Laos: 2012 Economic Report

Via Live Trading News, a look at Laos’ 2012 Economic Report:

In spite of ongoing economic challenges, such as the effect of the European debt crisis and the risk of natural disasters, Laos will aim to increase its GDP by 8 percent to 80,500-B Kip (about US$10.6-B) for the F-Y 2012/2013.

According to a draft plan completed recently by the Lao Ministry of Planning and Investment (MPI), the Lao government sets the GDP growth target of 8% for the F-Y 2012/2013 and intends to mobilize investment funding of US$3.2-B, which will account for 32% of GDP.

The plan will be considered for final approval by the cabinet and National Assembly in June this year.

Laos, one of the poorest countries in Southeast Asia, is on track to reach this F-Y goal of US$8.8-B which is 8% higher than the previous F-Y.

The MPI initially forecast a growth of 8.3% in the middle of last year, but revised the number to 8% because of a less than expected improvement in agricultural output after storms and flooding damaged farming production areas last year.

Local economists identified two major challenges for F-Y 2012/2013: the ongoing European debt crisis and unpredictable natural disasters. The debt crisis is an issue, as Laos exports clothes to the EU and receives financial aid. There is concern that both these may be affected in the near future.

Serious flooding and storms are an ongoing danger in Laos during the wet season every year. Last year, two major tropical storms struck Laos causing flooding, leaving 42 people dead and more than US$200-M worth of damage. The storms destroyed 37 thousand hectares of rice fields, as well as some important infrastructure such as roads, bridges, schools and health facilities.

The Lao government is taking steps to address these issues. Talks were held recently between EU and Lao government officials to discuss the potential impact of the European debt crisis. Lao government agencies and UN departments also remain alert to deal with flooding. The United Nations Development Program and the World Bank are working with the Lao National Disaster Management Office to develop a national disaster management plan.

Nevertheless, the economists expect that Laos’ ongoing political stability will help build confidence among investors. Laos’ demographics are also appealing to potential investors, with a young healthy workforce.

However, a significant percent of the Lao people feel that they have not benefited from the strong economic growth and growing foreign investment, as foreign investment has so far not brought about the expected decrease in unemployment, local media reported recently.

Foreign investment, which amounted to US$2-B in 1-H of this F-Y, has created only about 6,100 jobs, 11% of the target for this F-Y according to data from the Lao government.

Lao Ministry of Labor and Social Welfare also reported that about 1,780 people, including 634 women, have registered as unemployed and want the government to help them find work. Most are seeking jobs in the agricultural, industrial and services sectors. Lao officials say that a major challenge for job seekers is their lack of skills compared to workers from other countries.

Mana Southichack, director of a local investment advisory firm and economist, told Xinhua last week that job opportunities for the Lao people will also improve more rapidly if the hurdles that decrease foreign investment are removed.

Foreign investment has the potential to create both jobs and foster domestic industries. More large foreign projects in Laos means domestic industries can spring up to support their needs, said Southichack.

This entry was posted on Tuesday, May 8th, 2012 at 10:11 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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