Lao PDR reached a number of important development milestones in 2018. It passed the thresholds for Gross National Income (GNI) per capita and the Human Assets Index at the Committee for Development Policy’s Review on 12-16 March, thus becoming eligible for Least Developed Country graduation for the first time. Lao PDR came close to passing the third criterion, the Economic Vulnerability Index. To graduate from Least Developed Country status, the graduation threshold must be met for two of the three criteria in two consecutive triennial reviews. If it sustains its current progress until the 2021 review, Lao PDR will be recommended to graduate in 2024, following a three year transition period.
Having reached the mid-way point of the national planning cycle, the Government conducted a midterm review of the 8th National Socio-Economic Development Plan (2016-2020) and of several sectors. As a trusted partner, the Government requested the UN to provide lead support and coordinate development partners in conducting the review. Based on inputs from the Sector Working Groups, the mid-term review took stock of progress achieved since 2016 and provided recommendations for the way forward. It thus served as the basis for the high-level policy dialogue between the Government and development partners at the Round Table Meeting on 4-5 December and as the starting point for the development of the 9th National Socio-Economic Development Plan (2021-2025), for which UN technical assistance has again been requested by the Government.
Given its high level of commitment, Lao PDR also continued to make significant progress on the localization of the global Sustainable Development Goals, presenting its first Voluntary National Review to the UN High-Level Political Forum in New York in July. A comprehensive list of sustainable development indicators is expected to be adopted by the Government in the coming year. 2019 will be particularly critical to promote the mainstreaming of the Sustainable Development Goals. In addition to the development of the 9th National Socio-Economic Development Plan, the sectoral strategies for the next national planning cycle are being rolled out.
The Lao Social Indicator Survey II informed the analyses in the above documents. It showed that important progress has been made in several areas of wellbeing, such as child mortality, stunting, skilled birth attendance, water and sanitation coverage, primary education attendance, and to some extent in reducing violence against children. However, disparities persist between households from different geographical regions, rural and urban areas, households with different wealth and education level of mothers, and between ethnic groups. With strengthening the rule of law one of the top national priorities, the National Assembly has played an increasingly important role in enhancing Government accountability, including that of state-owned enterprises. The Government remained committed to promoting transparency and combatting corruption. The Government, together with UN, European Union and Australia, celebrated the 70th anniversary of the Universal Declaration of Human Rights on 10 December.
Throughout the year, Lao PDR had submitted reports on three core Human Rights Conventions, and thus interacted with three treaty bodies: the Committee on Civil and Political Rights in June; the Child Rights Committee in September; and the Committee on the Elimination of All Forms of Discrimination against Women, also in September. The Special Rapporteur on the sale and sexual exploitation of children has visited Lao PDR in 2017 and noticed that Laos has made good progress on child protection but must do more to tackle a range of problems including child trafficking, forced marriage, prostitution, online sexual abuse, and sexual exploitation by travelers. In March 2019, the Special Rapporteur on Extreme Poverty and Human Rights also visited Laos and presented recommendations towards alleviating extreme poverty.
The Lao PDR has been severely affected by floods. Between July and September, Lao PDR experienced widespread floods that significantly affected its people and economy across all provinces. On 23–24 July, a breach in the Xe Pien-Xe Nam Noy hydropower saddle dam caused an unprecedented flash flood in Attapeu Province, inundating an estimated 55,000 hectares of land, covering it with mud and sludge.
Less than one month later, on 16-18 August, Tropical Storm Bebinca also affected the northern part of the Lao PDR. The Government-led Post-Disaster Needs Assessment – which took stock of damages and losses across productive, infrastructure, social and crosscutting sectors – estimated damages at US$ 147 million and losses at US$ 225 million. Recovery needs across all sectors were estimated at over US$ 520 million. The assessment also includes a Disaster Recovery Framework which outlines the way forward for policy, institutional, finance and implementation of the recovery efforts.
GDP growth is expected to reach 6.5 percent in 2018, vis-à-vis a target of 7 percent, and vis-à-vis growth of 6.9 percent in 2017 and 7 percent in 2016. Growth was driven mainly by the industry and service sectors, in particular wholesale trading and construction. Growth of agriculture, mining and tourism – despite the ‘Visit Lao Year 2018’ initiative – remained below expectations. Main challenges to the economy include low productivity, limited law enforcement and inadequate human resources that cannot meet the economy’s demand. Despite overall growth, wealth is increasingly distributed unequally. With revenue collection remaining a challenge, the flood emergency between July and September, and most of the budget allocated to recurring costs such as staff salaries and pensions, fiscal space is further shrinking and the risk to debt sustainability has been reclassified as high by the IMF. Only a limited number of new Government-funded investment projects have therefore been approved through the Public Investment Programme as of early 2019, further increasing the importance of international development cooperation. Hydropower and mineral exports are expected to increase in 2019, which may contribute to a narrowing of the budget gap. The deficit is estimated at 5.7 percent of GDP in 2018.
Within this context and given the importance of improving the private sector environment, the Government endorsed the amended Law on Investment Promotion and established an Investment Management Committee chaired by the Deputy Prime Minister. A further initiative included the creation of a One-Stop-Service Office under the Investment Promotion Department of the Ministry of Planning and Investment. These are all steps to support SME development, especially through streamlining business start-up procedures. Despite these measures, Lao PDR has further dropped on the World Bank’s 2018 Ease of Doing Business Index to #154 of 190 countries, down from #141 in 2017 and #134 in 2016. Similar to previous years, in 2018 the UN System in Lao PDR – including agencies operating from regional offices and headquarters – commutatively delivered around US$ 70 million in programming. The support of national agencies, as well as international partners such as Australia, Canada, China, the European Union, Ireland, France, Germany, Japan, Republic of Korea, Luxembourg, New Zealand, Switzerland, United States and many others, has been crucial for the partnership between Lao PDR and the UN, which remained first and foremost a provider of technical cooperation and a facilitator of policy dialogue.
This report covers key development trends and results achieved under the Lao PDR – UN Partnership Framework (2017 – 2021), as well as lessons learned and consideration of options for the way forward. It also reports on progress on communications and common business operations and includes an indicative financial overview.