Supporting SMEs and private sector in Laos

In April 2022, Ecorys was awarded a 24-month full-cost extension to extend our Business Assistance Facility (BAF II) operations to continue to improve the business environment, assist Lao businesses to recover from COVID-19 and ultimately (help) create better-paying jobs for the next generation of Laos people.

Funded by the World Bank, USAID, Australia, and Ireland, BAF II promotes Improving Firm-Level Competitiveness of the Lao PDR Competitiveness and Trade (LCTP) project to simplify business regulations, facilitate trade, and improve firm-level competitiveness, and in particular diversification of the economy away from the natural resource sectors.

Since May 2019 our local team in Vientiane has been supporting private sector companies and SMEs to build their skills and expertise so that they can become locally, regionally and internationally competitive, through providing (1) direct (pro bono) guidance and mentorship services to Lao enterprises; and (2) matching grant funding support for bespoke business development services (BDS) and other eligible technical assistance inputs provided by third party experts.

BAF II’s implementation was commended as “highly satisfactory” by the World Bank LCTP Support Mission that took place at the end of 2021, despite (at the time) continuing adverse effects on business activity from Covid-19 measures, including prolonged lockdowns and closed borders. Feedback from the externally appointment Impact Assessment Mission reported that BAF was working well, and that the service quality provided was appreciated by client firms.

With inflation and the depreciation of the local currency (Lao Kip) both accelerating during Q1 2022, the issue of rising prices for various imported goods and inputs has started to overtake COVID-19 as the primary concern for Lao manufacturers.  In April, the World Bank revised down its GDP growth forecast for Laos in 2022, from 4.5% to 3.8% and anticipate that companies will be increasingly forced to look for efficiency gains that can help mitigate this inflationary trend.

We continue to believe (and anecdotally observe in the kinds of grant applications that BAF receives, as well as the advisory work that the BAF II team provides) that:

  • New business models are emerging as a result of technology-driven advances in digitisation that have the potential to revolutionise how various business sectors operate.
  • Apart from being an immense stress test for the Lao economy and its business community, the pandemic has changed spending and procurement patterns, and in doing so has created exciting new business opportunities
  • Covid-19 has also served to remind companies of the need for greater resilience in their business models in the face of extreme exogenous shocks as well as more ‘run of the mill’ adverse impacts like recent spikes in energy and commodity prices

It is in this context that BAF II’s continuation to April 2024 will be of utility in helping Lao companies not only to recover from the pandemic, but more importantly, prepare to ‘snap forward’ to a potentially (very) different business environment that will pertain in the coming two years and beyond. To be sustainable, firms will increasingly need to start thinking outside of their ‘business as usual’ comfort zones, by developing new products and/or new services, as well as new ways of delivering their offerings to customers and clients.  This in turn should create demand for BAF II’s pro bono advisory support, as well as more technical BDS provision to help business owners and managers make informed decisions and adjustments to their business models.  Executing those adjustments, including some potentially major pivots in some business models will require expertise that is outside of firms’ core competencies, and so demand for BDS provision and matching grants to help underwrite the fees associated with that provision should also drive-up demand for BAF II’s services.

For more information, contact Khalid Miah, Senior Consultant and BAF II Project Manager.

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28 June 2022

3 minute read

Key Experts

Khalid Miah

Senior Consultant