15 November 2021 Vientiane MESSAGE FROM THE PRESIDENT ON THE 18th TRADE AND PRIVATE SECTOR WORKING GROUP Dear Members, Last Wednesday 10th November, on behalf of AustCham, I attended the 18th Trade and Private Sector Working Group hosted by: - His Excellency, Mr Khampeng Saisompheng, Minister for Industry and Commerce; - Her Excellency, Ms Ina Marcuiullionyte, the EU Ambassador; and - our very own Australian Ambassador, His Excellency, Paul Kelly. Despite the hardships of COVID-19, I thought the Event succeeded as a positive kick-off for private sector advocacy throughout 2022 and in the lead up to the Lao Business Forum this year. HE Mr Khampeng laid the foundations for a successful dialogue by sharing the importance to the Lao Government of a conducive framework for business and cited political willingness to further improve the environment for trade and the private sector more broadly, citing the PM’s decree 02 and 03, as well as actions taken by Laos to comply under WTO and ASEAN agreements. He acknowledged that the Government’s approach to strengthening the legal framework and introducing policies, is overshadowed by a far more pressing need to effectively understand technical aspects, enforce the right policies and take into account local context. HE Paul Kelly built on the Minister’s opening with examples of good progress made when private side and public side have worked together, including work led by AustCham to promote a level-playing field through the Financial Services Working Group; the recently ratified Regional Comprehensive Economic Partnership; and the extraordinary meeting of the National Assembly in August where a national agenda sets the scene for a ceiling on commercial borrowing, an increase in foreign reserves, an increase in domestic production, and an increase in revenue collection. If Laos wants to become land-linked, it needs to address import tariffs, investment restrictions, customs delays, bureaucracy, red tape and corruption. It was a good segue into World Bank’s presentation which suggested that Laos must prioritise addressing macro challenges, particularly the high debt burden, in order for other targeted changes to the business environment to be effective. Kim Edwards, from World Bank, joined the Working Group live from Sydney and, together with Melise Jaud also of World Bank, shared that Laos’ rich natural resources had been a key driver of fast economic growth in Laos over the past two decades, but that the benefits had not been shared by all. · There was a stark contrast in consumption growth between rich and poor households over the years and Lao GDP growth did not translate into high job creation due to labour-intensive industries such as agriculture, services and to a lesser extent manufacturing, growing much slower or going backwards. · The approach to improving the investment climate appears to have been too timid and without the level of predictability high quality foreign private side investors would require when considering investment and expansion. · There is scope to improve competitiveness of Laos-based manufacturing which has not expanded since 2013, noting that Laos manufactured goods mostly participate as imports for other countries’ value-added exports. · Agricultural exports have shown resilience in value throughout COVID-19, but are a small contributor to total exports with scope to improve. In particular, improving quality is a key challenge that needs to be addressed. · The growth model over the past decades had created environmental pressures in Laos, and failed to significantly increase public revenue. · Going forward new mining licenses need to keep high standards and a shift to use coal also needs to be weighed against impacts to Laos’ marketing of clean energy. It resonated with me when World Bank spoke about Laos’ need to attract high quality manufacturers to Laos who connect into global value chains, and who generally have higher labour standards and wages; stronger environmental and social protections; and better responsible business conduct practices. And it is good news for AustCham members is that going forward there are opportunities for sustainable growth that preserves Laos’ natural environment. I’m very proud that at AustCham, we have members that are high quality companies with strong labour and environmental standards in Laos. Our advocacy work often promotes our members’ high standards and role models high quality CSR practices for other local enterprises to adopt. This year AustCham launched the inaugural Laos CRS award with our business chamber partners, and sponsor, the Canadian Embassy. You can still put your entries in for the CSR Award, which is open until 1 December 2021. Trade Consultant, Robert Kirk, shared some of the challenges of evaluating policy success and effectiveness given limited data points locally. The implication is that more than new reforms, there is a need for prioritization and implementation of existing ones which can only be addressed via an increase in transparency and information access for the Laos Government and its technical partners. · Look to formalise the business sector by making it easier for businesses to register (i.e. one stop business registration) and pay taxes (i.e. tax registration) · Reduce complexity of tariffs because the amounts themselves are not too large for business, but having 11 tariff buckets is administratively burdensome for business to comply with Complexity and uncertainty for businesses in Laos were key themes that also overlap with AustCham’s own advocacy agenda, particularly tax complexity in Laos. Mr Kirk spoke about the challenge of resolving Lao Business Forum given the high levels of technical skill required, including effective inter-departmental coordination and multi-year arrangements. In recognition of prioritization and limited data points in Laos, AustCham has this year partnered with other foreign chambers to launch an inaugural survey on business conditions for foreign enterprises in Laos. The survey seeks to identify the highest priority areas for business advocacy as well as lay the foundations for a business confidence index as a future data point for the Government as it looks toward investment growth. I’d like to remind members to ensure they provide their feedback into this survey before it closes on 26th November 2021. The Ministry of Industry and Commerce (MOIC) took feedback from World Bank and Mr Kirk in stride and Mdm Valy, representing the National Chamber of Commerce and Industry (LNCCI), shared plans to improve the Lao Business Forum and incorporate greater feedback from foreign chambers. Last year, AustCham was the first chamber and only foreign chamber to be invited to lead a working group ahead of the Lao Business Forum and it was my great honour to talk to the Prime Minister and Line Ministries about the convertibility, margin and depreciation challenges of the Lao Kip for businesses with foreign currency exposure. AustCham’s co-chairing of the financial services working group was seen as a successful partnership and this year, the LNCCI will aim to work with two foreign chambers to increase inclusiveness and continue to raise the voice of foreign chamber members. I want to thank the hosts of the Trade and Private Working Group for AustCham’s invitation to attend and we all look forward to working on a stronger, inclusive and more conducive business environment. I would also ask our members to please reach out if you have ideas, questions or want to be more involved with AustCham’s advocacy efforts. Regards, Carli
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