Laos Year In Review: Developments in 2016

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The year 2016 saw Laos make remarkable progress in national protection and development despite global economic uncertainties.

The highlights of the year were the Asean Summits hosted by Laos and a change in the country’s leadership. The new Party and State leaders are playing a significant role in guiding the Lao people out of poverty and helping Laos to graduate from the UN’s list of Least Developed Countries by 2020.

The dream of transforming Laos from a landlocked country to a land link within the region will become reality with the start of construction on December 25 of the Laos-China railway linking Vientiane to the Chinese border over a distance of 427km. An official groundbreaking ceremony for the US$5.8-billion project took place in December last year.

Political stability, security and social order have been maintained to facilitate national development and poverty reduction. But Laos continued to face a number of challenges in the form of a revenue shortfall, financial leaks, and corruption.

The following sections summarise the most significant events of 2016:

Politics and Foreign Affairs

There were many events of political significance in 2016. Among the most important were the 10th Party Congress of the Lao People’s Revolutionary Party in January, the election of National Assembly and Provincial People’s Council members in March, and the Asean Summits in September.

The 10th Party Congress took place from January 18-22 in Vientiane and was attended by 685 delegates, representing the 252,879 Party members nationwide.

The Congress elected the 10th Party Central Committee comprising 69 members and eight alternative members, which constitutes the core leadership body in guiding the Party, State, armed forces and Lao people nationwide to successfully implement the Resolution adopted by the 10th Party Congress.

The 10th Party Congress resulted in the election of 11 Politburo members, namely: Bounnhang Vorachit, Thongloun Sisoulith, Pany Yathotou, Bounthong Chitmany, Phankham Viphavanh, Chansy Phosikham, Xaysomphone Phomvihane, Chansamone Chanyalath, Khamphanh Phommathat, Sinlavong Khoutphaythoune and Sonexay Siphandone.

Mr Bounnhang Vorachit was elected as Secretary General of the Party Central Committee, while Mr Phankham Viphavanh was elected as Standing Member of the Secretariat.

The Inspection Committee comprises nine members, with Dr Bounthong Chitmany elected as president of the committee.

The Resolution of the 10th Party Congress was adopted to serve as guidance and direction for developing the country over the next five years.

On March 20, almost 4 million voters (out of a population of 6.5 million) cast ballots to elect their representatives to the National Assembly (NA) and Provincial/Capital People’s Councils.

Voting took place in 18 constituencies at 6,715 polling stations, reflecting the democratic right of the Lao people to elect their representatives to the legislative bodies.

The election saw voters elect 149 National Assembly members from 211 candidates and 360 Provincial/Capital People’s Council members from 508 candidates.

In April, the NA’s 8th Legislature began its four-day inaugural session with members re-electing Ms Pany Yathotou to a second term as the Assembly’s President before electing Party Secretary General Mr Bounnhang Vorachit as the head of state and Mr Phankham Viphavanh as Vice President of the Lao PDR.

The NA also approved the election of Mr Thongloun Sisoulith as Prime Minister, and Dr Bounthong Chitmany, Dr Sonexay Siphandone, and Mr Somdy Duangdy as Deputy Prime Ministers, and approved other cabinet members.

In addition, Mr Khamsane Souvong and Mr Khamphanh Sitthidampha were re-elected as Prosecutor General of the Lao PDR and President of the Supreme People’s Court respectively.

As the Chair of Asean this year, Laos hosted and chaired a number of Asean meetings at various levels throughout 2016 covering the three Asean pillars, namely the political-security community, economic community, and socio-cultural community.

The 28th and 29th Asean Summits and related summits took place from September 6-8, bringing several thousand people to Laos including top leaders, businesspeople and media.

The Asean Summits and East Asia Summits in Laos saw the attendance of top leaders from Asean dialogue partners China, Japan, Republic of Korea and India, and global leaders including President Barack Obama who became the first US president to visit Laos.

President Obama pledged to provide an additional US$90 million over the next three years to help Laos clear unexploded ordnance (UXO) dropped during the Indochina war, which continue to kill and injure Lao people despite being dropped on the country more than four decades ago.

The summits not only helped to further strengthen regional cooperation but also enhanced the profile of Laos in the international arena.

The three days of meetings resulted in the adoption of many joint statements and other important documents.

At the 28th Asean Summit on September 6, leaders adopted the Master Plan on Asean Connectivity 2025, which stated that Asean needs at least US$110 billion of investment in infrastructure each year to support future growth.

Laos joined Asean in 1997 and hosted the Asean Summit for the first time in 2004.

Asean, established in 1967, is now a single market of over 620 million people and a production base with a combined GDP of US$2.6 trillion, ranking as the seventh largest economy in the world.

The year 2016 also saw a rise in the number of exchange visits by delegations of all levels from Laos and foreign countries, aiming to strengthen mutual cooperative relations.

In April, the Secretary General of the Lao People’s Revolutionary Party and President of Laos, Mr Bounnhang Vorachit, paid his first overseas visit to Vietnam after being elected as the top leader of Laos.

On May 3-5, President Bounnhang paid a goodwill visit to China in response to an invitation from his Chinese counterpart Xi Jinping. During his visit, the two sides signed a number of cooperation agreements as a guideline to further strengthen their relations, friendship and cooperation.

Also in May, Myanmar President U Htin Kyaw, his wife and a high-level delegation paid a state visit to Laos in response to an invitation from President Bounnhang.

This was U Htin Kyaw’s first visit to Laos after being sworn into office as the President of Myanmar in March. He was also the first foreign head of state received by President Bounnhang during his term of office.

President of the Republic of Korea Park Geun-hye paid an official visit to Laos in September in response to an invitation from President Bounnhang.

During the visit, the two sides agreed to push for greater cooperation in areas related to economics and trade, education, agriculture, health, human resource development and tourism.

Diplomatic Relations

Laos has been lauded for its proven ability to host international events and to communicate with nations around the world. During the Asean Summits and related summits, Laos issued a number of joint statements to foster greater cooperation within Asean and between Asean and its dialogue partners.

All of these achievements were the result of the Party and government’s clear-sighted foreign policy.

Laos pursues a consistent foreign policy of peace, independence, friendship and cooperation with all nations around the world based on the principles of mutual respect, a win-win approach, and non-interference in internal affairs.

As a result of the proactive implementation of its foreign policy in recent years, Laos has established diplomatic relations with 139 nations.

Laos has embassies in 27 nations, nine general consulates and 15 honorary consulates abroad and three Permanent Representative Offices of Laos to the United Nations in New York, Geneva, and Jakarta. The Party has also strengthened relations with 130 political parties around the world.

Governance Reform and Fighting Corruption

Since the new government took office in April, led by Prime Minister Thoungloun Sisoulith, a number of changes have been made to ensure the efficiency and effectiveness of its administration.

The new prime minister began by restructuring government bodies to avoid duplication and overlapping among the various sectors.

Under the government’s streamlining programme, various commissions and committees were transferred to merge with existing ministries. This means central tasks have been delegated from the Prime Minister’s Office but more duties have been entrusted to line ministries and the provinces.

After assuming office, Mr Thongloun declared a crackdown on corruption and made it clear he intended to address unapproved and so-called ‘ghost’ development projects, public debt, revenue shortfall, and budget leaks.

In May, at least 60 ghost projects were uncovered by Lao authorities. These involved 95 officials who were reportedly disciplined.

More than 785.8 billion kip (US$96.83 million) was found to have been spent on these so-called ghost projects schemes for which money was budgeted but which did not actually exist.

The projects were uncovered during inspections into state-funded investment projects carried out by the Ministry of Finance for the 2015-16 fiscal year.

Of the total, 29 such projects were discovered in Luang Namtha province, 26 in Oudomxay province, three in Xekong province, and two others in Attapeu province.

More than 4,807 billion kip has been lost to corruption over the past five years and 734 targets were found to be involved, according to a recent report by the Inspection Committee of the Party Central Committee.

Another major issue this year was the large number of incorrect electricity bills sent out in May with charges being unreasonably high, triggering a slew of public complaints.

In June, Prime Minister Thongloun ordered the Ministry of Energy and Mines to investigate and address public complaints about skyrocketing electricity rates and ensure that consumers who were overcharged received compensation.

Mr Thongloun also told the ministry to investigate the cause of the rate hikes, to correct erroneous charges, and reimburse households that were overcharged because of any fraudulent acts or errors by Electricite du Laos employees.

Another move that gained public approval was the issuance of Prime Ministerial Order No. 15 on May 13. This prohibited the export of unfinished wood products and imposed stricter measures to regulate wood processing businesses.

The crackdown resulted in 1,154 family-run furniture plants across the country shutting down their illegal operations, while more than 55,421 cubic metres of illegally harvested wood were seized.

The government also announced the repeal of the import tariff exemption on petrol, which was previously granted to many importers, causing an enormous loss of state revenue.

In mid-December, the government instructed its anti-corruption body to devise measures to prevent corruption and to carry out inspections to fight all forms of dishonesty.

Mr Thongloun told the more than 500 participants from central and local departments who attended a meeting to discuss the socio-economic development plan and budget for 2017 that the expensive state-owned BMW and Mercedes Benz cars currently driven by leaders would be taken back and sold through a bidding process. They would be replaced by cheaper vehicles.

The government also announced it would change the start of the fiscal year from October 1 to January 1.

Economy

This year, the economy grew at a rate of only 6.9 percent, which fell short of the government’s target of 7.5 percent. Nevertheless, this rate of growth is high compared to other countries in the region.

Declining demand around the world has driven down product prices, particularly for commodities like mineral ores and rubber, which are key income-generating exports for Laos.

Economists also noted that few mega projects had been proposed in Laos in recent months.

As a result of the economic slowdown, the government asked the National Assembly to lower the economic growth targets for the next four years.

This means the economic growth target has been revised to 7 percent for 2017 and 2018, with a slight increase to 7.3 percent in 2019, rising further to 7.5 percent in 2020.

The agriculture sector grew by 3 percent in the 2015-16 fiscal year, representing 23.3 percent of GDP; industry grew by 9 percent, representing 28.8 percent of GDP; and the service sector grew by 8.5 percent, representing 39.8 percent of GDP (tariffs not included).

In 2016, the Bank of the Lao PDR cut the interest rate in a bid to lower the cost of loans to businesses. This was intended to lower production costs and enable businesses to be competitive in the era of Asean economic integration.

Exchange rates remained stable despite an increase in the money supply and falling foreign currency reserves. Another positive is that the inflation rate was recorded as being less than 2 percent.

Gross Domestic Product (GDP) reached 108,709 billion kip (US$13.3 billion) with GDP per capita climbing to US$2,027.

Finance

Despite the continuing growth of the economy, Laos still faces a lot of challenges. Its macro-economy is not strong and it remains vulnerable to external impacts.

Revenue shortfall, falling foreign currency reserves, financial leakages, chronic debt and a lack of skilled labour will continue to pose great challenges for the economy in the near future.

Over the past 10 months of the 2015-16 fiscal year, revenue collection amounted to 15,711 billion kip, equal to 66.5 percent of the plan for the year.

However, expenditure soared to 24,291 billion kip. The government addressed the budget deficit through loans sourced from overseas (4.6 trillion kip) and an internal loan (1.37 trillion kip).

Infrastructure Development

Actual construction of the Laos-China railway began in December, a year after an official ground-breaking ceremony for the approximately US$5.8-billion project took place last year.

The historic railway linking Vientiane to the Chinese border over a distance of 427 km is expected to be complete within five years.

Laos and China set up a joint venture company to oversee the project with Laos holding 30 percent of the project share and China being responsible for the remainder.

The Lao government says the railway is important in transforming Laos from a landlocked country to a land link within the region and will attract more foreign investment and tourists.

When being used for passenger transport, trains will travel at a maximum speed of 160 km per hour, but when goods are being transported the maximum speed will be 120 km per hour.

In addition, water supplies, electricity transmission and road networks have been improved in response to the needs of local communities.

In the north of Laos, over 738 billion kip was spent on 1,210 infrastructure development including the construction of electricity transmission lines and irrigation in Huaphan province, along with urban road upgrades in Paklai district, Xayaboury province and in Luang Prabang province.

But construction of the US$74-million Nongkhang Airport in Huaphan province has been suspended for almost six months. The new air strip was scheduled to be completed in December this year but the developer (Hoang Anh Gia Lai Joint Stock Company) is experiencing financial problems, resulting in delays.

In Champassak province, the expansion of Road No. 16 linking Pakxe to the Vangtao-Chongmek border crossing between Laos and Thailand was completed. But many people have complained about the tolls being charged to use the road, saying it is unfair to charge road users without any options. The Duangdy Bridge-Road Construction Company spent US$30 million to expand the road and will recoup the cost through the fees collected from road users over a period of 45 years.

Private Investment

According to the Ministry of Planning and Investment, 1,222 investment projects were approved for domestic and foreign businesses over the past nine months, with registered capital of over 25.5 trillion kip (US$3.13 billion).

Of the total, nine projects were approved in the form of concessions, worth US$447 million. Approval was given to another 33 projects for operation in special and specific economic zones, with a total value of US$443.9 million. The rest were general businesses.

However, only US$883.7 million of the money invested in these projects has been transferred through the banking system for investment in Laos.

Imports and Exports

Laos usually imports more than it exports, but this year the country achieved a trade surplus for the first time, thanks to growing investment and an increase in exports.

The value of exports over the past nine months of the 2015-16 fiscal year reached US$3.15 billion while the value of imports amounted to US$3.04 billion.

Exports consisted mostly of mining commodities, electricity, wood products, garments, coffee, and various agricultural products. Imported products included construction equipment, electrical equipment, vehicles and spare parts, industrial products and food items.

Laos began selling rice to China last year. So far, about 3,700 tons of sticky rice and non-glutinous rice have been shipped.

The value of exports is expected to reach US$4.081 billion for the whole year while the value of imports is expected to reach US$4.008 billion. Laos enjoys strong trade relations with its neighbours Thailand, China and Vietnam.

Energy

In September, Thailand increased its purchase of electricity from 7,000 to 9,000MW from Laos.

Of the total 9,000MW, most will be generated by hydropower, which is more cost-effective than fossil fuels.

As of 2015, the installed capacity of Lao power plants reached 6,265MW and will increase to 12,500MW in 2020 as the construction of various hydropower schemes gets underway. The government is also building more transmission lines to ensure that many more people can access electricity.

Tourism

The tourism industry has been growing at a faster pace in recent years. The number of foreign visitors climbed to 4.6 million in 2015 and is expect to reach 5 million people in 2016.

The first visit to Laos by US President Barack Obama in September helped to put the country in the global spotlight. Many more people now know about Laos and hope to visit.

In addition, the opening of more direct flights between Laos and other countries and improved facilities are key factors in bringing more tourists to Laos.

Luang Prabang is the top destination for all travellers to Laos, with 83 percent of visitors spending time in the northern town, followed by Vientiane.

Culture

In November, Vientiane authorities placed almost 10 kilogrammes of gold leaf atop the That Luang Stupa to mark the 450th anniversary of the stupa’s construction.

The gilding of the grand stupa was a historic milestone, with 9kg and 135 grammes weight of gold being added to the tip.

The full restoration project is expected to cost about 15 billion kip. As of November 2016, the committee in charge of the project had received 16kg and 660g of gold, and over 2 billion kip in cash from government and private donations.

The stupa was originally built during the ancient Khmer civilisation, when Vientiane was inhabited by people known as the Cham.

The structure was renovated on the orders of King Xaysetthathirath in the 16th century when the original site was covered with a bigger stupa. From then on the monument took the name That Luang, or Grand Stupa.

At another landmark in the capital, since 2014 the authorities have been restoring the Horpha Keo museum. Materials needed to replace broken and damaged parts, including walls, the roof and floor tiles, will cost 7 billion to 8 billion kip, which is being raised both locally and overseas.

The Horpha Keo museum is one of the most significant historic sites in Laos. The ancient temple was built in 1565 during the reign of King Xaysetthathirath to house the famed Emerald Buddha that is now in Bangkok. This is the third major overhaul since it was first built.

Information

The National Assembly approved the amendment of the Media Law in November after it was first promulgated in 2008.

The amendment will enable the media to better serve society by pushing for greater development and poverty reduction throughout the country.

According to the law, Lao citizens have the freedom to express their views on events in Laos and overseas, and to constructively criticise individuals and organisations.

Education

As Laos becomes part of the Asean Community, the government is giving priority to human resource development so the country can benefit fully from regional integration.

The government is continuing its reform of the education system and has invested more in building facilities, training teachers and providing more materials for students in rural areas.

School enrollment of children aged 3-5 has increased from 43 percent in 2015 to 49 percent today, and the drop-out rate has declined.

In August, a Lao team won first place in the regional 7th Asean Quiz after beating teams from nine other Asean countries, reflecting the can-do capacity of Lao people and improvements in the human resource sector.

Health

Although the Ministry of Health has worked to expand health services in rural areas, the high mortality rates of mothers and their babies remains a great challenge.

Every day on average 40 children are born in Laos, but five of them will die because mothers and their babies do not have proper access to health services.

According to the 2016 Lao Social Indicator Survey, the mortality rate of infants is 86 per 1,000 live births. The mortality rate of mothers was 200 out of 100,000 births.

Poverty Reduction

The number of poor families fell from 83,856 in 2015 to 76,318 this year, equal to 6.5 percent of the total number of families. However, the decline in the number of poor families slowed in 2016 due to several factors. One of them is that many poor families live in remote and mountainous regions with poor road access. Other reasons relate to the economic slowdown, unemployment, and natural disasters.

Traffic Accidents

The number of road accidents nationwide is not yet available. Nevertheless, the official record from January to August shows that 714 people were killed in road accidents around the country over this period.

Some 5,935 people were injured and 6,883 vehicles were damaged. Motorbikes were involved in 95 percent of the accidents, with 90 percent of people dying in accidents being male.

Police said the number of road accidents continues to increase, with many people dying due to dangerous driving. About 90 percent of accidents involve drunken driving, speeding and other violations of the traffic rules.

Social Ills

Laos continues to face challenges in dealing with drug problems. The country has been considerably harmed by drug abuse, with many young people in every province becoming addicted to amphetamines.

Drug abuse results in family breakdowns, domestic violence, robbery, murder and other social ills.

Drugs are not only destroying our children’s lives but also undermining our workforce and the future of the nation.

According to a recent report from the Ministry of Public Security, more than 2,200 drug-related cases were dealt with in the first nine months of this year and more than 3,200 suspects arrested.

This involved the seizing of more than 1,850kg of methamphetamine tablets, 181kg of heroin, 106kg of raw opium, around 300kg of dried cannabis, more than 130kg of crystal amphetamine (ice), and 1,105kg of powder used to mix and produce drugs.

Overall, the year 2016 has been an exceedingly positive one for Laos with development continuing at an increasingly rapid pace and the country’s profile raised to new levels in the global arena. Tourists, government officials and investors are coming to the country in larger numbers and Laos is playing an ever greater role on the world stage as it closes in on its development targets.

Source: Vientiane Times

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