14 Oct, 2024
Capital Links Forum Highlights Opportunities, Barriers to Investment in Laos
On 11 October, Laos hosted the “Capital Links Forum” at the Souphattra Hotel in Vientiane, bringing together financial institutions, investors, policymakers, and fintech innovators. The event focused on the significant barriers hindering capital mobilization in the country, sparking critical discussions about how to unlock Laos’s economic potential.Laos has long been an attractive economic and infrastructure partner for its neighbors, thanks to its strategic location in Southeast Asia. Many see great potential in Laos as a connecting hub for regional trade and investment. Recent initiatives, such as the “Land Locked to Land Linked” project—part of China’s Belt and Road Initiative—aim to enhance infrastructure and promote economic integration within the ASEAN region.“The first time I came (to Laos), over a decade ago, there wasn’t much infrastructure development,” said Hongwei Wang, CEO of CGIF, a collaboration project involving ASEAN +3 and the Asian Development Bank. “Importing goods was challenging. Now, improved connectivity makes a big difference.”Despite these advancements in physical connectivity, the financial landscape remains underdeveloped, especially in rural areas. Many residents lack access to formal banking services, resulting in what participants at the event referred to as a “capital lock.” This phenomenon restricts the efficient flow of investments that are vital for unlocking Laos’s economic potential.In this context, Wang emphasized the importance of establishing a local currency bond market, which is essential for initiating the country’s first steps in bond issuance. One crucial aspect of Laos’s economic development is the establishment of a local currency bond market, Wang explained. Issuers in this market must meet specific criteria, but the advantages are substantial, according to Wang. With this in mind, CGIF’s support includes significant credit investments, allowing issuers to raise large amounts of capital. Previously, bonds could only be issued for up to three years; now, they can extend to five years. This extension is expected to positively impact the country’s economy in the long run, providing more stability and opportunities for growth.“A larger investment base provides users with more opportunities. As we pursue this work, it’s essential to adhere to social and environmental standards, which is a crucial aspect of our mission,” Wang said. “What we offer to investors is an unconditional guarantee. This means that investors are 100 percent protected, no matter the circumstances. This level of security is one of the key benefits we provide.”GCIF aims to contribute to regional financial integration through this project. Addressing Financial Accessibility, InnovationThroughout the day, attendees engaged in discussions about the challenges facing Laos’s financial sector. They highlighted the concentration of economic activity in Vientiane, which limits opportunities for development in other regions. Participants pointed out that an underdeveloped capital market, regulatory hurdles, and inadequate financial infrastructure are significant obstacles to attracting investment.A major theme that emerged was the pressing need for improved access to financial services. Expanding banking facilities and financial products to underserved rural communities could foster greater economic participation and investment throughout the country.“Blockchain may sound intimidating, but it’s something we engage with every day. It helps us simplify complex concepts. For example, in Thailand, we collaborate with specialists, and we’re currently building platforms that connect directly with customers,” said Vachara Aemavat, Co-founder and Co-CEO of SIX Network, he blockchain platform for reinventing the Digital Economy, and Co-founder of Computerlogy, a leading startup in Thailand that develops social media tools for enterprises, offering a variety of products such as social media analytics, command centers, and chatbots.“Blockchain has been around for 5 to 10 years; we’re now in its second cycle. The real challenge is finding ways to generate revenue from this technology. While cryptocurrency appears significant, with around 3 million users, it’s still relatively small compared to the larger market,” he added.In addition to identifying challenges, the event also brought up potential solutions, exploring successful financial products and innovative fintech solutions from other regions, emphasizing the importance of leveraging technology to enhance capital market connectivity. Discussions also focused on the impact of digital platforms on financial market efficiency, presenting a pathway for Laos to modernize its financial infrastructure.Tech Path to Economic Resilience, GrowthAs the tech startup scene gains momentum across the region, the qualities required for success are becoming clearer. Natavudh Pungcharoenpong, Founder and CEO of OOKBEE and Co-CEO of SIX Network, emphasized the importance of a strong entrepreneurial spirit. “In the early stages, it’s not just about being a tech expert; the entrepreneur must be resilient and visionary,” he said. “You need the ability to attract talented individuals who share your vision. Having good people on your team is crucial.” Natavudh also highlighted the necessity of financial acumen, “You need to secure funding to pay these talented individuals.” According to the tech expert, vision, talent, and funding forms are the foundations for successful tech entrepreneurs.When discussing the pitfalls of tech entrepreneurship, Natavudh pointed to timing as a critical factor in a startup’s success. “Launching at the right moment is vital, especially in a saturated market filled with innovative ideas and strong competition,” he explained. Without sufficient funding, even the best ideas can falter. “Tech development takes time, and without adequate financial resources, many startups struggle to scale.” He advised aspiring entrepreneurs to ensure they have someone on their team who excels in fundraising, as this can be a decisive factor in overcoming the challenges of growth.Natavudh also recognizes the importance of community and local connections in building a successful tech venture. “The networking effect in local communities can be incredibly powerful. People know each other and are willing to help one another,” he notes. Drawing from his experiences in Thailand and Laos, he explains how collaborating with local entrepreneurs can offer a significant advantage. However, he also recognizes the value of seeking external partnerships to broaden a startup’s reach. “Given the smaller market size, working with outside investors or partners can be essential for growth,” he said.The event’s alignment with the priorities of the ASEAN Business and Investment Summit 2024 strengthens Laos’s commitment to economic connectivity and resilience. As the nation transforms from a land-locked to a land-linked country, the discussions highlighted the crucial role of breaking down barriers to capital flow.By addressing these financial challenges, Laos can better position itself as a key player in the ASEAN economy, attracting cross-border investments.