VIENTIANE, May 29 (Vientiane Times/ANN): Laos hopes to unlock the potential of regional connectivity by not only focusing on infrastructure development, but also boosting economic activity along key economic corridors.
The government is developing key road and rail networks to connect Laos with its neighbors, especially China, Vietnam and Thailand, transforming itself from a landlocked country into a land-connected country.
In its latest economic update for Laos, the World Bank has highlighted some of the major challenges and key reforms needed for Laos to fully benefit from improved connectivity and transit services.
“Major investments include the Laos-China railway, the East-West economic corridor and major road networks,” the World Bank said.
“The challenge is to ensure that Laos can fully benefit from this improved connectivity, not only as a transit country, but also through increased economic activity and export volumes, value-added services and creation of new and better jobs”.
Most recently, the World Bank’s Board of Directors approved the $132 million Regional Economic Corridor and Connectivity Project in Southeast Asia, aimed at improving transport connectivity and regional trade along an east-west corridor.
Under this project, National Highway 2 in northern Laos, which stretches nearly 300 kilometers from the Thai border to the Vietnamese border, will be upgraded and widened to meet Asian road standards.
However, Lao infrastructure investments face some challenges due to high construction costs.
“The cost of these investments is high and Laos will only benefit from improved connectivity if it can successfully undertake complementary policy reforms and improve connecting road infrastructure,” the Bank said.
“Reforms of the business and investment environment must be accelerated to take full advantage of them. In addition, the railway poses macro-fiscal risks associated with contingent liabilities and will also present social and environmental risks if management is not sound.
The World Bank has recommended following critical reforms that could reduce the risks and maximize the benefits of improved connectivity:
– Fill the gaps in transport connectivity to ensure open access to rail and logistics infrastructure and efficient road connections to production and consumption centres;
– Promote more efficient cross-border transit, improved logistics and value chains, simplify market entry and remove operational barriers in the logistics sector;
– Deepen and accelerate trade facilitation reforms by establishing an effective transit management regime;
– Improve the business environment to attract investment and generate jobs;
– Improve accessibility and modernize business services;
– Promote more productive and job-creating sectors where Laos has a comparative advantage, for example, in high value-added agricultural products and nature tourism;
– Rationalize tax incentives based on an economic logic, by reducing State debts and ensuring compliance with the law on public debt management;
– Improve compliance with social and environmental regulations through rigorous assessment and enforcement. -Vientiane Times/ANN