Govt encourages private sector investment in infrastructure development

The government has issued a decree to promote the participation of both domestic and foreign investors in the development of infrastructure and public service delivery projects through private-public partnerships (PPP).
PPP projects are proliferating in Laos because the government requires huge investment to improve road networks, railways, and other amenities to boost economic growth.
Economists say the contribution of the private sector in the construction of roads and railways will help ease the burden on the government’s budget at a time of financial difficulty.
But such projects must not affect national security, the environment, or the health of local communities.
Under the PPP scheme, the private sector will provide most of the financing while the government will provide additional capital to fund joint investment projects, according to the 31-page decree signed by Prime Minister Thongloun Sisoulith recently.
The Vientiane-Vangvieng section of the China-Laos expressway which opened for public use last month is the first highway in Laos to be funded jointly by the Lao government and China’s Yunnan Construction and Investment Holding (YCIH) Group. YCIH has a 95 percent investment stake in the project while the Lao government contributed 5 percent of the cost. The expressway will be operated under the Build-Operate-Transfer (BOT) model for a period of 50 years.
Given that private sector investment represents more than 50 percent of all investment in Laos, the government is committed to offering incentives to encourage private sector investment in State-funded development projects by providing information and labour as well as formulating policies to facilitate the implementation of those projects.
The government also needs to enact and amend legislation and improve the business environment in ways that encourage investment, enabling private companies to access funding and carry out mega projects.
The decree also stressed the need to offer tax breaks in a bid to woo more foreign investment.
Article 28 of the decree states that any PPP project with an investment value of more than US$300 million must be approved by the National Assembly. In addition, all joint investment projects with a government contribution of 20 billion kip or more must get approval from the National Assembly.
The National Assembly will be instrumental in approving PPP projects relating to nuclear energy, that may have a severe impact on the environment, affect more than 500 families, or involve the granting of a concession for a parcel of land measuring more than 4,000 hectares. 
The government can approve only PPP projects that do not require funding from the national budget, as well as projects that do not involve the conversion of protected areas to other forms of land use.
Government bodies have been urged to inspect and assess the implementation of PPP projects for the benefit of investors and the country as a whole.

By Somsack Pongkhao
(Latest Update January 24, 2021)