Table 3.4. Foreign direct investment in Savannakhet province by economic sector in the period 2010-2020
Economic sector
Project Number | Registered capital (million USD) | Realized Capital (Million) USD) | Proportion (%) | |||
Project Number | Registered capital | Realized capital | ||||
Processing industry | 64 | 44.88 | 40.4 | 10.44 | 12.26 | 12.37 |
Accommodation and food services | 56 | 23.04 | 15.76 | 9.14 | 6.29 | 4.83 |
Transportation and warehousing | 32 | 16 | 12.8 | 5.22 | 4.37 | 3.92 |
Family activities as employers, movements manufacturer | 8 | 4.8 | 4 | 1.31 | 1.31 | 1.23 |
Support services and activities administrative management | 16 | 1.92 | 1.6 | 2.61 | 0.52 | 0.49 |
Other service activities | 16 | 5.04 | 5.04 | 2.61 | 1.38 | 1.54 |
Real estate business | 32 | 27.2 | 25.6 | 5.22 | 7.43 | 7.84 |
Professional, scientific and technical activities | 16 | 14 | 7.6 | 2.61 | 3.82 | 2.33 |
Financial and banking activities goods and insurance | 48 | 27.92 | 26.48 | 7.83 | 7.63 | 8.11 |
Extractive | 16 | 26 | 20.72 | 2.61 | 7.10 | 6.35 |
Agriculture, forestry and fish industry | 128 | 60.08 | 52.08 | 20.88 | 16.41 | 15.95 |
Electricity generation and distribution, gas | 24 | 44.96 | 40.8 | 3.92 | 12.28 | 12.50 |
Information and communication | 24 | 8.8 | 6.56 | 3.92 | 2.40 | 2.01 |
Trade, wholesale and retail, auto repair and motorcycle repair | 88 | 34.72 | 32.08 | 14.36 | 9.48 | 9.83 |
Build | 45 | 26.72 | 34.99 | 7.34 | 7.30 | 10.72 |
Total | 613 | 366.08 | 326.51 | 100 | 100 | 100 |
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Source: Department of Planning and Investment of Savannakhet province, 2021
In general, FDI capital invested in the province is unbalanced among industries. Agriculture
The industrial sector still accounts for a high proportion of total investment capital with 128 projects and registered capital of 60.08 million USD, accounting for 16.41% of total capital. The electricity and gas production and distribution sector ranks second with 24 projects, total registered capital of 12.28% and total realized capital of 12.5%. The processing industry ranks third with 64 projects and registered capital of 12.26% and total realized capital of 12.37%. Next are sectors such as trade, wholesale and retail, auto and motorbike repair; construction, real estate business, respectively, accounting for a high proportion of total investment capital.
The leading sectors in FDI investment projects mainly come from familiar fields to the provincial economy. Because FDI investors have taken advantage of the available advantages of natural conditions, resources, and minerals of the province.
Table 3.5. Foreign direct investment by sector in the period 2010-2020
Field
Project Number | Registered capital (million USD) | Implemented capital (million USD) | Proportion (%) | |||
Project Number | Registered capital | Realized capital | ||||
Industrial | 104 | 115.84 | 101.92 | 16.97 | 31.64 | 31.21 |
Agriculture | 128 | 60.08 | 52.08 | 20.88 | 16.41 | 15.95 |
Service | 304 | 136.24 | 111.92 | 49.59 | 37.22 | 34.28 |
Construction and real estate | 77 | 53.92 | 60.59 | 12.56 | 14.73 | 18.56 |
Total | 613 | 366.08 | 326.51 | 100 | 100 | 100 |
Source: Department of Planning and Investment of Savannakhet province, 2021
Figure 3.2. Proportion of projects in FDI structure by sector in the period 2010-2020
Industry Agriculture Services
Construction and real estate 12%
Service 50%
Industry 17%
Agriculture 21%
Source: Author's statistics based on data from the Department of Planning and Investment of Savannakhet province, 2021
Figure 3.3. Proportion of registered capital in FDI structure by sector in the period 2010-2020
Industrial
Agriculture Services
Construction and real estate 15%
Industry 32%
Service
37%
Agriculture 16%
Source: Author's statistics based on data from the Department of Planning and Investment of Savannakhet province, 2021
When divided by sector, the amount of foreign direct investment in the province is mainly concentrated in the service sector with 304 projects, total registered capital of 136.24 million USD, accounting for 37.22% of total FDI capital. The industrial sector ranked second with 13 projects and total registered capital of 115.84 million USD, accounting for 31.64% of total capital. Next is the agricultural sector with 128 projects and total registered capital of 60.08 million USD, accounting for 16.41% of total capital. Finally, the real estate construction sector has 77 projects and registered capital of 53.92 million USD, accounting for 14.73% of total capital. It can be seen that investment projects in the province have followed the direction of economic restructuring towards modernization and industrialization to catch up with the trend of the times.
3.2.4. Investment structure by investment form
Table 3.6. Foreign direct investment in Savannakhet province by investment form in the period 2010-2020
STT
Investment type | Project Number | Registered capital (million USD) | Proportion (%) | ||
Reserve number sentence | Registered capital sign | ||||
1 | Business cooperation contract | 54 | 14.56 | 8.81 | 3.98 |
2 | 100% FDI enterprise | 128 | 92.17 | 20.88 | 25.18 |
3 | Joint venture | 431 | 259.35 | 70.31 | 70.85 |
Total | 76 | 613 | 366.08 | 100 | |
Source: General Statistics Office of Savannakhet Province, 2021
It can be seen that the joint venture type accounts for the majority of foreign investment types in the province. There are 431 projects of joint venture enterprises with a total capital of 259.35 million USD, accounting for 70.31% of the number of projects and 70.85% of the total capital. Meanwhile, 100% FDI enterprises have 128 projects with a total capital of 92.17 million USD, equivalent to 20.88% of the number of projects and 25.18% of the total capital. The rest are business cooperation contracts with a small proportion.
In fact, when the Foreign Investment Law was first promulgated, foreign investors did not have the opportunity and time to fully understand the laws of Laos in general and of Savannakhet province in particular, especially the regulations on land, dispute resolution as well as the socio-economic situation in the province. Therefore, they believe that the best way to enter the Lao market is to find a Lao partner to explore, approach, and carry out investment procedures... Therefore, in order for investors to increase investment in the province, the province needs to have measures to propagate, promote, and clarify policies and regulations to foreign enterprises.
3.3. General assessment of foreign direct investment in Savannakhet province, Laos in the period 2010-2020
3.3.1. Achievements
Over the years, foreign direct investment activities have made positive contributions to the implementation of socio-economic development goals in Savannakhet province. This is demonstrated through the following results:
3.3.1.1. FDI adds important capital for development investment
FDI capital has increased over the years, contributing significantly to economic growth and is an important source of compensation for the balance of state capital, contributing to improving the international balance of payments. Through FDI, many domestic resources (labor, land, resources, etc.) are exploited and put into use.
Table 3.7. Investment capital for socio-economic development of Savannakhet province in the period 2010 - 2020
(Unit: Million USD)
Year
Total domestic capital | FDI capital | Domestic capital ratio (%) | FDI proportion (%) | |
2010 | 85.02 | 16.75 | 83.54 | 16.46 |
2011 | 87.41 | 19.27 | 81.94 | 18.06 |
2012 | 102.61 | 20.96 | 83.04 | 16.96 |
2013 | 104.87 | 24.22 | 81.24 | 18.76 |
2014 | 106.83 | 28.94 | 78.68 | 21.32 |
2015 | 108.38 | 32,245 | 77.07 | 22.93 |
2016 | 105.13 | 37.14 | 73.89 | 26.11 |
2017 | 100.08 | 38.17 | 72.39 | 27.61 |
2018 | 98.94 | 49.84 | 66.50 | 33.50 |
2019 | 99.62 | 52.28 | 65.58 | 34.42 |
2020 | 93.79 | 46.29 | 66.95 | 33.05 |
Source: General Statistics Office of Savannakhet Province, 2021
FDI capital is mainly capital from private enterprises, aiming to make a profit, focusing on implementing projects in fields and localities with favorable conditions. Meanwhile, the state must determine investment strategies in many fields and localities. Therefore, to meet the demand for attracting FDI capital, the state can be more proactive in arranging investment capital structure, allocating more budget capital for investment in socio-economic infrastructure and providing incentives to encourage domestic and foreign investment in areas with difficult conditions, creating a relatively even and reasonable growth rate in localities (Table 3.6).
Figure 3.4. Investment capital for socio-economic development of Savannakhet province in the period 2010 - 2020
150.00
100.00
50.00
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total domestic capital
Total foreign capital
Source: Author's statistics based on data from the General Statistics Office of Savannakhet province, 2021
Reality has proven that foreign investment capital in the period from 2010 to 2020 has made a very important contribution to the socio-economy of Savannakhet province.
It can be seen that while foreign direct investment capital tended to increase continuously from 2010 to 2019, domestic investment capital increased and decreased unevenly.
During the period from 2010 to 2015, domestic investment capital continuously increased from 85.02 million USD to 108.38 million USD. FDI capital also increased from 16.75 million USD to 32.24 million USD. The proportion of FDI capital in the total investment capital in the province also increased gradually from 16.46% in 2010 to 22.93% in 2015.
In the period 2016-2018, domestic investment capital decreased from 105.13 million USD to 98.94 million USD. FDI capital still tended to increase from 37.14 million USD to 48.83 million USD. The equivalent contribution ratio in total capital was 26.11% in 2016 and 33.50% in 2018.
In 2019, both domestic investment capital and FDI capital increased, with domestic capital being 99.61 million USD and FDI capital being 52.28 million USD, accounting for 34.42% of the total capital.
In 2020, due to the impact of the Covid-19 pandemic, both domestic investment capital and FDI capital decreased. While domestic investment capital decreased to 93.79 million USD, FDI capital decreased to 46.29 million USD, accounting for 33.05% of the total capital.
It can be seen that FDI capital plays an extremely important role in socio-economic development. In the period from 2010 to 2020, although domestic investment capital has changed unevenly, FDI capital still accounts for a high proportion of the total.
investment capital in Savannakhet province.
3.3.1.2. FDI promotes economic growth of the province
In summary, after nearly 30 years of opening up to attract FDI, although there are still many difficulties and complexities, Savannakhet province has achieved great results and victories, in which the FDI sector has made an important contribution. During the implementation period of the first 5-year socio-economic development plan (1981-1985), the national economy has developed regularly and been gradually consolidated, with an average gross domestic product (GDP) of 5.5%/year.
During the implementation of the second economic development plan (1986-1990), although it was the first stage of the new economic reform and faced many difficulties, the average GDP growth rate was still 4.4%/year. The inflation rate decreased from 30.3% in 1985 to 11.5% in 1987 and 14.6% in 1990.
The period from 1991 to 1995 was the third socio-economic development plan, which was the period of implementing the comprehensive renovation policy based on the Party's principles. Development during this period achieved a high average growth rate of 6.85%/year and an average inflation rate of 11.2% in 5 years, down to 40.7% compared to the previous 5 years. GDP per capita increased from 213 USD in 1990 to 334 USD in 1995.
The 4th Socio-Economic Development Plan (1996-2000) aimed to build a sectoral and local structure to continue to consolidate and link with environmental protection. The economy continued to maintain a relatively good growth rate, with an average GDP growth rate of 6.2% per year over the five years, lower than the period of 1991-1995. The main reason was the financial and monetary crisis in the Asian region that caused the Kip to depreciate, with an average inflation rate of 55% and the highest in history of 128% in 1999.
The 5th Five-Year Socio-Economic Development Plan (2001-2005) aimed to implement the national industrialization, modernization, growth and poverty reduction strategy. During this period, the average GDP growth rate was 6.3%/year, GDP per capita reached 491 USD, and the inflation rate decreased from 15.5% in 2003 to 7.8% in 2005.
The 6th Economic Development Plan from 2006 - 2010 aims to shift from unstable development to rapid and stable development. Create a variety of goods with high volume and value. Enhance the promotion of comparative advantages to fulfill commitments with ASEAN countries, bilaterally, multilaterally and WTO. GDP growth rate is 8.1%/year, GDP per capita increases to 610 USD, inflation rate decreases to 6.1% (General Statistics Office of Savannakhet Province, 2021)
From 2011 to present, the province has continued the success of the previous 5-year development plans. In addition to continuing to develop the socio-economy towards industrialization and modernization, the province has also actively expanded the market, gradually reformed legal policies, and created favorable conditions for foreign investors to attract significant capital, contributing to increasing GDP.
Table 3.8. Contribution of the FDI economic sector to the average GDP of Savannakhet province in the period 2010 - 2020
Year
GDP (USD) | Contribution of the area FDI sector (USD) | Proportion (%) | |
2010 | 2050.79 | 924.40 | 45.08 |
2011 | 2069.47 | 933.12 | 45.09 |
2012 | 3191.14 | 1055.66 | 33.08 |
2013 | 3501.23 | 1489.73 | 42.55 |
2014 | 3723.12 | 1530.22 | 41.10 |
2015 | 3731.27 | 1555.35 | 41.68 |
2016 | 3702.81 | 1556.73 | 42.04 |
2017 | 3699.50 | 1589.46 | 42.96 |
2018 | 3684.74 | 1603.69 | 43.52 |
2019 | 3700.52 | 1609.13 | 43.48 |
2020 | 3496.58 | 1591.42 | 45.51 |
Source: General Statistics Office of Savannakhet Province, 2021
GDP per capita in the province has an unstable trend of increasing and decreasing over the years, in which the FDI sector has made significant contributions to the total GDP per capita of the province. In 2010, GDP contributed by the FDI sector accounted for 45.08% of the total GDP per capita, by 2020 GDP contributed by the FDI sector was 45.51%.