FDI flow drives Lao trade deficit

FDI flow drives Lao trade deficit

Growing domestic and foreign investment in Laos has become a major contributor to a larger trade deficit, according to data from the Bank of the Lao PDR.

According to the annual report of the central bank made available to Vientiane Times earlier this month, Laos saw a US$568 million trade deficit in 2011 as the import value in the year was US$2.4 billion, about a 17 percent increase, while the export value was only US$1.8 billion, about 6 percent up.

The central bank's import and export data shows that the import value of investment goods in 2011 was US$1.2 billion, the import value of raw materials for the Lao garment industry intended for eventual export was US$77 million and the import value of electric power was US$51 million.

The import value of goods for consumption including fuel, vehicles and food was US$901 million and the import value of gold and silver was US$66 million, according to the 2011 report of the Bank of the Lao PDR.

In 2011, Laos exported US$812 million of mining produce, mainly US$676 million of copper and US$111 million of gold, and a further US$75 million of electricity. The country also exported US$171 million of agricultural and forestry products, US$17 million of coffee, US$27 million of wood products and US$24 million of general goods.

In 2011, Laos approved 288 Foreign Direct Investment (FDI) projects with a total investment value of US$2.7 billion, most of these projects being in the mining and agriculture sectors. The top investors are Vietnam and China, according to the bank.

FDI funds transferred through the banking system in 2011 amounted to US$300 million. Most of the funds were from China, Hong Kong and Vietnam. The majority of this was spent on mining, electricity and investments in the Lao security exchange. Compared to 2010, the funds transferred grew by US$21 million.

Officials at the Ministry of Industry and Commerce said that the larger trade deficit was not a big worry as most of it was due to an inflow of foreign investment goods, adding that the move would boost growth of the Lao economy in the future.

Foreign reserves of Laos in 2011 was US$678 million, which could secure the import of goods for about 3.4 months. The foreign reserves of Laos in 2010 stood at US$737 million.

vientiane times