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Low-wage Laos attracts Japanese, S. Korean companies
Japanese companies are looking at Laos as an alternative production base to fast-growing Asian economies where wages are rising, while South Korean businesses are investing in the country to cultivate a promising market.
Japanese direct investments have gradually increased in recent years.
Last year, there were 65 Japanese-affiliated companies, up from 40 five years ago, according to the Japanese Embassy.
The companies include many apparel makers and electronic parts makers in addition to companies involved in mining and hydropower generation.
The manufacturers are diversifying their overseas production bases partly because labor costs have increased in emerging economies such as China and Thailand.
Shirt maker Yamaki Co. set up a factory in Vientiane in 2005 because wage levels were expected to rise in Thailand, where it had been operating a plant since 1989.
The minimum wage is equivalent to about 5,300 yen ($65) a month, less than half of those in China and Thailand. About 300 people work at the factory.
The company had considered setting up shop in Cambodia or Myanmar (Burma) but decided on Laos due to its ample electricity supply and political stability.
"It is easy to transfer the know-how accumulated at our Thai plant (because the two languages use similar words)," said Hidehiro Omori, manager of the factory.
Almost all the products are shipped to Japan for sales at supermarket stores and mens' clothing shops.
Yamaki plans to produce 900,000 shirts in fiscal 2011, up 50 percent from the previous year.
"We will probably be able to use Laos as an export base to (the neighboring) Yunnan province and other parts of China in the future," President Keiji Miyamoto said.
About 30 companies are members of the Japanese Chamber of Commerce and Industry in Vientiane.
Secretary-General Kenichiro Yamada said the number of inquiries from Japanese companies concerning investing in Laos has increased since the end of April although it temporarily fell after the March 11 Great East Japan Earthquake.
South Korea's growing presence in Laos is symbolized by the country's first stock market, which started operations in Vientiane in January with two listings.
The exchange is operated jointly by Laos' central bank and the Korea Exchange, which runs stock exchanges in South Korea.
"Laos will deepen its relationship with South Korea over the long term while writing the history of its capital market," said Lao Securities Exchange Vice Chairman Park Ho-jeong, from the Korea Exchange. "It can lead to business opportunities for (South Korean) companies."
The Korea Exchange has provided a wide range of support, from personnel training on the role of a stock exchange to provision of computer trading systems.
A senior official at the Laos exchange said its goal is to increase the listings to about 20 by 2015.
Laos is a largely agricultural nation of more than 6 million people. But its economy has grown nearly 8 percent a year, and the government has set an annual economic growth target of 8 percent or more through 2015.
Manothong Vongsay, deputy director general of the Investment Promotion Department at the Ministry of Planning and Investment, told The Asahi Shimbun that the communist government expects that foreign investments will continue to lead economic growth.
"We want to attract investments centered on mining, agriculture and related processing industries as well as tourism," Manothong said, adding that education and medical services are among other candidate areas.
Laos' per-capita gross domestic product is slightly more than $900, which puts it among the least developed countries, according to United Nations definitions.
Manothong said the country's goal is to outgrow that status by 2020.
While three neighboring countries--Thailand, China and Vietnam--dominate in foreign direct investments, South Korean companies have filed into Laos in such areas as financial services, construction and real estate.
Kolao, a Lao company established by South Korean entrepreneur Oh Sei-young, is listed on a South Korean stock exchange and handles sales of Hyundai vehicles and other products.
Heunghwa, a mid-ranked construction company, has been operating a high-class condominium for rent in Vientiane since two years ago, with foreigners as its main target customers.
Jo In-koo, who heads the company's local arm, is bullish, although less than 40 percent of the property has been occupied.
"The market size may be small, but we can expect decent profits if we move ahead of other companies," Jo said. "We want to make the name of Heunghwa synonymous with condominiums in Laos."
asahi.com
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