COUNTRY HIGHLIGHTS LAO PDR 2016 The World Bank Group conducted face-to-face interviews with top managers and business owners of 368 enterprises in Lao PDR from January 2016 through June 2016. The Enterprise Survey (ES) sample is representative of Lao PDR’s formal private sector. The ES covers several aspects of business environment along with measures of firm performance. Below are the main highlights from the survey. Firms in Lao PDR lag behind comparator countries in terms of annual sales and employment growth 10 0 Between 2013 and 2015, the private sector in Lao Real annual sales growth (%) PDR considerably underperformed the East Asia and Pacific (EAP) region in both real annual sales 0 -10 growth and employment growth. Annual sales in Real annual Annual sales growth employment Percentage Percentage Lao PDR decreased by 21%, compared to a much (%) growth (%) -10 -20 more moderate decrease in the EAP region (- 0.5%). Firms of all sizes had negative annual sales growth but large firms (100+ employees) were the 2016 LAO PDR ENTERPRISE SURVEY -20 -30 worst performers (-36%). The annual employment growth in Lao PDR was also negative and lower -30 -40 than the average for EAP (-0.5% compared with LaoPDR2016 EAP13 Small(5-20) Medium(20-99) 4.6%). Large(100+) Fewer firms use bank financing than in 2012, but the proportion of bank-financed investments has increased 30 15 The percentage of Laotian firms using banks to finance purchases of fixed assets (or investments) has declined from 21% in 2012 to 16% in 2016. 20 Percentage Percentage This percentage is also lower than the average for 10 the EAP economies (20%). Interestingly, though, 10 the intensity of bank use has slightly increased. The proportion of investments financed by banks has increased slightly from 9% in 2012 to 11% in 2016. 0 5 Percent of firms using banks to Proportion of investments However, this is comparable to the average finance investments financed by banks (%) proportion of investments financed by banks in lower middle income economies, which is 10%. LaoPDR2016 LaoPDR2012 EAP13 Compared to 2012, Laotian firms spend less time to obtain permits and to comply with regulations 8 Since 2012, the time required to obtain 80 construction permits and to comply with 60 6 government regulations has significantly decreased Percentage in Lao PDR. The average time to obtain a Days 40 4 construction permit is almost one third of what it was (20 days in 2016 compared to 59 days in 2012). 20 2 The “time tax”, that is the percentage of time senior managers spend dealing with regulations, is almost 0 0 Days to obtain construction- one quarter of what is was in 2012 (1% compared related permit Senior management time spent in dealing with requirements of to 6%), and it is also lower than the average in the government regulation(%) EAP region (6%). LaoPDR2016 LaoPDR2012 EAP13 Fewer firms in Lao PDR are offering formal training compared to 2012 and to regional comparators 40 80 The percentage of firms that offer formal training to their employees (incidence of training) has declined 30 60 substantially since 2012. Only 7 percent of the firms Percentage Percentage offer formal training in 2016, a significant decline 20 40 from 29% in 2012, and well below the average for the EAP region (32%). However, the intensity of 10 20 training (the share of workers offered formal training) has slightly increased, from 33% in 2012 to 0 0 38% in 2016. Despite this small improvement, Lao Percent of firms offering formal Proportion of workers offered training formal training (%) PDR is underperforming compared to the average in the EAP region, where 63% of workers are offered formal training. LaoPDR2016 LaoPDR2012 EAP13 The incidence of crime and security costs are lower in Lao PDR than in comparator economies 60 3 In 2016, both the percentage of firms paying for security and the percentage of firms experiencing 2016 LAO PDR ENTERPRISE SURVEY 40 2 Percentage losses due to crime fell significantly compared to Percentage 2012. The percentage of firms paying for security fell 20 1 by almost 50% (from 57% in 2012 to 27% in 2016) and well below the average in the EAP region (49%). Further, the percentage of firms experiencing losses 0 0 Percent of firms Percent of firms Security costs (% of annual due to theft and vandalism is only 4%, a drastic paying for security experiencing losses sales) due to theft and improvement from 2012 (26%) and much lower than vandalism the average of 18% in EAP. Security costs have also declined to less than 1% of annual sales, compared LaoPDR2016 LaoPDR2012 EAP13 to 1.7% in 2012 and 1.8% in the EAP region. Firms consider informal competitors as the biggest business environment obstacle Among 15 areas of the business environment, 27% Informal competitors of firms in Lao PDR chose competition from Tax rates Poorly educated workers informal competitors as the biggest obstacle to their Electricity daily operations in 2016. Tax rates and poorly Access to finance educated workers were ranked 2nd and 3rd (cited by Transport 22% and 13% of firms respectively). The top three Customs & trade regulations obstacles have not changed since 2012. Also in that Labor regulations Corruption year, informal competitors were the biggest obstacle Access to land (cited by 18% of firms) while poorly educated Licensing and permits workers and tax rates ranked 2nd and 3rd, cited by 17% Courts LaoPDR2016 and 15% of firms respectively. Firms’ perceptions Tax administration LaoPDR2012 about the provision of electricity have instead Political instability Crime, theft and disorder deteriorated, as this obstacle is now ranked 5th (cited 0% 10% 20% 30% by 13% of firms), while in 2009 it was ranked 9th and Percentage of firms cited by only 4% of firms. The Enterprise Analysis Unit is a joint World Bank and IFC team of economists, survey experts specialized in private sector development. Surveys implemented by the team reveal what businesses and firms experience across the world by interviewing representative samples of the formal, non-agricultural, non-extractive, private sector with 5 employees or more. The resulting globally comparable firm-level data is used to construct business environment indicators and measure firm performance. The findings and recommendations help policy makers identify, prioritize, and implement policy reforms that support efficient private economic activity. For more information on the survey visit http://www.enterprisesurveys.org Generated using Enterprise Survey data as of June 26, 2017