PM pushes for SMEs promotion
Prime Minister ThonglounSisoulith has instructed the Ministry of Industry and Commerce to devise incentives to boost job creation among small and medium enterprises (SMEs).
The premier made the instruction at the annual meeting of the ministry that closed on Tuesday in Vientiane, according to Lao Economic Daily.
He told the authorities to investigate and find out the reasons that drove Lao production costs higher making made-in-Laos products uncompetitive.
The ministry was told to create conditions more conducive for expanding investment promotion and getting additional firms involved while exploring markets to drive local production.
Director General of National Economic Research Institute, DrLeeberLeebouapao said Lao SMEs encountered a common problem – difficulty in accessing finance.
“SMEs have been facing difficulties accessing bank loans. Moreover, interest rates of bank loans in Laos are higher than in many countries',” he told Vientiane Times yesterday.
“The SMEs are viewed as risky businesses by banks; therefore the banks prefer to release loans to major businesses.”
DrLeeber noted that it was critical for the government to introduce incentives to enable the SMEs to survive and grow given they played a large part in the L ao economy.
He pressed on the need for the government to create conditions to enable SMEs to gain easier access to finance with appropriate interest rates. Tax incentives were also an additional option that would help Lao SMEs to compete with their rivals.
The director warned that if these barriers were not resolved it would increase operating risk for many Lao SMEs amid growing competition as the Asean Economic Community is realised.
DrLeeber cited an example that small Chinese enterprises or even household-scale businesses were able to open retail shops in many parts of Laos, which many Lao people could not do because of the fact the Chinese enterprises enjoyed better finance incentives from their government.
President of Lao Agro Industries Co Limited MrLoumkhamVongsay said previously that in the context of his business there were many factors driving production costs higher making it a struggle to compete with their regional rivals.
He elaborated that high borrowing costs coupled with the difficulty in accessing finance discouraged farmers from investing in crop growing.
Therefore, his company has provided finance to farmers who undertook contract-farming with his company. This has added a financial burden to the company.
“We have been functioning as finance provider [bank] and as buyer at the same time, while our rivals in other countries function as only buyer,” MrLoumkham said. The businessman added that the Lao government's incentives lag far behind those offered in Thailand and Vietnam. In the neighbouring countries, he said farmers do not have to pay irrigation fees, while Lao farmers pay up to 900,000 kip per hectare.
In addition, Laos' low standard roads required busine sses to carry only about seven tonnes per truck, meaning MrLoumkham has to use three trucks to transfer 20 tonnes of his products to market, while other regional countries only use one truck to carry 20 tonnes.
He highlighted the need for the key players to work closely with the government to offer concrete supportive measures including financial incentives through the banking system, while buyers had to play a key role in seeking markets for the crops that farmers grow.
According to a report from the Ministry of Industry and Commerce, Laos registered 35,931 enterprises over the past five years from 2011-2 015 with total investment of more than 123,760 billion kip.
(Latest Update July 21, 2016)