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Lao govt tightens expediture amid revenue shortfall
Publication Date : 17-09-2013
The government will no longer approve any private sector involvement in the construction of public offices as part of measures to tighten expenditure and prevent a looming budget crisis.
In past years the government has been reliant on the private sector to fund public construction projects either in exchange for state-owned land or to be paid back by the government at a later date.
However at a meeting to discuss the 2013-14 socio-economic development plan last week in Vientiane, Prime Minister Thongsing Thammavong said the practice of offering state property to companies in exchange for construction projects placed the government at a disadvantage.
He called on government sectors to avoid private sector involvement in state office building carried out in exchange for state land, as the government lost more than it gained on such projects.
Thongsing assigned the Ministry of Finance and the Ministry of Planning and Investment to work with relevant sectors to provide a report to the government next fiscal year on the land exchange practice and what had been learnt through projects funded in such a way.
“If the projects are effective, we can continue to study a policy and formulate legislation to specifically regulate this matter,” he said.
The government will also suspend new project proposals that do not aim to boost productivity while studying measures to reduce the country's debt, which stands at 29.8 per cent of gross domestic product.
Earlier this year the government halted new proposals to be funded by private investment companies and paid back by the government at a later date until legislation could be enacted to regulate the practice
Current debt problems are partly attributed to the practice, which often saw the private sector charge overly high prices for the completed works.
The PM assigned the Ministry of Finance and Ministry of Planning and Investment to formulate legislation to regulate projects funded in such a way, expected to be complete and promulgated at the beginning of next fiscal year.
Despite financial difficulties, the government has made the significant decision to settle its chronic debt owed to the private sector to operate state investment projects.
The move aims to reduce financial pressure on the government and also enable Lao entrepreneurs to have a strong financial capacity to operate their businesses.
Thongsing said relevant sectors had to play an active role in following financial policy and laws to limit debt in the near future. He said projects without National
Assembly (NA) approval and those initally funded by the private sector needed to stop completely in order to avoid creating more debt.
The PM said operating projects without NA approval was contrary to executive legislation, excluding projects that aimed to not use government money.