Private Firms Driving Lao Economy

Private firms have become a major driving force of Lao economic growth, according to a government magazine.

The Manager, published by the Government Public Relations Department, reported in its April issue that in 2011 domestic and foreign private firms contributed 16 percent of total Gross Domestic Product (GDP), becoming the largest contributor to economic growth.

The second largest contributors to GDP growth in 2011 were the 100 percent state-owned enterprises, which contributed 8.2 percent of GDP. In 2011, there were 139 state-owned enterprises with total assets of 19,430 billion kip or 33 percent of total GDP.

The third largest contributors to economic growth were state-private joint ventures. These contributed 7.3 percent of GDP in 2011. At that time there were 48 state-private joint ventures in the country with a total asset value of about 4,292 billion kip.

It is not surprising to learn that domestic and foreign private companies are playing a significant role in driving the economy. The government adopted a market oriented policy in 1986, allowing the private sector to take part in economic development after a decade of running a centrally planned economy.

In 1989 the government passed the Foreign Investment Promotion Law, to encourage other countries to share in Laos’ economic development.

According to the latest report from the Ministry of Planning and Investment, from 1989 to 2012 Vietnam invested in 429 projects in Laos with a combined value of about US$4.9 billion, becoming the largest foreign investor in the country.

The second largest foreign investor in Laos is Thailand. From 1989 to 2012, Thailand invested in 742 projects with a combined value of about US$4 billion. The third largest foreign investor is China with 801 projects and a combined investment value of about US$3.9 billion.

In 2009, the government revised the Investment Promotion Law, to create equal opportunities for domestic and foreign investors to compete. The change in the investment promotion policy is also in line with World Trade Organisation requirements.

The government has also made a strong commitment to improve the business climate, to encourage the private sector to invest and do business in Laos. One of the government’s major achievements has been the easing of restrictions on exports and imports by business operators.

The government has also simplified tax payments and the obtaining of an investment licence by establishing a so-called ‘one stop’ investment service.

There are a number of investment and business opportunities in Laos including agricultural product processing, mining, and hydropower. The government has also set up special economic zones to attract foreign investment.

Source: Vientiane Times