Unprocessed timber exports from Laos continue unabated
Laos has a policy to add more value to Lao timber products before exporting them but it is not easy to put the policy into practice as most of the local wood processing firms do not want to change their ways of doing business.
According to a survey funded by the World Bank, most of the wood processing firms in Laos have very strong links with the wood processing industry in a neighbouring country, which has strong interest in using Laos as a source of raw materials for their businesses.
In most cases, companies from neighbouring countries provide the necessary working capital for Lao firms to secure log quotas, as was highlighted in the Lao People's Democratic Republic Investment Climate Assessment for 2011.
The survey also shows that the fundamental problems which discourage Lao firms from entering the secondary wood processing industry include a lack of investment incentives, not enough skilled labour and poor enforcement of the government policy to ban the export of unprocessed timber.
The government announced several years ago that it would stop the export of unprocessed timber, aiming to extract more value from natural resources before exporting them. However, enforcement of the policy is ineffective as unprocessed product continues to leave the country in substantial quantities.
One of the measures which the government has taken was to close down sub-standard sawmills, allowing them to reopen after they upgrade their mills to use raw materials more effectively. However, most of the Lao timber firms are family owned and they cannot afford the substantial investment required to introduce modern technology.
According to the survey, there are more than 1,000 furniture manufacturers in Laos and more than half of them are family owned micro companies, which purely service the domestic market. The sector accounts for about 15 per cent of total exports and employs about 22,000 workers in Laos.
A number of wooden furniture manufacturers have urged the government to enforce its policy to ban exports of unprocessed products and secure a supply of timber for domestic firms, so they can increase investment and expand their businesses.
They said that restricting the export of unprocessed Lao timbers will not only help the Lao government add more value to its natural resources but also force the wood processing firms in neighbouring countries to relocate their production bases to Laos.
The Lao furniture makers expect to establish joint ventures with foreign firms if the government enforces its regulations to use natural resources more effectively. They also said that the joint venture will enable Lao firms to import the knowledge and technology required to improve the Lao timber industry.
About US$200 million worth of Lao timber products are exported annually, of which less than five million are secondary processed timber products.
