Finance - Banking - MoneyLao Economy

Caution Urged On Provision To Use State Assets As Collateral

The creation of conditions to enable state-owned enterprises to use their assets as collateral for bank loans heated parliamentary debate yesterday at the ongoing National Assembly session.

The draft-amended Law on Enterprise was debated at the ongoing ordinary session of the National Assembly, which will close today.

The newly added Article 201 stipulates that using the assets of an enterprise like land and other property to guarantee bank loans is one of the ways to secure finance.

Although the draft states that principles on how to use the assets as guarantees or collateral for loans is set out in a separate regulation, some NA members suggested that it should be set out in the law instead.

NA member for Vientiane Dr Kikeo Khaykhamphithoun said such principles were important aspects of the use of state enterprises’ assets and recommended that the details and conditions should be specified in the law.

“Core principles should be defined and included,” he said, citing the need to set out principles on how to use state enterprises’ assets appropriately when it comes to securing funding.

The government is aware of the need to enable state enterprises to access bank loans to secure finance for their business operations and development.

Dr Kikeo recognised that state enterprises have encountered difficulties accessing bank finance which has weakened some enterprises in the past years.

He described the difficulties that state enterprises face in accessing finance as chronic however he reiterated the need to include the principles on how this might be done in the amended law.

NA member for Khammuan province Bounpan Duanglaty welcomed the move that will enable state enterprise to access bank finance, but he agreed with many members on the need to work out regulations to ensure effective implementation.

NA member for Savannakhet province Mr Khammany Inthirath supported the move to use assets to secure finance, saying that accessing capital for business development is critically important.

However, NA member for Xieng Khuang province Mr Vilaysouk Phimmasone remained cautious, suggesting that if an enterprise was unable to repay the debt to a bank, this would mean the loss of state land which would be sold by the bank.

“Personally, I disagree,” he said, referring to the use of state assets to guarantee bank loans.

He called for reconsideration on the matter, saying there were other ways to access finance.

According to Article 201 of the draft, state enterprises can access capital through the contribution of state funds, by entering joint ventures with partners, using their assets to guarantee bank loans or by listing on the stock market.

According to the draft, the chairman of a state enterprise’s executive council must be a state official. The vice chairman will also take post as director of the enterprise.

In necessary cases, enterprises can employ qualified and experienced executives from outside as directors of the enterprise.

Source: Vientiane Times