laos03

Lao gov’t urged to exploit railway potential, up GDP, lower inflation

Economists and lawmakers in Laos have called for the government to capitalise on the benefits offered by the Laos-China railway to boost economic growth, while doing more to lower the inflation rate.

With the railway attracting the attention of foreign visitors and investors, the government needs to expedite the vaccination programme and reopen the country as a means to minimise the damaging impacts of the pandemic on the economy.

For 2022, the government has set a target for gross domestic product (GDP) growth of four per cent and an inflation rate of five-to-seven per cent.

However, the chairman of the National Assembly’s Planning, Finance and Audit Committee and senior economist Dr Leeber Leebouapao told the ongoing National Assembly (NA) session that the government needed to review these figures.

“In principle, GDP growth must be higher than the inflation rate to reflect a positive trend in national development. If inflation is higher than GDP, it could mean no growth,” he said.

“Over the past two years, the amount of M2 rose by almost 20 per cent but the nation has seen low GDP growth,” he said, referring to a measure of money supply.

“This means the increasing amount of money in circulation has yet to stimulate GDP growth as anticipated.”

Dr Leeber said the government needs to ensure that the increase in M2 boosts the economy, particularly small- and medium-sized enterprises (SME) and the production of goods for export.

NA member and Lao National Chamber of Commerce and Industry vice-president Valy Vetsapong said GDP could increase by 4.5 per cent but the government needs to do more to develop the service sector.

“The service sector is not only about tourism – it also includes SMEs, which can generate more jobs and income for the government through taxes,” she said.

“Many people in Asia and around the world are talking about the Laos-China railway, which will convert Laos from being geographically disadvantaged by taking advantage of its location and becoming a regional land-linked hub.”

Valy said Lao entrepreneurs have suffered from high transport costs for years but these challenges will be resolved when the Laos-China railway becomes operational in December.

“One of the most important things for the government at present is to speed up vaccination, immunise 80-90 per cent of the population, and reopen the country. However, the reopening of borders needs to be well regulated to attract investors and visitors while also complying with Covid-19 guidelines,” she said.

NA member and Lao Youth Union deputy secretary-general Bounta Thephavong said the Laos-China railway has attracted considerable attention from visitors and investors in the region.

“Clear plans and policies are needed for investors regarding economic development zones on both sides of the $5.9 billion railway. With this information available, Lao and foreign investors can partner or make concession deals with the government to develop facilities and produce more goods for export,” he said.

VIENTIANE TIMES/ASIA NEWS NETWORK