Govt Urged To Speed Up Privatisation Of Unprofitable Enterprises

Source: Vientiane Times

Lao economists have urged the government to accelerate the privatisation of state enterprises that have been underperforming, as part of measures to improve its financial position.

Economists at the Lao National Economic Research Institute made the recommendation in their March economic update, aiming to help the government find ways to reduce its subsidisation of state organisations.

Another option open to the government to improve its financial position is to turn underperforming state enterprises into state-private joint ventures. This would enable the government to access new sources of development funding.

According to a report from the Ministry of Finance, the government is facing a big challenge in collecting sufficient revenue to meet its expenditure needs. Over the first quarter of this year, the government was able to collect only 20 percent of its target figure.

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In addition, public debt is rising as the country borrows money to finance infrastructure development. This poses a big challenge for the government’s attempts to stabilise national economic development, according to reports from the World Bank and IMF.

Economists believe that if the government could reduce its subsidy to underperforming enterprises or sell its shares to the private sector, its financial position would be better. The government would then have more funds at its disposal to finance its priority projects.

According to a report from the Ministry of Planning and Investment, there are about 135 state-owned enterprises in Laos with more than US$5 billion in assets. In recent years, the government sold its shares in major state-owned enterprises such as BCEL and EDL-Gen to the private sector.

The government is now planning to sell its shares in Lao Airlines so the national flag carrier can operate more efficiently and become more innovative and competitive.

With regard to state financial sector reform, economists said the government should continue to identify sustainable sources of revenue. At present, a large proportion of the government’s revenue comes from the resources sector, such as mining, whose reserves will one day be exhausted.

As part of this reform, the government should also transform ways of balancing the budgets of local administrations.

Instead of providing financial support to local administrations that are facing a budget deficit, the government should encourage local authorities to maximise the use of their resources to generate revenue so they can become self-sufficient, the economists said.

They said the adoption of new financial management methods would not only strengthen the government’s financial position but also reduce its reliance on external funding and assistance.

The economists also suggested that private and state enterprises should be encouraged to adopt electronic transaction methods and pay taxes electronically. This would help the government to prevent further leaks of state revenue.