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Economists Query Accuracy of Investment Figure

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Economists have queried the investment figure reported by the government, saying it does not reflect the reality of economic growth.

Minister of Planning and Investment Dr Souphan Keomixay told the National Assembly recently that the total investment figure over the past nine months of the 2015-16 fiscal year was 41.82 trillion kip, equal to 38 percent of Gross Domestic Product (GDP).

Investment funding came from both domestic and foreign sources, the state budget, Official Development Assistance (ODA), and the banking sector.

The minister was asked by Assembly members to clarify the figure, saying that if investment was equal to 30 percent of GDP, the country’s economic growth rate would be 7.5 percent.

However, the economy grew by only 6.9 percent this year so it must be impossible for total investment to equal 38 percent of GDP.

A senior economist at the National Economic Research Institute and a member of the National Assembly, Dr Leeber Leebouapao, told Vientiane Times this week the minister has told us that the investment figure was inaccurate.

Dr Leeber said government bodies calculated the value of project investment in their annual fiscal reports after the projects had been approved by the government.

But many of these projects failed to get off the ground or were postponed.

In addition, some mega projects took four or five years to complete, but all of the capital ploughed into them was included in the one-year report. To be accurate, we should calculate the actual money spent on a project each year (not the approved investment figure) since that is the amount that is in circulation in the economy, Dr Leeber said.

I think the figure on investment values is unclear. We still don’t know exactly how much investment funding goes into the economy each year.

According to the Ministry of Planning and Investment, 1,222 investment projects were approved for domestic and foreign businesses over the past nine months, with registered capital of over 25.5 trillion kip (US$3.13 billion).

Of the total, nine projects were approved in the form of concessions, worth US$447 million. Approval was given to another 33 projects for operation in special and specific economic zones, with a total value of US$443.9 million. The rest were general businesses.

However, only US$883.7 million of the money invested in these projects has been transferred through the banking system for investment in Laos.

Concerning the economic growth figure of 6.9 percent this year, Dr Leeber said he believed it was accurate because the calculation of GDP was based on productivity, not on the approved investment capital.

The government has projected that the economy will grow by 7 percent next year due to the revenue shortfall and the global economic slowdown.