Sunday, December 18, 2011
What's the future for Laos economic boom?
http://www.reuters.com/article/2011/12/18/us-laos-investment-idUSTRE7BH06F20111218 I disagree with this article. First of all Western countries pay a lot for health and rural development. Second, China and Vietnam just buying the country. A lot of property in Vientiane is already in VN hands. Logging takes place in the south, basically unregulated, and in the north China is building ghost towns for future gamblers. None of the Lao phone companies makes profit, and the same goes basically for most SOEs. Beer Lao might be different. The income from dams is nice, but will not be enough. Yes, there is a boom, but it will not take long then Laos is facing the same problems like Vietnam right now: Investors cash in and run away. Regional companies, especially from the neighbors, just have one advantage: They can deal better with corruption. This and the total lack of law enforcement is the reason why Western companies are careful. In Vietnam we saw that investment and return of investments isn't the same process. Just an example: I was told that in Laos local DVDs are not much copied because people are afraid to be sued. But copying foreign movies isn't a problem at all - because a foreign company has basically no tools for getting justice here. I still believe the current boom won't last long. While Vietnam can rely in a export crisis on it's large population and the domestic market, Laos doesn't have this advantage. It is depending on foreign investment, what means giving concessions and creating income based on the fees and taxes. Mining seems already to be on it's peak, logging might decrease following more protests of local farmers suffering from landslides, and most property in Vientiane is sold already. As long as there is no market supervision and regulation, a safe business environment and enforced laws, Laos is still a high risk place for business.