PETALING JAYA: GD Express Carrier Bhd (GDEX) believes Laos offers much promise for its postal and courier business.
According to executive deputy chairman Teong Teck Lean, Laos is an ideal regional hub due to its strategic location bordering five countries — China, Vietnam, Cambodia, Myanmar and Thailand.
“Laos’ courier service is still at development stage. Entreprise Des Postes Lao (EPL) is still struggling to achieve economies of scale due to lack of technology. Efficient processes will help lower prices and increase volume, which is where GDEX comes in,” he told StarBiz in an interview.
The Asian Development Bank forecasts the Laos’ economy to grow about 5.5% to 6.5% this year amid the global financial crisis. The country is hosting this year’s SEA Games for the first time.
Teong said Laos would be a vital connection point for trade by 2010 following the implementation of the Asean Free Trade Area.
Currently, Luang Prabang was attracting millions of tourists annually, which would have a spill-over effect on businesses and investments, he added.
Last month, GDEX signed a memorandum of understanding with EPL to set up a joint venture to develop international and domestic express delivery services under shared brands for the Laos market.
“The joint venture is ideal for us because of the little capital involved and allows us to tap into each other’s strengths. We’d rather not take up too much risk in the current economic conditions,” Teong said.
EPL would provide the network and GDEX the technology and proven despatch systems, he added.
“EPL needs cutting-edge technology to compete with its regional peers but international players currently in Laos would rather sell their services instead of sharing technology,” Teong said.
The foreign players in Laos are mainly operating in major cities and do not have an national presence like EPL, which GDEX can leverage on.
In GDEX’s feasibility study, which is likely to be completed by September, the Mesdaq-listed company will evaluate Laos’ overall courier system as well as the capital expenditure involved for the venture.
“We want to have management control although we can compromise in terms of equities. We also want a long-term concession of at least 20 to 30 years,” Teong said, adding that operations in Laos could begin as soon as next year if the partners concluded the evaluation successfully.
GDEX’s expansion strategy has always been “one at a time” to ensure the impact on bottom line while controlling cashflow.
“In 2007, we penetrated Singapore and now we’re moving into Laos, which is more challenging because of the language and cultural barriers. Nonetheless, this is an interesting period for us,” Teong said.