Investment in concession projects drops, but newly registered businesses increase

While investment in concession operations and special economic zones dropped in Laos last year, the number of newly registered businesses has increased significantly, a new report has unveiled.
The value of authorised investment in concession projects dropped from US$7.39 billion in 2020 to only US$2.41 billion in 2021 and US$2.14 billion in 2022, according to the latest report from the Macro-economic Research Institute of the Lao Academy of Social and Economic Sciences (LASES).

Tourism related businesses have been recovering after Laos opened its door to international visitors last year.

The new report attributed the significant drop to the huge decline in investment in hydropower projects in 2021 and 2022.
Meanwhile the actual value of investment in special economic zones fell by 69 percent last year from US$210.1 million in 2021 to only US$65.7 million in 2022.
The decline was linked to the fact that no new investments were made in the Savan Seno Special Economic Zone in 2022. In 2021, some US$132 million from investment projects flowed into the zone, according to the report.  
Lao researchers called for the bodies concerned to review legislation, policies and mechanisms concerning investment promotion with a view to removing red tape and rolling out the red carpet to encourage more foreign companies to invest in Laos.
The number of new businesses registered in Laos increased by 36 percent. Some 18,218 new enterprises registered in 2022, up from 13,392 in 2021. Meanwhile the value of registered capital rose from 138.03 trillion kip in 2022 to 82.87 trillion kip in 2021, an increase of 67 percent. 
The wholesale and retail trade and vehicle repair represented the largest amount of registered capital in 2022, accounting for 31.4 percent of the total.
This was followed by the supply of electricity/gas/air-conditioning (13.5 percent), financial and insurance businesses (12.8 percent), mining (9.3 percent), and the processing industry (7.8 percent).
The increase in newly registered businesses reflects the government’s drive to diversify the economy by encouraging more people to operate businesses, thereby creating jobs and generating more revenue for the government.
One of the most important points to note is that the value of registered capital in the wholesale and retail trade and vehicle repair jumped from 27.13 trillion kip in 2021 to 43.35 trillion kip in 2022.
In addition, the value of registered capital in finance and insurance businesses soared from 6.39 trillion kip in 2021 to 17.63 trillion kip in 2022.
However, the business sector is still largely dominated by Small and Medium Enterprises (SMEs), which account for more than 90 percent of all enterprises in Laos.
Over the past few years, businesses have suffered hugely because of the Covid-19 pandemic, particularly those operating in the service sector, such as airlines, travel agents, hotels, transport operators, restaurants, massage parlours and golf clubs. But the service sector is making a recovery after Laos reopened its doors to international visitors in May last year.

By Somsack Pongkhao
 (Latest Update June 1, 2023)