Govt opens up investment in state run firms
Govt opens up investment in state run firms
The government has initiated a policy to allow local and foreign investors to purchase shares in state enterprises, hoping that the move will enable the companies to run their businesses better.
According to a report from Manager Magazine, published by the Government Office's Public Relations Department in December, the government has a policy to allow local and foreign investors to purchase shares in state enterprises so that they can find good business partners to help run the companies.
The magazine did not provide further details as to which state enterprises the government plans to allow private sector investors to hold shares in and which it will not.
However, officials who worked on the development of the policy on state enterprises said a number of companies including Lao Airlines plan to become public companies and list on the stock market in the near future.
At present, there are 139 state-owned enterprises in Laos with a total asset value of 19,430 billion kip (US$2.4 billion). The government also holds shares in 48 state-private joint ventures with a total asset value of about 4,292 billion kip (US$536.5 million).
The officials said that the government would sell shares in some state enterprises but would remain the majority shareholder in the companies as it wants to remain in the driving seat when it comes to management and company policy.
However the government wants to have good business partners to help it run state companies in a more transparent manner and effectively turn a profit.
The magazine also highlights the fact that the government has a policy to allow the management of state enterprises to use their assets as a guarantee for bank loans so that they can use the funds to invest, expand their businesses and be able to compete with rivals.
The policy makers believe that if the management of state enterprises has no right to manage the business as it sees fit it will face difficulties running the business as the country opens to welcome foreign investment in 2015 after the establishment of the Asean Economic Community.
One of the main benefits the government is seeking from the sale of state shares to the private sector is that the state enterprises will be audited by external accounting firms, one of the key conditions to make the management of the companies more transparent. At present, most state enterprises use internal auditors as the government has no policy to force state enterprises to be audited by well known accounting firms. More transparent management of the enterprises will help the government to prevent corruption in state firms.
According to the magazine, the government also wants to allow state enterprises to hire professional managing directors to administer the companies so they can run their businesses more professionally and make larger profits. The government wants to keep only the position of chairman reserved for state officials.
Laos first adopted a market oriented policy in 1986, allowing the private sector to take part in economic development after a decade of running a centrally planned economy. However the implementation of the policy was struggling due to the lack of a clear policy on state enterprises.
The government had already sold shares in EDL Gen and BCEL after the launch of the stock market back in 2011.
vientiane times
