Building the competitiveness of Lao PDR and their entrepreneurs

Workshop on “Lao PDR towards AEC 2015”19 and 21 February 2013,

Laos PDR

Dr. Witada AunkoonwattakaTrade and Investment Division, ESCAP

anukoonwattaka@un.org

Competition vs Competitiveness• Competition (การแข่งขนั)

– A state of market influenced by regulation

• Competiveness (ความสามารถในการแข่งขนั)– At firm level

• Ability of a firm to compete in the global market

– At country level– At country level• Ability of a country to improve and maintain national well

being • Measured by a combination of factors such as “relative” rates

of growth, income per capita exports, investment, job creations, etc.

In a world of competition, only competitive player s remain.

ในโลกแห่งการแข่งขัน ผู้มีความสามาถในการแข่งขันเท่านั�นที�จะอยู่รอด

In a world of competition, only competitive player s remain.

ในโลกแห่งการแข่งขัน ผู้มีความสามาถในการแข่งขันเท่านั�นที�จะอยู่รอด

Future scenario

• Competition will be more and more intense

• Inflows of FDI in mining and electricity industriesindustries

• Potential to become an export platform of ASEAN (using LDCs status)– Light manufacturing– Agriculture and forestry

Challenges facing Laotian entrepreneurs

• Competitions between local and foreign entrepreneurs– Domestic goods and imports– Local businesses and multinationals

• Will Lao PDR be fitted into the “Factory of Asia”?– Real value is productivity gains

Competition between local and foreign entrepreneurs

Four Success Factors

Entrepreneurship

Management SkillsBusiness Plan

Resources

Those factors translate into five requirements to remain competitive

1. Customer development: identify new market niches/

nurture customer relations

2. Product development: identify shifting market demand

3. Improve productivity: Human resources development and

technology

4. Risk management

5. Cash flow management

Strategies for entrepreneurs (1)

• Market research and understanding international market trends

• Innovation is the key• Cluster strategies• Cluster strategies

– Strengthening associations within industrial clusters

– Invest in your own R&D, if need be in partnerships or clusters

Strategies for entrepreneurs (2)

• Branding Lao PDR in high-value products and services– E.g.. exporting furniture not logs, high-income

tourists not backpackerstourists not backpackers

• Invest in people: human resource management– Foreign languages, marketing, IT, design, basic

business skills

Issues for entrepreneurs

• Deepening commercial and contractual relationships with local and foreign partners

• All agreements should be recorded in writing.

• Competitiveness will not occur without investment– Investing in human capital (language, marketing, IT,

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– Investing in human capital (language, marketing, IT, business skills)

– Adopting new technology– Systemize the business process

• Protecting your IPRs

Will Lao PDR be fitted in the “Factory of Asia”?

Value of joining GVCs: Value of joining GVCs: Value of joining GVCs: Value of joining GVCs: opportunities to grow & improve productivityopportunities to grow & improve productivityopportunities to grow & improve productivityopportunities to grow & improve productivity

� Increased access to international marketsIncreased access to international marketsIncreased access to international marketsIncreased access to international markets� Support from TNC (training/investment in business Support from TNC (training/investment in business Support from TNC (training/investment in business Support from TNC (training/investment in business

process/information sharing etc.)process/information sharing etc.)process/information sharing etc.)process/information sharing etc.)� Technology and knowledge transferTechnology and knowledge transferTechnology and knowledge transferTechnology and knowledge transfer� Technology and knowledge transferTechnology and knowledge transferTechnology and knowledge transferTechnology and knowledge transfer� Long term buyerLong term buyerLong term buyerLong term buyer----supplier relationshipsupplier relationshipsupplier relationshipsupplier relationship� Reputation and brand development Reputation and brand development Reputation and brand development Reputation and brand development � Opportunity to upgrade and move up to the next tierOpportunity to upgrade and move up to the next tierOpportunity to upgrade and move up to the next tierOpportunity to upgrade and move up to the next tier

� Thailand: various GVCs in auto, electronics, high-

tech, agri-business, consumer-goods sectors.

� Viet Nam: GVCs under development in garment,

consumer goods, auto and electronics sectors

GVCs in GMSGVCs in GMSGVCs in GMSGVCs in GMS

� Cambodia, Lao PDR and Myanmar: Agro-business

and garments; need promotion to attract GVCs

(underdeveloped domestic markets)

Entrepreneur centred development strategies

Access toInfrastructure

BusinessEnvironment

Entrepreneurs

Access toFinance

BusinessDevelopment

Services

Technologyand innovation

Infrastructure

Marketaccess

Competitiveness Framework in the world of GVCs

--Contestable market power

- Capacity to respond effectively to competitors- Capacity & flexibility to respond to changing environment

- Capacity to create new market niches

Enterprise (internal)

-Market access- Access to resources

- Business related regulatory framework- Supporting services

QDC (Quality, Delivery, Cost)

External

Last but not least…

The key role of government

Ease of Doing Business Ranking 2013 (World Bank and IFC)

WB Ease of doing business

ranking

Country Country Ranking

2005 (135 countries)

2008(183 countries)

2013 (185 countries)

1 Singapore 3 1 1

2 Malaysia 25 24 12

3 Thailand 20 15 18

Favourable business climate is key!

3 Thailand 20 15 18

4 Brunei n.a. 78 79

5 Viet Nam 98 91 99

6 Indonesia 131 123 128

7 Cambodia 142 145 133

8 Philippines 121 133 138

9 Lao PDR 163 164 163

Bad institutions add to business costs and uncertainty

Average of 2006-2009

Difficulty of completing trade procedures (2012)

Time taken

(days)

Cost incurred

(2000 constant USD)

Lao PDR 26 1683

Cambodia 24 653

Timor-Leste 26 594

Brunei Darussalam 17 562

Thailand 14 527

Indonesia 20 515

Philippines 15 491

Viet Nam 21 477

Singapore 5 353

Malaysia 10 337

Southeast Asia 18 619

Source: APTIR (2012)

Building competitiveness of Laotian

entrepreneurs require the government to

provide appropriate business climate.

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The priority for the government is to

reduce regulatory burdens to make it

easier to engage in international trade.

Thank you

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