FDI drives Lao economic growth
FDI drives Lao economic growth
Foreign Direct Investment (FDI) has become a major driving force of Lao economic growth over recent decades, according to a report from the Ministry of Planning and Investment.
The latest report on private investment data in Laos shows the country has approved US$ 24 billion in private investment since the introduction of a m arket oriented economy in 1986. Most of the private investment in the landlocked country is from foreign countries.
The approved private investment from Lao sources was US$5.9 billion while the rest was from foreign countries, in particular neighbouring nations. Top foreign investors in Laos were China with a combined investment value of US$5.2 billion, Vietnam with US$4.7 billion and Thailand with investment valued at US$4.6 billion, the report highlights.
South Korea, France, Japan, Netherland, Malaysia are also listed in the top 10 foreign investors in Laos. Most of the foreign investment targeted the resource sectors of hydropower and mining. Agriculture, hotels, industry and handicrafts, as well as telecommunications have also been attractive sectors in which foreign investors have preferred to invest.
With increasing FDI in Laos, the nation has seen strong economic growth of at least 7.5 percent over the past 10 years. The statistics from the Ministry of Planning and Investment show that Laos would face difficulty boosting economic growth without foreign investment.
The government introduced the market oriented economy in 1986 after 10 years of putting the centrally planned economy into practice. Laos introduced the first foreign investment promotion law in 1988, offering a number of investment incentives including lower taxes of only 20 percent on profits while domestic firms had to pay 30 percent.
The government decided to merge domestic and foreign investment promotion law in 2009 as part of efforts to create a fair business environment for all.
Economists have said there is a need for Laos to boost domestic investment, adding that the move will boost the growth of the Lao economy.
Speaking at a meeting with Lao National Assembly officials this week, Deputy Minister of Planning and Investment Dr Bounthavy Sisouphanthong said the strong economic growth over the past years does not reflect the actual wealth of Lao citizens.
“As we are dealing with poverty reduction, we need to put the stress on GNI rather than GDP as it does not reflect the real economic status of the citizens,” he said.
Gross National Income (GNI) measures annual total output by residents where as Gross Domestic Product (GDP) records the market value of goods and services produced by a country.
The economists also said that expansion of small and medium enterprises will also help to boost sustainable growth of the Lao economy. The government also needs to diversity the economic base and stop relying on the natural resource sector, which would be one day exhausted.
vientiane times
