Vientiane - It seems that every successful communist economy in Asia wants a stock market nowadays. China opened the Shanghai Stock Exchange in 1990, and the Stock Trading Center of Vietnam has been operating in Ho Chi Minh City since July, 2000. Both bourses are booming in tandem with their fast-paced economies.
Formerly communist Cambodia is working on its own Phnom Penh bourse with technical assistance from South Korea (Pyongyang may need to wait a while, though).
Therefore, it should come as no surprise that communist Laos has its own stock market plans which will be taking a small step forward at the end of this month.
"We are drafting a prime minister's decree on a Securities Exchange that we expect to submit to the government by the end of September," said Khankeo Lamanigao, deputy director general of the monetary policy department at the Bank of Laos, the central bank.
The Lao central bank has been tasked with setting up a stock market for Laos by the year 2010, the end of the current five-year plan. Informal stock trading may start as early as next year.
"Maybe we will set up a small trading centre in the central bank, to introduce people to stocks and teach them about securities trading," said Khankeo.
Not everyone is convinced that this is the right time for Laos, with its rather limited private sector, to be mulling an exchange.
"It is very premature," said Charles Schneider, head of the International Finance Corporation (IFC) office in Vientiane. The IFC turned down a Lao government request for advice on setting up an exchange, citing other priorities for Laos, such as the need to strengthen the banking sector and leasing industry.
Laos' fledgling banking sector, in fact, took a step forward in August, with the opening of the Vientiane ANZ Bank, a joint venture between ANZ Bank of Australia/New Zealand (holding 60 per cent of the shares), the privately owned Vientiane Commercial Bank (30 per cent) and the IFC (10 per cent).
The commercial bank was the first equity investment in Laos for the IFC, the financial arm of the World Bank.
"I think this shows that there is some potential here," said Schneider.
Laos, a land-locked communist country of 6.5 million people, is doing okay economically, at least in its urban centres.
Gross domestic product grew 8.3 per cent last year, inflation was stable at under 7 per cent, the kip currency appreciated against the dollar around 10 per cent and exports (mostly hydroelectricity and gold) almost hit 1 billion dollars.
This was a real turn-around for Laos, which was hard hit by the Asian financial crisis of 1997, and has never really been on the international radar screen for trade and investment.
Laos, a former member of the Soviet bloc, opened its economy up in 1986. Reforms have come slowly, and the economy has been largely kept afloat with foreign aid.
The recovery has been fuelled by a lot of foreign investment in mining and hydro-electricity projects over the past three to four years, so much so, in fact, that the government has essentially put a freeze on all new concessions this year.
But other than a few hydroelectric dams, some gold mines, telecommunication companies and the country's sole brewery - Lao Brewery Ltd - there are not too many candidates for getting listed on a stock exchange.
The government could start issuing bonds, for which there would no doubt be a market, but a stock exchange is not needed to trade government papers.
But what is apparent is that Laos' leaders have decided a stock market is needed, for prestige if nothing else, so a stock market is likely to happen.
"For a perfect exchange there are so many things involved, such as a securities commission, a securities depository, securities firms and also the IT system," noted Khankeo. "In the initial stage we could start with just the most important things, like the seed of an exchange, same as everything we have done."
One piece of good news for the future stock market is that Lao Brewery Ltd, the country's largest manufacturer, seems keen to get some of its shares listed.
"I think it will benefit us and everyone," said Sounthone Phommachak, Lao Brewery's senior deputy managing director. "We will be the first company listed," he predicted.
It may help that Lao Brewery is 50 per cent owned by the government (the remaining 50 per cent of the shares belong to Carlsberg of Denmark) and claims 99 per cent of Laos' beer market.
