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Agriculture processing factories in Laos face financial woes
Publication Date : 20-09-2013
Agriculture processing plants in Laos are currently facing financial difficulties because they cannot obtain bank loans to boost their capital, according to a senior government official.
Minister of Agriculture and Forestry Vilayvanh Phomkhe highlighted the issue when speaking to Lao media in Vientiane on Thursday during the ongoing government open meeting.
He said the lack of revolving funds has delayed the expansion of processing factories, which play a significant role in realising the government's policy to bolster commercial production for export purposes.
“Processing factories try to get funding from banks but they cannot get a loan,” he said. “The root cause of the problem is that our government is not rich.”
He explained that banks themselves do not have large reserves as most of their money comes from cash deposits, so the business sector needs to provide sureties to borrow money from banks.
The minister mentioned several tapioca factories that lack revolving funds to expand their businesses. As a result, the number of cassava plantations has declined this year. Many people began planting other crops after factories started buying less cassava from local growers.
The Dao Instant Coffee Factory has encountered a similar problem. Opened last year after racking up construction costs amounting to US$128 million, the factory is considered one of the most modern in Laos.
Farmers offered between 70,000 and 80,000 tonnes of coffee beans to the factory but the company can buy only 30,000-40,000 tonnes. They have asked for help from the government and sought partnerships with foreign companies.
In addition, the minister refereed to modern sawmills in Khammuan and Savannakhet provinces which are currently experiencing a lack of revolving funds.
He gave the example of a woman who operates a sawmill in Mahaxay district, Khammuan province. There are seven sawmills in the group, which has about 1,000 families as members.
Farmers have between 50,000 and 60,000 tonnes of wood to sell to the sawmill but she has only enough money to buy 14,000 to 15,000 tonnes annually.
“I say this: it doesn't mean our policy is incorrect - it's the implementation that's not easy. Our government is aware of the issue and is seeking ways to address the problem,” Vilayvanh said.
The minister confirmed that Laos has sufficient foodstuff but said that selling it is not an easy matter. In some areas, people have rice for sale but road access is difficult, hindering their efforts to boost productivity.
The government has been promoting commercial production for decades now but in many instances it has yet to materialise.
Laos imports more than it exports. According to a government report, in the past six months of the 2012-13 fiscal year the export value reached US$880 million while the value of imports exceeded US$1.16 billion. The main items imported included processed foods.
Vilayvanh admitted that Lao farmers cannot produce sufficient of some crops to meet market demand so “we have to import from other countries”.
“To produce sufficient for export will require time, especially as other countries are not yet familiar with our products.”