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Improving Living Conditions and Environment in Small Towns of Lao PDR

MANILA, PHILIPPINES (30 January 2003) - Living conditions will be improved in 10 small towns in Lao People's Democratic Republic with the help of a US$16 million loan approved by the Asian Development Bank (ADB).

Blending environmental and livelihood improvements with reforms promoting decentralized urban governance and civic awareness, the Small Towns Development Sector Project aims to reduce poverty and boost incomes in urban areas with populations of between 8,000 and 20,000. The total population of the 10 selected towns is 143,000.

The small towns perform critical administrative functions as provincial and district capitals. They are also economic links between the rural areas and national and international markets, but they have been left behind as urban investment and decentralization over the last six years have significantly improved conditions in the national capital of Vientiane and four provincial capitals.

"The focus now needs to shift to the smaller towns to support more broad-based development and reduce poverty within urban and rural hinterland communities," says ADB Senior Urban Development Specialist Gulfer Cezayirli.

"The health and productivity of the populations in these small urban centers is undermined by poor environment, living conditions, services, and limited earning opportunities."

The project will improve roads, drainage, public markets, and bus stations. To clean up the townscapes, solid waste management and sanitation services will be upgraded, supported by civic awareness campaigns across all sectors.

With poverty levels in the towns running at about 30%, the project will support sustainable pro-poor microfinance institutions and set up credit lines for microfinance loans to promote income opportunities.

The project will also support the establishment of decentralized urban governance to bring urban administration closer to the people and make it more efficient and responsive to local needs.

Taking a flexible demand-led sector lending approach, the towns need to demonstrate commitment to institutional reforms as well as contribute to costs.

"There is a strong emphasis on community dialogue at all stages," says Ms. Cezayirli. "Village organizations and communities will play a major role in planning, carrying out, operating, and maintaining improvements."

The total cost of the project is about US$20 million, of which the Government will contribute US$3.8 million and the beneficiaries US$200,000.

ADB's loan comes from its concessional Asian Development Fund, with a 32-year term, including a grace period of eight years. Interest is 1% per annum during the grace period and 1.5% per annum subsequently.

The executing agency for the project, which is scheduled for completion at the start of 2009, is the Ministry of Communication, Transport, Posts, and Construction.

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