Lao economy restructures as service sector sees rapid growth
Lao economy restructures as service sector sees rapid growth
The fundamental structure of the Lao economy has been changing in recent years as the service sector is becoming the main base of national economic growth, according to a report from the Ministry of Planning and Investment.
The ministry made the report to the ongoing session of the National Assembly recently, showing that the service sector saw 9.7 percent growth last fiscal year, now accounting for 38.9 percent of the national economy.
Businesses contributing to the growth of the service sector include tourism, banking services, retail sales, business consulting services and transportation. These businesses have been booming over the past years thanks to the higher purchasing power in a growing economy.
The second largest economic foundation in Laos is the industry sector, which saw 7.4 percent growth in the 2012/2013 fiscal year, amounting to 28 percent growth compared to the previous year. The sector's growth was driven largely by mining and hydropower. The expansion of the manufacturing industry, in particular in special economic zones also contributed to the sector's growth.
The third largest economic base in Laos is agriculture, which saw modest growth of 3.1 percent but still represents 25 percent of the economy.
Economists said that they were not surprised to see the foundations of the national economy changing as the government has a deliberate policy to boost the development of the industry and service sectors, and so the change reflects this policy.
“Agriculture was the main base of the Lao economy in the past but today it is the industry and service sectors. The largest share of the Lao economy is now held by the services,” a prominent economist told Vientiane Times recently.
Despite the rapid growth of industry and services, agriculture remains the sector which employs the largest portion of the Lao population. More than 70 percent of the nation's 6.5 million people earn a living in the agriculture sector, according to economists.
The growth of the industry and service sectors is providing only a small number of jobs for local people as many are not particularly labour intensive, especially hydropower and mining.
One of the problems is that most Lao people are not sufficiently skilled to work in mining or hydropower, forcing the country to rely on foreign technical expertise.
Th e government has a policy to modernise the agricultural sector, which could see the movement of labour to the industrial and service sectors in the future. At present though, Laos has to import industry and service professionals to meet growing business demand.
The government also has a policy to expand vocational schools around the country and improve the quality of education to supply enough skilled labour to meet the demands of economic development and the various investment projects in Laos.
vientiane times
