Trade Development Facility Project in Lao PDR
November 25, 2013
Lao PDR is a least developed country and the only landlocked country in Southeast Asia. The country’s main challenge, at the time of project appraisal, was that it was not very well integrated into the regional and global economy. The lack of a strong regulatory trade framework and a poor investment climate acted as barriers for trade. The Diagnostic Trade Integration Study (DTIS), prepared in 2006, strongly emphasized the need to build competitiveness and increase international and regional integration. It also set out an action matrix of priorities for implementation.
The project was designed to provide resources so that Lao PDR could implement the priorities set out in the trade and integration action matrix.
The project consisted of five components: (i) trade facilitation; (ii) strengthening of frameworks for sanitary and phytosanitary standards and technical barriers to trade; (iii) increasing export competitiveness; (iv) capacity building, trade policy, trade agreements and global opportunities, and (v) strengthening of the National Implementation Unit.
The project was the first coordinated development partner effort to pool resources around a single approach led by the government.
The project achieved positive results. In addition, the Ministry of Industry and Commerce’s capacity to manage a large multi-sectoral reform program (through the NIFGS) has grown substantially.
Over the implementation period from 2008 to 2013, Lao PDR became much more closely integrated into the regional and international economy, as measured by substantial increases in trade in goods and services , including from non-natural resource sectors (100 percent growth in services, over 40 percent growth in goods) that generate the majority of jobs necessary reduce poverty in Laos. Activities undertaken with financing from the project contributed towards faster and more transparent trade facilitation; better coordination among government agencies operating at the border; improved integration into the regional and multilateral trading system; increased productivity in the garments export sector (a key diversified manufacturing industry); and increased aid-for-trade management capacity.
Key achievements during January 2009 until March 2013 include:
- Substantial trade negotiating efforts culminating in Lao PDR’s formal accession to the World Trade Organization in February 2013;
- The approval and implementation of a first National Trade Facilitation Strategy and Action Plan;
- The establishment of a permanent National Trade Facilitation Secretariat;
- The launch of an electronic Trade Portal that puts all trade-related information on tariffs, licenses, measures, laws, regulations and import/export procedures into the public domain;
- Substantial legislative reforms on sanitary and phytosanitary measures associated with WTO accession. An inter-agency Sanitary and Phytosanitary Measures Risk Evaluation Group was established;
- The launch of fee-based productivity training services in the Garment Skills Development Centre;
- Support to the operations and commercialization of the Lao Handicrafts Festival;
- Measured growth in domestic trade policy research capacity, including the design of a technical trade policy and competitiveness curriculum for civil servants; and
- The publication of the Lao Trade Research Digest.
The Trade Portal is an important step towards maintaining transparency when conducting trade. It isn’t only for us entrepreneurs but also for government officials.
The total cost of the project was $ 7.6 million and was financed through a multi donor partnership.
The Ministry of Industry and Commerce, along with development partners, established the Trade Development Facility as the principle mechanism for financing the implementation of the trade and integration action matrix via a Multi Donor Trust Fund. The trust fund consisted of contributions from the European Union, Australia, and Germany
The World Bank acted as the trust fund administrator and contributed additional resources for product supervision. The National Implementation Unit, under the Department of Planning and Cooperation (of the Ministry of Industry and Commerce), was responsible for coordinating activities financed by the project.
Lao PDR now has the key building blocks to manage and implement an effective aid-for-trade program. It has an enlarged capacity and is largely motivated for the next phase of the program – the Second Trade Development Facility, which started in April 2013.
“The Trade Portal is an important step towards maintaining transparency when conducting trade,” said Sinouk Sisombat, Lao Coffee Association president, “It isn’t only for us entrepreneurs but also for government officials,”
Lao producers and workers, whose income opportunities have improved because of the country’s better integration into the world economy and through improved external competitiveness, have benefited from the project.
The government also benefitted because of an increased capacity to effectively manage its trade reform agenda and better coordination for the aid-for-trade support it receives from the donor community.