Laos: Business operations face high logistics costs, study says

High logistics costs in Laos are still a major obstruction for business operations throughout the domestic private sector and can also deter investors, a recent study suggests.

Logistics costs in the country are as high as double compared to other neighbouring or Asean countries according to the Japan External Trade Organisation’s (JETRO) survey team.

A study conducted by the survey team has compared logistics costs between Laos and Thailand and especially those costs between Vientiane to Savannakhet province and Bangkok to Khon Kaen province.

The route from Vientiane to Savannakhet province is 490km long and the cost was worked out to be US$2.5 per kilometre while the route from Bangkok to Khon Kaen is 450km long and costs only US$1.1 per kilometre.

The reasons behind the high logistics costs may not be petrol prices or driver’s salaries but poor basic infrastructure.

Transportation of goods between Vientiane and Bangkok is also struggling with additional payments for documents at border checkpoints.

The issue is a major challenge for the government and relevant sectors should be paying more attention to seek possible solutions, the report suggests.

JETRO Representative to Laos, Mr Tetsuo Shibata commented that after he had met with 200 Japanese companies, there were only one to two percent interested in investing in Laos citing high logistics costs and a lack of skilled labour as relevant barriers to investment.

He advised that the logistics sector in Laos should receive more promotion and active implementation from the government especially around infrastructure improvement in order to attract more of these Japanese investors.

As a reference the survey also compared costs between Bangkok Port and Yokohama, Japan being US$800 while transport costs between Laem Chabang Port and Nong Khai – a border city in Thailand en route to Vientiane – was US$700.

Considering the difference in logistics costs to Bangkok Port and to Laem Chabang Port is small, the logistics costs onwards to Vientiane can increase those costs to around US$1000.

This raises several questions. Are the transport costs over the 20km between Vientiane and Nong Khai really so high?, asks Mr Tetsuo, adding that they had conducted their research project over the 2016 fiscal year to answer questions specifically like these.

During the JETRO survey, the team interviewed several logistics firms based in Laos, Thailand and Japan while the team also traveled from Savannakhet to Laem Chabang Port and from Vientiane to Klong Toey port to measure times and distances.

Source: http://www.vientianetimes.org.la/FreeContent/FreeConten_Business.htm