Laos seeks US$20 million for SME development
Laos seeks US$20 million for SME development
The Lao government is seeking a loan of US$20 million from the World Bank to fund the development of small and medium enterprises (SME) in the country, according to a senior official from the Ministry of Industry and Commerce.
“We are discussing the loan issue with World Bank officials. They have agreed in principle to give us the loan. However, there are still many details to finalise,” Small and Medium Enterprises Promotion Department Director General, Mr Somdy Inmyxai said yesterday.
He added that the government expects to finalise the loan agreement with bank officials at the end of this year so that it will have enough money to finance the development of small and medium d enterprises before the inception of the AEC.
The loan will be used to fund various measures to improve the business climate for SME and enable the enterprises to access low interest loans, Mr Somdy said.
It will be utilised to create a more favourable environment for SME in Laos so that the new enterprises will find it easier to access state services. The loan will create opportunities for the enterprises to access low interest loans.
The government has already approved US$2 million towards the initiative, which it received as a grant from international financial institutes for SME development. However, the fund is not enough to make big changes in SME development in Laos.
According to a survey in 2006, Laos had a total of 127,000 enterprises, of which 99.8 percent were small and medium enterprises. The government aims to boost SME development by at least 15 percent per annum over the coming years.
Mr Somdy said that SME development is facing a number of challenges in Laos, adding that aside from a lack of access to finance, the capacity and competitiveness of SMEs in Laos is still low.
At present there are more than 30 commercial banks in Laos. However most of the banks in the country provide loans largely to mega investment projects.
The banks tend to offer SMEs loans with high interest repayment rates, meaning they are less likely to take them up and therefore struggle to build their businesses.
Mr Somdy said cooperation between private and state agencies to develop SMEs in the country is still not efficient, contributing to the slow development of smaller enterprises.
Economists said that SME development must play a significant role in the sustainable development of the Lao economy.
They noted that at present the economy of the landlocked country relies on mega investment projects in the resource sector including mining and hydropower development.
SME development will also play an important role for the country to create more jobs and income for Lao people as the majority of the Lao workforce are employed by SMEs, but at this stage most of them are family businesses.
The government expects that SME development has the potential to create some 10 percent of the new jobs generated in the country each year.
SME development will also provide a significant boost to major industry in Laos. In many developed nations, SMEs supply raw materials and spare parts to their larger counterparts, providing a component to the supply chain.
vientiane times
