Lao State Fuel to protect its market via growth

ASEAN+ March 24, 2018 01:00

By VIENTIANE TIMES
ASIA NEWS NETWORK
VIENTIANE

LAO STATE FUEL, one of the largest state-owned enterprises, does not plan to borrow money or request additional funding from the government to expand its operations even though it is threatened by the rapid expansion of private firms, according to a company official.



“We have no policy to borrow money or request more funds from the government to expand our business. What we will do is to keep our focus on maintaining a good relationship with our current customers,” the company’s Deputy Managing Director, Phayboun Phomphaphithak, said earlier this week.

Phayboun, who is Acting President of the Petroleum and Gas Association, made the comment against the backdrop of a growing threat due to the rapid expansion of private firms in petrol-related businesses.

A number of private fuel companies in Laos have developed their operations over the past few years. Using the business concept of one-stop service, many firms are transforming themselves into not just a petrol station but also a convenience store, mini bank unit, restaurant and coffee shop.

This is posing a strong challenge to state fuel enterprises, which have dominated the fuel distribution market in Laos since 1975.

Phayboun said that despite the rapid expansion of private firms, particularly foreign firms, Lao State Fuel remains a top fuel distributor.

“Our market share is around 21 per cent. We are still number one in this market,” he said.

He said the company’s main customers were still government bodies, which have made a strong commitment to stay with the firm. In addition, the company is still able to retain mega development projects as customers.

“Our strength is that we are seen as reliable by our customers, especially the developers of major investment projects, who continue to use our services. They want us to supply them with fuel,” he added.

Asked about the current government policy concerning fuel businesses, Phayboun said the government is implementing a new regulation that seeks to ensure safety, quality control and fair competition among petrol stations.

In pursuit of this goal, the government will no longer allow fuel distributors to locate a petrol station close to an existing one, so that they don’t compete with each other. New petrol stations are being encouraged to set up business in areas where people need access to this service.

He also said the government wants to encourage fuel suppliers to reform their organisational structure so that the government can inspect and collect taxes from them more easily.

A fuel company must make it clear whether it wants to be an importer, a wholesale distributor or a retail sale distributor. 

A company should not operate all these businesses using a single business licence, he added.