Lao gov’t policies to lure investors fail to spark industrial sector

The growth rate of factories in Laos is continuing at a moderate pace despite the government improving its policies and regulations to attract investors.

The number of factories has grown by just five per cent annually, according to statistics collected by the Department of Industry and Handicrafts under the Ministry of Industry and Commerce.

Laos had 13,148 factories in 2016, including large, medium, small and household units, according to information posted on the ministry’s website. The department compiled the inventory of factories in 2015.

The statistics showed the number of factories that were active and productive, analysed the operational flow, presented the goods and services they dealt with, employment, amount of investment, management of fixed assets and raw materials, and electricity consumption.

The department said it faced difficulties in collecting the data, which was the main reason why an in-depth assessment of each industrial sector could not be carried out.

However, the collected statistics showed there were few large factories that could drive the economy, with about 80 per cent being household businesses.

Information on investment in environmental protection is inadequate, but anecdotally many factories are energy-intensive and release air pollutants at a high rate.

Foreigners owned a total of the 354 companies involved, 2,115 companies were joint ventures and 10,679 received domestic investment.

There were 714 large factories or 5.43 per cent of the total, 784 medium-sized factories or 5.96 per cent, 6,707 small factories or 51.01 per cent, and 4,943 household workshops, equal to 37.6 per cent of the total.

Most factories are located in Vientiane, Borikhamxay, Khammuan and Savannakhet provinces, and in the cities of Pakse and Vientiane.

The plants produced more than 80 types of industrial and service products, and many were rice and sweetcorn mills. The products produced ranged from concrete to furniture.

The units generated billions of kip – which currently exchanges at 8,800 kip to $1 – in revenue that contributed to socio-economic development, the government’s budget, and employed more than 145,000 people.

To attract additional investors, the government should carry out a review and identify measures that can improve the investment climate.