Attracting industry requires containing living costs
Attracting industry requires containing living costs
Laos has a policy to become one of the new production bases in Asean but it will not be able achieve its dream if the cost of living in the country continues to rise.
According to a report from the Ministry of Planning and Investment's National Statistics Bureau, the inflation rate in the country has continued to rise steadily over the past years with rising prices of food as one of the major driving forces of inflation growth.
The inflation rate in Laos saw a 5.66 percent increase in February alone. The rising cost of living in the country has become a major challenge when it comes to attracting foreign investment in the manufacturing sector.
Most manufacturing firms want to locate their production bases in countries which enjoy low costs of living, economists said.
A number of Japanese firms have vowed to remove their production bases from China after finding that cost of living and therefore salaries demanded by the labour force in the country are increasing, making their business uncompetitive. One of the destinations which Japanese firms are looking towards are the countries of Asean.
Vientiane Industry and Trade Area (VITA Park) President, Mr Sibounheuang Vienheuangphay told media recently that a number of foreign firms in particular Japanese companies have expressed interest to build factories in the park.
“We have seen more Japanese firms looking for investment opportunity in Laos,” he said. “But one of the main challenges the Japanese firms want us to address is the shortage of labour supply.”
The Lao government has established more than 10 special and specific economic zones in the country as part of efforts to turn the land locked country into a new production base in the region. The special economic zones offer a number of incentives such as the 10 year profit tax exemption.
Officials from the Lao Trade Union said that Laos was not actually facing shortages in labour supply as many people understood, noting that the majority of Lao people are of working age. However many companies are facing difficulties recruiting workers due to the fact that they are not willing to offer higher wages.
They said that the workers are demanding a higher minimum wage so that they can earn enough money amid rising costs of living in the country. At present, the minimum wage is about 600,000 kip per month. A worker needs at least a million to survive amid rising living costs.
About 400,000 Lao workers migrate to work in Thailand every year, where they earn a better wage.
The Lao Garment Industry Association President, Mr Onesy Boutsivongsakd told Vientiane Times that if Laos can keep the cost of living low, labourers would not demand higher wages, noting that the inflation rate has continued to rise over the past years.
He also said that the value of Lao kip against the US dollar and Thai baht was increasing but the price of the goods had not dropped, adding that the majority of goods in Laos were imported from foreign countries, in particular Thailand.
vientiane times
