Tag Archives: economy

World Bank Projects Positive Economic Growth for Laos

Economic Growth to Improve in Laos (Photo: That Luang Special Economic Zone)

The World Bank has projected that economic growth in Laos is expected to recover 6.5 percent in 2019, from 6.3 percent in the previous year, mainly driven by strong investment inflows to large infrastructure projects, including the Lao-China railway.

Journey From Resource Exploitation To Knowledge Economy A Long, Necessary Road in Laos

Development of Knowledge Economy A Must in Laos.

OPINION: What are you going to do when you grow up? It’s a question relevant to socio-economics as well as people as policymakers discuss “Vision 2020-2025”. 

It is a question many if not all of us will remember parents or elders asking when were kids.

“What are you gonna be when you grow up?”

Some of us knew already. Others had barely a clue.

A few see their future dreams come true. Others not so much. Even more just muddled through.

When it comes to posing this question, many of us of a certain age or older may well have reciprocated with the younger generations.

Perhaps, the need to make future considerations is one of the few constants in a rapidly changing world in some ways radically changed from that experienced by our ancestors just a few generations ago.

Yet one difference is that these days, it’s not only children that are being asked this question.

It’s a question being asked of entire countries.

The increasingly rapid,  landscape-shifting developments in technology and their positive and negative externalities at a time of increasing connectivity have a multitude of economic and social development implications for all nations of the world.

This is particularly relevant for a least developed country (LDC) such as Laos, still dealing with long-lasting legacies of colonialism and war plus persistent corruption issues while pushing toward an aspiration of lower-middle-income status.

This comes at a time of rapid automation and emergence of Artificial Intelligence that promises to upend employment globally in both East and West, North and South.

So in Laos as elsewhere, the nation’s policymakers and entrepreneurs alike look ahead in both anticipation and trepidation to a future of potential opportunity as well as challenges as the public and private sectors seek to manage risk and increased prosperity in an unknown world.

In the case of resource-abundant and sparsely populated Laos, natural resource exploitation to feed the demand of foreign markets has long been a necessity to raise funds for necessary imports.

Over time, mining and power development have provided steady yet fluctuating rivers of revenue that have long helped to float the nation’s budget that has also helped to pave more than a few roads, paid the modest salary of civil servants, teachers and medics and other necessary services as well as funding the construction of buildings and purchase of vehicles and their fuel.

Yet with natural limits in mind and with an eye to the longer term future of a still young populace, policymakers are increasingly cognizant that moves to an increasingly knowledge-based economy promise greater long term sustainability than banking on continued returns from natural resource exploitation.

A more human development focused strategy should also go some way toward more judicious use of the country’s remaining natural resources in the long term,  a welcome consideration considering the finite and already depleting extent of the country’s natural endowments of minerals, forests and river catchments.

Such topics are among those being aired in Vision 2020-25. Reported upon by state-run English language daily Vientiane Times recently, it is believed the document accompanied the latest 2019 installment of the nation’s socio-economic development plan that is being circulated among the policymaking fraternity for discussion.

It involves measures to continually improve the climate for doing business so as to facilitate quality investment from domestic and international sources.

A knowledge economy is one that draws on insights from the crowd, so Laotian Times looks forward to reporting more upon the contents of the Vision 2020-2025 as they are released.

Such moves come as the country’s PM Thongloun Sisoulith has urged improvements to Lao workforce skills, advising labor and social welfare authorities to deliver on the country’s labor skill development policy to help more Lao employees to benefit as their skills meet the needs of the job market.

The comments were made at the national labor and social welfare sector meeting that took place in late January at the National Convention Centre in Vientiane.

It also comes as the country moves to codify areas for investment in controlled sectors, laying out in a clear way the procedures and permissions necessary to invest.

The recent development of a civil code in the country, with the help of Japan’s International Cooperation Agency (JICA), is also encouraging.

Such developments should all have a positive influence towards improving Laos scores on various international indices including the Ease of Doing business and Transparency International’s Corruption index.

When it comes to making a better and safer country, another area for major improvement remains road safety.

Laos’ young population has taken to the wheel, but the danger of the roads is very real as many do not have training, licenses or insurance.

Air quality is another area in which improvement is needed.

While the parlous state of air pollution neighboring nations has hit global headlines, Laos’ own capital and its many dusty rural towns can also undertake various measures to make the air better, including increased efforts to prevent and control the burning of household, garden, plastic and other wastes as prosperity grows.

Meanwhile, progress is being made on several indicators in health and education.

Of course, challenges remain abundant. Disparities are more than evident. Natural disasters are testing resilience. Accidents, whether on road or at Xe Pian Xe Namnoy, cause death and demoralization. Compensation, where available, is still no replacement for life and livelihood.

With such challenges, it might seem churlish to raise less life-threatening yet still very serious issues.

One such area so critical to the future of Laos like anywhere is as that of internet access, reliability and speed, as the data in World Bank’s February 4, 2019 report Digital Connectivity in Lao PDR: Lagging Behind Peers reveals.

How well will Laos be able to prioritise, optimise and engage on all these many challenges and make the most of opportunities to create a better future for its population together?

This will be important in achieving any of the goals the nation has set for itself.

When it comes to human financial and environmental capital, we can all do our part to move to a future where the country uses its limited resources and boost its human resources and knowledge capacity for the benefit of all of her people.

Tourism Access, Urban Services Improvements Attract $US125.5 Million Boost via ADB in Laos

Tourist Map of Bolaven, Champasak Province

Better roads to ease access to tourist hotspots, improved urban water supplies and sewage treatment are among the sweeteners revealed in the announcement of funds totalling $125.5 million for three projects in the tourism and urban sectors announced by the Asian Development Bank (ADB) and the Lao Government.

Agreements were signed by Deputy Minister of Finance Ms Thipphakone Chanthavongsa and ADB Country Director to the Lao PDR Mr Yasushi Negishi at a ceremony in Vientiane. Representatives of the nation’s Ministry of Finance; Ministry of Planning and Investment; Ministry of Public Works and Transport (MPWT); Ministry of Information, Culture, and Tourism (MICT); and other line ministries also attended the event.

The announcement comes after the ADB forecasted a revision in Laos’ economic growth rate to 6.6% as floods dampened prospects in September’s Asian Development Outlook (ADO) 2018.

Managing urbanization, tourism, attracting investments for vibrant, livable cities and towns 

“Vibrant, livable cities and towns play an important role in the development of industry and services, particularly manufacturing, agribusiness and tourism”, Asian Development Bank‘s Lao PDR Country Director Mr Yasushi Negishi told the gathering.

“The three grants demonstrate ADB’s commitment to help the Lao PDR sustainably manage urbanization, tourism, and attract investments that create good jobs in a wide range of economic sectors, helping the country to be eligible to graduate from the least developed country status.”

The $47 million grant for the Second Greater Mekong Subregion (GMS) Tourism Infrastructure for Inclusive Growth Project will support MICT’s efforts to rehabilitate last mile access roads to tourism destinations, improve tourist-related urban environmental services, and enhance sustainable tourism management in Louangphabang, Vientiane, and Champasak provinces. The grant was approved by ADB’s Board of Directors in August 2018.

The project’s climate resilient transport and urban infrastructure investments and support for tourist-related capacity building are designed to boost tourism development and deepen the Lao PDR’s economic integration with neighbors in the GMS and Association of Southeast Asian Nations (ASEAN).

Meanwhile, a $48 million grant for the Fourth GMS Corridor Towns Development Project to improve urban environmental services, including the construction of wastewater treatment plants and sewerage networks, solid waste management, and river embankments for flood protection in two corridor towns of Pakxan and Thakhek will be implemented by MPWT.

Approved in September 2018, the project will also support the preparation of town master plans with climate-resilience and gender-responsive measures for both areas to support growth and regional connectivity.

A third grant, amounting to $30.5 million, is an additional funding for an ongoing ADB-assisted Water Supply and Sanitation Sector Project also to be implemented by MPWT.

This additional financing will expand access to safe and reliable water supply and sanitation services in six towns in Attapeu, Xekong, Huaphan, and Luang Prabang provinces, as well as improve the operational and financial efficiency of provincial water utilities in the provinces.

According to the Bank’s press statement, the “ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled 32.2 billion, including $11.9 billion in co-financing.”

Connectivity, Transport Keys to Unlocking Laos’ Growth Potential While “Navigating Uncertainty”: WB

Aiming for sustainable local, regional growth amid global uncertainty.

A complex and fast-changing world and a stronger US dollar on the back of interest rate rises could make for a rough or productive ride for business, investors and the economy in developing countries around the world seeking to ride the wave of continued economic growth, Laos included.

This was one of the take outs from a major regional report entitled East Asia and Pacific Economic Update released by the multilateral World Bank on Thursday.

According to the World Bank, Laos’ economic growth is projected to ease to 6.7 per cent in 2018, down from 6.9 per cent in 2017, remaining robust compared to regional peers.

It recommends that economies such as Laos:

  • Save some financial reserves for a rainy day and loosen up the exchange rate.
    “Reduce short-term vulnerabilities and build policy buffers. Greater exchange rate flexibility can help absorb and adapt to external shocks. Tighter fiscal policies can help preserve or rebuild buffers to cope with a future downturn, without threatening debt sustainability.
  • Trade is your friend.
    “Redouble commitment to an open, rules-based international trade and investment system, including through deeper regional economic integration. Regional economies could gain by deepening existing preferential trade agreements and lowering non-tariff barriers. A further escalation of trade tensions could be avoided by turning to bilateral negotiations or the World Trade Organization.”
  • Get your house in order.
    “Deepen structural reforms, including liberalizing key sectors, improving the business climate, and boosting competitiveness. Leveling the playing field between SMEs and large firms, and between foreign and domestic firms, could also help reduce resource misallocation and create jobs.
  • Build a social safety net.
    “Strengthen economic security and promote economic mobility though programs such as targeted cash transfers, fiscally-sustainable social insurance systems, better access to prenatal and early childhood development, and more resources to schools in geographically-disadvantaged areas so as to reduce gaps in access and quality of education.”

It comes after recommendations for Laos were covered in greater depth in the World Bank publication “Safeguarding Stability” completed in June (prior to major flooding).

In the report, Laos’ economic growth was “projected to ease to 6.7% in 2018, down from 6.9% in 2017, but is still robust compared to regional peers.”

  • “Growth in the power sector and the recent expansion of the manufacturing of electronic parts and components is expected to continue.
  • After a fall last year, tourism is gradually recovering with the number of international tourists and non-ASEAN countries increasing in the first quarter of 2018.
  • Mining output is expected to remain flat this year, but higher metal prices, compared to 2017, are likely to help exports.
  • Expansion of job-creating sectors such as agriculture, manufacturing, and services in recent years, as well as inflows of remittances, are expected to continue to support poverty reduction.
  • Inflation has started to pick up since late 2017, reaching almost 2% by April 2018, reflecting the increase in oil prices.
  • Credit growth further moderated to 11% by the end of 2017, and the trend continued in the first quarter of 2018.
  • The current account deficit narrowed slightly in 2017 due to strong exports of electricity, manufacturing and agricultural products, as well as higher mining exports, supported by improved copper prices. This trend in exports continued into 2018, but import is expected to grow as the construction of the Kunming-Singapore railway and oil prices pick up. Therefore, the current account deficit is projected to temporarily widen this year.”

It said that “despite improvements in macroeconomic management, risks remain.”

  • “Total budget revenues increased by 5% in 2017 compared to a year ago – slightly short of the target and declining to 16.1% of GDP.
  • Cuts in recurrent spending were not enough to offset the increase in capital spending, including for paying off arrears and public investment, mostly in the power sector. Total public spending increased to 21.4% of GDP in 2017, widening the deficit to 5.3% of GDP, up from 4.3% a year ago. Continued efforts to increase revenues and bolder steps on fiscal discipline will be needed to meet the 2018 target of 4.9%.
  • Public debt reached around 61% of GDP in 2017. Debt is largely external and on less concessional terms, which makes Lao PDR’s public debt vulnerable to risks for exchange rate volatility and, to a lesser extent, from interest rate increase.
  • Reserves remain low, with the ratio of reserves to foreign currency deposits at less than 30% and less than two months of imports. Greater flexibility in the exchange rate saw the kip depreciate against the dollar and the baht, narrowing the gap between the official and parallel market exchange rates.
  • Parts of the financial sector remain weak, including with low capital buffers, weakening loan portfolios, and low profitability.
  • The medium-term outlook remains broadly favorable, subject to improvement in fiscal and debt management, reforms in the business environment, and efforts to improve the viability of the power sector.
  • Growth is projected to rebound to nearly 7% next year as large power projects start operation and non-resource sector opportunities, for example agriculture, agro-processing, tourism, trade, and manufacturing, open up in response to improvements in the business environment.”

“Going forward, policies should aim to reduce risks and implement business environment reforms for long-term growth.

  • Taking bolder steps on the fiscal consolidation plan and fiscal discipline is an immediate priority. Improved tax administration, expanding the tax base, modernizing revenue collection methods and the ongoing revision of laws can contribute to higher revenue collection.
  • Public investment should be carefully prioritized and scaled back, particularly in the power sector.
  • Achieving stable and long-term growth will require vibrant private sector development, including addressing informality and constraints to doing business, as well as investing in human capital and infrastructure services.”


“Large challenges loom for the global economy”

The WB’s report comes as another global organisation, the International Monetary Fund (IMF) issued its own latest World Economic Outlook released overnight.

The IMF singled out ultra-low interest rates and surging debt levels as potential triggers for another meltdown.

“The extended period of ultralow interest rates in advanced economies has contributed to the build-up of financial vulnerabilities,” the IMF warns.

Increases in rates could see a turbulent ride ahead for global currencies and exchange rates and the willingness of creditors to lend at rates of interest that remain at historic lows.

“The large accumulation of public debt and the erosion of fiscal buffers in many economies following the crisis point to the urgency of rebuilding those defences to prepare for the next downturn.”

Laos’ economic growth rate revised to 6.6%, floods dampen prospects

Students in Laos

Anyone who has been flicking on screens to news of floods in Laos, extreme weather-related disasters in the region and trade frictions beyond will not be surprised to hear that such developments have subdued economic growth somewhat.

Multilateral lender Asian Development Bank agrees. Its update of its flagship annual economic publication, Asian Development Outlook (ADO) 2018 has economic growth for the Lao People’s Democratic Republic (Lao PDR) is expected to moderate in 2018.

ADB projects Lao PDR’s gross domestic product (GDP) to grow by 6.6% in 2018 and 6.9% in 2019, revised down from its April estimates of 6.8% for this year and 7.0% for next.

According to the bank’s analysis, weather-affected sectors like agriculture and mining outputs are forecast to underperform, with growth set to trend lower than previously forecast in April.

Agriculture is expected to grow by just 2.0% this year and mining outputs projected to decline by 2.0%.

Economic expansion related to electricity generation, construction, and services will partially offset these adverse effects, the bank asserts.

Electricity generation is expected to increase by 8%.

According to the ADB, construction is benefiting from foreign direct investment in hydropower and transport projects.

These include the railway line from Vientiane to the border with the People’s Republic of China now under construction.

A sharper depreciation of the Lao kip against the US dollar in the open market, compared with the official exchange rate from January 2018 to July, points to continued vulnerability to stress in external payments, the Bank states.

Inflation is forecast to be 2.5% in 2018 and 3.1% in 2019, about half a percentage point higher than ADO 2018’s projections.

The current account deficit in percent of GDP is projected at 13.8% in 2018 and 13.0% in 2019, lower than the April estimates of 14.9% and 13.7%, respectively. Despite Lao PDR’s expected improvement in the current account deficit, net international reserves are forecast to remain below $1 billion by December 2018, covering only 1.5 months of imports due to a large trade deficit weighing on the balance of payments.

Downside risks to the outlook in the near term include external payments vulnerability and the possibility of recurrent natural disasters.

With a stated commitment to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty, ADB was established in 1966. The multilateral lender is owned by 67 members including 48 from the region.

In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in co-financing.

Traffic Accidents Bleeding the Lao Economy

Traffic Accidents in Laos

Traffic accidents are one of the largest causes of death in the Lao PDR, and are also causing massive economic losses, according to one economist.

Police reports state that 1,086 deaths were caused by traffic accidents in 2016, with the number of injuries caused by traffic accidents reaching 8,912.  The total number of accidents reached 5,616, and the cost of these accidents was a whopping 83 billion kip.

According to a recent Vientiane Times article, senior economist at the National Economic Research Institute, Dr Leeber Leebouapao, losses from road accidents amount to nearly 1 percent of Gross Domestic Product, which saw growth at 6.9 percent last year.

Dr Leeber feels that road accidents should be placed at the top of the nation’s agenda, and calls upon all sectors to devise programs and awareness campaigns that will help to mitigate the problem.

He went on to say that fatalities caused by road accidents in Laos were higher than deaths caused by wars or political conflicts in some countries.

Without urgent measures being taken, the situation will be unlikely to see improvement. Accidents cause tremendous financial losses to the state, and negatively affect society.

These costs include personal costs to victims families, property damage, ambulance and hospital cover. Accidents involving essential members of the workforce can also directly affect the nation’s human resources.

The rise in accidents is connected to the rapid economic development seen in Laos, which has led to an increase in vehicle ownership among the population. Growing demand for personal transportation and a lack of public transport options only adds to the issue.

The country’s very reputation is at stake, with reports appearing in foreign news media regarding the astonishing accident rate in Laos.

Dr Leeber added that road accidents are a huge drain on time and money, and law enforcement has not been serious about taking action toward a viable solution.

Cabinet Approves Five Decrees to Boost Economy, Improve Administration

The government cabinet has approved five new and amended draft prime ministerial decrees to boost socio-economic development and improve administration.

They are the draft Decree on Government Bond, Decree on Tourism Fund, Decree on Technical Positions of Civil Servants, amended draft Decree on Private Education Institute Promotion, and amended draft Decree on Administrative Positions.

The approval was made at the government’s monthly meeting for November held on Monday, which was chaired by Prime Minister Thongloun Sisoulith and attended by cabinet members.

Final revisions will be made to the five draft decrees in accordance with recommendations from cabinet members.

The cabinet instructed the Ministry of Finance to work out measures to implement the Decree on Government Bonds to regulate bonds in order to create confidence among investors while minimising risk.

The Decree on Tourism Fund defines regulations and measures on how money can be raised for the fund and the purpose of its expenditure.

Amendments to the Prime Ministerial Decree on Private Education Institute Promotion have been made to ensure the decree coincides with the amended Law on Education and amended Law on Investment Promotion.

The Decree on Administrative Positions and Decree on Technical Positions of Civil Servants give guidance to provide support for administrative and technical officials in Party, state and mass organisations.

The meeting approved a report on the establishment of an education centre for community development of the Southeast Asian Ministers of Education Organisation (SEAMEO) in Laos.

Concluding the meeting, Mr Thongloun highlighted the work cabinet members needed to pay particular attention to in December.

He instructed the cabinet to maintain law and order, while curbing antisocial activities, particularly the illegal drug trade, robbery and theft to create an environment conducive to celebrating the 41st anniversary of Lao National Day on December 2.

The cabinet was told to prepare a report on the government’s performance since it took office in April for the meeting of cabinet members, provincial governors and the Vientiane Mayor, which is scheduled for December 14-15.

Mr Thongloun instructed the cabinet to translate the Resolution of the National Assembly (NA)’s second ordinary session, which ended last week, into a prime ministerial decree and other regulations to realise the Resolution so that its implementation can be reported to the next NA ordinary session scheduled for April 2017.

The cabinet was told to keep a close eye on the exchange rate and define appropriate measures to regulate it in order to prevent increased inflation.

The premier told the meeting to closely monitor the price of goods in markets and define measures to intervene appropriately to prevent significant fluctuations that would affect business operations and people’s living conditions.

In order to boost dry season crop yields, Mr Thongloun instructed the relevant sectors to prepare necessary measures to help farmers.

The cabinet was told to keep an open ear to public complaints to determine the root cause and address any issues. The cabinet was also asked to investigate any possible immediate and long term solutions to address the intensifying traffic congestion.

Mr Thongloun also stressed the need for the cabinet to ensure that state laws and regulations are strictly observed.


Source: Vientiane Times

Lao Economy Forecast To Grow 7 Per Cent For 2016/2017

The World Bank (WB) recently forecast that the Lao economy would grow at 7 per cent in 2016 and 2017, ranking second in Southeast Asia, behind Myanmar.

However, the growth is estimated at only 6.8 per cent in 2018, Vietnam News Agency (VNA) reports.

Senior economist Libo Libuapao from the National Economic Research Institute said the Lao government has revised down the growth rate to 7 -7.3 per cent from 7.5 per cent in 2016-2017 due to the world economic downturn.

Notably, the Chinese economic slowdown also hurt Lao exports to the country as well as reduced Chinese direct investment in Laos.

Earlier, Lao Deputy Prime Minister and Finance Minister Xomdi Duangdi affirmed that the Lao government has set the goal of achieving economic growth at least 7.5 per cent per year during the implementation of the national socio-economic development scheme for 2016-2020.

To that end, the agro-forestry sector must grow 3.2 per cent, industry up 9.3 per cent and services up 8.9 per cent annually, and the total capital inflow into Lao projects must reach US$27 billion during the period.

According to the WB, the Southeast Asian economy this year will expand 5.8 per cent from 2015 and 5.7 per cent in 2017 and 2018.