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Vehicle assembly plants a non-starter at present
The government has good intentions in wanting to set up vehicle assembly plants but it will take time to bring the idea to fruition, Lao Automotive Association President Mr Saneu Chounlamany has said.
Mr Saneu made the comment last week after the government put a stop to second-hand vehicle assembly plants in Laos. Instead, the government wants investors to set up assembly plants that would turn out new vehicles.
The government believes that the proliferation of cheap second-hand vehicles is causing traffic congestion and that old vehicles cause air and noise pollution in urban areas. However, low wage earners rely on second-hand vehicles because they can't afford to buy a new model, which is much more expensive.
Mr Saneu said that one of the major challenges for Laos in attracting domestic or foreign investors in the industry was the small market in the country, which has a total population of less than 6.5 million. This made it hard to convince potential investors there was a profit to be made.
Because Laos is not a member of the World Trade Organisation its exports are subject to high import tariffs by other countries. Only a few locations, including the European Union, charge a low tariff for Lao products. This limited access to international markets poses challenges for Laos in attracting foreign investment in the automotive industry.
Mr Saneu also pointed out that Laos did not have enough skilled workers or the necessary infrastructure to operate vehicle assembly plants. The government would have to train up workers to meet the needs of this industry, he said.
It would not be easy to convince vehicle manufacturers to move their production base to Laos, since investors would not only require skilled workers and infrastructure but also special incentives.
“It took Japan more than 30 years to build up a regional assembly industry in Thailand, so it won't be easy to make it happen in Laos,” Mr Saneu said. To service the industry, parts would also need to be manufactured.
He said there were many vehicle parts manufacturers in Thailand, which turned out components for brand name vehicle assembly plants. However, the supply of these was limited and the making of copies was prohibited.
Mr Saneu said it was possible for Laos to build motorbike assembly plants because this would not require such a large capital outlay and the demand for motorbikes was on the increase due to strong economic growth.
Honda, Kolao and some Chinese motorbike manufacturers have already set up plants in Laos because the government reduces the import duty on imported components, which means Laos-assembled bikes are cheaper than imported ones.
vientiane times
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