Tue, August 16, 2022


Lao PM: Embezzlement, lax management key to losses by state enterprises

Lao state enterprises are undergoing serious reform after years of chronic losses from embezzlement and poor management, the prime minister has announced.

Premier Phankham Viphavanh said the reforms include selling off stakes in some enterprises to end the state’s burdensome subsidy of their operations.

The Lao state owns 178 enterprises, nearly all of which have recorded losses for years.

“There are very few state enterprises that make a profit,” the PM told lawmakers last week in response to questions in the National Assembly.

State enterprises should be driving the nation’s economy but have instead become a heavy burden, he added. Enterprises that are fully state-owned hardly ever make profit and have had to be heavily subsidised.

The administration of these enterprises typically did not follow a sound business plan, the PM said. He blamed their management failures on recruitment policies that were largely based on nepotism.

Companies that were thought likely to generate remarkable revenue through the participation of their children or other relatives provided the main source of recruitment, the prime minister told the televised session, referring to the children and relatives of influential individuals.

In some cases, managers of state enterprises invented projects and allocated budgets for them, but put the money in their own pockets, he said.

He also admitted these issues had arisen because of government negligence.

Phankham said the government has now embarked on a deep reform of state enterprises, pledging to no longer tolerate damaging practices.

Under the reform programme, the government will retain full ownership of enterprises of extreme strategic importance. It will sell stakes of various sizes in other enterprises to private investors, depending on their importance.

Under the reform agenda, two banks that were previously state-owned and suffered chronic losses have begun to turn a profit after the government sold a 70 per cent stake in the banks to local investors.

Since being restructured last October, the Lao Development Bank had generated profit of 87.91 billion kip by the end of December. The bank has also paid 58.85 billion kip to the government in fees and taxes.

In addition, the Agriculture Promotion Bank had turned a profit of 7.56 billion kip as of the end of May this year, after restructuring began in December.

The top executive posts of these joint-venture businesses are held by individuals who have a large stake in the banks, with the management system based on accepted business models.

PM Phankham said civil-servant-like officials who previously headed up state enterprises could no longer do whatever they wanted as was the case before the joint ventures were formed.

Under the reform programme, the government has also sold a 51 per cent stake in the Lao State Postal Enterprise, according to the Finance Ministry.

Meanwhile, sale of a 49 per cent stake in the Lao Logistics State Enterprise and MSIG Insurance (Lao) Co Ltd is currently being processed.

Given its significant importance, the government will retain full ownership of Electricite du Laos, but comprehensive reform will be undertaken.

The government will retain at least a 51 per cent stake in Lao Airlines, the Agro-industrial Development Company, Lao Export-Import Trading Company, and the Lao State Fuel Enterprise. EDL-Generation Public Company will remain a public company, but comprehensive reform will be carried out, according to the Finance Ministry.

The state-owned Inter Lao Tourism has been dissolved and two others – DAFI and the Lao Cotton State Enterprise – will also be disbanded after being considered incapable of reform for efficient operation.

Vientiane Times

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Lao PM: Embezzlement, lax management key to losses by state enterprises

Published : June 27, 2022

By : Vientiane Times