Lao PDR, a lower-middle income economy with a GNI per capita of $1,600 in 2014, is one of the fastest growing economies in the East Asia and Pacific region. GDP growth averaged 7 percent over the last decade, with increasing use of the country’s natural resources – mostly water, minerals and forests – contributing one third of output growth. Construction and services also expanded as resource rents spread to the rest of the economy and growing regional integration boosted tourism and attracted foreign investment. Growth contributed to lowering the number of poor people to an estimated 23.2 percent of the population in 2012/13 from 33.5 percent a decade ago. However, poverty reduction has taken place at a slower pace compared to some regional peers. In addition, the macroeconomic environment remains challenging, reflecting both domestic, and increasingly external risks, and needs careful management.

Still, growth prospects are generally favorable. Natural resources - forestry, agricultural land, water, and minerals - comprise more than half of Lao PDR’s total wealth and the country’s key development challenge will be to ensure that this wealth is sustainably managed and transformed into investments in public infrastructure, better health and educational outcomes for all, especially the poor, and an efficient business environment. Managing natural resources to achieve long-term development and sustainability is also a key focus of the Government’s 8th National Socio-Economic Development Plan (NSEDP), to which the World Bank Group’s Country Partnership Framework is aligned. At the current pace of development and improvement in human and economic outcomes, Lao PDR is likely to meet the criteria for graduation from ‘Least Developed Country’ status by 2020.

As a member of the Association of Southeast Asian Nations (ASEAN) Lao PDR is increasing its integration into the regional and global economy. The launch of the ASEAN Economic Community at the start of 2016 will further liberalize the movement of goods and services, capital and high-skilled labor in the regional block. On February 2, 2013, Lao PDR officially became a member of the World Trade Organization, the culmination of a 15-year process of reforms and negotiations. 

Lao PDR has made good progress on a number of Millennium Development Goals (MDGs), including halving poverty, reducing hunger and improving education and health outcomes. However, a few MDGs remain off track, most crucially on nutrition, with an estimated 44 percent of under-five children being stunted and 27 percent severely underweight.  Lao PDR still has a high maternal mortality rate and limited skilled birth attendance and could also do more to place gender equality at the center of its national development plans. The Sustainable Development Goals (SDGs) post-2015, built on the MDGs, will also provide a framework for the government to monitor and evaluate the progress in its development plan implementation and commitments. 

The World Bank Group (WBG) continues to work with the Government as it strives to meet the conditions for graduation from Least Developed Country status. The WBG’s operations in the country are guided by the Country Partnership Strategy (CPS) for 2012 to 2016, designed to build stronger institutions for sustainable and inclusive development and support the Government’s development strategy laid out in the 7th NSEDP for 2011-2015. The 8th NSEDP for 2016-2020 is near finalization.

Last Updated: Oct 09, 2015

The World Bank Group Country Program Strategy (CPS) for Lao PDR 2012-2016 has three strategic objectives, with a cross-cutting theme of stronger public sector management.

Competitiveness and Connectivity. The WBG supports efforts towards improved trade facilitation, economic diversification and a better investment climate through project financing and analytical work. It also aims to help Government improve people’s access to transport and energy infrastructure services to facilitate regional connectivity.

Sustainable Natural Resource Management. Through project financing and advisory services, the WBG assists in strengthening Government capacity to make informed decisions on resource-based investments. It also supports the Government in strengthening and implementing institutional, legal and regulatory frameworks that aim for sustainable development of natural wealth – water resources, minerals, forests and biodiversity - and mitigate the environmental and social impacts of natural resource development.

Inclusive Development. The WBG continues to support the Government in providing essential maternal and child healthservices and access to quality primary education in targeted, disadvantaged districts. It also builds on successful community driven platforms to assist communities in remote and poor areas, particularly among ethnic groups and women, tobenefit from increased opportunities to participate in and benefit from development and livelihood activities.

Overall, the World Bank Group CPS program has been implemented largely as anticipated. The CPS Progress Report highlighted concerns about macroeconomic policies and public financial management. Good progress in achieving the outcomes of the first three themes of the CPS has been supported by strong performance in the delivery of new financing, satisfactory performance of the overall IDA portfolio, a high disbursement rate, and successful completion of a range of important knowledge products.

The WBG is preparing the Systematic Country Diagnostic (SCD) to identify key development challenges and opportunities for reducing poverty and boosting shared prosperity in Laos. It will also provide inputs towards the preparation of WBG’s Country Partnership Framework (CPF). The CPF will identify areas where the WBG can engage over the next four years.

Last Updated: Oct 08, 2015

The NT2 Multi-purpose Hydroelectric Project is jointly implemented by the Nam Theun 2 Power Company and the Government of Lao PDR. It is supported by financing from 27 parties including the World Bank, MIGA and Asian Development Bank. By 2035, the project is expected to have generated around $2 billion in Government revenues for poverty reduction and environmental protection through the sale of electricity to Thailand and into the Lao grid. Revenues from electricity sales are being used to finance Government efforts to enhance access to health care and education in Lao PDR.

Other ongoing projects related to Sustainable Natural Resource Management include the Scaling-Up Participatory Sustainable Forest Management (SUFORD SU) Project, which is executing REDD+ (Reduce Emissions from Deforestation and Forest Degradation) activities through participatory sustainable forest management, and piloting forest landscape management. The Protected Area and Wildlife (PAW) Project has improved management of National Protected Areas and reducing the trade in illegal wildlife. This project was renamed the Second Laos Environment and Social (LENS2) project, and was restructured and received $15 million in additional IDA financing in April 2015. Its scope was increased to capacity-building for protection of forested watersheds and for environment and social impact management.

The Second Education Development Project helped increase enrollment and completion rates for students, and to improve the quality of education in Lao PDR’s six poorest provinces. Under this project, 781 primary schools were built, each offering a complete five grades of primary education. Approximately 4,000 teachers were trained, a range of teaching-learning tools was developed and more than three million textbooks were distributed. The Second Global Partnership for Education Project was approved in April 2015. It supports the Government of Lao PDR in improving pre-primary and primary education quality through strengthening school-based management, improving reading outcomes and assessment and improving project management including monitoring and evaluation, planning and execution, financial management, procurement, internal audit, environmental and social safeguards management. The Early Childhood Education Project is also ongoing.

The Health Governance and Nutrition Development Project, approved June 2015, aims to improve the health of women and children by supporting the Government’s free maternal and child health services including reproductive, maternal and child health for women, and nutrition services for children. Over five years, the project is expected to benefit approximately one million women and children. The World Bank also supports the Government of Lao PDR through the Health Services Improvement Project. This project assists the Government to increase utilization and quality of health services for poor women and children, particularly in the rural areas of five provinces—Attapeu, Champasack, Savanakhet, and Sekong. Its preliminary results show that 0.78 million poor people have access to a basic package of health, nutrition, or reproductive health service, nearly 0.9 million cases of health equity fund have been provided to poor people, 424 health facilities have been constructed and renovated, and more than 3,350 health personnel received training.

The Poverty Reduction Fund (PRF) is the largest multi-sector community-driven development project in the country. The current phase, the PRF II project, with total funding of about $63 million from development partners, including $25 million from IDA and $10 million from the Government of Lao PDR, has benefited more than 450,000 rural poor in about 850 villages. In target villages, results include 37 percent increase in the use of health services, 76% in access to safe water resources, and 30% in access to all weather roads. Additional financing to the Poverty Reduction Fund was approved in June 2015 to enable the construction of vital infrastructure including schools, health clinics, roads and drinking water systems for poor communities across Laos.

The Customs and Trade Facilitation Project is helping to make border clearances faster and more efficient. A computerized customs clearance system, which now operates in 21 official customs checkpoints, takes payments electronically and provides this information in real-time to the Government’s financial management system. The automated customs system—ASYCUDA World—covers 99% of formal trade at these checkpoints and has improved customs valuation, introductory risk management and trade statistics reporting. Customs clearance procedures have also been streamlined and modernized as part of the project.

The Second Trade Development Facility Project (TDF-2) assists the Lao PDR to implement trade and competitiveness priorities after its formal WTO accession in February 2013. It builds on the achievements of TDF-1, which established a permanent National Trade Facilitation Secretariat and launched an electronic Trade Portal making all trade-related information publicly available. Under TDF-2, all non-tariff measures affecting trade have been catalogued and published online, and assessments of regulations affecting trade in services and investment, as well as sector specific regulations for telecommunications, insurance and professional services, have been completed.

The Tax Simplification Project assists Lao PDR to increase the fairness and equity of the small business tax system by adopting a self-assessment principle and increasing the tax base for the value added tax (VAT). It has piloted new implementation guidelines in two districts. The project also aims to increase the capacity of tax authority and taxpayers.

The Lao Regulatory Reform Project is helping to improve the investment climate and business environment in Lao PDR. The project has supported the Government in assessing key regulatory constraints and developing reform proposals on key priority areas. The Government is now planning to reform procedures for starting a business and the issuance of construction permits. 

Last Updated: Oct 09, 2015


Lao PDR: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments