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Chairman's Report

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

Economic Environments

The World Bank estimates that Lao PDR's growth will decline drastically in 2020 to −0.6 percent. The COVID-19 pandemic has mainly affected labor-intensive service sectors and those linked to global and regional value chains, having an especially negative effect on tourism-related services, wholesale and retail trade, and manufacturing. It has affected livelihoods and poses a serious risk to Lao PDR's progress on poverty reduction. The poverty rate (measured as US$3.20 a day, 2011 PPP) is expected to increase by at least 1.7 percentage points in 2020, as compared with a non-COVID-19 scenario. The sharp drop in domestic revenue mobilization has led to worsening of the fiscal situation and a growing debt problem. Under the baseline scenario, Lao PDR's GDP growth rate is projected to rise to 4.9 percent in 2021, assuming that the domestic spread of the virus is brought under control, that the government's small but targeted COVID-19 fiscal support measures are implemented effectively, and that there are no new interruptions to the global economic recovery. The anticipated recovery will be supported by investment in infrastructure, and growth in services, exports, and private consumption. However, risks are tilted heavily to the downside, as unpredictable evolution of the pandemic and therefore its threats to macroeconomic stability could delay the resumption of regular economic activity. Under the downside scenario, which assumes some of these risks are realized, the growth rate is estimated to rebound to only 2.8 percent in 2021.

The service sector has been hardest hit, due to lockdown measures and the decline in travel and tourism. Supply chain disruptions have negatively affected industry, especially manufacturing, while the agriculture sector has stayed resilient despite COVID-19 related disruptions and is expected to grow by 2 percent in 2020, up from −0.9 percent in 2019, supported by forestry and wood pulp exports. Service sector output is expected to contract by 4.5 percent in 2020, down from an expansion of 6.7 percent in 2019, as precautionary behavior and travel bans negatively affect tourism-related services and transportation. Cautious spending patterns and weakened supply chains are slowing wholesale and retail growth but the information and communications sector has been less exposed to the direct effects of the pandemic. Industrial production growth is expected to decline to 2.9 percent in 2020, down from 4.7 percent in 2019, following contraction in mining and manufacturing activities.

The current account deficit is expected to increase to 11.3 percent of GDP in 2020, up from 8 percent in 2019. Over the first nine months of 2020, imports dropped by 10.2 percent compared to the same period of 2019, while exports fell by 0.5 percent. COVID-19 is negatively affecting tourism-related activities and is expected to reduce tourism income by more than US$500 million in 2020. At the same time, remittances are projected to decline by about 50 percent (or US$100 million) in 2020. With a low foreign currency reserve buffer, the country faces heightened balance of payments pressures and difficulties in meeting external debt obligations.

Banking Sector

Most recently, on September 7, 2020, the Ministry of Finance issued domestic bonds of 1,500 billion Kip and US$50 million. The previous US dollar bond of US$500 million issued by the Central Bank was heavily undersubscribed, with only US$31 million taken up. This could be attributed to uncertainty associated with the government's credit worthiness, coupled with the marginal difference between the interest rates offered by these bonds and commercial bank US dollar deposit rates. Moreover, for Kip bonds, the real interest rate is only marginally positive, given an average inflation rate of 5.3 percent over the period January to November 2020. Given the recent depreciation of the Kip, this makes local currency bonds less attractive and less likely to be taken up by non-state financial institutions or individuals.

Foreign Direct Investment

FDI has been driven mainly by construction of the Laos-China railway, the Vientiane-Vang Vieng highway, and several small and medium-sized power projects. However, the overall trend has declined from 2019 due to the previous completion of various large hydropower projects and the pandemic. Inflows of FDI to Lao PDR have remained stable when compared to those in other regional countries, a fact that may be attributed to government efforts to smooth the path for investors. The government has pledged to further improve the business climate to attract more domestic and foreign investment, especially from the private sector, citing a "Three Open" policy, that will open "minds", "doors" and "barriers".

Export and Import

The goods trade deficit declined by US$517 million, from US$955 million in January-September 2019 to US$438 million in January-September 2020. Imports declined by 10.2 percent from US$5,297 million in January-September 2019 to US$4,757 million over the same period in 2020. Exports fell by 0.5 percent over the same period, from US$4,342 million to US$4,319 million. Compared with neighboring countries, Lao export performance contraction was mild during the first nine months of 2020

Border closures have led to delays in delivering inputs to export-oriented manufacturing industries. In addition, electronics parts and garment exports have been adversely affected by lower demand from Thailand and the EU while mining exports have decreased, mainly due to lower copper production. However, wood pulp exports to China performed well between January and November 2020, rising by 15.2 percent compared with the same period last year. Electricity exports also continued to grow by 22.1 percent between January and November 2020, year-on-year. Lower demand in the manufacturing sectors drove lower imports from China, Thailand, and Vietnam. These sectors include cement and construction materials, car and motorbike assembly parts, iron and steel, and other light manufacturing. Overall import performance from January to November remained weak and was exacerbated by the pandemic. In the future however, trade volumes in the Lao PDR are expected to benefit from the RCEP Agreement.

Economic Outlook

Despite economic contraction caused by the pandemic in 2020, growth is projected to recover gradually in the medium term on the back of infrastructure investment allied with growth of services, exports, and private consumption. Infrastructure includes two major transport projects, the China-Laos Railway expected to commence commercial operations in 2021 and the Vientiane-Vang Vieng Expressway, which opened in December 2020. The service sector activity is likely to be boosted by increasing demand. Export activities will be positively affected by a recovery in China, its offering the Generalized System of Preferences (GSP) for 97 percent of Lao export products and by the signing of the Regional Comprehensive Economic Partnership (RCEP). Private consumption is expected to resume with economic recovery.


The Board of Directors met by conference call four times in March, June, September and December during the course of 2020 and in addition the Board of Directors passed resolutions by E-mail. Our main activities in 2020 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 2019;
  • Reviewed and approved the Business Plan, Budget and Capital Expenditure Plan, and Funding Strategy 2021;
  • Reviewed and approved Amendments to TORs of Board Committees;
  • Reviewed Reports of Board Committee Chairmen on their Committee activities;
  • Reviewed and approved Amendments to Policies and Operating Manuals of ACLEDA Bank Lao Ltd.;
  • Approved the nomination of a new Managing Director & CEO of ACLEDA Bank Lao Ltd.;
  • Approved the nomination of a new Finance Consultant & CFO of ACLEDA Bank Lao Ltd.;
  • Approved the nomination of the Heads of Departments and Branch Managers of ACLEDA Bank Lao Ltd.;
  • Approved changing the logo of ACLEDA Bank Lao Ltd.;
  • Approved setting the inflation rate for ACLEDA Bank Lao Ltd.'s employees for 2020.

Achievements of ACLEDA Bank Lao Ltd. in 2020

Since the opening of ACLEDA Bank Lao Ltd., our mission has been to build a commercial bank with an extensive branch network throughout the 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, 2020, ACLEDA Bank Lao Ltd. had 998 staff working in 38 offices nationwide. It had total assets of US$ 193.871.930, gross loans outstanding US$ 147.248.491 and a balance of deposits of US$ 127.186.782.

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 portfolio increase stemmed mainly 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 the Lao PDR, the Bank of Lao PDR, regulators, all relevant authorities and our customers for their support and our gratitude to the Bank's 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 the Lao PDR.

Dr. In Channy
Chairman of the Board of Directors

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Address:#398, Corner of Dongpalane and Dongpina Road, Unit 20, Phonesavanh Neua Village, Sisattanak District, Vientiane Capital, Lao PDR. See map
P.O. Box:1555
Tel:+856 (0)21 264 994 / 264 998
Fax:+856 (0)21 264 995 / 219 228
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