Lao businesses seek low lending rates ahead of AEC

Members of Laos' National Assembly have urged the country's central bank to lower interest rates for loans ahead of the ASEAN Economic Community (AEC) integration in 2015, the state-run daily Vientiane Times reported on Monday.
Businesses are anxious to coordinate with the Lao central bank to investigate ways to lower loan interest rates and access cheaper investment funds.
Current borrowing rates for business stand at between 13 percent to 14 percent per annum, significantly higher than the rates of other Southeast Asian countries. Thai banks, for instance, frequently offer loans to business in the range of 6 to 8 percent interest per annum.
National Assembly member of Vientiane Kikeo Khaikhamphithoun asked central bank governor Somphao Phaysith to lower the borrowing rate for Lao businesses so that they can access cheaper investment capital to produce goods and provide services at a more competitive price.
"I would like to hear what measures you would take to lower the rates so business people can access cheaper investment funds," he said, quoted by the newspaper.
Pressure is mounting to shore up Lao businesses in preparation for more direct competition with foreign rivals under 2015's AEC.
The central bank governor admitted that lending rates in the country were high due to high inflation and subsequent higher deposit interest rates.
"If we do not raise our deposit interest rates we will find it hard to encourage people to make deposits," Somphao said.
Somphao said that high loan interest rates reflected the measures of commercial banks to protect their own interests, adding that businesses that are assessed as higher risk will continue to face higher borrowing interest rates.
Despite the challenging financial environment, the Lao central bank will try its best to lower loan interest rates. The central bank will also continue to keep the currency exchange rate stable so as to assist businesses producing goods for export.
The government has already established a policy in which farmers from poor districts in the country are able to access loans at about 6 percent to 8 percent interest.