Food processing plants facing financial problems in Laos
Agricultural processing plants in Laos are facing financial difficulties because they are unable to obtain bank loans to boost their capital, a senior government official says.
Agriculture and Forestry Minister Vilayvanh Phomkhe highlighted the issue when speaking to Laotian media in Vientiane on Thursday during a government open meeting.
He said the lack of revolving funds had 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 said the banks themselves did not have large reserves as most of their money came from cash deposits, so the business sector needed to provide sureties to borrow money.
The minister mentioned several tapioca plants 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 worth US$128 million (Bt3.9 billion), the plant is considered one of the most modern in Laos.
Though farmers have offered between 70,000 and 80,000 tonnes of coffee beans to the factory, the company has only been able to buy 30,000-40,000 tonnes and is seeking help from the government. The company is also seeking to set up partnerships with foreign companies.
The minister also referred to modern sawmills in Khammuan and Savannakhet provinces that are currently experiencing a lack of revolving funds.
Farmers usually have between 50,000 and 60,000 tonnes of wood to sell to a sawmill, but one of the factory owners only has enough money to buy 14,000-15,000 tonnes annually.
“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 had sufficient food, but added that selling it was 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 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 $880 million, while the value of imports exceeded $1.16 billion.
The main items imported included processed foods.
Vilayvanh acknowledged that Laotian farmers were not able to produce enough 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,” he said.
