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Overview of Industry Development in
Lao PDR
Overview
After the independency
and declaration of Lao PDR in December 2 1975, the state government and
the population has focused on constantly implementation of socio Economic
development in two periods: old mechanism period and new mechanism.
Through those procedures the national economic has constantly expand. In
1981-1985 Gross Domestic Products has risen average 5.5% per year, in 1986
- 1990 GDP rose average to 6.4% per year and in 1996-2000 GDP has risen to
average 6.2% per year. The Industry expansion rate at 9% per year, if
compare to GDP structure industry has taken periodically as 16% in 1990
and 22% in 2000.
Industry situation in the country
Manufacturing
and Handicraft industry:
in few years
Manufacturing and Handicraft factory considerably expanded as in 1995,
10.826 of Manufacturing and handicraft factory, in 2000 rose to 21.558. In
the figures 96% is manufacturing factory, most industry is small
enterprises. GDP of manufacturing industry rose at 56% of overall GDP
industry which could be figured as follow: Joint venture at 69.4%, State
enterprises at 20.4% and 10.2% is private sectors.
Energy
industry:
In previous years, international situation and
domestic condition which facilitate the energy development from Natural
resources as in the construction of Hydropower electricity to serve the
country and export, using the electricity has become shape points to
support socio - economic development of Lao PDR, production capacity has
expanded from 33 MW in 1975 to 644 MW in 2000, 627 MW from Hydropower
electricity. Low, medium and high voltages of electrical network have
expanded to locals. In 2000 the population consumed electricity at 35% of
total.
Mineral
exploration:
In recent year the
government conducted survey and confirm basic mining in the country. In
2000 we could evaluate mineral volume of more that 20 different kinds in
50 mines, in that figure 10 different kinds has been tested and utilized
such as : Charcoal, iron ore, emerald, limes, ceramics for cement
production, barite stone, zinc, phosphorus, wet coal, salt, construction
stone, sapphires etc. In 2000 domestic and international investors,
survey, exploration and testing has been conducted, have been approved to
mining some 110 activities, most of them in survey procedures.
Basic
technique and technology:
Most basic technique and technology
uses in the industry production of Lao PDR at present are out of date,
only few industry use modern technology such as: Electrical industry
including hydropower electricity, Timber processing industry, food and
beverage industry. The use of successful science and technology to provide
the socio-economic development of Lao PDR are still limited such as lack
of scientist, technician and shortages of funds and technical materials
for the research and development work. Therefore, our country is not
succeeded in research of technique and technology for production,
depending on import technology.
Labor
situation in the industry:
In 1995 the number of
labor in the industry has risen to 56.635 and to 83.240 in 2000, which
growth at 3.8%, with female at 58% female labor in textile factory. Most
of Labor is young with low education, most of them graduated lower
secondary education, low labor skills and from rural areas.
Investment Environment in an industry sectors
Based on the National policy of electricity to overall country aims at
establishing electrical network to assure sufficient electricity for
production and basic living condition and enable electrical network links
with other countries. The government investment in the industry and
handicraft sectors have constantly increased as the most 80-90% in the
electricity, other 10-20% in the mineral and manufacturing sectors.
Mineral investment and manufacturing have gradually increased.
Private investments in the industry sector have considerably increased as
268.4 billion kip in 1999 and rose to 1.019,9 billion kip in 2000.
However, there are still low industry growths and low competency of
solving economic matters and low competitiveness of self -produced goods
against imported goods especially manufacturing sector. The export
manufacturing goods are low, using old and low technology of processing
and production, shortage funds, administrative and management experiences
and the quality of labor are low. Although many industries have succeeded
in number of ways. Those mentioned circumstances became the most
challenges for our growing industry development in future.
Nevertheless, basic
electrical development for domestic and exit consumption is short in
comparison to the capacity; small electrical development of transforming
central electricity to remote areas are still low; the export of
electricity couldn't achieve the plan due to economic and financial crisis
in the pass few years, regional competition has also increased;
environment protection request more concerned and strict. In the future,
Cooperate policy of ASEAN electrical commercial market carried under Power
Pool system would mainly depend on quality and pricing competition.
Investigation are limited in quality and quantity for mineral exploration
as shown low mineral exploration efficiency and out of date technology
use; leakage in mining management, limit funding capacity and personnel /
engineers.
In real situation that has mentioned are major
problems, strategic factor for the National development that appropriate
to our country's industrialization is visually necessity, but how we are
going to plan proper strategy for our conditions and strengths that can be
challenges in international.
Strengths and
opportunity, constraints and challenges
Strengths
Geographic allocation
Lao PDR is the only one
Asian country sharing border with 5 nations: 505 km border with RP China;
236 km with Myanmar; 1.835 km with Thailand, 2.070 km with S R Vietnam;
535 km with Cambodia total of 5.181 km. Due to Lao PDR is located in an
appropriate position for the "transit" or "central" role for the link of
Asian countries from North to South, east to west. With the appropriate
position is strategic location and stimulation for international like
ASEAN seen as importance for cooperate expansion between Lao PDR and the
Sub regional countries, stimulate links economic between Lao PDR and
regional and global.
Climate
Lao PDR lies on the
tropic of Capricorn, with annual monsoon and typhoon. In rainy season the
typhoon blown from South East to the country which brings rains recorded
at 1.600 to 1.800 nun/year. The weather in Lao PDR is appropriate for
growing crops, industry foods, livestock such cow, buffalo, Sheep and
poultry.
Forests
The country has a wealthy forest area of 11.160.900 hectares every year
that covers 47% of the country areas. In that figure 30.6% is deep forest,
50.4% mixed forests; 17.17% are large leave forests and 1.9% are jungle.
The loggings process of mixed forests is about 150 m2/ hectare in
2.500.000 hectares and in remote areas about 50-80 m2/hectare in 300.000
hectares.
Economic strength in
forestry for the expansion of timber processing in Lao PDR is capable if
the forest has been used with modern technology and knowledge in wiser and
effectiveness for national security and major incomes, as forest could be
reforestation and wealthy development with people's knowledge and minds.
Water
The country located in a
tropical and monsoon region and is rich of rivers and waters creating
various kinds of water species: aquatic animals, amphibian, weeds, as well
the water has creating facilities for the irrigation, transportation,
tourism, living conditions and hydropower electricity.
Based on research
conducted in the Mekong river,( including branches ),flows to the sea is
about 400 billion m3 and can be generated into hydropower electricity
about 42.000 MW ( for the power in Mekong branches ). In that figure it
covers nearly 30% ( 13.000 MW ) in the Lao PDR which can generate
hydropower electricity for the production and consumption and transforming
at 40 billion kwh annually.
Therefore, hydropower
electricity in Lao PDR is major strengths for basic socio economic
development and regional cooperation.
Mining
Survey information has
been evaluated primarily in quantity such as: 655 million tons of coals,
1.5 million tons of wet coal, 57.7 million tons of zinc, 1 million tons of
bronze, 0.7 million tons of pyrite, 92.546 million tons of salt (nitrate,
kali, Myra), 20.6 million tons of ceramic, 1.180 million tons of lime for
cement production, 55 million tons of sand for bricks production, 8
million tons of sand glass, 29.6 million tons of, 100 ton of gold, 0.55
million tons of phosphorus, 0.15 million tons of balid, 0.3 million tons
of micon, 32.3 million karats of sapphire and other unexplored minerals.
Nevertheless, we
understand that natural resources would not be revitalized. So that
Exploration for use should be carefully consider in advance and long term
affects.
Tourism
We have rich natural,
historical and cultural tourist attractions, enable to develop into
National remarks of tourism industry that would become immobile trade and
services which creates jobs in the economics sectors, as well increase
more foreign currencies for the country in future with direct and indirect
expanded incomes to locals and regions. Therefore, many developing
countries have discovered their strengths into tourism as a primary
economics changes from textile and garment to link with world
economics, based on international theory 30 years in the past.
Constraints and Challenges (1). Constraints
Nearly 2/3 of the
country areas are mountainous and landlocked which causes the obstacles
for the transportation development that needs sufficient funds for
production and services. On the other hand, most of the population lives
along the rivers and valley in small groups. Those minority groups live in
remote areas, which is difficult for communication, provides education,
public health and other facilities.
Climate
Although our country
have good climate but it is often affected by monsoon rains from South
China Sea, Pacific and Indian Ocean which causes huge floods and leaves
many days to dry in a central and South areas. Those are major obstacles
for the overview economic development specifically in agriculture,
transportation and living conditions of the population.
Social and Economic infrastructure
Social and Economic
infrastructure such as roads, harbors, electricity, water supply, freight
services, communication, education and public health networks have yet not
been improved in overall and contributed to the development needs at
present. Main transportation is by roads, water and airway is still
limited and no railway for train. Therefore, the cost of transportation is
high when compare to neighboring countries which is a comparative
disadvantages in international competition and not an attractive choices
for foreign investment.
Market systems
Due to our
transportations are not facilitated which is inconvenient for the
distribution of goods and services in the country and market has been
divided in portion, the market is relatively expanded along the basin, but
slowdown in the remote and rural areas.
Therefore, agricultural production in the remote
areas are natural-self support, slow transactions and trading goods,
banking system, financial market, labor market have just established in
the city center. These are major obstacles for the productions and transit
goods.
Domestic funds
At present 90% of GDP has been utilized that left 10% on
saving funds for development work, it is low. The national budget is
deficit, funding generation mechanism of the financial system is not yet
expanded. National development basically needs sufficient funds in term of
loans, grants and private investment. These are major obstacles and
constraints for our country's development.
Foreign currencies
National revenue of Lao PDR in foreign currencies is
still low. Export is not against half of import, which made the amount of
foreign currencies flow out more cause a deficit in foreign currencies
each year. From this point it makes shortage of funds in National Savings.
Therefore, macro economic stability is in difficult circumstances,
moreover, the amount of foreign debts increased and also the obligations
of debt clearances increased every year.
Labor
Lao PDR is lack of skillful and levelly labor in
comparison to neighboring countries.
Most populations are farmers, laborers with low
skillful, under knowledge and labor disciplines. At present the total
laborers are 85.000 people, which are still low against the total
population. 10% of labor works in agricultural sector, 3.8% in industry
and other in services.
Institute sectors
The institute system of our country is shortage in
number and quality when compare
with other developing countries in education,
research institutes and others. State administration is shortage and old
dated and low effectiveness. Theory of New Industry Countries and
developing countries stated that effective social-economic development
should be basically provided for the utilization of modern technology and
technique especially research and utilization institutes such as: sciences
& testing institute, development education institute, law including
research institute in practical sectors. In the old days those institute
in Lao PDR have not yet been aware of which shown in the low budget
figures in the research & development each year. Form theory of developing
countries average of the population in 10.000 should be at least 4-5
researchers that could support the development process.
(2) Challenges
Due to our basic
economic is very slow in comparison with regional countries and global and
it will be a potential to link regional and international economic in
these process that we are facing with contradiction and competition with
neighboring countries and others in the world with toughness, in which we
are confronted and loosen in implementing AFT A agreement after 2003. If
not well prepared especially production and services for domestic market
as well export goods that unable to compete in the condition of linking
economic, trade, investment, publicity and etc.
The labor and personnel capacity of our sector is
limited in numbers and qualities, low education level if compare with
needs in a new competition era, especially businessman trading in
international level, state administrative and scientist. So that decision
should be decided from now on.
Due to management capacity is low, development
process are risks on social and environmental affects.
In the process of
establishing factor for industrialization and central transit services
that we have a potential in strength, solidarity, opportunity that
facilitate filled also a constraints and challenges in mechanism, policy
and measures in carrying out with appropriate to realities.
(Sources from CPC, 2003)
The Ministry of Commerce
I. The Role and Duties
Functions and Roles
The Ministry of Commerce is
a state management organization at the central level within the government
apparatus and has the role of the managing the overall development of
commerce throughout the country. It aims to stimulate and develop
production, to move the economy from one based on primary products to one
based on commercial goods, to develop the domestic market and link it to
regional and global markets, and to accelerate the development and to
improve infrastructure of the country step by step. The Ministry of
Commerce is responsible for the implementation of its state management
duties and responsibilities in accordance with the Law on the government
of the Lao PDR.
Duties and Scope of
Authority
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To study and implement
the party's strategic guidelines for commerce in the form of long term
plans, projects and detailed plans in the commerce. To take
responsibility for the successes and failures in the implementation of
commerce activities.
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To study and establish
policy, law and decrees concerning commerce development during each
planning period, for submission to the government and approval by the
National Assembly.
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To study and research
on the domestic and foreign markets in order to stimulate and promote
growth in domestic production, reduction, reduce import, in order to
stimulate and protect domestic production in a more appropriate way.
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To manage the commerce
in a vertical line of authority at levels of administration throughout
the country.
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To educate, train,
develop, manage and update the quality of officers and civil servants in
the commercial sector.
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To summarize and
evaluate the implementation of commerce activities within each planning
period and then report them to the government.
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To manage and
administer commerce activities concerning budgets, means of transport,
and premises that are equipped by the government.
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To maintain relations
and cooperate with foreign countries and international organizations in
commerce as authorized by the government.
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To coordinate and
collaborate with sectors at central and local levels in order to
implement commerce activities more efficiently.
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To assist the
government in managing and supervising the National Chamber of Commerce
and Industry.
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To carry out the
examination of profession works in commerce throughout the country.
1. Permanent Secretary Office
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Implement for all
secretariat work to the Minister of Commerce
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Research and study the
party policies, the rules and regulation of the government and expending
for the implementation correctly in the field of commerce.
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Research, criticize
and identify data of trade statistic and collect information to help
ministers and vice Minister for planning in short term and long term,
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Draft the rules and
regulations on trade by cooperating with the concerned department and
propose to the decision makers.
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Implement the works
which are relating to the ministry
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Financial and
documentary
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Manage the real estate
which is including vehicles and materials of the ministry
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Coordinate with
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Line ministries
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Trade Department at
the provincial level
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The government
agencies concerned on the field of economics and trade
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And International
organizations in term of technical assistance, training, workshop and
others.
2. Foreign Trade Department
The department of foreign trade is the expert department
which is running under the ministry of commerce. The roles of the
department are as follows:
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Research, planning,
implement the party policies and the rules and regulation of the
government which are related to foreign trade, border trade, transit
goods.
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Manage the export and
import.
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Coordinate with
foreign agencies and set up trade negotiation with our trading partners
country to promote export
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Research and
coordinate with the economic group and with the international
organizations
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Leading and provide
the skill on trade for the trade department at provincial level.
3. Domestic Trade Department
The Department of Domestic Trade was established under
the Ministry of Commerce. This Department is a state management
organization at the central level.
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Implement the party
and Government policies which are concerned on domestic trade,
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Manage the market
price in some commodities which are necessary for society, adopt and
interfere into the domestic market if necessary.
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Promote domestic goods
production for domestic consumption and for export
Develop domestic trade network throughout the country
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Protect the consumers
of goods and services, and protect domestic production of goods.
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The registrations of
the companies
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Manage and lead the
Trade Department in the provincial level and district level as well.
The Department of personnel organization in one of the Government
Organization, which has the role and function as followed:
·
Implement party
policies and the rules and regulations of the government.
·
Recruitment and
organize the staff inside the ministry through the decision milers,
·
Making plan and
strategy for midterm and long term which are concerned on human resources
development plan for short and long term to the minister.
·
Audit and
management the implementation of the party policies in the field of
commercial.
5. Economic Research Institute For Trade Department
This institute was established under the Ministry of
Commerce, which has the role and position equivalent to the department in
the Ministry. The main duties are as followed:
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Research and study the
government policies in the field of economic, trade for expending and
for the implementation correctly.
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Research the world
economic situation and report to the minister.
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Draft the rules and
regulations on trade and propose to the decision makers.
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Coordinate with line
ministries and government agencies concerned on the field of Economics
and Trade.
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Held training,
seminars and workshop for short term for government staff and for
privates companies in the field of economic and trade.
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Finding technical
resources from foreign agencies and donors in according to the minister
approval.
The Department of Inspection was established under the
Ministry of Commerce. This Department is a state management organization
at the central level. The role of the Department is to:
·
Implement the
state-party policies which are concerned on trade inspection
·
Inspect the
implementation of the rules and regulations of the government officers,
·
Inspect the
implementation the state-party policies on trade in each department, and
in the companies throughout the country.
·
Study and
research the government policies, the rules and regulations and get
develop in all levels
7.
Lao Trade Promotion
Center
The objective of the
LTPC is to assist Lao manufactures and exporters to fulfil their
potentials in the producing and marketing processes. Lao Trade Promotion
Center is the government
organization that is running under the Ministry of Commerce. The LTPC was
established on 08 November 2001. The role of LTPC is to assist the
Minister on research planning, implementing
the rules and regulations of the government which are concerning on:
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Export promotion,
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Trade Promotion,
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Exhibition & trade
fair,
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Overseas market
analysis to help Lao manufacturers and exporters to fulfill their
potentials in the production, and
Providing service such
information on marketing processes to Lao and overseas businessmen.
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