Overview

  • Last Updated: March 2018

    Lao PDR’s economic growth has moderated in recent years, but remains high, with income per capita reaching $2,330 in 2017. GDP growth averaged 7.8% over the last decade, with the use of the country’s natural resources – mostly hydropower potential, minerals and forests – contributing around one third of this growth. Economic growth remained vibrant in 2017, though slower compared to earlier years. An expansion in power generation, manufacturing, and agriculture was offset by a slight deceleration in investment, slower credit growth, and a drop in tourism. The growth in agriculture, where most Lao workers are engaged, and the recent expansion of labor intensive manufacturing, albeit from a low base, are expected to help in poverty reduction. Growth is expected to further ease slightly in 2018 as current trends continue, before picking up in 2019-2020 supported by increased power generation and growing opportunities in the non-resource sectors from closer regional integration and reforms to improve the business environment.

    Still, the country continues to face a challenging macroeconomic situation. The fiscal deficit remains high, limiting the fiscal space and keeping public debt levels elevated. Despite some improvement in recent years, the current account deficit is high and foreign reserves buffers remain thin, signaling remaining vulnerabilities in the economy. Parts of the banking sector continue to have weak capital buffers and deteriorating portfolios. Maintaining macroeconomic stability will require continued efforts to reduce the fiscal deficit, improve domestic revenue collection, strengthen public debt management, and address weaknesses in the financial sector.

    Lao PDR made good progress on a number of important fronts, including halving poverty, reducing hunger, and improving education and health outcomes. However other key areas are lagging,  most crucially on child undernutrition, with an estimated 44% of under five children being stunted. Total fertility rates, though declining, are high, with a high unmet demand for family planning. Lao PDR still has a high maternal mortality rate and limited skilled birth attendants and could also do more to place gender equality at the center of its national development plans. The Sustainable Development Goals (SDGs) provide a framework for the government to monitor and evaluate the progress in its development plan implementation and commitments. Lao PDR is one of the first countries in the world to localize the SDGs into the national development plan.

    The government’s National Nutrition Strategy (2015-2025) and Plan of Action (2016-2020) lay out an ambitious multi-sectoral convergence approach aimed at reducing chronic malnutrition (stunting) for children under five from 44% to 25% by 2025.  This approach is backed by strong evidence from other countries that have successfully addressed chronic malnutrition.

  • Last Updated: March 2018

    The World Bank Group continues to work with the Government of Lao PDR to eliminate extreme poverty and boost shared prosperity, supporting the Government’s 8th National Socio-Economic Development Plan 2016-2020. The World Bank Group’s new Country Partnership Framework (CPF) 2017-2021 was approved at the end of April 2017.

    To develop the CPF, the Bank Group carried out public engagement meetings with a wide range of stakeholders on Lao PDR’s Systematic Country Diagnostic (SCD). The engagement included eight face-to-face meetings in four locations with around 350 stakeholders, including government officials in the capital and provincial authorities, private sector, civil society representatives and development partners. Upon completion of the SCD, the World Bank Group worked with Lao PDR to develop the CPF. 

    Focus areas of the CPF include:
    Supporting Inclusive Growth: Putting public finances on a sustainable path and supporting financial sector stability, making it easier to do business, and investing in infrastructure for growth and inclusion.

    Investing in People: Reducing the prevalence of malnutrition, improving quality of primary and pre-primary education and keeping girls in school, improving access to and quality of health services, reducing vulnerability and inclusive access to social services.

    Protecting the Environment: Promoting environmental protection and sustainable natural resources management, putting in place enhanced disaster risk management and climate and disaster resilience.

    Cross-cutting theme: Enhancing governance and creating a rules-based environment.

    For each target of the Country Partnership Framework, the World Bank will provide customized development solutions combining knowledge and advisory services, convening capability, and financial services. The World Bank is providing $281 million equivalent between 2017-2020 for new programs in Lao PDR, on top of an ongoing portfolio of about $481 million. The International Finance Corporation—the World Bank Group’s institution that provides financing to the private sector—is also active, with about $40 million currently in investments and advisory services. The largest sectors are environment and natural resources (23%), energy and mining (19%), transport (18%), education and health (18%).

    The World Bank is mobilizing substantial resources to support the government’s approach to reduce stunting. In particular, under the CPF, the World Bank will support the government in ensuring that the multiple causes of malnutrition are addressed. The World Bank will do so by adjusting ongoing projects and designing new ones to provide long-term support to the same households and villages in target districts where stunting rates are especially high.

  • Last Updated: March 2018

    The Poverty Reduction Fund (PRF)  is the largest multi-sector community-driven development project in the country.  The PRF II project, with total funding of about $65 million including $37.6 million from IDA and $10 million from the Government of Lao PDR, benefited more than 650,000 rural poor in about 1,400 villages. In PRF II target villages, access to protected water increased by nearly 60 percentage points, and travel time to the nearest village was reduced on average by 114 minutes in the dry season and about 70 minutes in the wet season. More than 90% of subprojects implemented 4–6 years ago are still in good or fair condition, and PRF investments are overall equally or more cost effective compared to similar investments financed under other sources. The third phase, PRF III, approved in May 2016 will continue to improve access to vital infrastructure including schools, health clinics, roads and drinking water systems in about 250 poor village clusters in 10 provinces.

    The Health Governance and Nutrition Development Project, which started in October 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. The project uses an innovative approach of linking disbursement of funds to improved performance in the delivery of basic health services. In addition, through a social and behavior change communication program for caregivers, children in high priority nutrition districts will benefit from improved counselling, changed behaviors and practices, and follow up of their growth. The project further includes support for strengthening information systems and technical assistance in improving the performance of health financing and health protection programs, with a view to progress toward Universal Health Coverage in Lao PDR. It received additional financing in 2017, aimed to scale up current efforts.

    The Second Education Development project focused on helping Lao PDR work towards universal primary education, and contributed to improving both enrollment and primary completion rates.  The project, which closed in 2013, focused specifically on poor and remote areas that were not supported by other development projects. The school construction model used under this initiative led to schools being substantially cheaper, even though they were located in remote areas. Through the project, 2462 classrooms were built or rehabilitated at the primary level, serving 781 primary schools.  Most of the schools have operated for 8-10 years without any major maintenance or renovation.

    The Customs and Trade Facilitation Project, which closed in 2017, helped to make border clearances faster and more efficient. A computerized customs clearance system, which now operates in 24 official customs checkpoints, takes payments electronically and provides this information in real-time to the Government’s financial management system. The automated customs system covers 99% of formal trade at these checkpoints and has improved customs valuation, introductory risk management and trade statistics reporting. As part of the project, customs clearance procedures are now streamlined and modernized by reducing customs clearance steps. Being a landlocked country, trade costs remain relatively high but the average time to clear imports, exports and transits by Lao Customs has fallen significantly by 47%, from 17.9 hours in 2009 to 9.4 hours in 2017.

    The Second Trade Development Facility Project (TDF-2) assists 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. A matching grant, “Business Assistance Facility”, supported individual firms in building their skills and experience to become more competitive internationally.

    The Scaling-Up Participatory Sustainable Forest Management project has been working to build a solid foundation of sustainable forestry in Lao PDR, and has contributed to 2,242,257 hectares of forest area currently brought under management plans, as well as supports to legislation and regulation reforms. Complementing this effort, the Second Lao Environment and Social project is helping to strengthen environmental protection management systems, specifically for the conservation of protected areas, enforcement of wildlife laws, and environmental assessment management.

    The Lao Road Sector Project 1 helped Lao PDR improve key national road services. Vehicle travel time on upgraded national roads was reduced by 40%, benefiting over 100,000 people who are regular users. The share of the provincial road network in good and fair condition increased from 46% to 64%, and about 1,100 km of roads damaged by Ketsana have been repaired and improved. Road safety facilities were installed at identified blind spots to help reduce accidents. A contingency fund was established for quick restoration of passage and safety of national and provincial roads following disasters. The project also supported the Ministry of Public Works and Transport to enhance capacity for sector planning and management, road asset management, and implementation of road maintenance works at both central and local levels.  The Road Sector Project 2 is now building on these achievements, and aims to strengthen maintenance systems to improve reliable road connectivity and provide immediate and effective response in case of crisis or emergency.

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LENDING

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

*Amounts include IBRD and IDA commitments



PHOTO GALLERY

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In Depth

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Super-Clean Cookstoves Promise Results for Women and Climate

An initiative is introducing 50,000 clean cookstoves to replace charcoal and wood-burning stove in three provinces.

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Empowering Local Citizens for Better Development

Lao PDR’s Poverty Reduction Fund has helped implement over 4,500 projects that local villagers chose themselves.

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Lao PDR Development: Past, Present and Future

In the last decade, Lao PDR has achieved strong growth. The challenge now is to end extreme poverty.

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Expanding Employment Opportunities in Lao PDR

An additional 96,000 young people will be looking for jobs each year. This report recommends steps on how to create more and better jobs.

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Poverty in Lao PDR: Achievements and Challenges

Lao PDR has made great strides in reducing poverty from 33.5% in 2003 to 23.2% in 2013.

Additional Resources

Country Office Contacts

Vientiane
Xieng Ngeun Village, Chao Fa Ngum Road, Vientiane
Tel: (+856-21) 266 200
worldbanklaos@worldbank.org
Washington
1818 H Street NW, Washington DC, 20433 Tel: +1 202-473-4709
eastasiapacific@worldbank.org