Overview

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Context
Strategy
Results

Last Updated: September 2018
GDP growth averaged 7.8 percent over the last decade, with income per capita reaching $2,270 in 2017. Notwithstanding the flooding-related disasters of mid-2018, economic growth is expected to remain robust in 2018, at 6.7 percent. Growth in the first half of 2018 was driven primarily by buoyant growth in the power, construction and manufacturing (electronic parts) sectors. In contrast, despite higher metal prices in the first half of 2018, output in the mining sector declined. Supported by increased power generation, growing opportunities in the non-resource sectors from closer regional integration, and reforms to improve the business environment, growth is expected to pick up in 2019-2020.
The government is seeking to maintain macroeconomic stability by taking actions to improve domestic revenue collection, controlling expenditure and strengthening public debt management. As a result, there will be fiscal consolidation, with the deficit expected to decrease to below 5 percent in 2018. The government is strengthening revenue administration and efficiency through the introduction of electronic tax payments, while adjusting current spending in the first half of 2018. Progress is partly offset by an increase in capital spending and settling public commitments. Fiscal consolidation is expected to slow down the accumulation of public debt this year, though not enough to reverse the rising debt/GDP ratio.
Lao PDR has made good progress over the past twenty years, including halving poverty, reducing hunger, and improving education and health outcomes. However, other key areas are lagging. Malnutrition, in particular, still affects over 30% of children under five suffering from stunting. Total fertility rates are declining but remain high, and the demand for family planning remains, by and large, unattended. Other gender-related indicators that call for renewed efforts include the maternal mortality rate, which remains high at 220 per 100,000 births (2013), and only 38% of births occurring in a health facility.
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 the current 33% to 25% by 2025. This approach is draws from strong evidence from other countries that have successfully addressed chronic malnutrition. Overall, the Sustainable Development Goals (SDGs) provide a framework to monitor and evaluate progress on the government social and economic plans and commitments.
Last Updated: September 2018
The World Bank Group (WBG) continues to work with the government of Lao PDR to reduce extreme poverty and boost shared prosperity, supporting the government’s 8^th National Socio-Economic Development Plan 2016-2020. The World Bank Group’s current Country Partnership Framework (CPF) 2017-2021 was approved at the end of April 2017. A comprehensive consultation strategy underpinned the development of the CPF.
The WBG carried out public engagement meetings with a wide range of stakeholders on Lao PDR’s Systematic Country Diagnostic (SCD), a document that highlights the key binding constraints to the twin goals of reducing poverty and boosting shared prosperity. The engagement included eight face-to-face meetings in four locations with around 350 stakeholders, including government officials in the capital and provincial cities, private sector, civil society representatives and development partners. The SCD consultation process guided the elaboration of the CPF, which was carried out in collaboration with the government of Lao PDR.
Focus areas 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.
The World Bank has an ongoing portfolio of around $451 million in Lao PDR. The largest sectors are environment and natural resources (16%), transport (14%), and social, urban, rural and resilience (14%). The International Finance Corporation—the WBG institution that provides financing to the private sector—is also active, with about $43 million currently in investments and advisory services. The World Bank is mobilizing substantial resources to support the government’s approach to reduce stunting. Under the CPF, the World Bank supports the government in ensuring that the multiple causes of malnutrition are addressed. The World Bank is doing 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: September 2018
The Poverty Reduction Fund (PRF) is the largest multi-sector community-driven development project in the country. The PRF II project, active from 2011-2016, with total funding of about $65 million including $37.6 million from IDA and $10 million from the Government of Lao PDR, has 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, continues 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 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 support 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 Typhoon 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.