Willingness to invest in Laos must be improved upon

The Ministry of Foreign Affairs (MoFA) stated that the governments of Vietnam and Laos have agreed to boost economic cooperation and assist each other to rebound from the pandemic. “Both sides agree to continue maintaining stable trade growth of 10-15 per cent annually, with continued expansion of investment cooperation, with attention paid to boosting investments in localities along the border,” the MoFA said.

At the 45th meeting of the Vietnam-Laos Intergovernment Commitee organised one month ago in Vientiane, both sides also agreed to continue developing bilateral projects implemented successfully in 2022, and remove difficulties faced by existing projects.

Khamchen Vongphosy, Minister and Head of the Prime Minister’s Office, stated on January 12 at a Vietnam-Laos investment cooperation conference that the country would study and revise legislative rules to ease the operations of Vietnamese firms in Laos. He urged Vietnamese firms to continue undertaking ventures and increase their contributions to the Laos economy.

Meanwhile, a week ago HAGL Agrico startled the Vietnamese stock exchange through revealing record high after-tax losses of up to $118 million in the fourth quarter of 2022. For the whole year, HAGL Agrico’s revenue was just $31.43 million, while its losses were $151 million. This increased the total loss to almost $300 million.

After HAGL reorganised in 2017, HAGL Agrico, a subsidiary of Hoang Anh Gia Lai JSC, engaged in its first projects in Laos. During that time, HAGL Agrico invested approximately $100 million to establish a sugar industry cluster in Laos with a capacity of 7,000 tonnes per day. It simultaneously built a 30MW-capacity power plant, an ethanol plant with capacity of 30,000 tonnes per year, and a 50,000-tonne capacity fertiliser factory. These moves, however, failed to result in a breakthrough for HAGL.

In 2008, Laos was the first nation in which Viettel invested funds, to operate the Unitel telecommunications network. But foreign investment does not just bring in capital from elsewhere – it often causes enterprises to incur losses. In Q4 of 2022, Viettel Global Investment posted a record-breaking loss of $115 million, compared to a profit of $5.97 million in the same quarter of 2021, despite hundreds of millions of US dollars in profits during the first three quarters.

As a result of provisions and bad debts, Viettel Global’s business administration expenditures increased to $163 million, which was almost 4-fold from the previous year. From $2.76 billion at the beginning of the year to $6 billion by the end of 2022, the amount of corporate bad debt has also soared.

Investing from Vietnam into Laos has been deemed troublesome as legal regulations are not yet robust enough. Many Vietnamese financiers have highlighted the constraints of investment cooperation between the two countries, including the tardy implementation of projects and the low percentage of disbursed money. The unwillingness of Vietnamese corporations to pump money into Laos is a significant obstacle, particularly for companies like Indochina Holdings, which desires to expand in the regional market.

According to Hua Thi Bich Thu, general director of Indochina Holdings, poor transport infrastructure is “one of the primary obstacles” to attracting foreign direct investment from Laos.

“Transportation between Laos regions is still tough,” Thu noted. “This is because 70 per cent of Laotian traffic is carried by road, while waterway and rail travel are scarce.”

Thu anticipates that Laos will eventually upgrade its transport network, particularly the roads linking regions and between this nation and neighbouring countries. She said that Laos had several advantages in attracting capital, including a large land reserve and an atmosphere conducive to the development of agricultural production and tourism.

Vietnam invested $118.3 million in Laos in 2021, up 33.3 per cent on year. By late 2022, the figure it $180 million, up 52.5 per cent on-year.

The Vietnam-Laos business seminar has taken place in Vientianne, co-chaired by Minister of Planning and Investment Nguyen Chi Dung and Laos Minister of Planning and Investment Khamchen Vongphosy, during which several bilateral agreements were signed.

The Government of Laos has agreed with contractors to conduct a feasibility study for the construction of an expressway from Houaphanh province to the border with Vietnam under an agreement signed recently, Vientiane Times reported.

Vietnam and Laos expect that the former will become the leading investor in the country with seven million people, which will be realised via an effort to foster the bilateral trading turnover.

The Lao National Assembly (NA) on December 30 voted to approve the nomination of Deputy Prime Minister Sonexay Siphandone as the new Prime Minister, replacing Phankham Viphavanh.