Economic Diversification, Structural Reforms Needed for Lao PDR to Achieve Inclusive Growth — Report | Asian Development Bank

Economic Diversification, Structural Reforms Needed for Lao PDR to Achieve Inclusive Growth — Report

News from Country Offices | 9 November 2017

VIENTIANE, LAO PEOPLE’S DEMOCRATIC REPUBLIC (9 November 2017) — The Lao People’s Democratic Republic (Lao PDR) must look for new drivers of growth by diversifying exports, maintaining macroeconomic stability, and providing good nonagricultural jobs to achieve sustained and inclusive growth, says a new Asian Development Bank (ADB) study.

The country diagnostic study, Lao PDR: Accelerating Structural Transformation for Inclusive Growth, takes an in-depth look at the challenges and opportunities policymakers face in strengthening and broadening the country’s economic base. The study helps to identify constraints to sustainable and inclusive growth and offers concrete recommendations for policymakers. Hence, the study aims to provide policy support to the government in its effort to meet the target of Lao PDR graduating from the roster of least developed countries by 2020.

The study complements ADB’s recently approved Country Partnership Strategy 2017–2020, and will serve as the basis for policy dialogue with wider development stakeholders on the challenges facing the country. The policy recommendations are in line with the government’s National Socio-Economic Development Plan for 2016­–2020.

The study highlights that while the Lao PDR has been successful in sustaining high economic growth during 1986–2016, this growth has not yet translated into high private investment and employment opportunities in the modern nonfarm sectors of the economy. Natural resource-intensive sectors have driven most economic growth, generating inadequate productive employment opportunities in the domestic labor market. To achieve inclusive growth, the ADB study highlights the need for more job opportunities in nonfarm sectors, even though the agriculture sector will remain as the main job provider.

The study also underscores the importance of focusing on high value-added products to achieve more inclusive growth. The Lao PDR should consider redeploying human resources through education and skills upgrading and expanding meaningful dialogue between the public and private sectors to help identify opportunities and constraints in developing new products. By addressing these constraints, the government can encourage the private sector to invest in nontraditional products and thus accelerate the speed of structural transformation.

Infrastructure needs to be upgraded and made more efficient to expand access to vital services in order to increase economic opportunities for a wider segment of society. The government’s efforts toward improving the quality of governance, business environment, and public service delivery are also essential. This includes provision of health facilities and expansion of access to education, in particular for people living in rural and upland areas.

The services sector can also become a more effective driver of growth and employment. The tourism industry, for instance, has been growing and provides opportunities for economic growth and job creation. Improvement in infrastructure, logistics, and information and communication technology will be important to enhance the country’s tourism.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 has marked 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2016, ADB assistance totaled $31.7 billion, including cofinancing of $14.1 billion.