The number of entrepreneurs opening businesses in Laos declined by 13 percent over the past 10 months of this fiscal year compared to the same period last year.
According to a recent government report, the number of registered businesses reached 1,666 units from October 2016 to May 2016 with registered capital amounting to 23.8 trillion kip.
Retail and wholesale businesses accounted for 39 percent of the total, followed by transport and warehouse related business (10 percent), construction (8 percent), industrial processing (8 percent), and science and technology (6 percent).
A senior economist at the National Economic Research Institute, Dr Leeber Leebouapao, told Vientiane Times this week that the downturn was linked to several factors including the global economic slowdown, which resulted in declining demand.
“I also think that some business sectors are saturated, such as restaurants,” he added.
Dr Leeber also said the long time it took to approve the setting up of a business was to be blamed as it delayed those wanting to do business and was a deterrent in some cases.
Laos is a landlocked Least Developed Country with a population of 6.5 million people and has strong trade relations with its neighbours including China, Thailand and Vietnam.
While the Ministry of Industry and Commerce has indicated a willingness to shift to the non-resource sectors, it is not clear exactly where this policy intent is directed.
Last year the EU provided 5 million euros for the Lao National Chamber of Commerce and Industry to promote business activities between Laos and the EU.
Several months ago, commercial banks in Laos lowered interest rates on both deposits and loans in line with a decision made by the Bank of the Lao PDR.
The move supports the government’s wish to lower the interest charged on loans and thereby stimulate business activity and lower production costs, which should enable Lao products to be competitive in international markets.
This year, the economy grew by 6.9 percent which was lower than the government’s target of 7.5 percent. However, this growth rate is high compared to other countries in the region.
The economic slowdown in China and falling commodity prices on the world market have impacted on the Lao economy.
In general the Lao economy is vulnerable to external impacts because it relies too heavily on the resource sector.
Economists say it is essential to diversify the economy by encouraging more people to operate businesses that create jobs and generate more revenue for the government.
Another requirement is to make the investment process easier so that local and foreign entrepreneurs are encouraged to do business in Laos.
All of these factors will help to build a strong economic foundation that will enable Laos to be more resilient in the face of the global economic slowdown.
Source: Vientiane Times