Laos presents huge trade and investment opportunities for Thailand thanks to its lavish natural resources, but the Thai side will have to do more to strengthen bilateral ties if it wants to benefit fully, said Thai Ambassador to Vientiane Wiboon Khusakul.
Thai companies that have invested in the country include Mitr Phol Sugar Group, which has a sugar mill in Savannakhet, Charoen Pokphand Group with a coffee plantation in Champasak province, and Lao World Group, which is involved in contract farming in Borikhamsay.
Thailand still has the upper hand when investing in the Lao agricultural sector because transportation costs are cheap due to the two countries’ proximity, Wiboon said.
The prominent points of Laos for investors are its abundant natural resources such as copper, aluminium and tin, as well as its hydropower. The country also has political stability.
Investors from Vietnam and China in particular are increasingly interested in doing business in Laos, with China already having 40 mining projects there.
But the biggest gain will come from Laos’ plan to become the “Battery of Asia” in 2020, with 20,000 megawatts of electricity generated per year and the country’s main income by then coming from selling electricity.
Thailand is already a major customer of Lao power, as the two countries have an electricity purchase contract for 5,000MW in 2015.
In 2007, electricity generation became a key sector attracting investment money from abroad, accounting for 53 per cent of other countries’ investments in Laos.
Wiboon said that, looking at the accumulated investment from 2000 to 2009, Thailand was the top investor at US$2.65 billion (Bt86.6 billion) followed by China at $2.24 billion and Vietnam at $2.11 billion. However, Thailand fell to third place in 2009 at $908.6 million, while Vietnam soared to top spot with $1.421 billion followed by China with $933 million.
Turning to international trade, the Economist Intelligence Unit reported that in 2009 Thailand was Laos’ No-1 trade partner with 49 per cent of bilateral trade, followed by Vietnam at 18.6 per cent, China at 12.1 per cent, South Korea at 6.3 per cent and the United Kingdom at 3.3 per cent.
To Wiboon, transportation continues to be an obstacle for bilateral trade and investment because Laos has only one road – the R3 – linking it with other countries.
He said that after two bridges currently under construction across the Mekong River are completed, transportation would be more convenient.
The Nakhon Phanom-Tha Khaek Bridge – due for completion in 2011 – is invested in by the Thai government, while the Huai Sai-Chiang Khong Bridge is invested in by the Chinese government.
On the 63rd anniversary of Thai-Lao relations this coming December, the ambassador said he hoped the Thai government would approve the Bt800 million needed for railway construction from Tha Na Laeng to Vientiane, which would make transportation even more convenient and bring bilateral ties closer.
The Export-Import Bank of Thailand (Exim Thailand) is a major support player for Thai-Lao business.
As of last December, the bank had outstanding loans amounting to Bt24.7 billion for investment in all countries.
The largest portion – Bt9.02 billion – went to Laos, followed by Burma at Bt4.39 billion, Cambodia at Bt3.15 billion, the Maldives at Bt1.4 billion, Indonesia at Bt2.58 billion, Malaysia at Bt3.19 billion and Vietnam at Bt425 million.
Exim Thailand president Apichai Boontherawara said most of the loans to Laos involved electricity projects. Besides the Nam Ngum 2 Dam that the bank has already funded, there are four other projects: the 210MW Theun Hin Bun Dam, the 150MW Huay Ho Dam, the multibillion-baht Hongsa coal-fired power plant and a raw-sugar processing factory.
Of the $881-million loan for the Nam Ngum 2 Dam in 2006, Exim Thailand approved $60 million for the Lao Finance Ministry. Laos holds 25 per cent of the project, while the rest is held by SouthEast Asia Energy, a subsidiary of Ch Karnchang (Lao).
Ch Karnchang (Lao) Managing Director Khampui Jeerareunsak said the dam’s construction was now 85 per cent complete and that commercial operations should start in early November, four months ahead of schedule.
Apichai said Exim Thailand this year aimed to be the Greater Mekong Sub-region’s leading financial institution for trade and investment. Many other banks usually lend money to projects that Exim Thailand sponsors, he said.
He added that the bank hoped to increase its investment role in Indonesia, which also has abundant natural resources.