The Nation, February 21, 2013
The Laotian government has suspended infrastructure projects that are initially financed by a private contractor who is later repaid by the government, until regulations are in place to better manage this kind of operation.
“According to the Prime Ministerial Decree on the implementation of the National Socio Economic Development Plan for 2012/2013, no project of this kind should be allowed until we have project management regulations in place,” Ministry of Planning and Investment chief Kikeo Chanthaboury told the Vientiane Times yesterday.
“I think the sectors concerned are aware of the decree and will follow the government’s policy strictly.”
Chanthaboury said higher authorities had ordered the ministry as well as the Ministry of Finance to jointly formulate regulations to manage state infrastructure development projects that are initially financed by private companies. The government then repays the company within a specified period of time after the completion of the project.
He said the government’s decision to put the brakes on this kind of project financing was taken after it was learned that the cost of such projects was generally set too high. The system resulted in increased public debt and also provided opportunities for corruption.
The government introduced this method of financing a few years ago to encourage the private sector to take part in economic development.
However, a number of such projects have taken place without first undergoing bidding. This contravenes the State Investment Law, which requires all public projects to undergo bidding when choosing a project contractor.
Without bidding, the obvious loopholes open the way for corruption and project investors can quote costs that are unreasonably high. Officials said some companies that had been authorised to invest in state-funded projects did not in fact have sufficient funds to carry out the project and had used the project agreement as a guarantee to get a bank loan from a state-owned bank.
Overseas financial institutions have warned the government to curb credit growth, especially that incurred through infrastructure projects, saying this could cause inflation, which in turn is one of the main causes of macro-economic instability.
Chanthaboury said officials suggest that the authorities first identify infrastructure development projects and then invite private companies to bid for the job, as this would result in the government securing the best contractor.
He also said the bidding process would help the government to save a large amount of money in carrying out state-funded infrastructure projects.