The Lao Government is in the process of preparing documents, measures and regulatory and legal frameworks necessary to register government bonds on the Lao stock market (Lao Securities Exchange – LSX).

All the arrangements are being handled by the Lao Securities Commission Office (LSCO) and the regulatory work and other measures are set to be completed this year, Secretary General of LSCO Saysamone Chanthachack said.

“According to the planned project, we are set to register the government’s bond on the LSX as soon as possible, but the Ministry of Finance is the key decision-maker,” she said, adding that the bond will be the latest product in the local capital market pipeline.

She said the planned bond offering is based on the experiences learned from neighboring countries and ASEAN-Plus-Three countries (China, Japan, and South Korea) because they have successfully offered products similar to the planned bond.

“I can’t give a fixed schedule as to when the bond will be ready for registration or trade on the LSX, but we are doing our best to pave the way for its registration,” Chanthachack said.

Seven companies are currently listed on the local stock market:

• Banque pour le Commerce Exterieur Lao Public (BCEL)
• EDL Generation (EDL-Gen)
• Lao World (LWPC)
• Petroleum Trading Lao (PTL)
• Souvanny Home Center (SVN)
• Phousi Construction and Development (PCD)
• Lao Cement Public Company (LCC)

“According to the plan, two to three companies are set to be listed on the LSX this year and some companies are now preparing to meet the requirements of the LSX,” she said.

A sovereign bond is a debt security issued by a national government. Sovereign/government bonds can be denominated in a foreign currency or the government’s own domestic currency, generally with a promise to make periodic interest payments and to repay the face value on a maturity date.

The LSX was established in 2010 with technical and financial support from South Korea. The Korea Exchange has a 49 percent stake in LSX.

Thailand provided technical advice to help build the exchange and it became operational on the 11th of January, 2011.

Source: Vientiane Times

Lao people are paying some of the highest prices for rice in the region despite the country being a significant rice producer, according to the recently released World Bank Economic Monitor on Laos.

Rice is the country’s biggest agricultural commodity. The crop covers about 75% of arable land in the country and 90% of production is glutinous rice (also known as sticky rice).

The production meets 95% of domestic consumption along with 70% of Lao households’ caloric and protein intakes.

However, Lao rice is not competitive in foreign markets with only 5% being exported, mainly to the neighboring countries of China and Vietnam.

The retail price for second grade rice in Vientiane Capital is about US$0.85 per kilogram, the highest among countries in the region.

The World Bank analysis suggests that farmers have comparatively low profit margins, while consumers are paying one of the highest prices for rice in the region.

Key challenges for Lao rice value chains include production costs, accounting for 29% of the final consumer price, the relatively high cost of hired labor, a lack of mechanization and low yields.

Improvements will depend on more productive partnerships between farmers and millers as well as more streamlined business regulations, improved public services to enhance rice commercialization, and better access to finance. These efforts will reduce farm production costs and increase the quality of rice, addressing some of the sector’s key challenges, said the report.

To download the full World Bank Economic Report on Laos, click here.

Sources: World Bank Economic Report, Vientiane Times, Xinhua, VietnamPlus

A World Bank report released last week reports that “informal” financial services continue to play an important role in the lending sector in Laos despite the fervent growth of legal micro-finance institutions (MFIs) around the country.

According to the report, which employs data garnered from Lao authorities, the legal micro-finance sector saw rapid expansion around the country. The total assets of MFIs in Laos reached US$450 million by the middle of last year. This figure marked an 11 percent increase over the same period last year, accounting for about 3% of the country’s GDP.

The World Bank also mentioned that the proportion of Lao adults using at least one regulated financial service was 47% in 2014, higher than Myanmar (at 30%), but lower than Nepal (at 61%) during the same year. It is surprising, however, to note that despite the growth of banking and non-banking institutions in Laos, informal financial services continue to play a key role in lending money to a significant proportion of the population. The reported number of adults using unregulated financial services was as high as 60% in 2014, compared to 33% in Myanmar and 21% in Nepal.

The World Bank report further noted that the interest rates offered by informal finance services in Laos were higher than those of formal financial institutions. However, this has not discouraged people from using their services. The strength of informal financial services was that they imposed fewer procedural requirements (as opposed to formal banks and MFIs).

Lao officials admit that one of the primary concerns for businesses seeking access to business expansion capital was the unnecessarily high number of processes they have to undertake in order to apply for commercial loans.

The Lao government has promised to streamline the loan approval process to help businesses access funds to invest in and to expand their businesses.

The Governor of the Bank of the Laos, Somphao Phaysith, said that the central bank is borrowing US$300 million to boost the expansion of SMEs. Some observers note that massive injection of funds into the micro-economic sector may help Laos handle the issue of informal financial services.

The Lao Economic Monitor is published twice yearly by the World Bank office in Laos.

To download the report, click here.

Source: Vientiane Times