SME development slow despite strong economic growth
SME development slow despite strong economic growth
Only about 50 percent of Lao businesses are experiencing increased profit margins despite the country's strong economic growth, according to a recent industry survey.
The Enterprise Survey 2011 shows that just over 50 percent of the 728 enterprises in five major provinces reported increasing profits in 2011 thanks to growing foreign investment and the rapid growth of the Lao economy over the past few years.
The survey, which was conducted by the Emerging Markets Consulting group with financial assistance and support from the Lao Ministry of Planning and Investment and German Agency for International Development (GIZ), also shows that just over 24 percent of the enterprises surveyed said their business profits remained steady despite the growing economy.
Of the remainder of the businesses surveyed, one said profits had fallen while the rest of the respondents said they had no idea whether they made a profit, a loss, or their income was stable.
According to a report from the Ministry of Planning and Investment, Lao GDP is on track to reach US$70,600 billion kip (US$8.8 billion) at the end of this fiscal year, about an 8 percent increase compared to the previous fiscal year. Economic growth in Laos is largely driven by the resources sector, with the mining and hydropower industries predominant.
Economists said the rapid economic growth was supposed to create better opportunities for small and medium enterprises to expand but this has not necessarily been the case. They said that in many countries, large industries need support from small and medium enterprises to supply them with raw materials and services.
The Lao National Chamber of Commerce and Industry says there are a number of potential business opportunities in Laos due to strong economic growth. One of these is to provide electrical equipment and construction materials to the hydropower and mining industries, with the government approving a lot of investment in the sector.
However, only a few business operators consider that the growing investment and economic growth offer sufficient opportunities to expand.
The survey also highlights that most of the businesses interviewed have no plans in place to improve their business or train their staff to prepare for increased competition when Laos opens its market to foreign countries in 2015.
Economist Dr Mana Southichak said earlier this month that Laos should take serious action to boost SME development otherwise it will face serious social problems including growing unemployment in the coming years.
He said large industries alone cannot provide enough jobs for the growing population and Laos needs more graduates who are ready to leave the traditional agriculture based economy.
Lao National Economic Research Institution Director General, Dr Liber Libouapao, said education was key to ensuring sustainable economic growth.
The international com-munity has urged Laos to invest the money it receives from the sale of natural resources to improve education and establish a knowledge based economy.
vientiane times
