China looks set to become the largest foreign investor in Laos in the near future
This was the opinion expressed by Lao National Chamber of Commerce and Industry Secretary General Mr Khanthavong Dalavong during an interview with Vientiane Times yesterday.
“Chinese investment in Laos has increased rapidly since the end of last year. If the rate of increase remains unchanged, China will become the largest foreign investor in the near future.”
At present, China is the second largest foreign investor in Laos after Vietnam, Mr Khanthavong said, quoting a report from the Ministry of Planning and Investment. He was unable to give details of the current value of Chinese investment.
From 2000 to 2010, Vietnam was the largest foreign investor with an investment value of US$2.77 billion, while China was in second place with an investment value of US$2.71 billion. Thailand ranked third with a total investment value of US$2.68 billion.
Mr Khanthavong said the rapid increase in Chinese investment was due to the Chinese government's policy to encourage companies to expand into overseas markets including Laos. At the same time, the Lao government has been strongly promoting foreign investment in order to boost economic growth.
The Lao government is assisting Chinese firms to invest in northern Laos, especially in the areas of agribusiness, mining, hydropower and real estate development, he added.
“Laos and China have agreed on a list of 300 priority products as a means to boost bilateral trade and investment,” Mr Khanthavong said, adding that China's offer to reduce import duties on Lao products would further encourage Chinese investment in Laos.
He said many Chinese companies were now establishing industrial farms in northern Laos, growing bananas, sweetcorn and cassava.
Mr Khanthavong said the Asean-China free trade deal, which Laos will have to implement in 2013, will create even more opportunities for Laos to attract Chinese investment .
Lao companies should strengthen their operations and be ready to join forces with Chinese businesses, and should also be prepared to face stronger competition.
“If we are not ready for competition, we run the risk of being controlled by foreign companies,” he said.
Mr Khanthavong said that increasing Chinese investment in Laos would bring both opportunities and challenges.
The increase in foreign investment would boost GDP growth and job creation, he said. But Laos would suffer a major trade deficit and loss of economic power if it could not produce exports for China, which is one of the world's largest markets.
