Wednesday, December 21, 2011

Japanese investments in Laos

Interesting read about investments in Laos, in particular from Japan. It seems that EU and Japan are the doners, while the business goes to China and Vietnam. Why that? First of all I think that EU and Japanese business are not taking as much risk as VN and China: They look for return on investment rather than market share or to be the first. Also, business procedures are different: Industrialized countries are less likely to pay bribes and follow instead international business standards.
These emerging countries will need to transport their goods through Laos so they can increase trade value and economic cooperation. Laos' land-linked status can provide Japanese investors with investment opportunities in the service sector, including international freight operations.
This sounds nice, but Laos is quite far away from becoming a freight-hub: No streets, and if so they are not maintained and broken in less than a year. The high-speed railway is in fact on hold, since China seems to demanding way to much (a 10km special chinese business zone along the track). Once the government can assure the assure the consistence of infrastructure, this can indeed become a great income source for Laos.
Laos also has a strong workforce as most of its population is of working age.
This is when you look only at numbers. In fact, most of these workforce is unskilled, and the Japanese (and other) government trying to improve the skills. But as long as there is no major change in curriculums in public schools and in business oriented education (more practice, less textbooks), the workforce will be useless.
At present, there are 87 Japanese investment projects in Laos worth about US$540 million, with most in the areas of agriculture, hydropower and construction.
Sounds nice, but actually a lot of them failed. It all comes down to two issues: Governance and Education. This has to be improved, then Laos can have a brighter future.

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