MORE AND more Japanese companies are investing in Laos given that the country is integrating with the region and the world and is improving its investment climate.
As of last month, the number of Japanese companies in Laos had climbed to 132, which is double the figure recorded in 2012, according to the Japanese Embassy.
Last year, Japanese businesses operated 22 investment projects in Laos, an increase of two projects from the year before.
However, the value of Japanese investments more than halved from US$38.49 million (Bt1.37 billion) in 2014 to $17.37 million in 2015.
The decline could be linked to the fact that fewer investment projects were operated by Japanese companies in the sectors that generally require large registered capital, such as power and mining.
As for investment trends, manufacturing is the dominant sector but recently Japanese companies have diversified their interests and are increasingly targeting agriculture, banking and consulting.
One of the most interesting features is that the number of Japanese companies investing in special and special economic zones (SEZs), notably in Champassak and Savannakhet provinces, has increased significantly.
In 2014, five projects were operated by Japanese businesses in SEZs with a total value of $5.43 million, rising to 10 projects in 2015 with a total value of almost $6 million.
There is no up-to-date report on the total value of Japanese investments in Laos, but in 2013 the figure stood at $405.7 million.
The government is keen for more Japanese investors to come to Laos because they are concerned about environmental and social responsibilities.
As major investors, the Japanese see Laos as a new production base following the improvement of the country’s infrastructure, legal framework and availability of cheap labour.
One of the main reasons Japanese companies have shifted from Thailand to Laos is because of the risk of flooding, political uncertainty and an increase in the minimum wage there.
Other factors have also led companies to Laos, such as the similarities between Thailand and Laos in language and culture, and competitiveness in labour rates and electricity fees, and the stable political situation in Laos.
It is relatively easy for companies that operate and have some know-how in Thailand to move to Laos, which is known as the “Thailand Plus One” strategy.
If the Lao government further improves the business environment, this momentum of Japanese investment in Laos is expected to accelerate in the future.
There is a framework for the discussion of business environment improvement between Laos and Japan, called the “Laos-Japan Public and Private Sectors Dialogue”.
This annual dialogue began in 2007, aiming to attract more Japanese investment in Laos through discussions about how to address the challenges that Japanese companies in Laos currently face.
These discussions are beneficial for the improvement of the business environment in Laos through the direct exchange of views between the private sector and the Lao government.
Japanese experts say it would be highly appreciated if the Lao government were aware of the issues facing the business sector and formulated concrete measures to address them.