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Economists advise caution on public/private projects
Most provinces in Laos are now encouraging private companies to participate in developing transport infrastructure by investing capital which the authorities will repay within a set period.
Economists agree in principle that this approach will boost investment and development and create jobs, but have warned that without proper management, local authorities could face financial problems and debt could spiral out of control.
Lao economist Dr Liber Libuapao considers this arrangement to be a form of state investment since, although a private company will initially put up the capital required, the authorities will fully reimburse the company at a later date.
He says the benefit of this system lies in faster infrastructure development for individual provinces and the country as a whole.
But he warned that authorities must be able to pay the debt, by making certain new projects don't increase debt to an unmanageable level.
“I'm fully aware that the priority of private companies is the profit margin to be made, which they calculate taking into account interest rates, inflation and construction costs,” Dr Liber said.
One of the most important things is that projects should only be awarded following a bidding process to ensure government money is used effectively and efficiently for the benefit of Lao people.
“A project that goes ahead without a bidding process is considered contrary to the law on state investment,” he said .
Another Lao economist, Dr Sathabandith Insixiengmay, agreed the arrangement is a good system for development but stressed the authorities need to ensure they get a good deal in negotiating with private companies.
“In other countries similar systems operate. Private investors often only look at the financial benefits so the authorities are responsible for taking into account any project that affects the population by undertaking social impact assessments,” he said.
As an independent country, Laos started out with no infrastructure following liberation in 1975. Now, the country mainly relies on overseas development assistance (ODA) and natural resources which are considered unsustainable sources of revenue.
The country's economy is driven by both domestic and foreign investment. In the past five years, overall investment accounted for 32 percent of GDP, of which 10 percent was government funded.
According to the Ministry of Planning and Investment, the value of state investment will reach 1,725 billion kip this fiscal year. About 318 billion kip will be invested in the economic sector, 476 billion kip in the social sector and 931 billion kip in infrastructure development.
But this budget is considered inadequate to meet development needs, forcing provincial authorities to turn to private companies to fund their development activities.
To finance projects to mark the 450th anniversary of Vientiane as the nation's capital, private companies undertook the construction of roads and other infrastructure, on the understanding they would be reimbursed within five years.
vientiane times
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