Home 
Countries and Regions Country Partnership Strategies Document
|
Country Strategy and Program 2005-2006: Lao People’s Democratic Republic
II. Implementation of the Country Strategy and ProgramA. Progress in Poverty Reduction11. The government has finalized the National Growth and Poverty Eradication Strategy (NGPES)—which also serves as the full poverty reduction strategy paper—following discussions at the Donor Roundtable Meeting in September 2003. The NGPES aims to reduce poverty through strong economic growth and an increased focus on the poorest districts. The government has selected 47 of the poorest districts for prioritized investment. The NGPES proposes agriculture, education, health, and transport as priority sectors for poverty reduction. The Asian Development Bank (ADB) has played an active role in the NGPES process through various initiatives, including the participatory poverty assessment, the poverty reduction partnership agreement, a joint public expenditure review, and its national and subregional programs. ADB assisted the government in formulating the northern region development strategy for the NGPES, with emphasis on economic integration of the poor northern region with neighboring dynamic economies, market-based development initiatives, human resource development, and sustainable social and environmental management. 12. The preliminary results from the Lao Expenditure and Consumption Survey III conducted in 2002–03 suggest that poverty incidence has fallen to about 32% from 38.6% in 1997–98 and 45% in 1992–93. The sharp reduction in poverty incidence in recent years is associated with consecutive years of strong economic growth, achievement of rice self-sufficiency, and increased cross-border trade. However, wide variations in poverty levels are likely to persist between urban and rural areas and between provinces. In order to achieve the poverty reduction target included in the NGPES, investment will have to be increased in priority areas. In particular, market accessibility should be enhanced, more employment opportunities created, and efficiency of investment in human resource development increased. ADB has supported the government’s efforts to set up a poverty monitoring system, and to strengthen the institutional capacity of the National Statistics Center and local authorities. The quality of data collection has improved and a series of qualitative studies has provided greater social insight into poverty issues. The Poverty Reduction Fund was established with the support of the World Bank in 2003, and its subproject activities have commenced in 10 target districts. While sound progress is being made on poverty reduction, major challenges remain. These include: (i) incorporation of the NGPES into the national and provincial planning frameworks, (ii) raising sufficient financial resources to implement priority poverty reduction initiatives, and (iii) strengthening the government’s institutional structure and capacity to effectively deliver public services. B. Progress in the Country Strategy and Program Focus Areas13. Rural Development and Market Linkages. Improved agricultural performance and marketing are critical to improving rural livelihoods and reducing the vulnerability of poor households. Achievements in recent years indicate that there is considerable development potential for commercial agriculture and forestry development. FDI in rubber, tea, and resin tree plantations are newly demonstrated possibilities for sustainable alternative agriculture. A multinational agribusiness company successfully pilot tested capacity strengthening of Lao farmers in maize production and post-harvest handling. Contract farming pilot tests continue to yield good results. While encouraging, improvements are still required in land tenure and allocation, basic technology and infrastructure, basic research and extension services, disease control, quality and productivity standards, rural finance, and effective mechanisms to link investors with farmers. The government should play the role that it would in a market-based economy. For instance, it should be less involved in deciding what to produce, where, and how, and more involved in creating a positive environment for commercial agriculture. The ongoing smallholder development project supports the government’s efforts to enhance commercial agriculture. The small towns development sector project, approved in 2003, and roads for rural development project, approved in June 2004, will also contribute to enhancing urban-rural market linkages and connecting rural areas to subregional and international markets. The community-managed irrigation sector project will contribute to food self sufficiency in the poorer northern provinces through enhanced agricultural productivity. 14. Human Resource Development. More than 60% of the population is under age 25 and the government has put an increasing emphasis on human capital development to create a positive future for them. NGPES identifies education as a priority sector and the action plan for the Education for All initiative is under preparation. Steady progress has been made in primary education in recent years: net enrollment ratio increased from 59% in 1991 to over 80% in 2001. While higher numbers of children are enrolling, many have to repeat grades. Disparities in terms of access and quality of education—between girls and boys as well as between provinces— remain wide. Innovative and strategic interventions are required to significantly improve efficiency and quality of education service delivery. To achieve balanced education sector development, the government plans to introduce a sector-wide approach in close consultation with its development partners. The National Commission for the Advancement of Women, chaired by the Deputy Prime Minister and Minister of Foreign Affairs, was recently established to facilitate and monitor gender equality, and is currently preparing a gender mainstreaming strategy and action plan. The high fertility rate (about 5 births per woman of reproductive age) and rapid population growth (about 2.8% per year) are persistent contributing factors to poverty. Rural women have particularly high birth rates because they lack access to contraceptives: they have an average of 5.4 births during their reproductive years compared with 2.8 births for urban women. The government is currently implementing the national birth spacing policy and a national population and development policy. In 2004, the government plans to develop a comprehensive national reproductive health policy. 15. Sustainable Environmental Management. The government has taken initiative to improve environmental protection and social safeguards, including progress towards attaining the MDGs and the adoption of the Johannesburg Plan of Implementation at the World Summit on Sustainable Development in 2002. The government has been implementing a wide range of policy reforms under ADB’s ongoing Environment and Social Program Loan. These include a prime minister’s decree on implementing the Environmental Protection Law (EPL), as well as ministerial regulations of the Science, Technology, and Environment Agency (STEA); the Ministry of Communications, Transport, Posts and Construction (MCTPC); and the Ministry of Industry and Handicrafts (MIH). STEA has issued national public involvement guidelines and established a civil society consultation forum; a national environment committee has been established by decree; agreement was reached on modalities for a third-party monitoring system for hydropower and transport projects; provincial science, technology, and environment offices are functioning and have prepared provincial environmental action plans; and the Ministry of Agriculture and Forestry (MAF) issued strategic vision concepts and guidelines for integrated watershed management. The government adopted the National Biodiversity Action Plan and Strategy in April 2004. Awareness of environmental and social safeguards and the role of STEA have been raised within many agencies. Despite these improvements, there is a need to further strengthen mechanisms to ensure compliance with the EPL. The major challenge is to improve local-level implementation by strengthening institutional, human, and financial resources. The government is giving serious attention to capacity enhancement within all relevant agencies to implement sound environmental management and social safeguards. Various donors, including the Swedish International Development Cooperation Agency (Sida), World Bank, ADB, and the United Nations Development Programme, are also involved in government capacity building relating to the environment. ADB and the World Bank are undertaking due diligence of the proposed Nam Theun 2 Hydropower Project, including a cumulative impact assessment. 16. Private Sector Development. The private sector is in the early stages of development but is playing an increasingly important role. The government has responded by establishing an enabling environment for private-sector investment. Prime minister’s decrees on promoting and developing small- and medium-sized enterprises (SMEs) and decentralizing FDI management were issued in April 2004 to strengthen the institutional mechanisms for private sector development and to facilitate the participation of private business groups. The government has simplified business registration and trade procedures, as well as reduced quotas and tariffs on imports from its major trading partners. Lao National Chamber of Commerce and Industry has become more independent since July 2003. A sound, well-functioning financial sector is critically important to private sector development. ADB’s banking sector reform program loan is helping the banking sector address challenges associated with a low capital base and a high burden of nonperforming loans. Two state-owned commercial banks (SOCBs) merged and a restructuring program is being implemented with the guidance of international banking advisors. Amendments to the Decree Law on Commercial Banks were prepared to allow foreign bank branches to operate nationwide. Anti-money laundering legislation has been drafted. The first phase of the restructuring plan of the Agriculture Promotion Bank (APB) is under implementation. Three pilot savings and credit unions were established in three locations with strong market linkages. The government has been developing a rural and microfinance development strategy, and the associated legal and regulatory framework. Efforts are being made to develop a policy framework to involve the private sector in developing large-scale plantations and to more efficiently manage livelihood plantation initiatives. Technical assistance projects on integrating the poor in regional development through standard-setting for private sector development have developed a framework for the development of a Standards Council, in accordance with internationally recognized benchmarks, thereby facilitating access of goods into regional and international markets. 17. Governance and Capacity Building. There has been progress in establishing a regulatory framework for governance. This includes (i) amendments to the constitution, strengthening the public administration mechanism and structure; (ii) adoption of the revised National Assembly Law, the Government Law, the Local Administration Law, and the Law on Enforcement of Court Sentences; and (iii) revisions to the Land Law, Civil and Criminal Law, the Law on the People’s Court, and the Law on People’s Judiciary Authority. The prime minister issued a new Civil Service Act in May 2003 to improve civil service management by introducing recruitment exams, job descriptions, assignment criteria, performance evaluations, and a reward system. Personnel management regulations for the management level are under preparation. The government plans to upgrade the Department of Public Administration and Civil Services to the level of a subministry in order to accelerate public administration reform. The government is addressing weak capacity at the provincial and district levels through the decentralization process. The government is preparing a progress report on public administration reform—including people’s participation, rule of law, and public financial management—that will be discussed at a governance roundtable meeting in September 2004. 18. Geographical Focus. To enhance the development impact of projects and to ensure proper monitoring and complementarity, ADB’s interventions focus primarily on the poor northern provinces and the GMS East-West Economic Corridor (EWEC) in Savannakhet Province. ADB has also helped the government develop a northern region development strategy. This strategy emphasizes development opportunities from cross-border trade and movement, and the importance of the private sector along border areas and key economic corridors. The government’s socioeconomic development plans and ADB activities will reflect these findings. 19. Subregional Cooperation. The government has made great efforts to transform the country from being “landlocked” to becoming “landlinked” through cooperation initiatives such as GMS, ACMECS, and ASEAN. There has been significant progress in opening and upgrading border crossings and improving infrastructure links with neighboring countries. The key transport components of the GMS EWEC are expected to be complete by 2007. Rehabilitation of the main road in Lao PDR will be completed in 2004 and its access roads are expected to be completed in 2005. The construction of the Second Mekong International Bridge, funded by the Japan Bank for International Cooperation (JBIC), will be completed in 2006. To transform the transport corridor into a full-fledged economic corridor, significant activities have been introduced: (i) a joint study on the shared use of Savannakhet Airport between Lao PDR and Thailand was agreed in March 2004; (ii) a joint study on the Savannakhet special economic zone between Lao PDR and Thailand was agreed; (iii) Thailand and Lao PDR have allowed each other’s vehicles to enter since March 2004; (iv) no visas will be required for Vietnamese citizens from July 2004 and for other ASEAN countries in 2005; and (v) Thailand approved a zero import tariff for 9 agriculture crops from Lao PDR in March 2004. Work has also commenced on the Northern Economic Corridor (NEC), which will establish an important trade link between Thailand, Lao PDR, and PRC. Under the ACMECS, Thailand is helping improve physical infrastructure between Thailand and Lao PDR, including bridges, roads, and a railway link. C. Highlights in Coordination of External Funding and Partnership Arrangements20. ADB has been conducting strategic dialogue and operational coordination with development partners including the World Bank and the International Monetary Fund (IMF) through regular participation at the quarterly informal donor meetings, membership in the UN Country Team, and participation in 7 of the 8 recently formulated sector and thematic working groups. ADB is chair of the infrastructure working group and co-chair for the agriculture, environment, and natural resources working group. ADB is working closely with the World Bank and Sida on poverty and with the World Bank and IMF on banking sector reform. A joint due diligence process with the World Bank is under way for the Nam Theun 2 hydropower project. In 2003, the Nordic Development Fund (NDF) cofinanced the Northern Area Rural Power Distribution project, and a number of technical assistance and grant projects were financed by the Governance Cooperation Fund (GCF), the Japan Fund for Poverty Reduction (JFPR), and the Poverty Reduction Cooperation Fund (PRF) in private sector development, solid waste management, and gender. Possible loan cofinancing for 2004–2006 includes collaboration with Agence Française de Développement (AFD) and NDF in the northern and central region water supply and urban development project; NDF and the Organization of Petroleum Exporting Countries (OPEC) Fund for the roads for rural development and northern airport improvement projects; and Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) and Kreditanstalt für Wiederaufbau (KfW) for the rural finance sector development and small- and medium-sized enterprise development programs. A development coordination matrix is in Table A1.5.
|
RSS Feeds
Back
Top of page