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 Aunkoonwattaka Trade and Investment Division, ESCAP

Competition vs Competitiveness Competition ( การแข่งขัน ) –A state of market influenced by regulation Competiveness ( ความสามารถในการแข่งขัน ) –At firm level Ability of a firm to compete in the global market –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 players remain. ในโลกแห่งการแข่งขัน ผู้มีความสามาถในการ แข่งขันเท่านั้นที่จะอยู่รอด In a world of competition, only competitive players remain. ในโลกแห่งการแข่งขัน ผู้มีความสามาถในการ แข่งขันเท่านั้นที่จะอยู่รอด

Future scenario Competition will be more and more intense Inflows of FDI in mining and electricity industries 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 Skills Business 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 –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 backpackers Invest in people: human resource management –Foreign languages, marketing, IT, design, basic business skills

10 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, 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: opportunities to grow & improve productivity  Increased access to international markets  Support from TNC (training/investment in business process/information sharing etc.)  Technology and knowledge transfer  Long term buyer-supplier relationship  Reputation and brand development  Opportunity 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  Cambodia, Lao PDR and Myanmar: Agro-business and garments; need promotion to attract GVCs (underdeveloped domestic markets) GVCs in GMS

Entrepreneur centred development strategies Entrepreneurs Access to Finance Business Development Services Technology and innovation Infrastructure Market access Business Environment

Competitiveness Framework in the world of GVCs -Market access - Access to resources - Business related regulatory framework - Supporting services - -Contestable market power - Capacity to respond effectively to competitors - Capacity & flexibility to respond to changing environment - Capacity to create new market niches Enterprise (internal) 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 CountryCountry Ranking 2005 (135 countries) 2008 (183 countries) 2013 (185 countries) 1Singapore311 2Malaysia Thailand Brunein.a Viet Nam Indonesia Cambodia Philippines Lao PDR Favourable business climate is key!

Bad institutions add to business costs and uncertainty Average of

Difficulty of completing trade procedures (2012) Time taken (days) Cost incurred (2000 constant USD) Lao PDR Cambodia24653 Timor-Leste26594 Brunei Darussalam17562 Thailand14527 Indonesia20515 Philippines15491 Viet Nam21477 Singapore5353 Malaysia10337 Southeast Asia18619 Source: APTIR (2012)

20 Building competitiveness of Laotian entrepreneurs require the government to provide appropriate business climate. The priority for the government is to reduce regulatory burdens to make it easier to engage in international trade.

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