Skip to Main Navigation

Overview

  • Lao PDR has made good development progress over the past twenty years, halving poverty, reducing malnutrition, and improving education and health outcomes. However, there is room for further improvement. A child born in Laos today will only be half as productive as she could be if she enjoyed full health and education. Malnutrition continues to be a critical issue, with stunting (impaired growth and development from poor nutrition) affecting over 30 percent of children under five. The maternal mortality rate is also high, at 185 per 100,000 births (2017). While a Lao child goes to school for 10.8 years on average, she only receives the equivalent of 6.4 years of learning. Moreover, the effects of COVID-19 on the Lao economy are placing at risk some of the gains made against poverty.  

    A shift in leadership in early 2021 has brought various pressing issues to the front of the Lao government’s socioeconomic planning. The new prime minister announced seven priorities in March, vowing to tackle public debt and revenue leakages, boost exports, counter corruption, and create more job opportunities. The government has also pledged to foster quality growth and reduce reliance on the natural resource sector, to increase access to basic public services, especially health and education, and to place more emphasis on human resource development. 

    This approach aims to correct the country’s previous reliance on a narrow growth model based on natural resource extraction and capital-intensive infrastructure investment. While this policy orientation delivered sustained economic growth over the past two decades, is has been less successful in fostering the creation of jobs, and has led to the accumulation of significant public external debt. In the wake of the COVID-19 pandemic, economic growth declined to an estimated 0.4 percent in 2020, the lowest level in three decades. The service sector, including travel and tourism, has been hit hard by lockdown measures while remittances, a vital source of income for many families, have dried up. The unemployment rate has risen to over 23 percent, from 16 percent at the end of 2019. Public external debt stock has increased to 65 percent of GDP in 2020 from 59 percent in 2019. Laos has onerous debt service obligations, which stand at around US$1.1 billion per year for 2020-23.  

    Last Updated: Apr 06, 2021

  • The World Bank Group (WBG) works with the government to reduce extreme poverty and boost shared prosperity, supporting the Ninth National Socio-Economic Development Plan 2021-25, to which the Bank and other development partners contributed. The WBG’s current Country Partnership Framework (CPF) 2017-2021 was approved in April 2017 following a Systematic Country Diagnostic and public engagement meetings with a wide range of stakeholders on the twin goals of reducing poverty and boosting shared prosperity. A cornerstone of the CPF is support to greener, more inclusive growth, aiming to improve local livelihoods by diversifying income sources and encouraging the private sector to spur market development, for instance through sustainable forest management and nature-based tourism. A Performance and Learning Review of the CPF completed in 2020, emphasized the need to redouble efforts on the macro-economic front and consolidate the country’s project portfolio. The CPF was extended by one year, until June 2022. 

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

    • Protecting the Environment: Promoting environmental protection and sustainable natural resource management, enhancing 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 25 projects in Laos, with a funding value of US$745 million. These include 21 projects financed by the International Development Association, the World Bank’s fund for the most in-need countries. The largest sectors by total financing are health, nutrition and population (14%), environment, natural resources and the blue economy (14%), and transport (12%). The International Finance Corporation — one of the five institutions that make up the World Bank Group and the largest global development institution focused exclusively on the private sector in developing countries — is also active. Since 2000, IFC has invested and mobilized more than $98 million in Lao PDR mainly in the power, banking, manufacturing, and services sectors. IFC is currently implementing five advisory projects valued at $12.2 million to improve the business environment, expand access to finance for SMEs, boost sustainable economic growth, and create more jobs.

    Last Updated: Apr 06, 2021

  • The Poverty Reduction Fund (PRF) is a large multi-sector local development project that has been supported with $123.5 million through three phases of IDA financing. The PRF has improved access to basic services for 1.2 million rural people through more than 5,000 community infrastructure projects in the poorest districts of the country. In target villages, access to an improved water source increased by nearly 60 percent, and travel time to the nearest village was reduced by an average of 114 minutes in the dry season and about 70 minutes in the wet season. Under the latest World Bank support, the PRF has scaled up production and consumption of nutritious foods in four northern provinces (Oudomxay, Phongsaly, Houaphan and Xieng Khouang) where the incidence of child stunting is high. A recent impact evaluation of the PRF’s Road Maintenance Groups found that these groups have significantly increased women’s engagement in paid work, a particularly relevant finding as options are examined for economic recovery after the COVID-19 pandemic. 

    The Lao PDR COVID-19 Response Project was approved in April 2020 to provide a quick response to the pandemic in Laos by enhancing technical capacity among health professionals at all levels and delivering emergency medical equipment and supplies to all 18 provinces. The Micro, Small, and Medium Enterprise Access to Finance Emergency Support and Recovery Project, approved in October 2020, helps small business weather the economic slowdown associated with the virus.   

    To address the urgent issue of nutrition the World Bank finances a series of projects titled “Nutrition Convergence”, taking a holistic approach towards the reduction of stunting among Lao children. In four northern provinces, projects support government efforts through a multi-sectoral approach to improve water supply and sanitation, health and nutrition, social protection, education, and agriculture. The first phase (2019-24) targets households in the twelve poorest northern districts. In the first quarter of 2021, pregnant women in these districts started receiving cash transfers to supplement their children’s health and nutritional status. 

    At the same time, the Health and Nutrition Services Access Project, approved in March 2020, is working to strengthen the Lao health system and improve the quality and coverage of health and nutrition services by providing funds to health centers and departments using results-based instruments. The project will help tackle childhood stunting through a Multisectoral Nutrition Convergence Approach, by increasing access to and use of nutrition interventions. This work builds on the achievements of the Health Governance and Nutrition Development Project, which has improved the delivery of basic health services to around one million Lao women and children over the last five years.  

    In addition, since April 2014 the Early Childhood Education Project has been helping to improve the coverage and quality of education for 3- to 5-year old children in 11 provinces. This project promotes community-based construction grants for pre-primary classrooms and the establishment of Community Child Development Groups for 3- and 4-year-olds. Results so far show the project has benefited 53,000 children aged 3-5 and achieved significant improvements in enrollment, learning environment, and in both literacy and numeracy, plus a reduction in stunting. A new complementary project, Global Partnership for Education III, focuses on preparing pre-school children to enter school ready to learn, screening to help provide extra resources to children with disabilities, and targeted training and management systems to improve the environment for teaching and learning. The project incorporates features to help make up for learning time lost due to COVID-19.  

    The Competitiveness and Trade Project, approved in 2018, supports government efforts to simplify business regulations, facilitate trade, and improve competitiveness. New and existing Lao firms are starting to benefit from lower costs of doing business, easier procedures, and access to funding for business improvements. These reforms also benefit the public by generating job opportunities and stimulating competition, leading to lower prices and increased choice in goods. The project prioritizes reforms that benefit SMEs and women-led enterprises. Such reforms include streamlining of operating licenses and business registration, and easier documentation for import and export. The project Business Assistance Facility helps private enterprises access business development services and aims to improve company management and innovation. By July 2020, 61 matching grants were approved for firms in Laos.  

    Supporting the government’s green growth strategy, the Scaling-Up Participatory Sustainable Forest Management Project is helping to build a solid foundation for the strategically important forest sector in Laos. The project has worked with over 100,000 people, largely from ethnic minorities, in over 650 forest villages. Livelihoods support and casual employment in forest restoration has reduced the deforestation rate in Laos and saved 1.8 million tonnes of carbon dioxide-equivalent emissions. Work on management plans for state production forests and third-party certification of wood products has helped to modernize the sector and to create the new Forestry Law of 2019. Complementing this effort, the Second Lao Environment and Social Project is helping to strengthen environmental management capacity by publicly disclosing air pollution data and environmental and social impact assessments, and by improving the management of 11 protected areas. The project promotes conservation-friendly livelihoods in 189 villages and is strengthening the capacity to curb the illegal wildlife trade, a critical factor in preventing future pandemics like COVID-19 arising from zoonoses. These initiatives are backed up by the recently approved Lao Landscapes and Livelihoods Project, which will help communities in over 600 villages and 25 forest areas secure livelihoods and jobs from sustainably managed forests, including opportunities in timber and non-timber products, and nature-based tourism.   

    Last Updated: Apr 06, 2021

Api


LENDING

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

*Amounts include IBRD and IDA commitments



PHOTO GALLERY

More Photos Arrow

In Depth

Protecting Oceans in the Lao PDR

Meet Dr Vatthanamixay Chansomphou, a scientist and innovator finding creative ways to beat plastic pollution and save oceans from landlocked Laos.

Biodiversity and Resilient Green Growth

Lao PDR is home to some of the world’s biologically richest ecosystems and most endangered species. This endowment is crucial to the Lao economy but needs protection. A new report outlines key challenges and recommendations.

From Landlocked to Landlinked

The Lao-China Railway has the potential to transform the Lao PDR from a landlocked to a land-linked economy. Success will require complementary reforms.

Good Wood: Sustaining Forest Landscapes and Livelihoods

Forests could be key to Lao economic recovery after COVID-19

Additional Resources

Country Office Contacts

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