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Foreigners analyse Lao economy !

The World Bank says Laos is opening up it's doors to increased foreign investment, and they hope Singapore will be able to play a lead role.

A delegation from the World Bank is meeting with Singapore Government representatives this week in a bid to move the country from a socialist economy to a free market.

Presenter: Stephanie March
Speakers: Dr Adam McCarty, chief economist, Mekong Economics; Professor Martin Stuart-Fox, author and Laos historian; Patchamuthu Illangovan, country director for the World Bank in Laos

MARCH: Laos is one of the world's few remaining Communist regimes and also one of Asia's poorest nations. The government opened up it's doors to foreign investment and began loosening restrictions on private enterprise in 1990s. Since then Thailand has become the biggest investor, with China following close behind. Dr Adam McCarty is from Hanoi based consultancy firm Mekong Economics.

MCCARTY: Well foreign investment and infrastructure spending financed from Japan, and World Bank and Asian development bank is really opening up the country cause it's landlocked of course but now their punching through these big roads through to china and down to thailand and across to vietnam.

MARCH: Professor Martin Stuart-Fox is an author and Laos historian.

STUART-FOX: Foreign investment is very important to Laos because it doesn't produce internally any investment capital and that has been flowing into a number of areas- particularly hydro power, tourism and some industry. In a bid to encourage more foreign investment, a delegation from the World Bank in Laos are meeting this week with the Singapore Government's trade
promotion agency to explore future investment opportunities.

MARCH: And Professor Stuart-Fox says Laos has potentially a lot to offer them.

STUART-FOX: I think it probably reflects the realisation more widely that Laos is a good place for investment there are natural resources there that can be developed and the whole region is developing so quickly that the potential in Laos for hydro power and mining in particularly is substantial and i think the Singaporians understand that very well.

MARCH: Country director for the World Bank in Laos, Patchamuthu Illangovan says the Laos Government recognises the benefit of opening up it's market to both internal and external investment opportunities.

ILLANGOVAN: Well you can see the economy expanding.....I mean the GDP per capita has steadily grown in the past five years it is now $600 and it used to be about $300 in 2002, 2003, so it certainly has improved opportunities in terms of employment quality of life, in basic services and so on.

MARCH: Exports from hydropower projects make up 30 percent of the Lao economy, but Mr Illangovan says it's important to look to investors who are interested in other areas as well.

ILLANGOVAN: Resource sectors are contributing a lot to growth if you look at the past couple of years so has manufacturing and agriculture and they should continue to expand these sectors so they have a very diversified economy in which both can add to growth in a sense so they can better weather any shock,

MARCH: But as Laos expert Martin Stuart-Fox says, the benefits of foreign investment don't always filter through to the entire population.

STUART-FOX: Well I'm afraid they benefit very little because the investment areas where the exports benefit the government and the government has tended to develop the main Mekong areas - the main towns - rather than investing it in human resource development in the more remote mountainous areas.

MARCH: In terms of boosting the economy and income generation from taxes for the government does the average Laotian see the benefit of that?

STUART FOX: Well not as much as they should a lot of that money is finding it's way into the pockets of party officials rather than into, as i said, human resource development.

MARCH: And economist Adam McCarty says there are still some hurdles Laos must overcome before it becomes an ideal place for foreign investors.

MCCARTY: I mean it is geographically isolated which is a problem you cant solve, but also the general environment for corporate governance and gov in general uis still very weak, legal framework property rights, contracts, all these things are weak which is typical of a poor, developing country like Laos of course.

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