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IMF Executive Board: Lao Economy Continues to Perform Well

Photo Credit: Flickr.com

The Executive Board of the International Monetary Fund (IMF) recently gave a favorable analysis of the Lao economy:

Lao P.D.R.’s economy continues to perform well, supported by a favorable external environment and strong flows of foreign direct investment from its dynamic neighbors. Growth in 2017 was supported by the expansion of electricity exports, construction activity and financial services, but moderated to 6.8 percent as a result of the prohibition on illegal logging, tighter credit conditions and fewer tourist arrivals. Inflation remained low at 0.2 percent in December 2017, reflecting a stable exchange rate and a decline in food prices. Private sector credit growth was robust at 17 percent year-on-year in 2017, a pace consistent with dynamic economic activity and moderate financial deepening. The current account deficit was high at 13 percent of GDP in 2017, although it is estimated that about half the deficit reflected imports related to large foreign direct investment projects, including the Kunming-Vientiane railway project, which is part of China’s Belt and Road Initiative. Nevertheless, gross international reserves remain low at about 1 month of prospective imports.

The authorities have developed a reform agenda to address some of the vulnerabilities in the economy, with the goal of supporting stable and sustainable growth to graduate from Least Developed Country (LDC) status. Aware of the challenges presented by high public debt and deficits, they are moving to put in place a gradual fiscal consolidation mainly through tax policy and administration reforms. They are also moving to strengthen the banking system by recapitalizing and restructuring public banks, restructuring loans related to infrastructure projects and improving regulation and supervision. The authorities have also focused on integrating the Sustainable Development Goals (SDGs) into their 5-year development plan to promote inclusion and environmental sustainability.

Looking ahead, the outlook is positive, with growth on the order of 7 percent per year, and gradual economic diversification matched by integration with ASEAN and China. Downside risks stem from high public debt and deficits, pockets of weakness and high dollarization in the banking sector, and a vulnerable external position with low gross international reserves. Addressing these risks and successfully implementing the authorities’ reform agenda will help ensure sustainable and inclusive growth and graduation from LDC status.

Executive Board Assessment

Executive Directors welcomed Lao P.D.R.’s good record of high growth and stable inflation. However, they noted vulnerabilities in key areas, in particular, a high fiscal deficit and public debt, a weak external sector and low external reserves, and a highly‑dollarized banking system. While the outlook is for continued high growth, risks could materialize if government finances do not improve, or if external conditions deteriorate, which could be amplified in the domestic economy through negative macro‑financial feedback loops. Directors encouraged the authorities to continue to address these risks.

Directors stressed the importance of a gradual fiscal consolidation to bring the public debt on a credible but realistic downward path over the medium term. They agreed that this could best be done by improving fiscal revenue, and welcomed the authorities’ interest in developing a medium‑term revenue strategy. They noted that there is also scope to rationalize expenditures and reorient spending to improve health and education outcomes, and welcomed efforts to contain the wage bill. Directors recommended stronger debt management and a more rigorous selection of public investment projects.

Directors welcomed the progress in strengthening banking regulation and supervision and the reform of public banks, but noted that further efforts are needed to reduce foreign currency lending risks, identify non‑performing loans, and strengthen capital buffers. They took positive note of the prospects for putting in place crisis management and prompt corrective action frameworks, and the progress in developing the AML/CFT regime.

While noting that external sector vulnerabilities are being ameliorated, Directors considered that the overvaluation of the exchange rate and the high current account deficit call for a further accumulation of international reserves. They welcomed the gradual depreciation of the exchange rate and recommended letting the exchange rate move gradually within the official band to support competitiveness and help accumulate reserves. They agreed that a cautious approach is warranted, given possible currency mismatches in the non‑bank private sector. They noted that further reforms to improve the functioning of the interbank and domestic debt markets are important steps to put in place the preconditions for greater exchange rate flexibility in the medium term. A number of Directors urged removal of the interest rate caps.

Directors noted that the gap between income per capita and welfare indicators points to the need to pursue more inclusive and sustainable growth. To promote economic diversification, developing public infrastructure and improving conditions for private investment will be critical. Improvements in human capital will also be important, in particular through workforce training, public education, and health services, particularly for women and children. This will help reduce regional and gender disparities.

Directors called for improvements in economic statistics and welcomed the authorities’ interest in joining the General Data Dissemination System.

Lao P.D.R.: Selected Economic and Financial Indicators, 2013–19
                   

  2013 2014 2015 2016 2017 2018 2019
        Proj. Proj. Proj.  
GDP and prices (percentage change)              
Real GDP growth 8.0 7.6 7.3 7.0 6.8 6.8 7.0
CPI (annual average) 6.4 4.1 1.3 1.6 0.9 2.3 3.1
CPI (end year) 6.6 2.4 0.9 2.5 0.9 2.6 2.9
Public finances (in percent of GDP)              
Revenue and Grants 20.9 21.0 17.9 15.8 16.7 17.0 17.4
Of which : Resources 2.9 2.1 1.6 1.6 1.7 1.3 2.0
Of which : Mining 2.1 1.8 1.3 0.9 0.9 0.7 1.0
Of which : Hydro power 0.8 0.9 0.8 0.8 0.9 0.6 1.0
Of which : Grant 4.8 4.5 2.2 1.4 1.8 1.8 1.8
Expenditure 25.2 23.8 22.4 20.5 21.5 21.2 21.5
Expense 14.0 13.8 14.2 14.5 13.5 13.1 13.4
Net acquisition of nonfinancial assets 1/ 11.1 10.1 8.1 6.0 8.0 8.1 8.1
Overall balance -4.3 -2.8 -4.5 -4.6 -4.8 -4.3 -4.1
Nonmining balance 2/ -6.2 -4.6 -5.4 -5.5 -5.7 -5.0 -5.1
Public and public guaranteed debt (in percent of GDP) 56.3 57.9 57.7 58.5 61.1 65.3 65.9
Money and credit (annual percent change)              
Reserve money 7.7 30.3 6.6 -1.4 9.9 9.4 10.2
Broad money 18.8 23.4 14.7 10.9 12.9 22.8 22.0
Bank credit to the economy 3/ 34.5 14.2 16.8 20.9 15.0 18.5 17.0
Bank credit to the private sector 36.3 11.7 19.3 22.0 16.5 16.7 15.0
Balance of payments              
Exports (in millions of U.S. dollars) 3,501 4,299 3,743 4,379 5,084 5,303 5843
In percent change 5.4 22.8 -12.9 17.0 16.1 4.3 10.2
Imports (in millions of U.S. dollars) 7,163 7,817 7,366 6,636 7,538 8,313 8822
In percent change 15.1 9.1 -5.8 -9.9 13.6 10.3 6.1
Current account balance (in millions of U.S. dollars) -3,400 -2,657 -2,586 -1,903 -2,204 -2,728 -2751
In percent of GDP -28.4 -20.0 -18.0 -12.0 -13.0 -14.9 -13.7
Gross official reserves (in millions of U.S. dollars) 662 816 987 815 979 1,023 1224
In months of prospective goods and services imports 1.0 1.3 1.7 1.2 1.3 1.3 1.5
Exchange rate              
Official exchange rate (kip per U.S. dollar; end-of-period) 8,030 8,096 8,119 8,231 8,279
Real effective exchange rate (2010=100) 113.9 120.9 131.1 134.5 125.9
Nominal GDP              
In billions of kip 93,868 106,797 117,252 129,279 140,019 152,822 168,514
In millions of U.S. dollars 11,974 13,266 14,363 15,916 16,984
               
Sources: Data provided by the Lao P.D.R. authorities; and IMF staff estimates and projections.          
1/ Includes off-budget investment expenditures.              
2/ Net lending/borrowing excluding mining revenue.              
3/ Includes Bank of Lao P.D.R. lending to state-owned enterprises and subnational levels of government.

[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here.

Source: IMF

 

Laos Banana Exports No Longer Pick of the Bunch

Laos banana exports uncertain

China has slapped inspection measures upon banana exports from Laos, hindering what was a booming trade.

While Laos is still the second largest exporter of bananas to China, a protocol has been signed between Laos and China determining inspection and quarantine measures for bananas exported by Laos. Now, only bananas that meet strict criteria will be given the green light for export to China.

This is the first time export standards have been initiated between the two countries.

According to the protocol, bananas exported to China from Laos must meet the following requirements:

– The harvest time must be ten to eleven weeks after flowering.
– Ripe bananas will not be permitted entry into China.
– Bananas found with dangerous contaminants will be rejected.
– Banana exports shall not include the rhizome, leaves, or soil during transportation.
– Delivery must be made to the designated location according to Chinese regulations.

According to the Lao Ministry of Agrculture and Forestry, banana exports have become the largest source of Laos’ foreign exchange. In 2014 Laos exported 43,000 tons of bananas to China, amounting to US$ 31 million. By 2016, exports reached 250,000 tons and a value of US$ 183 million.

The large majority of banana farms in Laos are owned by Chinese investors, and questions were quickly raised about the use of chemicals in 2016, after workers experienced ill health and water pollution led to the death of fish near plantations.

In 2017, exports diminished after the government of Laos enacted strict regulations against polluting banana farms, and halted the development of large plantations. As a result, many farms were forced to shut down.

Faced with strict environmental protection regulations, the future of the banana industry in Laos is uncertain.

Source: Produce Report
Photo: legalnomads

Sunny Side Up: Getting Your Hands Dirty at Phutawen Sunflower Farm

At the end of a long, dusty red road in Bolikhamxay Province stands a ticket booth, a turnstile, and fleet of electric buses. Festive local music plays from hanging speakers, and groups of visitors mill about among lush garden beds, taking selfies with exotic seasonal flowers and organic vegetables.

Landfill Fire Almost Out, Residents Affected by Toxic Smoke

Landfill Fire Almost Out

The fire that consumed the Vientiane Capital landfill at KM32, Phasouk Village in Xaythany District has been almost completely extinguished, however nearby residents have been affected by toxic smoke.

Mr Chanthala Inthalangsy, Xaythany District Governor and head of the committee responsible for dealing with the landfill fire stated in a press conference on 6 March that measurements of the toxicity levels of the smoke found that it was beyond safety standards, with eleven nearby villages being directly affected.

He said that the Ministry of Public Health was working hard raising awareness of health concerns among the local population. Those that are not able to leave their homes have been instructed to wear safety masks to protect against dust and smoke, and have been told to remain low to the ground and to stay inside their homes. They have also been told to continually wash their hands to protect against food contamination.

Those experiencing respiratory problems, dizziness, or heart problems have been instructed to seek immediate medical attention.

The KM32 landfill fire broke out on March 4 and consumed some 30 hectares of the landfill area, causing a cloud of toxic smoke.

The fire brigade and a team of volunteers worked day and night to control the fire using a combination of fire trucks with water hoses, and bulldozers to smother the fire with soil.

The cause of the fire remains unknown.

Source: Lao Post

Lam Vong Dance to be Nominated for UNESCO World Heritage Status

Laos is preparing to nominate the famous traditional dance Lam Vong for UNESCO World Heritage status.

On the 9th of March, a meeting led by Bouangern Xaphouvong, Deputy Minister of Information, Culture and Tourism allowed representatives from relevant sectors to deliberate the possibility of nominating this unique and quintessential element of Lao culture for the prestigious UNESCO World Heritage status. It was only a month earlier that Minister of Information, Culture and Tourism Bosengkham Vongdara officially appointed a committee to supervise the preparation of documents required for this purpose.

Participants of the meeting also discussed the possibility of nominating other cultural elements such as Lao New Year, almsgiving, Baci ceremony, and Kong Khao Festival for the UNESCO World Heritage status.

National Assembly President Pany Yatothu dances the Lamvong with former US President Barack Obama (photo credit: US Embassy)

According to the definition provided by UNESCO, intangible cultural heritage (ICH) is made up of oral traditions, performing arts, social practices, rituals and festive events, knowledge and practices concerning nature and the universe, and traditional craftsmanship knowledge and techniques.

Some characteristics of ICH are that it is simultaneously traditional and contemporary; it is integrative and contributes to cultural identity; it is representative and transmitted from generation to generation; and it is based on communities.

Its importance lies not in the cultural manifestation itself, but in the heritage of the knowledge and techniques that are passed on, revealing social and economic value for both human groups and entire countries.

Within the context of globalisation, ICH is of tremendous importance as it allows cultural diversity to be maintained through dialogue between cultures and the promotion of respect towards other ways of life.

Several months ago, UNESCO recognized the Khaen, Laos’ famous traditional piped instrument, as part of the list of intangible cultural heritage of humanity.

Source: KPL

Embankment Road to Offer New Southern Route for Vientiane

Embankment is New Southern Route for Vientiane

A road stretching 26km along the Mekong River in southern Vientiane, which also serves as an embankment, will soon be paved and ready for commercial traffic.

The road improvement, which was announced in 2016, serves as part of the Vientiane Flood Embankment Protection Project, under the Flood and Drought Risk Management and Mitigation Project (FDRMMP).

The embankment helps to protect the city against flooding, while offering a new route for traffic to travel through southern Vientiane. This will ease traffic on Kaysone Phomvihane Road, which is currently the only major road facilitating traffic bound for the country’s southern provinces.

A loan has been provided by the Asian Development Bank (ADB) at US$ 36.5 million to finance the project.

The road stretches from the Vientiane-Nong Khai Friendship Bridge, downstream through Huaymark-hiew Village in Hatxayfong District, befor connecting to Phao Village in Pakngum District, which then connects to Route 13 South.

It is said the road will alleviate traffic congestion in Vientiane Capital by offering a new route, and will become a regular commercial route between Vientiane and the southern provinces.

Many large trucks are already using the road, despite its lack of sealed surfacing. An 8km section has already been paved, while another 6km section near Buddha Park will be surfaced by the end of April, prior to the rainy season.

Villagers are happy with the new route, which saves them time when transporting crops to markets in the area. The original roads, in poor condition, meant a trip of up to three hours to the city center for some, and will now take only one hour.

The road upgrade will also better facilitate tourists who want to visit Buddha Park, which is a popular tourist attraction located 25km southeast of downtown Vientiane Capital.

The Flood and Drought Risk Management and Mitigation Project is comprised of several components, including urban flood risk management, disaster risk management systems, disaster risk financing and insurance, project management, and contingency emergency response.

Source: Vientiane Times

Top Lao Government Websites You Didn’t Know About

While most of us are familiar with visiting state offices and calling public hotlines for access to various government services, few would have considered that the Lao government has forayed into the virtual sphere. From being present on social media to maintaining more conventional websites and facebook pages, several government sectors have been more active than others in getting on the online bandwagon. Countless resources from both public money and official development aid have been employed in an attempt to get information on/in Laos on to the digital world map, so to speak.

For various reasons, although the country may not have yet fully realized its true digital potential, it is on the right track. Here are some top useful government websites that you may not have known existed.

The Lao Official Gazette

The Official Gazette is operated by the Ministry of Justice. Its primary objective is to publish legislation as well as draft legislation to ensure that members of the public are aware of and can comment on all approved and promulgated legislation.
 
Laws in Laos are adopted by the National Assembly and promulgated by a Presidential Decree. Subsidiary legislation (e.g. decrees, decisions, orders, instructions, etc.) may be issued by the National Assembly or its Standing Committee, the President, the Government, the Prime Minister, or a ministry.
 
While national legislation applies uniformly throughout the country, local legislation may also be adopted and implemented to address local issues. Provincial and municipal legislation must be published in the Official Gazette for 15 days to come into legal force, whereas district and village legislation may opt for local publication.
 

Enterprise Registration Database

The Enterprise Registration and Management (ERM) Department of the Ministry of Industry and Commerce (MOIC) is tasked with maintaining the country’s national register of enterprises (businesses). This website consists of a complete database of all registered businesses in Laos.
 
If you’re dealing with a company in Laos and would like to verify whether it’s a legitimate and registered business, the chances are that you will find them on this website. You can search for the owner’s name or the company’s name in both English and Lao language.
 
While this should not be a substitute for actual due diligence before potentially conducting business with prospective firms, searching for them on this official government website would be a starting point.
 
Copies of the records of the businesses listed in the website can be bought or viewed at the MOIC central office in Vientiane Capital, according to the website.
 

Lao Trade Portal

The Lao Trade Portal is the single stop point for all information relating to import into and export from Laos.

Managed by the Department of Import and Export of the Ministry of Industry and Commerce on behalf of all government agencies involved in the import/export process, the website allows traders access to information about all the regulatory requirements they need to fulfill in order to carry out their transactions. These regulatory requirements may involve a number of government agencies. This website will help with finding out what is required by each agency in relation to a specific business.

The website provides a comprehensive set of guidelines in easy to understand language, and the database is also designed for convenient search by topic.

Lao Securities Exchange – Checking Local Stock Prices

While it’s hard to compete with MarketWatch or CNN Money, the Lao Securities Exchange website does offer all the latest stock prices of and updates from all locally listed companies. To date, there are currently 7 local company stocks that are traded daily.

In order to be able to trade Lao stocks, one must open a brokerage account with any brokerage firm registered in Laos such as BCEL-KT or Lanexang Securities.

The stock prices are also available on the Laotian Times website.

Lao State Fuel – Checking Fuel Prices

Being the biggest provider of fuel products in Laos, the Lao State Fuel Enterprise’s fuel prices provide a benchmark for all other fuel stations in the country.

The rates for Vientiane Capital are available on the Laotian Times website.

National Television & National Radio

 

Do you want to improve your Lao comprehension skills? Do you want to be kept up to date with current events inside Laos? Are you interested in Lao music?

The official websites for Lao National Television (also available on YouTube) and Lao National Radio are great examples of Lao broadcast media that provide answers to the aforementioned questions!

BCEL – Check Exchange Rates

The biggest and most widely used bank in Laos is undoubtedly state-owned Banque pour le Commerce Extérieur Lao, otherwise known as BCEL. For this reason, its exchange rates are often used as a benchmark for all other banks to issue their own rates for the day.

While the Bank of Laos website provides, on a daily basis, the rates by which all commercial banks must follow, it is often BCEL to which members of the commercial public turn to when the question “what’s the bank rate today?” comes up.

These rates are also available on the Laotian Times website.

Lao Tourism

While it could benefit from a little revamping, this is the government’s official tourism website and it contains a wealth of information about what to do and visit in Laos. Managed by the Tourism Marketing Department of the Ministry of Information, Culture and Tourism (MOICT), the website contains swathes of pictures of activities, attractions and advice to travelers.

For alternative sources of information, it may be wise to check out the Lao Airlines inflight magazine website, Champa Meuanglao or the newly-created We Are Lao portal.

The Status of Laos’ Forests

Photo Credit: WWF
Photo Credit: WWF

The beauty of Laos resides not only in its charming people and sabai sabai culture, but also in the large amounts of green forests that cover the country. Decades of improper and unplanned use of forest areas, deforestation, slash-and-burn-cultivation practices by indigenous peoples in mountainous areas have led to a noticeable reduction in Laos’ arboreal resources – less than 40% of the country’s total land area – in the 1990s.

However, according to Sousad Xayakoummane, Director of the Forestry Department of the Ministry of Agriculture and Forestry, things have been looking brighter as the government’s reforestation efforts have increased the nation’s forest cover from 40% (since 2012) to 58% of the total land area in 2017.

The government has set an ambitious plan to restore forest cover to 70% (its original state in 1940) of the country’s terrain by 2020, in government hosted seminar which included Deputy Prime Minister Sonexay Siphandone, Agriculture and Forestry Minister Lien Thikeo, deputy provincial governors, and representatives from the relevant sectors.

“In recent years, the government and local authorities have focused on sustainable forest resource protection by issuing policies, laws and regulations,” said the Deputy Prime Minister.

In 2000, the government issued a decree on commercial tree plantation and environmental protection allowing for the allocation of tree plantation areas and land concession activities, ownership of farmed trees, credit policies, tax exemptions and reductions.

“The implementation of the policies and strategies over the past years has not yet been satisfactory as there have been continued impacts on forest resources and forest areas have decreased,” said Xayakoummane.

Source: KPL