|
Lao cement makers can survive in AFTA: Business leader
Cement factories are becoming more efficient and will be ready to deal with stronger business competition when Laos joins the Asean Free Trade Area (AFTA) in 2015, according to a local business leader.
“We are aware of the competition we will face after 2015 and have taken steps to improve our business operations,” Lao Cement Producers' Group President Mr Vanthong Sitthikoune said yesterday.
He made the comment following a report from the Vientiane Industry and Commerce Department which indicated that cement producers would face strong challenges when Laos joins the AFTA, because cement made in Laos is more expensive than imported cement.
In 2015 Laos will have to abolish import duty on foreign made cement and remove all international trade barriers as part of its obligations as a member of the AFTA. By establishing the free trade area, Asean aims to create a single regional production base and market.
Mr Vanthong said members of the Lao Cement Producers' Group had already begun to invest in more modern technology, which would enable them to boost output and cut operating costs. This would be a major factor in giving them a competitive edge in the regional market.
Increased output would enable producers to sell cement at a price below that of imported products.
Mr Vanthong said one of the major challenges the industry faced was to improve the efficiency of business operations so factories could bring down production costs and sell a cheaper product.
A number of people have asked why Lao cement is more expensive than imported cement given that Lao factories use raw materials that are sourced locally and labour costs are low compared to those in other countries.
Mr Vanthong said one of the reasons for the high cost of Lao cement is the high interest rate carried by loans. Cement producers have not been given soft loans by the government as is the case in other countries.
Some cement factories in neighbouring countries have sourced investment capital through stock markets and so do not have to pay interest on loans, which cuts their production costs and lowers the price of the end product.
Producers in Laos will be able to sell cement at more competitive prices once they have paid off their debt to the bank, he added.
Small-scale production is another factor in the high price of Lao products, he said, explaining that if a factory can produce a large quantity of cement, it can sell the product at a lower price.
Most cement factories in Thailand have a production capacity of about 5 million tonnes a year, while the largest factory in Laos has a production capacity of about 1 million tonnes a year, Mr Vanthong said.
According to a study by the Ministry of Industry and Commerce, businesses that use domestic raw materials will be able to compete when Laos joins the AFTA in 2015, while those that rely on imported raw materials will struggle to survive.
vientiane times
|
