VIENTIANE, LAO PDR - Market-driven reforms have helped to spur strong growth, cut absolute poverty, and enhance social conditions in the Lao People’s Democratic Republic (Lao PDR) in recent decades, but they’ve also been accompanied by a rise in inequality, says a new Asian Development Bank (ADB) study.
“The increase in inequality is of considerable policy concern as it can threaten social cohesion, as well as the sustainability of future growth,” said Sandra Nicoll, ADB Country Director for Lao PDR.
Two Decades of Rising Inequality and Declining Poverty in Lao PDR, authored by ADB Lead Economist Jayant Menon and Australian National University Professor Peter Warr, examines how inequality has evolved in the country over the past two decades. The study computes and compares measures of consumption inequality using household data surveys over a 20-year period including, for the first time, the most recent data from the Lao Expenditure and Consumption Survey for 2012-2013.
“The study finds that inequality has increased, at both the national level and within rural and urban areas,” Mr. Menon said today at the launch of the report in Vientiane. “The estimated Gini coefficient of expenditure inequality has risen from 0.311 in 1992-1993 to 0.364 in 2012-2013, a statistically significant increase.”
At the same time, the estimated incidence of absolute poverty has halved, from 46% to 23%. Coupled with the Gini coefficient finding, this indicates that while the poor are now better off in real terms, the rich have benefited even more, in both proportionate and absolute terms.
The report notes that if the real expenditure of all household groups had increased at the same rate over the study period, poverty incidence would have declined from 46% to 17%—demonstrating that rising inequality undermined the extent of potential poverty reduction by 6%.
Ms. Nicoll noted that for the fruits of growth to reach all citizens, economic opportunities must be expanded and access to them equalized.
“Inclusiveness must be an integral part of growth and policy development to reduce the inequality gap and to cut poverty further,” she said.
Based in Manila, ADB is owned by 67 members – including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.