Service sector’s contribution to economy still not enough in Laos

VIENTIANE (Vientiane Times/ANN) - While there has been steady growth in services, authorities are concerned the sector’s contribution to the economy is insufficient given that most of the supporting inputs are imports. 

This year the government had expected the service sector to grow at about seven percent or register an increase of 0.4 percent in gross domestic product (GDP).

Wholesale and retail services and the vehicle repairing sector expanded at 9.9 percent and contributed 1.4 percent to growth of the service sector; real estate grew at 6.7 percent contributing 0.4 percent, financial and securities growing at 7.7 percent contributing 0.2 percent and guesthouses, hotels and restaurants grew at 5.3 percent contributing 0.1 percent.

The government instigated the Visit Laos-China Year 2019 to bring in more visitors and this increased revenue for the service sector, especially of hotels, guesthouses, restaurants, transportation and wholesale and retail trade.

During the last nine months, a total of 3.45 million people visited Laos or about 76.59 percent of the target set at 4.5 million people by the National Assembly.

Next year, the government will try to grow the sector at around 6.9 percent or cover around 41.47 percent of the GDP.

Tourism is an important economic development contributor in Laos; it is a source of foreign exchange and helps create more employment throughout the country. Therefore, it can potentially lead to poverty reduction.

Since the Lao government announced Visit Lao Year in 2018, the number of visitors increased by 8.2 percent - from 3.8 million people in 2017 to 4.2 million in 2018 - whereas the number of visitors decreased in both 2016-17 by 10 percent and 8.7 percent respectively.

In terms of revenue generation, the tourism sector earned more than US$800 million of direct revenue in 2018, which is the highest recorded revenue since 2015 when the number of tourists hit the highest level of 4.6 million.

In comparison with export revenues, tourism sector ranked 3rd as the top three earners after mining US$1.4 billion and US$1.41 billion of electricity.

However, Lao’s service sector is still facing hurdles in its contribution to economic development.

These include a lack of a comprehensive tourism promotional budget from the central government, ambiguous management by different authorities, and inadequate regular consultation or strategic planning between the public and private sectors, according to the Lao National Chamber of Commerce and Industry.   

Entrepreneurs of the service sector are also being charged a higher electricity tariff when compared to the industrial and commercial sectors.



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