Regions and Countries

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p. 3 of 20 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Lao People's Democratic Republic : I. Country Performance Assessment

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B. Poverty Assessment

9. The Government conducted two nationwide Lao Expenditure and Consumption Surveys in 1992/93 (LECS I) and 1997/98 (LECS II), respectively. Since an official poverty line has not yet been adopted by the Government, poverty analyses prepared by different donor agencies on the LECS data provide somewhat inconsistent results. The Asian Development Bank (ADB) has assisted the Government in refining the existing methodology and reanalyzing the LECS data. ADB, together with the World Bank, is assisting the Government in conducting a participatory poverty assessment to identify the nature and causes of poverty in detail (see para 36). To facilitate this process, the Government plans to introduce an official poverty line during 2000, thereby providing a benchmark for monitoring and evaluating poverty trends in Lao PDR.

10. According to poverty analysis based on consumption, 38.6 percent of the population were below the poverty line in 1997/98, compared to 45 percent in 1992/93 (see Appendix 1, page 2). The incidence of poverty varies quite substantially across regions and provinces. The northern region has the highest percentage (52.5 percent) of poor, followed by the southern region with 38.4 percent and the central region with 34.9 percent. In contrast, only 12.2 percent of the population in Vientiane Municipality are poor. There is also considerable disparity in the incidence of poverty between urban and rural areas. The incidence of poverty in rural areas is 41.0 percent while in urban areas, it is 26.7 percent. Although rural poverty, particularly in the northern area, is extremely high, rural poverty has been reduced more significantly compared to urban poverty during this period. However, income disparities widened: the Gini index estimated by per capita consumption is 35.7 percent in 1997/98, compared to 28.6 percent in 1992/93. Important policy implications from the preliminary analysis include: (i) economic growth has played a dominant role in reducing poverty in Lao PDR; (ii) economic growth has more beneficial impact on the poor near the poverty line than on those far below the poverty line; and (iii) the proportional benefits of economic growth received by the rich are much greater than those of the poor.

11. The Government’s development goal is to eradicate absolute poverty by 2010. Three key components of its poverty reduction strategy are rural development, human resource development, and public participation. Most poverty is rural based, reflecting in part low agricultural productivity. Poverty reduction through the improvement of rural productivity complements sustainable economic growth in Lao PDR. Improved agricultural productivity is a major way to increase real incomes, create a local market, and favor the emergence and development of nonfarm activities in the poor provinces. An improvement of labor productivity in agriculture can also free labor for nonfarm activities. The expansion of nonfarm activities in rural areas should target primarily small and micro enterprises where the scope for economies of scale is limited. Such a development is a condition for the transition from a subsistence to a modern agriculture sector and for a more balanced development.

12. Rural poverty is perpetuated by serious weaknesses or gaps in basic education and health services, and by very poor rural infrastructure including irrigation, market access roads, and electricity. Policies to improve productivity and growth in poor regions should be directed towards the components of the underdevelopment trap. Measures that improve educational attainment and human capital formation should receive first priority not only because of their direct effect on labor productivity, but also because of the role they play in improving the efficiency of investments in infrastructure. The Government recently emphasized that participation and influence of beneficiaries are necessary to improve the provision and quality of education and infrastructure services.

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