December 14, 2017

Overvalued development projects face scrutiny in Laos

By:  Somsack Pongkhao, Vientiane Times, December 12, 2017

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VIENTIANE - Stronger measures have been put in place to address the problems related to overvalued state investment projects, a senior official has confirmed.

Deputy Minister of Planning and Investment Dr. Kikeo Chanthabouly told Vientiane Times on Friday that the government was announcing measures to enforce laws strictly to ensure the effective expenditure of the State budget.

“From now on, all State investment projects must follow all requirements as stipulated in the investment promotion law, particularly evaluation and bidding procedures,” he said.

“The move will not only aim to ensure the quality of the projects, but also seek to disburse the State budget effectively and transparently.”

Over the past years, the construction costs of many State investment projects, notably roads, were too expensive and exceeded the realistic value.

Dr. Kikeo attributed the existence of overvalued projects to several factors.

One was the case of projects not authorised by the NA in which companies paid upfront for the project construction, and government bodies repaid the developers later following the completion of the projects.

Secondly, projects that had been solely carried out by the investors, including project survey and designs, without due oversight.

Thirdly, where investors had determined the cost of the project construction which had then been implemented without bidding procedures.

Fourth, the cases in which contractors faced financial difficulties since the government was unable to repay them promptly, causing the companies to be responsible for repaying interest rates of commercial banks, so they had to raise costs.

Sometimes, projects had been re-designed, with extra work and costs being added to the bill.

In October, the Prime Minister Thongloun Sisoulith told the National Assembly session that the value of road construction was too high, but the quality of the roads was often lower than anticipated.

“Some people sarcastically say that road construction in Laos is described as “low profile, high profit”,” he said.

For instance, the construction of 1-km road should be about 3.5 billion kip yet in actuality; a case existed where some 14 billion had been charged for one km stretch, a figure he described as incredible.

An example of an overvalued road construction project was in Huaphan province where the government used funds recovered from overvalued project to construct an additional 15-20 km stretch of roadway.

Starting early next year, inspection teams comprising officials from the Ministry of Planning and Investment, State Inspection and Anti-Corruption Authority and other relevant sectors will carry out missions in a bid to carefully examine the status of State investment projects.

Since the State administration led by PM Thongloun took office in April last year, higher attention has been placed on the roles played by State Auditing Organisation and State Inspection and Anti-Corruption Authority.

The move is aimed to reveal any potential cases of official corruption to ensure transparency in State administration under a rule-of-law approach and comes as the country seeks to firm up its financial position amid budgetary pressures.

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