Lao general business attracts huge investment
Lao general business attracts huge investment
The number of companies operating general businesses has rapidly increased since the government introduced the market oriented economy in 1986, according to a report from the Ministry of Planning and Investment.
The latest updated information also shows that these private firms invested 456 trillion kip (US$58 billion) in operating businesses from 2008 to May, 2014. The huge private investment has become one of the major driving forces of the Lao economy.
The government has registered more than 97, 000 private companies for operating general businesses since it abolished the centrally planned economy, giving the green light to private firms to take part in the economic development of the country 28 years ago, the report from Investment Promotion Department shows.
According to the ministry, general businesses are companies which sell general goods and services to customers such as retail shops and manufacturers, and do not cause negative impacts to environment and national security.
The number of private firms operating general businesses was limited in Laos prior to 1986 as the government promoted state owned and collective businesses, narrowing down opportunities for private companies to operate. Lower production output forced the government to introduce the new economic mechanism in 1986.
With the rapid increase in private investment, Laos' economic structure has changed. At present, the private sector is the major driving force of Lao economic growth. The information from the planning ministry highlights that domestic and foreign private firms contributed 16 percent of total Gross Domestic Product (GDP), becoming the largest contributor to economic growth.
The second largest contributors to GDP growth in 2011 were the 100 percent state-owned enterprises, which contributed 8.2 percent of GDP. In 2011, there were 139 state-owned enterprises with total assets of 19,430 billion kip or 33 percent of total GDP.
The third largest contributors to economic growth were state-private joint ventures amounting to 7.3 percent of GDP in 2011. At the time there were 48 state-private joint ventures in the country with a total asset value of about 4,292 billion kip.
Economists have said that Laos has to continue its efforts to improve the business climate as part of measures to boost private investment in the country, adding the improved cl imate will also help the nation from relying on the natural resource sector.
At present, most private investment is in the area of mining and hydropower. The mining sector will be exhausted one day and economists also noted that improvements in the business climate will also help Laos to improve its knowledge based economy.
They said the government should promote establishment of these types of private companies; for example engineering consulting firms, which require no use of natural resources but instead the knowledge of people.
vientiane times
