Thursday, 31/03/2011 11:46

Rising transport costs a further blow to struggling families

Lao economists are very concerned about rising inflation as high oil prices have forced the transportation sector to increase their prices for goods delivery both within Laos and to and from other countries.

The increase in transport costs will absolutely affect the price of goods in Lao markets, as well as the livelihoods of Lao people, particularly low-income earners.

President of the International Transport Association Mr. Prachith Sayavong said the cost of transporting goods within Laos and to and from other countries has increased by between 10 and 15 percent this month compared to the beginning of the year.

He said the rising oil price on world markets is the main driver for the changes in transport costs.

Vientiane is also facing a cement shortage after transportation companies said they cannot transfer cement from provincial factories to the capital without increasing prices.

In the Philippines on Tuesday, the government was reported to be considering the provision of a one-month fuel subsidy to the public transport sector to cushion the impact of rising fuel costs.

In Laos, the government may consider a fuel subsidy if the price of oil in the world market continues to rise, despite the fact that the government may lose more than 70 billion kip per month if it subsidises fuel.

A senior Lao economist, Dr Liber Libuapao, said governments in many countries have decided to subsidise fuel as a way to curb inflation .

“I think that it's a good time for our government to interfere in the market by subsidising fuel prices to curb inflation,” he said.

“We will gain more than we lose if we subsidise fuel prices because the cost of oil is linked to several factors including transport and market prices.”

Dr Liber said the volatile oil price would also affect the value of investment projects in Laos due to rising prices of construction materials in the country.

“We should set up a taskforce to study and define the problems, as well as seek possible solutions to address them.”

Laos imports more than it exports, resulting in a large trade deficit, mainly with Thailand. The price of goods in Lao markets often go up when fuel prices rise or the Thai baht appreciates, but rarely go back down.

Early this year, the Ministry of Public Works and Transport approved an increase of between 20 and 30 percent in public bus fares nationwide in response to the rising price of fuel. Bus operators say they would ask the ministry to increase bus fares again if petrol in Laos hits 11,000 kip per litre.

The increase in bus fares has affected the nation's inflation rate and led to complaints by the public about rising costs of living but stable incomes.

The year-on-year inflation rate in Laos jumped to 7.98 and 8.14 percent in August and September 2010 respectively, despite the country's economic growth of 7.9 percent for the year.

On Tuesday, the price of oil in world markets stood at US$104 per barrel. Fuel consumption in Laos increases by an average of 7 to 10 percent each year and is expected to total more than 750 million litres this year.

vientiane times

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