Transport liberalisation could lower freight service costs 

|     Ekaphone Phouthonesy     |

VIENTIANE (Vientiane Times/ANN) – The cost of freight services in Laos would be much lower if the government allowed foreign firms to provide these services, a new study suggests.

The study, sponsored by the World Bank Group and international development partners in Laos, shows that the cost of freight services on routes where the government allows foreign firms to operate appears to be cheaper than on routes where domestic freight providers have a monopoly.

One of the routes the study cites as evidence is the Vientiane-Boten route, from the capital to the Chinese border.

Thanks to transport sector liberalisation, the cost of freight services on this route is less than from Vientiane-Luang Prabang, which partially covers the same route and is a shorter distance.

Based on this finding, one of the policy options the Lao government may adopt to lower transport costs is to allow foreign firms to operate, according to the study that was unveiled recently.

Lao trucks provide freight services at an international border crossing. – VIENTIANE TIMES/ANN

Local and international businesspeople in Laos cite the cost of transport as a key business constraint.

They have been asking the government to help them lower transport costs so that their products are more competitive in local and international markets.

According to the study, titled Transport Costs and Prices in Lao PDR, unlocking the potential of the Idle Fleet, although transport liberalisation could make a significant contribution to lowering transport service costs, one risk of this policy option is that it could kill domestic transport firms.

The study finds that domestic firms are still not ready for international competition, and that they must do more to adjust themselves to meet global transportation standards. In addition, if domestic transport firms are able to improve themselves, they will be in a better position to provide more competitive services across borders, the study said.

However, it is not easy for Lao firms to penetrate foreign markets, particularly in Thailand and Vietnam, whose firms are very competitive in their markets.

The Lao government is well aware that the cost of transport is one of the factors hindering economic development.

The government is working to transform Laos from being a landlocked country into a land link.

As part of the implementation of this policy, the government has allowed a Lao-Chinese joint venture company to build a railway between Vientiane and the Chinese border.

In addition, it is conducting a study on another rail link and expressways to Vietnam.

The government believes that improving transport infrastructure could help businesses to access cheaper transport services, which is one of their conditions to ensure their operations thrive in the future.