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Economic recovery in Laos will be a long road

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An employee invites customers at an open air restaurant on the banks of the Mekong river in Vientiane. The resumption of business is not a cause for celebration, but a time of great challenge for operators in the wake of their closure during the lockdown. AFP

Economic recovery in Laos will be a long road

Economic recovery from the damage caused by the Covid-19 pandemic is a huge challenge for every country.

The global outbreak of the virus is creating massive losses. It has claimed thousands of lives and jobs, while services have been suspended, and production and exports curtailed worldwide.

Stronger action by governments to prevent the spread of and control the disease is the most effective way to protect populations. Governments are aware that the measures they impose will impact businesses and people’s lives, but they must be complied with.

The pandemic has forced countries to lower their predicted economic growth rates after businesses, which are key to economic growth, have been forced to suspend operations. This has particularly affected industry and tourism and has slowed imports and exports.

As control of the outbreak builds public trust in authorities, some countries, including Laos, have begun easing lockdown measures so that people can start to resume life as normal and businesses can reopen. Laos has relaxed measures in three phases since the nationwide lockdown began on April 1.

The first restrictions were lifted from May 3-18, which allowed some businesses to resume operations and people to go outside their homes. The second phase runs from May 18 to June 1. More businesses and offices have been allowed to reopen, people can go to work, and inter-provincial travel has also been given the green light. But everyone must continue to follow government guidelines on preventing the spread of the virus.

The third set of restrictions runs until June 30. Businesses, factories, hotels, shopping centres, public transport and some schools are now opening and resuming their normal functions, and people in general are living life as usual. But people are still concerned about protecting themselves against the virus and are avoiding going to places where they may be at risk.

Businesses are especially at risk, and executives and business owners have a lot of work to do to ensure they survive this time of hardship. When they do resume operations, they will likely have few customers or orders. The resumption of business is not a cause for celebration, but a time of great challenge for operators in the wake of their closure during the lockdown. Those who have made the decision to reopen need to bite the bullet and begin a fight for survival, despite all the risks they face.

In this situation, business operators are faced with administrative costs such as electricity bills and wages, while income falls far short of their needs. Some factories have few or no orders because development projects are not in full swing yet, so they cannot fully reinstate workers. It is possible that some newly reopened businesses may face further temporary closures after they have been open for a while and find they are making a loss.

Of course, when businesses are unable to earn sufficient revenue or make a profit, this has an impact on state revenue and the unemployment rate. It is a certainty that if it takes a long time to restore the business sector, it will slow economic growth, and the two are interlinked. There will be fewer job opportunities which could lead to social problems such as mental illness and increased theft because people are unable to earn an income but still have many responsibilities.

It is expected that economic recovery in Laos could take two or three years or longer. This is not only dependent on the local situation but also on external circumstances. As a net importer, Laos’ economy is closely linked with other regions. If the Covid-19 pandemic continues to spread in surrounding countries and other regions, it will have an even greater impact on domestic production for export, tourism, and airlines in Laos because of the country’s overseas connections.

An important factor in the revival of businesses and the economy is assistance from banks, tax relief, cuts in electricity and water rates, and support from other sectors. The government has already announced that it will relax or postpone tax payments. At the same time, the Bank of the Lao PDR has advised commercial banks and financial institutions to devise policies that will ease the burden on businesses.

These forms of support are essential mechanisms in giving businesses the opportunity they need to rebuild. However, the authorities must urgently monitor the effectiveness of such measures to ensure that businesses are able to quickly resume operations and employ a large number of people to meet the needs of the production base.

In addition, the authorities must be prepared to cope with natural disasters such as drought and possible flooding in the rainy season. Many parts of the country are currently suffering from drought conditions. Drought and floods are a real threat and may create further economic hardship, which would mean it could take even longer to get back on the road to economic growth and prosperity.

Editorial/VIENTIANE TIMES/ASIA NEWS NETWORK

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