Service sector in Laos slows but industry surges
ALTHOUGH growth in the service sector slumped last year, Laos is still on the right track towards becoming a modernised and industrialised nation.
The main reason for this assumption is that industry grew significantly while agriculture and services declined.
According to a government report last week, the industrial sector grew at 12 per cent last year above the target rate of 8.7 per cent, representing 28.7 per cent of gross domestic product (GDP).
Growth was driven by hydropower projects and processing factories that have already been built and are now operational.
Also, more investors set up factories in special and specific economic zones.
A senior economist at the National Economic Research Institute, Leeber Leebouapao, said that over the past six years, industry had grown 7-8 per cent.
In 2005, industry represented only 21.4 per cent of GDP, rising to 25.6 per cent in 2010 and 28.7 per cent in 2016.
Unfortunately, the growth of service was lower than anticipated. For a few years it grew by 8.5 or 9 per cent, but in 2016 the growth rate dropped to just 4.6 per cent, far lower than the target of 9 per cent.
In 2005, services represented 37.4 per cent of GDP, rising to 39.2 per cent in 2010.
Leeber attributed the decline to the global economic setback last year and a drop in foreign visitors.
According to the Tourism Development Department of the Ministry of Information, Culture and Tourism, 4.23 million foreign tourists visited Laos in 2016 – a fall of 10 per cent from 2015.
From 2011-15, Laos reported average annual growth in foreign tourist arrivals of 10.7 per cent, with this being the first drop in tourist arrivals in five years.
“If the number of foreign visitors and the export of crops drop, I think transport services will also plummet,” he said.
Experts agree that Laos has huge potential to offer transit services since the country is centrally located within the region and borders major nations like China, Vietnam and Thailand.
Although paved roads connect Thailand to Vietnam and China via Laos, transit services did not grow as expected.
Economists say Laos needs to improve infrastructure and other facilities to boost the growth of business and further improve the investment climate to attract more foreign entrepreneurs.
Meanwhile, the agriculture sector grew just 2.7 per cent, lower than the target of 3.1 per cent.
In 2005, agriculture made up 34.9 per cent of GDP, declining to 28.9 per cent in 2010 and 17.2 per cent in 2016.
