Laos Market: Advantages and Problems

With a population of 5.7 million people, per capita income of US$402, economic growth rate of 6.5 per cent in 2004, and average demand, Laos’ market is truly attractive to Vietnamese businesses especially those in Nghe An.

 

In doing business with Laos, Nghe An’s businesses have several advantages. First, in the process of regional and world economic integration, Laos is improving its investment environment. Their legal framework, policies and mechanisms are more transparent and predictable. The infrastructure is being upgraded. The living conditions are being improved together with political and social stability. The successful ASEAN 10 in Vientiane has increased the position of Laos in the international arena.

 

Second, Vietnam has encouraged all economic sectors to invest in Laos, considering it as a strategic partnership. Vietnamese government has simplified investment formalities, applied tariffs exemption or reduction, and provided preferential loans to boost business efficiency in Laos. Representatives of business communities from the two countries meet every year to discuss and remove constraints. Nghe An province has 419 kilometres of common border with three Lao provinces : Xieng Khoang, Bolykhamsay, Huaphane. Nghe An businesses export construction materials, agricultural produce, wheat flour, pharmaceuticals, and steel to Laos. The export value increased from US$3.3 million in 2003 to US$4 million in 2004 and is expected to reach US$5 million in 2005. Successful businesses include Thanh Thanh Dat Co., Ltd, 4th Military Zone Company, An Binh Co., Ltd, Agricultural Export Company, Vietnam-Laos Investment Company, and Vietnam-Laos Economic Corporation.

 

There are, however, certain difficulties. First of all, payment is sluggish at the Laos-Vietnam joint venture bank in Vientiane. In some cases, the remittance from Xiengkhuang to Vientiane took three months, for instance, the payment for steel export to Laos by Agricultural Export Company, denying the company of capital cycle. Due to an unstable market and weak payment system, Vietnamese companies had to accept lower prices than the contracts because they cannot bring back commodities with additional transport fees.     

 

In addition, barter trade and tax rates have also created problems for Vietnamese businesses. Evidently, business communities of the two countries should meet and find solutions and the central government should lend stronger support. It is hoped that in the coming years, Nghe An exports to Laos will increase, contributing to the partnership and economic development of the two countries.