Overview

Last Updated: April 2016

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 to growth. Construction and services also expanded, with growing regional integration boosting tourism and attracting 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.

The economic outlook remains broadly favorable supported by the power sector and growing ASEAN integration, and the fiscal and external deficits are expected to gradually narrow. GDP growth is projected at 7 percent in 2016. The 1,878 MW Hongsa lignite power plant will largely come on stream in 2016 and together with the output expected from other new power projects is expected to increase power generation by more than 30 percent compared to 2015. Some fiscal expansion (with the deficit increasing to 3.9 percent of GDP) and investments will add to domestic demand. The current account deficit is expected to narrow slightly as power exports increase and recent trends in exports of parts and components continue.

As a member of the Association of Southeast Asian Nations (ASEAN), Lao PDR is increasing its integration into the regional and global economy, and is the chair of ASEAN in 2016. The launch of the ASEAN Economic Community in of 2016 is expected to further liberalize the movement of goods and services, capital and high-skilled labor in the regional block. Lao PDR is a member of the World Trade Organization since February 2013.

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, certain 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 provide a framework for the government to monitor and evaluate the progress in its development plan implementation and commitments.

As of March 2016, the Bank has an ongoing portfolio of $415 million supporting 19 projects, including $76 million provided through the development partner funding. The largest sectors are environment and natural resources (28%), social development (18%) and energy and mining (13%).

Last Updated: April 2016

The World Bank Group (WBG) continues to work with the Government of Lao PDR as it strives to graduate from Least Developed Country status. The WBG’s operations in the country are guided by the Country Partnership Strategy (CPS) for 2012-2016, 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 CPS has three strategic objectives and one cross-cutting theme.

Competitiveness and Connectivity. Strengthen government capacity to support growth diversification and competitiveness and to increase access to improved infrastructure services in transport and energy.

Sustainable Natural Resource Management. Strengthen governance and management of hydropower and mining sectors, including sustained Nam Theun 2 implementation, sustainable environmental, social and water resource management, as well as sustainable management and protection of forests and biodiversity.

Inclusive Development. Increase utilization and quality of essential maternal and child health services, expanded access to and improved quality of primary education in targeted, disadvantaged districts, improved access to basic services and markets and community participation in rural areas.

Cross-cutting Theme. Strong Public Sector Management: Strengthen government capacity for macroeconomic management and policy coordination, strong linkages between planning, fiscal, borrowing strategy and annual budgeting, as well as improved financial management for appro­priate revenue management.

Overall, the World Bank Group CPS program has been implemented largely as anticipated. 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. However, the CPS Progress Report highlighted concerns about macroeconomic policies and public financial management.

During February and March 2016, the WBG carried out public engagement meetings with a wide range of stakeholders on Lao PDR’s Systematic Country Diagnostics (SCD). The engagement process included 8 face-to-face meetings in 4 locations with around 350 stakeholders, including government officials in the capital and provincial authorities, private sector, civil society representatives and development partners. To reach out to more stakeholders, an online survey was also undertaken. Upon completion of the SCD, the World Bank Group plans to work with Lao PDR to develop its future WBG Country Partnership Framework (CPF). 

Last Updated: April 2016

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 680,000 rural poor in about 1,400 villages. In target villages, results include 36 percent increase in the use of health services, 11 percent increase in access to safe water resources, and 48 percent increase in access to all weather roads. Additional financing ($11.6 million) 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 Health Governance and Nutrition Development Project, approved in June 2015, aims to improve the coverage of reproductive health, maternal health, child health and nutrition services for women and children in Lao PDR.  Over five years, the project is expected to benefit approximately one million women and children across 14 provinces. In addition, children in higher priority nutrition districts will benefit from changed behaviors and practices of their caregivers, resulting from intensive social and behavior change communication (SBCC). An earlier World Bank supported Health Services Improvement Project (HSIP) assisted 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, Salavan, Savanakhet, and Sekong. Its preliminary results showed that 0.78 million poor people have been provided with 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 NT2 Multi-purpose Hydroelectric Project is helping to finance health care and education in Lao PDR through the sale of electricity to Thailand and to the Lao grid. Government revenues generated by the NT2 project are used to finance priority poverty reduction, environmental management, and natural resource conservation projects in Lao PDR. Since the start of commercial operations in 2010, NT2 has consistently met energy production targets and the government has received about $174 million in gross revenues. By 2035, the project is expected to have generated around $2 billion in government revenues for these activities. NT2 is jointly implemented by the Nam Theun 2 Power Company and the Government of Lao PDR and is supported by financing from 27 parties, including the World Bank Group.

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 World Trade Organization 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 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. A matching grant “Business Assistance Facility” is supporting individual firms in building their skills and experience, so as to become more competitive internationally.


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

*Amounts include IBRD and IDA commitments