Laos Turns to China for Gasoline Imports Amid Economic Crisis

Source: Radio Free Asia

Laos has begun importing gasoline from China instead of purchasing it from neighboring Thailand amid an ongoing economic crisis, including surging inflation that has prompted one lawmaker to call for an increase in salaries for domestic workers and state employees.

The first shipments of gasoline arrived in Laos last week following the signing of a memorandum of understanding in late May by the Vientiane Petroleum State Enterprise, managed by the Lao Ministry of National Security, SINOPEC Hong Kong, and SINOLAO. 

Under the deal, Laos will import fuel from China for wholesale and retail distribution.

SINOPEC Hong Kong delivered the initial fuel consignments to the two Lao entities at the Boten international border crossing in Luang Namtha province on June 27. 

Gasoline prices in Laos have increased four times this year amid a serious economic slump characterized by high inflation, worsening public finances and the devaluation of the Lao currency, the kip.

But some consumers said they believe that the price of petrol will drop slightly or remain the same because the Chinese entered the deal to make a profit. 

“It’s businesses — not policy, not aid,” said a Lao entrepreneur who imports fuel, asking not to be identified to speak freely. “If the government imports more, it will reduce gas prices in Laos, and the price at the pumps will go down.”

The Lao government has turned to China for gasoline because it doesn’t have the foreign currency to buy it from Thailand, which accepts payments only in Thai baht or U.S. dollars, said a Lao intellectual who is familiar with the situation. 

China, however, accepts Lao kip or Chinese yuan as payment, or allows the Lao government to take out a loan with a high interest rate to pay for gasoline imports, ensnaring the country in a debt trap, he said.

Landlocked Lao does not have its own gasoline production company, but rather a business in Xiengkhouang province that refines imported crude oil from overseas.

Call to raise salaries

As rising prices, including that of gasoline, hit Laotians hard in their wallets, some officials are trying to mitigate the financial pain.

Also on June 27, Oudom Vongkaysone, a lawmaker from Borikhamxay province, urged the government to increase the salaries of both ordinary Lao workers and state employees.

He urged the government to increase the monthly minimum wage to 1.8 million-2 million kip (US$94-104).

During a meeting of the National Assembly, Vongkaysone said that if the government could not increase salaries, it should find other ways to lessen their financial hardship, such as issuing more bonuses, paying overtime or increasing pension amounts. 

Otherwise more state employees will quit their jobs and more workers will head to neighboring countries for better-paying jobs, he said.

He also called on the Lao government to rein in inflation and urged citizens to use the kip in financial transactions instead of foreign currency.

A Lao garment factory worker told Radio Free Asia that she cannot live on her 1.3 million kip monthly salary, and wants to see her pay raised to 2 million-3 million kip so she and her family can survive the country’s high inflation.

An official from the Lao Federation of Trade Unions who requested anonymity so as to speak freely told RFA that a decision to raise the minimum wage would take a long time to implement if adopted.

“The government has to conduct a survey of the price of goods in the market first to find out if it is necessary or not to raise the minimum wage,” he said.

Businesses opposed

Some Laotians have headed to Thailand and South Korea for jobs, where wages are higher than at home.

“The rate of exchange is high, 1 million Lao kip can’t buy much, and foods and essential things are more expensive than before,” said one Laotian. “Workers have gone to work in Thailand because the pay rate is higher over there.”

But entrepreneurs who own businesses in Laos are against raising the minimum wage, saying the move would threaten their survival. They would not be able to pay their workers 1.8 million-2 million kip per month if the lawmaker’s proposal is adopted, some of them said.

“Entrepreneurs don’t want to pay high salaries,” said one business owner.

A factory owner said his enterprise could not afford to pay higher salaries of about 1.6 million-1.8 million kip, but no more.

“It would be too much to pay,” he told RFA.

A garment factory owner in the capital Vientiane said she could not immediately raise salaries to 1.8 million kip or more because of high production costs and the kip’s devaluation, and that any future increases should be incrementally implemented over several months.

An official at the Ministry of Finance said the government’s ability to raise the monthly minimum wage depends on the state budget, and salaries cannot be increased if there is a deficit.

“We want to raise the salaries of state employees between 1.8 million and 2.5 million kip per month, but it depends on the state budget,” he said.