Japanese investment in Laos has skyrocketed and the prospects remain strong looking forward, according to a leading economic expert in the field.
With strong forecasts for growth, Japanese investors see Laos as a new production base following the improvement of the country’s infrastructure, legal framework and the availability of cheap labour.
The value of Japanese investment in Laos in 2013 reached US$405.7 million, increasing by a factor of almost 15 compared to the year before, according to Japanese economic expert Prof. Dr Motoyoshi Suzuki. Japan is also a major donor to development in Laos.
Prof Suzuki, who is Executive Advisor to the Government Office and Ministry of Planning and Investment, was giving an interview to Vientiane Times on Monday on the sidelines of the nationwide meeting to evaluate the achievement of Special and Specific Economic Zones (SEZ) development in Laos.
“I think that within the next two years, Japan will climb in the rankings from 6th to 4th largest for foreign investment in Laos after China, Vietnam and Thailand,” he said.
Prof. Suzuki observed that foreign investment in Laos, notably in SEZs, was centred largely on real estate and golf courses but the Japanese investors will focus on manufacturing, services and agro-forestry.
“Manufacturing, for example, offers good job opportunities for people,” he said, noting that only four people are required for one hectare of agriculture production. Whereas if you use that one hectare for manufacturing, the project will hire between 2,000 and 5,000 people.
Prof. Suzuki said 47 percent of people in Savannakhet province go to work in Thailand because there are not enough jobs available in Laos.
“Many parents of villagers in Savannakhet said to me that they don’t want to send their children to Thailand, particularly the daughters, because [the perception at least is that] it is quite dangerous,” he said.
Prior to this, Japanese companies told Prof. Suzuki that they didn’t want to come to Laos because there was limited infrastructure in terms of water supplies, electricity and roads while a good legal framework was also lacking.
However there has been considerable improvement in these sectors in recent years and that’s why many Japanese have decided to do business in Laos. Prof Suzuki said there is still some concern though from Japanese enterprises about the reliability of supplies of electricity and water if many companies set up factories in Laos.
In addition, the surging labour costs in China, especially in major cities, and the floods in 2011 plus continuing political turmoil in Thailand have led to an increase in the number of Japanese investors in Laos to 60 last year, up from 27 in 2009, according to Japanese data.
He said the flooding in Thailand made the Japanese change their minds and not rely on production bases in one location only; that’s why many companies from the more than 7,000 Japanese companies in Thailand are looking to shift their businesses to Laos.
The latest investors from these countries include Nikon and Toyota, which will both be building part of their production bases in Laos.
Due to the rising number of Japanese investors coming to Laos, the Japan External Trade Organisation (JETRO) plans to open an office in Vientiane this year.
JETRO said Laos was appealing to Japanese investors because of its political stability, cheap labour and robust economic growth.
Source: Vientiane Times