Regions and Countries

	Table of Contents
p. 9 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Development 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 : III. Sector Strategies

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A. Agriculture

1. Agriculture and Rural Development

38. Agriculture and forestry account for 52 percent of GDP and 85 percent of employment. During the 1990s, agriculture output has grown at an average 5 percent per annum. It is estimated that, for the first time, the country overall has achieved aggregate self-sufficiency in food in 1999. It is, however, noted that remote and mountainous areas still face seasonal food shortages due to partly a distributional problem. The Government’s approach to developing agriculture is to further increase agriculture output and rural productivity to reduce poverty and to develop rural areas.

39. Productivity in the sector is still hampered by a number of institutional and systemic constraints including:

1. weak public sector institutions and human resources, particularly in the country's remote provinces;

2. the need to provide more supportive environment for private sector investment in agricultural development;

3. poor rural transport, electricity, and communications infrastructure which severely hinder economic development and the integration of markets and public services delivery;

4. underdeveloped rural credit and savings services;

5. heavy dependence on rain-fed agriculture systems;

6. lack of the marketing system linking between producers, wholesalers, and retail buyers;

7. lack of diversification in agricultural production; and

8. the declining natural resources base resulting in decreased soil fertility, increased erosion, and erratic water supplies.

40. The World Bank has supported the Government’s agriculture and rural development programs through assistance in land titling (with Australia), and southern lowland area development. The United Nations Development Programme (UNDP) and the United Nations Capital Development Fund (UNCDF) have been supporting microfinance development. Australia, France, Germany, Japan, Sweden, European Union, and International Fund for Agriculture Development have been involved in rural infrastructure development.

41. ADB has assisted the Government in formulating its Strategic Vision for Agriculture Sector in 1999. To realize this vision, the Government is currently preparing an agriculture sector action plan with follow-up assistance of ADB. ADB will help the Government to implement the strategic vision and continuously conduct its policy advisory role in the agriculture sector. Further agriculture market expansion and market development throughout the country will be emphasized. Crosscutting issues related to rural poverty, gender, mass organization, rural community and possible NGO involvement, and environmental protection are specifically to be addressed in ADB operations in the agriculture sector.

42. Two projects are included to address some of the stated constraints in the sector over the next three years. The Rural Sector Development Project will be processed in 2002 (PPTA 2000). The project will seek to strengthen the policy environment for rural development, and enhance the Ministry of Agriculture and Forestry's (MAF) institutional capacity, skill levels, and delivery of services, to be followed by more project oriented work. A loan for Rural Finance Development will be processed in 2003. The project will build upon achievements under the cluster TA, Rural Finance Development, approved in 2000. ADB will focus on the enabling policy environment as well as financial architecture and institutional capacity for sustainable rural finance services. Without an appropriate financial institution which can effectively reach most rural areas, it is difficult to mobilize significant domestic resources to raise the quality of life for much of the rural population. In addition, ADB operations will address rural infrastructure constraints, particularly access to electricity and roads (see: paras. 49 and 54).

2. Forestry and Natural Resources

43. Over 11 million hectares (ha), or 47 percent of the Lao PDR’s total land area, are covered by forests. It is estimated that on average 148,000 ha or about 1 percent of the total forest area is lost annually, through inadequately regulated logging practices and shifting cultivation activities. Careful and sustainable management of forests is critical to the country’s future development and is also an essential element of efforts to protect water and land resources. However, the forestry sector is faced with a number of major constraints including:

1. a weak regulatory framework and poor monitoring and enforcement;

2. lack of systematic and transparent logging management, planning and inventories;

3. weak institutional capacity of agencies concerned at central and provincial levels;

4. inconsistent implementation of forest management activities through local communities; and

5. ineffective execution of the national plantation strategy.

44. The irrigation and water resources subsector is one of priority areas of the Government. Investment in irrigation development is about 40-50 percent of the agriculture-forestry sector budget. Irrigation had increased dry season rice fields rapidly from 15,500 ha in 1994 to around 92,000 ha in 1999. The Government’s irrigation strategy is to shift away from large, capital intensive schemes to gravity and small-scale pump schemes, and to move away from government-managed systems toward farmer-managed systems. There is a growing recognition that beneficiaries should be actively involved in operation and management of irrigation systems and share in the cost of development projects. A number of constraints in the irrigation and water resources subsector includes:

1. lack of a national water policy and legal support mechanism;

2. ineffective coordination among stakeholders utilizing water resources; and

3. weak maintenance and rehabilitation for irrigation schemes.

45. The World Bank, together with Finland and Sweden, have provided assistance in the forestry management and conservation. ADB will continue to be actively involved in the irrigation and water resources subsector through providing policy advice as well as project loans. ADB will increasingly adopt participatory approaches in project processing and implementation. A sector type loan for Decentralized Irrigation Development and Management project will be processed in 2000. The project will focus on decentralizing irrigation management to local water user groups and provide necessary investments to rehabilitate existing irrigation schemes. The proposed PPTA for Northern Community Managed Irrigation Project will be processed in 2001 to prepare a follow-up project of the ongoing Community Managed Irrigation project. A loan for Nam Ngum River Basin Development will be processed in 2002 (PPTA in 2000). This project will adopt a holistic approach for river basin development, addressing water resource and land management, and environmental protection, in the context of an integrated sustainable development plan, particularly as it relates to potential hydropower development. The proposed Second Industrial Tree Plantation Project is programmed in 2003 as standby (PPTA in 2001) to further promote plantation forestry.

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