Lao construction sector eyeing strong growth in 2019

VIENTIANE (Vientiane Times/ANN) - Laos expects to see more than 10 percent growth in the construction sector this year with the government putting in place measures to address business financing and stimulate the economy.

The trend is being driven by factors such as investment in services, infrastructure development and real estate, which are strongly interconnected.

Director General of the Centre of Macroeconomic Policy and Economic Restructuring under the National Institute for Economic Research, Mr Sthabandith Insisiengmay, told Vientiane Times on Tuesday growth of the construction sector is trending higher.

However, problems relating to businesses servicing debt and difficulty in accessing loans need to be addressed to strengthen the construction sector.

The government has acknowledged the problem of chronic debt being faced by construction companies and has issued eight measures to stimulate the economy.

Mr Sthabandith said these measures were key to the future expansion of the construction sector.

In the past, the private sector faced immense difficulties in handling State-funded projects under the weight of rising debt. The State could not repay contractors and at the same time, the companies owed money to the banks. Furthermore, the banks could not provide additional loans to enable them to continue State-funded projects. These circumstances led to delays and rendered the schemes ineffective.

Mr Sthabandith noted that providing bank loans was important for the future expansion of the construction sector.

Therefore, economic stimulus initiatives will help solve immediate problems as well as act as long-term mechanisms.

Last year, Laos saw 8.9 percent growth in the construction sector due to a growth spurt in the energy and service sectors, such as shopping centres. According to statistics from the centre, from 2013 to 2017, the construction sector grew overall by 13.6 percent or 3.4 percent per year followed by last year’s sizable surge. 

The Lao government strongly believes the sector will continue to prosper this year with many construction projects underway or about to start such as the Laos-China railway, Vientiane-Vangvieng expressway, construction of the Siphandon new city development and infrastructure projects in the special economic zones. These projects will play a significant role in fuelling the macroeconomy, according to a report by Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy at the recent session of the National Assembly.   

In addition, hydropower projects are being constructed while real estate and the tourism industry will play a significant role in pushing the growth of the construction sector.

Mr Sthabandith projected that real estate, which makes a crucial contribution to the construction sector, will climb in line with the economy.

At the same time, he urged authorities to run a strong tourism campaign as the growth of this sector would benefit the construction sector accordingly.

Last year, Laos did not meet its international visitor target so authorities needed to do more to attract tourists during Visit Laos-China Year 2019, he added.