Bribes are a common business expense in Laos, a new report says

Almost 70 percent of businesses that applied for registrations, licenses and permits in Laos paid bribes to government officials to get approval, a report by the Asian Development Bank (ADB) said.

The report on the cost of doing business in Laos drew responses from 1,357 respondents, 68 percent of whom said that so-called “informal payments” were necessary for smooth and efficient business operations. ADB, which is based in Manila, provides loans, grants and other financial assistance to projects that promote growth in Asian countries and reduce extreme poverty in the region.

“The informal charges must be paid for everything … because the access to the officials and the system they control is difficult, and the system is slow to adopt technology,” an employee at the ADB office in Laos, who requested anonymity for safety reasons, told RFA’s Lao Service Thursday.

“It’s going to take some time to update the rules, amend the laws and improve the behavior of officials. The Lao government should develop human resources by upgrading their skills and knowledge, but it is more important that they are more transparent,” the ADB official said.

Paying the bribe to get things done is sometimes easier than doing business by the book, an owner of a bar and restaurant in the historic town of Luang Prabang in northern Laos told RFA.

“Paying kickbacks is widespread in Laos. They do it in every district and in every province because the process of obtaining license or permit in this country is very complex, bureaucratic and time consuming,” said the owner, who declined to be named.

“In my case, I knew somebody in the provincial business registration office. They came by and inspected my facility first before I could register my business. You have to know somebody in the office, if not, it’s going to be difficult to get registered,” he said.

Connections and money are integral to doing business in Laos, the owner of a Luang Prabang car rental company told RFA.

“If you try to do it yourself, you’ll find a lot of trouble. But if you have a link or a connection in the office, it’ll be much easier because you and your connection can talk and compromise, of course, with the appropriate amount of money under the table,” he said.

“With the appropriate amount, a process that normally takes three months takes only three weeks. In my case, I paid the appropriate amount to an acquaintance outside of his office after work hours,” the car rental owner said.

Lao governmental paperwork is overly complicated, the owner of another business told RFA.

“When I submit an application form for a permit, I can say to an official, ‘Please look at this application form. When it’s done, I’ll buy you a beer or two.’ Then I give him 300,000 kip ($25), the cost of one or two beers, for his service,” the source said.

A Lao economist told RFA that the report did not uncover anything out of the ordinary.

“For many people who don’t know about Laos, the ADB report looks negative. But for those who are used to it, kickbacks are normal because this kind of practice is a problem in every country in the world,” the economist said on condition of anonymity for safety reasons.

“For example, when officials perform inspections for safety, labor practices or environmental impact of a factory, the factory owner would have to pay the inspectors cash and never receive a bill or receipt. The inspectors put the money in their pockets. The money is not a fee charged by the government,” he said, adding that foreign investors might not want to do business under that type of system.

“For investors who are already here, the extra expenses in the form of kickbacks add up and increase the cost of doing business.”

Solutions

Kickbacks are often necessary because officials depend on them for much of their income, an official of the Lao Finance Ministry told RFA.

“They take the kickbacks to make a living. I cannot deny that,” he said. “It’s getting worse in the current economic situation. The government is tackling this practice head-on in hopes of reducing it little by little.”

The Lao Chamber of Industry and Commerce suggested in the ADB report that the government should step up training for its employees and switch from a system requiring person-to-person contact to an online processing method.

In Transparency International’s 2021 Corruption Perceptions Index, which measures public sector corruption on a scale of 0 (“highly corrupt”) to 100 (“very clean”), Laos received a score of 30, placing it in 128th place among 180 countries.

The least corrupt countries were New Zealand, Denmark, and Finland, each with score of 88, while the most corrupt was South Sudan, with a score of 11.

Translated by Max Avary. Written in English by Eugene Whong.

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