The cash-strapped government in Laos has imposed a freeze on salary increases for civil servants during the new fiscal year beginning October, reports say, as the country reels from shrinking revenues.
Some government workers said their morale has been dampened by the state media’s announcement of the freeze on July 31.
A government decree had assured the more than 150,000 civil servants of salary increases for three consecutive years beginning from the 2012-2013 fiscal year.
The salary increase could not go ahead due to current "budget tensions," the Vientiane Times reported.
The government has to exercise cautious spending and cut unnecessary expenditure, it said.
Senior Ministry of Finance official Bounzoum Sisavath confirmed the freeze in the report, which came following the approval by the National Assembly, the country’s parliament, of a trimmed down budget for the next fiscal year.
Civil servants received a salary increase and a monthly living allowance of 760,000 kip (U.S. $94) in 2012-2013.
The monthly allowance, which is much larger than the salary increase, was suspended this fiscal year.
Loss of incentive
One state employee who works closely with employees in the provinces said the salary freeze especially dampens the motivation of workers serving in remote areas.
The employees are already facing various constraints in the rural areas and had been expecting the salary increase as an incentive, he said.
“They feel very discouraged,” he said. “Some do not want to work and want to come back or be transferred out.”
“They say working in remote areas is already a sacrifice. When the government suspends the salary increase, the only incentive is gone.”
Laos, which has more than six million people, currently has approximately 156,000 civil servants.
The Lao government’s financial difficulties were a key focus in the recent National Assembly session.
Lack of transparency
According to an official report, in the first half of the current fiscal year, the government collected just over 9.221 trillion kip (U.S. $1.1 billion), or 36.5 percent of the annual plan, the Vientiane Times reported.
According to Minister of Finance Lien Thikeo, budgetary woes stemmed largely from lack of transparency by finance officials, who help companies avoid their tax obligations, the report said.
Under questioning at the National Assembly, he described how some finance officials would help to manipulate the books of companies to show low or no profits, enabling them to evade taxes.
Poor revenue collection is due to lack of strong enforcement mechanisms to ensure businesses and enterprises pay taxes.
Lien Thikeo believes that updating revenue collection with modern technology can help minimize the problem of tax fraud.
The ministry has begun a pilot program to use electronic systems, such as smart cards, at border checkpoints in Vientiane, as well as the provinces of Luang Namtha, Champassak and Bokeo, according to the Times.
Reported by RFA’s Lao Service. Translated by Somnet Inthapannha. Written in English by Di Hoa Le.