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ADB’s Work in the Lao People’s Democratic Republic

Change in the Heart of the Mekong Region

Ban Palai elementary students
Children at the Ban Palai elementary school in Paklai District

Thirty years ago, the Lao People’s Democratic Republic (Lao PDR) decided to make sweeping changes to its economy and society. ADB joined the effort with projects that have responded to the country’s changing needs.

Regional cooperation is vital for countries throughout Asia, but for the Lao PDR, it is even more vital. The country is situated in the heart of the Greater Mekong Subregion, bordering all five other countries: Cambodia, the People’s Republic of China, Myanmar, Thailand, and Viet Nam.

ADB, which acts as the secretariat for the Greater Mekong Subregion Economic Cooperation Program, has helped the Lao PDR become more connected to its neighbors and the rest of the world. This has involved work on transport and electricity, and had a major effect on trade, tourism, and job creation in the country.

A history of responsiveness

ADB has partnered with the Lao PDR since 1966. The partnership started slowly and grew steadily—ADB financed 12 projects during 1970–1990.

Download: Lao PDR and ADB - Celebrating 50 Years of Partnership

ADB’s engagement deepened in 1986 when the Lao PDR began a process of radically transforming the economy, from one that was centrally planned to a market-based system. To support this transformation, ADB extended an assistance package that helped craft policies and build basic infrastructure needed to drive a modernizing economy.

ADB has been involved in the Lao PDR’s road sector since 1983, but work ramped up in the 1990s after the government identified land transport as a key building block to taking the economy to the next level. ADB had already developed extensive institutional experience in the transport sector and was able to put forward a package of projects.

A 1991 national transport study noted that a modern road connecting Xieng Khouang Province, in the northeast of the country, to the Viet Nam border could benefit impoverished communities in the area and throughout the country by helping to open up regional trade.

ADB responded with the Xieng Khouang Road Improvement Project, which built nearly 300 kilometers of roads throughout the province, created jobs and income opportunities, and reduced poverty in the area.

"ADB has continually played a major role in our region, which has shown tremendous success and also has deep-rooted problems, from widespread poverty to environmental degradation and rising inequality."

Thipphakone Chanthavongsa
Vice Minister of Finance
Lao People’s Democratic Republic

A booming economy

By the 2000s, the country’s economic transition was in full swing. Economic growth was strong—gross domestic product rose by about 7% per year during 2000–2009—but growth was based primarily on hydropower and mining. The government and ADB recognized that greater economic diversity was needed. Initiatives were taken to promote wider private sector activity.

Mahaxay substation
Mahaxay substation of the Nam Theun 2 Hydropower Project

Despite the narrow economic base, prosperity was spreading and poverty was falling. The percentage of people living below the national poverty line fell from 39% in the late 1990s to 23% in 2013.

During these years, the economy was evolving. People were moving away from a subsistence lifestyle in rural areas and migrating to towns and cities.

The Vientiane Urban Infrastructure and Services Project responded to the challenges of rapid urbanization with a series of measures to improve public services and infrastructure for the poor in Vientiane, the country’s capital and largest city. This included new roads and drainage systems that resulted in drastic reductions in waterborne illnesses among the city’s poor.

In July 2001, ADB opened a field office in Vientiane to provide more resources and greater focus for the work being done in the country. To reach the poor most effectively, agriculture, natural resources, and rural development have been the core of this work.

ADB helped build a new airport terminal, control tower, and 1,600-meter runway to allow larger planes and more passengers to use the Luang Namtha Airport. The 26-kilometer access road to Kwangsi Falls, a tourist destination, was also upgraded, halving travel time from nearby Luang Prabang.

In the Lao PDR, rural areas remain home to the vast majority of the country’s population, including many ethnic groups, and these areas also have the highest poverty levels. Even after years of rural–to–urban migration, more than 70% of the population still depends on agriculture.

Lao PDR border checkpoint
Border checkpoint on the Lao PDR side of the Mekong River

In response, ADB has financed a series of inclusive rural development projects, initially with poverty reduction and food security as the priority. Today, the focus is on agricultural commercialization, rural economic development, and natural resource conservation.

Thipphakone Chanthavongsa, vice-minister of finance of the Lao PDR, recognized the value of this work in her country and throughout the region, in a recent speech.

“ADB has continually played a major role in our region, which has shown tremendous success and also has deep-rooted problems, from widespread poverty to environmental degradation and rising inequality,” she said.

This article was originally published in a special edition of Together We Deliver, which tells 50 stories highlighting the importance of good partnerships in Asia and the Pacific in meeting the complex development challenges of this dynamic region.