VIENTIANE, LAO PDR – The President of the Asian Development Bank (ADB), Takehiko Nakao, today met Thongsing Thammavong, Prime Minister of Lao People’s Democratic Republic (Lao PDR), Finance Minister Liane Thykeo, Minister for Planning and Investment Somdy Douangdy, and Education and Sports Vice Minister Kongsy Sengmany, to discuss ADB’s support for efforts to ensure recent strong economic growth is sustainable and benefits all citizens.

“The economy continues to grow vigorously and it is encouraging to see private consumption emerging as a new driver of growth, along with rising industries like tourism and construction,” said Mr. Nakao. “Further efforts to diversify the economy and improve macroeconomic management would help the country fulfill its undoubted economic potential.”

Mr. Nakao commended the government’s commitment to eradicating poverty as a key step towards its target of graduating from least-developed country status (countries with the lowest gross national income, highest poverty and most vulnerable economies) by 2020. ADB’s assistance would be aligned with the government’s policy priorities under the forthcoming 8th Five-Year National Socio-Economic Development Plan (2016-2020).

ADB expects Lao PDR’s economic growth to reach 7.0% this year and 7.2% in 2016, driven mainly by mining and hydropower which account for 18% of gross domestic product. Despite strong growth, more focus is needed on macroeconomic stability given the sizeable fiscal deficit and low foreign reserve levels. Mr. Nakao said shortfalls in tax revenue collection are expected to continue despite recent improvements, highlighting the need for efficient budget management, as well as effective tax enforcement.

Mr. Nakao stressed the importance of reforms to foster private sector development as an engine of economic growth. With the help of ADB, the government recently opened the Centre for Regulatory Impact Assessment for Draft Legislation which assesses the impacts of draft legislation on the private sector. “The private sector can grow if complex business regulations are simplified, the tax structure is clear and predictable, and access to finance strengthened particularly for smaller businesses,“ Mr. Nakao said.

An improved business climate would support the growth of Public-Private Partnerships (PPPs) as a means of providing finance and expertise to much-needed infrastructure such as roads, airports, and urban services, said Mr. Nakao. He commended recent government efforts to establish a clear legal and policy framework for PPPs, which have been used to build a number of hydropower projects in Lao PDR. ADB stands ready to support the government’s evolving PPP program, he said.

Lao PDR, located at the heart of the Greater Mekong Subregion (GMS), is the only GMS country to share a border with the subregion’s five other member nations. It is therefore ideally placed to benefit from regional cooperation and integration, especially along the three GMS economic corridors (North-South, East-West, and Southern). Mr. Nakao said a key challenge facing the country is to ensure it obtained jobs and investment from integration, and is not merely used as a transit point for trade among its neighbors.

Mr. Nakao also visited an ADB-supported vocational education and training project site in Vientiane. “Well-educated and skilled people encourage private sector growth and catalyze the diversification of the economy,” said Mr. Nakao. “ADB support has focused on strengthening higher and vocational education, and this will continue especially for underserved parts of the country.”

He also attended the signing of a $35 million loan to help finance a bus rapid transit system in the capital. The strains placed by rapid urbanization on services and infrastructure could be eased by better urban planning and land management, as well as more private sector involvement in providing urban infrastructure, said Mr. Nakao.

ADB assistance to Lao PDR has also focused on the energy sector through financing for large hydropower projects such as Nam Theun 2 and Nam Ngiep 1. Other priorities include upgrading the quality of agricultural infrastructure and rural roads, strengthening tourism infrastructure and management, expanding water supply and urban infrastructure and services, improving access to health services by building and renovating provincial and district hospitals, and assisting small businesses.

During discussions with government officials, Mr. Nakao reaffirmed ADB will allocate $116.6 million from its Asian Development Fund over the 2-year period 2015-2016 to strengthen education, develop economic corridors, enhance transport sector governance, and improve health services delivery.

Lao PDR joined ADB as a founding member country in 1966. Since then it has received $1.8 billion in loans, $151 million in technical assistance and $496 million in grants.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members – 48 from the region. 

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