Vehicle imports drive trade deficit
Vehicle imports drive trade deficit
Laos experienced a US$281 million trade deficit over the first six months of this fiscal year with the import value of vehicles as the main reason behind the trade imbalance.
According to a report from the Ministry of Planning and Investment delivered to the National Assembly conference this week, the country's exports between October 2012 and March 2013 totalled US$880 million while the import value over the same period reached US$1,161 million, leaving a substantial trade deficit.
The report shows that this export figure was lower than expected at only 42 percent of annual plan due to lower prices on the major export commodities produced by Laos while imports saw a large increase at 69 percent of annual plan.
The main export earner was mining produce such as gold and copper from two major mining operations. Electricity generated from hydropower plants was another principal earner.
The top contributors to import growth were vehicles and spare parts, which accounted for 26.4 percent of the total.
The second largest import category was for goods to be used in industrial development, which accounted for 16.19 percent of the total, while the import of fuel was third at 14.73 percent.
The import of construction materials, food and clothes accounted for 12.85, 7.88 and 3.44 percent respectively.
Trade officials said that the import value of vehicles had seen a rapid rise over the past two years, becoming the largest item on the list, replacing fuel and construction materials after the government allowed car importers to offer payment by installment plans.
A number of Lao people, in particular middle-income earners, now find the purchase of a vehicle more affordable as they only need to deposit 20 to 30 percent of the total value and pay off the balance plus interest over the next three to five years.
Interest rates for car loans have been dropping since early this year as the number of firms providing car loans has increased, thereby creating easier conditions for purchasing cars.
Observers said that the large trade deficit was not a big concern since some of the imported goods were considered as capital goods for investment projects, adding that these projects will boost the country's economic growth leading to a rise in Lao exports in the future.
A number of the investment projects, including the construction of hydropower plants, are now under way, causing rises to the import of vehicles, construction materials and food, they said.
The Bank of the Lao PDR said recently that despite the rapid growth of imports, foreign reserves were healthy and able to secure imports for more than five months.
vientiane times
