Ailing state enterprises face risk of shutdown

VIENTIANE (Vientiane Times/ANN) - Under performing state enterprises are at risk of being shut down as the government has no policy to subsidise them forever, according to Prime Minister Thongloun Sisoulith.

Speaking at the National Assembly earlier this month, Mr Thongloun made it clear that the government will not continue providing financial support to state-owned enterprises so that they keep running.

“The government will help state enterprises. However, if they fail to perform efficiently, the government will treat them in accordance with the bankruptcy law,” the premier told the Assembly while outlining eight measures to stimulate economic growth.

He said the government will keep only strategic enterprises under its commercial arm while the rest will be transformed into new units, such as public-private joint ventures.

He also said the government will facilitate the private sector to deliver public goods and services, for example the construction and operation of expressways. This new policy aims to reduce the government’s financial burden.

While the top government leader made it clear that ailing enterprises should start to improve themselves or prepare to shut down, he did not provide further information on which enterprises might be wound up.

The improvement of state enterprises has been listed as one of the top topics that National Assembly members are scheduled to debate, according to the Assembly president, Mrs Pany Yathortu.

Speaking at the opening ceremony of the Assembly, Mrs Pany said 4members will debate the improvement of state enterprises in Laos after learning that many units had failed to perform efficiently.

Earlier, economists from the Lao National Economic Research Institution said the government should privatise or sell part of state-owned enterprise shares to the private sector so they can perform more efficiently.

According to government data, there are 135 state-owned enterprises in Laos with more than US$5 billion in assets. The number of enterprises has been on the decline since the government made the switch to a market-oriented economy in 1986.

In the past, the government viewed state enterprises as tools to keep the market under control. With this philosophy, a number of state enterprises were established.  

However, due to lack of innovations and application of professional business management, many state enterprises could not compete with private firms to deliver public goods.

As part of efforts to strengthen the production capacity and service delivery of state enterprises, the government has framed a policy to sell the shares of some state-owned enterprises to the private sector.

One of the major components of this policy is the transformation of BCEL and EDL Gen into public companies. The two firms are now listed on the Lao stock market.

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