Vientiane Times, 5 March 2013

The Xayaboury dam, the first run-of-river hydropower project to be built in the lower Mekong basin, will play a significant role in driving economic growth in Laos this year, according to a senior economist.

“The Xayaboury dam is a mega investment project, so it will be one of the drivers of economic growth this year,” Director General of the Lao National Economic Research Institute, Dr Liber Leebouapao, said yesterday.

Construction of the US$3.5 billion dam officially began in November last year and is expected to become operational in 2019.

Dr Liber said the massive project would create jobs and generate income for Lao people, explaining that small and medium sized enterprises such as food suppliers would see a major boost by providing food for project workers.

According to a report from the Ministry of Energy and Mines, the government expects to earn US$3.9 billion from the Xayaboury dam throughout the 29 year concession period, including US$1.897 billion in royalties and US$637 million in taxes.

The government has committed to use the income to fund poverty reduction programmes and infrastructure development, hoping to graduate from the UN’s list of least developed countries by 2020.

Dr Liber said another mega investment project that would power economic growth was the construction of special economic zones in Vientiane. Projects of this scale would help to ensure that economic growth would reach the target of 8.3 percent this year.

One of the major concerns the government must address to secure sustainable growth over the next several years was pulling in more foreign investment in the non resource sector, he added.

“The value of foreign direct investment has fallen since the government announced the suspension of land concessions for rubber and mining projects until 2015,” he said, adding that Laos needs more investment in non resource projects to secure sustainable economic growth.

Another area of concern is that urgent measures are required to curb rising prices, as the rising cost of living would place Laos at a disadvantage when producing goods for export.

“The average inflation rate is now about 6 to 7 percent,” Dr Liber said. The government also needs to control rapidly rising land values, otherwise investment in Laos will be unattractive compared to other countries in the region.

According to a real estate agent, the price of land in Vientiane has risen by 10 to 15 percent, while in some prime locations it has increased by more than 50 percent.