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Budget blowout blamed on Laos’ govt infrastructure overspend

Publication Date : 11-12-2013

 

The Laos government has overspent on infrastructure investments with slow returns and spent too little on promoting commercial production ventures with faster returns, the National Assembly (NA) declared on Monday.

The comments came as NA Vice President, Xaysomphone Phomvihane, unveiled a report evaluating the success of the government's implementation of its socio-economic development programmes, conducted by the NA Standing Committee.

Xaysomphone said the state had disproportionately invested in slow-return investment projects and much more of the budget should have been allocated to commercial production and rural development to help the poor escape poverty.

NA member for Vientiane province, Bouavanh Thammavong, backed the findings of the report.

She said Lao banks had been giving many loans to infrastructure projects, while only a small percentage of loans had been provided to agriculturalists.

The report found government bodies had not done enough to allocate funding on the basis of priority and had not been thoroughly inspecting the quality of the projects it was financing.

It also found that state-owned banks did not have the funds to keep up with the demands of investors. The NA is now calling on the whole society, including the private sector, to help sustain economic growth.

On Tuesday, the NA discussed the current 8 percent per annum growth in Laos' GDP and the average annual per capita income of US$1,500, and debated the future of the country's economic growth.

Despite Laos' achievements, many people in rural areas still live below the poverty line.

NA member for Savannakhet province, Vankham Inthichack, said the government should not just look at the average per capita income as a measure of economic success.

He said many people in his province remain poor. Some earn very much less than the national average.

The NA called on government sectors to wait for its approval before signing off on development projects to avoid creating chronic debt. It also recommended developers be made to bid on tenders to ensure the most efficient use of the budget.

This year Laos faced a number of challenges including severe flooding in several provinces, rising inflation and growing debt, which have had an impact on the stability of the economy.

The revenue shortfall has forced the government to stall development projects and promote savings habits in the state administration.

The government also cancelled a monthly allowance of 760,000 kip (US$95) granted to employees to cover the cost of electricity, water and clothing to prevent Laos from heading into a major economic crisis.

The NA also urged the government to tighten revenue collection, particularly from tariff and taxes, and address financial leaks.

In 2012-13, the revenue collected from the international border check point on the Lao-Thai Friendship Bridge in Vientiane fell short of the target.

Officials attributed the shortfall to tariff exemptions on various items including fuel, steels and cement used for the construction of government projects.

The NA asked the government to clarify the tariff exemption after discovering some development projects had been taking advantage of the tariff exemption by intentionally ordering more fuel than they needed then selling the excess to petrol stations.

 

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