To salvage once-thriving Vietnamese investment into Laos, the countries’ respective governments have vowed to remove obstacles facing this investment flow.
Under the Vietnam-Laos 2017 co-operation agreement signed by the two governments at last week’s 39th meeting of the Intergovernmental Committee on Vietnam-Laos Bilateral Co-operation in Hanoi, the two governments agreed that the two sides will soon work to boost Vietnam’s investment into Laos and vice versa, and that Vietnamese firms will be facilitated to invest in poor areas of Laos.
Once the largest supplier of foreign direct investment (FDI) to Laos, in recent years Vietnamese investment in Laos has been falling.
“The two sides will jointly review all Vietnamese investment projects in Laos, and increase the implementation of investment deals already signed,” stated the co-operation agreement.
The two countries will also organise a Vietnam-Laos investment co-operation conference in Laos this year.
Currently, Vietnam has 408 valid investment projects in Laos, registered at about $3.7 billion.
Tran Bac Ha, chairman of the Association of Vietnamese Investors in Laos, said that over the past five years, Vietnam’s registered investment capital in Laos has increased by 1.6 times, and the number of Vietnamese projects in its western neighbour has also risen by 1.4 times.
However, Ha warned that in 2015 and 2016, Vietnamese investment into Laos plummeted. In 2016, only three projects with registered capital of $6.3 million were licensed, occupying 4.7 per cent of the total 63 foreign projects invested in Laos, and a mere 1.69 per cent of the total FDI that Laos attracted.
“In 2010, Vietnam was Laos’ largest FDI investor. But the rank was down to third in 2016 and may further decrease to fourth in the near future,” Ha said.
He also pointed out a series of obstructions for Vietnamese investors. For example, Vietnam has yet to have any mechanism on credit-related support for local investors’ overseas investment projects. In another case, while the central banks of many nations in the world allow investors to use their land rights as collateral for mortgages at banks “it is not the case in Laos, though we have sent petitions to the government 12 times over the past five years,” Ha said.
Minister of Planning and Investment Nguyen Chi Dung also said that some Vietnamese projects in Laos are not effectively implemented. However, he also pinpointed some obstructions that Vietnamese investors face in Laos.
For instance, recently Laos has a new policy in limiting FDI in the forestry sector. This has affected many Vietnamese investors wishing to invest in this sector there.
“Laos’ investment climate is not quite attractive due to weak infrastructure, a low-quality labour force, and prolonged administrative procedures,” Dung said. “Meanwhile, Vietnamese investors are considering other regional markets with a more attractive investment environment.”
Vietnam’s investments have contributed over $250 million to Laos’ budget. Last week, the two countries agreed that Vietnam will grant Laos a non-refundable sum of $38.64 million for 2017.
By Khoi Nguyen