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Chairman's Report

Dr. In Channy, Chairman of the Board of Directors of ACLEDA Bank Lao Ltd.

Economic Environments

Economic growth in the Lao PDR was projected to rebound to 6.5 percent in 2019, up from 6.3 percent in 2018. Growth is expected to be driven by the construction sector, supported by investments in large infrastructure projects, and a resilient services sector, led by wholesale and retail trade growth. Against a backdrop of challenging domestic and external environments, the Government of Lao PDR has remained committed to fiscal consolidation by tightening public expenditure and improving revenue administration, according to the latest edition of the World Bank's Lao Economic Monitor.

Fiscal consolidation was expected to result in a decline in the budget deficit to 4.3 percent of GDP in 2019 down from 4.4 percent in 2018, driven by tighter control of the public wage bill and capital spending. This is expected to keep public expenditure stable at around 20 percent of GDP in 2019. The revenue to GDP ratio is projected to improve slightly in 2019 thanks to efforts to strengthen revenue administration and the legal framework. Looking forward, public debt is expected to decline from 57.2 percent of GDP in 2018 to 55.5 percent of GDP in 2021. The outlook until 2021 is subject to increasing downside risks.

Banking Sector

The capital adequacy of the banking sector continued well above the regulator's level. The regulatory capital to risk-weighted assets of the banking sector gradually improved from 15.8 percent in Q4-2017 to 18.3 percent at end 2018, which is above its selected regional peers, except Cambodia. In addition, Tier-1 capital to risk-weighted assets increased to 14 percent from 12.5 percent over the same period. Banking sector assets continued to grow at 8 percent in Q1-2019, slightly slower than a year ago as the increase in state-owned banks' assets offset the slowdown in other bank groups.

The authorities are focusing on enhancing the resilience of the banking sector, including through the upgrading of the regulatory and supervisory framework. The authorities view the strengthening of the financial system as a continuing and crucial process amid increasing integration with the global economy. Relevant laws and regulations have been amended to be in line with international best practices. In particular, the Commercial Bank Law contains relevant provisions for crisis management and bank resolution. To fully implement the provisions of the law, the BOL is carefully drafting a prompt corrective action, crisis management and resolution framework to improve its regulations under the Commercial Bank Law. Also, to supervise the domestic payments and settlement system, the BOL established the Payment and Settlement Supervision Department and issued the Payments System Law.

Foreign Direct Investment

The high current account deficit in 2019 is expected to be largely financed by foreign direct investment. In 2018, FDI inflows remained at an historic high of 9.4 percent of GDP, financing a large part of the current account deficit. Inflows of FDI were expected to remain buoyant in 2019, owing to the construction of the Lao-China railway. About half of the foreign investment inflows are related to the construction sector, which mostly relate to the construction of the railway line, and which has a high import content, like other large investments.

Robust FDI inflows have supported a slight increase in foreign reserves to USD 885 million in Q1-2019 from USD 873 million at end-2018, but they continue to remain relatively low. At the end of 2018, foreign reserves buffers represented 1.1 months of total imports compared to 1.6 months in 2017. The downturn in reserves is due to external public debt amortization and interest payments in 2018. By end-2019, inflows of foreign investments and exports are expected to help boost foreign reserves to 1.2 months of total imports or 2.4 months of non-FDI-related imports. This level is considered low compared to regional peers.

Export and Import

The imports and exports of Lao PDR in December 2019 totaled USD 988 million, including USD 455 million of exports and approximately USD 534 million of imports. This, therefore, lead to a trade deficit of USD 79 million.

Total exports in November were approximately USD 455 million. These included USD 39 million worth of gold ore, USD 35 million of copper and accessories made of copper, USD 23 million of bananas, USD 36 million of pulpwood and waste paper, USD 20 million of beverages (water, juice, and energy drinks), USD 24 million of mixed gold and gold bars, USD 19 million of potatoes, USD 19 million of clothing, USD 35 million of rubber and USD 27 million of livestock.

Total imports in November were valued at approximately USD 534 million. The imports included USD 35 million worth of vehicles besides tractors and motorcycles, USD 19 million of electrical machinery and equipment, USD 47 million of diesel, USD 50 million of mechanical equipment (other than motor vehicles), USD 39 million of steel and steel products, magnetic steel, USD 21 million of beverages (water, juice, and energy drinks), USD 13 million of spare parts (including tires, mirrors, chains), USD 15 million of line steel and various forms of steel, USD 17 million of plastic and plastic products and USD 29 million of livestock.

The Lao PDR's main exporting countries included China-USD 175 million, Thailand-USD 100 million, Vietnam-USD 115 million, India-USD 10 million and Japan-USD 9 million.

The main importing countries of Laos are Thailand 285 million, China-USD 145 million, Vietnam-USD 61 million, Japan-USD 6 million and the United States-USD 6 million.

Economic Outlook 2019

Lao PDR growth is expected to edge up to 2.7 percent in 2020 and 2.8 percent in 2021. Slowing activity in advanced economies and China is expected to be accompanied by a modest cyclical recovery in major commodity exporters and in several Emerging Market and Developing Economies (EMDEs) affected by recent pressure related to financial market stress or sanctions. EMDE growth is projected to pick up from a four-year low of 4 percent in 2019—0.3 percentage points below previous projections—to 4.6 percent in 2020-21. This recovery is predicated on the waning impact of earlier financial pressure currently weighing on activity in some large EMDEs, and on more benign global financing conditions than previously expected. It also assumes no further escalation in trade restrictions among major economies and stability in commodity prices.

COVID-19 pandemic has caused uncertainty in global economic growth which Lao's is part of that. Lao PDR has worked hard so that its economy can be resilient with the challenge of the business impacts from the fear of the COIVID-19 virus.

Significant Decisions of the Board of Directors and Achievements of ACLEDA Bank Lao Ltd. in 2019


The Board of Directors met by face-to-face four times in March, June, September and December during the course of 2019 and in addition the Board passed resolutions by E-mail. Our main activities in 2019 were as follows:

  • Reviewed the Bank's quarterly Financial Reports and received progress reports on all operational aspects of the Bank's operations including services and products;
  • Approved the Audited Financial Statements and Annual Report for the year 2018.
  • Reviewed and approved the Business Plan, Budget and Capital Expenditure Plan, and Funding Strategy 2020;
  • Reviewed and approved amendment of TORs for Board Committees;
  • Reviewed Reports of Board Committee Chairmen and Chairwoman on their Committee activities;
  • Reviewed and approved amendments to Policies and Operating Manuals of ACLEDA Bank Lao Ltd;
  • Approved the re-nomination of the Managing Director & CEO of ACLEDA Bank Lao Ltd;
  • Reviewed and approved the Master Plan of BASEL II;
  • Reviewed and approved amendments to the Board Committee Structures;
  • Approved setting the inflation rate for ACLEDA Bank Lao Ltd.'s employees for 2019.

Achievements of ACLEDA Bank Lao Ltd. in 2019

Since the opening of ACLEDA Bank Lao Ltd., our mission has been to build a commercial bank with an extensive branch network throughout Lao PDR, providing access to retail banking services with a special focus on the lower segments of the market. We will at all times observe the highest principles of ethical behavior, respect for society, the law and the environment.

At the end of December 31, 2019, ACLEDA Bank Lao Ltd. had 1.009 staff working in 38 offices nationwide. It had total assets of USD 179.777.223, gross loans outstanding of USD 131.756.636 and a balance of deposits at USD 112.198.843.

From a performance perspective, we are pleased to report that ACLEDA Bank Lao Ltd. had its fourth consecutive year of increase in terms of income. Over the year, ACLEDA Bank Lao Ltd. focused on risk mitigation and improving loan assets' quality. The loan increase mainly stemmed from an increase in loans to Small 3 and Medium enterprises.

In closing, we would like to express our sincerest gratitude to the Government of Lao PDR, the Bank of Lao PDR, regulators, all relevant authorities and our customers for their support and our gratitude to the management and staff for their efforts. Our Board of Directors and staff remain committed to building ACLEDA Bank Lao Ltd. into the best bank in Lao PDR.

Dr. In Channy
Chairman of the Board of Directors

Source: BOL, IMF, World Bank, ADB and Lao PDR Trade Portal


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