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Laos a rising star among investors
 
Bangkok Post, 15 March 2010
 
VIENTIANE : Even at a time when all eyes are fixed on booming China,
the impressively growing economy of Laos is capturing the attention of
investors, particularly from neighbouring Thailand.
 
The Lao economy last year expanded by 6.4%, the second highest in East
Asia after China, according to a World Bank report. From 2003-08, the
country's real GDP growth averaged 7.2% per year.
 
Although Laos's limited exposure to global trade helped shield it from
the global financial crisis, the Communist country has increasingly
become more open to the outside world, attracting everyone from
curious tourists to yearning investors.
 
Wiboon Khusakul, the Thai ambassador to Laos, said Thailand's trade
value with Laos last year was worth 72 billion baht, an 8.8% drop from
2008 due to the recession.
 
Total foreign direct investment in Laos in the 2009 fiscal year was
worth 142.3 billion baht from 208 projects. There were 37 projects
from Thailand worth 30 billion baht, behind Vietnam at 47.6 billion
baht and China at 31.3 billion.
 
However, Thailand remains the top trade partner and investor in Laos,
with cumulative investment of 89 billion baht from 2000 to 2009,
followed by China, at 75 billion, and Vietnam, at 71 billion. Thailand
has invested mainly in dams and power plants.
 
Laos last year attracted 1.8 million foreign tourists, more than 60%
of them from Thailand.
 
"Despite the past two years of political woes, Thailand has still
managed to drive forward relations with Laos," Mr Wiboon said. "Last
year, the president of Laos made a state visit to Thailand for the
first time in 14 years."
 
Mr Wiboon said relations between the countries were based on the
pursuit of common benefits. Laos is looking to maintain stability and
build wealth, which Thailand considers a key to maintaining close
relations.
 
This year will mark the 60th anniversary of diplomatic relations
between Laos and Thailand.
 
"There are good opportunities for investment in logistics services
following the development of four main economic routes such as the
East-West Economic Corridor," Mr Wiboon said.
 
The North-South Economic Corridor or R3E route, which links Kunming in
China with Bangkok through Laos and is due to be completed next year,
also lacks service businesses. There are only one or two Thai projects
in Bo Kaew in Laos, he said.
 
The Export-Import Bank of Thailand over the past three years has
adjusted its role to become a leading financial institution for trade
and investment in the Greater Mekong Sub-region.
 
Apichai Boontherawara, the Exim Bank president, said the bank aimed to
focus on supporting projects abroad that are commercially viable and
contribute to the target country's economic development.
 
Of the bank's 24.69 billion baht in loans to foreign projects, those
in Laos received the most support, with 9 billion, followed by Burma's
4.4 billion baht.
 
Projects being supported in Laos include hydropower dams, power plants
and a raw sugar factory.
 
Among the projects is the Nam Ngum 2 hydropower dam and powerhouse
worth 30.83 billion baht. The project, in which 25% is held by the
Laotian Ministry of Finance and 75% by South East Asia Energy, is due
to start operations around the end of this year. The Electricity
Generating Authority of Thailand will buy the power.
 
Electricity contributes about 11% of the export revenue earned by
Laos. The country aims to be the "Battery of Asia" by 2020 generating
20,000 megawatts. Currently, it has production capacity of 700 MW.
 
Thailand has contracts to purchase 5,000 MW from Laos by 2015.
 
"In the next two years, our financial support to projects in Laos will
surge with a number of future investment projects that are in the
process of consideration. Each is worth about 100 billion baht," Dr
Apichai said.
 
The bank has a loan target of 24 billion baht this year. Of that, 8
billion baht will be for investments outside Thailand.
 
The World Bank says a growing dependence on the resource sector is
seen as unsustainable in the long term because of depletion of natural
resources. Therefore, Laos should shift its economic focus toward
agricultural processing and services, the report says.