Vietnam and Laos partnership boost

The Lao presidential visit to Vietnam targeted investment co-operation improvements

During the visit to Vietnam by General Secretary of the Lao People’s Revolutionary Party and President of Laos Bounnhang Vorachith from December 19-21, leaders of both countries assigned relevant ministries and agencies to work with each other to radically remove all obstacles for Vietnamese investors in Laos, and boost the implementation of some key projects of Vietnam in Laos. They claimed this as one of the key priorities in co-operation between the two countries as of now.

According to the Association of Vietnamese Investors in Laos, Vietnam’s investment in Laos is decreasing. In 2015 and 2016, Vietnamese registered investment into Laos was only about $100. Last year, only three projects registered at $6.3 million were licensed. In this year’s first 10 months, only two new projects were licensed, registered at $12.86 million.

Many Vietnamese projects in Laos have been bogged down in difficulties.

For example, Vietnam’s biggest Laos-based investment project, which is to exploit and process potassium salt, began construction last year. The $522.5 million project, invested by Vietnam National Chemical Group (Vinachem), will use potassium salt as a material to produce potassium fertilizer. However, only 30 per cent of the plant’s construction has been completed so far, with over $74 million disbursed.

“The project is faced with difficulties due to the price of potassium in the world market plummeting from a former $480 per tonne to a present $250 per tonne, with no signs of an approaching recovery. This has made the project ineffective, and the investor cannot mobilise capital for further implementation,” said a document on Vietnam’s investments in Laos sent to VIR by the Department of Foreign Economic Relations (DFER) under Vietnam’s Ministry of Planning and Investment (MPI).

“The Vietnamese government and the prime minister have organised many meetings with ministries and Vinachem to lift this project out of difficulties,” the document stated.

DFER ascribed the uneven situation of Vietnamese investment in Laos to many factors, including the weak financial capacity and expertise of some Vietnamese investors; complicated procedures for investment, business, and import-export in Laos; and lack of incentives for Vietnamese projects in Laos. Also, Laos’ land planning and infrastructure remain imperfect.

According to MPI, Vietnam currently has 276 valid investment projects in Laos, registered at about $5 billion, of which $1.6 billion has been disbursed. If loans from Vietnam’s banks are taken into account, the disbursed sum is $1.8 billion. Laos is Vietnam’s biggest overseas investment destination.

Vietnam’s investments in Laos are focused largely on the hydropower sector, with total capital of $1.47 billion or 29.4 per cent of Vietnam’s total investments in Laos, followed by the service and infrastructure sector (over $1 billion – 20 per cent), the mining sector ($970 million – 19.38 per cent), the agri-forestry sector ($903.5 million – 18 per cent), and other sectors including property, finance, and banking.

DFER’s head Tran Nhat Thanh, who is in charge of the Laos-Cambodia Co-operation, said Vietnam’s government regards Vietnam’s investments in Laos as “a vital contributor to its comprehensive political, economic, cultural, and security and defence co-operation with Laos”, and the investments are aimed to “ensure long-term benefits based on friendship, equality, and mutual benefits between the two countries”. In Vietnam’s investment strategy into Laos, Thanh said, “All investment activities must ensure effectiveness and harmonise the benefits of investors and national interests of both nations, and contribute to solving social issues, generating employment, and improving the quality of people’s lives in Laos.”

Vietnam’s Party Central Committee’s Commission for External Relations wrote in a document on the Vietnam-Laos co-operation, “Many projects have produced profits, and positively contributed to the two countries’ development, generated employment, and done a very good job in contributing to ensuring the social security of Laos.”

Viettel Group’s Viettel Global Investment JSC earned revenue of VND13 trillion ($590.9 million) in this year’s first nine months, up 19 per cent year-on-year.

The Unitel network Star Telecom, a joint venture between Viettel Global and Lao Asia Telecom, has 2.8 million subscribers and is aiming for 10 per cent growth in revenue to $175 million this year.

Another major endeavour is Hoang Anh Gia Lai Group’s investments in rubber tree and oil palm plantations in Laos. The firm also put into operation the Attapeu Airport in 2015 and has invested $80 million into building the Nong Khang Airport in Houaphanh province.