Category: Industry

Two years into the COVID-19 pandemic, Laos’ economic future looks precarious, bogged down by massive public debt and an economic strategy overly reliant on power generation.

The World Bank reported in August 2021 that Laos’ public debt has climbed to U.S. $13.3 billion, or 72 percent of its gross domestic product. Most of the debt was incurred by the energy sector, with the state-owned Electricite´ du Laos (EDL), accounting for 36 percent.

Laos has built dozens of hydropower dams on the Mekong and its tributaries and is building about 50 more under a plan to become the “Battery of Southeast Asia” and export the electricity they generate to other countries in the region, mainly Thailand.

Additionally, Laos and China in December completed a $6 billion high-speed railway project linking the Lao capital Vientiane with China’s Yunnan province. Though Laos only has a 30 percent stake in the project, it still needed to borrow heavily from China to fund what it pledged to the project.

The World Bank said Laos owes a total of $1.3 billion in debt service each year through 2025 and estimated that servicing the annual bill would reach 52.5 percent of public sector revenue in 2021, considered high for low-income countries. It noted that Laos’s obligations far exceed its reserves, recommending a shift in focus to “managing debt in a more sustainable and transparent manner.”

Two international credit rating agencies in 2020, Moody’s and Fitch Ratings, downgraded Laos’ sovereign rating, meaning they believe the country has a high likelihood of defaulting.

Fitch said in an August 2021 report that almost half of Laos’ external debt over the next few years must be paid to China. The two sides have worked together on the debt issue previously, with Laos asking for a debt suspension agreement, and the People’s Bank of China swapping yuan with the Bank of the Lao PDR in 2020 to help boost reserves of foreign currency, Fitch noted.

At an October meeting of the Lao National Assembly, the minister of finance warned that interest payments will sharply increase over the next five years on public debt that stood at $13 billion in 2020.

“The government will have to pay $414 million a year in interest alone, so we must tighten our belts,” Finance Minister Bounchom Oubonpaseuth said.

Negotiating with China will be key to getting Laos out of its debt problems, and there are four possible options, a foreign journalist and analyst who has covered Laos extensively, told RFA’s Lao Service on condition of anonymity.

“You can suspend … and give a longer time to pay the debt. They can cancel the debt. … They can ask Laos to settle for a foreign currency swap between the Bank of Laos and the People’s Bank of China. Or, China can loan money to Laos to pay the debt.”

This map published by AFP shows the locations of hydropower projects in various stages of completion along the Mekong River.

EDL heavily indebted

Chanthaboun Soukaloun, managing director of Electricite´ du Laos, told the annual general meeting on February 11 that EDL has been losing money for years and has accumulated $5 billion in debt. The loss is affecting EDL’s ability to repay its loans, the Lao government news agency, KPL reported.

“The government has been aware of the debt. Everybody and every department of the government must help repay our debt, but we at the EDL don’t have money,” an EDL official, who requested for anonymity for safety reasons, told RFA Feb. 17.

“The government knows that EDL owes a lot of money to EGAT (Electricity Generating Authority of Thailand), and that the EDL doesn’t have money to pay them back,” he said.

The debt rose sharply over the past decade as EDL borrowed significant sums from foreign countries, especially Thailand and China, to build dams, install power lines and invest in other power related businesses.

But some of the dams have not been productive due to a lack of water, while other dams with sufficient resources produce power that nobody is buying.

The EDL has an obligation to purchase the electricity generated by the dams at high prices but must sell it at lower prices to companies in Thailand and China.

Additionally, EDL owns only 10 of Laos’ 88 currently operational dams, while the rest belong to foreign investors, who sell the power they generate to EDL at high prices.

Despite the excess electricity, power prices remain too high for many domestic customers to pay, which is why the company is losing money, the official said.

The power business favors foreign investors, an official from the Ministry of Energy and Mines told RFA.

“Of course, they pay all taxes and royalties to the government, but the government has huge expenses, such as paying out compensation” to people displaced by hydropower projects, the energy official said.

Compensation for households, or even entire villages displaced by dams and infrastructure projects has been a source of friction for years. Many rural villagers have told RFA that the offered compensation is far below the value of the property they are giving up, and they trade fertile farm land for remote parcels of land with poor soil.

For those that accept, the government sometimes struggles to pay out compensation in a timely manner, with relocated families waiting years for payment in some cases.

In this March 2020 file photo, employees of the Électricité du Laos (EDL) work on a power line in Vientiane, Laos. Credit: Citizen Journalist

Another problem for EDL is that it anticipated higher electricity prices when it signed agreements to buy electricity from the dam investors, with the eye of selling it for higher to its buyers.

EDL is obligated to buy the electricity from most of the dam projects for $0.06 per kilowatt hour but currently can only sell it for $0.04 to companies in China’s Yunnan province or $0.05 to companies in Thailand.

Many Lao citizens blame EDL’s problems on corruption, which has plagued the inner workings of Laos’ national and local governments for decades.

Berlin-based Transparency International’s 2020 Corruption Perceptions Index ranked Laos 134 of 180 countries it evaluated in fighting corruption.

Prime Minister Phankham Viphavanh pledged to stamp out corruption, bribery, fraud and other malfeasance by state officials in a speech to the Lao National Assembly in August, and in December, Laos stepped up the campaign against corruption by expelling corrupt officials from the Lao People’s Revolutionary Party, the country’s sole political party.

Corruption is so pervasive in Laos that many of its citizens suspect it is the reason EDL is losing so much money.

“EDL must inspect and closely monitor its employees at all levels, making sure that they don’t abuse power and seek personal financial gain,” a Lao businessman told RFA. “Widespread corruption leads to financial leaks and massive debts.”

EDL must be reorganized, a resident of the southern province of Champassak, told RFA.

“EDL’s employees and management team are running the company for their own benefit, not for the company or the state. First and foremost, actions for personal benefit must be stopped,” the Champassak resident said.

A resident of the capital Vientiane slammed EDL’s lack of transparency.

“There are no financial reports published. There must be a lot of corruption going on. That’s why the company is in such a big debt,” he said.

An EDL affiliate in a letter last year asked several Thai companies for a longer grace period in repaying debt, due to the COVID-19 pandemic and rapid inflation.

Prime Minister Phankham Viphavanh told the Lao National Meeting in November that the government was in the process of reforming several large state enterprises, including EDL, because of massive debt problems.

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On February 24, 2022, Labour Minister Mr. Suchart Chomklin assigned the Labour Minister’s Advisor, Mrs. Thiwalrat Angkinan, to preside over the opening ceremony of the seminar on the benefits from the Skill Development Fund under the Skills Development Promotion Act B.E. 2565 and its amendments for the 2022 fiscal year. The seminar took place at the Muang Tara Conference Room, 3rd floor, Tara Mantra Hotel, Cha-am District, Phetchaburi Province. The Department of Skill Development’s Deputy Director-General, Ms. Pailin Jindamaneeporn, and heads of government agencies under the Ministry of Labour in Phetchaburi Province gave a welcoming. Mrs. Thiwalrat said that the government under the leadership of Prime Minister and Minister of Defense General Prayuth Chan-ocha, the Ministry of Labour under the supervision of Deputy Prime Minister General Prawit Wongsuwan, and Labour Minister Mr. Suchart Chomklin, are concerned about the establishments, especially business establishments that are in the scope of the Skills Development Promotion Act B.E. 2545, which has been affected by COVID-19 pandemic. Therefore, the Department of Skill Development launched an important policy to assist establishments in 2021, reducing the number of employees required to develop skills from a minimum of 50 percent to 20 percent, whereby not being required to contribute to the Skill Development Fund. It has also extended the application period for course certification from 60 days to 90 days and reduced the rate of contributions to the Skill Development Fund from the original rate of 1 percent to 0.1 percent, for example.

Mrs. Thiwalrat further said that the Skills Development Promotion Act is a very important mechanism in skill development in line with the 20-year national strategic plan on human resource development and capacity building to increase the labour productivity of entrepreneurs. It is a response to the increase in the country’s competitiveness by allowing operators to participate in skill development for their employees to have the knowledge and empower them to support operations to be more efficient, with an exemption from income tax on expenses spent on training, including other benefits as well.

This seminar was organized so that business establishments know and understand the Skill Development Promotion Act B.E. 2545 and its amendments. It aims to create knowledge and understanding of the procedures and criteria for applying for certification of courses and training expenses of entrepreneurs through the e-Service system. Additionally, it intended to create knowledge and understanding of loan lending rules and granting assistance or subsidies from the Skills Development Fund and listen to opinions, obstacles, and recommendations for implementation under the Skill Development Promotion Act B.E. 2545 and its amendments.

Source: Ministry of Labour

TOKYO, Crude oil jumped while the rouble plunged nearly 30% to a record low on Monday after Western nations imposed tough new sanctions on Russia for its invasion of Ukraine, including blocking some banks from the SWIFT global payments system.

Safe-haven demand boosted bonds along with the dollar and yen while the euro sank after Russian President Vladimir Putin put nuclear-armed forces on high alert on Sunday, the fourth day of the biggest assault on a European state since World War Two.

The ramp-up in tensions heightened fears that oil supplies from the world’s second-largest producer could be disrupted, sending Brent crude futures up $4.21 or 4.3% to $102.14. U.S. West Texas Intermediate (WTI) crude futures were up $4.58 or 5.0% at $96.17 a barrel.

“I am telling clients all we know for certain is that energy prices are going to be higher, and there are going to be some beneficiaries,” said John Milroy, Ord Minnett financial advisor in Sydney.

“It’s an old cliché, but it’s true that uncertainty drives moves in both directions.”

Asia-Pacific shares turned lower after spending the morning session mostly in the green, putting them in line with declines for U.S. and European stock futures.

Japan’s Nikkei 225 fell 0.25%, while Chinese blue chips slipped 0.36%. Australia’s benchmark, though, added 0.64%, boosted by energy shares.

MSCI’s index of regional stocks lost 0.58%.

U.S. emini stock futures were pointing to a 2.35% drop at the restart, while pan-European EURO STOXX 50 futures slid 3.90%. FTSE futures declined 1.21%.

“We had a deluge of very negative information over the weekend,” said Kyle Rodda, a market analyst at IG Australia. “We’re talking about financial stability risks, and sprinkle over that the threat of nuclear war.”

“Volatility is heightened,” he said. “Price action is incredibly choppy.”

The 10-year U.S. Treasury yield fell about 9 basis points to 1.89%, and equivalent Australian yields retreated about 6 basis points to 2.177%.

The euro slid 1.1% to $1.11465 and 1.1% to 128.785 yen , while the risk-sensitive Australian and New Zealand dollars sank 0.78% and 0.88%, respectively.

The rouble dived as much as 29.67% to a record-low 119.5 per dollar.

Gold rose more than 1% to around $1,909 on demand for the safest assets.

“This volatility will go on for a while yet, until the dust settles,” said Shane Oliver, chief economist at AMP Capital.

In the meantime, “markets are going to be swinging from headline to headline,” he said.

Source: Thai Public Broadcasting Service

Labour Minister Mr. Suchart Chomklin assigned Assistant to the Labour Minister Mr. Surachai Chaitrakulthong to visit factories under the “Factory Sandbox” project at Maxim Integrated Products (Thailand) Co., Ltd., in Khlong Tamru Subdistrict, Mueang Chonburi District, Chonburi Province. Deputy Governor of Chonburi Province Mr. Niti Wiwatwanich, the Departmental Inspector-General Mr. Sakdinat Sonthisakyothin, and the heads of government agencies under the Ministry of Labour in Chonburi joined the visit. Mr. Richard Cohen, Vice Presidential Advisor to the Sr. V.P., Mr. Wirat Sriamornkitkul, Managing Director of Maxim Integrated Products (Thailand) Co., Ltd., employees, and staff gave a welcome.

Assistant to the Labour Minister Mr. Surachai Chaitrakulthong revealed that the government under the leadership of Prime Minister and Minister of Defense General Prayuth Chan-ocha and Labour Minister Mr. Suchart Chomklin is committed to solving issues from the COVID-19 situation that has affected the health of the workforce, which is an important force in driving the economy in all sectors of the country. The Ministry of Labour by Labour Minister Mr. Suchart Chomklin had the idea of managing the structure and processes in a manner of “Health Economics” that aims to operate in parallel between public health and the economy. It has a special emphasis on the manufacturing sector, which is considered a key mechanism to support its economy. The main principles are to inspect, maintain, control, and supervise the resource management that is limited to the most beneficial and targeted groups for insured persons in enterprises operating in the manufacturing and exporting sectors, including vehicles, electronic components, food, and medical devices, which employs 100 or more employees. The focus is on 11 provinces with major export sources such as Chachoengsao, Chonburi, Nonthaburi, Pathum Thani, Prachinburi, Phra Nakhon Si Ayutthaya, Rayong, Lop Buri, Saraburi, Samut Prakan, and Samut Sakhon, to promote prevention and control from the COVID-19 virus, by limiting the area to prevent wide spread that will affect the country’s economy both directly and indirectly. It also aims to care for the health of people across the country. The “Factory Sandbox” project will greatly benefit in maintaining economic stability in the manufacturing export sector, maintaining the employment level, and preventing factory clusters from infection. The initiative also aims to create a balance between public health measures and drive the country’s economy forward while building confidence for both Thai and foreign investors.

Mr. Surachai went on to say that today, he and the relevant departments were assigned by Labour Minister Mr. Suchart Chomklin to visit the area to monitor the operation of the “Factory Sandbox” project at Maxim Integrated Products (Thailand) Co., Ltd. He thanked the company’s management and staff for their cooperation in implementing the “Factory Sandbox” project and Vibharam Amata Nakorn Hospital, which provides screening services. Employees and insured persons can access screening for COVID-19 at the establishment. The Ministry of Labour’s Social Security Office is determined and dedicated to work. It is ready to help companies continue their businesses without stopping production and promptly alleviate insured persons’ suffering in all situations. He also acknowledged the problems arising from the impact in all aspects to find a way to formulate corrective measures accordingly. With the changes that occur, he asked that insured persons be confident that the Social Security Office will take care of insured persons to provide stability to their lives and health.

Source: Ministry of Labour

The government’s stumbles in tackling the economic problems that plagued the country due to the COVID-19 pandemic appears to have forced the ruling Palang Pracharath Party to reshuffle its economic team in preparation for a return to power after the next election.

Former Government Savings Bank (GSB) president Chatchai Payuhanaveechai was recently mentioned at the ruling party meeting as joining their new economic team.

Palang Pracharath leader General Prawit Wongsuwan, who is also a deputy prime minister, informed during the party meeting on February 7 that Chatchai would join the economic team of the party and would be responsible for formulating the party’s economic policy platform for the next general election.

It was reported that Chatchai would be appointed as a new economic minister, responsible for either the energy or finance portfolio in the next Cabinet reshuffle. Observers believe it was an attempt by Prawit to boost the morale of the party amid its declining popularity.

Palang Pracharath has been in the eye of a political storm after 21 MPs from the faction of the party’s former secretary-general, Thammanat Prompao – who was expelled from the party – moved on to join other parties. The ruling party also faced its third consecutive by-election defeat in January in Bangkok, following setbacks in Songkhla and Chumphon provinces.

The report of Chatchai joining the party has left many wondering why the 62-year-old former banker would come on board a potentially sinking ship.

Solid banking credentials

Chatchai was appointed president of the GSB, one of the specialized financial institutions owned by the state, in 2015. He was an outsider, vying with two inside candidates for the top job at the GSB.

Chatchai’s banking career took off when he became a senior executive vice president at Kasikornbank, one of Thailand’s leading commercial banks. His stint at Kasikornbank since 1983 gave him experience in commercial and construction sector lending, consumer loans, retail lending, credit card business, and personal loans.

The then GSB chairman, Somchai Sujjapongse, said the bank’s board chose Chatchai because he had shown leadership and had an outstanding vision, in line with the bank’s mission to help individuals and small and medium-sized enterprises get easier access to bank loans.

After he completed his four-year term, the bank’s board extended his tenure until he reached retirement age in 2020.

While helming the state-owned bank, Chatchai introduced credit card service, and launched mobile banking services, continuing the mobile banking development started by previous executives.

One area where his management style differed from that of his predecessors was that he also spent more money on marketing activities, buying ads from many media outlets, including newspapers, TV, and digital news websites. His marketing strategy was aimed at making people aware of the bank’s activities.

The COVID-19 pandemic hit Thailand in early 2020 and Chatchai left the bank in June of that year, handing over the reins to new president Vitai Ratanakorn, who had a different management style. Vitai substantially increased the bank’s reserves and focused on cost control in order to strengthen its financial base to cope with the impact of the pandemic.

Strong background

Chatchai informed the National Anti-Corruption Commission that he and his wife had net assets worth Bt144. 24 million when he ended his first tenure in January 2019, which increased to Bt154.85 million when he left the GSB in June 2020 on reaching retirement age.

Chatchai currently serves on the board of directors of several private companies, including as chairman of the executive board of public-listed Origin Property Plc.

His educational background has also contributed to his outstanding success in his professional career. He got a bachelor’s degree in Business Administration from Thammasat University and a master’s degree in Business Administration from Chulalongkorn University.

Over the years, his name has often made the rounds as a candidate for one of the economic ministers during Cabinet reshuffles or when some ministers resigned.

As Chatchai ran the state-owned bank after the 2014 military coup, he had to work with many ministers, including Prawit. The latest announcement by Prawit to appoint him to Palang Pracharath’s economic team suggests that Chatchai continues to be well-connected politically.

Many changes at the helm

Since the 2014 coup, from Prime Minister General Prayut Chan-o-cha’s first government to his current administration after the general election in March 2019, many economic ministers have come and gone.

After Prayut led the military coup in 2014, he appointed MR Pridiyathorn Devakula as deputy prime minister and head of the economic team to formulate economic policy.

But in 2015, Prayut appointed Somkid Jatusripitak, a former finance minister in the Thai Rak Thai Party-led government during the Thaksin Shinawatra years, to replace Pridiyathorn who fell out with Prayut.

After the March 2019 general election, Prayut reappointed Somkid, but Somkid later resigned along with other four economic ministers known as the “Four Boys” group in 2020 due to a power struggle in the ruling party. The four former economic ministers, including former finance minister Uttama Savanayana, and former energy minister Sontirat Sontijirawong, recently formed a new political party to contest in the next general election.

Following their resignation, Prayut appointed Supattanapong Punmeechaow as the new deputy prime minister and energy minister, responsible for economic policy.

Prayut had appointed Predee Doachai as finance minister to replace Uttama, but Predee resigned in September 2020 after less than a month in office, reportedly due to a conflict with Santi Promphat, his deputy finance minister from Palang Pracharath. Following Predee’s quick exit, Prayut tapped Arkhom Termpittayapaisith as finance minister.

Source: Thai Public Broadcasting Service

BANGKOK, Thailand’s economy rose 1.9 percent in the fourth quarter of last year, thanks to the country’s easing of COVID-19 curbs, and the reopening to overseas visitors that helped support its tourism sector.

This marked a strong rebound from a decline of 0.2 percent, registered in the previous quarter, according to data released by the Office of the National Economic and Social Development Council (NESDC), today.

The improvement was driven by higher domestic and external demand for goods and services, the relaxation of the COVID-19 control measures and economic stimulus measures, the NESDC said, in a statement.

The country’s economy expanded 1.6 percent in 2021, recovering from a 6.2-percent contraction in 2020, due to COVID-19, its worst economic performance in more than two decades.

The NESDC expected the economy this year to expand in the range of 3.5-4.5 percent, boosted by a further recovery in tourism and the government’s supportive measures.

It also forecast that the country’s headline inflation would pick up this year, rising between 1.5-2.5 percent year-on-year.

Source: Nam News Network

Widely dubbed the “Progressive Liquor Bill”, a new draft law on excise tax is tipped to revolutionize Thailand’s alcohol industry if it sails through Parliament untouched.

Thailand’s booze market is now worth about Bt260 billion, but in normal times before the arrival of COVID-19 it weighed in at a whopping Bt370 billion in 2019.

Critics have complained for years that the market is monopolized by a handful of giant producers because Thai laws favor big investors. For instance, beer manufacturers are required to have at least Bt10 million in registered capital.

Meanwhile brewpubs – manufacturers that also sell their craft beer – must produce at least 100,000 liters a year. And under current rules, factories must produce a minimum of 10 million liters per year. Similar regulations apply to manufacturers of spirits.

Though the existing community liquor law allows small-scale production, its rules require these operations to be very small – manufacturing equipment must be no more than 5 horsepower and the workforce cannot exceed seven staff.

Freer, fairer market

Move Forward Party MP Taopiphop Limjittrakorn has been determined to free up the alcoholic beverage market since he was arrested for making and selling craft beer without a license in 2017. Back then he was just 28, a young entrepreneur trying to start a business.

“While changes in society come from the behavior of the masses, we can also push for change through law,” said the graduate of Thammasat University’s Law Faculty.

Seeking to make legal changes in Parliament with a political party behind him, he joined Future Forward Party, which has now reincarnated as Move Forward.

Taopiphop made his stance clear from the very beginning. While canvassing for votes under the Future Forward banner in 2019, he launched a door-to-door campaign to explain his crusade to the public.

His idea obviously impressed many voters; despite being a new face in politics, Taopiphop won by a landslide in Bangkok’s Constituency 22.

Soon after entering Parliament, he proposed the new Excise Tax Bill on May 29, 2020, aiming to end the oligopoly in Thailand’s booze market.

What does the draft say?

The bill is simple and brief, containing just seven articles. If passed, it will remove the complicated rules on manufacturing capacity, number of staff members, and production horsepower.

In effect, the new law will make it easier for people to brew booze either for themselves or for sale via a small enterprise or brewpub.

The legal changes will even allow villagers to use their local wisdom to create signature brews, helping spur tourism and benefiting people working further down the supply chain. The profits may also be extended to the agricultural sector via ingredients such as rice or wheat.

What chance of legislation?

The idea of the “Progressive Liquor Bill” may please many, especially those who like a tipple, but it has not won overwhelming support on the floor of Parliament.

When the draft law was first considered on February 9 this year, it failed to gain approval in principle. Instead, MPs voted 207:195 with two abstentions and two no-votes to have the Cabinet review the bill first.

The Cabinet has 60 days to consider the bill before it is submitted to Parliament for debate and voting.

Will the bill be scrapped?

Taopiphop has expressed concern that the Cabinet may end up scrapping the bill, especially if the review period includes behind-the-scenes negotiations with big business.

“The situation needs to be closely monitored,” he said.

Taopiphop added that if the bill does not sail through under this government’s tenure, he hopes voters will give his party a landslide victory so he can continue his push for liberalization of the alcohol market.

Source: Thai Public Broadcasting Service

A high-level Thai business delegation will visit Saudi Arabia on February 26th, the first in many years, to promote trade and business between the two countries.

Sanan Angubolkul, president of the Thai Chamber of Commerce and the Board of Trade, said that the delegation will visit Riyadh, the Saudi capital, and Neom.

The delegation will meet with their Saudi counterparts and the government sector for discussions on the expansion of trade between Thailand and Saudi Arabia.

Last year, Thailand exported US$1.6 billion worth of goods to Saudi Arabia, representing just 0.2% of Thailand’s overall exports, said Sanan, as he expressed hope that Thai exports to the oil-rich Arab kingdom will increase to US$5 billion,which was the level registered in 1989 when relations between the two countries were still normal.

Sanan said that Thai goods with market potential in Saudi Arabia are cars, car accessories, fresh and processed food, machinery and electrical appliances.

Ronnarong Phoolpipat, director of the Commerce Ministry’s Trade Policy and Strategy Office, said that the improvement in relations between the two countries, following Prime Minister Prayut Chan-o-cha’s visit to Riyadh on January 26thand 27th, the first by a Thai prime minister in more than three decades, will open up opportunities for Thai labour, investment, tourism and trade.

Bilateral trade between the two countries this year is expected to reach 280 billion baht, an expansion of about 20.3%, with exports set to increase to about 54 billion baht, an expansion of 6.2%, compared to 225 billion baht in imports, which are mainly oil and gas. This is an increase of 24.3%, resulting in a trade deficit of 171 billion baht.

Saudi Arabia’s economy is the second largest in the Middle East, after that of Turkey.

Thai-Saudi relations soured more than 30 years ago and diplomatic relations were downgraded after a Thai worker stole jewellery, including a precious blue diamond, from a Saudi palace and the subsequent murder of three Saudi diplomats and a businessman in Thailand. Several of the stolen jewellery items returned to Riyadh were found to be counterfeit, but the Blue Diamond has never traced.

Source: Thai Public Broadcasting Service