Lao businesses face ‘high logistics costs’

business April 21, 2017 01:00

By   VIENTIANE TIMES
Asia News Network
Vientiane

HIGH LOGISTICS costs in Laos are still a major obstruction for business operations throughout the domestic private sector and can also deter investors, a recent study suggests. Logistics costs in Laos are as high as double those of other Asean countries, according to the Japan External Trade Organisation.



A study conducted by a Jetro survey team compared logistics costs between Laos and Thailand, especially between Vientiane and Savannakhet province and between Bangkok and Khon Kaen.

The route from Vientiane to Savannakhet province is 490 kilometres long, and the cost was worked out at US$2.50 (Bt12.50) per kilometre, while the route from Bangkok to Khon Kaen is 450km and costs only $1.10 per kilometre. The reasons behind the high logistics costs in Laos may not be petrol prices or drivers’ salaries but poor basic infrastructure.

Transportation of goods between Vientiane and Bangkok is also struggling with additional payments for documents at border checkpoints.

The issue is a major challenge for the Laotian government and relevant sectors should be paying more attention to seek possible solutions, the report suggests.

Jetro’s representative to Laos, Tetsuo Shibata, said that judging from his meetings with 200 Japanese companies, only 1-2 per cent were interested in investing in Laos, with most citing high logistics costs and a lack of skilled labour as relevant barriers to investment.

He advised that the logistics sector in Laos should receive more promotion and active implementation from the government especially around infrastructure improvement in order to attract more of these Japanese investors.

As a reference, the survey also compared transport costs between Bangkok Port and Yokohama, Japan, which averaged $800, while transport costs between Laem Chabang Port and Nong Khai – a border city in Thailand en route to Vientiane – was $700. Taking into account the relatively small difference in logistics costs for the two Thai ports, moving goods onwards to Vientiane can be put at around $1,000.