in Thailand. These issues need to be urgently addressed.”

Second, the accountancy system in Laos is not synchronised with those in other Asean countries, making cross-border business activities difficult.

Third, Internet access is expensive and it plays a significant role for small and medium-sized enterprises. Expensive and slow Internet speeds will make it difficult for the SME sector to grow.

Another challenge for Laos is the lack of a seaport to serve the import and export sector.

Mana said he supported construction of the historic railway linking Vientiane with the Chinese border over a distance of 417 kilometres. The almost US$6-billion project, which will be complete over the next five years, will not only reduce costs but will also serve as the key route for facilitating economic and tourism development.

“I also support the railroad project linking Savannakhet province to the Laos-Vietnam border and the route linking Vientiane to Vung Ang Port in Vietnam. These projects will help make the cost of transport in our country cheaper,” he said.

However, Laos has a great opportunity to become more integrated into the regional and global markets, financial and economic systems, he said. This is especially important for Laos, given that it is a landlocked country with domestic-market-size constraints, as the AEC in effect makes Asean a single market of more than 600 million people.

To survive, prosper and lead in a more competitive environment, business owners and executives need to learn and understand the changing environment, find ways to improve efficiency and reduce costs, innovate and improve product and service quality, and be able to differentiate themselves.

Companies that are followers and not leading firms also need to be efficient and attentive to quality. This may require some changes in the way of thinking and doing business, and paying more attention to and caring more about human resources.