Laos 20231129

Mekong Memo Laos Weekly: Business, politics, finance, trade & legal news.

Nov 29, 2023

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Headlines:

Strategy Sharpens Focus with National Agendas

Setting the Bar High for Economic Growth

Inflation Tips Past 25% in November

Mandatory Mobile Phone Registration Looming

SEZ Bill Falls Short in Assembly Over Details

USAID Expands Support for SMEs

APO Boosts Backing for Productivity and Growth

Digital Frontiers: ‘Rare Earth’ Digital Token

Socio-Economic Plan Hits Halftime

Trade Surplus Approaching Three Commas YTD

Luang Prabang Heritage at Risk from Hydropower

Strategy Sharpens Focus with National Agendas

Laos appears to be actively addressing its financial and economic challenges through a series of legislative and policy measures. The National Assembly has extended two national agendas until 2025, focusing on financial stability and combating the drug trade.

Efforts to modernize revenue collection and reduce spending have narrowed the budget deficit, while measures to increase foreign currency reserves and control inflation are (slowly) gaining traction. The cabinet is also exploring innovative solutions, such as a rare earth token project (more on that story below), a scheme scant on details but which claims to be aimed at generating more foreign currency.

The government continues to work on stabilizing exchange rates, improving revenue systems, and supporting exporters. The new agendas place an emphasis on ensuring export receipts are processed through local banks to increase foreign currency inflows and government is also looking at reducing imports of luxury items and goods that can be produced domestically, alongside efforts to streamline processes and improve the business environment to attract more foreign investment.

Read more: Xinhua (Strategies), Xinhua (National Assembly), Xinhua (Cabinet)

Setting the Bar High for Economic Growth

The government has announced an ambitions 4.5% economic growth target for 2024, an increase from the 4.2% forecast for 2023. The reason this target, although only slightly ahead of this year’s forecast, is seen as ambitious is due to ongoing economic and financial challenges, including high inflation and currency exchange rate concerns. The government acknowledges the difficulty of achieving these goals, especially reducing the inflation rate from nearly 30% (next article) to the targeted 9% in 2024.

Inflation Tips Past 25% in November

In November, Laos experienced an annual 25.2% inflation rate, slightly lower than the previous month. This inflation surge significantly impacted most sectors, with notable increases in restaurants and hotels (35.2%), clothing and shoes (31.8%), and healthcare (26.5%). Despite a minor decrease in food and non-alcoholic beverage prices, the overall economic landscape remains challenging. The Lao kip's depreciation, partly due to labor shortages, has substantially contributed to these inflation numbers. The Bank of the Lao PDR continues to claim that they will be able to reduce inflation to 9% by the end of 2024 through tighter monetary policies and improved banking services.

Mandatory Mobile Phone Registration Looming

Laos has mandated the registration of all 6.45 million cell phone users by December 16, 2023, as part of a government initiative to combat online scams and suppress dissent. This demand for registration has been met with mixed reactions, with some viewing it as a necessary step against criminal activities, while others criticize it as an infringement on privacy and a heavy-handed means to suppress dissent in the one-party state. The registration requires personal details including facial scans and residency information. The policy, initially introduced in 2020 as a COVID-19 measure, faces challenges due to a lack of necessary identification documents among over half of Laos' rural population. The government's strict enforcement of this policy seems to be in support of its broader efforts to control internet access and monitor content, as noted in the U.S. State Department's 2022 Human Rights report.

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