## _cr08341 ## Source details **Canonical URL:** [_cr08341](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08341.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08341.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08341.pdf.json) --- ### Executive summary — overview and structure - Document organized in three Parts: EXECUTIVE SUMMARY (page 1), PART I (assessment of Fifth NSEDP, pp. beginning 12), PART II (Sixth NSEDP, pp. beginning 54), and Part III (implementation, monitoring and evaluation). - Two principal parts: - PART I: IMPLEMENTATION OF THE FIFTH NATIONAL SOCIO ECONOMIC DEVELOPMENT PLAN (2001 – 2005) - PART II: SIXTH FIVE-YEAR NATIONAL SOCIO ECONOMIC DEVELOPMENT PLAN (2006-2010) ### PART I — Fifth Plan (2001–2005): major achievements and constraints - Macroeconomic achievements (2001-2005): - GDP grew at about 6.24 percent per annum. - Growth rate increase of about 0.3 percentage point over 1996-2000 average. - Total investment rose from 21.3 percent of GDP in 2001 to about 29 percent in 2005; averaged at 27.8 percent for 2001-2005. - Budget revenue mobilization remained at around 13.6 percent of GDP (5-year average). - Aggregate value of exports (2001-2005): USD 1.83 billion; average growth rate 7 percent per year. - Total imports (2001-2005): USD 2.86 billion; average annual increase 4.9 percent. - Trade deficit ratio to GDP declined from 11.1 percent in 2001 to 8 percent in 2005. - ODA disbursements shown in budget totalled USD 935 million; averaging USD 187 million per year. - FDI: 585 projects with committed capital USD 2.8 billion; disbursements USD 1.07 billion (2001-2005). - New jobs created: about 505,000 (target 500,000). - Monetary balance improved; inflation averaged at 9.6 percent per annum over 2001-2005; end-year inflation: 2001: 7.8 percent, 2002: 8.9 percent, 2003: 15.5 percent, 2004: 8 percent, 2005: 7.7 percent. - Foreign currency reserves increased from 2.6 weeks of imports in 2001 to 12.8 weeks in 2005. - Sectoral performance (2001-2005): - Agriculture production value increased on average by 3.4 percent per year. - Industry sector average growth: 11.3 percent per year. - Services growth averaged 6.7 percent per year. - Selected production figures: - Maize production: 372,560 mt in 2005. - Coffee: 25,000 tons (2005). - Rice yield: 3.6 mt per hectare in 2005; rice production 2005: 2.65 million mt; per capita availability ~457 kilograms per capita. - Irrigation schemes: increased from 19,170 in 2000 to 24,695 by end-2004. - Afforestation 2001-2005: 91,000 ha (91 percent of target 100,000 ha). - Total installed power capacity by 2005: approximately 690 MW. - Tourism: about four million foreign tourists 2001-2005 (average ~800,000 per year); 2005: about 1.05 million foreign tourists. - Social and poverty outcomes (2001-2005): - Education and health: increased facilities and literacy improvements; primary health expansion; mortality rates lowered. - Eliminated opium cultivation; opium addicts reduced (e.g., from 52,613 in 2002 to 28,000 in 2004). - Poverty graduation: 137,500 families graduated from poverty (about 90 percent of Plan target 150,050). - Vocational training: about 100,000 people trained (Plan target 300,000). - Key constraints and limitations: - GDP growth underperformed Fifth Plan targets (achievement 6.24% vs target 7-7.5%). - Credit growth (outstanding loans) expanded at 11.4 percent per year—below Plan target. - High non-performing loans, short amortization periods, limited financial market depth. - Budget revenue shortfalls: revenue mobilization 14.6 percent of GDP in 2005 (Plan target 18%); state budget deficit averaging around 7.4% of GDP (2001-2005). - Heavy reliance on external financing for investment; domestic financing limited. - Structural issues: low-skilled labour (skilled labour about 2 percent of total), geographic disparities, limited industrialization, dependence on raw exports. ### Lessons learned from Fifth Plan - Need for stronger focus on implementation and enforcement of regulations, laws and policy guidelines. - More decentralization and improved public administration reform required. - Increase domestic resource mobilization and human capacity development. - Promote private property rights, enabling environment for business and economic restructuring while retaining state guidance. ### PART II — Sixth Plan (2006–2010): overall strategy and targets - Strategic orientation: - Transform to fast, stable development within a market mechanism with socialist orientation. - Mobilize all resources, including increased internal resource mobilization. - Link economic development with human development and poverty reduction; align with MDGs and Brussels Programme of Action for LDCs (2001-2010). - Increase competitiveness and fulfil international commitments (ASEAN, WTO, bilateral/multilateral). - Macroeconomic and sectoral targets: - Annual average GDP growth target: 7.5-8 percent. - Sectoral growth targets: - Agriculture and forestry: 3-3.4 percent. - Industry: 13-14 percent. - Services: 7.5-8 percent. - Projected sectoral shares of GDP by 2010: - Agriculture: about 36 percent of GDP. - Industry: about 36.4 percent of GDP. - Services: about 27.6 percent of GDP. - GDP at current prices in 2010 projected to be 59.5 thousand billion Kip (USD 4.97 billion). - GDP per capita projected to reach USD 827 by 2010. - Short-run acceleration: GDP growth expected to rise from approximately 7.2% in 2006 to perhaps 8.2-9% in 2010 (conditional on large projects progress). - Labour and employment targets: - By 2010, total employed: approximately 3,366,000 people. - New employment opportunities 2006-2010: 652,000 (130,000 per year). - New entrants stated in source: "1,217 million" (preserved from source text). - Sectoral employment shares projected for 2010: - Agriculture and forestry: 73.9 percent. - Industry and handicrafts: 9.3 percent. - Services: 16.9 percent. - Unemployment rate target: reduce to 3.8 percent in 2010. - Labour export target: about 5,000 workers abroad each year (20,000 over five years). - Investment and financing: - Total investment required for 2006-2010: 73.9 thousand billion Kip (equivalent to about 32 percent of GDP). - Investment growth target: about 19.3 percent per year; increase from 29 percent of GDP in 2005 to 34.3 percent in 2010. - Composition: - Government budget: 23.1 thousand billion Kip (31.25% of total investment; stated as 10% of GDP). - Private sector (domestic and external): 50.8 thousand billion Kip (68.75% of total). - ODA projection: average about USD 357 million per year (2006-2010). - FDI mobilization target: about USD 600 million per year. - Investment allocation by sector (five-year totals): - Agriculture: 11,800 billion kip (16%). - Industry: 31,000 billion kip (42%). - Services: 31,060 billion kip (42%) — detailed sub-allocations include Transport, post and construction: 19,200 billion kip (26%); Education and HRD: 2,590 billion kip (3.5%); Health: 2,220 billion kip (3%); Science, technology & environment: 1,480 billion kip (2%). - Fiscal targets and trajectory: - Total expected state budget revenue (2006-2010): 34,600 billion kip; growth target 19.9 percent per year; average 14.8 percent of GDP over 2006-2010. - Total budget expenditure (2006-2010): 49,600 billion kip; 5-year average 21.4 percent of GDP; growth 17.8 percent per year. - Projected budget deficit over Sixth Plan: about 15,000 billion kip (6.1%); planned to decrease gradually: 7.3 percent in 2004 → 6.07 percent (intermediate) → 5.8 percent in 2010. - State investment target: about 10% of GDP. - External sector projections: - Total exports (2006-2010): USD 3.48 billion; annual average growth rate 18.1 percent; exports in 2010: USD 1,046 million. - Total imports (2006-2010): USD 4.5 billion; annual average growth rate 8.8 percent; imports in 2010: USD 1,045 million. - Trade deficit (2006-2010): about USD 1.02 billion; equivalent to 29.3 percent of export turn-over, or 5 percent of GDP. - Export composition projections: raw materials, energy and minerals to account for 44.6 percent of total export turn-over by 2010; electricity export planned growth 18-25 percent per annum in latter years. - Monetary policy and exchange rates: - Inflation target (2006-2010): control and keep below 7 percent per annum; rate of inflation to average about 6-6.5 percent per year. - Money supply (M2) and open market operations to be used to smooth large fluctuations in Baht and US Dollar flows. - Target to decrease share of foreign currency in total money supply from 65 percent in 2005 to 30 percent in 2010. - Target foreign exchange reserves: at least three months of imports. - BOL measures: establish Open-market Operations Management Board; improve capability to manage capital and government bills; issue higher denomination Kip notes (50,000 and 100,000). ### Thematic and cross-cutting priorities (selected) - Poverty reduction: - Aim to reduce proportion of poor households to below 15% by 2010. - Targets include: new jobs 652,000; decrease malnourished children under five to less than 30%; infant mortality under 1 to 55 per 1,000; child under-five mortality to 75 per 1,000; maternal mortality to 300 per 100,000; rural clean water 70% coverage; forest cover above 50%. - Targeted interventions in the 47 poorest and 25 poor districts; Village Development Funds and Poverty Reduction Fund (PRF) expanded (example: PRF implemented 1,212 projects valued at USD 8 million in 1,913 villages). - Poverty-focused national programmes: - Drug control: sustain opium eradication, alternative livelihoods, rehabilitation; post-opium Balanced Approach (2006-2009). - UXO: focus on community education, victim assistance, survey and clearance; target clear UXO in high-priority agricultural areas by 2013; UXO Lao cleared over 1,500 ha by end-2005. - HIV/AIDS: National Strategy and Action Plan on HIV/AIDS/STI (2006-2010) aiming to maintain low prevalence; estimated funding needed USD 26 million; ARV slots and pilots planned. - Gender equality: - Targets include increasing women’s training, leadership, literacy among women aged 15-40 to 88 percent by 2010; increase women in management and National Assembly seats by 30 percent in Sixth Plan period. - Governance: - Four main areas: public service improvement, people’s participation, rule of law, sound financial management. - Public administration reforms, pay reform, anti-corruption, transparency, tax and customs administration modernization. - Natural resources and environment: - National Environment Strategy 2003-2020 objectives: sustainably utilise natural resources; target planting 25,000-30,000 ha of forest to reach >50% forest cover by 2010; stop slash-and-burn cultivation by 2010. - Private sector development: - Reform of business laws, one-stop procedures, SME promotion (Prime Minister’s Decree No. 42/PM), investment promotion, FDI facilitation, development of property and financial markets. - Science and technology: - Long-term objective: technologically advanced nation; priorities: basic sciences, agricultural R&D, technology transfer, establish research centres and IP awareness. ### Sectoral and regional development (highlights) - Agriculture, forestry and fisheries: - Investment: 11.8 thousand billion kip (16% of total investment). - Rice production target by 2010: 3.2 - 3.3 million tons. - Forest target: increase cover above 50% by 2010; plant 25,000-30,000 ha. - Industry and minerals: - Industry growth target: 13-14% per annum. - Power generation capacity increase targets: add about 2,000 MW in Sixth Plan; Nam Theun 2 capacity 1,088 MW (output 5.5 billion Kwh/year); target electricity production by 2010: 14-15 billion kWh; electricity exports and mineral processing emphasized. - Cement production target: 1.3 million mt by 2010; various cement projects cited. - Infrastructure: - Road construction target 2006-2010: 2,300-2,400 km (1,500-1,600 km asphalt-paved; 750-800 km paved). - Construct bridges total length 4,000 metres including three bridges over Mekong. - Increase electricity access; water supply target 59 percent households; rural clean water 70 percent by 2010. - Railway surveys and initial construction planned (Friendship Bridge link, Thakhek to Kiumuya study). - Services and tourism: - Service sector growth target: 7.3 - 7.8% per year; service share of GDP targeted to 29 percent by 2010. - Tourism targets: by 2010 attract more than 1.7 million foreign tourists; extend average stay from 5 to 8 days; total tourism revenue target USD 200-300 million; sector revenue expansion noted. - Regional development: - Regional GDP growth targets 2006-2010: - Northern provinces: 6-6.5% - Central provinces: 8.5-9% - Southern provinces: 6.5-7% - Per capita income 2010 targets: - Northern: USD 610 - Central: USD 1,000 - Southern: USD 930-950 - Investment needs by region (billion kip): Northern 20,698 (28%), Central 36,960 (50%), Southern 16,262 (22%). ### Implementation measures, monitoring and evaluation - Implementation framework: - Sixth Plan formulated within Ten-Year Strategy (2001-2010); CPI coordinates with Ministry of Finance and BOL. - Primary implementation focus: monetary stability mechanisms, sound financial management, improved commodity quality, strengthen economic structures, public administration reform. - Institutional roles: - Committee for Planning and Investment (CPI) leads NSEDP and PIP coordination; Department of General Planning (DGP) compiles monthly, periodic and annual progress reports. - National Statistics Centre (NSC) to establish uniform national database; LaoInfo v.4.1 deployed (upgrade to v.5.1 expected 2006). - Monitoring & evaluation architecture: - Two broad levels: (i) implementation monitoring by CPI; (ii) impact monitoring by NSC. - Multi-level participation: centre to village; use implementation monitoring to inform assistance and overcome constraints. - Data systems and capacity building required: compilation of National Accounts using 1993 SNA continues; statistical capacity and communications need strengthening. - Plan formulation and consultations: - Formulation commenced February 2004; iterative consultations with ministries, provinces, development partners, private sector and Party; draft process culminated in Party endorsement March 2006 and National Assembly approval June-July 2006. - Reporting and planning outputs: - CPI to prepare reports for Government and National Assembly; three documents to be drafted and approved: (1) focus priority goods production report; (2) overall investment plan; (3) mechanisms, policies and detailed action plans. ### Macroeconomic projections (selected figures from Annex I) - Population (1,000): 5,610; 5,722; 5,833; 5,944; 6,056; 6,168 - Total GDP at current prices (Billion kip): 28,682; 33,109; 37,916; 45,410; 53,746; 59,936 - GDP at current prices in USD (Million USD): 2,753; 3,184; 3,612; 4,054; 4,556; 5,097 - Total GDP Growth Rates (%): 7.2; 7.5; 7.2; 7.5; 7.8; 8.2 - Inflation (average) (%): 6.9; 7; 7; 7; 7; 7 - Broad Money (M2)/GDP (%): 19.6; 24.3; 25.1; 24.7; 24.6; 26.1 - Revenue/GDP (%): 13.8; 14; 14.8; 14.8; 14.9; 16.1 - Expenditure/GDP (%): 20.3; 22.3; 22; 21.2; 20.8; 21.8 - Budget Deficit /GDP (%): -6.5; -8.3; -7.2; -6.5; -5.9; -5.8 - Total Investment / GDP (%): 20.4; 31.1; 31.6; 31.7; 31.3; 34.1 - Exports (Million USD): 455.6; 621.7; 576.4; 634.0; 697.4; 1,046.1 - Imports (Million USD): 686.0; 931.4; 829.8; 896.2; 967.9; 1,045.3 - Trade Deficit (Million USD): (230); (310); (253); (262); (271); 0.77 ### Selected policy measures and reform priorities (implementation-oriented) - Fiscal: revise Budget Law; strengthen tax and customs administration; implement PER and rolling PERs; medium-term expenditure framework pilot; control expenditure growth; improve revenue mobilization (target revenue/GDP average 14.8% over 2006-2010). - Banking and financial markets: recapitalise SOCBs (~700 billion Kip in 2006-2007); strengthen CAMELs supervision; develop bond market; pilot stock market feasibility; modernize payment systems and e-transaction. - Investment: mobilize domestic savings (expected mobilization about 51.3% of investment); privatize/sell some state assets; use BOOT/BOT; issue government bonds for long-term projects; attract FDI via streamlined procedures and incentives. - Trade and integration: export diversification to higher value-added products; implement CEPT/AFTA tariff reductions; prepare WTO accession negotiations; trade facilitation and export promotion measures. - Social sectors: implement Education for All; expand rural PHC with emphasis on 47 poorest districts; scale-up HIV/AIDS, UXO clearance and post-opium alternative livelihood programmes. - Governance and public administration: civil service pay reform; anticorruption enforcement; decentralization and capacity building; enhance transparency and audits. *Source: Lao PDR: National Socio Economic Development Plan (2006-2010) — Executive Summary and selected chapters extracted in _cr08341.* ### EXECUTIVE SUMMARY ..................................................................................................... ### EXECUTIVE SUMMARY ### Overview - Document structure spans: EXECUTIVE SUMMARY (page 1), INTRODUCTION (page 11), PART I and PART II (pages beginning 12 and 54 respectively). - Two principal parts: - PART I: IMPLEMENTATION OF THE FIFTH NATIONAL SOCIO ECONOMIC DEVELOPMENT PLAN (2001 – 2005) - PART II: SIXTH FIVE-YEAR NATIONAL SOCIO ECONOMIC DEVELOPMENT PLAN (2006-2010) ### PART I: Implementation of the Fifth Plan (2001 – 2005) - I. FIFTH PLAN GOALS AND TARGETS - A. Context - B. Goals and Targets - 1. Goals - 2. Targets - II. FIFTH PLAN ACHIEVEMENTS - A. Economic Growth - B. Sectoral Performance - 1. Agriculture Sector - 2. Industry and Construction Sector - 3. Services Sector - C. Other Macroeconomic Achievements - 1. Investment - 2. National Budget - 3. Monetary Management - D. Structural Changes - 1. Economic Sectors - 2. Private Sector - 3. Employment - E. Foreign Trade - 1. Exports - 2. Imports - 3. Trade Balance - F. Official Development Assistance - G. Foreign Direct Investment - H. Social Development - 1. Education, Training and Human Resources Development - 2. Health - 3. Labour and Employment - 4. Other Social Sectors - 5. Poverty Reduction - III. CONSTRAINTS AND LIMITATIONS - A. Economic Growth - 1. Agriculture Sector - 2. Industry and Construction Sector - 3. Services Sector - 4. Infrastructure Use - B. Monetary and Fiscal Management - 1. Savings and Investment - 2. National Budget - 3. Financial Sector - 4. Economic Base - C. Structural Adjustment of the Economy - 1. Structure of the Economy - 2. Geographic (Spatial) Structure - 3. Labour Force - D. External Economic Relations - 1. Foreign Trade - 2. Foreign Investment - 3. Official Development Assistance (ODA) - E. Social Development - 1. Education and Training - 2. Health - 3. Employment - 4. Public Sector Salaries - 5. Poverty Reduction - 6. Social Security - F. Limitations and Causes - 1. Limitations - 2. Causes - IV. LESSONS LEARNED - A. Implementation Focus - B. Sustainable Development - C. Resource Mobilization - D. Economic Restructuring - E. Integration and Autonomy - F. Simultaneous Economic and Social Development - G. Public Administration Reform ### PART II: Sixth Plan (2006-2010) — Strategy and Policy Directions - V. OVERALL DEVELOPMENT STRATEGY - A. Development Context - 1. International Context - 2. Domestic Context - B. Overall Development Strategy - 1. Background - 2. Development Directions - 3. Overall Goals of the Plan - C. Plan Targets and Tasks - 1. Targets - 2. Tasks & Economic Balance - VI. MACRO DIRECTIONS - A. Introduction - B. Monetary Policy - C. Financial Sector - 1. Banking Sector - 2. Insurance - 3. Information and Coordination - 4. Legal Framework - 5. Financial Market Development - D. Fiscal Management - 1. Fiscal Management - 2. Some Important Initiatives in 2005/06 - E. Real Estate (Property) Market Development - F. Trade Strategies and Regional and Global Integration - 1. Exports - 2. Imports - 3. Trade Balance - 4. Trade Development Strategies - 5. Regional and Global Integration - G. Labour and Employment - 1. Labour Force and Employment - 2. Exports of Labour - 3. Labour Imports - 4. Labour Market Development - H. Role of the State in the Market Economy - VII. THEMATIC AND CROSS-CUTTING AREAS - A. Poverty Reduction - 1. Poverty Situation - 2. Poverty Reduction Strategy - 3. Targets - B. Poverty Focussed National Programmes - 1. Drug Control - 2. Unexploded Ordnance (UXO) - 3. HIV/AIDS - C. Gender Equality - 1. Overall Strategy - 2. Specific Strategies - 3. Targets - D. Governance - 1. Governance Strategies - 2. Targets - E. Natural Resources and the Environment - 1. Overall Strategy - 2. Specific Measures - 3. Targets - F. Private Sector Development - 1. Overall Strategy - 2. Specific Strategies - 3. Foreign-Invested Sectors - 4. Targets - G. Science and Technology *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08341.pdf* ### 1. Overall Strategy..................................................................................................... ### _cr08341 - 1. Overall Strategy ### Macroeconomic Achievements (Fifth Plan: 2001-2005) - GDP grew at about 6.24 percent per annum. - Growth rate was an increase of about 0.3 percentage point over the average growth rate of the previous five-year period (1996-2000). - Total (public and private) investment rose from 21.3 percent of GDP in 2001 to about 29 percent in 2005, averaging at 27.8 percent for 2001-2005. - Budget revenue mobilization remained at around 13.6 percent of GDP. - Aggregate value of exports over 2001-2005 was estimated at USD 1.83 billion, achieving an average growth rate of 7 percent per year. - Total value of imports over 2001-2005 amounted to USD 2.86 billion with an average annual increase of 4.9 percent. - Trade deficit ratio to GDP declined from 11.1 percent in 2001 to 8 percent in 2005. - ODA disbursements shown in the budget totalled USD 935 million, averaging at USD 187 million per year. - Lao PDR received 585 FDI projects with total committed capital of USD 2.8 billion, and USD 1.07 billion in disbursements during 2001-2005. - About 505,000 new jobs were created in the five-year period, surpassing the target of 500,000 jobs. - Monetary balance improved, contributing to control and reduction of inflation and stabilization of the Kip exchange rate. ### Sectoral Performance (Fifth Plan: 2001-2005) - Agriculture production value increased on average by 3.4 percent per year. - Industrial production sector-wide average growth reached 11.3 percent per year. - Services growth averaged at 6.7 percent per year over 2001-2005. - Policy focus: reorient agriculture from semi-subsistence to commercial production to supply processing industries and expand exports. - Industrial developments: establishment of industrial zones and increase in new factories and companies. - Services: progressed to better meet production, trading and daily life requirements. ### Social Development (Fifth Plan: 2001-2005) - Advances in education and health care systems: increased quantity and quality of education facilities, improved literacy rates. - Expansion and improvement of primary health care and lowering of mortality rates. - Infrastructure further developed, improving access to basic services and connecting more rural areas to urban centres. - Maintained a low prevalence rate of HIV/AIDS. - Eliminated opium cultivation (goal achieved). - Poverty reduction: about 137,500 poor families graduated from poverty through local initiatives. ### Lessons Learned (from 2001-2005) - Need increased focus on implementation of restructuring policy with decisions translated into detailed, complete and consistent programmes. - Regulations, policy guidelines and laws must be fully enforced. - Need for more decentralization. - Require sound understanding of and commitment to sustainable development linking economic growth with social and cultural development, social equity, environmental conservation, overall human development and democracy. - Increase domestic resource mobilization. - Further develop human capacities and resources of multi-ethnic people to exploit and utilise natural resources efficiently. - Ensure protection of private property rights and develop supportive enabling environment for business. - Promote further economic restructuring accompanied by development of the domestic market. - Pursue international integration and opening of external markets while retaining ownership. - Continue public administration reform, including central and local organisations and the civil service. ### Overall Development Strategy (Sixth Plan: 2006-2010) - Sixth Plan plays a crucial role in achieving Ten-Year Socio-Economic Development Strategy (2001-2010) targets and directions from the 8th Party Congress (2006). - Directions include transforming the multi-sectoral economy to fast and stable development within a market mechanism guided by the State. - Emphasis on mobilizing all resources, including increased internal resource mobilization. - Main focus areas: - Promoting economic development with human development as a key vehicle. - Increasing competitiveness and utilizing comparative advantages to implement international economic commitments (ASEAN, bilateral, multilateral, including WTO). - Strengthening linkages between economic growth and social development to address poverty and other social evils and maintain socio-political stability. - Plan indicators and targets coincide with most Millennium Development Goals (MDGs) and Brussels Programme of Action for the Least Developed Countries (2001-2010). ### Economic Balance (Sixth Plan: 2006-2010) — targets and structure - Annual average GDP growth target: 7.5-8 percent. - Sectoral growth targets: - Agriculture and forestry: 3-3.4 percent. - Industry: 13-14 percent. - Services: 7.5-8 percent. - By 2010 projected sectoral shares of GDP: - Agriculture: about 36 percent of GDP. - Industry: about 36.4 percent of GDP. - Services: about 27.6 percent of GDP. - GDP per capita projected to reach USD 827 by 2010. ### Labour and Employment Balance (Sixth Plan: 2006-2010) - By 2010, approximately 3,366,000 people expected to have access to employment opportunities. - New entrants in 2006-2010: 1,217 million (note: as provided in source). - New employment opportunities expected to meet demand of 652,000 people. - Sectoral employment shares projected for 2010: - Agriculture and forestry: 73.9 percent. - Industry and handicrafts: 9.3 percent. - Services: 16.9 percent. - Unemployment rate target: reduce to 3.8 percent in 2010. - Focus on upgrading labour quality and productivity, developing professional skills for industry. - Support export of labour with target of about 5,000 workers working abroad each year. - Formulate policy on use of foreign labour to attract skilled professionals not available in Lao PDR. - Improve the Labour Code to balance benefits for employees and employers. ### Investment Balance (Sixth Plan: 2006-2010) - Total investment required to support Sixth Plan: 73.9 thousand billion Kip (equivalent to about 32 percent of GDP). - Investment growth target: about 19.3 percent per year, from 29 percent of GDP in 2005 to 34.3 percent in 2010. - Composition of total investment: - Government budget: about 23.1 thousand billion Kip, accounting for 31.25 percent of total investment. - Private sector (domestic and external): 50.8 thousand billion Kip, accounting for 68.75 percent of total investment. - ODA projected to average about USD 357 million per year over 2006-2010. - Foreign direct investment mobilization target: about USD 600 million per year. - Projected sectoral shares of investment: 16 percent for agriculture, 42 percent for industry, 42 percent for services. ### Budget Balance (Sixth Plan: 2006-2010) - Total expected state budget revenue for the five years: approximately 34,600 billion kip. - State budget revenue growth target: 19.9 percent per year on average. - State budget revenue as percent of GDP: - 14 percent of GDP in 2005 to 16.2 percent in 2010. - Average of 14.8 percent of GDP over 2006-2010. - Total budget expenditure for the five-year period: about 49,600 billion kip (21.4 percent of GDP), growing at 17.8 percent per year. - Projected budget deficit over the Sixth Plan period: about 15,000 billion kip. *Source: Lao PDR: National Socio Economic Development Plan (2006-2010), Executive Summary (sections excerpted).* ### 6.07 percent of GDP. The budget deficit will decrease gradually from 7.3 percent in 2004 to ### _cr08341 - 6.07 percent of GDP. The budget deficit will decrease gradually from 7.3 percent in 2004 to ### Fiscal balance and financing - Budget deficit trajectory: - Will decrease gradually from 7.3 percent in 2004 to 6.07 percent of GDP. - Will decrease to 5.8 percent in 2010. - Financing: - Financed mainly through foreign concessionary loans and the mobilization of domestic investments to a certain extent. - The State Budget Law will be amended. ### Export-Import balance and trade projections - Export objectives: - Develop export of high value-added products with a stable growth rate while reducing raw material exports. - New technologies and skilled labour required to upgrade export quality and quantity. - Main objectives: expansion and diversification of markets and strengthening positions in existing markets. - Export projections: - Total exports in the five years would reach USD 3.48 billion. - Annual average growth rate of 18.1 percent. - Import policy and projections: - Prioritize imports of materials and equipment for industrialization to enhance competitiveness of locally produced commodities. - Import turn-over in the five year period is estimated to be USD 4.5 billion, increasing on average at 8.8 percent per annum. - In 2010 the imports should reach USD 1,045 million. - Trade balance: - Trade deficit in the five-year period 2006-2010 is projected to be about USD 1.02 billion. - Equivalent to 29.3 percent of total export turn-over, or 5 percent of GDP. ### Monetary balance and exchange rate policy - Monetary policy objectives (2006-2010): - Control inflation and keep it below 7 percent per annum. - Ensure safety of banking and credit organizations to stabilize investment environment and strengthen economic development. - Inflation and money policy: - Rate of inflation will average at about 6-6.5 percent per year. - Money supply and open market operations will be regulated to smooth out large fluctuations in the Baht and the US Dollar flows. - Central bank measures: - Improve capabilities of the BOL and establish Units in charge of managing available capital to define and assess market demand, and adjust purchase of fixed duration bonds and Government bills. - Government will issue relevant regulations to utilize capital replenishment tools to supplement tools such as the key interest rates of BOL. - Foreign currency and reserves: - Limit overuse of the US Dollar in the economy and control foreign exchange to accumulate more foreign reserves. - Target to decrease the share of foreign currency in the total money supply from 65 percent in 2005 to 30 percent in 2010. - Confidence in the Kip is growing; higher denomination Kip notes (50,000 and 100,000) will be issued. ### Role of the State in the market economy - Government role: - Strengthen effective coordination between market economic mechanisms and macroeconomic management through reform and improvement in taxes, banking and investment promotion. - Use macro management to effectively use economic tools and coordinate with management and legal tools for national planning, mid-term and long-term development strategies. - Economic laws should be firmly enforced ensuring transparency. ### Thematic and cross-cutting areas - Poverty Reduction: - Indicators show commendable results on poverty reduction since 1990. - Continued trend could enable achievement of the MDG target of reducing proportion below the poverty line by half by 2015. - Strategy: assist the poor to utilize labour and modest resources, enlarge economic opportunities, provide basic social and essential economic services, ensure security, and facilitate participation and empowerment. - Proposed initiatives: rehabilitation and construction of infrastructure, development of agricultural production and SMEs, extension of credit to the poor, provision and effective use of basic social services. - Provide secure environment against violence, destruction, theft, unexploded ordnance (UXO), food insecurity and natural disasters. - Targeted interventions in the 47 poorest and 25 poor districts for more rapid poverty reduction. - Enhance decentralisation and two-way flow of information to enable poor participation. - Poverty Focussed National Programmes: - Maintain low prevalence rate of HIV/AIDS; National Strategy and Action Plan on HIV/AIDS/STI for 2006-2010 formulated to maintain low prevalence. - Opium eradication achieved; number of opium addicts reduced by a third. - Post-opium strategy: sustain eradication, provide alternative livelihoods, cease drug trafficking, rehabilitate addicts, increase awareness. - UXO: community education, victim assistance, UXO survey and clearance operations are priority; National Regulatory Authority (NRA) for the UXO sector established and functioning. - Gender Equality: - Support poor women’s economic activities; improve access to basic services and productive resources; involve women in local decision-making. - All ministries to develop strategies and action plans to promote gender equality at national, provincial, district and village levels. - More training to promote role of women in agricultural and business sectors and improve access to credit. - Improve women’s legal awareness and access to justice; increase number of women in leadership positions. - Governance: - Build an effective and ethical public service; ensure constitutional rights through education and information; establish credible legal framework and accountable, transparent financial management. - Governance programme aims to improve public service improvement, people’s participation, rule of law and sound financial management. - Upgrade capacities and ethics of civil servants, intranet systems, and working conditions. - Increase public confidence, knowledge of the legal system and access to it. - Make budgetary framework more supportive of private sector growth and investment. - Natural Resources and the Environment: - Protect and exploit natural resources sustainably. - Prepare and implement national strategic plan on the environment: improve environmental management, plans, policies and laws; increase environmental education and awareness; establish mechanisms and promote investment; improve international coordination and cooperation. - Collect more surveys and information to assess situation and develop plans and policies. - Industries to reduce and minimize pollution. - Private Sector Development: - Create a more favourable environment for private sector promotion and FDI attraction by improving legal system and maintaining socio-economic stability. - Modify existing regulations, laws and procedures; reform administrative application system for business activities to accelerate business setup. - Accelerate investment procedures and develop a technically educated workforce. - Review investment priority policies including regulations on granting investment permits, land acquisition fees, transport and telecommunications service charges. - Science and Technology: - Aim to create a technologically advanced nation with a highly skilled workforce. - Prioritise research in basic sciences for technological development, exploitation of natural resources and environmental protection. - Upgrade scientific and technological research and teaching, facilities, laboratories and equipment. - Disseminate basic information about intellectual property rights and copyright registration for registration of science-technology products for industrial (patent) rights. ### Sectoral and regional development - General approach: - Develop sectors and regions to strengthen national advantages and international competitiveness by developing and utilising natural and human resources. - Agriculture, Forestry and Fisheries: - Vision: transform agriculture into a thriving sector based on innovative technologies and practices in high value-added production and processing for domestic and world markets. - Diversify rural economies, upgrade farming methods and infrastructure. - Establish development structure for prioritised plants and domestic animals toward large-scale production. - MAF to implement four strategic programmes on sustainable use of natural resources, land allocation, food security, support services and others. - Promote markets to improve sale conditions for farm products. - Limit logging and plant forests for economic and protection purposes. - Continue investment in introduction and breeding of high value aquatic products. - Rural Development: - Vision: reduce disparities between rural and urban areas by enhancing transport and communications and improving living conditions in remote areas. - Strategy: create employment, increase incomes and restructure rural economies. - Support development of small-scale industries and develop industrial centres in three regions. - Invest in development of border economic zones for import-export, tourism and border transport. - Largest health programme: expansion of the rural health service network. - Improve education of rural population by increasing access to quality education. - Education: - Strengthen education as cornerstone of human resources development to increase labour productivity. - Concentrate on equitable access, quality, relevance and management. - Implement principle of compulsory primary education and develop education at all levels, focusing on ethnic areas and disadvantaged groups. - Education for All programme to increase primary and lower secondary participation and completion and reduce adult illiteracy. - In 2006-2010 hope that illiteracy will be completely abolished and access to primary, secondary, vocational and tertiary schools and universities will increase. - Upgrade, construct more schools, supply appropriate equipment and qualified teachers. - Health: - Objectives: reduce urban-rural health differentials, lower mother and child mortality rates, raise life expectancy and reduce spread of communicable diseases. - Focus on prevention and increased treatment with priority programmes on primary health care covering preventive and curative aspects. - Increase number of health centres and properly qualified medical staff and improve equipment and medicines. - Increase access to fair and equal health service. - Industry and Minerals: - Orientation: priority to electricity and processing industries for domestic consumption and exports; continue to promote mining and develop selectively industries serving agricultural and rural development. - Bring new power stations into operation to boost electricity exports and meet domestic needs. - Encourage investment in mining and regional industries; concentrate investment in innovative technologies, modernise manufacturing, reduce imports and gradually increase exports. - Improve distribution modes to increase transaction ability and commodity circulation. - Infrastructure: - Continue to maintain, improve and develop socio-economic infrastructure: inland, international, river and air transport; telecommunications; schools; health centres. - Provide necessary infrastructure for people to participate in development and interact with external markets. - Further develop integrated inland infrastructure with emphasis on major roads. - Build new airports and upgrade current ones; improve and construct river routes and main river port systems. - Commence construction of a railway system. - Increase distribution of sanitised water and irrigation systems. - Services including Tourism: - Upgrade quality of service activities to meet demands of production, consumption and exports, contributing to economic growth, employment expansion and improvement of welfare. - Concentrate on services with quick turnover of capital and those that generate sufficient revenues to the state budget. - Promote effective and convenient exchange and flow of commodities domestically and internationally. - Upgrade human capacities and infrastructure of information and telecommunication systems, transport, trade, and banking. - Provide more sports facilities in preparation for the 25th SEA Games. - Regional Development: - Long-term vision: achieve balance between the three regions and among provinces by building upon natural and human resources in each area. - Address disparities among and within regions by mobilising funds from all economic sectors and directing funds for regional follow-up by local authorities. - Utilise regional potentials in agriculture, forestry, hydropower, mining and tourism to develop regions equitably and boost economic growth. - Continue investing in socio-economic infrastructure, expand production of goods, provide health and education facilities and reduce poverty. *Lao PDR: National Socio Economic Development Plan (2006-2010)* ### Part III. IMPLEMENTATION MEASURES AND MONITORING AND ### Part III. IMPLEMENTATION MEASURES AND MONITORING AND EVALUATION ARRANGEMENTS ### Implementation measures - Implementation framework: Sixth Plan (2006-2010) formulated within the Ten-Year Socio-Economic Development Strategy (2001-2010). - Primary focus areas: - Mechanisms supporting monetary stability. - Sound management of finances. - Production of improved quality commodities. - Strengthening economic structures. - Market and governance orientation: - Manage a multi-sectoral market economy with a socialist orientation, establishing different types of markets and favourable conditions for enterprises and people to do business. - Improve the environment for investment attraction. - Formulate an action programme to utilize expertise and knowledge of the Party, the people, and Government Officials to achieve Sixth Plan targets and missions. - Public administration: - Reform and upgrade public administration to enhance implementation capacity for the Sixth Plan. - Learn from more developed countries, particularly regional neighbours. - Implement State policies transparently to increase income and effectively utilize the budget by lowering expenditure. - Institutional roles and coordination: - Committee for Planning and Investment (CPI), in coordination with the Ministry of Finance and the Bank of Lao PDR (BOL), will lead and facilitate conditions for growth in production and foreign direct investment and improvement of financial management. - CPI responsible for coordination and formulation of National Socio Economic Development Plans (NSEDPs) and Public Investment Programmes (PIPs). - Department of General Planning (DGP) in CPI coordinates ministries and sectors to prepare monthly, periodic and annual progress reports on Plan implementation. ### Monitoring and evaluation arrangements - Multi-level participation: All levels of Government from centre to localities are involved in monitoring and evaluation. - Two broad levels of monitoring: - (i) Implementation monitoring carried out by CPI. - (ii) Impact monitoring undertaken by the National Statistics Centre (NSC). - Purpose and use of monitoring: - Utilise information from implementation monitoring to improve future implementation and to provide assistance from stakeholders to overcome constraints. - Results will feed into the Monitoring and Evaluation System for the Sixth Plan (2006-2010). - Data systems and capacity building: - NSC has begun steps to establish a uniform and consistent national database on economic, social and governance indicators; many indicators are incorporated in LaoInfo 4.1. - Compilation of the National Accounts using the 1993 Standard National Accounts (1993 SNA) system is continuing. - Government will create a strong statistical system to collect and provide necessary information for policy formulation, planning, monitoring and assessment. - Current limitations and planned actions: - Quality of information often incomplete due to limited capacities and inadequate communications systems. - Government taking steps to build upon existing systems at CPI, line ministries, agencies and localities. - A monitoring and evaluation mechanism will be established for planning; an information system will be created to improve forecasting. ### Plan formulation process - Timeline and consultations: - Formulation commenced in February 2004 with consultations on Fifth Plan (2001-2005) progress and Sixth Plan priorities. - Central Ministries in four priority sectors costed priority programmes in NGPES and NSEDP for 2006-2010. - Preliminary draft shared with development partners, domestic and foreign private investors, Lao researchers, mass organizations and localities; feedback incorporated. - Central Committee of the Party reviewed results in September 2005; National Assembly in October 2005. - Draft shared at Annual Round Table Process Information Meeting on 29 January 2006; feedback incorporated as appropriate. - Revised draft endorsed by the Party at the Eighth Congress in March 2006. - Final draft considered and approved by the Sixth National Assembly at its inaugural session in June 2006. - Ongoing improvements: - Planning work will continue to be upgraded and decentralised with more technical support. - Sixth Plan will be disseminated nationwide to build foundations for sector programmes. ### Context and link to Plan document structure - The Sixth Five-Year NSEDP (2006-2010) document is organized in three parts: - Part I: Assessment of implementation of the Fifth NSEDP (2001-2005) including goals, targets, achievements, constraints and lessons learned. - Part II: Main elements of the Sixth NSEDP (2006-2010) including strategy, targets, macro directions, sectoral and cross-cutting strategies. - Part III: Implementation actions; monitoring and evaluation arrangements; Plan formulation process; situation likely to prevail in 2010. Some macroeconomic projections are provided in Annex 1 and localized Millennium Development Goals (MDG) indicators and targets in Annex 2. ### Key Fifth Plan targets and selected indicators (from Table I-1) - GDP growth: 7-7.5% - Agriculture-forestry sector growth: 4-5% - Industrial sector growth: 10-11% - Services sector growth: 8-9% - Sector shares in GDP (2005): - Agriculture-forestry sector: 47% - Industrial sector: 26% - Services sector: 27% - Exports growth: 8.6% - Imports growth: 8.6% - Trade deficit as % of GDP: 6% - Inflation rate: Less than 10% - Exchange rate: Stabilised - Budget revenue as % of GDP (2005): 18% - Budget deficit as % of GDP (2005): 6% - Public investment as % of GDP (2005): 12-14% - GDP per-capita (2005): US$ 500-550 - Total population (2005): 5.9 million - New jobs created each year: 100,000 - Provide vocational training and skill development: 350,000 workers - Poor households graduating out of poverty (2005): Half of 2000 level of 304,100 hh or 150,050 hh. (or 20-25% of total hh) - Primary school enrolment of 6-10 year olds (2005): 86% - Lower secondary school enrolment (2005): 52% - Upper secondary school enrolment (2005): 24% - Literacy among people 15 to 40 years old (2005): 85% - Life expectancy at birth (2005): 61 years - Infant (children under one) mortality (2005): 60 per 1,000 live births - Child (children under five) mortality (2005): 98 per 1,000 - Maternal mortality (2005): 350 per 100,000 ### Selected Fifth Plan achievements (implementation highlights) - Macroeconomic growth: - Average GDP growth during 2001-2005: about 6.24 percent per annum (about 0.3 percentage point higher than 1996-2000 average, but about 0.8 percentage point lower than Fifth Plan target). - GDP per capita by 2005: USD 491. - Agriculture and rural production: - Agriculture sector value of production increased on average by 3.4 percent per year (2001-2005). - Maize (corn) production tripled to 372,560 mt compared to 2000. - Coffee production increased by 6 percent, reaching 25,000 tons. - Peanut production doubled to 26,990 tons. - Soybean production increased to 11,100 tons. - Sesame production: 8,710 tons (up by 2.6 times). - Mung bean production: 3,700 tons (up by three times). - Tobacco harvest: 28,100 tons. - Sugar cane harvest: 196,100 tons. - Vegetable production increased by 17 percent to 744,450 tons. - Rice yield increased from less than 3.06 mt per hectare in 2000 to 3.6 mt per hectare in 2005. - Rice production in 2005: 2.65 million mt; per capita availability approximately 457 kilograms per capita. - Seed self-sufficiency by 2005: 80 percent for rainy season seed requirements and 100 percent for dry season. - Irrigation and afforestation: - Number of irrigation schemes increased from 19,170 in 2000 to 24,695 by end-2004. - Irrigated crop area (dry season) increased from 197,100 ha in 2000 to 215,000 ha in 2004. - Irrigated area (rainy season) increased from 296,000 ha to 315,000 ha. - Afforestation during 2001-2005: 91,000 ha (91 percent of target of 100,000 ha). - Forest restoration during 2001-2005: 481,000 ha. - About 325 tree nurseries established; about 240,000 kg of tree seeds used to produce some 119 million tree saplings. - Livestock and fisheries: - Livestock numbers in 2005: - Buffalos: 1.09 million (6 percent increase over 2000). - Cows: 1.27 million (15.6 percent increase). - Pigs: 1.82 million (28 percent increase). - Poultry: 19.8 million (51 percent increase). - Goats and sheep: 190,000 (56 percent increase). - Meat production in 2005 projected to reach 96,000 mt (increase of 17.5 percent over 2000). - About 10.2 percent of meat production provided by industrial farms with high technology, which grew at the rate of 9.8 percent in 2003-2004. - At end-2005, about 10 percent of cattle and 20 percent of poultry were raised in commercial farms. - Fish production in 2005: 143,000 mt (increase of 15 percent). - Fish farms accounted for 68.5 percent of total; capture fisheries 31.5 percent. - Fish fingerling production: 320 million (adequate to meet about 50 percent of national demand). - Fish farms achieved high productivity in basket-raised fish. *Source: Part III. IMPLEMENTATION MEASURES AND MONITORING AND EVALUATION ARRANGEMENTS, Lao PDR: National Socio Economic Development Plan (2006-2010).* ### 41.5 percent (9,724,700 ha) of the country’s total land surface. If the brushwood, bamboo ### _cr08341 - 41.5 percent (9,724,700 ha) of the country’s total land surface. If the brushwood, bamboo ### Forestry and land use - Forestry coverage: - 41.5 percent (9,724,700 ha) of the country’s total land surface as dense forest. - If brushwood, bamboo forests, degraded forests, and mixed deciduous forests with a canopy of less than 20 percent are combined with dense forests, forestry coverage accounted for 72 percent (17 million hectares) of the country’s land surface. - Exploitation of perennial trees: - 2001: about 300,000 cubic meters exploited. - 2005: declined to 150,000 cubic meters. - Current practice: exploitation combined with plantation of alternative trees; wood exploitation subject to more careful consideration. - Land allocations and shifting cultivation: - Over the past five years, over 1.09 million ha of arable land and 3.6 million ha of forestry land were allocated to 7,125 villages composed of 419,250 households. - Purpose: reduce shifting cultivation and ensure sedentary highland and lowland cultivation to reduce poverty among ethnic people. - Shifting cultivation area declined from 118,900 ha in 2001 to 29,400 ha in 2005: - Northern Provinces: 26,800 ha. - Central Region: 2,600 ha. - Southern Provinces: ceased completely. - Number of farm families practicing shifting cultivation reduced from 174,036 in 2000 to 32,790 in 2005. - Rural economic diversification: - Establishment of many farms and resumption of traditional handicrafts. - Handicraft development generated additional local jobs and improved living conditions. - Government actions: removed barriers to private sector investment and trade in agriculture, increased population purchasing power, and contributed to poverty eradication in rural areas. ### Industry and Construction Sector - Sector-wide average industrial production growth: 11.3 percent per year (exceeding Plan target of 10-11 percent). - Industry sub-sector growth rates: - Mining: 33.87 percent. - Food processing: 9.17 percent. - Tobacco: 20.75 percent. - Textiles: 20.11 percent. - Garments: 11.15 percent. - Footwear: 7.57 percent. - Wood processing: 1.17 percent. - Ownership and investment dynamics: - Sectors receiving foreign investment achieved the most rapid growth, followed by non-state sector; domestic private sector grew slowly. - Notable projects and capacities by 2005: - Exploitation of gold and copper at Sepon; zinc in Vientiane Province. - Cement plant in Vangvieng; steel factory in Vientiane. - Motorcycle assembly plants established. - Completion of Nam Leuk and Nam Mang III hydropower plants and other hydropower projects. - Installed capacity of Nam Ngum 1 expanded from 150 MW to 155 MW. - Total installed capacity of power plants by 2005: approximately 690 MW. - Construction commenced on other major power plants/projects including Nam Theun 2 Hydropower Project. - Mining and industrial units: - Sepon gold mine production: approximately six mt each in 2003 and 2004, projected increase to 6.5 mt in 2005. - Investments in mining: 90 companies at end-2005 (34 foreign, 56 domestic). - Industrial-handicraft units: 26,200 by 2005 (from 23,574 units in 2001). - Industrial zones and geographic concentration: - Industrial zones established in Vientiane and Savannakhet, attracting enterprises and foreign investment. - High-industry-proportion areas maintaining high growth: Vientiane City, Champasak, Khammouane, Bolikhamxay, Luang Namtha, Xayaboury, Savannakhet Provinces. - Outcome: - Diversification across manufacturing scale, technology level, product types and quality. - Industrial sectors responsible for creating the most jobs. ### Services Sector - Aggregate performance: - Growth in total retail sales and revenues from services averaged 10 percent per year over 2001-2005. - Value added in services sector grew at an average of 6.7 percent per year over the five years (below Plan target of 8-9 percent). - Developed sub-sectors: - Trade, transport, telecommunications, tourism, hotels and restaurants. - Finance, banking and insurance experienced strong growth. - Registered enterprises: about 61,200 in 2003. - By end-2003, 209 large markets (including 11 at international border cross-points and 28 at local border cross-points). - Tourism: - Number of hotels and guesthouses: increased from 468 in 2000 to 887 in 2003 and about 1,200 in 2005. - Hotel rooms: increased from 7,333 in 2000 to 20,000 in 2005. - Tourism sites: 364 by mid-2005. - Foreign tourists in 2001-2005: about four million total (averaging about 800,000 per year), with 900,000 in 2004 and about 1.05 million in 2005. - Annual increase in foreign tourists over 2001-2005: 9 percent. - Sector revenues: reached over USD 100 million per year. - Proportion of tourists from European countries: 11.7 percent in 2000; 14.8 percent in 2003; about 16.5 percent in 2005. - Policy and facilitation: - Tourism designated as one of eight focal economic sectors in the five-year Plan. - Entry visa requirements lifted for tourists from several regional countries by end-2005. - 13 land border crossing points upgraded to international border crossing points; visas on arrival facilities provided. - Hosted ASEAN Tourism Forum in 2004 (ATF 2004) in Vientiane Capital. - Luang Prabang awarded a gold medal in 2006 as the most popular town in tourism by UK travel companies (award mentioned in source). - Transport and freight services: - Freight volume increased at an annual average rate of about 11 percent; circulation by 15 percent. - Passenger volume increased by about 7 percent per year; circulation by 5 percent per year. - Trans-border shipping volume increased at an average of over 20 percent per year. - Road accident deaths reduced from 19 per 10,000 vehicles in 2001 to 10 in 2005. - Infrastructure works completed: - Improvement/upgrading of over 1,130 km of roads. - 39 bridges with total length of 2,611 metres completed. - Increase in transportation services by land and river by about 10-12 percent per year. - Ports built/upgraded along the Mekong River routes. - Airport improvements including Wattay International Airport; Luang Prabang and Pakse airports upgraded to international standards. - About 14 kilometres of railway along the Friendship Bridge to Khamsavat village surveyed and designed; survey and feasibility study of railway from Thakhek to Kiumuya carried out. - Telecommunications and postal: - Telephone users by end-2004/05: - Landline telephone subscribers: 87,500. - Mobile telephone users: 327,000. - Public telephone booths: 404. - Total telephone subscribers of all types: 415,900. - Average coverage: 7.3 lines per 100 people (exceeding Plan target of 2.5 lines per 100 people by 2005). - Internet shops: 2,570 across the country. - By 2005 targets/coverage: - 80 percent of the districts and 60 percent of the communities will be contactable by telephone. - Around 130 post offices in 104 districts and about 23,247 public post boxes. - Postal, telecommunications, freight, mail and money order (transfer) services increased at moderate levels. - Finance, banking and insurance: - Continued establishment and expansion. - Insurance market established with domestic and foreign participation. ### Other Macroeconomic Achievements #### Investment - Investment mobilization: - Investment funds mobilized increased from 21.3 percent of GDP in 2001 to approximately 29 percent in 2005. - Averaged 27.8 percent for the five-year period 2001-2005. - Total investment mobilized over 2001-2005: 30,623 billion Kip (in current prices), exceeding Plan target of 27,900 billion Kip. - Composition of total investment funds: - State investment: 14,990 billion kip. - Investment from Lao society: 2,266 billion kip. - Foreign investment: 13,367 billion kip. - Shares and trends: - Proportion of public investment in total investment decreased from 63.8 percent in 2001 to 35.7 percent in 2005. - Lao people’s investment dropped from 14.2% to 4.4% during the period. - Ratio of foreign investment rose from 22% in 2001 to 59.9% in 2005. - Over the five years, public investment accounted for 10.8% of GDP while domestic and foreign private investment accounted for 17% of GDP. - Domestic financing: - During 2001-2005, domestic financing reached 7,571 billion kip, accounting for 27.6% of total investment. - Foreign direct investment (FDI): - Total registered FDI in 2004/05 expected to reach USD 1,500 million (includes major projects such as Nam Theun 2 and Sesaman 3 Hydropower projects). - Over 1986-2005, about USD 8.5 billion of FDI invested in 1,087 investment projects. - Sectors attracting most investment: electricity, mining, agricultural development and services. - Major investor countries: Australia, Canada, Japan, France, South Korea, China, Malaysia, Singapore, Thailand and Vietnam. - Government and ODA focus: - Government budget and ODA concentrated on agriculture and rural development, poverty eradication, human resources development (HRD), science and technology development and infrastructure. #### National Budget - Revenues: - Total revenues over the five years expected to reach 15,010 billion Kip, at an annual growth rate of 17.2 percent. - Budget revenue mobilization tends to remain at the level of 13.6 percent of GDP. - By 2005, revenue mobilization reached 14.6 percent of GDP (below Plan target of 18 percent of GDP). - Average fund mobilisation ratio in the state budget over 2001-2005: 13.6% of GDP. - Fiscal measures: - Reduction of income tax rates from four (3 percent, 5 percent, 10 percent and 15 percent) to three (3 percent, 5 percent and 10 percent). - Reduction of excise duty on tobacco production by 50 percent. - Increase in income tax exemption threshold from 200,000 Kip per month to 300,000 Kip. - Tax revenue composition shift: - Tax revenues collected on domestic production rose from 63% of total budget revenue in 2001 to 71.5% in 2005. - Expenditures: - Total budget expenditures over the five-year period expected to reach 22,830 billion Kip, at an average growth rate of 13 percent per year. - Expenditures accounted for 21.3% of GDP overall and 19.7% in 2005. - Proportion of development expenditure (investment) in total public expenditure: about 49.5 percent. - Domestic share in total public development expenditure accounts for only one-third and is decreasing; international share accounts for two-thirds and is increasing. - Deficit and financing: - State budget deficit during 2001-2005 reached 7,820 billion kip, averaging around 7.4% of GDP annually. - Deficit was covered mainly by external loans and grants; domestic borrowings covered only a small part. *Lao PDR: National Socio Economic Development Plan (2006-2010) — extracted content* ### 3. Monetary Management ### 3. Monetary Management ### Monetary outcomes and policy implementation - The monetary balance improved positively and significantly and contributed to the control and reduction of inflation. - Monetary policy and management has been strengthened during the Plan period. ### Money supply, deposits and credit - The money supply (broad money or M2) grew on average at 20 percent per year. - Bank deposits increased by 19.2 percent per year. - Outstanding loans (credit) expanded at a lower rate of 11.4 percent per year, which is far below the Plan target. - Both M2 and bank deposit growth rates are close to the Plan targets; credit growth underperformed relative to the Plan. ### Inflation and macro stability - The high inflation rate was reduced over the Plan period. - Annual inflation rates by year: - 2001: 7.8 percent - 2002: 8.9 percent - 2003: 15.5 percent - 2004: 8 percent - 2005: 7.7 percent - Over the five-year period, the inflation rate averaged at 9.6 percent per annum. - Greater macro stability has been important in stimulating increased domestic private investment to Lao PDR. ### Exchange rate and foreign currency reserves - The Kip’s value has been gradually stabilized; the local currency “Kip” was quite stable on both domestic and foreign fronts. - The exchange rate between the Lao Kip and the US dollar increased annually at around 7%, although it increased by only 0.7% in 2004. - In 2005, the local currency gained strength against the US dollar by 2%. - The difference between the official and unofficial (market) rates of exchange was reduced to a quite narrow gap as compared to the early stage of the Plan implementation. - Foreign currency reserves increased from 2.6 weeks of imports in 2001 to 12.8 weeks of imports in 2005, which laid a major foundation for the control of the exchange rate. *Source: _cr08341 - 3. Monetary Management* ### 3. Labour and Employment ### 3. Labour and Employment ### Labour legislation, institutions and vocational training - A number of Articles in the Labour Code were amended and supplemented (2001-2005). - Government instruments promulgated: Decree guiding implementation of the revised Labour Code, the Civil Service Law, the Law on Minimum Wages, and the Law on the Establishment of the Social Welfare and Social Security Reserves. - A vocational training centre was set up in Vientiane. - Vocational training output (2001-2005): - About 100,000 people have undergone vocational training. - Plan target was 300,000. - By the end of 2004/05, there are over 100 private training centres in operation, providing training in low-investment, high-return occupations such as English language, computer applications and accounting. - Government policy allows foreign workers to open a Human Resources Training centre in the country. ### Foreign workers, technology transfer and overseas labour - A new policy on foreign workers was drawn up, especially applicable to technical workers in industrial plantations (rubber, coffee, cashew) and industries (electricity, coal, cement, agro-processing). - Thousands of foreign workers (from Vietnam, China and Thailand) entered the country, facilitating technology transfer. - Sister cities and provinces in Vietnam and the Lao PDR established business networks to exchange experiences. - Labour centres were set up providing opportunities for Lao labourers to go to Japan, Malaysia and Singapore. - A Government Decree guiding the movement of Lao labourers overseas was promulgated. - An Agreement on Labour Cooperation was signed between the Lao PDR and Thailand. - Two state-owned enterprises (SOEs) and some private enterprises were established for “Employment Promotion.” ### Other social sectors with labour and social welfare links - Handicapped, disabled, veterans and orphans: - Health care services and other assistance provided to persons with merits, families of handicapped veterans and national heroes in accordance with Decree No. 145/PM. - A national veterans federation was set up. - Five orphanages and SOS schools established for homeless orphans. - The National Committee for the Disabled and the Association for Disabled Women and Children were established. - Social assistance and disaster/victim support measures included food distribution, irrigation construction, livestock credit, and assistance to victims of natural calamities, fires and accidents. - A policy for a single uniform assistance (lump sum rewards) to national heroes was outlined; cemeteries of national heroes were maintained and remains of Vietnamese volunteers were sought for repatriation in coordination with Vietnam. ### Drug control, opium eradication and shifting cultivation - Integrated anti-opium strategy combined eradication with poverty reduction and socio-economic development support. - Cultivation techniques and infrastructure (communication, electricity, piped water, education, health) were promoted to support transitions away from opium. - Opium-growing area reductions: - From 26,387 ha in 1988 to 3,556 ha in 2004. - By end of 2004/05, the Lao PDR had completely eradicated opium production ahead of the UN agreement schedule. - Drug addiction reduction: - From 52,613 addicts in 2002 to 28,000 in 2004. - Enforcement and rehabilitation: - Rehabilitation of addicts organized in rehabilitation centres. - Police, border patrol and customs coordinated with Vietnam to identify and restrict narcotics producers and transporters and to maintain border order. - Conversion and eradication results: - Almost 19,000 ha of opium fields destroyed. - Nearly 30,000 ha of slash-and-burn fields converted into industrial tree plantation areas. - By end of 2004/05, ten provinces (Oudomxay, Luang Namtha, Bokeo, Vientiane, Phongsaly, Huaphan, Xiengkhuang, Xayaboury, Bolikhamxay) and one special zone were officially declared free from opium production. - Slash-and-burn cultivation reduction: - From 118,900 ha in 2001 to 29,400 ha in 2005, fulfilling 75% of the Fifth Plan target. - Of converted area, 72,870 ha have been put under industrial trees. ### Information, culture, sports, science, environment and public administration - Information and culture: - Mass media network developed and extended to localities. - Preservation efforts for memorial sites and artefacts. - Culture-models expanded: - Culture-model villages: from 65 in 2001 to 85 in 2005. - Culture-model families: from 6,000 in 2001 to 16,000 in 2005. - Sports and physical education: - Sports trainers trained and regional cooperation expanded. - Lao sportsmen won three gold medals in the 23rd SEA Games in the Philippines. - The seventh national games were organised in Savannakhet Province. - Science, technology and environment: - From 2004 to 2005, a number of research institutes were set up. - New technologies applied in businesses (seedling production, processing of aloe, extracting vegetable oils). - The National Strategy on Environmental Protection until 2010 and the 2020 Vision were formulated and implemented from 2004 onwards. - Certification of environmental standards initiated for hydro-electricity, mine exploration and construction projects. - Public administration reform and official training: - Public administration reform implemented with progress in public management and approval processes at central and local levels. - Strict disciplinary measures applied to government officials, including high-ranking officials, for lack of responsibility and corruption. - Training aims to enhance political ideology and professionalism: - Senior officials sent for further training in politics. - Professionals encouraged to do further study and sent on field trips domestically and abroad. - Short-term political courses organized for leaders of central and local organizations. ### Poverty reduction measures linked to labour and livelihoods - Poverty reduction is the core task of socio-economic development and implemented aggressively across CPI, public organizations and priority sectors (Agriculture and Forestry, Education, Health and Infrastructure). - Targeted localities included 10 pilot districts selected from the 47 poorest districts. - The 47 poorest districts encompass: - 2,935 communities with a population of around 1.2 million people in 111,850 poor households, which account for 55.4 percent of total poor households in the country. - Village development funds and Poverty Reduction Fund: - By 2005, 192 village development funds with 10,925 members. - Government injected an input of 18.3 billion kip into the funds. - With a loan of USD 20 million from the World Bank, the Poverty Reduction Fund implemented 1,212 projects, valued at USD 8 million in 1,913 villages in 20 districts in five provinces. - Land-forest allocation program: - Presented 1.09 million ha of agricultural land and 3.6 million ha of forested land to 419,259 households in 7,125 villages. - Poverty graduation and targets: - In 2000/01, about 38 percent of the population was below the national poverty line; 304,100 poor households in 2001. - Plan target: move 150,050 households out of poverty (half of 2000 level or 20-25% of total households). - Achieved: 137,500 families graduated from poverty (about 90 percent of the Plan target) during 2001–2005. - Local income generation and microfinance: - Model associations of villages and groups formed for commercial production and development funds. - Savings groups and credit funds organized; example: Women’s Union Group of Somsavi Village (Saithany District, Vientiane Capital). - Land and production outcomes: - Almost 19,000 ha of opium fields destroyed; nearly 30,000 ha of slash-and-burn fields converted to industrial tree plantations (see above). *Source: _cr08341 - 3. Labour and Employment* ### 2. Industry and Construction Sector ### 2. Industry and Construction Sector ### Industry and Construction - Production costs in the industrial sector remain quite high. - Very few enterprises use modern technologies; most enterprises using advanced technologies are foreign-owned. - Public investment in the industrial sector remains low due to an excessive focus on agriculture (particularly irrigation), infrastructure (mainly roads and ports) and services. - There is a lack of incentives for different economic actors to invest in industrial development. - Coordination between line agencies and local authorities to encourage industrial development remains weak. - Handicrafts sector is not sufficiently developing at the local level; although advanced techniques are used, its development remains limited. ### Services Sector - Services sector infrastructure is very limited and inadequate to meet socio-economic development requirements. - Quality of many types of services is low. - Management shortcomings include weak control on investors, personnel management, and management of family and private enterprises providing services. - Coordination between Government officers and sectors at the local level in planning infrastructure, tourism, and other services is very weak, resulting in low efficiency. ### Infrastructure Use - Application/use of infrastructure in many sectors is very low because production has not developed at the same pace as physical infrastructure. - Limited capacity to make efficient use of irrigation schemes, ports, airports, etc., resulting in waste and reduced cost-effectiveness of investments. ### Monetary and Fiscal Management — Macroeconomic fragility - Macroeconomic ratios remain fragile and could be easily destabilised by external factors. #### 1. Savings and Investment - Ratios of savings and investment to GDP, although significantly improving, are still low compared to potentials and development requirements. - The difference between domestic savings and public investment is significantly high and requires use of foreign funds, mostly loans. - Mobilization of savings for investment is limited because Government has not secured adequate revenues and enterprises are not sufficiently developed. - No policies and detailed mechanisms exist to convert land and other resources into sources of capital. - Mobilized funds for investments are limited and not concentrated on strongly encouraging structural adjustments, skills development, eradicating hunger (scarcity of rice) and reducing poverty. - Investments in infrastructure are scattered and project implementation is often delayed. - Debts incurred for financing infrastructure are substantial, and debt service obligations create pressure on the budget and prices. #### 2. National Budget - Budget revenues are low and planned targets are not consistently realised. - From 2001 to 2005, monetary and fiscal situation faced difficulties due to slow economic development and slow growth in revenues; tax incentives at start-up stage contributed to slower revenue growth. - Legislative texts and decrees on remittance of duties and taxes by enterprises are not strictly enforced. - Negative phenomena within tax and customs administration entailed substantial loss in revenues. - Investment ratio targets of the Plan have not been achieved; excluding grants, this ratio represents only 11-12 percent of GDP, instead of 18% of the GDP as targeted. - Capital investment is the largest line of expenditure at 50 percent of the total budget, with approximately 70 percent of investments funded from external loans and grants. - Given the high investment ratio, current expenditures are limited and do not meet requirements, affecting public administration, social development, and delivery of health services. - Low civil service pay is an urgent issue. - Budget expenditures remain heavily subsidized in several lines (e.g., cars and fuel) with uncontrolled recruitment of additional civil servants, while expenditures for health and education may not yet be ensured. - Low revenues well under planned targets (partially due to exceedingly ambitious Plan targets) undermined national budget balance; expenditures exceed Plan target. - Prolongation of such expenditures and substantial government debts have pushed fiscal security toward non-sustainability, risking a return to higher inflation and threat to socio-economic balance. #### 3. Financial Sector - Administration of financial sector policies has been slow in solving several issues. - Monetary policy framework is limited and incomplete; mainly based on obligation and issuance of bonds of the Bank of Lao PDR which credit and marketing officers may not yet use. - Sources of money and credit are restricted. - Exchange rate management mechanism is not fully consistent with actual conditions, limiting implementation efficiency. - Use of foreign currencies in transactions by enterprises and general population is still widespread. - Central bank has not set indicative interest rates to guide the market; administration and setting of guidelines for market rates encounter severe difficulties. - During the last two years of the Fifth Plan, interest rates on loans remained substantially high although inflation declined significantly, adversely affecting economic growth. - Financial market is developing within a limited scope. Credit meets only 15 percent of requirements. - Loan amortization periods are short, creating pressure on enterprises and commercial banks' recovery capacity. - Volume of repayments overdue in the banking system is substantial and concentrated mainly in domestic commercial banks with poor financial capacity and transaction quality. - High non-performing loans (NPL) are a drag on credit flow and high interest rates remain. #### 4. Economic Base - Total GDP in 2005 amounted to USD 2.8 billion, with an average GDP per capita of USD 491. - These indicators are among the lowest in the region; Lao PDR remains one of the poorest countries in the world. - Economy’s growth rate has not reached full potential; with a low economic base, even significant acceleration in growth would yield modest absolute value added to GDP. - The gap between Lao PDR GDP per capita and other countries in the region continues to widen. ### Structural Adjustment of the Economy #### 1. Structure of the Economy - Adjustments focus on sectoral composition of GDP and rate of industrialization but do not adequately align structural adjustment with industrialization and modernization goals. - Domestic industries characterized by obsolete technologies, high costs and low efficiencies, requiring high protection/subsidies and reducing long-run competitiveness. - Structural adjustments in agriculture recently initiated by converting low productivity rice land into industrial plantations. - Agriculture components not strongly linked to processing industries and markets. - Rural economic structure primarily reliant on agriculture, which accounts for 84% of the people’s livelihood. - Sale of many agricultural products is difficult due to high production costs and low quality; many products are not competitive. #### 2. Geographic (Spatial) Structure - Geographic structure shows considerable disparity with large variations in growth rates; many Northern and Southern Provinces have relatively low development. - Economies in many areas remain unbalanced; territorial potentials not yet strengthened. - Economic transition remains slow; large share of land in agro-forestry. - Development gaps between urban and suburban, provinces/territories, economic sectors, and ethnic groups are large, making it difficult to identify intrinsic potentials in each province/territory. #### 3. Labour Force - Skill level of labour force is developing slowly compared to sectoral improvements. - Capacity development characterized by self-improvement with only occasional training opportunities, resulting in casual labour. - Without proper institutional arrangements and training programmes, redistributing labour to meet industrialization and modernization requirements will be difficult. ### External Economic Relations #### 1. Foreign Trade - Exports and imports face severe constraints. - Exports per capita are extremely low due to constraints in large-scale commercial production and processing of higher quality products. - Export of unprocessed and low value added agricultural products accounts for about 50 percent of export revenues. - More than half of export revenues are from products with unstable markets (e.g., garments), reduced volume (e.g., wood), or price declines (agricultural products). - Rate of growth of exports is not yet stable and is lower than GDP growth rate. - Foreign trade management policy framework and measures need further detailed development; current framework lacks overall coverage and long-term vision. - Coordination between central and local authorities on exports and imports is weak and inefficient. - Shortage of management officers, technical staff and workers with high technical skills. - Substantial imports have contributed to domestic production and exports but are increasing faster than Fifth Plan envisioned. - Import management faces severe difficulties; lack of market information, concentration on smaller markets, and imported technologies often obsolete. #### 2. Foreign Investment - Foreign investment increased at a slow pace. - Investments in agriculture, forestry and fisheries and in areas with difficult access are very limited. - Capacity to attract industrial investment remains low; licensing process is time consuming and cumbersome. - Foreign investors face difficulties due to insufficiently open investment environment, inadequate facilities, and lack of consistency and predictability. - Costs of inputs such as fuel, electricity, telecommunications and shipping are much higher than in many other countries in the region, restricting competitiveness and attractiveness to investors. - Very few investors can raise large funds from regional and international economic groups. - Skilled labour represents only 2 percent of the total labour force and is insufficient for foreign enterprises' requirements. #### 3. Official Development Assistance (ODA) - Delayed disbursement of ODA negatively affects mobilization of funds and their efficient use. ### Social Development #### 1. Education and Training - Repetition and dropout rates are high and increasing: - Dropout rate in 2005: 8.9 percent at primary level, 7.2 percent at lower secondary level, and 3.2 percent at upper secondary level. - Repetition rate at primary schools (mostly year 1) in 2005: 34.1 percent. - Due to low quality of graduates, few are accepted in the labour market; many work outside their training areas. - By 2005, about 19 percent of teachers had not been properly trained. - Curriculum is obsolete; enrolment at lower and upper secondary levels remains generally high. - Treatment and management of teachers characterized by inconsistencies; teachers paid very low salaries irregularly. - Classrooms are insufficient; student-per-class ratio is high at around 70-80. - Literacy rates in 2005: - About 68.2 percent of people aged 15 years and over are literate (including 15-39 years age group with literacy rate of 78.6 percent). - Another review indicates only about 45.2 percent of the population are literate, with 53.7 percent for men and 36.3 percent for women. - That review also indicates only 37.7 percent of the literate have a normal level of application of literacy skills and 30.8 percent are able to make good use of literacy skills in their activities. - Training of personnel, workers and skilled artisans does not meet labour market requirements. - Development of education in isolated, ethnic and highland areas is very slow; illiteracy eradication efforts lack strategic plans and detailed procedures. - Implementation of scholarship awards is slow: in 2005 only about 7.5 percent of persons with merit received assistance, representing only 30 percent of the Plan target (the Plan provides assistance to 25 percent of students through different means). - Education sector lacks equipment and tools (textbooks, learning materials, school facilities); ratio of schools meeting Government standards is very low. - Budget allocations to education are limited and not constant, peaking at only 10 percent of total budget expenditures; up to 80 percent of such allocations are from external grants. - National Assembly agreed to allocate 12 percent of the budget to education and training sector, but none of the provinces have yet received such an allocation. #### 2. Health - Health sector and service delivery do not fully meet population requirements in quantity or quality. - Health system does not meet requirements of isolated and poor areas with difficult access. - Competence level of health personnel is inconsistent with needs; dispensaries still need medical doctors. - Deployment of health personnel is not in accordance with their training; pharmaceutical sub-sector is developing very slowly. - Ethnic groups still uphold superstitious beliefs, lead unsanitary lifestyles and mainly rely on shamans for cures. #### 3. Employment - Need for new employment opportunities is huge, but employment generation is slow and unemployment is high. - Allocation of labour force is shifting slowly without significant socio-economic changes. - Subsistence production results in underemployment and complicates social management. - Lack of external communication results in an inward-looking economy. - Labour cooperation mechanism is not yet open to facilitate labour movement among districts, provinces, and other countries in the region. *Lao PDR: National Socio Economic Development Plan (2006-2010) — Chapter 2 (Industry, Construction, and related sectors).* ### 4. Public Sector Salaries ### 4. Public Sector Salaries ### Salary levels and impacts - Public sector salaries are described as "very low" and "not adequate for civil servants to meet their daily requirements." - Civil servants commonly seek a second job to support family expenses and children’s schooling and health care. - Low pay and multiple job-holding have "impacted significantly on the quality of work and performance of civil servants." - Reform of civil service pay and increases in salaries for civil servants are identified as "currently urgent matters to uplift the quality of performance." - The Plan notes "delay in the payment of salaries and very low salary packages for Government officials and people whose main income is from the Government budget," which "is likely to result in the low quality of services provided by Government officials." ### Poverty reduction: coordination and capacity constraints - Coordination shortcomings: - Insufficiently firm coordination between relevant agencies and unified guidance from the Government leaves each agency to carry out sector activities independently. - "The overall supervision, assessment, control and monitoring of poverty reduction activities have not been entrusted to any agency." - Financial mechanisms: - Need for "clear and specific credit policies" so public funds reach producers when required. - Need to establish mechanisms to mobilize domestic and foreign resources to create funds that extend credit to the poor for production and poverty reduction. - Human resource constraints: - Civil servants and technical staff of local administration authorities are "insufficient in number and have inadequate capacities," with a "substantial number" having minimal qualifications. - These shortages constrain dissemination and implementation of Party and Government policies and reduce the efficiency of poverty reduction efforts. ### Social security coverage and provisions - Public servants: - Public servants are covered by provisions including pensions and health care financed partly through a "six percent deduction from salaries" and partly from the state budget. - National Social Security Scheme: - A Decree on Social Security System for Enterprise Employees (1999) led to creation of a Social Security Organisation (SSO) which began operating in June 2001. - The SSO administers the Social Security Scheme for enterprise workers in the private and SOE sectors. - The scheme provides coverage for: - Access to health care from an approved health care provider for insured workers and their families; - Long-term pensions in case of invalidity or old age and to surviving dependants; - Short-term benefits for incapacity to work due to sickness or maternity; - Benefits for incapacity to work due to employment-related injury or sickness. - Coverage gaps and performance: - "Only 4.7 percent of the total labour force, with about 28 percent in Vientiane City, has social security coverage." - In 2005, care and aid were given to only "7.5% of the total beneficiaries, accounting for 30% of the set target." ### Other sectoral issues affecting service delivery - Information and culture: - Cultural exchange between ethnic groups is "irregular and discontinuous" and lacks necessary materials. - Mass media grows slowly and its quality is "not high," limiting policy dissemination to remote areas. - Awareness campaigns (e.g., against drugs) are "not launched thoroughly." - National defence and public security: - Development of national defence and public security "has not received sufficient attention," causing gaps that permit social evils. - Socio-economic development is "not closely connected with the improvement of the national defence and public security forces." - Budget allocation for armed forces is limited, causing operational and living difficulties. ### Limitations and root causes related to public sector salaries and administration - Key limitations linked to salaries and administration: - Severe shortfall in revenues, excessively high expenditures, and weak maintenance of budgetary targets; public debt (domestic and foreign) is "overwhelming." - "Many social issues are problematic, including the delay in the payment of salaries and very low salary packages for Government officials..." - Identified causes: - "Lax implementation of instructions and resolutions" and weak coordination between ministries, sectoral authorities, and central and local authorities. - Incomplete legislative framework and slow acceptance of new economic concepts delaying market-oriented reforms. - Lack of long-term strategy and policies to attract and use FDI and ODA, reducing efficiency in fund use. - Slow institutional (re)organization and civil service reform; weak guidance and supervision in civil service and public administration. - Insufficient resource mobilization and inefficient use of funds, with excessive concentration on infrastructure over production and skills development; low investment in education and quality health. ### Policy implications and recommended reforms - Salary and civil service reform: - Prioritize reform of civil service pay and increase salaries to improve quality of performance. - At the outset of the forthcoming five-year period, "detailed mechanisms will be designed to ensure that the performance of civil servants meets these requirements." - Ensure staff deployment aligns with development requirements; clearly define tasks, rights, and responsibilities at institutional and individual levels; enforce strong accountability and timely replacements where performance is inadequate. - Pay "proper attention ... to the rights and benefits of officials including solving the delays in salary payment and the very low salary level." - Strengthen coordination and capacity for poverty reduction: - Entrust overall supervision, assessment, control and monitoring of poverty reduction to a designated agency. - Develop and implement clear credit policies and mechanisms to mobilize domestic and foreign resources for funds extending credit to the poor. - Build capacity and increase the number and qualifications of civil servants and technical staff at local administration levels to improve policy dissemination and implementation. - Broader reforms to support salaries and public administration: - Accelerate public administration and civil service reform consistent with socio-economic development level. - Improve mobilization of domestic resources, protect private property rights, and create an enabling environment for business to increase domestic financing. - Develop a comprehensive socialist market-oriented legislative framework and implement market economy principles while strengthening social protection, employment, and human development investments (education, health). - Enhance transparency and accountability to ensure efficient use of limited resources. *Lao PDR: National Socio Economic Development Plan (2006-2010).* ### PART II: ### PART II: SIXTH FIVE-YEAR NATIONAL SOCIO ECONOMIC DEVELOPMENT PLAN (2006-2010) ### Development Context — International - Expectation that global cooperation for development will continue over the five-year period (2006-2010). - World economy: growth rate in the period 2006-2010 likely to be slightly higher than during 2001-2005. - Official development assistance (ODA) has been growing and is expected to rise significantly during the next five years. - ODA increased from the low USD 50 billion range in 2001 to USD 79 billion in 2004. - OECD/DAC expects ODA to rise to USD 97 billion in 2006 and USD 128 billion in 2010. - Note: most of the additional aid has been utilized so far to write off the debts of developing countries including those of Iraq and Nigeria. - International financial markets likely to be more active; FDI and indirect investment flows expected to recover and expand. - Adverse global shock: rapid, sustained and large increases (more than doubling) in petroleum (oil) prices in the past two years continue to have adverse impacts, particularly on low-income oil-importing countries including the Lao PDR. - Scientific and technological revolutions (information technology and bio-technology) expected to grow strongly; economization of intellectual property will spread globally. - 2005 World Summit reaffirmed commitment to eradicate poverty and achieve the Millennium Development Goals (MDGs); emphasized need to increase aid to LDCs and support implementation of the Brussels Programme of Action for LDCs (2001-2010). - Implication: widened and strengthened bilateral and multilateral relations will help Lao PDR exploit development opportunities, reduce poverty, and advance industrialization and modernization. ### Development Context — Domestic - Positive factors: - Political and social stability over the past five years, to be strongly maintained. - Production capacities and abilities of many industries increased substantially by end of the Fifth Plan (2001-2005). - Economic structure changed significantly; enterprises and national economy adapted better to international markets; competitiveness of Lao products improved steadily. - Geographic location and natural resources attract tourism and investment; country recognized as a regional transit center. - Full membership in regional and global organizations including the WTO will boost economic dynamism and accelerate development. - Constraints and challenges for 2006-2010: - Moderate size of the economy and small-scale of much domestic production. - Low GDP per capita; insufficient domestic income, savings and investment to expand production and accelerate development. - Weak financial and monetary systems. - Economic and social infrastructure developed but still not fully adequate to meet growing needs. - Technological base low and far behind regional peers. - Services sector still growing slowly. - Limited skilled human resources and labour force; budget constraints restrict investment in skills development. - Limited effectiveness of state administration. - External threats: erratic weather and climate changes; widespread diseases such as SARS and Avian Influenza (bird flu). - Social problems: poverty, drug abuse, AIDS, prostitution, and low salaries. - Limited capacity of Lao enterprises for regional and international economic integration; pressures from AFTA, WTO and other commitments. - External economic pressures: rising oil prices, currency fluctuations, price subsidies, and non-tariff trade barriers. ### Overall Development Strategy — Background - The 7th Party Congress set the Ten-Year Socio-Economic Development Strategy (2001–2010) with priorities: - Improve and build economic infrastructure for fast and sustainable economic growth. - Emphasis on agricultural production; eliminate forest fires and deforestation; reduce number of poor households; promote industrialization and modernization. - Develop human resources step-by-step in quality and quantity to prepare for industrialization and to position the country as a regional centre for exchange of goods and services. - Encourage socialist-oriented industrialization and modernization; prepare for graduation from LDC status by 2020. - Support achievement of the MDGs and implementation of the Brussels Programme of Action for LDCs (2001-2010). - Role of the Sixth Five-Year Plan (2006-2010): - Implements socio-economic policy guidelines of the 7th Party Congress. - Constitutes the vehicle for the second half of the Ten-Year Strategy (2001–2010). - Institutionalizes and concretizes directives and tasks for 2006-2010 to achieve the Ten-Year Strategy targets. ### Overall Development Strategy — Development Directions - Principal directions for 2006-2010: (i) Turn from under-development to fast and stable development, producing high value-added goods both in quantity and quality step-by-step to meet domestic demand and increase exports. (ii) Increase competitiveness and utilize comparative advantages to implement international economic commitments (ASEAN, bilateral and multilateral commitments, including the WTO). (iii) Strengthen links between economic development and social development, and protect natural resources and the environment; prioritize solving social problems (poverty, unemployment, social evils) and maintain social and political stability. (iv) Accelerate building comprehensive socio-economic infrastructure and finalize establishment of a market-oriented economy with socialist orientation as the basis for industrialization and modernization. - Characterization: the Sixth Plan is a break-through plan aimed at fast, firm, and qualitatively enhanced development, boosting competitiveness and improving material and moral wellbeing. ### Overall Development Strategy — Overall Goals and Tasks - Ten-year Strategy expectations set by the Party Congress (2001-2010): - GDP in the ten years (2001-2010) to increase on average at least 7.5% per annum. - GDP per capita in 2010 to be USD 700-750. - Population growth rate in 2010 to be reduced to about 2% per year. - Main goals of the Sixth Plan (2006-2010) (quoted): - “Accelerate economic growth and improve the people’s quality of life, restructuring the economy and employment in building a market economy, based on the country’s rich resources and international integration. Further build the market economy with a socialist orientation. Continue to enlarge and develop effective external economic relations. Create breakthrough changes in education and training in terms of quality and quantity, utilising the advances in science and technology, protecting the environment, and taking human, scientific and technological players as vehicles for development. Develop culture and society in synchrony with economic growth. Continue poverty reduction, creating jobs, and eliminating social evils. Continue strengthening the socio-economic infrastructure as fundamentals for development in the Sixth five-year Plan and for the next (Seventh) five-year plan. Maintain political stability and social security, protecting sovereignty, territorial integrity and national security.” - Tasks and guidelines for 2006-2010: (i) Economic growth target: increase to an average of 7.5 - 8% per annum; establish fundamental economic players to support the Seventh Plan; enhance product potentials by region; improve quantity and quality of goods and services and competitiveness; develop information technology and foundations for human resources development. (ii) Ensure balanced economic and social development, protect the environment, solve urgent social problems, create job opportunities, reduce unemployment, uplift material and mental wellbeing, improve salary scales, reduce poverty, and care for national heroes. (iii) Encourage development across sectors with the state economy as the leading sector while establishing and developing collectives, private and foreign businesses; implement market economic arrangements with socialist orientation; create facilitating environments for investment and business; ensure transparency and high economic competitiveness in the region. (iv) Promote rapid expansion of small and medium enterprises (SMEs); strengthen financial status of state-owned enterprises step-by-step, including improving their debt situation. (v) Maintain existing infrastructure; establish additional infrastructure to support socio-economic development, trade, investment and tourism; increase investment in infrastructure; explore national resources including human resources effectively; prioritize investment projects to establish effective economic structures and readiness for competition. (vi) Broaden economic opportunities and external economic relations; create facilitating conditions to increase exports; attract investment in funding and technology to support production and exports; actively and strictly implement bilateral and multilateral agreements at central and local levels. (vii) Improve and strengthen financial and monetary sectors by increasing capacity of national financial administration bodies; solve long standing debt problems using many financial sources including financial balancing at local levels; strictly implement national economization policies; maintain macroeconomic balance; establish and develop financial markets to meet socio-economic development needs. (viii) Pursue comprehensive development in education and capacity building; implement compulsory primary education programs; apply science and technology; upgrade human resource quality to match economic structural changes; apply advanced and modern technologies in favourable areas with primary focus on economic centers and provinces, municipalities and cities. (ix) Enhance public administration with strong steps; improve and upgrade effectiveness of state organizations; organize relations between state bodies, local people and businesses with transparent approaches allowing audits; solve bureaucracy and corruption; uplift capacity of government officials. (x) Strengthen national defence, public security, social and political aspects; broaden foreign relations; maintain societal stability; and create a favourable environment to support development and protection of the nation. - Alignment: these goals coincide with the MDGs and the Brussels Programme of Action for Least Developed Countries (2001-2010). *Source: PART II — SIXTH FIVE-YEAR NATIONAL SOCIO ECONOMIC DEVELOPMENT PLAN (2006-2010), Lao PDR: National Socio Economic Development Plan (2006-2010).* ### 1. Targets ### 1. Targets ### Economic Targets - Average annual GDP growth target for the first decade of the new millennium (2001 to 2010): more than 7 percent. - Sixth Plan (2006-2010) specific projections: - Total GDP in 2010 should be 1.95 times (or about two times) that in 2000. - GDP at current prices in 2010 projected to be 59.5 thousand billion Kip, equivalent to USD 4.97 billion. - Average GDP per capita will reach USD 827 (exceeding Plan target USD 700 - 750). - GDP annual average growth rate target: 7.5-8%. - Agriculture and forestry growth: 3-3.4%. - Industry growth: 13-14%. - Services growth: 7.5-8%. - Short-run acceleration: GDP growth rate expected to rise from approximately 7.2% in 2006 to perhaps 8.2-9% in 2010 (depending on progress on large-scale projects, particularly hydropower dams). - Sectoral shares by 2010: - Agriculture: about 36% of GDP. - Industry: about 36.4% of GDP. - Services: about 27.6% of GDP. - Table V-1 Projected Structure of the Economy (2006-2010) (percent) - Agriculture: 43.1 (2005-06); 41.3 (2006-07); 39.6 (2007-08); 37.8 (2008-09); 36.0 (2009-10) - Industry: 29.9 (2005-06); 31.4 (2006-07); 33.0 (2007-08); 34.6 (2008-09); 36.4 (2009-10) - Services: 27.0 (2005-06); 27.3 (2006-07); 27.4 (2007-08); 27.6 (2008-09); 27.6 (2009-10) - GDP: 100 across periods - Public finance and external trade (2006-2010 aggregate/averages): - Total budget revenue in the five years (2006 -2010): 34.6 thousand billion Kip. - Ratio of budget revenue to GDP: average 14.8%. - Total budget expenditure: 49.6 thousand billion Kip; averaging 21.5% of GDP. - Budget deficit: reduce from 7.8% of GDP in 2005 to 5.8% in 2010. - Total exports in next five years: USD 3.48 billion; annual average growth rate 18.1%. - Total imports in next five years: USD 4.5 billion; annual average growth rate 8.8%. - Rate of inflation (consumption prices): average about 6 - 6.5% per year. ### Social and Environmental Targets - Complete establishment of compulsory primary education nationwide; ensure all children of school age are enrolled in primary schools. - Enrolment rate in middle level vocational schools and long-term vocational study to increase by 15%. - By 2010: - Population growth rate reduced to 1.91% per year; absolute number projected at 6,170,000 people. - New jobs created: about 652,000 (with 20,000 workers sent abroad as labour export). - Reduce number of poor households to below 15%. - Reduce malnourished children under 5 years of age to less than 30%. - Infant mortality (under 1): reduce to 55 per 1,000 live births. - Child mortality (under 5): reduce to 75 per 1,000 live births. - Maternal mortality rate: reduce to 300/100,000 live births. - Supply of clean water to rural communities: cover 70%. - Maintain complete eradication of opium cultivation. - Raise ratio of forest cover (all natural forest areas) to higher than 50% of the land area. ### Sixth Plan Targets and Fifth Plan Targets and Achievements (select items from Table V-2) - GDP growth: Sixth Plan target 7.5-8%; Fifth Plan target 7-7.5%; Fifth Plan achievement 6.24%. - Agriculture & Forestry sector growth: Sixth Plan 3-3.4%; Fifth Plan target 4-5%; achievement 3.4%. - Industrial sector growth: Sixth Plan 13-14%; Fifth Plan target 10-11%; achievement 11.3%. - Services sector growth: Sixth Plan 7.5-8%; Fifth Plan target 8-9%; achievement 6.7%. - Sector shares in GDP (2005): - Agriculture & Forestry: Sixth Plan 36%; Fifth Plan 47%; achievement 45.4%. - Industrial sector: Sixth Plan 36.4%; Fifth Plan 26%; achievement 28.2%. - Services sector: Sixth Plan 27.6%; Fifth Plan 27%; achievement 26.4%. - Exports growth: Sixth Plan 18.1%; Fifth Plan target 8.6%; achievement 7.0%. - Imports growth: Sixth Plan 8.8%; Fifth Plan target 8.6%; achievement 4.9%. - Trade deficit as % of GDP: Sixth Plan 5%; Fifth Plan 6%; achievement 9.4%. - Inflation rate: Sixth Plan 6-6.5%; Fifth Plan target Less than 10%; achievement 9.6%. - Exchange rate: Sixth Plan Stabilised Kip; Fifth Plan noted Kip appreciated by 7% per year against US dollar. - Budget revenue as % of GDP: Sixth Plan 14.8%; Fifth Plan 18%; achievement 13.6% (5-yr. average) and 14.6% (in 2005). - Budget deficit as % of GDP: Sixth Plan (2005) 6.07% (5-yr. average) [5.8% in 2010]; Fifth Plan 6% target; achievement 7.4% (excluding arrears) [7.8% in 2005]. - Total investment as % of GDP: Sixth Plan 32% (5-yr. average); Fifth Plan 27.8% (5-yr. average) [29% in 2005]. - Public investment as % of GDP (2005): Sixth Plan 10.0%; Fifth Plan target 12-14%; achievement 12.3%. - Private (domestic and foreign) investment as % of GDP: Sixth Plan 22.0% (5-yr. average); Fifth Plan 15.5% (5-yr. average). - Total GDP (2005 current prices): US$ 2.8 billion. - GDP per-capita (2005): Sixth Plan target US$ 700-750; Fifth Plan target US$ 500-550; achievement US$ 491. - New jobs created each year: Sixth Plan 130,000; Fifth Plan 100,000. - Provide vocational training and skill development: Sixth Plan 350,000 labour; Fifth Plan 100,000 labour. - Total employed by 2010: 3,366,000. - Sector shares of employed 2010 / 2005: - Agriculture & Forestry: 73.9% (2010) / 76.6% (2005). - Industrial Sector: 9.3% (2010) / 7.7% (2005). - Services Sector: 16.9% (2010) / 15.6% (2005). - Total population (2005): 6.17 million (2010); Fifth Plan 5.9 million; achievement 5.61 million (2005). - Population growth rate: Sixth Plan 1.91% (5-yr. average) [1.85% in 2010]; Fifth Plan 2.0% (5-yr. average) [2% in 2005]. - Total fertility rate: 3.9 in 2010; 4.5 in 2005. - Proportion of poor households (2005): Sixth Plan Less than 15% of total households; Fifth Plan Half of 2000 level of 304,100 hh or 150,050 hh (or 20-25% of total hh); achievement 137,500 households (28.7% of total households). - Malnutrition among children under five (2005): Sixth Plan Less than 30%; Fifth Plan 30%. - Primary school enrolment of 6-10 year olds (2005): Sixth Plan 90.6%; Fifth Plan 86%; achievement 84.2%. - Lower secondary school enrolment (2005): Sixth Plan 52%; achievement 54.8%. - Upper secondary school enrolment (2005): Sixth Plan 24%; achievement 34.4%. - Higher education and universities enrolment (2005): Sixth Plan 410 per 100,000 people. - Literacy among people 15 to 40 years old (2005): Sixth Plan 85%. - Life expectancy at birth (2005): Sixth Plan 63.5 years; Fifth Plan 61 years; achievement 61 years. - Infant (children under one) mortality (2005): Sixth Plan 55 per 1,000 live births; Fifth Plan 60; achievement 70. - Child (under-five) mortality (2005): Sixth Plan 75 per 1,000; achievement 98. - Maternal mortality (2005): Sixth Plan 300 per 100,000; Fifth Plan 350; achievement 405. - Access to clean water: Sixth Plan 70% of rural communities. - Forest cover: Sixth Plan More than 50%. ### Rationale for setting GDP growth target at 7.5-8% - (i) Overall development target by year 2020: graduate from being an undeveloped country; GDP per capita must be higher than USD 1,000 (UN standard). Average income per capita by 2010 to be higher than USD 700-750. - (ii) Address disparity in income per capita compared to regional countries (Laos USD 491 in 2005; China USD1,000; Philippines USD1,080; Malaysia USD 3,780; Thailand USD 2,190; South Korea USD12,200). - (iii) Maintain political sustainability and increase resources to upgrade living conditions. - (iv) Industrialization and modernization to eradicate poverty by increasing employment and incomes; strong economic growth required. - (v) Uplift country status to become an equal development partner with other ASEAN and regional countries. ### Foundations and sectoral strengths supporting targets - Reasons expected results are likely to be met: - (i) Lessons and experience from implementing Socio Economic Development Plans. - (ii) Rich natural resources for exploration and utilization. - (iii) Central geographic location providing strong economic linkages. - (iv) Favorable culture and natural environment facilitating tourism, trade and investment. - (v) Plentiful and cheap labour force; abundant resources for power generation attractive to investors. - (vi) More opportunities for regional and global economic integration. - (vii) Political and social stability favourable for development. - Sectoral prospects: - Agriculture: growth target 3-3.4% per year; increased value and quantity from processing industries and new export markets; expansion of crops and industrial trees (corn, tobacco, coffee, beans, rubber, cassava, sugar cane, vegetables, fruit). - Industry: electricity for export from six hydropower dams expected within Sixth Plan (calculated at only 70% of potential installed capacity of 3,000 MW); additional potential from 6 - 8 small dams generating 600 - 800 MW; cement production capacity additions (Khammouane cement factory first phase 600,000 tons per year; Saravan cement factory 300,000 tons per year; two small-scale cement factories in Savannakhet province 400,000 tons per year); increased exploitation and processing of minerals. - Service sector: tourism currently about 1.7 million tourists per year with average stay about 5 days; aim to increase average stay to 8-10 days; potential to increase tourism income to over USD 500 million per year on average. ### Tasks & Economic Balance — Major principles - Maintain macroeconomic balance in labour and employment, investment, the budget, and between exports and imports. - Basic principles: - Development guidelines from resolution of the 7th Party Congress in the ten-year Socio Economic Development Strategy (2001 – 2010). - Expectations of capabilities for development activities in Sixth Plan. - Exploitable development potentials: (i) total production power including private sector; (ii) potentials of services sectors (tourism and higher-quality services); (iii) underutilized labour force; (iv) ability to use advanced technologies and science; (v) possibilities to expand domestic market channels. - Economic integration and globalization creating favourable conditions for macro-economic balance. ### Balance in Labour and Employment - Labour demand and supply over 2006-2010: - Number of people who need employment in five-year period 2006-2010: 1,217 million (text states "1,217 million" — preserved as in source). - New entrants to labour force: 592,000 people. - Unemployed remaining from last five years: about 144,000. - Unemployed during short period of 2005: about 485,000. - New employment opportunities expected in 2006-2010: 652,000 people (130,000 per year). - By sector among those 652,000: approximately 406,000 in agriculture and forestry; 102,000 in industry and construction; 144,000 in service sector. - By 2010: - Total employed: approximately 3,366,000 people. - Approximately 2.486 million employed in agriculture and forestry. - 312,000 in industry and construction. - 568,000 in service sector. - Sectoral employment shares change: - Agriculture and forestry: drop from 76.6% in 2005 to 73.9% in 2010. - Industry and handicrafts: increase from 7.7% to 9.3%. - Service sector: increase from 15.6% to 16.9%. - Unemployment rate: reduce from 5% in 2005 to 3.8% in 2010. - International labour migration: - Each year approximately 5,000 labourers can be sent to work in foreign countries; about 20,000 labourers over five years. ### Balancing investment - To achieve economic growth of 7.5-8%, total investment required for 2006-2010: 73.9 thousand billion Kip (ICOR equal to 4.2). - Equivalent to about 32% of GDP. - Investment would increase at about 19.3% per year. - Sources of investment (text breaks off at this point). *Lao PDR: National Socio Economic Development Plan (2006-2010), section "1. Targets"* ### 23.1 thousand billion Kip from the Government budget accounting for 31.25% of the total ### _cr08341 - 23.1 thousand billion Kip from the Government budget accounting for 31.25% of the total ### Investment overview and financing projections - Total investment planned: 73,900 billion Kip (100% of plan; 29.0% of GDP in 2005 rising to 34.3% in 2010). - Public investment: 31.25% of total investment, equivalent to 23.1 thousand billion Kip from the Government budget (10% of GDP). - Private investment: 50.8 thousand billion Kip, accounting for 68.75% of total investment (approximately 22.0% of GDP). - External financing assumptions for the next five years: - ODA expected: USD 357 million per year on average. - FDI expected: USD 600 million mobilized each year. - Domestic savings and local investment: - Mobilization of domestic savings expected to reach about 51.3%. - Remaining 48.7% of funds expected to be directly invested by local people. - Policy emphasis: improve investment climate to encourage domestic investment and confidence. ### Mobilization measures and government financing instruments - Government measures to mobilize funds: - (i) Selling some assets (projects) or privatizing non-essential state enterprises and using revenues to invest in higher-priority projects. - (ii) Utilize private investments through BOOT, BOT and other forms. - (iii) Issue government bonds to invest in large-scale projects; future long-term bond income to be used for investment rather than filling budget gaps. - (iv) Receive assistance and soft loans from international sources. - (v) Intensively convert land and properties into capital. ### Sixth Plan resource envelope (Table V-3) — key figures - Total investment: 73,900 billion Kip (100%); 5-Year Average percent of GDP: 32%; 2005: 29.0 %; 2010: 34.3% - Public investment: 31.25% (10% As % of GDP) - Government budget: 23.1 billion Kip - ODA: USD 1,785 million - Private investment: 50.8 billion Kip (68.75%; 22% As % of GDP) - FDI: USD 3,000 million ### Investment allocation by sector (Table V-4) — five-year totals and shares - Total: 73,900 billion kip (100) - Agriculture: 11,800 billion kip (16% of total) - Industry: 31,000 billion kip (42% of total) - Services: 31,060 billion kip (42% of total), including: - Transport, post and construction: 19,200 billion kip (26%) - Education and HRD: 2,590 billion kip (3.5%) - Health: 2,220 billion kip (3%) - Science, technology & environment: 1,480 billion kip (2%) - Culture, information & sports: 1,110 billion kip (1.5%) - Remaining sectors: 4,430 billion kip (6%) ### Budget balance and fiscal aggregates (Sixth Plan, 2006-2010) - Total expected state budget revenue: 34,600 billion kip (100.0% of budget), growing at 19.9% per year on average; 5-year average: 14.8% of GDP. - Revenue composition (amounts and shares): - Taxes: 12.500 billion kip (36.3% of total revenue) - Customs duties: 10,000 billion kip (29%) - Land tax: 350 billion kip (1%) - Real estate: 7,900 billion kip (23%) - External assistance: 3,700 billion kip (10.8%) - Total budget expenditure: 49,600 billion kip (100.0%), growing at 17.8% per year; 5-year average: 21.4% of GDP. - Budget deficit: 15,000 billion kip (6.1%). - Planned trajectory: deficit to decrease gradually from 7.3% in 2004 to 5.8% in 2010. - Financing sources for deficit: mainly foreign concessionary loans and mobilization of domestic investments to some extent. - State investment by the state targeted at about 10% of GDP. ### Fiscal policy measures to strengthen revenue and control expenditure - Expenditure-side controls and efficiency: - Review and apply strict controls on expenditure lines, particularly investment and administrative expenditures. - Economize administrative expenditure, reduce extravagant spending, reduce losses, eliminate compensation items, increase reserves, and accelerate reduction of the budget deficit. - Main measures to increase state budget revenue: - (i) Improve and establish mechanisms of administration across customs, tax, real estate and treasury; improve political/ethical standards and technical know-how of staff. - (ii) Revise and amend the Budget Law to clarify obligations and responsibilities, enable nationally uniform budget administration, and allocate budgets to priority areas while balancing local deficits. - (iii) Improve strengths and discipline in financial management; control unplanned and unnecessary expenditure. - (iv) Keep the rate of increase of expenditure smaller than the rate of increase of GDP; adjust expenditure items if revenue does not meet targets. - (v) Solve fundamental and urgent problems such as government staff salary payment. - (vi) Strengthen collection of taxes on natural resources to increase national revenue. ### External sector projections: exports, imports, and trade balance - Total exports (2006-2010): expected USD 3.48 billion, average increase of 18.1% per annum. - Exports in 2010: USD 1,046 million (a 2.2 fold increase over 2005 and 3.22 fold over 2001). - Exports per capita: about USD 187 by 2005. - Total imports (2006-2010): estimated USD 4.5 billion, average increase of 8.8% per annum. - Imports in 2010: USD 1.045 million (expected to balance with exports at USD 1,046 million). - Trade deficit over 2006-2010: about USD 1.02 billion, equivalent to 29.3% of the export value, or 5% of GDP (compared to 8.4% of GDP in 2005). ### Strategic objectives and structural reform priorities (selected) - Restructure the economy and employment to improve effectiveness and exploit comparative advantages of goods, sectors and regions. - Develop a multi-faceted economy with the public sector facilitating development of household, domestic private, foreign and collective enterprises; create a fair, transparent, stable, open and highly competitive environment for private investment. - Encourage development of small and medium enterprises to increase domestic resource mobilization, investment, economic output and employment. - Increase investment in socio-economic development and strengthen accountability mechanisms to ensure efficient use of public investment. - Expand and improve foreign trade; attract investment and technology; integrate into the international economy while implementing bilateral and multilateral commitments. - Continue reforms to make financial and monetary systems healthy; maintain stability of macroeconomic indicators, control inflation and budget deficit, and gradually build and expand the credit market. - Continue education, training, science and technology reforms to improve human resource quality; provide elementary education for all; utilize modern technology in advanced areas. - Develop economy in harmony with social development and environmental protection; create jobs, reduce unemployment and poverty, ensure equitable access to health services, and address social issues. - Speed up administrative reforms to improve effectiveness, transparency, and reduce bureaucracy and corruption; implement a fundamental civil service salary reform. - Maintain socio-political stability to sustain an environment conducive to national defence, security and overall development. ### Monetary policy and exchange rate objectives - Overall objective: control inflation and ensure safety of banking and credit organizations to stabilize investment environment and strengthen economic development. - Specific targets and tools: - Implement a flexible and cautious monetary policy to stabilize the Kip and keep inflation in single digits per annum during the Sixth Plan period (2006-2010). - Operate monetary policy through regulation of money supply and open market operations; BOL to trade bonds to regulate money in circulation. - Establish an Open-market Operations Management Board and BOL units to manage capital and adjust purchases of fixed duration bonds and Government bills. - Utilize capital replenishment tools: provisions for capital replenishment, discount, overdraft and deposits alongside key BOL interest rates. - Continue a controlled floating exchange rate regime to keep the Kip relatively stable vis-à-vis the Baht and the Dollar. - Target to decrease the share of foreign currency in total money supply from 65 percent in 2005 to 30 percent in 2010. - Target to accumulate and maintain foreign exchange reserves equal to at least three months of imports. - Issue higher denomination Kip notes (50,000 and 100,000) to facilitate larger transactions and limit over-use of the US Dollar. *Lao PDR: National Socio Economic Development Plan (2006-2010) — excerpt* ### 1. Banking Sector ### 1. Banking Sector ### Objectives and legal framework - Continue to refine the legal framework for the banking sector to better meet the needs of the fast developing economy and its increasing international integration. - Modify and supplement laws on Banking and credit organizations to serve as the basis for the development of the capital markets. - Move towards full implementation of internationally accepted rules and standards on banking activities. - Drafting and finalizing of the legal framework to fit the socialist-oriented economy and commitments on integration and opening markets will be completed to ensure systematic implementation of fair, consistent and stable financial sector policies. ### Commercial banks: operations, objectives, and priorities - Guide commercial banks toward provision of improved credit services based on principles of safety, efficiency and self-sustainability. - Priority lending to support production, processing and marketing of key products/goods in the agriculture sector and in rural areas. - Encourage expansion of credit to profitable and effective projects. - Reduce interventions by relevant authorities in commercial bank operations to improve dynamism. - Improve procedures and practices for loan provision and base monitoring/adjustment mechanisms on asset ownership (collateral). - Encourage diversification of monetary and banking services, development of capital markets and foreign exchange trading among commercial banks to enhance SOCBs’ capacity including in lending. - Improve staff skills to support commercial bank activities and ensure strict monitoring and evaluation. ### State-owned commercial banks (SOCBs): oversight, restructuring, and capitalization - Government to monitor SOCBs and enforce adherence to government agreements. - Examine accounting systems to bring them up to international standards; change classification of SOCB debts based on international standards. - Enforce regulations including shark loans, exchanges, guarantees and other conditions to allow creditors to collect debts, including through confiscation and sale of debtors’ properties. - Improve assessment of borrowers’ creditworthiness and increase loan monitoring to reduce loan losses; enhance transparency in evaluating debt amounts accurately. - Government committed to recapitalise the SOCBs through the provision of about 700 billion Kip in 2006 and 2007. - Restructuring and strengthening of SOCBs will continue, especially the three major ones (Banque Pour Le Commerce Exterieur Lao, the Lao Development Bank and the Agriculture Promotion Bank) building upon results of diagnostic financial audits. - Government exploring feasibility of partial privatization/joint ownership of the Lao Development Bank. - Government plans to gradually eliminate preferences for State-owned banks and require SOCBs to stop direct involvement in business activities of commercial banks. ### Agriculture Promotion Bank and microfinance - Transform the Agriculture Promotion Bank (APB) into a self-sustaining, market-oriented rural financial institution. - Encourage a variety of micro-finance institutions. - Endorsement (early 2004) of Policy Statement, Industry Assessment and Action Plan by the Rural Microfinance Committee to promote sustainable microfinance development, encourage diverse forms and ownership, and discourage subsidized credits. - Develop and increase quality of the people's credit system; announce regulations on peoples’ credit funds (including Village Development Funds) to suit social economy needs; continue loans to help build independent associations on volunteerism, self-reliance and self-motivation. ### Supervision, prudential standards, and monitoring (CAMELs) - Bank of the Lao PDR (BOL) to continue improving and creating regulations for monitoring operations and loans based on capital, assets, management, earnings and liquidity (CAMELs) ratios.4 - Study feasibility of an advance warning system initially based on the Basel Principles to forecast interest and profit trends, prices of services and loan growth. - Monitoring of SOCBs will utilize modern technology. - Assess BOL’s capacity to pay interest on mandatory reserves of commercial banks deposited with BOL, based on BOL revenue from foreign currency fund management and effectiveness of open-market and repayment operations. (Note 4: The CAMELs ratios comprise the prudential indicators of the adequacy of bank capital, the quality of bank assets, the efficiency of bank management, the robustness of bank earnings, the adequacy of bank liquidity, and the bank’s coverage of market risk.) ### Payments, services modernization and market infrastructure - Modernize banking operations adopting e-transaction systems. - Increase investments in inter-bank settlement, credit payment mechanisms and deploy new services. - Diversify financial services and improve quality and quantity to increase contribution to services sector value added. - Modernize communications modalities in financial and banking systems to make services courteous and expeditious. ### Financial market development - Implement a comprehensive plan to expand the financial market in the initial years of the Sixth Plan (2006-2010) with directions of safety, tight management monitoring and benefit protection for investors. - Focus first on developing a financial capital market to channel resources into business activities including monetary, foreign exchange, property and other means of converting resources into capital. - Expand financial markets with transparency in short-term capital swapping and currency trading. - Strengthen relationships between monetary and financial markets, policies, accounting management mechanisms and progress monitoring. - Development of a market for State bonds is at an initial stage; undertake research to improve market strength by assessing real returns and reflecting turbulent changes in market value of State bonds. - Implement early Sixth Plan tasks: conduct tenders for selling State bonds through Lao banks and targeted purchasers; obtain National Assembly approval for a clear domestic borrowing (state bond selling) plan with annual budgets; show ownership, divide bonds into sub-groups, and inform commercial banks to maintain funds to purchase State bonds at the beginning of the year. - Research experimental establishment of a stock market in Vientiane Capital City by the end of the final year of the Sixth Plan. ### Insurance sector - Increase the registration capital requirement for insurance agencies to enhance financial capacity for reimbursement of insured losses. - Encourage insurance businesses to study new products and diversify services, especially catering to agriculture, forestry and fisheries programmes. - Modernize professional financial management, risk assessment and information technologies to provide better services. - Strengthen government authorities’ capacity to closely monitor implementation of the Law on Insurance, regulate insurance companies and protect customer rights. ### Information, coordination and capacity building - Improve monetary and banking information systems to track money movement and provide solutions. - Provide training for government officials to upgrade skills in analyzing monetary developments, including impacts from interest rate changes, inflation, and economic growth. - Strengthen cooperation between ministries and sectors on annual financial and monetary policies and macro policy implementation. - Upgrade information systems in each ministry and sector by integrating databases to ensure adequate macro-environment information sources. - Complete legal requirements for BOL to coordinate with relevant ministries/sectors in calculating pricing tables, instalments and other data based on international standards. - Provide guidelines to Ministry of Finance and BOL to create firm cooperation between annual fiscal policies and monetary policies to contribute to macroeconomic stability. Final source: _Lao PDR: National Socio Economic Development Plan (2006-2010)_ *Source: _cr08341 - 1. Banking Sector_* ### 2. Some Important Initiatives in 2005/06 ### 2. Some Important Initiatives in 2005/06 ### a) Measures to Implement Customs and Tax Laws - Revised Laws on Tax and Customs adopted by the National Assembly in May 2005. Revision of the Law on Value-Added Tax (VAT) completed and to be submitted to the National Assembly. - Tax Law implementation measures: - Disseminate the revised Tax Law to businesses, civil servants and all citizens; provide training and advice to facilitate compliance. - Tax Department to accurately survey all businesses nationwide to achieve revenue targets. - Improve tax collection administration by using vouchers/receipts defined by the Law and transferring responsibility for tax collection (in transactions) to businesses. - Encourage all people to obtain accurate receipts of purchases to improve tax monitoring. - Conduct studies to define taxable items and tax amounts on imports and exports to draw up a tax payment verification paper. - Encourage businesses that meet requirements to keep necessary accounts per Article 41 of the Tax Law; enhance coordination with provincial accounting offices to monitor and act against non-compliant enterprises. - Monitor companies and projects granted tax exemptions on imported goods to ensure intended use; monitor newly established duty-free shops for compliance. - Establish an investigation committee to investigate smuggling cases with authority to take action according to the Law. - Study improvements to the information system, including: - (i) have a computerized tax declaration system; - (ii) supply information on taxable goods; - (iii) link all border and provincial offices and departments; and - (iv) supply the necessary statistical data to the tax offices. - Customs Law implementation measures: - Disseminate revised Customs Law nationwide to civil servants, private sector and entrepreneurs; provide training and advice on implementation. - Incentive/bonus of 0.5 percent of the collected revenue (except special charge for timber, electricity, etc.) to sectors and localities that generate income from collection of customs duties and taxes (import and export). - Study ways to improve and expand the information system to all border and provincial offices to ensure effective implementation. - Finance Control Department and local Finance Control offices, with related Departments and Offices, will: - Monitor performance of each Department, Provincial Finance Office, Border Post and enterprise regularly; - Seek productive lessons learned; review performance results; prevent negative phenomena; solve outstanding financial problems. - Monitor newly established duty-free shops and present breaches to higher authorities. - No custom officers or authorities are exempt from customs duties. - In cooperation with concerned sectors, set up an investigation committee to investigate smuggling cases (e.g., illegally imported vehicles and goods) with the right to take action according to the law. ### b) Public Expenditure Review (PER) - PER undertaken to examine expenditure trends between 2002 and 2005 to support establishment of sound, accountable and transparent financial management practices. - PER provided inputs to formulation of the 2006 state budget and the pilot Medium-Term Expenditure Framework (MTEF) for 2006-2010. - Main objectives of the PER: - (i) review macro fiscal performance and intra- and inter- sectoral allocation of public spending at central and local levels for 2002-2005; - (ii) assess sustainability of the macro fiscal framework and budget financing by source for 2006-2010; - (iii) review institutional framework for public expenditure management (PEM) to support Government efforts to strengthen PEM; - (iv) conduct intra-sectoral analysis of public resources for NGPES/NSEDP priority sectors by assessing quality of core public services, efficiency in delivery and budget execution processes, especially at local level. - The report is being finalized. - Government intends to implement a rolling programme of PERs, public expenditure tracking surveys (PETS) and analytical work to monitor progress in implementing the Public Expenditure Management Strengthening Programme (PEMSP) and assess improvements in fiscal management and impact of public spending in key sectors. ### c) Public Expenditure Management Strengthening Programme (PEMSP) - Overall objective: achieve sound financial management in a transparent and accountable manner. - PEMSP formulated with consultation and assistance from development partners; supported by the World Bank (IDA) through the Financial Management Capacity Building Credit. - Programme focuses on improvements in five main areas: - (i) fiscal planning and budget preparation; - (ii) budget execution, accounting and financial reporting; - (iii) local government financial management; - (iv) financial legislation and regulatory framework; - (v) capacity building. - Coverage and timing: - Programme covers four main Departments – Fiscal Policy, Budget, Treasury and Accounting – in the Ministry of Finance and their counterparts at the local level. - To be implemented during the Sixth Plan period (2006-2010). - Operationalisation and governance: - First Annual Work Plan for FY 2005/06 presented to development partners on 22 November 2005. - A Steering Committee based in the Ministry of Finance established for programme management. - An Implementation Committee and three Thematic Task Forces formed for technical aspects. - A Secretariat led by a Programme Director set up in the Ministry of Finance to assist coordination. - Strategy and stakeholder engagement: - Strategy involves national stakeholders through consultative workshops at provincial and central levels to build national understanding and consensus on priorities, strategy, outputs and approach. - All MOF departments consulted during the first months of 2006. - Three provincial workshops held to familiarize provinces and districts with the programme, exchange PFM experiences, and discuss assistance needs. - Planning and pilots: - Information on the programme to be shared with development partners through regular Consultative Forum meetings. - A draft programme document prepared for discussion and endorsement at an upcoming national workshop; document contains short and long-term strategies and a five-year budget. - A PEMSP pilot to be launched in Xiengkhouang Province in cooperation with the Governance and Public Administration Reform (GPAR) Programme. ### E. Real Estate (Property) Market Development - Complete legal framework for real estate market development including land acquisition and home-owners’ rights. - Make conditions for transferring ownership of land and other property rights more favourable. - Open opportunities for citizens and enterprises to obtain long-term rights to utilize land in production and business to improve living conditions. - Focus on land for agriculture and development of farms with large or medium-scale parcels in areas with good conditions. - Revise records related to land use to identify land acquisition without benefits or objectives by state enterprises, state and social organizations. - Review utilization of land within urban areas and issue appropriate directives for enterprises and people. - Continue dissemination of regulations related to land acquisition for both Lao and foreign persons to attract funds and meet accommodation demand, especially for citizens who provide excellent achievement for the country and for families with low incomes. ### F. Trade Strategies and Regional and Global Integration - Objectives: - (i) accelerate export of commodities and participation in regional and international economic activities by developing exports with high and stable growth to drive the economy; - (ii) secure adequate foreign currency to import materials and equipment for production; - (iii) create stable markets for competitive agricultural and industrial products; - (iv) increase market share in existing markets; - (v) improve accessibility of new markets. 1. Exports - Export Guidelines: - Support production and export of important products and develop other potential products into key exports. - Increase exports of high value-added, processed, high-end technology and key products known in world markets; reduce share of raw materials/products in total exports. - Projected value of exports in 2010: USD 1,046 million (about USD 116 per person) or 2.2 times that in 2005. - Composition of Exports: - Agriculture, forestry and aquatic products: - Growth estimated at 13 percent per annum during 2006-2010. - Likely share in total exports around 27-28 percent. - Requires investment in high quality and high yielding seeds and post-harvest technologies; focus on genetic, processing, storage/preservation, sanitation, packaging, transport, distribution and value added aspects. - Coffee: - Share in total exports would stay at 3-4 percent. - Value of coffee exports estimated to grow at a rate of 8 percent per annum. - Competitiveness limited by lack of investment in post-harvest processing causing a 10 percent price discount in world markets. - Wood and wood products: - Export growth estimated at 7-9 percent per annum in coming years due to raw material shortages from logging quota policy. - Light industry and handicrafts: - Textiles and handicrafts dominant. - In 2005, group generated export revenues accounting for more than 26 percent of total exports. - Expected to reach USD 195 million in 2010, with share declining to 24.4 percent of the total. - Textiles: - Projected export turn-over increase by 5 percent on average during the next five years. - Markets mainly EU (France, Germany and Great Britain) thanks to GSP; in 2003 exports under GSP comprised more than 90 percent of total export turn-over of Lao textiles. - Handicrafts and artefacts: - Mostly silk and cotton costumes and bamboo furniture; exported to EU, Japan and the USA. - Raw Materials, Energy and Minerals: - By 2010, sector to account for 44.6 percent of total export turn-over. - Dominant commodities: electricity and minerals (gypsum, gold, etc.). - Electricity export share: 28 percent in 2001; 26 percent in 2005. - Major export market for electricity: Thailand, followed by Vietnam and Cambodia. - Electricity export turn-over planned to grow at a rate of 18-25 percent per annum, especially in latter years of the Sixth Plan (2006-2010). - Mineral sector exports projected to grow by between 18 and 20 percent per annum during 2006-2010. - Export Markets: - Asia projected to account for between 55 percent and 60 percent of total export turn-over during 2006-2010. - Share of exports to the EU strengthened to 28-30 percent; Australia to 10-12 percent; USA and Africa to 3-4 percent. - Focal markets: ASEAN; China, Japan, Taiwan and Korea; EU, Switzerland and Russia in Europe; Australia; the U.S.; and South Africa. - Emphasis on expanding and diversifying markets while strengthening positions in existing markets; upgrade quality of products for export. 2. Imports - Guiding Principles: - Prioritize imports of materials, equipment and advanced technology for industrialization to enhance competitiveness and increase exports. - Make full use of locally made materials and equipment; limit imports of consumption products. - Shift composition of imports toward machinery and industrial equipment: - Share of imports for investment projects increasing from 40.3 percent in 2005 to 44.7 percent in 2010. - Share of raw materials and fuel decreasing from 48.4 percent in 2005 to 44.6 percent in 2010. - Import turn-over in five years estimated at USD 4.5 billion, increasing on average at 8.8 percent per annum. - Imports to increase from USD 686 million in 2005 to USD 1,045 million in 2010. - Market Sources: - In 2006-2010, share of imports from the Asian market to reduce from 80 percent to 75 percent; EU markets to increase to 18-20 percent; USA market share at 2-3 percent; Oceania and African market share around 2-3 percent. - Focal Asian markets: ASEAN (particularly Thailand and Vietnam), China, Japan and Korea. - Develop trade relations with EU and non-EU European countries (Norway, Switzerland and Russia); other major import markets: Australia, USA, Canada and South Africa. 3. Trade Balance - Projected trade deficit for 2006-2010: about USD 1.02 billion, equivalent to 29.3 percent of total export turn-over, or 5 percent of GDP. 4. Trade Development Strategies - Government to formulate and implement programmes and projects to develop key exports; increase export volume of commodities with established export markets; improve quality of exports to meet market demand. - Mechanisms to promote exports: export credit, export awards, trade promotion, and border market development to be formulated and implemented. - Export development strategy being formulated to cover tourism, garments, medicinal herbs, organic (agricultural) products, silk, handicrafts and wood products; conducted in parallel with Diagnostic Trade Integrated Study under the Integrated (Trade) Framework (IF-DTIS). - Draft matrix of follow-up actions prepared to implement trade facilitation activities with development partner support. - Increased efforts to acquire and timely disseminate world market information to exporters; provide advice to factories on market promotion, expansion and brand development. - Encourage businessmen to promote exports of highly processed and high technology products. - Continue to refine export management mechanism in line with regional and international economic activities to raise competitiveness of commodities, services, enterprises and the overall economy. - Explore avenues to reduce production costs, increase quality and competitiveness of exports, promote investment in new technology, increase value and quality of processed products, and reduce volume sold through middle agents. - Enhance efforts to control smuggling, illegal trading, and production and sale of counterfeits. - Review tax and fee collection systems to resolve issues timely; create favourable environment by implementing rules and laws for import-export enterprises. - Implement import duties policy to comply with processes of participation in regional and international economic activities. - Promote international trade activities firstly with regional countries; formulate an overall plan and road map with proper timelines compatible with Lao PDR development stage and international organization requirements. - Promote implementation of CEPT/AFTA and actively negotiate accession to WTO during the Plan period. *Source: _cr08341 - 2. Some Important Initiatives in 2005/06_* ### 5. Regional and Global Integration ### 5. Regional and Global Integration ### International integration and trade policy - Sixth Plan (2006-2010) objective: fully implement the integration roadmap and commitments for the country to become a prestigious member of international organizations (including WTO) and in multilateral relationships such as AFTA and GMS. - Policy actions: - Extend bilateral and multi-lateral agreements; formulate and improve draft laws with respect to mutual development; maintain long-term relationships with contracting parties to contribute to socio-economic development. - Explore trade and cooperation arrangements that generate more benefits while minimizing constraints that impede socio-economic development. - Implement AFTA tariff reductions on time. - Adjust and strengthen institutions and staff capacities to meet modernization requirements and comply with WTO regulations. - Advise enterprises to reduce product costs, increase product quality and competitiveness, and create brand names as protection barriers are removed. ### Labour and Employment — objectives and targets - Overall Sixth Plan labour targets and measures: - Target to provide additional employment for 652,000 people during the next five years, with an annual average of more than 130,000. - Reduce proportion of labour in agriculture, forestry and fisheries to below 73.9 percent by 2010. - Increase labour in industry and construction to at least 9.3 percent by 2010. - Increase labour in services to 16.9 percent by 2010. - Skills, training and financing: - Focus on upgrading quality and productivity of the labour force; mobilize all potential workers for national development. - Promote sectors (notably light industry and industrial processing) to increase investment and develop professional skills; emphasize vocational training promotion mechanisms. - Encourage domestic and foreign private sector participation in vocational training. - Mobilize funds from Government, other domestic sources, foreign aid and FDI to solve unemployment problems and promote employment in industry and rural areas. - Regional training and labour mobility: - Formulate employment policy for youth in rural areas and minority groups; improve employment networks and technical skills. - Develop training centres in the Northern, Central and Southern regions to increase employability. - Conduct market testing for some occupations, particularly in Vientiane and Champasak, and develop labour markets linked to general planning. - Support increased mobility through commuting, and temporary and permanent migration to urban areas to reduce income variability and transfer skills and disposable incomes back to origin areas. ### Labour exports and imports - Exports of labour: - Target of about five thousand workers working abroad each year during the next five years. - Prepare labour export project to widen participation in economic sectors and upgrade workers' skills for high-wage labour markets. - Adjust labour export procedures to be compatible with laws, culture, attitudes and traditions of receiving countries. - Encourage foreign language learning and strengthen cooperation with receiving countries; improve information base for Lao labour exports. - Labour imports: - Formulate a policy on the use of foreign labour to motivate foreign markets to work with line agencies and provide professional skills not available domestically. - Continue to address foreign labourers working in the country without permission. ### Labour market development and social protection - Labour market matching and measures: - Ensure smooth matching of workers with jobs; encourage economic sectors to create jobs, disseminate occupation information, dispatch workforce overseas, and adopt policies to attract highly skilled labour domestically and internationally. - Support self-employment and access to international markets for local workers. - Improve regulations on business services for employment and labour exports to offer preferable conditions for local service providers and increase state monitoring capacity. - Social security: - Implement social security, especially unemployment insurance, to provide equal opportunities to workers in all economic sectors with reasonable benefits for employees and employers. ### Role of the State in the Market Economy — objectives and tasks - Overarching role: - Establish market economic mechanism that clarifies Government’s role in market monitoring, service provision, and macroeconomic management through reform and improvement of taxes, banking, and investment promotion. - Use macro management, legal tools, national planning prioritization, and mid-term and long-term development strategies to guide market economy management. - Ensure economic laws provide transparency and firm enforcement; follow the principle that people can run all businesses not prohibited by law. - Government intervention only when market economy creates adverse societal impacts; interventions to be clearly stated in legal documents and enforced. - Improve legal documents on business audit to avoid duplication and complications for enterprises. - Priority tasks during 2006-2010: 1) Stabilize macro economy; formulate effective management and legal systems; support competitive multi-sectoral economic development including private sector; encourage market efficiency and expansion of comparative advantages; ensure implementation of comprehensive laws. 2) Continue improvement of state regulation of the economic mechanism by developing comprehensive macroeconomic management, including: - a) Reform operational mechanism: clarify roles, tasks and responsibilities of Government ministries, agencies, NGOs and local authorities; focus on policy formulation, supervision, monitoring and implementation of macro management programmes; define division of authority among central and local levels; enhance participation of civil society, NGOs and other enterprises in social service delivery. - b) Reform document administration to ensure law enforcement efficiency, transparency and equity; eliminate duplicate documents, corruption-prone procedures and unnecessary processes in granting investment permissions; implement “one door” mechanism; train officials to increase public servants’ morals and ethics. - c) Increase quality, knowledge and capacity of civil servants in management following “market-orientation”; conduct regular study and improve staff training plans; increase transparency in official movement, particularly in financial and budget areas; enhance anti-corruption campaign within government organizations. 3) Reorient planning as an important Government tool integrated with the market economy: increase scientific knowledge and practice in planning; reform characteristics, contents and methodologies in basic planning to utilize planning as a tool against “irregularity” of funds and ensure sustainability of national development. 4) Government to act as economic manager and investor as necessary during the “transition” process: - a) Explore methods to solve problems of ineffective state-owned enterprises that still play important roles in basic economy sectors. - b) Ensure legal bodies implement roles in formulating national economic policy and socio-economic development plans, focusing on structural change toward an industrial and modern economy. 5) Integrate social roles (education, health, job creation, poverty reduction, social, cultural and environmental protection) with economic goals to strengthen social and political stability and provide a solid base for economic development. ### Thematic and cross-cutting area — Poverty reduction: situation and implications - Poverty characterization: - Poverty is multidimensional: beyond inadequate income, it includes lack of access to basic social and essential economic services and life choices; different groups experience poverty differently; inequality in land ownership, wealth and income distribution, access to goods and services, remunerative jobs, and participation contribute to poverty. - Income poverty trends (LECS surveys): - Incidence of income poverty (headcount index) declined from 46.0 percent in 1992/93 to 39.1 percent in 1997/98. - LECS III (2002/03) shows income poverty declined further to 33.5 percent in 2002/03. - If the declining trend continues, the country could achieve the MDG target of reducing the proportion of people below the poverty line by half by 2015 (as compared to that in 1990). - Other social indicators and progress: - Life expectancy has exceeded 60 years as compared to 50 years in 1990. - Infant mortality declined from 120 in 1990 to 82 per 1,000 live births. - Under-five mortality declined from 163 to 115. - Maternal mortality declined from 650 per 100,000 live births in 1990 to 350. - Adult literacy rose from 43 percent to 53 percent. - Net enrolment in primary education increased from 61 percent to about 81 percent. - Access to health services, safe water and roads has improved modestly during the past fifteen years. - In terms of MDGs: country seems on track for under-five mortality target but may have difficulty meeting maternal mortality target if past trends continue. - Policy implications: - Poverty reduction requires redistributive policies and programmes to extend opportunities, incomes, services and choices to the poor across the multi-ethnic population. - Development of productive potentials of the poor, women and vulnerable groups would contribute to rapid economic growth and sustainable development and reduce negative externalities such as crime, disease spread and environmental degradation. - The National Growth and Poverty Eradication Strategy (NGPES) reflects the vision for poverty reduction within the 2020 goal framework; Government committed to poverty eradication and promotion of equity within rapid and sustainable economic growth. *Lao PDR: National Socio Economic Development Plan (2006-2010), Chapter 5.* ### 2. Poverty Reduction Strategy ### 2. Poverty Reduction Strategy ### Overall strategy - Assist the poor to help themselves to fully utilise their labour and other modest resources, improve their situation and exit poverty. - Government roles: - Enlarge economic opportunities. - Enable the provision of basic social and essential economic services. - Ensure security. - Facilitate participation and empowerment of the poor in economic, social, political and other arenas. - Only a small fraction of the poor that can not take advantage of the opportunities to help themselves due to age and other factors would require direct financial support. - The Government will continue to provide pensions to people with disabilities and those elderly individuals who did good deeds for the nation. - NGPES presented the strategic medium term framework for fighting poverty with the participation of the people through human resource development and rural development. ### Expansion of Economic Opportunities - Rapid economic growth is recognized as necessary to reduce poverty on a sustainable basis. - The people — including farmers, workers, traders, and micro, small, medium and large entrepreneurs — are the main agents that generate economic growth through their efforts and innovations; the Government is primarily a facilitator. - Assets and efforts of all people, including the poor, are necessary to maintain rapid economic growth, reduce poverty and sustain development. - The poor constitute about a third of the population of the Lao PDR. - Successful countries in East and Southeast Asia mobilised the efforts of all their peoples — rich and poor, men and women, skilled and unskilled — to generate and sustain rapid economic growth, reduce poverty and achieve the status of newly industrialised countries (NICs). ### Rural emphasis and agricultural productivity - More than three-quarters of the population of the Lao PDR live in rural areas and a large majority of these depend on agriculture for their main means of livelihood. - Poverty in the Lao PDR is predominantly rural and is more severe in the remote highlands. - Experience during the past fifteen years has shown that increasing agricultural productivity and improving market access through road infrastructure have been instrumental in reducing poverty in the lowlands. - The incidence of poverty in the accessible rural lowlands is significantly lower than that in other rural areas. - Lesson: increasing productivity in agriculture and auxiliary occupations in rural areas and improving access to markets are critical for achieving further significant reductions in poverty over the medium term. ### Government priorities and proposed initiatives - The Government recognizes increasing agricultural productivity and market access as a high priority. - Proposed initiatives within the Plan include the rehabilitation and construction of irrigation systems and their improved operation. *Source: Lao PDR: National Socio Economic Development Plan (2006-2010), Chapter 2.* ### introduction and wider distribution of improved seeds of crops, fruits and vegetables; ### introduction and wider distribution of improved seeds of crops, fruits and vegetables; ### Agriculture and rural livelihoods - Introduction and wider distribution of improved seeds of crops, fruits and vegetables; protection of livestock; and sustainable management of forests and other natural resources, through community participation. - Improvements in marketing and infrastructure are planned. - Provision of support services including agricultural and livestock extension and the supply of production and investment credit are planned by the Government. - Private initiatives including those by foreign investors and traders from neighbouring countries to promote contract farming, especially in horticulture and tree crops are being encouraged. ### Informal sector, micro and small enterprises - The informal sector comprising mostly micro and small enterprises has been an important contributor to growth in the Asian NICs, especially during the early stages. - A large proportion of the full and part-time employed in the Lao PDR are dependent on the informal sector (in mainly trade and services) in both the urban centres and the rural areas; a significant proportion of these are likely poor. - Initiatives proposed in the Plan include: - Promotion of micro, small and medium enterprises; - Enlarging access to appropriate technologies; - Provision of support services including the supply of credit (both through formal institutions and informal ones including user groups) and training. ### Formal private sector and investment - Formal private sector areas: agro-processing/manufacturing, mining, construction, tourism, wholesale and retail trade, transport, and other services. - Legislation and regulations have been put in place to improve the enabling environment, and to encourage both domestic and foreign private investments. - Private investments are described as vital catalysts for technological advances and engines of growth of higher productivity (remunerative) jobs important for poverty reduction. ### Infrastructure - Provision of infrastructure includes roads and bridges, river landings/jetties, electricity, telecommunications and postal services. - These are critical for the movement of people and goods, flow of essential information, and orderly and efficient functioning of markets including labour markets. ### Macroeconomic policies and public finances - Macroeconomic policies and the management of public finances, including public expenditure allocation, are a priority. - The Government has begun to pay increased attention to pro-poor macroeconomic and public expenditure policies and will implement these with increased vigour during 2006-2010. - Funds will be increased for poverty reduction to support the extension of credit to the poor to support the development of their production and business operations. - Efforts will focus on increasing the incomes of the poor and reducing the gap between the rich and the poor. ### Social services: education, health, water and sanitation - Basic social services highlighted: primary, lower secondary and adult education, basic healthcare, safe water and sanitation. - Enhanced access to and use of basic social services is an urgent need especially in the remote highlands. - Government dilemma: high cost of providing basic social services to a small and widely scattered population; testing approach of bringing people to accessible service centres in selected difficult to reach areas. - Education: - Implementation of the Education for All Programme as the key plank within the Government’s Education Sector Strategy. - More primary, secondary and pre-schools will be built and supplied with qualified teachers and necessary equipment. - Programmes to improve school participation and completion rates, and the quality of teaching and learning. - Evidence shows education of girls and women has multiple benefits. - Health: - Access of the poor constrained by availability and ability to pay service fees and purchase medicines. - Present system provides for exemption of payment by the poor, but application has proven difficult. - Most health facilities depend on service fees to cover operating costs. - Immediate priorities: (i) increase people’s access to quality health care services, (ii) stop the spread of communicable diseases, and (iii) decrease maternal and child mortality rates. - Government actions: building and upgrading health centres and hospitals, raising capacity of health care professionals, prepare and use policy on health monitoring and treatment for the poor. - Water and sanitation: - Access to safe water and sanitation is relatively low compared to regional averages. - Costs of water supply schemes are quite high due to high standards stipulated; need to explore less costly and more appropriate technologies. - Government approach: address provision of water supply services on a cost recovery basis; in rural areas pilot community ownership and operation under various projects. ### Security: UXO, opium elimination, food security, natural disasters - Security covers protection against violence, destruction, theft and unexploded ordnance (UXO), food insecurity, and unforeseen calamities such as natural disasters. - Security situation has improved consistently over the past decade with community and government efforts. - UXO: - UXO is a major security challenge affecting access to land and markets and is a major risk for children. - Significant correlation between presence of UXO and prevalence of poverty. - Government with development partners addressing UXO clearance and rehabilitation of cleared areas. - UXO/Mine Risk Education (MRE) teams will visit and deliver MRE training to all communities in the country. - All agricultural areas considered “high priority” will be cleared, and a sizeable portion of other areas identified as “medium priority.” - A national database on Mine/UXO accidents will be developed and updated regularly to feed into prioritisation of UXO clearance and MRE tasks. - Opium elimination: - Elimination of opium cultivation and use has been successful in eliminating cultivation, but finding alternative livelihood activities that generate adequate incomes remains difficult and requires continued attention. - Food (rice) security: - Geographic and seasonal pockets of rice scarcity persist; many communities lack adequate coping mechanisms. - National food security has improved due to substantial increases in rice production, but food security may still be a significant concern for the poorest households. - Constraints include limited distribution capacity, increasing population pressure on available lands and prevalence of natural disasters. - Natural disasters: - Government will develop and implement programmes for prevention of and protection from natural disasters; regularly monitor situations including seasonal rice scarcity and weather changes; find methods to solve damage and provide timely support to victims. - Emphasis on community involvement and strengthening community resilience. ### Participation, empowerment and decentralisation - Participation of the poor in decision-making on economic, social, cultural and political issues is essential for empowerment. - Prime Minister’s Decree (no. 001) stipulates provinces as strategic units, districts as planning and fiscal units, villages (communities) as implementing units. - Public administration and Party machinery encourage active participation of people in local decision-making. - Measures in the Plan to strengthen capacities of communities including the poor in articulating priorities, implementing programmes and monitoring progress. - Decentralisation: - The State Administration is built on a decentralized system with authorities and responsibilities shared between the Centre and the Provinces. - A comprehensive review of distribution of authorities and responsibilities between the Centre and Provinces is necessary; Government has initiated steps to review arrangements and the process of adjustment during the Plan period. - Information and communication: - Improvements needed in two-way (top-down and bottom-up) flow of information and communication and education. - Mass media and telephones are important means; people will be provided more information to increase their ability to participate and their knowledge about rights and obligations. ### Development of the poorest areas and targeted interventions - NGPES identified 47 poorest and 25 poor districts. - Committee for Planning and Investment (CPI) together with relevant Ministries and local communities has facilitated preparation of focal area development plans for some 33 kum bans (groups of villages) in pilot districts among the 47 poorest districts. - Programmes mostly in agriculture and rural development (sustainable livelihoods), education, health and transport/infrastructure. - Targeted interventions include focal areas development, Village Development Funds and the Poverty Reduction Fund (PRF). - Government plans include: - (i) diversify funds for resettlement, stop forest destruction, and eliminate opium growing areas; - (ii) increase incomes of people in rural and remote areas and minority ethnic people; - (iii) encourage people to escape poverty and become rich to help others and abolish hunger (rice scarcity) and poverty; - (iv) integrate poverty reduction action plan into regional socio-economic development; - (v) prepare priority projects in particular areas such as support for land zoning conditions for production and housing; - (vi) support campaign and upgrade knowledge and responsibilities of people involved in poverty reduction at different levels; - (vii) evaluate and publicize types, models and effective methods suitable to each part and locality; - (viii) develop and increase staffing; and - (ix) promote agriculture, forestry and fisheries as ways to reduce poverty. - Organize pilot project to dispatch youth to work in poor districts and villages; prepare suitable policies for youth to build confidence and volunteer for long term work in difficult areas. - Boarding schools developed to provide schooling opportunities for ethnic minorities in remote villages. - Government will facilitate migration from remote areas to find wage employment and better access to services. - Emphasis on increasing investment and implementing transparent policies for poverty reduction; priority projects in the PIP focus on development of difficult areas, especially the 47 poorest districts. - Grant aid needs to be attracted for infrastructure development in these areas. - Attention paid to border economy development: border checkpoints, important roads and economic corridors; focus on animal rearing, planting industrial trees and forestry for raw materials. - Poverty reduction projects implemented in association with projects for reducing slash and burn practices and turning to permanent paddy cultivation, and healthcare projects. - Priority to development of local labour skills and significant investment in upgrading education and healthcare. ### Key measures (selected) - Continue work on poverty reduction in the 47 poorest districts, with focus on rapidly reducing the number of poor households by 2010. - Set new national standard of poverty based on international standards. - Develop national strategy to solve absolute poverty reduction problems and establish mechanism and structures for project management. - Strengthen staff capacity for implementation of poverty reduction strategies and projects; closely monitor implementation at local level; priority to assist remote areas with special difficulties. - Estimate costs and prioritize poverty reduction projects in focal development areas to be supported by domestic and foreign resources. - Urgent need to set up the national advisory committee on poverty reduction at the beginning of the Sixth five-year Plan; set up model development villages and conduct regular exchange of views on poverty reduction. - Urgently complete development of pro-poor policies; pay special attention to policy on health care for poor people and the special policy on access to school for children from poor families. - Develop investment policy; expand schools in rural areas, particularly remote and difficult areas; gain support from the World Bank and other international agencies. - Priority assistance on land use, production conditions and housing in difficult areas; support advocacy and increase awareness and sense of responsibility on poverty reduction at all levels. - Analyse and propagate effective formats, models and methods on poverty reduction appropriate to each region and locality; develop and increase staff for promotion of agriculture and forestry related to poverty reduction and ensure close sectoral coordination. - Conduct pilot project sending junior staff to poor districts and villages with appropriate incentive policies. - Undertake social mobilization for implementation of the national poverty reduction strategy; organize introduction of poverty reduction among mass organizations, business persons and local authorities. - Coordinate development of key economic sectors related to poverty reduction such as eco-tourism and tours to historical and cultural sites in poor districts to generate income while preserving cultural heritage and protecting the environment. - Review strengths of development format from Fifth five-year Plan (2001-2005) to strengthen implementation of Sixth five-year Plan (2006-2010). - Increase funds for poverty reduction, focusing on promotion of credit schemes for poor people, setting appropriate interest rate and repayment periods, provide technical assistance and market information, guarantee price of agricultural production through Funds, expand village development fund, job opportunities and supplementary professions. - Raise capacity of poor people for goods production and small-scale businesses; endorse policy on assistance to poor people on production and marketing; reduce adverse effects (risks) for poor households from membership in AFTA and WTO. - Improve and continue implementation of pro-poor policies focusing on curative and preventive health care, education, housing and access to low interest credit schemes or grants. - Establish information system as basis for monitoring and evaluation of implementation of poverty reduction strategy from central to local levels. - Continue management, social mobilization and international cooperation in implementation of NGPES priorities incorporated in Sixth Five-Year Plan (2006-2010); make poverty reduction a public responsibility and a priority of the Government. - Conduct advocacy for raising awareness among ethnic groups; implement policy on care for the disabled, orphans and disadvantaged people. - Develop and implement strategy on prevention and protection from disasters; regularly observe famines that occur in mid-season and natural changes to solve problems and provide help in time. ### Guidelines for remote village development (2006-2010) - Develop and implement the socio economic development plan in remote, ethnic areas; strive to supply necessary infrastructure for these villages. - Develop infrastructure for village groups; reorganize village groups to facilitate agro-forestry development; reduce disparity of living conditions among different ethnic groups. - Implement land-forest allocation to local people and build capacity for ethnic groups and highland people, especially families of ethnic minorities with focus on effective production and increase awareness on national security. - Encourage and promote permanent settlement to ensure production; upgrade people’s living conditions in accordance with traditions and based on focus village arrangement. - Study and consider conditions for development of infrastructure for community groups such as roads, water supply, electricity, information and markets. - Explore potential of land and labour force; encourage forestation and plantation of industrial trees and fruit trees. - Promote traditional handicrafts of ethnic groups and highland people; introduce methods for earning a living; promote agriculture, transfer of technology, and provide information focusing on active goods production. - Provide capacity building and training of staff from ethnic groups and utilize them for long-term services in their locality. - Grant special authority to older persons in villages (the Lao National Front) and the Lao Women’s Union to strengthen solidarity among ethnic groups. - Improve and expand education, health care, culture and information programs for ethnic groups. - Increase awareness on preservation and promotion of cultural values and traditions of all ethnic groups; sustain and develop spoken languages and written characters/alphabets. - Teach ethnic dialects in schools where ethnic characters/alphabets already exist. *Lao PDR: National Socio Economic Development Plan (2006-2010).* ### 3. Targets ### 3. Targets ### Poverty reduction objectives - Overall goal: Improve quality and living standards of the people, particularly in poor and remote areas; promote employment in rural areas and income generation activities while respecting the laws; increase access of poor households to education, health, credit, etc.; encourage households that have overcome poverty to help other poor families. - Specific targets: - Implement the objective of poverty reduction to bring down the ratio of poor families to below 15 percent in 2010 compared with that in 2000; - By 2010, abolish completely seasonal hunger (rice scarcity) at the household level; - Reduce the ratio of malnourished children under five to below 30 percent; - Accomplish the programme of Education for All; - Provide clean water to 65 percent of the population in rural areas; - Lower the population growth rate to 1.91 percent; - Raise the ratio of green areas to above 50 percent of all natural areas. ### B. Poverty Focussed National Programmes — 1. Drug Control - National commitment: - Party to the three international conventions on narcotic drugs; committed to eliminating illicit opium poppy cultivation. - 7th Party Congress identified elimination of opium and poverty as national priorities. - Progress and livelihood impacts: - Recent data shows Lao PDR has reached its goal of eliminating opium cultivation in the country. - Many farmers have adapted or are adapting to livelihoods without opium poppy by: growing more rice and other crops, selling livestock, collecting non-timber forest products. - Some farmers earn more now than from opium; in some areas alternative livelihoods remain insufficient and some coping strategies may be unsustainable. - There are 18,500 opium addicts in the eight Northern Provinces covered by the 2005 Opium Survey, which is a decrease of 32 percent since 2003. - Women benefit from opium elimination through increased time at home, tending livestock, growing vegetables, market participation; stopping addiction reduces domestic abuse and increases labour capacity and family income. - Post-opium national strategy (The Balanced Approach to Sustaining Opium Elimination in the Lao PDR (2006-2009)): - Goal: Stabilize post-opium scenario and provide assistance to uncovered areas via a holistic approach addressing capacity building, household incomes and livelihoods, road access, economic and social services, ethnic diversity, migration, and sustainable natural resource management. - Four main components: - (i) Development of alternative livelihoods: provide sustainable assistance to improve existing livelihood strategies and increase access to micro-credit, markets and skills training; - (ii) Reduction of demand for opium: improve community capacity to resolve drug problems, provide treatment to remaining addicts to prevent relapse and new addictions to other illicit substances, and provide treatment to old addicts, especially those with severe diseases; - (iii) Increased law enforcement: support capacity enhancement and strengthening of provincial, district, village and community based drug control bodies to stop opium production and trafficking; - (iv) Enhancing civic awareness: mobilize relevant communities in community drug control and prevention and promote national and local campaigns including dissemination of appropriate public information material through the media. - Emerging drug challenges: - Since the Opium Elimination Programme launch, trafficking and abuse of Amphetamine Type Stimulants (ATS) have increased dramatically. - Increased ATS availability may be linked to freer border movement and reduced opium availability may have created a market for alternative drugs. - ATS use and dependency greatly increases vulnerability to negative economic, social and health outcomes; injecting behaviour is linked to spread of HIV/AIDS. - Government has formulated a Drug Demand Reduction Strategy that includes ATS; next step is to establish law enforcement strategy for drug trafficking. - Government and development partners intend to prevent spread of ATS and minimize risk of opium demand being replaced by ATS demand. ### B. Poverty Focussed National Programmes — 2. Unexploded Ordnance (UXO) - Scope and impact: - UXO threatens physical safety, livelihoods and food security of people in more than 25 percent of villages in the Lao PDR. - Two-thirds of the land area is contaminated with UXO; many highly contaminated villages are in remote, difficult to reach areas. - High incidence of poverty in rural communities is often correlated with high levels of UXO contamination. - Large-scale contamination renders vast land areas unsafe for agriculture, infrastructure or other human activity. - Children are increasingly at risk. - Accident statistics and trends: - Number of UXO accidents increased from 60 accidents in 2003 to 90 in 2004, and 89 so far in 2005. - Children represented 45% of victims in 2003; that proportion currently stands at roughly 60%. - UXO Lao suggests one main cause of increased accidents is the introduction in 2002-2003 of low-cost, low-technology metal detectors and a steep rise in the trade in scrap metal; children are principal collectors of scrap metal. - Historical and human costs: - Since 1975, UXO accidents have resulted in over 13,000 casualties, with about one-third of the victims dying from their wounds. - Many survivors suffer severe impairment and face barriers reaching hospitals; average cost of treatment for survivors can be as much as half the annual income of a rural family. - Children with disabilities are often denied access to education due to lack of special facilities and trained teachers, perpetuating poverty. - National response and programmes: - Government estimates at least ten years of concerted efforts required to clear UXO from the most highly impacted priority agricultural and development sites. - Priority activities: community education, victim assistance and UXO survey and clearance operations. - UXO Lao Programme is main vehicle for implementing the Government’s ten-year National Strategic Plan (Safe Path Forward); plan calls for more than doubling output over five years and targeting operations to NGPES/NSEDP VI objectives. - UXO Lao’s “Claiming the Future” initiative: internal reforms to strengthen capacity, ensure optimal use of resources and assets, adopt new technologies and best practices from other countries to increase productivity and efficiency. - By the end of 2005, UXO Lao expects to have cleared over 1,500 ha of land, an increase of nearly 100% in the last three years. - Pilot initiatives testing new technologies and methodologies should generate greater increases from the second half of 2006. - Foundations of the “National Regulatory Authority” (NRA) for the UXO sector were established; Government has appointed its National Director and staff. - First two new humanitarian UXO clearance operators were accredited in the second half of 2005 and have begun operations in the Southern provinces, with funding support from the European Union; coordination and regulation needs increase as new operators enter the sector. - Funding and resource needs: - In February 2005, Government approved a budget of USD 5.1 million for the UXO Lao Programme. - By September 2005, UXO Lao had secured USD 3.6 million, which is the minimum funding required to maintain full operations. - The NRA also operates at a reduced level of funding. - The sector requires significantly more resources and mobilization of adequate resources to continue the implementation of the Programme as planned is a high priority. *Source: _cr08341 - 3. Targets (Lao PDR: National Socio Economic Development Plan (2006-2010))_* ### 3. HIV/AIDS ### 3. HIV/AIDS ### Epidemiological overview and risk factors - Cumulative number of people identified with HIV at end-2004: 1,470. - Of these, known to be living with AIDS: 835. - Number of infected who have died: About 556. - Reported HIV cases by sex: 62 percent male and 38 percent female. - HIV prevalence rate for persons between 15 and 49 years: less than 0.05 percent (estimate of UNAIDS). - Age distribution: More than 50 percent of those infected are between the ages of 20 and 39 years. - Major transmission route: More than 83 percent of HIV infections result from unprotected heterosexual intercourse. - Emerging risk factors noted: low awareness and limited access to prevention (including condoms), low socio-economic status of women, high levels of poverty, widening generation gap, increased population mobility, internal and external labour migration, changes in lifestyles and sexual behaviour, rapid expansion of recreational drug use, and an alarming number of sex workers thought to be injecting drugs. - International evidence cited: intravenous drug use may substantially accelerate the spread of the HIV epidemic. ### Achievements to date - Increased awareness and open discussion on HIV/AIDS among politicians and general public. - Second round of the National Surveillance carried out. - Capacity and Needs Assessment done in all provinces. - Improvements in managing HIV/AIDS case reporting. - STI prevention and treatment programmes implemented in Savannakhet, Vientiane Capital, Vientiane Province, Khammouan, Luang Prabang, Luang Namtha, Oudomxay, Champasak, Saravane. - Condom promotion expanded; pilot 100 percent Condom Use Programme (CUP) in Savannakhet, Oudomxay and Khammouan Provinces. - Interventions reaching vulnerable groups: awareness campaigns, peer education, life skills training in schools, community-based interventions, IEC, mass media campaigns. - Treatment of Opportunistic Infections implemented in Mahosot, Setthathirat, and Savannakhet Provincial Hospitals. - Pilot anti-retroviral (ARV) treatment implemented in Savannakhet. - Home Based Care programmes implemented in Savannakhet, Vientiane Capital, Champasak and Bokeo. - Six functional PLWHA self-help groups; The Lao Network of Positive People (LNP+) established. - PMCT pilot projects implemented in major hospitals in Vientiane and in Khammouan, Savannakhet, Champasak, Bokeo, Oudomxay and Xayaboury Provinces. - HIV/AIDS mainstreamed into several infrastructure development projects. - Cross-border cooperation initiated with neighbouring countries. - Increased number of multi-sectoral national partners and more regular coordination forums. - Several high-level advocacy initiatives and workshops carried out. - HIV/AIDS Policy and Strategic Plan disseminated to all provinces and translated into action. - Several sectors mainstreamed HIV/AIDS into sectoral development plans. - National Committee for the Control of AIDS (NCCA) restructured; new NCCA held three meetings, with the Prime Minister attending one meeting. - Increased nationwide and provincial trainings in programme management, monitoring and evaluation, IEC production; capacity building in programme priority areas. ### Main challenges remaining - Most prevention, care and treatment programmes are pilot initiatives and reach only a small portion of target populations. - Comprehensive interventions reach only a fraction of the population in need. - Limited interventions for certain vulnerable groups (migrant labour, drug users, men who have sex with men). - Low implementation capacity at all levels. - Research information not effectively shared and applied by different partners. - Limited involvement of civil society and private sector. - Insufficient coordination of HIV/AIDS/STI programmes and activities. - Need to strengthen high-level, multi-sectoral political commitment. - Lack of skilled personnel, frequent turnover and heavy workload hamper implementation and utilization of training. - Weak follow-up of benefits from trainings. - No functioning M&E system for the National Response. - Both human and financial resources are inadequate to tackle the epidemic. ### National Strategy and targets (National Strategy and Action Plan on HIV/AIDS/STI 2006-2010) - Overall goal: maintain present low level of HIV/AIDS in general population; ensure HIV seroprevalence among vulnerable groups is lower than five percent; scale up national response to prevent and minimize impact on social and economic development. - Definition of full coverage: 90 percent. - Means emphasized: creation of an enabling environment, increased availability of data, capacity building and effective management. - Vulnerability assessment finding: heterosexual transmission primarily through clients of sex workers identified as main determinant of spread. - By 2010 targets and priorities: - Objective: 80 percent of sex workers using condoms, with a “no condom, no sex” policy encouraged in entertainment venues (especially in priority provinces). - Main priority: maintain HIV seroprevalence in sex workers at less than 5 percent. - Awareness targets: 40 percent of ethnic groups and 90 percent of the military and police in prioritized locations will be informed about HIV/AIDS/STI. - Blood safety programme implementation: currently in Vientiane and eight other Provinces. - Vulnerable groups identified: sex workers and their clients, vulnerable youth (especially in rural areas and from ethnic minorities), men who have sex with men, and intravenous drug users. - Key interventions required: facilitate better access to condoms, change beliefs and attitudes, improve access to primary healthcare, tackle sex worker–client relations, and organizational change among programme managers and implementers. ### Prevention, care scale-up and resource requirements - With development partner support, Government will increase home based care and support services. - ARV therapy to be made available in three priority provinces with at least 700 treatment slots for adults and children. - Feasibility to explore more treatment options such as self-help groups to strengthen links between prevention and care. - Estimated funding needed to implement the five-year strategy and action plan: about USD 26 million. - Global Fund to Fight HIV/AIDS, TB and Malaria has approved continued participation of the Lao PDR. - Emphasis on rapidly scaling-up well prioritized and targeted interventions focused on the most vulnerable and marginalized groups. - Simultaneous needs: establish an effective system to track the epidemic, and monitor and evaluate responses and impacts; establish effective national coordination mechanism; improve quality of interventions; build capacities at all levels. - Government constraints noted: limited resources and skilled personnel, and socio-cultural factors. *Source: National Committee for the Control of AIDS; National Strategic and Action Plan on HIV/AIDS/STI 2006-2010; Case Reports, Ministry of Health (as reported in Lao PDR: National Socio Economic Development Plan (2006-2010)).* ### 3. Targets ### 3. Targets ### Gender and social targets - Increase the number of women labourers attending training in production techniques; - Increase the number of women attending agriculture and forestry production techniques training mainly in plantations and animal husbandry; - Expand women’s participation in the village development funds; - Increase job opportunities for women; - Promote SMEs of women; - Gradually, increase the opportunities for girls in every level to be equal with boys (according to the strategy of the Ministry of Education) to reach 89 percent for primary, 63.4 percent for lower secondary, 35.5 percent for upper secondary, and 40 percent for university levels; - Increase literacy among women aged 15-40 to 88 percent by 2010; - Increase the number of women in Government organisations and public service organisations from the central to the local levels; - Create opportunities for female Government officials to upgrade their knowledge of politics and management; - Provide skills training for women in many areas such as development planning, finance, banking, business services, law, science and technology and foreign languages; - Increase the number of women in management levels in education, public health, society and businesses; - Increase the number of female National Assembly Members in the Sixth Plan period by 30 percent; - Reduce the maternal mortality rate to 300 per 100,000 live births; - Increase the rate of medical service use during childbirth including traditional medicine, to 35 percent; - Increase women’s life expectancy to 66 years; - Expand the fertility project and HIV/AIDs prevention project and other sexually transmitted infection (STI) to cover the 47 poorest districts; - Develop the capacities of the Lao NCAW and LWU; - Improve the knowledge on gender for the leaders of the Lao NCAW and local organisations about gender; and - Expand networking among the Lao NCAW and the LWU at every level. *Lao PDR: National Socio Economic Development Plan (2006-2010)* ### Governance — overview - The Government intends to build an effective, efficient, well-trained, honest and ethical public service able to meet the needs of the multi-ethnic Lao people. - Ensure all Lao people are given the opportunity to be associated in all areas of decision-making to fully enjoy constitutional rights and be educated and well-informed to express opinions on Government policy. - Establish a coherent, credible and predictable legal framework in a transparent and participatory manner, providing efficient, effective, equitable and accessible justice and law enforcement institutions and systems. - Ensure accountable and transparent financial management practices to achieve macro-economic stability and sustainable growth for poverty eradication. - Improving governance will involve changing mindsets at all levels. ### Governance strategies (four main areas) - The Governance Programme comprises reforms in four main areas: public service improvement, people’s participation, rule of law and sound financial management. #### a) Public Service Improvement - Public administration reform is one of the main priority components of the governance programme. - Medium and long term training strategies have to be developed for each of the priority areas of governance. - A number of laws were passed, such as the Law on the Government, the Law on Local Administration and the Law on Anti-corruption; these have to be fully implemented. - The collection of national data and the updating of the national civil service database will continue. - The development of job descriptions has identified the need to increase the number of civil servants, particularly at the local level. - More service-orientated civil service training programmes will be carried out to create competent, professional personnel officers. - Administrative and internal management staff will be trained further. - Public sector institutions will be better coordinated for enhanced productivity and more efficient use of funds. - Recruitment procedures will become more effective, objective and transparent to enhance professionalism. - Examples of good customer service, creativity and innovation in the civil service will be promoted. - New salary scales for civil servants will be introduced, with appropriate increases in their levels. - Measures against corruption will be increased and laws and regulations will be enforced. - Tasks within administrative bodies will be monitored closely and the level of responsibility and effectiveness in the utilisation of the National Budget will be enhanced. - A code of ethics will be developed and ethical conduct will be rewarded. - Monitoring mechanisms would be improved, particularly the tax collection system across the country. - Judiciary, customs, national tax, national treasury and national audit or national inspection services will function under the full control of the concerned central ministries. - Extend the telecommunications network throughout the country and improve existing structures by gradually developing and expanding Local Area Networks (LAN) and Wide Area Networks (WAN) for the Government intranet system. - An ICT development strategy has to be finalised, approved and disseminated. - More small ICT units have to be established in the ministries. - ICT training will be given to staff in the priority ministries and expanded gradually to other ministries. - A legal framework has to be developed to support ICT development and use. - The public will have broader access to the performance reports of government organisations. - Manuals and information brochures on the organisation and mandates of government organisations will be increasingly produced and distributed, providing information on procedures and fees for public services. - Forums will be created for a participatory debate on a transparent and accountable Government. - Increase cooperation of ministries, central sectors and localities; review roles and responsibilities of each ministry and central sector to seek improvements and minimize duplication. - Appropriately adopt the role of public management among ministries, local and central sectors and all regions following the guidance to enhance the central management; and unify the Government at the central level, beginning with the areas of revenue collection and expenditure management; - Develop the roles and responsibilities of all ministries and sectors in accordance with the macro-management; together with stabilizing the mechanisms and staffs in order to effectively manage the task and achieve a higher level of success. The realignment of some ministries/agencies in 2006 is an important step in this direction’s. - Upgrade the competency of management mechanisms to a higher level, and expand the level of responsibility and the transparency of offices, organizations, authorities and jurisdictions; - Modernise the fundamental administration to become modern, alter the methods of management, and integrate improved technologies into the activities of public management; - Upgrade the level of professionalism, morality and the rationales of staff and Government officials. Enhance education, monitoring and inspection and the strict compliance of the staff and Government officials who lack knowledge; - Continue to ensure the payment of salaries to civil servants. Assess the salary system to find the advantages and disadvantages, and evolve approaches for solving the disadvantages. Examine the ways to change the salaries and assess and select the basic minimum salary of workers to pay tax; - Implement the policy on salaries and support the provision of incentive payments to the staff who work in remote areas; - Examine the social insurance system by particular fields suitable to the market mechanism managed by the Government. Urgently establish the social insurance fund and system from the central to the local levels; and ensure the long term sustainability of the fund to implement the social security policy; - Create the mechanism to manage the system of revenue generation, strictly implementing the declaration of the assets and personal income of the staffs, and Government officials, especially those higher up in the hierarchy; - Continue enhancing the measures against corruption and unreasonable expenses; implement rational spending; ensure the transparency of management; encourage the conclusion-appraisal of the tasks within the administrative bodies; enhance the levels of responsibilities and effectiveness in the utilization of the National Budget; and encourage economical practices and combat unreasonable expenditures; - Upgrade the technical knowledge of the officials at all levels through short-term and long-term training. Cooperate with domestic and foreign construction. Select the candidates, who have the solid political attitude, solid status, suitable qualifications and are ready to follow the new policy of the Party and the Government; and - Resolve the issue of reluctance, non-braveness and negative attitudes of some officials in the macro-management and create the mechanisms and policies to set it right. Strictly comply with the regulations, regime and the national law. Punish the ones who violate and infringe on the national law and regulations. #### b) People’s Participation - Improve human security, ensure a stable and peaceful society, and increase the knowledge of the population on laws, regulations and government policies and programmes. - Staff of mass media organisations will continue to be trained and provided with more specialised equipment to disseminate more up-to-date and accurate information on Government developments to the public. - The Government will ensure the regular supply of information by sources in relation to the services, policies and development plans for the people, and create conducive conditions for all the people to access information without any difficulties. - A legal framework for Civil Society Associations (CSA) will be developed. - The participation of women in national and local governance will be encouraged and the Lao youth will be given more opportunities to express their concerns, expectations and ideas. - Continue to strengthen service delivery closer to the people through ongoing refinement of the Government’s Decentralisation Policy and the further development of staff planning capacities at the local level. - Ensure greater input by the communities to the planning, monitoring and evaluation of development activities. - The CPI will continue to improve the planning capacity of key planning staff at local levels to promote and utilise broader and more effective participation techniques. - Human capacities would be strengthened at the local level so that the provinces will be able to collect accurate data and statistics and hence formulate their own socio-economic plans. - The data collection and analysis capability of the National Statistics Centre (NSC) is being strengthened to improve the accuracy and amount of information provided. - Intranet and telephone communications between the central and local government agencies will be increased, and regular coordination meetings between the two will be organised. - National Assembly members have to be better motivated, equipped, supported and informed in fulfilling their tasks and responsibilities. - The capacity of the National Assembly will be strengthened in drafting, revising, amending and adopting draft of laws. - The National Assembly’s ability to oversee the activities of the Government and the Courts would be improved. - Information on the activities of the National Assembly will be increasingly disseminated. - Laws targeted at the local administration and population will be further disseminated and implemented. - People’s participation in defining national priorities through their elected representatives in the National Assembly will be enhanced. #### c) Rule of Law - The domestic legal framework will continue to be harmonised with international law, and agencies responsible for the application of international commitments will be improved. - Laws on Government, People’s Courts, Public Prosecutor and Judgement Enforcement will be reviewed and amended. - Priority bills stimulating socio-economic growth and implementing guidelines will be drafted. - The comprehensive compilation and regular updating and dissemination of legislation through the Legal Research Centre will be continued. - Increase public’s access to legal services. - Ministry of Justice (MOJ) personnel need to become more efficient and effective, requiring streamlining of activities and procedures. - Work with key stakeholders and the public in formulating national laws. - Legal procedures will be rationalized and improved with declaration, enforcement, dissemination and serious studies. - Research to adjust, improve and add details to the existing legal system, especially in commerce, bankruptcy, enterprise, labour, credit, state budget and land acquisition, to suit socio-economic strategy and international participation. - Formulate new laws to suit development objectives and facilitate international participation. - Emphasize structuring transparent authorities and relating laws and encourage enforcement. - Increase public confidence in the court system by speeding up case resolution and decision making, establishing courts of appeal, judges, lawyers and prosecutors, updating equipment and establishing intranet connections for justice offices at the central and local levels. - Resume publication of the official Gazette. - Expand legal literacy programmes through the mass media. - Conduct legal training and awareness campaigns in all schools and villages to increase people’s knowledge of the laws and the role of the legal sector. - Increase publication of law books and manuals and supply them across the country. - Create a legal basis for the progressive circulation of court decisions and judgments, beginning with the People’s Supreme Court, and mechanisms for public access. - Strengthen the Lao Bar Association and Village mediation units. - Revise laws and regulations governing the Office of the Supreme Public Prosecutor and the courts at central and local levels. - Undertake training of trainers in legal affairs, legal dissemination and drafting of legislation and other legal documents. - Upgrade knowledge of public prosecutors, improving monitoring and control of law enforcement from central to local levels. - Improve reporting system of the Central Office of the Supreme Public Prosecutor through computerisation of data collection and statistical information. - Upgrade understanding among prosecutors, the police, the Ministry of Justice and the Ministry of Defence on law enforcement and penalty adjustment. - Train prosecutors at central and provincial levels further, particularly specialised prosecutor’s investigators. - Set up a computerised data/statistical information system for prisons. - Complete buildings for legal institutions and carry out further training to develop human capacities, particularly in management and record keeping. - Raise capacity of the Faculty of Law of the National University of Laos and the Judicial Training Institute by acquiring a strong team of staff and providing vehicles, equipment and materials. - Increase bilateral cooperation with ASEAN and neighbouring countries in judicial training. - Continually strengthen the Lao Bar Association to better provide legal services to disadvantaged groups. - Renovate and restructure the office responsible for providing legal advice to women. - Improve implementation of the Law on the Development and the Protection of Rights and Interests of Women. - Raise awareness at all levels of the Government and the community about the special needs and vulnerability of women. - The Government has prepared a draft road map/master plan for the legal sector discussed with stakeholders including partners in Development in May 2006. The road map/master plan is being finalised. #### d) Sound Financial Management - Tax administration: introduce new procedures for effective registration of taxpayers, simplification of filing and payment methods, procedures for detecting under-reported incomes, and training of tax officials in Information Technology solutions to support collection. - Prepare to convert the turnover tax into a fully fledged value-added tax (VAT). - Income, profit, personal and excise tax rates have been revised and strengthened. - GATT valuation will be adopted for controlling undervaluation of imports to prevent revenue leakage. - Customs administration: preliminary steps towards establishment of a National Customs Administration by allowing the Customs Department headquarters more control over the seven major international checkpoints. - Prepare reorganisation of the Customs Department Headquarters and field offices. - Continue reduction of customs tariffs in line with the AFTA agreement. - Expenditure side: make the budgetary framework more supportive of private sector growth and investment. - Support long term policy of increasing the share of the budget expenditure allocated to priority areas of education, health, rural infrastructure and environmental conservation. - Develop a training plan to strengthen capacity for budget preparation and execution. - Take steps to prevent expenditure arrears and establish a reporting system on arrears. - Improve revenue projection basing future budgets on actual performance. - Develop a cash management system between the central and key provincial treasuries. - Extend State accounting system regulations and procedures to all provinces. - Increase the number of businesses maintaining proper accounting records. - Provide more stability and clarity in the legal and regulatory framework by drafting new and amending current legislation to encourage private sector investment. - Translate all laws and regulations with regard to investment activities into English and distribute them. - Create a sound and competitive banking sector capable of supporting private sector led growth and extending rural outreach. - Continue banking sector reform with support from the ADB and the World Bank; develop performance targets for the State banks in consultation with ADB and World Bank. - Strengthen Government’s ownership of ODA beyond the Ministry of Foreign Affairs. - Support sectoral coordination agencies to guide effective planning, management, evaluation and reporting of ODA. - Enhance coordination of monitoring and evaluation capacity across CPI, line ministries and provinces. - Harmonise project documentation, accounting, procurement and reporting. - State audit organisation: review the reform roadmap identified in “Accounting and Auditing in the Lao PDR – A Diagnostic Assessment of Current Practices and a Roadmap to International Standards.” - Develop the structure for possible draft legislation through drafting, distribution, comment and amendment for submission to the National Assembly and approval. - Continue institutional strengthening of audit and inspection bodies as outlined in the five-year audit plan for the fiscal years 2005-2009. ### 2. Targets ### 2. Targets ### a) Public Service Improvement - Develop a cost effective and people centred public administration; - Modernise the civil service personnel management, including the use of Information and Communication Technologies (ICT); - Develop a productive and highly motivated public service; - Develop an honest and ethical public service; - Eradicate corruption; - Enhance professionalism in the public service through training and development; - Improve Information and Communication Technology (ICT) to enhance transparency and productivity; ### b) People’s Participation - Ensure a stable and peaceful society and improve human security; - Strengthen the National Assembly; - Promote a dynamic and participatory society; - Promote a more open and transparent society; - Redefine central-local relations, bringing services closer to the people; ### c) Rule of Law and Access to Justice - Establish a complete, clear and coherent legal framework; - Strengthen the informal and formal mechanisms for dispute resolution; - Ensure predictable and transparent mechanisms for legal enforcement; - Take initiatives to strengthen the Ministry of Justice; - Take priority initiatives for the National Assembly; - Take priority initiatives for the People’s Supreme Court (PSC); - Take priority initiatives for the Office of the Supreme Public Prosecutor (OSPP); - Improve the ability of all the peoples of the Lao PDR to access the justice system; ### d) Sound Financial Management - Develop a sound fiscal policy; - Develop transparent and accountable practices for the implementation of efficient and equitable revenue collection policies; - Develop transparent and accountable practices for expenditure planning and management; - Modernise the accounting system; - Develop a banking sector capable of supporting private sector led growth and extending rural outreach; - Ensure accountable and transparent management of ODA; - Strengthen the capacities of the audit and inspection bodies; - Improve the efficiency in land management and administration; and - Improve the environment for private sector development. ### E. Natural Resources and the Environment #### Overall objective - The overall objective of the draft National Environment Strategy 2003-2020 is “to sustainably utilise natural resources and protect and conserve the environment to ensure the sustainable development of the country while reducing poverty and enhancing the quality of life and health of the Lao people.” #### 1. Overall Strategy - Improve environmental management, plans, policies and laws; - Increase environmental education and awareness; - Establish financial mechanisms and promote investment; - Improve international coordination and cooperation; - Develop and implement strategies, action plans, laws and regulations related to environmental protection, such as the National Environmental Strategy, provincial environmental strategies, the Environment Education and Awareness Strategy and Action Plan, Forest Action Plan on Biodiversity, and strategies and action plans on agriculture and water resources. - Prepare and implement the national strategic plan on the environment; draw up and effectively use policies for environmental management in development projects for the prevention of environmental damage; publicize environmental protection methods and upgrade people’s participation in environmental protection. - Mobilize the population to preserve the environment and prevent damage; this is expected to increase investment in environmental protection methods. #### 2. Specific Measures - Three main strategies have been identified to achieve the objectives: a) Improving the management of natural resources by means of increased participation and protection through: - Strengthening participation, especially by the poor, in the preparation and implementation of national and local plans, policies and strategies; - Jointly managing environmental services and resources with the poor through strengthening community management of environmental resources; - Protecting access to the critical resources, which the poor already have (e.g. entitlements to land, water, trees, pastures and fishing grounds); - Expanding the natural asset base of the poor (e.g. community forest rights); - Reducing subsidies for environmental services that benefit the less-poor; and - Undertaking ecological zoning of the Lao PDR. b) Improving the institutional framework and its capacity by means of strengthening it and raising public awareness and political commitment through: - Developing a sound legislative and legal framework for property rights, water resources, forestry, land management and bio-diversity; - Using market-based instruments as much as possible; - Building capacity for more effective environmental management; - Deepening public awareness and political commitment; - Improving public access to environmental information; - Introducing environmental education as a standard part of the curriculum; and - Integrating environmental concerns into private sector decision-making, including promoting industry-wide codes of conduct and environmental auditing. c) Improving the environmental management in industrial and construction sectors through: - Promoting environmental infrastructure and technology that benefit the poor; and - Promoting the development of environment-friendly private sector products such as eco-tourism and technologies that are energy efficient and clean. - The Government plans to finalize and implement the national strategic plan on the environment; develop policies for environmental management and effectively use them in development projects for the prevention of environmental damage; publicize environmental protection methods and upgrade people’s participation in environmental protection. It will mobilize the population to preserve the environment and prevent damage. - The Policy on Sustainable Development of Natural Resources will be implemented. Natural resources will be managed and utilised in a reasonable and sustainable manner to ensure high benefit from the use of land, water, forest, mineral resources and biodiversity. - Master plans on the management and utilisation of land, agricultural, industrial, urban, cultural, historical and natural sites will be developed, including master plans on water resources, forests, mineral resources, biodiversity and bio-safe technology, and on the prevention and control of adverse impacts from natural phenomena. - Develop policy, strategy, laws and regulations on land, forests and water resources use. - Upgrade the Government’s environmental sector and provide appropriate training to staff. Establish provincial environmental committees in all provinces. Develop a national environmental training programme and kit. Build more environmental laboratories. Develop and disseminate a report on the state of the environment at national and provincial levels. Develop and implement the National Strategy and Action Plan on Environmental Education and Awareness. Develop a national plan on environmental scientific and technological research. - Develop national, sectoral and provincial environmental protection funds. Develop financial mechanisms to promote and enable individuals, businesses and legal entities to contribute to the National Environment Protection Fund (NEPF). Allocate a specific government budget for environmental management. Declare policies on taxes and expenditure and the funds for environment. - Encourage public participation in environmental protection processes. Integrate environmental studies into formal and non-formal education, including vocational training. Publicize more environmental protection methods and improve the quality of broadcasting on weather disasters, early warning and prevention plans for natural disasters. Prepare plans to solve natural disaster problems including flooding and environmental damage along rivers, streams and lakes. Raise the capacity of provincial and district disaster control committees. - Promote studies of agricultural systems appropriate to the livelihood practices of highland and flat land people. Preserve local genetic resources and traditional species; draw up an inventory of plants, animals, insects and organisms with a focus on species usable in agriculture and herbal medicine. Develop and encourage the use of traditional knowledge and practices in using natural resources. Encourage organic production and markets for organic products. Encourage the use of trade marks such as ‘organic product’ to guarantee quality and uniqueness in international markets. - Continue surveys and data collection by line ministries and local administration to improve plans and the Sixth Plan implementation. Prioritize surveys of land for minerals and forestry; execute surveys on wind energy by location and livelihoods; promote surveys for basic data on natural conditions and resources; expand surveys to collect social data on culture, ethnic origin and religion of the mountainous and ethnic peoples. Undertake environmental assessments on impacts of development projects and operations on agricultural land. Carry out surveys, assessments and evaluations on the impacts of UXOs and yellow rain from the Indochina war on human health and soil quality. - Encourage the use of environment-friendly technologies and production processes, and systematic environmental inspection for urban and infrastructural development projects, including industrial manufacturing and medium and large scale projects. Develop and enforce environment and social assessment regulations of infrastructure and environment quality and emission standards. - Streamline procedures for managing the social and environmental impacts in hydroelectricity and mining development. Implement the National Policy on the Social and Environmental Sustainability of the Hydropower. Encourage industry and mining sectors to reduce and minimize pollution, and toxic and hazardous wastes. Establish waste treatment facilities for agricultural, industrial and service projects and operations. Encourage implementation of the Environmental Protection Law. Implement policies and laws on urban planning and the master plan for Urban Development and Administration Authority. Promote recycling and anti-litter campaigns. Promote the use of renewable energy based on local and regional conditions. Promote business sector involvement in environmental protection, restoration and the sustainable use of natural resources. - Improve regional and international environmental cooperation, especially with neighbouring countries, ASEAN members, Mekong region countries and international organisations, to ensure good cooperation to deal with trans-border environmental issues and the protection of the environment. Implement the strategic plan on the development of special economic zones and free trade areas. #### 3. Targets - Ensure the balance between socio-economic development and environmental protection, so that all citizens live in a clean and nice environment; - Develop and manage land resources exploitation and natural resources (water and minerals) in better ways; - Coordinate policies on economics and preventive policies; develop the natural resources and the environment; ensure the proper and effective use of natural resources; ensure the activities for industrialization and modernization through saving and reducing the use of non-renewable natural resources; support the implementation of the policies on the use of land and other natural resources to generate funds for economic development; - Focus on solving the problems of environmental damage in the industrial areas and densely populated areas; - Efficiently check pollution levels and methods of environmental protection; - Raise the ratio of green areas to above 50 percent of all natural areas; - Aim to plant 25,000-30,000 ha of forest to increase the ratio of forest cover to more than 50 percent in 2010; and increase forest plantation in national parks, inter-provinces and national routes; - Reorient forestry administration including clarifying forest areas, giving land to households and communities, increasing methods for protecting and developing forests and preventing forest fires; - Plant trees to cover logged areas and bare hills, particularly the areas along the Mekong, while at the same time preserving the natural view; - Develop areas for industrial trees, producing large volumes of goods such as rubber, fruit trees and special trees; - Increase the usage of quality control systems, modern environmental management (ISO 9000, ISO 14000), as well as paying attention to product standards; - Increase the number of companies using environment-friendly technologies and production processes; - Support basic production entities that have just been established to use clean technologies and equipment to reduce pollution; - Ensure that waste disposal meets environmental standards, with 20 percent of production units to get certificates on compliance with environmental standards or certificates; the production areas should have drainage systems for waste disposal as the standard to preserve the environment; and complete the basic level of improvement and upgrade the rain (storm) drainage systems in the cities as well as in the industrial and production areas; - Provide for the needs of environmental protection linked with international economies and reduce the constraints to export to the international markets, and link the economies through the mobilization of community participation; - Aim to clear UXO from all high priority agricultural areas by 2013; - Put an end to slash-and-burn cultivation by 2010; - Reduce the proportion of the population using solid fuels; - Reduce carbon dioxide emissions from all sources; - Reduce the consumption of ozone-depleting chlorofluorocarbons; - Biodiversity Conservation by improving NBCA management (FS/NBSAP); - Conserve threatened and endangered species in their habitat (NBSAP); - Controlling Wildlife Trade (FS/NBSAP); and - Biodiversity Management and ecologically sustainable agriculture and forestry (NBSAP). ### F. Private Sector Development #### Vision - Make the private sector an increasingly important driving force for accelerating economic growth, generating high-paying jobs, and reducing poverty. Increased private investment will provide new income generating opportunities including many new jobs during the next five years. Private sector investment will also play a pivotal role in increasing the competitiveness of the Lao economy in regional and international markets during the period. #### 1. Overall Strategy - Create a more favourable environment to promote the private sector and to attract foreign direct investment (FDI). - Change existing regulations, laws and procedures to accelerate the process of setting up a business. - Accelerate the rate of growth of foreign investment into various projects. - Vary investment activities due to an open environment for attracting foreign investments from the private sector or Lao people living overseas to be involved in commodity production for domestic and/or international markets. - Implement measures for developing market types, science and technology services, intellectual products and business consultancies. - Maintain recent improvements in economic stability and sustaining social stability as private investors want stability and predictability. *Lao PDR: National Socio Economic Development Plan (2006-2010), section 2. Targets.* ### 2. Specific Strategies ### 2. Specific Strategies ### a) Policies, Regulations and Practices - Policies will be drafted and issued aiming at facilitating the rapid development of the private sector, including businesses of all types and sizes. - The private economic sector will be supported via an equal and fair business environment for both private and state enterprises. - The business law has to be finalised, implemented and enforced. - Immediate action on the promulgation of the law against monopolies and barriers that confront enterprises. - Private enterprises do not have to obtain any further permission certificates when there is equality in operation based on rules and decrees regarding a list of permission certificates. - Procedures of application and other unnecessary restrictions will be limited to build connections among state organizations and to increase outside enterprises entering the markets (e.g. enterprise registration, procedures for obtaining official stamps, tax registration, leasing land for operating business and conditions for applying for loans). - Administrative application system for business activities of enterprises within the private economic sector will be reformed. - Reform of procedures such as monitoring, calculation and enterprise accounting to facilitate activities and increase effectiveness of monitoring. - Continued public administration reform related to business operation, improving efficiency of monitoring and evaluation to create more favourable conditions for all types of businesses. - Policy makers need to respond quickly in taking concrete measures to reduce barriers to business investment. - Government administration and organizations will be disciplined to prevent the rejection of business applications. - Experiment to transfer application processes to business associations and capable sectors. - Regulations of the three business coordinating organizations will be announced; regulations on business registration, official stamp management and customs will be disseminated. - Information on enterprises will be supplied to banks as a reference for granting loans; experiment on enterprise services to assist banks issuing limits on their loans. - Campaigns on collecting funds for growing investment through selling enterprise, state and Vientiane (municipal) bonds. - Priority reform areas to reduce monopolies: expand number of tourist operators permitted to establish in a province; lift restrictions on movements of goods between provinces; not limit provincial contracts to local firms. - Relevant Government agencies charged with studying and taking action to increase competition in priority areas such as transport, logistics and freight handling. - Eliminate discrimination between the state and the private sectors. - Government will complete the granting of land-use certificates and ensure land-use-related rights to businesses. - Review and revise credit and banking policies to expand target group and simplify loan provision and allocation procedures. - Establish and strengthen the overall business information system to support business operations and assist Government authorities in monitoring and evaluation. - Special attention to Small and medium enterprises (SMEs); appropriate legal frameworks to be in place at least by the end of the Sixth Plan (2010). - Prime Minister’s Decree on the Promotion and Development of Small and Medium Sized Enterprises (No. 42/PM) issued on 20 April 2004 provides framework for SME directions, establishment of SME support fund and support organizations, and regulations, practices and measures. - The Decree identified six priority policy areas for SME promotion and development: (i) creating an enabling regulatory and administrative environment; (ii) enhancing competitiveness; (iii) expanding domestic and international markets; (iv) improving access to finance; (v) encouraging and creating favorable conditions for establishment of business organizations; and (vi) enhancing entrepreneurial attitudes and characteristics within society. - Support to SMEs will be strengthened; traditional handicrafts will be developed and handicraft villages built to create jobs, generate income and develop the non-agricultural sectors in rural areas. ### b) Legal Framework Improvement - Promote drafting and finalizing of the legal framework that better fits the socialist-oriented economy of the Lao PDR to establish a base for business development in all economic sectors. - Create a comprehensive legal system as a factor for effectiveness in a market-oriented economy. - Rationalize and improve legal procedures with declaration, enforcement, dissemination and serious studies. - Research to adjust, improve or add details to existing legal system, especially in commerce, bankruptcy, enterprise, labour, credit, state budget and land acquisition, to suit objectives of socio-economic strategy and international participation. - Formulate new laws to suit development objectives and facilitate international participation. - Judicial system based on equality to facilitate foreign and domestic investments, build a stable environment and equity in business-production. - Implement regulations and policies on investments to suit each objective; improve judicial documents to prevent documents that are against overall regulations. - Ensure transparency in application procedures; administrative mechanisms based on a one-stop corridor window at central and local levels for foreign investments. - Announce law related to competition to encourage SOEs to receive fair competition; rules to monitor pricing and benefits for monopolistic enterprises. - Establish a central register of all legal documents and instruments related to private sector development as a high priority. - Registry of Secured Transactions established in the Ministry of Finance and will require technical support for making it functional. ### c) Information and Consultation - Accelerate publication of English versions of all laws and regulations with regard to investment; publish a newsmagazine on investment activities. - Regular publication of important economic documents such as the national budget. - Organize regular meeting forums by central and local Governments with the business sectors, domestic investors and potential economic partners in neighbouring countries to facilitate operations, resolve difficulties, and address barriers to development of cross-border production networks. ### d) Macroeconomic Environment - Measures include review of ceilings on tax-deductible investment expenditures and the approval system for imports and exports. - Focus of macroeconomic reforms on restructuring of the financial sector. - Improved credit risk management is a priority. - Complementary measures under study include enforcement of the Secured Transactions Law, and amendments to the Decree on Commercial Banks. ### e) Coordination and Management Capacity - Improve coordination and management capacities in enforcement of laws concerning bankruptcy, secured lending, dispute resolution and debt recovery; and enforcement of the Tax Law. - Train tax officials and apply strict penalties to businesses and individuals that do not comply with the Tax Law. - Raise quality and professionalism of public service provision and reduce corruption; make it easier for businesses to comply with regulations, and to pay customs duties and taxes. - Develop management and analytical capacities so Government can evaluate what is working and respond to lessons and changing circumstances. - Relevant senior officials at central and provincial levels must take immediate actions to resolve constraints effectively resolvable by Government actions and be held accountable for progress in increasing business investment. - Government needs regular consultation with local authorities, civil society and the business community to identify major constraints and develop actions to address them. - Prepare, distribute and discuss periodic reports on progress with plan implementation, emerging bottlenecks and actions taken to address these bottlenecks. ### 3. Foreign-Invested Sectors - Create a favourable environment to attract foreign direct investment (FDI), especially from the main companies in Asia. - Recognize FDI as an organic part of the economy to be developed in parallel with socio-economic development. - Foreign investments have played a key role in developing the country’s economy and will be major factors for development in the next decades. - Despite natural resource abundance, discovery and utilization hampered by lack of funds, skilled labour and management capacity; exploration and utilization would strengthen commodity production. - Limitations in attracting FDI due to lack of domestic workforce with technical capacity; human resources development requires extended time. - Interim solution: import international labour required to support projects receiving foreign direct investments. - Issue clearer labour policies to promote the private sector and foreign investors to invest more capital in developing industries. - Foreigners working for enterprises investing in the country have to contribute to commodity production. - Urgent need to train technical workers; employees and technical workers urged to prepare for meeting needs of foreign investments. - Sixth Plan (2006-2010) will translate programmes into actions and methods for economic development that incorporate foreign investments. - Immediate materialization of laws related to foreign investments; 5th National Assembly made changes to mechanisms, policy, plans, procedures for granting investment permits; these will be monitored regularly for further improvement and to enlarge the investment environment. - Create fast and simpler investment procedures. - Determine development plans based on occupation types and regional specialty to attract foreign investment (examples: hydro-electricity, mining, food processing, cattle rearing and export industries). - Compile a list of projects that require foreign investment within each five-year period in relation to granting foreign investment permits. - Assign supporting committee to inform potential investors in capable countries to attract foreign investment. - Major cities should set up meetings to discuss and report on foreign investments that suit local capacities, strengths and priorities. - Senior Government leaders to arrange meetings with local and international investors/enterprises to receive feedback and improve public investment environment; address and solve enterprise difficulties immediately. - Inject regular budgets into enterprise activities to enhance integration, discussion and assistance, solving difficulties confronting foreign investors. - Conduct regular assessments of enterprise business operations for every economic sector; policies to reward people with great achievements with medals. - Improve and disseminate regulations and services to simplify investment and shorten time for granting investment permits. - Improve effectiveness of investment promotion and develop new methods to gain awareness about investments with ownership and suitability for local conditions and types of enterprises. - Review policies on investment priorities, including regulations on granting investment permits, especially land acquisition fees, transportation and telecommunications service charges and others, to build a more favourable investment environment. - Allow projects with permission to be implemented immediately and speed-up new project registration. - Extend directions on minimizing service costs to obtain equal returns from both domestic and international investments. - Review land acquisition fees and some previous exemptions. - Improve procedures and administrative permits relevant to foreign investments and shorten time for granting permits. - Open registration for investments and limit certificates that are barriers to foreign investments. ### 4. Targets - Reform the laws and regulations involved in setting up enterprises and streamline the process; - Finalisation, implementation and enforcement of the implementing regulations for the Business Law; - Improve the quality and professionalism of public service provision; - Increasing transparency; - Hold regular meetings between the central and local level Government and the private sector; - Reform regulations and administrative constraints that give rise to monopolies such as: lift restrictions on the movement of goods between provinces; and abolish limitations on restricting provincial contracts to local firms; - Lift some restrictions on foreign workers; - Reform the tax system, setting up proper monitoring agencies; - Increase foreign investment; - Continue to develop regulations and business operation laws and improve the business licensing processes; reduce unnecessary procedures; and increase fast and convenient services to businesses and entrepreneurs; - Promote the establishment of enterprises, cooperatives and family businesses in all areas permitted by the Government; Increase people’s access to financing. ### G. Science and Technology #### 1. Overall Strategy - Long-term objective: make the Lao PDR a technologically advanced nation, with highly skilled people and enterprises able to compete effectively in regional and global markets; and contribute and benefit from such participation. - Rapidly catch up with regional technology by identifying, transferring and adapting existing appropriate technologies from neighbouring and other countries. - Increased FDI will contribute to technology catch-up. - Strategy to facilitate international integration on science and technology and reduce disparities in science and technology between the Lao PDR and regional and global levels; promote international cooperation. - Strengthen natural sciences to support industrialization, modernization and overall socio-economic development. - Give importance to research in basic sciences for technological development, exploitation of natural resources, and protection of the environment. - Increase focus on transfer of new technology to upgrade sectoral technologies effectively for economic development. - Develop standards to evaluate technology levels in production and services sectors. *Source: Lao PDR: National Socio Economic Development Plan (2006-2010), chapter 2 "Specific Strategies".* ### 2. Specific Strategies ### 2. Specific Strategies ### Evaluation and continuity from the Fifth Plan (2001-2005) to the Sixth Plan (2006–2010) - Evaluate outcomes of science and technology policies implemented in the Fifth Plan (2001-2005) to identify successes and lessons learned for selection and use in production and business plans in the Sixth Plan period (2006 –2010). - Support adoption of new technologies and best practices from science and technology for daily production and livelihoods. - Coordinate science and technology research with teaching and practical production through transformation of present basic science research institutions and establishment of new research institutions for schools and universities. ### National science and technology development priorities - Focus on establishment and development of national science and technology; increase knowledge, mastering and quality. - Customize modern technology from foreign countries to local conditions of production, service and infrastructure to reduce time for technology transfer and adoption and accelerate use. - Improve research on science and technology; examine and use best practices for production and businesses. - Upgrade technologies in main production and services sectors to increase effectiveness and competitiveness of economic sectors. - Increase contribution of science and technology to growth of each sector, each product, each area and the economy of each region. ### Capacity building, funding, and human resources - Improve capacities of domestic science and technology including ability to learn and apply regional and global innovations. - Provide funds for national research projects for use in socio-economic development. - Develop modern science and technology first in some focal sites and in fields needing high technical qualifications. - Socialize science and technology activities to support wider development. - Continue development of human resources in science and technology; promote creative ideas and best practices; encourage and recognize best researchers and scientists. - Increase opportunities for selection, learning and exploitation; develop technologies gained from foreign countries for appropriate application in the Lao PDR. ### Technology adoption, rural access, and sectoral upgrading - Support adoption of new technologies including upgrading technologies in production and service sectors, with particular attention to production sector in accordance with the AFTA agreement to upgrade labour efficiency and productivity and improve economic competitiveness. - Enhance access of rural, remote and difficult areas to techniques and outcomes of science and technology. ### Agriculture, natural resources, and prioritized research areas (2006-2010) - Give priority to development of science and technology to serve agricultural production and natural wetland resources in the five-year period 2006-2010. - Support research, select and use improved varieties of seeds and animals that provide high yields and high value to serve agricultural economies and rural areas. - Use modern technologies for integrated farming to expand employment, produce consumer products and exports, provide raw materials to processing industries and upgrade capacity for economic competition. - In agriculture focus on: - (i) research and application of the high productivity and high value crop and animal varieties; and - (ii) research and application of post-harvest and agro-processing technologies. - Support testing and adoption of improved rice production and livestock rearing methods. - Initiate development of bio-technology and apply promising results in production. ### Industry, construction, and environmental applications - In industry and construction focus on research and application of modern technologies to increase competitiveness of goods and services. - Use modern methods of science and technology to predict the weather and other natural phenomena and disseminate information widely to the public to reduce damages from natural disasters. - Promote use of new technologies for monitoring and solving environmental pollution; assess domestic and foreign technologies for use in food processing, upgrading public health, and protecting biodiversity and the environment. - Research focus to include health, environmental impacts on health, infectious diseases and HIV/AIDS prevention; use research results for effective examination of outcomes of natural resources utilization and environmental protection. ### Research infrastructure and geographic focus - Establish research centres and promote production of improved varieties of rice, corn, industrial trees, animal species, poultry and fish in the provinces of Vientiane, Luang Namtha and Champasak. - Increase number of staff in science areas based on needs of sectors in each region. - First establish research centre and laboratories for the universities in Vientiane, focusing on key sectors such as electricity, minerals processing including iron, agriculture and forestry, chemical fertilizer, organic fertilizer and animals feeds. - Coordinate the centre with ministries and projects to develop technical staff and focus on key sectors. ### Management, legal framework, and institutional mechanisms - Continue research on changes in mechanisms to manage science and technology aiming to mobilize funds and improve professional skills. - Empower domestic labour to quickly adapt to rapidly changing and stronger mechanisms in science and technology management. - Upgrade quality and capacities for trade in technology products. - Select and widely use tender procedures on science and technology to ensure competition, equality and openness. - Operate mechanisms for self-mastering and self-responsibilities for public agencies for science and technology. - Organize and research use and development of technology for activities in suitable forms of business mechanisms; enhance science and technology of business units. - Declare the law on intellectual property rights preservation and the law on the transfer of technology. ### Promotion, cooperation, and human capital mobilization during Sixth Plan (2006-2010) - Promote and prepare policies on transfer of new technology, encourage innovations and upgrade technologies in production and services in economic sectors to ensure efficiency and competitiveness for better economic integration. - Increase investment in scientific research; develop researchers and highly qualified scientific staff; upgrade data (information) on science and technology. - Cooperate widely in scientific research and train researchers with regional countries and the world; first cooperate with neighbouring countries to motivate Lao peoples to develop use of science and technology. - Improve organization of people and attract foreigners to invest in development of science and technology in the country. - Motivate expatriate experts, particularly excellent Lao experts permanently living abroad, to return to teach and organize activities on science and technology. ### Technology market development (overview of measures and institutional support) - Review and revise drafts of new legal documents on intellectual property, technology transfer and contracting to ensure intellectual property rights, declaration, and transfer of research results. - Simplify procedures and, if deemed necessary, reduce tax, especially personal income tax imposed on qualified domestic or foreign experts working in the country. - Apply measures to reduce transaction costs for technology transfer to the Lao PDR. - Establish an information system for science and technology domestically and internationally to facilitate access for eligible persons and enterprises. - Disseminate basic information about intellectual property rights and copyright registration for people and organizations to register their science-technology products for industrial (patent) rights. - Provide preferred conditions for building consulting organizations, technology services for all economic sectors, market fairs for “technology”, and regular seminars to introduce new outcomes of Lao and foreign technologies to mass customers to enlarge outcomes from science and technology and contribute to foundations of technology market development. *Lao PDR: National Socio Economic Development Plan (2006-2010) — Section 2. Specific Strategies* ### 1. Objectives ### 1. Objectives ### Overall objectives - Develop commodity production to meet local demand and to increase exports. - Increase the number of agricultural products for export, with the continued shift in the structure of the agriculture and rural economy towards promotion of commercial agriculture. - Introduce and increase the application of new technology including IT in production, preservation and processing. - Develop skills training in the rural areas on many aspects. - Diversify the rural economies, especially to increase the value-added through links to other sectors to improve the people’s living standards. - Build new agricultural development infrastructure. ### Development Guidelines (general) - Continue priority plans of the Government as laid out in the Sixth Five-Year Plan for rice production to reach 3.2 - 3.3 million tons by 2010, especially in the seven plains areas with existing agricultural facilities and infrastructure. - Diversify agricultural and forestry products to meet existing market demand; focus on plantation of certain industrial crops based on regional potential to increase export volumes, including coffee, rubber, tea, cashew, maize, cassava, beans, tobacco and sugarcane. - Raise cattle for export (cows and buffalos) and increase domestic-market supply of goats, pigs and fish. - Develop and establish focal areas for production and uplift production capacity by applying new technology. - Focus on processing industries to add value to agricultural products for export. - Over 2006-2010, reduce areas of slash-and-burn rice cultivation by introducing alternative livelihoods (industrial tree plantations, commercial crops, livestock rearing, and other permanent livelihood alternatives). - Establish and implement afforestation projects and watershed protection areas, with tree plantations reaching 25,000-30,000 hectares and increase the forest areas to 50% of the total land territory. ### Development Guidelines for Some Sub-sectors - Food crops and vegetables: - Increase production to ensure food security and maintain food reserves. - Rice production in 2010 should reach about 3.2 -3.3 million tons. - Volume of all food crops production reaching 3.8 - 4 million tons, providing for an average food availability of 450-500 kilograms per capita. - Promote corn by increasing planted area to 28,000 – 30,000 hectares, with total production capacity of 135,000 – 140,000 tons. - Transform low productivity land areas to tree crops; promote intensive agriculture and develop agricultural focal areas with specialization (plantations, vegetables, fruits with special Lao characteristics e.g. organic fruits). - Industrial trees: - Establish special plantation areas to secure supply to local processing industries and for export during 2006-2010. - Coordinate plantation of industrial trees with processing industry infrastructure. - Use focal and central investments to apply advanced technology and improved varieties to increase export volumes. - Expand plantations of rubber, coffee, tea, tobacco, cotton and cashew in suitable areas. - Livestock: - Ensure sufficient supply of meat to domestic markets; promote farm animal raising with priority to large animal programs and high-quality breeding. - Ensure animal feeding to enable export of a larger quantity of animals. - Intensify livestock increase, especially big animals and poultry, with growth reaching about 4-5% per annum. - By 2010, livestock sector should account for approximately 42 - 45 % of the total value of production of agricultural-forestry products. - Fish production: - Increase production of aquatic animals of high commercial value, especially fish raising in the Mekong and its tributaries. - Improve and expand fish processing industry to increase value-added. - Forestry: - Improve administration and reform exploitation of timber and non-timber forest products, with controls on timber exploitation. - Promote tree plantation and forest protection; categorize different forest types and identify ownership types (state-owned, collective, community and other forms). - Reduce exploitation of watershed forest areas by strong state management and increase forest cover. - Focus investments on plantations to ensure raw material supply to processing industries (paper and plywood mills). - Intensify forestry plantation efforts to reach 25,000 – 30,000 hectares. - Increase forest cover to above 50 percent of the total land area by 2010, including tree planting in public places and alongside roads. - By 2020, forest areas should reach about 17 million hectares covering 70% of the total land area (the same level as in 1940). - Continue efforts to reduce forest damage, especially from slash-and-burn cultivation; develop clear policies to create local job opportunities to implement guidelines. - Continue implementation of permanent livelihood programs: allocation of land and/or forests to local communities, long-term land titling programs, and tax exemptions on land use. - Provide financial assistance, production equipment, access to credit (loans) for poor households, and vocational training on plantation techniques. - Strongly support agricultural promotion activities to diversify local community production across agriculture, tourism and other services sectors aiming at poverty eradication. - Investment requirement: - To achieve objectives in 2006-2010, invest about 11.8 thousand billion kip in the agriculture and forestry sector, which would account for 16% of the total investment. ### Implementation Measures - Establish development regions (tree plantation regions and livestock production regions); rice and corn production areas already allocated; start implementation where favourable conditions exist. - Line ministries, sectors and local administrations to produce lists of main commercial crops and animals with high economic value for investment priorities; each district to select 2 or 3 prioritized items for development based on local potentials. - Continue agricultural production (vegetables and livestock) in plains of Vientiane, Bolikhamsay, Khammoune, Sedon, Champasak, Attapeu and in the North, focusing on rice, corn, vegetables for export; promote food production in some mountainous areas for local consumption. - Encourage development of raw-material regions to sustain supply to processing industry; identify mechanisms and special policies to attract domestic and foreign investment in the seven plains and other raw-material areas by reducing land lease costs, extending lease periods, and promoting employment of domestic workers and skilled foreign labour. - Continue rural infrastructure development and disaster prevention/reduction; invest in aquaculture; prioritize investment in science and technology; upgrade capacity to compete nationally and internationally. - Encourage society to increase investment in agriculture, forestry and aquaculture to reduce reliance on the state budget. - Invest in basic infrastructure for agriculture and rural development: breeding, fertilizers, agriculture extension and other technical areas. - Continue investments in construction of irrigation facilities; ensure supply of materials, breeding, fertilizers and pesticides; introduce measures to increase productivity and support vocational training. - Continue monitoring activities and improve environmental protection approaches; explore aquaculture potentials and promote safe aquaculture to avoid disease outbreaks. - Land policy: - Enhance land management planning and land-use management in provinces and local areas. - Implement long-term land allocation to local communities to support production and sustain forestry development. - People entitled to ownership of land for agriculture, businesses and product supply within right of land use and management; owners have five types of rights: develop/use, transfer, lease (offer for rental), inherit and use as collateral. - Government allows organizations and foreign individuals to lease (rent) land for specific periods at reasonable prices for farming and large-scale agriculture projects. - Develop mechanisms and policies to administer land use; recognize land as the biggest investment capital in the future. - Allocate land ownership rights step by step, collect rental fees at reasonable rates with increments according to local context. - Rental period should be long-term (e.g. 50 year for seasonal crop plantation or 70 years for long-term crops) to ensure confidence among land users and attract investment. - Enhance land/forest allocation and support land titling programs for agriculture purposes. - Conduct surveys to identify special land-use purposes across sectors (agriculture, industry, tourism); invest initially in prioritized focal areas when funds are insufficient. - Credit policies: - Create favorable conditions for local people to access credit from banks; ensure equal access to loans. - Allow commercial banks, especially the Agriculture Promotion Bank, to release loans with collateral in an appropriate, transparent and quick manner suited to local community conditions. - Make loans available for different durations (short-term, medium-term, long-term) according to nature and seasons of activities. - Ensure financial resources for distribution within agriculture and rural development schemes; mobilize funds from communities and social organizations domestically and internationally. - Continue implementation of savings groups and various fund forms including village development funds initiated since fiscal year 2003/04; review and share lessons to improve micro-finance administration, follow uniform guidelines and policies to promote agriculture and income generation. - Investment policies: - Increase proportion of budgetary investment to agriculture and rural development, prioritizing key infrastructure construction to transform agriculture structures and open other business opportunities. - Promote export-oriented agriculture (coffee, tea, rubber) with mechanisms to attract investors to construct agricultural infrastructure; ensure credit mechanisms reach rural communities to contribute funds to agriculture activities. - Implement policy of providing loans with variable interest to various economic sectors; commercial banks and credit institutions to set interest rates for each target group and region at appropriate terms to ensure financial liquidity. - Borrowers operating in difficult areas and poor families planting trees or raising animals in line with Government policies should receive priority access to loans with special interest rates, below 20 - 30% compared to regular interest rates for the same types of loan; budgets should compensate commercial banks for subsidized rates. - Revise loan policies for special loans for tree planting and livestock rearing and clearly identify interest rate differences for each loan type. - Agriculture extension and research: - Improve and expand agriculture extension units nationwide; promote extension activities including voluntary private domestic and foreign organizations operating in Lao PDR in compliance with laws to assist commercialization and rural development. - Enhance research programs; utilize scientific research and technology increasingly to provide inputs to agriculture sector. - Invest in agricultural research and development (R & D) with policies to support research maximizing economic effectiveness. - Introduce science and technology to farming communities via training; encourage farmers to learn new production and marketing knowledge. - Create policies to support qualified agricultural personnel to work directly with farmers; review development programs to encourage farmer operations, open business opportunities, and create production models. - State-owned enterprises and market development: - Reorganize state-owned enterprises in agriculture and forestry; dissolve or consolidate unprofitable or ineffective enterprises. - Continue allocation of land/forests to families and collective groups while increasing measures to prevent forest damage, support forest development, and prevent forest fires. - Enhance measures for distributing agriculture products, actively promote markets, develop rural markets and export opportunities; establish product distribution policy via sales contracts among producers, processors, brokers and farmers. - Introduce mechanisms to reach four target groups: farmers, scientists, business people (including commercial banking persons) and government officials to support agriculture development and product distribution. - Reorganize production and distribution to ensure adequate supply of quality products to consumers; support distribution of agriculture products with measures identifying competitive products, improve breeding varieties and processing technologies, and establish technical infrastructure for collective agriculture and commercial activities. - Implement agriculture production policies suited to domestic supply-demand realities; state will not intervene in pricing except to adjust prices in case of serious fluctuations by issuing appropriate instructions. - Increase consumption and purchasing power of rural communities by creating non-agriculture job opportunities; implement rural credit policies with instalment payments for machinery, equipment and production tools. - Strengthen preparedness and preventive measures against natural disasters (drought, floods) that damage production. - Promote and facilitate local people selling products and finding export markets; provide market information and advice, especially for exports to Vietnam, Thailand, China and other ASEAN countries. - Enforce strict forest preservation measures and punish officials or individuals involved in inappropriate forest exploitation. - Rural infrastructure development aimed to attract investment using privileges such as exemption of land tax for areas used for infrastructure development and public service facilities. - For non-agriculture rural policies, state to develop master plans for sustainable non-agriculture sector development. - Organize villages with specific occupations, development villages, and small-scale industrial groups; support vocational training, marketing knowledge, information dissemination and protection of rural goods. - Create policies to support services for local communities: trade services, product brand development, promotion of several varieties of goods. - Support farm-based production, collective farming and rural business units with loans, technology and training. ### C. Rural Development (objective) - Reduce disparities between rural areas and urban centres. - Enhance transport and communications networks. - Improve living conditions of rural people, especially those in mountainous and remote areas. *Lao PDR: National Socio Economic Development Plan (2006-2010) — 1. Objectives* ### 1. Overall Strategy ### 1. Overall Strategy ### Strategic overview - Rural poverty in the Lao PDR is directly linked to access to resources and social services. Resources include land tenure, access to forest and non-forest timber resources, livestock security, access to agricultural inputs, credit, irrigation services and markets. Social services include education, health services, clean water and safe sanitation. - The Government’s rural development strategy seeks to address development constraints: (i) inadequate infrastructure, (ii) limited and poorly developed human resources, (iii) poor health conditions, (iv) inadequate potable water and sanitation facilities, (iv) weak agricultural support and delivery services, (v) limited access to inputs and markets, and (vi) lack of access to short and medium term credit. - Core strategic aims: - Develop agriculture and non-agriculture sectors in rural areas to create employment, increase incomes and restructure rural economies while improving poor households’ access to basic social services. - Provide investment assistance for social and economic infrastructure in rural areas, prioritizing mountainous, remote, and minority areas. - Synergize industry and agriculture to increase the value of agricultural produce, especially for export. - Promote private sector development—particularly the domestic private sector—for rural non-farm employment creation and poverty reduction. - Strengthen linkages with neighbouring-country markets. - Encourage a strong community-based, highly participatory approach that enhances conditions enabling people to take charge of their development. - Comprehensive, poverty-focused planning at the district level will improve access to: (i) production inputs and sustainable natural resource management technologies; (ii) national and regional markets through physical (roads and trade facilitation) and institutional linkages; (iii) human resources and community institutional development; (iv) social services; and (v) rural finance. ### Specific strategies - a) Off-Farm Employment - Establish village groups to provide employment and construct new rural industries with the central aim of transferring professional skills. - Emphasize small scale industries, handicrafts and arts; support other non-agricultural activities. - Target: shift 15-20 percent of agricultural labour to small-scale industry, the production of handicrafts, and management of forestry development and forest businesses. - Develop forestry works and employment to support production and upgrade life-styles of ethnic populations. - Implement disaster prevention methods (preventing drought for rice and other grains; flood preparedness). - Remove barriers to internal migration to facilitate temporary migration as an important off-farm employment option. - b) Industry - Develop industrial centres in three areas based on the concept of a nuclear city with modern infrastructure and services. - Focus on value-added in larger-scale sectors: electricity, rice, food processing, wood processing, fertilizers, textiles, mining (gold, manganese, iron, bauxite), construction materials, machinery, electrical wares, and high quality consumption goods. - Support adjacent areas that supply raw materials and markets. - Priority orientation: develop electricity and processing industries for domestic consumption and export; continue promoting mining; selectively develop industries producing inputs (e.g. fertilizer) and industries serving agricultural/rural development (machinery manufacture, electronics, garments, footwear, food processing). - c) Services - Invest in border economic zones such as Xiengkhuang (Lao PDR - Myanmar), Boten (Lao PDR - China), Nam Kan (Lao PDR - Vietnam) and other check points (Lao PDR - Thailand). - Main activities: services for import-export, tourism and border transport to generate additional employment opportunities for surrounding rural populations. - d) Infrastructure Development - Increase investments for infrastructure development in each area to modernize the overall infrastructure system. - Provide electricity and infrastructure for education and health facilities in rural areas. - Improve urban infrastructure in rural towns to attract investments and generate off-farm employment. - e) Education (sector summary) - Concentrate on equitable access, quality, relevance and management of education to improve population-wide education. - Increase primary school attendance and literacy rates, particularly in under-served areas (ethnic peoples, children with special needs, and girls). - Build more schools in rural areas with necessary equipment, supplies and qualified teachers. - Improve accessibility to quality secondary education to raise the number of students entering and completing secondary school and proceeding to third level education. - f) Health - The expansion of the rural health service network is the single largest health programme, utilizing about 33 percent of the total investment over the five-year period 2006-2010. - Programme components include curative services and strengthening primary healthcare (PHC) with emphasis on the 47 poor districts. - Expand PHC to remote areas with: 150 new health centres, three regional hospitals, 13 provincial hospitals, ten type A District Hospitals (ADH) and 46 District Hospitals (DH) in poor districts. - Promote the role of women in PHC and increase attention to high risk groups, child immunization, safe water and sanitation, control of communicable diseases (diarrhoea, malaria, dengue fever, tuberculosis, leprosy, HIV/AIDS), and monitoring diseases caused by drug addiction. - Prevention and health care centres were built in eight areas throughout the country. - g) Food Insecurity - Address food insecurity as a first priority, especially for the 47 poorest districts. - Use the comprehensive district development planning system and improved accessibility as core elements of rural development strategy; favour a pro-active focal development area approach. - Prepare priority programmes in focal development areas or kum bans—one each in 23 districts among the 47 poorest districts. - Complete and implement focal area development plans in all kum bans in the 47 poorest districts during the Sixth Plan period (2006-2010). - Include activities under village development funds, private sector initiatives and projects such as the Poverty Reduction Fund (PRF). - Better coordinate activities under other national programmes (e.g. UXO decontamination and sustaining opium eradication). - Mobilize investment activities in rural and remote areas by attracting all economic players (state, domestic and foreign private investors) and continue investment in economic and social infrastructure with primary focus on the 47 poorest districts in mountainous, remote, and ethnic group areas. ### Cross-cutting rural development emphasis - Promote local occupations, local wisdom and knowledge to create jobs, promote income generation, and transform economic structures in line with agriculture sector development guidelines. - Ensure integration of district- and village-level initiatives to maximize effective use of limited resources and benefits. ### Education — detailed objectives and measures - Education as a pillar of poverty reduction: - Strengthen the education system as the cornerstone of a human resource development strategy focused on poverty alleviation and enhancing labour productivity. - Implement compulsory primary education as an important means of poverty reduction. - Develop education facilities at all levels (centre, provinces, districts, villages), with attention to ethnic and disadvantaged groups. - Measures to achieve education objectives: - Universal compulsory education at primary level and continue to increase participation at lower secondary level. - Strive to completely abolish illiteracy among the population. - Expand vocational, technical and higher education to meet labour market needs and improve economic rates of return. - Train skilled workers, technicians, professionals and intellectuals capable of applying modern science and technology. - Raise national education standards gradually closer to international standards. - Invest appropriately in education and make education a duty of all people. - Overall Education sector strategy (key actions): - Adapt literacy and skills training to local needs. - Expand ethnic education and cluster schools. - Coordinate literacy in remote areas with armed forces social activities. - Reform the education system and use modern methods for science, languages and technology. - Develop better curriculum and textbooks; promote distance education. - Provide an adequate supply of teachers and strengthen multi-grade teaching. - Establish special schools for talented students; strengthen institutional infrastructure. - Improve administration and management and decentralise management. - Improve policy and planning capacity; increase investment in education; promote private education. - Mobilise and advocate for education; strengthen Party and local leadership. - Promote potential for cross-border cooperation in education. - Education for All programme: - Seen as the main vehicle for expanding access to primary and lower secondary education and adult literacy. - Improve accessibility to quality secondary education to increase progression to tertiary education. - Increase educational standards in Universities and the number of vocational and technical colleges; emphasize scientific and technological research. - Improve college facilities (laboratories, libraries, research centers) and raise teaching and lecturing standards to achieve regional and international recognition. - Aim to increase semi-skilled, skilled and professional workers entering the workforce to boost foreign investment and socio-economic development. *Lao PDR: National Socio Economic Development Plan (2006-2010), 1. Overall Strategy* ### 2. Sub-Sector Strategies ### 2. Sub-Sector Strategies ### a) Early Childhood Care and Education (ECCE) - ECCE enrolment targets: - Enrolment rate of 11 percent for three and four-year olds in 2010 and 17 percent in 2015. - Enrolment rate of 30 percent for five-year olds in 2010 and 55 percent in 2015. - Proposed strategy to achieve targets: - Selectively increase and provide equitable access by promoting coordination between the Government, community and the private sector. - Mobilize communities in favour of pre-school education. - Promote development of community pre-school centres. - Promote access of five-year olds to pre-school education by establishing a special primary school class to prepare five-year old children for Grade 1. ### b) Primary Education - Overarching goal: achieve universal quality primary education by 2015, with equitable access and completion as medium-term objectives. - Observed disparities: gender, ethnic minorities, poor vs. non-poor, urban vs. rural vs. remote areas; low enrolment and completion concentrated in rural, remote and ethnic minority poor districts. - Main targets (for 2010 unless stated otherwise): - Convert 80 percent of incomplete primary schools to complete schools by 2010. - Provide access to a primary school to children from all under-served villages by 2010. - Gross Enrolment Rate to reach 95.8 percent (girls), 97.8 percent (boys), and 96.8 percent (total) in 2010. - Net Enrolment Rate to reach 89.7 percent (girls), 91.4 percent (boys), 90.6 percent (total) in 2010. - Reduce Repetition Rates in Grade 1 to 5 percent for both girls and boys in 2010. - Reduce Dropout Rate in Grade 1 to 5 percent for both girls and boys in 2010. - Reduce Dropout Rates in Grade 5 to 1 percent for both girls and boys in 2010. - Increase the Primary School completion Rate to 75.4 percent (girls), 79.5 percent (boys), and 77.4 percent (total) in 2010. - Pupil-Teacher Ratio to be kept constant and not to exceed 31:1. ### c) Lower and Higher Secondary Education - Coverage: highest in urban and economically developed areas; lowest in rural, remote, ethnic minority areas and poor districts, contributing to widening gaps. - Urban issues: high enrolment, lack of classrooms and teachers -> high pupil/teacher ratios. - Rural issues: low enrolment, surplus classrooms -> low pupil/teacher ratios. - Gender disparity: more prominent in rural, remote and ethnic minority areas; reducing in urban areas. - Main targets: - Achieve parity between girls and boys in access to lower secondary education, particularly in ethnic minority and poor areas. - Reach a national transition rate from Grade 5 to Grade 6 of 82.5 percent in 2010 and 85 percent in 2015. - Achieve an attendance rate of 68.4 percent for lower secondary schools. - Achieve an attendance rate of 40 percent for higher secondary schools. ### d) Non-Formal Education (NFE) - Current literacy baseline: Only 45.2 percent of the adult population are currently considered to be literate at a basic level. - Targets: achieve over 98 percent reported adult literacy rate and 61 percent tested basic adult literacy rate by 2015. - Purpose: increase learning opportunities for children not enrolled in school, school dropouts and young adults, thereby increasing adult literacy and reducing poverty. - MOE’s disadvantaged target groups: - Children and young adults aged 6-14 who did not have a chance to be admitted into primary school and are willing to follow literacy and continuing education courses. - Adults aged 15-40 who are illiterate and are willing to participate in literacy and continuing education courses. - Young adults and adults aged 15-24 who do not have definite vocations and are willing to participate in basic vocational training. - Programme targets: - Annually enrol 20 percent of the primary dropouts in non formal primary courses. - Annually enrol 2 percent of the illiterate adults in adult literacy programmes. ### e) General Developments for Pre-Schools, Primary and Secondary Schools - Infrastructure and staffing priorities: - Build more kindergarten, primary, secondary and vocational schools; equip with necessary facilities and qualified teachers. - Renovate existing schools. - Improve access by grouping schools and establishing self-sufficient dormitories for teachers and students. - Rural remote school facilities mainly temporary, lacking play/learning materials and basic sanitation. - Teacher development and working conditions: - Properly train kindergarten teachers and develop a curriculum with toys and aids. - Improve teachers’ conditions and salaries to support training, recruitment, deployment and motivation. - Improve working and living conditions for teachers in rural and remote areas to attract them. - Gradually improve teacher quality and ensure appropriate training. - Curriculum, management and quality assurance: - Reform teaching and learning methodologies; establish a comprehensive and uniform curriculum and text-books. - Upgrade training infrastructure; mobilise creative and free ideas for learners and students. - Implement monitoring and evaluation to ensure education quality. - Equity and financing policies: - Implement policies of exemption, reduce tuition fees and provide scholarships to poor students, other target groups and best students. - Create favourable conditions for regional and international integration of education. - Promote decentralisation in fund utilisation and education management. - Reform and improve Government capacities in education management; establish a legal framework for education monitoring and evaluation; clearly define responsibilities of central and local authorities. ### f) Tertiary Education - Planning and infrastructure: - Establish a master plan for development of universities, colleges, high schools and vocational training networks during the Sixth Plan (2006-2010) period. - Construct a university in Luang Prabang and a technical college in Luang Namtha to provide technical and managerial training (e.g., mineral exploration and processing, agro-forestry processing, tourism). - Capacity and curriculum development: - Upgrade capacities of teachers and professors in universities in Vientiane, Savannakhet and Luang Namtha. - Upgrade three national-level Universities with better libraries and laboratories. - Improve the National University to reach regional and international standards. - Improve bachelor’s degree curriculum and develop master’s degree curriculum. - Establish high-level technical schools for each industry area, middle-level technical schools for agriculture, and two or three teacher colleges. - Vocational training and research: - Expand and improve vocational schools by mobilising funds from all economic sectors to absorb secondary graduates. - Establish a policy to encourage households to send their children to study abroad and return to serve the country. - Increase investment in scientific research: establish research centres and laboratories for universities focusing on electricity, minerals processing, agriculture and forestry, seeds, chemical fertilizer, organic fertilizers and animal feeds. - Coordinate research centres with ministries and projects to develop technical staff and focus on key sectors. - Reform curriculum and teaching methods to train high-quality workers for key economic sectors; train scientific and technological researchers in line with regional standards. - Vocational training for labour market needs: - Promote vocational training for workers to increase employability and encourage domestic and foreign sectors to participate. - Develop vocational high schools in Xiengkhouang, Huaphanh and Oudomxay. - Develop curricula relevant to domestic and regional labour markets. - Supply schools with proper textbooks, workbooks and instructional materials. - Encourage businesses to upgrade professional skills of business people, particularly in business administration and management, technical knowledge and foreign languages. ### 3. Targets (education-sector summary) - Main targets for 2010: - Increase training to achieve the ratio of 1,140 students per 100,000 people. - Increase the proportion of well-trained workers at different levels to 10 percent by 2010. - Gradually popularize primary and secondary education, initially in urban areas. - Net enrolment rate targets: 16 percent for kindergarten, 90.6 percent primary, 68.4 percent lower-secondary and 40 percent upper-secondary schools by 2010. - 90 percent of those between 15-39 years old should be literate by 2010. - Other targets and operational objectives: - Reduce repetition and drop-out rates by 2-3 percent per annum. - Develop teaching/learning aids for Lao language teaching to ethnic minority children and distribute Lao language teacher guides. - Develop primary and lower secondary cluster schools. - Reach international standards in quality of education at all levels. - Provide pedagogical assistants and in-service training for teachers and upgrade untrained teachers to achieve basic qualifications. - Improve central and regional management and administration of the education sector by improving regulations, raising level of inspections, strengthening planning capacity (including EMIS) across all levels, appointing well trained administrators and school directors, and providing management and administrative training courses. - Promote community participation by establishing pupil-parent associations at all education levels. - Establish an education development fund and improve flow of funds to schools and institutions. - Improve financial management of the Provincial Education System (PES) and District Education Board (DEB) offices. - Sectoral thematic targets: - HIV/AIDS: develop instructional and reading materials on life skills for preventing spread of the disease. - Drug Control: develop awareness programmes in collaboration with MOH and other ministries to help eradicate drug use among students. - Information and Communications Technology (ICT): encourage investment in computer technology and facilitate internet use, particularly in remote and poor areas; promote education and training in ICT. - Distance Education: create a distance education centre at the National University of the Lao PDR. - Unexploded Ordinances (UXO) Decontamination: mainstream UXO awareness into standard teaching schedules. - School Feeding Programme: promote primary school participation of poor and vulnerable children, especially girls, in food-insecure areas through a school feeding programme. - Population: strengthen research and instructional capacity to support policy of balancing population growth and socio-economic development. - Health Education: integrate health education and promotion into primary and secondary curriculum and expand school sanitation. - Gender Equity: mainstream gender equity into virtually all MOE activities and implement specific “pro-girls” activities. - Children with Special Needs: focus on inclusive education. *Source: Lao PDR: National Socio Economic Development Plan (2006-2010), Chapter 2 (Sub-Sector Strategies) and associated sections excerpted from the provided PDF.* ### 4. Priority Programmes and Strategies ### 4. Priority Programmes and Strategies ### Primary health care: components and focus - Primary health care is the main priority aimed at increasing the standards and availability of health care in the country. Components include: - (i) Information, Education and Communication (IEC): reorganisation of the IEC, preparation of campaigns, translation and dissemination of information about hygiene and proper lifestyles (the ‘3 cleans’ of preventative healthcare: drinking boiled water, eating cooked food, and washing hands before eating and after using the toilet) in ethnic languages; - (ii) Expansion of the Rural Health Service Network: curative services, strengthening primary health care (PHC) with an emphasis on the 47 poor districts, expanding PHC to reach more than 80 percent of villages, enabling remote and poor villages to have access to basic health care and referral services to hospitals, the construction of 150 new health centres, three regional hospitals, 13 provincial hospitals, and 10 type A district hospitals and 46 Type B district hospitals in poor districts, and promote the role of women in PHC. This is the single largest programme accounting for about a third of the total expenditure in the sector; - (iii) Upgrading the Capacity of Health Workers: priority to increase the number of health personnel working at the village and district levels with emphasis on the 47 poorest districts; increase good behaviour, morale and capacity of health personnel at the district and village levels in parallel with provision of essential drugs and necessary medical equipment to the district hospitals, the Health Centres, and the drug revolving funds at the village level; - (iv) Maternal and Child Health (MCH) promotion: through the MCH Centre of the Ministry of Health and its facilities in provinces; essential obstetric care requires upgraded health facilities with delivery and operating theatres financed under Strategic Programme (ii) or subsumed under strengthening of the MCH network; - (v) Immunisation: as the cornerstone of primary health care, one of the most efficient and cost-effective methods of improving health; - (vi) Water Supply and Environmental Health: efforts to increase access to safe water through various methods and access to latrines at schools and in households; - (vii) Control of Communicable Diseases: malaria, dengue, cholera, tuberculosis and helminth, through among others the Global Fund (for funding the malaria and TB programmes); - (viii) HIV/AIDS/STI Control: surveillance, prevention, care, support and treatment; - (ix) Development of Village Drug Revolving Funds: mechanism to provide some curative services in remote areas so people do not depend completely on unsupervised itinerant drug sellers or travel excessively long distances to access simple care. - Supporting programmes absorb the lion’s share of resources in the health sector and include food and drug safety and promotion of collaboration/complementarity between traditional and modern medicines. - Need to improve health management and health financing structures through introduction of health insurance and health equity funds, both having considerable impact on financing health services for the poor. ### Health sector targets by end of Sixth Plan (2006-2010) - Life expectancy at birth will rise to 63.5 years; - Infant mortality to reduce to 55 per 1,000 live births; - Mortality of children under five years (child mortality) to reduce to 75/1,000; - Maternal mortality to reduce to 3300 per 100,000 live births; - Number of people catching tuberculosis to reduce to 72 cases per 100,000 people; - Child vaccination coverage to reach 85 percent; - Vaccination programme to eliminate dangerous epidemics to reach 100 percent; - Ratio of malnourished children under five to reduce to below 30 percent; - Access to basic health care services to reach 100 percent; - Access to safe water to increase to 75 percent of the people overall; - Access to safe water in rural areas to increase to 70 percent of the people; - Coverage of toilet facilities meeting sanitary standards to rise to 60 percent; - Proportion of schools having segregated sanitary facilities to rise to 35 percent; - For the 72 poor districts, Ministry of Health targets for 2010: - 100 percent of the population in all the 72 poor districts will have access to PHC; and - 75 percent will have access to clean water; and - 55 percent to will have access safe sanitation. --- ### F. Industry and Minerals ### Overall strategy - Long-term objective: develop industry and minerals as key to industrialization and modernization, contributing to the 2020 goal, based on natural resource endowments and comparative advantages. - Priority to develop electricity and processing industries for domestic consumption and exports, promote mining, and selectively develop industries serving agricultural and rural economic development (fertilizer, machinery manufacture, electronics, garments, footwear and food processing). - Develop some industrial by-products to increase home-made electronic products, automobiles, motorcycles and materials for garment and footwear manufacture. - Government actions: - Correct or issue clearer policies to promote the private sector and encourage foreign investors. - Implement development policies for industries using domestic materials to increase value-added. - Establish investment promotion policy for regional industrial development in regions with difficulties and mountainous regions. - Revitalize and develop state-owned sectors to increase SOE production and trade efficiency; adjust unfair regulations among economic components. - Formulate and implement supporting programmes for small and medium sized enterprises. - Implement Prime Minister instructions on banning export of logs and timber and promote forestation; encourage production of high value furniture and distribute logging permits for manufacturers. - Encourage technological transfer to improve product competitiveness; increase use of quality control systems and modern environmental management (ISO 9000, ISO 14000); address product standards, packaging, and regional habits/traditions to penetrate markets. - Fight smuggled goods and imitation products; simplify customs formalities and procedures for export and import of production materials. ### Sub-sector strategies (a–n) - a) Electricity: - Bring new power stations into operation to boost electricity exports and meet domestic demand. - Foreign investment permits consistent with the Power System Development Plan; integrate projects into emerging regional electricity market. - Construct electricity loading system to decrease transmission losses; reduce capital and operating costs. - Construct electricity transmission lines and transformer stations in Northern and Southern Regions with 2,860 km of high-tension lines to transmit electricity from the Lao PDR to Thailand and Vietnam. - Cooperate regionally to trade electricity and connect grids with China, Vietnam, Cambodia and Thailand. - b) Coal Industry: - Exploit discovered and potential coal mines to balance domestic supply and demand. - Anthracite coal production should reach about 50-60 thousand mt per year. - c) Mining and Metallurgy: - Encourage investment in gold, tin and copper. - Production projections: copper 45,000-50,000 mt per year, tin 2,000-2,500 mt per year, gypsum 300-400 mt per year, gold 10-13 mt per year. - Proposed growth of total mining industry: 15 percent per year during the Sixth Plan period (2006-2010). - d) Cement Industry: - Aim for growth rate of over 20 percent per year; cement production reaching 1.3 million mt by 2010. - Speed-up investments in cement projects implemented during 2004-2005 and seek capital for new projects. - Research to increase production and improve quality by replacing blast furnace technology with reverter furnaces. - e) Machinery: - Concentrate on manufacture of products with market advantages, especially serving agricultural and rural areas; develop construction, production lines, shipbuilding, machine-tools, automobile and motorcycle industries. - Redesign and improve production lines in cement, paper, electricity, and chemical fertilizer industries by gradually replacing imported equipment. - Focus on depth of investment, renovation of equipment and technology, and modernization of key production phases. - Develop advanced mechanical consumer products through foreign investment; develop assembly of automobiles and motorcycles. - f) Electronics, Information Technology and Telecommunications: - Develop electronic assembly, information technology, software for administration, education and training, e-commerce, finance and banking services. - Initially focus on manufacture of some electronic components; attract foreign investment. - g) Chemical Industry: - Speed up fertilizer production to balance availability for agricultural production. - Research market and efficiency for potash (rock salts) plants. - Develop industrial chemical products (phosphates, hydrochloric acid, nitric acid) for fertilizer industry, pesticides and rubber manufacture. - Research comparative advantages, demand and capital for producing some medicines for the domestic market to gradually cut imports. - h) Textile Industry: - Change garment product structure to increase share of high value products to meet fashion industry requirements and increase domestic value added in exports. - Cooperate with experienced Vietnamese enterprises to participate in global distribution networks of trans-national groups. - i) Footwear Industry: - Modernise manufacturing phases; develop sources of leather and increase use of domestic raw materials to increase export value. - Emphasise investments to increase quantity and quality by introducing software into design and sewing, diversifying products and designs, moving from assembly to producing materials and selling products. - Develop leather sources by strongly developing herds of cattle and importing modern processing technologies; organise leather purchasing and increase proportion of gathering pelt; encourage ranchers and leather suppliers to invest in leather tanning factories. - j) Beverage Industry: - Prioritize investments in factories manufacturing juices and mineral water. - Develop new beer factories and enlarge existing ones to increase productivity for domestic demand and export. - Target total growth rate about 10 percent per year. - k) Tobacco Industry: - Continue investing in renewal of equipment and technologies to improve product quality and maintain an annual growth rate of 3-4 percent while promoting exports. - Focus on products with filters and middle and high quality to increase value and decrease negative impacts. - l) Cooking Oil Industry: - Achieve an annual growth rate of 13 percent; exploit domestic market to meet demand while promoting exports. - Build cultivation of specialized areas for oil-bearing crops step-by-step to reduce dependence on imported raw materials. - m) Dairy Industry: - Emphasise investment to develop cow herds to increase domestic milk supply capacity. - n) Plastics Industry: - Attract investment to produce high quality plastic products (computer cases, televisions, automobile and motorcycle spare parts, plastic wrappers for industry). - By 2010, expected production of plastic products will reach 8,500 mt. ### Industry targets - Growth in industrial employment is a key target in reducing poverty; - Increase the general growth of industrial exports; - Mobilize the annual growth rate of industry at 13.2 – 14.3 percent, in which electricity production is to grow at 41.58 percent, manufacturing at 10.27 percent, and mining at 11.47 percent; - Provide electricity to 70 percent of households; - Construct electricity transmission lines: high voltage cables of 7,684 km, middle voltage cables of 4,332 km and low voltage cable of 3,650 km; with the low voltage system serving 1,612 villages and 125,879 households; - Install solar and other energy systems in 1,776 villages covering 30,000 households; - By 2010, electricity production will be 14-15 billion kWh. Power generation capacity will be increased by about 2,000 MW in the Sixth Plan period, with the total power generation capacity reaching 2,700 MW in 2010. Hydroelectricity plants under construction in the Sixth Plan period include: - Nam Theun 2 with a capacity of 1,088 MW and output of 5.5 billion Kwh per year, to be completed by 2009; - Sa Xa Man 3 with a capacity of 250 MW and output of 2 billion Kwh per year, to be completed by 2009; - Nam Mu with a capacity of 105 MW and output of 281 million Kwh per year, to be completed by 2009; - Nam Ngum 2 with a capacity of 615 MW, to be completed by 2010; - Nam Ngum 3 with a capacity of 460 MW, to be completed by 2010; - Set 2 with a capacity of 76 MW, to be completed by 2007; - In cooperation with China, research and construct the NamOu 8 hydroelectricity plant in Phongsaly with a capacity of 640 MW; - Continue implementing hydroelectricity projects signed with China such as Nam Leuk, Nam Mang 3 and Nam Mang 5; - Make efforts to produce two million pairs of leather shoes of different kinds by 2010; - Continue to diversify industrial development to maintain rapid growth, raise product quality and manufacturing efficiency; integrate efficiently into the global economy by maintaining and broadening domestic and overseas market shares; - Ensure supply-demand balance for main industrial products such as electricity, coal, steel and fertilizer by strengthening domestic manufacture; - Short-term focus on products with assured markets and high competitiveness to meet domestic consumption needs and increase export turnover with prospects for reducing production costs; - Concentrate resources on industrial groups with competitive advantage: electricity, mining, agro-processing, forestry, aquatic products and seafood, wood products, garments, footwear, electronics and motor vehicle assembly; - Emphasize developing some products in information technology; - Encourage all economic actors to invest in and develop industrial production of various scales, with particular attention to attracting foreign investment; increase industrial concentration (share) of the non-state sector and foreign investment in total value added of the industrial sector; - Build selected factories producing materials such as metals, machinery, basic chemicals and chemical fertilizers; - Establish and develop industrial zones with high technology in Vientiane, Champasak, Savannakhet and Luang Prabang; - Establish modern industrial centres of high competitive ability at the centre of three main economic areas as engines of national industrial development; - Develop industrial foundations for national defence and security; - Promote trade, increase export of industrial products, increase processed export products and products with high technological content; - Computer-electronics branch target: growth rate of 17-18 percent per year during the Sixth Plan period (2006-2010). ### G. Infrastructure - Long-term goal: provide necessary infrastructure to sustain a modern nation state where people in all parts of the country could easily communicate and participate in development activities and interact with people and markets outside the country. *Lao PDR: National Socio Economic Development Plan (2006-2010), Chapter 4: Priority Programmes and Strategies* ### 1. Overall Strategy ### 1. Overall Strategy ### Major objectives - Continue to maintain, improve, and develop socio-economic infrastructure during the Sixth Plan period (2006-2010). - Focus areas: inland, international, river, and air transport; telecommunications; schools and health centres. - Meet basic urban infrastructure demand with attention to waste water treatment and environmental sanitation. - Allocate new infrastructure and actions to mitigate hunger (rice scarcity) and poverty, with emphasis on maintaining existing infrastructure to facilitate socio-economic development, national defence and security. ### 2. Sub-Sector Strategies ### a) Inland Transportation - Prioritized projects to open up regions and the national economy: inland roads and bridges over the Mekong River, highways linking Vientiane Capital to other cities and provinces. - Emphasis on major roads connecting economic centres, remote areas, and roads for national defence and security. - Increase paved/concrete roads and construct bridges along main roads. - Develop inland and waterway checkpoints with connecting bridges to foreign countries and international markets. - Upgrade national roads connecting the Lao PDR to neighbouring countries to standard roads. - Priority corridors and sections named explicitly (selected examples from plan): - North-South road to Bokeo, Luang Namtha; East-West road to Savannakhet. - Provinces within Lao-Vietnam-Cambodia economic triangle (Attapeu, Sekong and Saravane). - Provinces within Lao-Thailand-Cambodia Economic Triangle (Saravane and Champasak). - Targeted construction to open inaccessible areas, reduce disparities, promote border trade, and protect national sovereignty. - Secure accessibility in both wet and dry seasons, focusing on concrete roads. - Continue increases in domestic funds through the Road Maintenance Fund for road maintenance. - Current unpaved main roads identified: - Central part of Xayaboury province (90 km), Bokeo and Xaysomboun. - Specific planned/upgrading works listed (selection preserved as in source): Thai-Lao-Teiching (Road No.2) Ngeun to Pak Baeng to Epak (Thailand); Kua to Teuychang (China); Road No.8 Ban Lao to KeoNeua through ODA from Sweden; Road No.12 Thakheak to Ngommalad; Nam Ngum Hydropower Project II related works; Road No.13 Nateuy in Oudomxay to Pakbeang with ODA from China; Road No.18B Attapeu to Ban Had, Contum province, Vietnam; Road No.15 Laobong to Saravane and Saravane to Lao-Vietnam borders; Road No.16 Sekong to Vietnam border; Road No.1B Ban Muang to Road No.2 to Phongsaly; Road No.14 in Xaysomboun (13 km) and Xayaboury to Paklai; Road No.1D Attapeu to Northern parts of Cambodia; Road No.4A central Xayaboury to Luang Prabang and to the Mekong River; Road No.1 Vientiane Capital to Kao Leo folk road and to the Friendship Bridge. - Study roads along border lines for economic development and national security (examples preserved): Road No.11 Sanakham to Xayaboury; Road No.14A Pakse along the border line to Cambodia; Road No.14B Angkham Phondaeng to the southern triangle boundary; Road No.5 Huaymo to Xaysomboun and Xaysomboun to Thavieng. ### b) Air Transport - Upgrade and construct essential airports; increase investment in training Lao aviation staff. - Pakse, Savannakhet and Luang Prabang to be upgraded to sub-regional airports. - Study construction of new stations and airports in economic centres. - Airports to be constructed to accommodate up to 2-2.5 million passengers per annum. - Priority for Wattay International Airport to accommodate big airplanes and serve about 1-1.5 million passengers per annum. - Construct an airport in Luang Namtha. - Facilitate increases in airplanes and airport equipment; improve quality of service, boarding safety, modern air traffic control, and staff capacity. - Improve and maintain the national airline; cooperate with international airlines to open more flights; allow more planes to use Lao PDR air space. ### c) Domestic waterways - Improve and construct river routes and main river port systems; modernize domestic waterways and upgrade river ports to regional and international standards. - Research international waterway transportation systems on the Mekong; explore feasibility of a deep river port. - Replace some loading (lifting) equipment. - Construct bridges connecting Luang Prabang and Xiengman; Huayxai and Xiengkhuang (Thailand); and a friendship bridge connecting the Lao PDR and Myanmar. ### d) Irrigation - Concentrate investment on irrigation works, especially new water sources and reservoirs in provinces subject to drought. - Focus also on irrigation and water quality for growing aquatic products. ### e) Railway Transportation - Lay about 3.5 km of railway line from Huu Nghi Bridge to Tha Na Leng. - Undertake field survey and mobilize capital to continue constructing the next rail link to Kham Sa Vat. - Research feasibility for constructing other railway lines for the next five years. - Continue construction of a 14 km railway line from the Friendship Bridge to Ban Kham Sa Vat using mobilized funds. - Invest in preparation phase and sourcing components: train locomotive, train compartment and driver. - Prepare to study, survey and construct a railway line from Thakheak to Kiew Mou Ya (Vietnam Border); seek funding for this project. ### f) Urban Development - Focus increasingly on mountainous districts to provide integrated infrastructure. - Aim to secure beauty, cleanliness, and greenery of civilized towns; complete town planning and develop modern road systems to mitigate traffic jams. - Develop new urban areas and upgrade existing ones; eliminate temporary unsafe blocks and slums; upgrade/renovate residential houses for low-income people; meet housing demand for police and resettlement gradually. - Develop a Land Fund through various capital sources, especially in major cities and concentrated industrial areas; mobilize funds from Land Projects and the Lottery. - Increase fiscal budget funds for some major projects and create mechanisms to attract funds for urban infrastructure. - Encourage society to invest in water supply, drainage and residential houses; establish targeted funds such as urban development funds and resettlement funds beginning in big towns and collective industrial zones. - Increase distribution of sanitized water in urban and suburban areas; solve waste water and solid waste issues in provincial capitals, industrial centres and hospitals. - More schools, regional technical colleges and universities to be built and existing ones upgraded; in the next five years, all children would have access to a primary school. - Build and upgrade more health centres and hospitals; ensure sufficient office space for government agencies; complete main headquarters and national works (Central Committee facility, new National Assembly venue). - Emphasize trade infrastructure, tourism, and high-standard health facilities. ### g) Telecommunications Sector - Open up telecommunications market in line with international economic commitments. - Encourage economic sectors (including private sector) to participate and mobilize internal and external resources. - Develop fundamental infrastructure to support post and telecommunications and new services such as the Internet and mobile phones. - Construct a cable line and telecommunications network from the North to the South and the East to the West linking the country with all of Asia. ### h) Sports Facilities - Upgrade and construct more sports facilities, such as stadiums, sports centers and tracks. ### 3. Training - Continue training staff of Departments of Communications, Transport, Post and Construction, contractors and consultants in: - Working in a competitive bidding environment; - Understanding contractual conditions and obligations; - Understanding the technical specifications required; - Planning and financial management; - The procurement process; - Control of operational costs; - Equipment management; - Site safety and safe working practises; - Contract management; and - Environmental impact assessment and mitigation. - Eight priorities to create an enabling business environment for national road construction capacity: - Further development of the regulatory framework; - Management system development; - National Transport Safety Strategy implementation; - Capacity development of central MCTPC level institutions; - Capacity development of local level (provincial/district) institutions; - Financial management development; - Procedures/routines for addressing inter-sector issues; and - Continual development of sustainable financing mechanisms (e.g. Road Maintenance Fund). ### 4. Investment Allocation - Review overall draft plan for infrastructure and adjust investment allocation to realized conditions and priorities. - Mobilize and prioritize resources for social investment to carry out infrastructure development with a structural shift towards economic effectiveness. - Publicise build operate and transfer (BOT) projects and call on domestic and foreign private investors and other economic actors to undertake projects. - Emphasize public investment in large-scale infrastructure: national highways, river ports, airports, modern and large-scale transport systems. - Special priority sectors: water supply, drainage, environmental sanitation, expressways, big towns, inland transport, municipal roads, railways, airports, and river ports. - Encourage private sector and foreign companies to invest in infrastructure including water supply, the new mega city, and urban communications. - Government will invest in construction of high quality health facilities. ### 5. Investment Management - Research and propose mechanisms to separate and upgrade government roles in each process of infrastructure investment management. - Consider decentralization of management at the implementation phase. - Increase use of independent consulting groups during project implementation, especially big projects; promote consulting organizations, construction bidders, and independent monitoring agencies. - Draw up a road map to eliminate collusion in construction investment. ### 6. Targets - Increase access to remote areas by building firm roads. - In the Sixth Plan period (2006-2010), construct roads with a total length of 2,300-2,400km, comprising 1,500-1,600km of asphalt-paved roads and 750-800km of paved roads. - Pave with asphalt all roads connecting Vientiane Capital with the provinces. - Construct bridges with a total length of 4,000 meters, including three bridges over the Mekong River. - Construct national roads to link provinces with Vientiane capital, and link national roads to neighbouring countries. - Construct provincial roads to link to districts, particularly to link to the poorest areas, and pave 6 percent of roads in the country with asphalt. - Expand telecommunications system to broadband, upgrade telecommunications system 3G to telecommunications system 4G. - Expand the optical fibre cable to every district and important zones, and increase the coverage of telephone to an average of one per ten people. - Improve service at Wattay International Airport to meet the requirements of 1-1.5 million passengers per year. - Provide water supply to 59 percent of total households. - Construct and arrange for successful river transportation during the Sixth Plan period (2006-2010). - Develop and construct a railway system. - Increase the people’s access to electricity, telecommunications, education and health facilities. - Develop sports infrastructure. ### H. Services Including Tourism ### 1. Overall strategy for services - Diversify and upgrade the quality of service activities to meet demands of production, consumption and exports; contribute to economic growth, expansion of employment and improvement of welfare. - Private sector to play a major role in developing service industries. - Concentrate on facilitating development of services with quick capital turnover and those generating significant revenues to the state budget such as tourism and financial, banking, transportation and telecommunications services. - Encourage steady development of trading and services according to economic potential; improve performance and quality; increase competitiveness of service products with participation of many economic components. - Further improve the role and efficiency of the State in governing commerce and services to satisfy demands in manufacturing, trading and society, contributing to economic growth, broadening markets, and promoting economic integration. *Source: Lao PDR: National Socio Economic Development Plan (2006-2010), 1. Overall Strategy (content unit _cr08341 - 1. Overall Strategy).* ### 2. Sub-Sector Strategies ### 2. Sub-Sector Strategies ### a) Domestic Trade and Markets - Continue to develop the domestic market to satisfy demands of production and consumption, assist to sell home-made products, stabilize commodity resources to promote exports and maintain export markets. - Ensure demand-supply relation for essential products: petroleum, steel, iron, cement and fertilizer. - Organize trading activities to maximize consumer satisfaction and accommodate export development; develop domestic commerce corresponding to foreign market activities for integration into the international economy. - Formulate and implement an overall development programme with special attention to infrastructure: market system (including border markets), trans-border economies, department stores, shops, distribution systems, distributors, warehouse systems, bus stations, and ports. - Implement policies to promote effective and convenient exchange and flow of commodities; develop business entrepreneurs and increase business cooperation and joint ventures. - Coordinate between producers, businessmen and consumers; maintain relationships between domestic and foreign markets; maintain sufficient production to stabilize prices. - Promote development of brand names and raise competitiveness of Lao products domestically, regionally, and internationally. - Strictly enforce measures to manage domestic market operations; counter smuggling and trade fraud; prevent unauthorized service operators; secure transparent and equal business environment. - Support and monitor trade enterprises for contraband and poor quality products. - Create conducive environment for mountainous area markets: grow retail trade, organize distribution channels for agricultural products for mountainous people, and provide subsidies to reduce high transport costs. - Construct and complete systems and policies to meet WTO and General Agreement on Trade in Services standards; prepare to fulfil service commitments required to join the WTO and liberalise services in the ASEAN framework by the year 2010 and thereafter. ### b) Financial, Banking, and Insurance Services - Covered under Financial Sector in Chapter 2. ### c) Transportation Services - Overall policy: build infrastructure and human capacity, enhance competitiveness, gradually open transportation service markets, attract foreign funding, and utilise modern technology. - Upgrade quality and safety in commodity and tourist transportation services; open up and upgrade some airports and river ports to enhance loading capacity for passengers and commodities. - Improve management and modernize loading vehicles and equipment at river ports to reduce transportation costs; key target is to reduce the cost of moving freight and people domestically and internationally. - Develop public transportation and open new urban routes to attract passengers; operate public communications systems in major cities efficiently; continue to maintain safety to limit and gradually reduce accidents, fatalities and injuries due to road accidents. - Expand river transportation services via supporting policies; initially focus on high-profit services with wider scope such as river transportation agencies. - Implement administration reform at river ports to reduce transportation costs. ### d) Telecommunications Services - Continue to diversify postal and telecommunication services, raise quality and gradually reduce costs; achieve a reasonable cost of calling (tariff rate) to make services accessible and affordable. - Increase competition to attract more users. - Improve control and management of postal rates under strict government management; empower enterprises to determine corresponding postal rates for competitive services; apply rate brackets for services becoming competitive. - Apply efficient management to the national infrastructure network to fully use information infrastructure and manage corresponding services. ### e) Tourism Development - Research and amend policies to facilitate tourism growth; diversify funding sources, mobilizing private and foreign investment. - Research and develop laws/decrees on tourism; complete draft Law or Decree on tourism. - Implement measures to raise quality of tourism services for foreign and domestic tourists. - Improve tourism infrastructure: communications and information systems, electricity, water supply, hotels and guesthouses. - Develop and promote eco-tourism and enhance competitiveness of tourism products for export. - Cooperate with mass media; organize International Trade fair in coordination with Airlines, and Trade, Information and Cultural agencies to promote tourist sites. - Continue overall programme on tourism development in 939 tourist sites: 570 ecological tourist sites, 257 cultural tourist sites and 112 historical sites. - Develop 364 potential tourism sites with investment attraction and encourage development of new tourism sites in the Sixth Plan period (2006-2010). - Focus on human resources: establish a tourism department in the National University to develop highly qualified tourist officers; encourage private sector participation in tourism training; coordinate with Asian partners for training. - Enhance roles of the Tourism Authority; in 2006 the National Tourism Authority will be upgraded to Tourism General Directorate. - Establish a National Council on Tourism under the chairmanship of H.E., the Deputy Prime Minister, with representatives from relevant line Ministries, central authorities, and leaders of key provinces. ### f) Information- Culture, Radio and TV - Prepare development programmes to ensure communication of ideas and better news information for all people to achieve modern and civilized lives with culture and national characteristics. - By 2010, targets include doubling the arts troupes; use Government art troupe for performances to serve the people; and increase Government’s management of culture, particularly in media and publications. - Government role: define political ideas, attitudes, beauty and social values; support investments in cultural facilities (cultural centre, sports facilities and libraries) as district and community centres. - Construct cultural halls, libraries, museums, public parks and recreation places in densely populated provinces and districts. - Continue distribution of information and culture in remote areas; promote cultural exchange among ethnic groups; prevent outdated beliefs that inhibit social development. - Preserve and develop traditional arts; preserve historical sites and special culture; carry out surveys on cultural values of minority people and pilot projects to preserve old and best villages. - Reward or provide grants to talented people in cultural affairs and promote artistic development projects. - Promote development of records (archives) and preparation of stories and documentaries; develop libraries in schools and nationwide. - Promote establishment of private films, private cinemas, cultural and artistic play theatres, private collectors and museums; participate in preservation of trails for trekking and cultural heritage. - Examine financing mechanisms for radio and TV; upgrade quality and transmission time of radio programmes using modern technology. - Add transmission time and improve TV programme quality; prepare and broadcast programmes on agriculture, rural lives and ethnic minorities using ethnic languages to disseminate knowledge on agriculture, forestry and fisheries and raise awareness about Government policies. ### g) Sports - Prepare basic plans and mechanisms to promote whole-society participation in sports activities and development. - Develop sports exercises to strengthen target populations; encourage line agencies, organizations and social associations to carry out sports exercises and activities. - Support sports including swimming, running, football, volleyball, tennis and badminton; support professional sports for children and youth within health education in schools. - Improve sports education and develop professional sports suitable to the situation; encourage development of sports for young people to produce professional athletes for regional (SEA) Games, the Olympics and other international events. - Encourage institutions such as hotels to provide sports facilities (stadiums, swimming pools and gymnasiums) and sponsor government-nominated sports. - Promote investment and business operations training and places for tournaments. - Rationalize division of work between Government administration, the Sports Federation and the Association; adjust sports management in accordance with international principles and hand over activities and tournaments to social and non-governmental associations; Government to provide only financial support to selected activities and for preparation of Lao sports teams for international events. - Create opportunities and implement policies to prepare for the general conference for national sports in the next five years, including Olympic and regional games participation. - Carry out survey works and construct the national stadium to serve national tournaments and prepare facilities for Lao PDR to host the 25th SEA Games in 2009. - Start scientific study of sports suitable to the Lao PDR; promote best practices from sports sciences and technologies for athlete selection and development to improve capacities and upgrade sports such as swimming and running. - Prepare systems to develop new quality sportspeople with adequate numbers to participate in SEA Games events in the future. ### 3. Targets - Make efforts to achieve a growth rate of 7.3 - 7.8 percent per year for the service sector during the Sixth Plan period (2006-2010). Continue transforming the sector, increasing the share of services in GDP to 29 percent by 2010; - Try to achieve an expansion in postal and telecommunication services at the rate of 10 percent per annum; by 2010, the number of telephones will be 690,000 units with a telephone density of 10 units per 100 people, and all provinces and 80 percent of villages will be equipped with telephones; - By 2010, about 21.5 billion mt of commodities are estimated to be transported, with an average annual increase of 8 percent. The volume of commodity rotation will be 2.08 billion mt/km, with an average increase of 10 percent per annum; the volume of passenger transportation will be 257 million, with an average increase of 11 percent per annum; the volume of tourist transport will increase on average at 12 percent per annum; - It is estimated that by the year 2010 the sector will attract more than 1.7 million foreign tourists into the country, and 2.5 million domestic tourists. The number of foreign tourists will increase at the rate of 11-12 percent per annum. The total revenue from the sector will reach USD 200-300 million. In 2005, the average duration of tourists’ stays was five days, which will be extended to eight days by 2010; - The target is to achieve a 20-30 percent share for International Airline routes for the Lao Airlines by 2010; - Mobilize 15 percent of the population to train for sports, 8 percent of the households in 80 percent of the provinces and districts; develop sports infrastructure (such as stadiums, swimming pools and other types of sports facilities), with 50 percent of districts having sports structures in which 90 percent are basic sports which do not belong to the Government and are gradually developed; - Ensure that all districts including the remotest areas have access to radios and TV. By 2010, over 95 percent of families will be able to access the National Voice of Lao (radio) and national TV channels. - Provide books on basic knowledge of socio-economic development to all districts and some focal sites. - There will be around 26,000 recognized “new families” and more than 60 national parks will be established. - Complete and submit applications to UNESCO to recognize Chum field and Khon Pha Pheng waterfall as world heritage sites. ### I. Regional Development #### 1. Targets for Regional Socio Economic Development - Develop five-year plans for each region with average economic growth targets: - Northern provinces: 6-6.5% - Central provinces: 8.5-9% - Southern provinces: 6.5-7% - Average income of people to increase at 5% per year. - By 2010, per capita income targets: - Northern region: USD 610 - Central region: USD 1,000 - Southern region: USD 930-950 - Direct regional economic structures towards sharp increases in the shares of industry and services sectors in regional GDPs. *Lao PDR: National Socio Economic Development Plan (2006-2010), 2. Sub-Sector Strategies* ### 2. General Development Guidelines ### 2. General Development Guidelines ### Overall development strategy - Push implementation of the strategic plan in focused areas and build focal points where big cities can cooperate with advanced countries in the region. - Build up development capacity of each area and all economic players (sectors) to become the driving force for development. - Adhere to fuller exploitation of existing potentials such as natural resources and the labour force to increase productivity and value-added in production, and service capacity. - Prepare appropriate investments to support socio-economic development of the least developed areas. - First infrastructure targets include rural communications, irrigation, electricity, schools and primary health care to provide facilities for economic development and upgrade living standards. - Coordinate and collaborate regional development in the five-year period (2006-2010). - Give special attention to decentralization of authority between central and provincial authorities and within local authorities, especially for national and regional construction projects, to allocate resources (funds and labour) in implementation and avoid overlapping responsibilities. ### a) Agriculture and Rural Development - Establish large agriculture processing areas with appropriate exploitation and sustainable development of forestry resources as raw materials for processing industries, particularly for export. - Take advantage of comparative advantages of natural resources and labour in each area; focus on: - high yield rice production, - special rice species, - short-term industrial trees, - organic vegetables, - aquatic cultivation, - raising of big animals for domestic and foreign markets. - Improve fisheries performance in rivers and conduct fish farming approaches. - Establish village groups as base for community development, employment generation, and creation of new rural livelihoods, aiming to develop small-scale industries, handicrafts and arts, and support use of indigenous knowledge. - Target to shift 15-20 percent of the agricultural labour to small-scale industry and the production of handicrafts. - Implement forest management and accomplish forest and land allocation with provision of permanent livelihoods and cultivation of rice paddy. - Encourage cultivation of cash crops to increase living standards. ### b) Industry - Develop industrial centers in three areas to achieve big-bang results based on nuclear cities with modern infrastructure and services. - Focus industrial investment on value-added, large-scale sectors such as: - electricity, - food processing, - wood processing, - fertilizers, - clothing, - mining (such as gold, iron and bauxite), - construction materials, - machinery, - electric wares, - consumption goods of high quality. - Achieve development through industry groups in the area to drive regional economic development. - Support nearby areas that can supply raw materials and markets for certain products. ### c) Services - Develop and expand domestic and foreign markets to increase market base and sales. - Develop and transform multi-style services and create service centers regionally or countrywide. - Establish: - financial service units, - construction agencies, - health services, - national and regional research for science in an effective manner. - Develop telecommunication and postal networks. - Increase efforts to promote tourism, exploiting unique potentials of each region. - Develop border economic zones such as Xieng Kouk (Laos- Myanmar), Boten (Laos- China), Nam Kan (Laos- Vietnam) and other checkpoints (Laos- Thailand). - Improve and develop infrastructure complexes for each area, prioritizing cities and facilities such as airports, main routes connecting Vientiane and other focal cities, international border and satellite cities, tourism sites, and populous cities. - Connect electricity transmission lines to districts, with priority to border areas and special economic zones (areas). - Develop urban water supply; prioritize provision of electricity infrastructure for education and health in rural areas. ### d) Urban Development - Allocate and develop four leading cities as socio-economic development centers of the regions: - Namtha (Luang Namtha) in the Northern region, - the capital of Vientiane, - Khaanthabouly (Savannakhet) in the Central region, - Pakse (Champasak) in the Southern region. - Expect these cities to lead economic expansion, industrialization and modernization, and to encourage development of industry and services to participate in regional and global economic integration. - Designate main leading cities as centers for political, economic, cultural-science and technological affairs, and as intermediaries to ensure coordination within and between areas. ### e) Poverty Reduction - Increase investment and implement transparent policies. - Prioritize Government projects for development in difficult areas, especially the 47 poorest districts, to lift them out of poor status as planned. - Attract grant aid for infrastructure development in these areas. - Pay attention to border economy development, focusing on border checkpoints, particularly along major border crossings and economic corridors. - Direct special attention to animal rearing, planting industrial trees and forestry for raw materials in mountainous and flat terrains. - Implement poverty reduction projects in association with projects to reduce slash-and-burn practices and transition to permanent paddy cultivation, and with healthcare projects. - Prioritize development of local labour skills. - Consider significant investment in upgrading and improving education and healthcare development in the first instance. *Lao PDR: National Socio Economic Development Plan (2006-2010), section 2* ### 3. Development Strategies for Specific Regions ### 3. Development Strategies for Specific Regions ### a) The Northern Region — overall guidance and targets - The Northern region is described as the most difficult due to inadequate infrastructure, lower level of education, and limited and out-dated information, but with potentials in agriculture, forestry, hydropower, mining and tourism and proximity to China, Vietnam, Thailand and Myanmar. - Development emphasis for 2006-2010: infrastructure development and participation in regional/international economies through promotion of tradable goods to change the economic structure. - Priority surplus-generating sectors: hydropower exploitation, mineral processing, forestry, organic agricultural products and eco-tourism. - Regional GDP structure target (2010): - Increase the share of non-agricultural sectors from 45.3 percent in 2005 to 51 percent in 2010. - Industry and construction sector: 32.1 percent. - Services sector: 18.9 percent. - Urban development: improve some big cities to transform them into provincial capitals (example: Luang Prabang City). ### a. Development guidelines for specific sectors — Northern Region Agriculture - Use land and forest resources, change forest structure, prepare areas for commercial trees and fruit trees, livestock and industrial processing; develop farming methods to allow planting of trees for food; invest in small-scale irrigation; select suitable seeds. - Encourage planting of trees suitable to soil and climatic conditions to supply raw materials for processing industries. - Secure lands for rice production and ensure rice production of 550,000 mt per year. - Expand corn planting in Luang Namtha, Luang Prabang, Xiengkhouang, Bokeo and Phongsaly to reach 120,000 mt per year for animal feed and as raw material to processing plants for export. - Develop short-term commercial crops (soybeans, beans, tobacco, sugar) for local markets and for export to China and Thailand. - Farm economy targets: - Promote animal husbandry in favourable areas to increase the number of cattle and buffaloes to 7,500,000 heads by 2010 to ensure meat and milk production and supply raw materials for canned food for export. - Wood sector: - Shift from exporting logs to supporting wood processing and encouraging furniture for export. - Develop new forests to supply raw materials; continue land and forest allocation to stabilize shifting cultivation and resettlement. - Infrastructure and extension: - Draft projects to develop communication, electricity and water supply to village development clusters, especially those stopping slash-and-burn and opium growing. - Encourage agricultural extension, reforestation based on improved technical advice, and modernize production methods. - Targets and programs: - Continue Government programs on goods production and poverty reduction in 2006-2010. - Ultimately stop slash-and-burn cultivation by 2007. - Develop cultivation and livestock in focal districts (rubber, maize, tea, sugar; livestock and poultry). - Support production of food, vegetables and processed agricultural products to meet border markets (Xayaboury, Bokeo, Luang Namtha, Houaphanh, Phongsaly, Xiengkhouang). - Persuade business units and households to participate in production movements and establish village funds to divert from opium and upland cultivation. Industry - Priority: Luang Namtha Development Centre focusing on mining (coal, antimony, salt, copper) and tree exploitation and processing. - Promote local and foreign enterprise investment in: - Gold and iron in Xiengkhouang and Bokeo. - Coal in Xiengkhouang and Phongsaly. - Iron sheets and bauxite in Phongsaly. - Sapphires in Bokeo. - Expand capacity of the cement plant in Oudomxay to 80,000 mt per year. - Improve electricity supply with completion of Namkha hydropower in Luang Namtha and hydropower in Nam Xieng, Luang Prabang. - Construct Luang Namtha Industrial Zone on 200 ha for gem stones, micro-bio fertilizers, canned products, textiles and animal feed. - Promote small-scale industry groups in districts and villages. - Develop industries: wood processing, construction materials, mineral exploration and processing, large-scale and small-scale hydropower for rural electrification; develop handicrafts and small-scale industries for rural and urban consumers. Services - Develop local commerce: rural and mountainous market systems and border markets; facilitate commodity exchanges and border area tourism (especially Houay Xai and NaMeo). - Invest and develop high quality services in Luang Prabang and Xiengkhouang; encourage machinery service and equipment maintenance. - Set up service centres for service, commerce and tourism in border areas (Luang Namtha province) to build border economic areas and ensure national defence and security. - Explore feasibility of free trade area in Botem and Xieng Koc. - Prioritize telecommunications, financial, commercial and tourism services; promote agro-forestry technical services, advertisement and information dissemination on tourism, culture and health. - Tourism targets: - Attract tourists to around 700-800 thousand tourists, generating income of US 20-25 million per year via economic and service centres in Luang Prabang. - Encourage eco-tourism, culture and history tourism; support investment in tourism infrastructure; diversify tours to border areas, economic zones and cross-border tourism; develop traditional products (handicrafts, weaving). b. Infrastructure development — Northern Region - Mobilize investments to upgrade national highways and roads linking to international borders, river transportation lines and ports to facilitate commerce and tourism while maintaining border order and security. - Improve services in border check points to attract tourists and tourism activities; develop eco-tourism and historical/cultural tourism. - Develop basic infrastructure (water supply, electricity, healthcare) in Northern main cities (Luang Namtha, Luang Prabang, Xayaboury, Bokeo) to balance development between cities and rural areas. - Pay attention to development along highway R3 (transit between Yunnan Province, China and Lao PDR) as it is being constructed. - Plans to: - Upgrade an airport in Luang Namtha. - Rehabilitate Luang Prabang airport to sub-regional level to expand flights to all GMS countries, Hong Kong and Singapore. - Deploy and complete construction projects on routes such as R3; R2. - Seek capital for construction projects for R.4; R13; R.4A; R.4B. - Construct electricity networks linking different areas to facilitate tourism routes and mining explorations. - Cooperate with China to study and construct a hydropower project with capacity of 640 MW in Nam Ou in Phongsaly province. Social development — Northern Region - Priority to human resources development and welfare of those who have dedicated service to the country. - Complete building of Souphanouvong University in Luang Prabang and some vocational colleges. - Allocate investment capital to upgrade primary and secondary schools and construct new ones. - Upgrade and provide medical equipment to provincial and village hospitals; vaccinate people against dangerous epidemics and infectious diseases. - Stop slash-and-burn practices and eradicate opium growing while providing re-employment opportunities. - Accomplish poverty reduction target by 2010. - Upgrade provincial broadcasting capacity and open postal network into all district towns. - Construct and upgrade infrastructure and develop the economy to take lead in regional integration. --- ### b) The Central Region — overall guidance and targets - The Central region has plentiful natural resources, skilled labour, relatively complete infrastructure and quicker communications; many flat terrains suitable for crop cultivation and livestock and more irrigation networks reaching focal development sites. - Role for 2006-2010: play a comprehensive and central role in national development, modernize economic structure and generate large commodity production volumes. - Economic growth and employment targets: - Effort to achieve economic growth at a rate of 8.5-9% per year based on development of effective industrial sectors, especially labour-intensive processing industries. - Aim to increase proportion of labour in non-agriculture by 40-50%. - Increase Central region share in country’s GDP to reach 49-54% by 2010. - Urban development: improve some big cities to transform them into provincial capitals (example: Khanthaboury district renamed to Kaysone district of Savannakhet). ### a. Development guidelines for sectors — Central Region Agriculture - Enhance fertile plains to produce high quality agricultural exports: beans, sesame, tobacco, sugar, Phala rubber, coffee, cashews (suitable in Bolikhamxay, Savannakhet, Khammouan, Vientiane provinces). - Expand areas for special and high-quality rice and vegetable production; increase cattle husbandry, buffaloes, poultry and fishery in Vientiane prefecture, Vientiane Province, Bolikhamxay and Khammouan to supply raw materials for processing industries. - Expand planting area of Phala rubber, sugar, Mai Ketsanan trees and fruit trees in hills of Bolikhamxay, Savannakhet and Vientiane Prefecture. - Farm economy target (same as Northern Region): - Increase number of cattle and buffaloes to 7,500,000 heads by 2010 to ensure meat and milk production and supply raw materials to canned food export. - Preserve rice field areas to ensure rice production of 550,000 mt per year. - Plant short-term crops (yellow beans, beans, tobacco, sugar, vegetables) for local markets and export to China, Thailand. - Wood exploitation to be managed with ecological balance; continue protection and regeneration of forest resources and new planting; continue land and forest allocations and promotion of agricultural and animal raising improvements. Industry - Focus for 2006-2010: development of electricity, exploitation and processing of minerals to increase export products and budgetary revenues for infrastructure and poverty reduction. - Enhance industrial sector with high technology for export: electronics, consumer products, non-timber forest product processing, construction materials, chemical industry. - Establish key industrial areas gradually along main communication routes; develop traditional production villages to increase employment and exports. - Priorities: hydropower plants; exploitation of gold, copper and iron; production of cement and paper; agriculture processing; tourism and high quality services. - Mobilize investment to improve infrastructure of Vientiane Capital and Khanthaboury district of Savannakhet. - Support modernization of satellite cities (Phone Hong, Tha Khec) and other district towns to link cities and rural areas. - Create conditions to develop cities along East-West corridor of Savannakhet (Outhoomphone, Atsaphangthong, Thapalanaxay, Phine, Sephone) linking developed and under-developed provinces (examples listed in text). - Support for hydropower and mining: - Support Nam Theun 2 and Nam Ngum 2 hydropower projects and other small/medium hydropower projects such as Sebanghiang. - Create favourable investment environment for exploitation of gold, copper, iron and coal. - Cement production targets: - Construct Vientiane II cement factory with production capacity of 200,000 mt per year. - Construct Savannakhet cement factory with production capacity of 100,000 mt per year. Industrial focal areas — Central Region - Urgently construct three focal areas for industry; one specified: - Vientiane Industry 1: total area of 150 ha for non-forestry products and good quality timber production for export, tailoring, handicrafts, machinery and small tools for agricultural production and electric wares. *Lao PDR: National Socio Economic Development Plan (2006-2010).* ### 2. Vientiane Industry 2 with a total area of 250 ha for food exports, tailoring, animal ### _cr08341 - 2. Vientiane Industry 2 with a total area of 250 ha for food exports, tailoring, animal ### Industry (Central region / Vientiane & Savannakhet) - Vientiane Industry 2: total area of 250 ha for food exports, tailoring, animal feed, vegetables, fertilizers, pharmaceuticals and consumer goods. - Savannakhet Industry: total area of 200 ha for construction materials, mining, canned food, juices and animal feed. - Expansion of industrial areas along national roads to extend handicrafts to paper production, oil crops, weaving, and natural dyeing to increase rural employment and income. - Government support to publicize wood products, organic products, and market information to local and foreign investors. - Support for management of imported goods in industry area in Denesavanh. ### Services (Central region) - Implement trade policy to open services in internal trading network areas to meet regional and international economic integration using the ITEC Centre and the Singapore Trading Centre (under construction) in Vientiane as display focal points. - Complete construction of provincial and district infrastructure concurrently with goods production for domestic markets and export. - Open goods distribution in provincial joint border areas, with focus on investment in Savan-Seno special economic zone (Savannakhet) and other areas linking the Lao PDR with Vietnam and Thailand. - Financial services such as banking will be improved. - Focus marketing activities via the East-West economic corridor; encourage exports through advertisement and open access to market information for domestic and foreign investors and businessmen. - Tourism development in the Central Region: develop tourism centre in Vientiane; complete roads linking tourism within and between provinces, prioritizing roads to the South and road links to Vietnam, Cambodia, Thailand, China and Myanmar. - Wattay airport to be upgraded and modernized to meet Central region air service demand. - Continue development of telecommunications, financial service, banking and other services. ### Infrastructure (Central region) - Priority to Vientiane Municipality: internal roads and roads linking to other provinces. - Construct rail road from Vientiane to Nong Khai. - Rehabilitate Roads No. 8 and No. 12 (section Thakek-Gnommalat) to the sea port in central Vietnam; construct Road No.11. - Allocate adequate funds for road rehabilitation (mainly provincial roads), bridges, and irrigation head-works to assure 80-90 percent usage of the irrigated areas. - Construct and improve public health and education infrastructure, including Savannakhet agriculture and forestry schools and the agricultural research centre (seed varieties) in Vientiane Province. - Develop telecommunications and post office networks; upgrade water supply; develop housing and waste removal/disposal in cities; improve urban environmental quality. ### Social development and poverty reduction (Central region) - Enhance central facilities for public health, education, science and technology and social affairs. - Comprehensive development of school and university systems, vocational schools, skill training centres (including for carpenters); improve provincial and district hospitals. - Mobilize investment in poor remote, rural and border areas. - By 2010, overall slash and burn cultivation will be generally stopped. - Mobilize resources to improve rural roads, electricity networks, small-scale irrigation and water supply. - Allocate land for plantations and production to people, provide cultivation techniques and saplings to reduce poverty by 2010. ### Southern Region — overall targets and context - Positioned in Laos–Vietnam–Cambodia and Laos–Thailand–Cambodia development triangles; located on East–West Corridor connecting Kuangnya-Champasack-Oudone-Bangkok. - Natural resource potentials include vast fertile plains, water and mining resources. - Five-year (2006-2010) targets: - Achieve economic growth at an average rate of 6.5-7 % per year. - Contribute 21-23 % of the country’s GDP. - Reach a per capita income of USD 930. - Transform some big cities (e.g., Pakse) into provincial capitals/cores. ### Agriculture (Southern region) - Focus on foodstuffs, large animals (cattle, buffalo and pigs), and plantations of Phala rubber, coffee and pepper for export. - Infrastructure construction to support transportation and agricultural production; rural economy development. - Intensive cultivation of high-yielding rice on 190,000-195,000 ha. - Target rice output of 630,000-650,000 mt, of which 250,000-300,000 mt are for export. - Encourage cultivation of beans, corn, vegetables and fruit trees where suitable. - Expand plantations using short-gestation industrial trees and enlarge farms for Phala rubber, coffee, tea, mangoes, cashew nuts and Mai Ketsana in Champasak, Saravane and Sekong. - Integrate traditional farming with more productive techniques; promote mixed crop-livestock systems. - Increase numbers by 2010 to: - 550,000-570,000 head of cattle and buffaloes. - 380,000-400,000 head of pigs, sheep and goats. - Forest exploitation to be concurrent with environmental preservation; allocate land and forest to communities and promote permanent employment for mountainous people. - Deliver agriculture and forestry technical advice; stop slash and burn cultivation and opium growing by 2007. - Develop new rural communities and support infrastructure investment to reduce poor households by 2010. - Increase and secure forest cover through reforestation and balanced management. ### Industry (Southern region) - Priorities: development of electricity industry, agro-processing and mineral exploitation. - Prepare construction of Xexet 2 (Saravane) and Sekong 3, Sekong 4 and Sekong 5 hydro power projects. - Implement projects for copper, bauxite, charcoal and gold exploitation and processing (in Sekong, Saravane and Champasak). - Develop industrial and processing sectors: paper mill, coffee and tea processing for export, rubber processing; improve quality wood production in Attapeu; construct processing plant in Sekong for high quality wood products. - Promote investment and incentives to build a canaries plant for high quality canned foods (tea, coffee, canned meat and fruit juice) to ensure exports from Champasak. - Construct chemical fertilizer plants in Attapeu and Saravane to supply Southern markets. - Ensure raw materials for Saravane and Champasak cement factories to operate at full capacity. - Mobilize investment for hydropower, bauxite mining, aluminium production and other mineral products; establish a focal site for industry. - Support traditional handicrafts: weaving, silk, cardamom, rice by-products, processed corn for domestic and export markets, and tourism. - Invest in industrial site at Pakse with an area of 250 ha to support production of construction materials, beverages, canned goods, tailoring, animal feed, machinery components and spare parts for agricultural tools. - Support industry and small-scale handicrafts along North-South and East-West roads and in cities in the two economic triangle areas. ### Services and Tourism (Southern region) - Construct Southern Trading Centre at Pakse and central provincial markets to link goods delivery and supply border markets. - Develop border markets with Vietnam and Cambodia; expand trading network to remote areas; construct district trading centres. - Develop marketing systems for rural and border markets; promote trade and improve border services; establish more border check points to support exchanges with neighbouring countries. - Support tourism development between local provinces and neighbouring countries (Vietnam, Cambodia, Thailand). - Develop a sub-regional tourism service centre in Pakse to encourage cross-border tourism along highways no. 18 B, 14 A and 15 linking to tourism services in Thaighuan, central Vietnam, North-East Thailand and tourism sites in Savannakhet, Khammuan and Vientiane Capital. - Target to attract about 130,000-150,000 tourists to the Southern region. ### Infrastructure and urban development (Southern region) - Develop district roads and roads to Vietnam and Cambodia with attention to connections to sea ports. - Improve core national highways and inter-provincial roads; continue rural communication line construction to remaining villages. - Rehabilitate Pakse Airport to be a sub-regional airport with links to Hong Kong, Singapore, Vietnam and Myanmar. - Extend routes to border checkpoints: Road No. 16 (Sekong to Lao-Vietnam border and Ber-EE), Road No. 14 A (Muong Cao to Lao-Cambodia border), Road No. 14B (to Lao-Cambodia border), Road No. 15 (Napong to Lao-Vietnam border), Road No. 1J (Attapeu to Lao-Cambodia border). - Implement provincial and district road improvements to ensure all districts have road access to the centre in all seasons. - Repair and complete irrigation projects and consider additional small and medium-scale irrigation schemes if necessary. - Invest in development of important districts in Pakse (Champasak) as central core for economic, scientific and technical development and links to Central and Northern Regions and neighbouring countries. - Promote infrastructure investment in districts around Pakse (Saravane city, Xaysethat, Laman) as connectors between centre, production areas and markets. ### Human capital, health, education, communication and culture (Southern region) - Continue construction of classrooms and schools for village groups; enlarge high schools, vocational schools and universities; upgrade technical worker schools. - Prioritize kindergartens in difficult areas; consider upgrading Champasak Technical School and transforming vocational college into Upper Technical College to build technical and managerial staff. - Improve health centres; build hygiene centres in villages for health checks; upgrade provincial hospitals to regional ones; employ more mobile medical staff; cooperate with military medical units. - Invest to upgrade Champasak hospital to be the large Southern hospital to provide medical services and health care, particularly at village level. - Extend radio and TV stations and establish broadcasting systems in larger villages and village groups. - Increase cultural activities in communities and villages; enhance cultural bases and promote Lao traditions and heritage. *Lao PDR: National Socio Economic Development Plan (2006-2010)* ### 4. Targets and Methods for Development. ### 4. Targets and Methods for Development ### Targets and Investment Requirements - Regional GDP growth targets (2006-2010): - Northern Region: 6-6.5% - Central Region: 8.5-9% - Southern Region: 6.5-7% - Total: 7.5-8% - GDP Per capita USD (2010): - Northern Region: 610 - Central Region: 1,000 - Southern Region: 930-950 - Region’s share in country’s GDP (2010): - Northern Region: 25-28% - Central Region: 49- 54% - Southern Region: 21-23% - Total: 95-105% - Investment Needs (billion kip): - Northern Region: 20,698 (28%) - Central Region: 36,960 (50%) - Southern Region: 16,262 (22%) - Total: 73,920 (100%) - Public Investment (billion kip): - Northern Region: 8,778 (38%) - Central Region: 6,468 (28%) - Southern Region: 7,854 (34%) - Total: (100%) - Private Investment (billion kip): - Northern Region: 11,919 (23%) - Central Region: 30,492 (60%) - Southern Region: 8,408 (17%) - Total: (100%) ### Mechanisms to Mobilize Investment Funds - Government-led preparation: - Government to lead and direct provincial authorities to draft master plans on socio-economic development within the Five-Year Plan framework. - Priority projects approved based on real local needs and capacity. - Incentive and facilitation measures to mobilize investment: - Make transparent and simplify the private investment license approval. - Implement special treatment for land use, tax exemptions, etc., to encourage domestic and foreign investors in key production and services sectors such as electricity, mineral processing, wood processing, agriculture processing for export, tourism, commerce, banking and financial service. - Encourage private investors to invest in public services and utilities such as irrigation projects, public transportation, health services and education. - Allocation priorities and diversification of financing: - Give special consideration to remote areas and their specific difficulties while ensuring appropriateness and efficiency. - Diversify Government credit to mobilize investment funds for provincial infrastructure development. - Special treatment and incentives targeted to rural road projects, roads and bridges, irrigations, infrastructure for tourism, trading zones within the economic zones in borders, and infrastructure for public health, community education and villages in poor regions. - Channel Official Development Assistance (ODA) appropriately according to area needs and with effective use to reduce poverty by developing necessary local skills. - For rural and mountainous areas, require village groups to be set up according to Party and government policy. ### Human Resources Development - Overall policy directions for 2006-2010: - Upgrade standards including health, intellect and quality. - Mobilize all energies and issue policies to prioritize capacity development and establish human resources with focus. - Develop region-specific economic development policies; prioritize investment in physical infrastructure, education curriculum development, and capacity building of teachers and professors at universities in Vientiane, Luang Prabang and Champasak. - Education and training infrastructure targets: - Establish 2-3 high technical schools for industry in each region. - Establish 3-4 agriculture technical colleges in each region. - Establish 2-3 pedagogic schools in each region. - Access, incentives and staffing measures: - Apply policies that promote students’ participation in the key sectors in the region. - Support bright but poor students for further study. - Create special conditions for teachers and technical staff working in remote and border areas to increase labour quality and close knowledge gaps. - Apply policies that promote highly qualified and temporary foreign labour, particularly foreign workers or Lao workers in foreign countries in key economic sectors, particularly technicians in control of modern technology. - Coordinate in producing Lao technicians up-to-date with global developments to meet long-term needs. - Intensive science and technology development focused on technologies serving advancement of regional economic sectors. ### Establish Science Research and Transfer of National Technology Research Centres - Research centre and laboratory establishment: - Establish research centres and laboratories at the University in Vientiane focused on key sectors: electricity, minerals, agricultural processing, iron products, chemical and organic fertilizers, and animal feeds concentrate. - Centres to coordinate with ministries and projects to develop technical staff and focus on key sectors. - Sectoral research and production centres: - Establish centres for research and production of rice and maize seeds, industrial trees, poultry and fish breeding in Vientiane, Luang Namtha and Champasak Provinces. - Training of staff on science and technology to be based on sectoral and regional needs. ### Improve Coordination in Administration and Management of Regional Development - Institutional coordination and oversight: - Establish a supervisory committee on regional development with efficient mechanisms under direct Government leadership. - Strategic and operational coordination elements: - Develop integrated strategies for regional socio-economic infrastructure development to profit from intra-regional economic integration; priority programs and projects based on agreements between provinces. - Coordinate investment between regions where raw materials exist and processing factories, especially for goods for local consumption and export. - Increase coordination in management, monitoring and evaluation of projects financed by the Government budget. - Implement policies and promote export enterprises. - Coordinate activities in data and information provision, economic and market forecasting, and trade and investment promotion. - Long-term aim: - Achieve balance between regions and among provinces within regions, building upon natural and human resources in each area. ### Implementation Measures (introductory points) - Implementation framework and priorities: - Measures for the Sixth Five-Year Plan (2006-2010) formulated within the ten-year Socio Economic Development Strategy (2001-2010) and Party directions. - Focus on mechanisms supporting monetary stability, sound management of finances, and production of higher-quality commodities; reform of state enterprises; creation of business activities including private sector to reduce production costs; facilitate land concessions; and improve sector and commodity management. - Continue and build on mechanisms and policies from the Fifth Plan (2001-2005) emphasizing a better environment for private business, investment attraction, quality upgrading and strengthening economic foundations. - Create measures innovatively, drawing on successful regional experiences relevant to sustained growth. - Government will manage a multi-sectoral market economy with a socialist orientation, establishing different types of markets and creating conditions for enterprises and people to do business. - All line ministries, sectors and localities required to align with Party guidelines to implement the Sixth Plan targets and missions. - Urgent establishment of an action programme to fully utilize the expertise and knowledge of the Party, the people, and domestic political and social entities to cooperate with Government, ministries and localities to achieve Sixth Plan targets. *Source: _cr08341 - 4. Targets and Methods for Development.* ### 1. Implementation of the Market Economy: ### 1. Implementation of the Market Economy: ### a) Implementation of the multi-sectoral economy development policies - Overall objective: - Continue the implementation of the socialist multi-economic sectors, establish various types of markets, and create the enabling conditions for investment in the production sector by the enterprises and the people. - In the five-year period, focus on restructuring, reform and development of enterprises. - (i) State-Owned Enterprises (SOEs) - Complete the restructuring and reform of the SOEs from the central to the local levels. Maintain some selective key SOEs that play leading roles in the basic national economy. - At the first stage of the Sixth five-year Plan, rapid assessment to take firm action on abolishment, announcement of bankruptcy or change to other forms of ownership of those SOEs that are operating at low efficiency or inefficient. - Formulate a comprehensive legal framework for the business management of the SOEs based on the independent financial movement. - Improve the application of modern technology in the management of SOEs. Newly established SOEs should have comprehensive conditions based on the standards set by the sector, region and the key geographical areas. - The establishment of new SOEs should be in the form of integrated enterprises, share holding companies and limited companies. - Establish mechanisms and regulations that enhance competitiveness among state-owned business units following the market mechanism and provide a level playing field for all economic players; monitor to avoid monopoly by state-owned businesses. - Improve the role and responsibilities between administrative management and business management so that state ownership and business management rights are clearly defined; eliminate direct intervention of state administration in enterprise business activities. - Improve accounting, auditing and financial reporting systems; implement reform to make business and financial enterprises more transparent and accountable. - Increase the effectiveness and efficiency of state management, particularly the government sectors that own the SOEs; increase efficiency of state monitoring on behalf of the owner of the SOEs. - Increase the role of legal bodies and civil society in monitoring state administration from the central to the local levels. - Develop plans for expansion and building business partnerships in SOEs. - Prior to appointment of any SOE Director, provide training to the candidate to upgrade technical knowledge. - (ii) Domestic Private Sector - Actively promote the domestic private (economic) sector based on equal and fair business environment (level playing field) for both private and state enterprises. - Enhance creativity in running businesses under the legal framework; promote the model family in family businesses that lead to small and medium-scale enterprises. - Improve mechanisms so obligations of the domestic private sector to the state (e.g. payment of land tax) are centralized, simplified, accountable and transparent. - Formulate regulation on free information sharing services by the Government and establishment of professional associations. - Review and remove all barriers to domestic private sector business movement to ensure legal independence of business movement. - Improve speed of issuing certificate permission process through single entrance (“one-door or one-stop”). - Improve monitoring, accounting and auditing of enterprises following policy on creating enabling conditions for enterprises while improving monitoring effectiveness and efficiency. - Improve import-export conditions and processes to create enabling conditions for small-scale businesses to legally produce unlimited quantities for export; promote participation in domestic and foreign expositions. - Facilitate regular meetings between local authorities and business units for problem-solving and information sharing (market, prices, other issues). - Pay attention to development of small and medium scale businesses; expand enterprise forms in traditional professional sectors, non-rural agricultural sector and establishment of model villages with special provision for job creation. - Study possibility of providing credit to help investors and businesses of all economic players, especially small and medium scale businesses. - Government assistance to include training and technology transfer, credit schemes and market information sharing. - Establish system of “budding entrepreneurs” and revolving funds for start up of new businesses; focus on increased investment in business development services. - Pay special attention to services in accounting, auditing, research, design, market analysis, technical consultation and technology transfer. - Establish and improve policies and mechanisms to create facilitating conditions for enterprises to be self-reliant (master) in expanding businesses through accumulation and mobilization of capital in the market. - (iii) Economic Areas with Foreign Investments - Create comprehensive facilitation to attract foreign direct investments, particularly from the main multi-national corporations in Asia. - Formulate comprehensive administrative regulations and allow foreign workers to work within the country; encourage and promote Lao workforce capable of working in projects; urgently train more domestic technical workers. - Attract many forms of investment in many types of businesses; open investment sector to foreign investors. - Promote and encourage private foreign investors and the Lao people living abroad to invest in commodity production to replace imports and contribute to market development and expansion. - Provide services in science and technology, protect intellectual property rights, and provide consulting services to serve businesses. - Study regulations to allow foreign investors with business licenses to use documents for land utilization as collateral to borrow from financial institutions, with investors showing other assets to provide adequate guarantee to the Government. - Study incentives that impact cost reductions in commodity production and lower prices of goods (e.g. exemption of taxes or adjustments in land leasing costs). - Establish mechanisms and policies to manage foreign investments in a simple manner via the “one corridor” policy from central to local levels. - Continue dialogue with domestic and foreign investors to identify operational difficulties and seek timely measures for problem solving. ### b) Creating incentives for comprehensive market development - (i) Financial Markets Development - Start work on development of financial markets at the initial stage of the Sixth five-year Plan in compliance with the strategic content of the Plan. - Develop stock market, money market, capital market and immovable property (including land or real estate) market in a comprehensive manner, guaranteeing their regular and safe operation to ensure growth of the markets step-by-step. - Enhance self-reliance of business operations of state-owned commercial banks; minimize intervention of bureaucratic hierarchy in provision of loans by commercial banks. - Improve mechanisms for provision of loans and ensure pledging of collateral (procurement of secured properties) is in accordance with direction of enhancing self-reliance. - Establish strong regulations to control monetary-financial markets to facilitate foreign exchange operations and transfer (trading) of money in the market to be simple and transparent; monitor movement of volume of currencies consistent with sound monetary management. - Strongly study development of the bond market, setting interest rate consistent with changing situation and trading within bond market. - Terminate sale of government bonds to commercial banks to solve problems of triangle debts (of SOEs). - Sale of government bonds should be through open bidding through the banks, with bond buyers providing clear certificates on their financial status. - Government should have an active role in selling bonds and have detailed plans on expenses by period (year) and publicly declare plans to enable commercial banks to balance their capital sources and buy the bonds. - Consider developing state-owned banks to enable Government to supervise and monitor performances of the monetary-financial system to be more transparent in solving doubtful debts through auditing of accounts and categorization of debts in accordance with international standards. - Study and experiment to establish the property market and stock market in Vientiane Capital towards the end of the Sixth five-year Plan period. - (ii) Labour Market Development - Improve the Labour Law to ensure balance of benefits between employees and employers, promoting and facilitating workforce to have jobs in both domestic and international markets. - Promote all economic players (sectors) to actively contribute to job creation in both quantity and quality. - Consider dissemination of laws and regulations and compile information on jobs and dispatch of labour to foreign countries. - Maintain a consistent policy to attract persons with capabilities, technical knowledge and good skills from neighbouring and other foreign countries to contribute to socio-economic development. - Improve regulations on employment agencies (job seeking business) and dispatch of labour to work abroad while improving state monitoring ability. - Establish effective social insurance system, particularly unemployment insurance, creating equality in providing social insurance for employees of all economic sectors (e.g. public, private and voluntary); consider protecting rights and benefits of employees and employers. - Improve management system of labour markets within central and local regions; clearly prescribe roles of relevant players (sectors) – including the Ministry of Labour and Social Welfare – in managing the labour market. - Ensure sufficient number of officials working on labour market management at all levels; upgrade knowledge and technical skills of civil servants. - Promote involvement of mass organizations and non-governmental organizations (NGOs) in developing the labour market and assign responsibilities such as training, skill upgrading, performance on the job, job creation planning, and supporting plans for start-up of enterprises. - Enhance role of the Trade Union as representative organization of employees to facilitate labour force involvement in plan formulation, policy setting and monitoring compliance with the Labour Law. - (iii) Real Estate Market Development - Consider developing the real estate market, with rights of land usage and ownership of dwellings; create facilitation for transfer rights of land usage and ownership to real estate. - Provide opportunities for citizens and enterprises of other economic sectors to own land and have long-term leases for land usage in farming, business operations and daily life. - Facilitate land usage to establish and develop medium and large-scale farms in areas with good conditions. - Examine and reform lands which certain enterprises, state organizations, social organizations and military forces are using very ineffectively or for wrong purposes; solve problems of idle land or land used for wrong purposes. - Reform land usage in cities and openly declare policy on land reform to inform enterprises and the public. - Continue to disseminate regulations on land use by Lao people living abroad and foreigners who invest in Laos. - Mobilize capital from many sources to construct accommodations to meet needs of people, particularly in urban areas. - Collect revenues on use of land provided by the Government to organizations and individuals; collect taxes on transfer of right of land usage from sellers of such rights. - Implement policy on establishing a land fund in order to bid for right of land usage, specifically in big cities, and utilize high value of land to establish a fund for developing socio-economic infrastructure. - Urgently formulate laws, especially the law on the real estate market, and regulation on registration of properties; disseminate those legal documents. - Establish a real estate management agency consistent with such management; create conditions for establishing a central agency for the real estate market (e.g. a place for exchanging real estate). - Urgently disseminate procedures for bidding, the agency active in bidding and the land account of the state; ensure public bidding to enable sellers and buyers to obtain completed data on properties. - Implement many bidding processes to comply with each project; determination of winner and bidding price should comply with domestic and international regulations. - Ensure benefits of all parties in land compensation are consistent, open and transparent. - Disseminate policies on land reform and management of land utilization, along with regulations on land reform, management, responsibility for land reform plane, and regulation on establishment and implementation of the reform plan. - (iv) Technology Market Development - Review and revise draft legal documents relevant to intellectual property rights, transfer of technology, and cooperation on science and technology to be more complete. - Utilize results of research and analysis in practical work and daily life; create facilities to import innovative techniques and new and modern technology from developed countries. - Establish an information and data system of science and technology (both local and foreign) to meet needs of individuals, entities, organizations and enterprises for convenient access. - Promote establishment and development of the technology market and widely communicate and disseminate information and basic knowledge on intellectual property rights, the patent laws and promotion of product registration by individuals and organizations. - Create facilitation for consultative agencies and technology services within all economic sectors to regularly organize Technology Fairs and seminars to present new technological developments. - Encourage utilization of technology in production as basis for developing the science and technology market. ### c) Increase the effectiveness of the legal framework for macroeconomic management; and continue to establish and improve the legal framework to be more effective - (i) Improvement of the Economic Legal Framework - Promote drafting of an improved legal framework in compliance with the socialist-oriented economy; strive for a completed legal economic system as basis for business operations, market-oriented mechanism and effective integration with regional and international economies. - Draft and improve necessary legal documents including: - Enterprise Law and Bankruptcy Law to protect the freedom of entry and exit of the stock markets; create competitive environment transparent and equal for all economic players (sectors). - Financial Law to ensure implementation of state budget in an open (public) and transparent manner; set up revenue sources and expense structure of central and local budgets to be consistent; utilize budget and mobilized capital from communities and society to improve effectiveness; strictly, openly and transparently implement the Budget Law. - Tax and Duty Law to ensure simplification of the tax system; tax rate must be compatible with real circumstances, stable and consistent with the AFTA conditions and other international instruments; change form of collecting. Customs tax collection should change from checking by custom officers to declaration of tax payments by business operators. - Contract Law on joint ventures with other countries in the region and the world. - Commercial Law to be consistent with international conventions to which the country is a party; establish basic legal documents to serve free trade, investment and services and protection of intellectual property rights signed within bilateral and multilateral cooperation frameworks. - Natural Resource and Environment Laws clearly stipulating legal responsibility and civil, criminal, economic and administrative penalties for violators; utilize rule “polluter pays” by issuing regulations on calculating environmental impacts. - Establish legal framework on market management to support domestic production and services such as commodities and services markets, real estate market, labour market, monetary market and technology market. - Draft laws serving successful integration with international markets: Anti-dumping Law, non-tariff barriers, and Anti-money laundering law. - Disseminate regulations and laws which have been improved and promulgated, including advice on strict implementation. - (ii) New Changes in Planning Processes - Continue improving planning and forecasting work in each period. - Enhance quality of local authorities in establishing work plans, financial plans and labour plans without only relying on central authorities. - Link plan formulation with the market and local capacities and conditions. - Establish comprehensive monitoring, control and evaluation mechanisms; increase coordination between central and local authorities. - Involve the people in establishment of work plans and action plans. - Move planning toward regional development; develop infrastructure to increase participation and integration of all areas. - Disseminate the general strategy and the Socio Economic Development Plan to all sectors, local authorities and enterprises to enable them to establish detailed plans. - Review, establish and improve information systems within each sector and local authority to be consistent and enhance reporting capacity on implementation progress at each level. *Lao PDR: National Socio Economic Development Plan (2006-2010)* ### 2. Mobilization of Investment and Improving Productivity: ### 2. Mobilization of Investment and Improving Productivity: ### Objective - Promote the attraction of capital to serve economic growth; enhance effectiveness of investment; minimize the leakages and wastefulness of investment. - Continue to promote and encourage the mobilization of capital throughout the society for rapid growth. Create all conditions and potentials for all economic players (sectors) to be actively involved in investment and commodity production. At the same time, the Government should concentrate on the management and prevent wastefulness and corruption in order to upgrade the effectiveness of state investment. ### a) Domestic Investment - (i) Continue to evaluate and improve the development strategies and plans - Continue to evaluate and improve the development strategies and plans and set up targets for the sectors and local authorities. - Determine some main products, particularly the fast growing products that already have established markets. - Widely disseminate the strategies and plans to enable (make) the enterprises to actively invest in commodity production. - (ii) Promote the mobilization of capital from all economic sectors - Promulgate and issue the new policies in a timely manner aiming at facilitating the private economy to grow strongly without limiting sizes and types. - Improve the procedures for filing documents and eliminate unnecessary regulations aiming at facilitating timely impact on preparing the application documents for investment, such as registration of enterprises, sculpturing and registration of the seal, duty registration, land leasing, credit, transport services fees, and communications, with particular attention to the collaboration between enterprise registration and duty registration sectors and seal management. - Establish the information system on enterprises for the banks to be the reference in releasing loans. - Establish an experimental location/point (spot) for the provision of services on forecasting the business trend of each category to assist banks in making decisions on the provision of loans to enterprises. - Continue to mobilize capital for investment in development through the sale of Government money orders, enterprise shares and state bank loans. - (iii) Enhance investment effectiveness and prevent wastefulness, and state budgetary leakages - Review and re-evaluate the investment plans and the effectiveness of large projects to formulate timely solutions without allowing any person to invest outside the plan and ineffectively. - Study how to establish project accounts, target activities, and target commodity product accounts in order to reform the centralization of investment, reducing decentralized investment. - Promote the monitoring of state projects by the public. - Separate the management of the projects and the project evaluators, particularly in capital-intensive sectors (communications sector, irrigation and accommodation construction), in order to lead to an independent audit agency. - Continue to implement Decrees Nos. 35/PM and 58/PM on management and enhance effectiveness of state investment. - Ministries, sectors and local authorities must actively establish their plans in compliance with the said Decrees and submit them to the State Committee for Planning and Investment to summarize and report to the Government. ### b) Foreign Direct Investment (FDI) - Rationale and role - It is necessary to have (high) consensus at the highest level on the (subjective) necessity for and the significant role of foreign investments that contribute to industrialization and modernization, aiming at making the performance of all sectors and every level, from central to local levels, to unanimously attract and effectively utilize foreign direct investment (FDI) because the FDI is an important component of the economic base and will grow as the process of integration with regional and international arenas continues. - The attraction of FDI plays an important role for the economic development of our country and it is one of the main factors to create a major step for rapid development in the coming years, because there are plenty of natural resources but not enough (lacking of) capital, skilled workforces and modern management. - Constraints and labor policy - In reality, the attraction of FDI is still limited because of the insufficient local workforce with high technical knowledge and skills. Therefore, it is necessary to use imported labour that is connected with the FDI projects by stipulating that the foreign worker have to contribute to economic development in parallel with human resources development. - In the Sixth five-year Plan period (2006-2010), it is necessary to focus on implementing measures and methods to develop the economic sectors where there are foreign investments. - It is necessary to issue regulations to manage foreigners working in the Lao PDR. Permits should be issued on a case-by-case basis in each period in accordance with the terms of the projects and in compliance with the needs of practical workforce, with the stipulation that the investor/project should have a plan to substitute the foreign workers by Lao workers. - Policy and promotional measures - Urgently disseminate and implement the laws on foreign investment that have been amended and adopted by the Fifth National Assembly. - Re-examine the policies, mechanisms and processes of foreign investment admission to have a favourable atmosphere, convenience and timeliness, and create a more favourable impression than that of other countries in the region. - Consider the formulation of a master plan for sectoral and regional development to propose to foreign investors (hydro electric power, mining, processing industries, livestock breeding and other strategic industries aiming to further increase exports). - Nominate groups to encourage and mobilize capital with capable countries that have the potential for investment capital. - Organize seminars and disseminate priority projects to attract foreign investors. - The Prime Minister, the President of the Committee for Planning and Investment, the Finance Minister, the Governors and the Mayor should organize conferences to meet with both domestic and foreign investors to listen to their comments and ideas on the investment environment. - The Government is to support and facilitate the business operations and production of domestic and foreign investors to be more convenient and effective. - The Government should monitor, examine and evaluate the systems of business operations of enterprises of all economic players (sectors) and must have a policy consistent with the mobilization of capital and appropriate methods for rewarding (praising) the good deeds and punishing the violators. ### c) Loans and Grants from Foreign Countries - Debt caution - Under the constraining high debt situation, the loans from foreign countries aimed at investing in commodity production projects will be one factor to be taken into account. - The loans should be considered carefully based on the effectiveness of the investments, especially the loans at commercial interest rates. Otherwise, it will be difficult to recoup (regain) such capital, leading to a long-term deficit that will result in creating a heavy burden on the state budget. - Planning and counterpart funding - Establish a master plan for each sector and clearly stipulate measures for utilization to increase the mobilization and utilization of loans and grant aid from foreign countries. - Mobilize sufficient additional counterpart funds (capital) to the grant aid projects within the Central region as well as the local regions aiming at ensuring the implementation of the projects in accordance with the agreements, particularly those projects that could be completed in time and contribute to the production. - Project implementation measures - Ministries, sectors and local authorities should guide the persons responsible for the projects. - Consider implementing relevant measures to promote timely project implementation such as bidding, establish plan for mobilizing counterpart funds, and with all relevant sectors. - Fight against delays, poor preparation, low project assignment, decentralized bidding or bidding in a nutshell manner. --- ### 3. Fiscal Management: ### Objective - Implement state policies in a transparent manner, strive for increasing income and effectively utilize budget by lowering expenditure. ### Fiscal targets - The financial policy has to concentrate on increasing revenue to about 17 percent of GDP by 2010, to ensure adequate resources for reasonable expenditure plans in the administrative budget and state investment. - At the same time, the expenditure components need to be reformed appropriately. Strictly observe the financial-budgetary regulations; and minimize the budgetary deficit to a safe level of finance. ### Measures to achieve targets - a) Formulate and Improve the State Budget Law - Modifying and improving the current Budget Law, along with disseminating and introducing some other laws such as the Tax Law and the Customs Law, which need to be enforced and observed in society. - Improving the organization system and reforming the financial officers, who are the main actors in enhancing effective performance and solving the sectors’ difficulties, including those concerning the budget. - Increase the training and mobilize the party’s ideology and policy concerning financial work to officials within the financial sector aiming at making them clearly understand the important significance of finance towards national construction and protection. - Create facilities to support business production and construct socio-economic infrastructure. - Educate and mobilize financial officials to have the characteristics of patriotism and firmly fight against the abuse of power for personal benefit. - b) Firmly Implement measures in budget management and administration - Budget revenue: - Improve mechanisms of collecting revenue and at the same time make efforts to fight against revenue leakages. - Firmly abolish arbitrary activities in tax exemption or minimization of revenues or illegal balancing of accounts. - Reform the tax collection system and national treasury system to be compliant with the needs of decentralization of financial administration to ensure the implementation of centralized guidance and have the consensus at the central level. - Effectively manage revenues-expenditures of departments and local authorities; this is the main duty and should be immediately implemented during the initial stage of the Sixth five-year Plan. - State-enterprises: - Improve the management mechanism of state-enterprises aiming at promoting high (financial) productivity in operating their businesses. - Continue to improve and reform the state-enterprises; promote the conversion of state-enterprises to partnership, or sell or lease them. - Implement financial management regulations in an equal manner with all economic sectors. - Terminate the practice of borrowing from the budget or Government guarantee for state-enterprises to borrow money from foreign countries. - Budget expenditures: - Ministries and local authorities have to ensure the management of their expenditures to be in line with the plan adopted by the National Assembly. - No entity or department should be allowed to arbitrarily issue agreement on decreasing budget revenue or increasing budget expenditures. - If new expenditures arise, promote increasing revenue collection to meet such expenses; otherwise reallocate (rearrange) expenditures to ensure balance between revenue and expenditure. - For investment, ensure counterpart funds for projects agreed with foreign partner; select new loan projects focusing on the most essential projects before agreements with foreign partners. - Domestic investment should concentrate on projects that can yield quick economic results. - Implement an effective debt clearance method for investment projects that have not been completed on time. - Re-audit regular expenditure and create suitable expenditure regulations in line with the real situation and the availability of the budget to support gradual reduction of supplementary expenditure. - Improve the salary system to sustain basic living standards. Priority to human resources development expenditure and other social activities. - Detailed procedures on the implementation of economic policy have to be indicated, such as the expenditure on administration. ### Ministry of Finance duties during the five-year period (2006-2010) - (i) Act as the central controller of the unanimous foreign debts, and do not allow local authorities to borrow funds from foreign countries. Clear the budget debt as soon as possible in order to guarantee financial security and budget flow. - For the Foreign Debt: Strictly allocate budget for debt clearance in accordance with the agreements. Negotiate with the creditors to reverse the debt, clear the debt, reduce interest, and especially to prolong the loan repayment period. - (ii) Improve the auditing process in order to avoid the loss of income and assets, and avoid luxury expenditure. Increase the awareness of financial regulations. Strictly resolve inappropriate actions that do not comply with budget revenue and expenditure management such as free customs duty reduction or exception, delays in the handover of revenues (budgets) with reference to time and central to local management system, etc. - (iii) Indicate the clear boundary and responsibility of each level in the revenue-expenditure management of the budget. Publicize and utilize the economic policy of the Government and put the into practice. Restructure customs and national treasury as soon as possible. The local authorities have to facilitate these organizations in the implementation process in order to guarantee the efficient outcomes. ### Tax and revenue administration - The tax organization structure has to be maintained. However, the tax collection strategy has to be improved by allocating the levels of responsibility between central and local areas based on the taxation rate and not based on the size of enterprises. - The taxation bodies from central to local areas must collect 100% of the revenue quota (ration) for the central level and also the revenue that has to be divided between the central and local budgets. - At the local level, there will be an organization within the finance section that is in charge of collecting 100% of the local revenue. - The finance agency has to be further modernized. Initially the customs and treasury divisions have to be effective in state budget management. - More emphasis has to be placed on the financial human resource development in response to the needs of budget management throughout the country. *Lao PDR: National Socio Economic Development Plan (2006-2010)* ### 4. Monetary Management: ### 4. Monetary Management ### Overall goals and policy orientation - Control inflation and guarantee the security of the banking system. - Set up the credit system and financial regulations to protect the investment environment and promote economic development. - Firmly link monetary policy with annual fiscal policy to stabilize the value of the Kip and direct the macro economy. - Implement currency policy "with flexibility and carefulness to support commercial based production while maintaining inflation at a manageable level." ### Legal and institutional reform - Continuously improve legislation for banking system operation; consider, improve, and adapt the Banking law and laws related to creation of the credit system. - Draft other necessary laws as basis for creation and development of the financial-monetary market. - Form a responsible body to manage usable funds to meet market demands and supervise buying and selling of fixed Government bonds and bonds between the Bank of Lao PDR and commercial banks to create the foundation for an open market. ### Monetary policy framework and tools - Upgrade monetary policy handling and strongly improve tools of monetary policy. - Create and implement monetary policy following market mechanisms, moving toward international standard management of the banking system. - Operate monetary policy on the basis of modifying the amount of money in circulation; gradually provide conditions to operate monetary policy via interest rate modification. - Set up base (basic) interest margins and main interest rate for banks to guide market interest rate formation. - Consider and create the maximum level of interest rate for the Bank of Lao PDR to direct and modify the basic interest rate of the economy and use open market operations. - Apply effective open market operations (tools) and re-supply new capital for commercial banks, drawing on revenue sources of the Bank of Lao PDR through effective foreign currency management and open market operations. ### Currency management and issuance - Bank of Lao PDR to purchase and sell Government bonds to modify money in circulation. - Re-build value of the Lao Kip notes to reflect the new price level of the past five years to facilitate debt clearance. - Reduce printing and delivery costs of new Kip currency notes. - Initially print the 50.000 kip and the 100.000 Kip bank notes. ### Exchange rate and foreign currency management - Continue to upgrade exchange management mechanism by following a wide range of variation in accordance with monetary open market level under international linkage and control of the Bank of Lao PDR. - Implement exchange mechanism called “controlled floatation.” Maintain stable exchange rate; guarantee official exchange rate stays close to actual exchange rate. - Keep limiting an economy heavily based on the Dollar; seriously control foreign currency exchange rates to centralize maximum foreign currency into the Bank of Lao PDR. - Propagate foreign currency exchange rate management law to enterprises and the population; closely observe the real situation. - Target to "Try to reduce the foreign currency share in the broad money supply (M2) from 52% in 2005 to 30% in 2010." - Keep increasing official foreign currency in Government reserve to be equal to at least 3 months of imports. ### Commercial banking system operations and credit supply - Upgrade business potential of commercial banking system to supply sufficient credit facilities for the basic economy. - Supply a variety of credit facilities based on responsibility, security approval, and business efficiency; priority to main goods production, agriculture, and rural areas. - Promote commercial banks to increase loans to profitable and high performance projects; target to "reach the peak of annual growth in lending of about 20-22%." - Provide autonomy for state-owned commercial banks by lessening public commercial banking authorities' control in loan decision-making. - Reconsider and adapt loan or mortgage mechanisms emphasizing self-reliance and self-responsibility in loan approvals. - Promote expanded monetary and service activities and new monetary business activities. ### Capitalization, restructuring, and debt classification - Create additional alternatives for registered capital of state-owned commercial banks to resolve viability (floatation) problems when specified criteria met. - Estimated supply of additional registered capital for state-owned commercial banks in 2006-2007: about 700 billion kip. - Continue upgrading commercial banks per restructuring guidelines, particularly three state-owned commercial banks; continue corporate bank restructuring on financial evaluation basis. - Improve debt classification criteria and provisions (reservation) in security banks in accordance with international standards. - Increase effectiveness of pawning, mortgage, and guarantee regulations; provide facilities for creditors to collect and clear debts. - Set up debt and asset buying-selling company for enterprises. - Increase on-the-spot auditing and apply bank evaluation techniques based on risk in credit business. - Further develop business monitoring and auditing regulations using CAMELS asset and debt management system and consider final application of BASEL I auditing principles. - Improve risk forecasting and distance auditing system, including fast forecasting of interest and exchange rate movements and credit growth using modern mass media equipment and technology. ### Debt clearance, bond issuance, and monetary transparency - Completely clear matured loans of the Bank of Lao PDR and the banking system. - Treasury must stop debt clearance on public loan investment projects by issuing bank bonds to commercial banks. - To clear such loans, Government should issue bonds for purchase by citizens, or provide Government bond auctions through the Bank of Lao PDR (selling to commercial banks and other large enterprises). - Address bonds with non-financial security similarly. - Apply amount of loan clearance for enterprises in the Bank of Lao PDR by using bank notes issued in past years; this method "may not affect inflation as such clearance methods do not increase the supply of money in circulation." - Cancel remaining un-cleared unsecured debts, non-existent debtors, or un-recoverable loans of state-owned commercial banks by using bank notes issued in past years. - Test successful resolution of unclear debts among Government, enterprises and banks at the beginning of the Sixth five-year Plan (2006-2010). ### Financial inclusion, population credit, and payment systems - Expand and upgrade the quality of the population credit system; publicize and apply suitable population credit regulations based on socio-economic specialty and population distribution. - Continuously improve population credit patterns to be self-reliant and independent credit organizations operating voluntarily and with self-responsibility. - Provide opportunities for population and enterprises to access banking services; widen non-cash clearance methods and quick clearance system through banks. ### Capacity building, information, and policy coordination - Improve staff capability to strengthen monitoring and auditing of commercial banks. - Improve monetary news network across ministries and sectors to collect up-to-date monetary movements and enable prompt actions. - Build legislation foundation for such news and assign Bank of Lao PDR as main body to link ministries and related sectors in developing periodic and annual balance sheets with international organizations. - Government to supervise and strengthen cooperation between Ministry of Finance and Bank of Lao PDR to align financial budget and monetary policies and provide macroeconomic stability. *Source: 4. Monetary Management, Lao PDR: National Socio Economic Development Plan (2006-2010).* ### 5. Improve Effectiveness of State Organizations: ### 5. Improve Effectiveness of State Organizations ### Improvement in public administration (core functions and tools) - Core function in state management improvement in the five-year period (2006-2010) is in gearing at upgrading the cooperation mechanism between ministries, central organizations and local authorities by re-examining their roles, duties, and responsibilities, as these were identified to be the main weaknesses in the past management process that led to the overlapping in performance, low quality of work and outcomes. - The following are certain critical tools for better operation: - Re-allocate the roles, duties and organizational structures at all levels [Government, ministries, (ministry equivalent) organizations, Government organizations and different levels of local authorities], to respond to the needs of the new era of social management by observing strictly the roles of the Legislature, the Government and the Judiciary, as indicated in the Constitution. Upgrade the roles and responsibilities of mass organizations in educating and preserving the citizens’ rights. - At the Government level, more emphasis has to be placed on legislation, policy guidelines and macro planning in the area of public administration and socio-economic development. Provide assistance and supervision on the implementation of orders, notes and suggestions. - The authorities at the local levels have to operate the Government plan, resolutions and orders. Put these into practice responsibly by converting them into detailed plans and action plans, and specifying implementation tools. It is also possible at the same time for the local authorities either to ask for permission in providing a coincident specific regulation in compliance with the order and resolution of related ministries and professional organizations, or to ask them for specific regulation assistance. Specify clearly the tasks in which local authorities can freely decide; the tasks where they have to ask for recommendations; and the tasks that have to comply with the central decision making authority. The administration level is classified in relation to finance, organization and staff. - Specify in detail the regulations on managing, work routine, roles, duties and responsibilities of each managerial level. Indeed, specify in detail the roles, duties and responsibilities of the heads in each organization. - Improve the effectiveness of the management structure to the higher level by relying on the responsibility and transparency of the organization, the Government and the Legislature. Provide a regular and assured (guarantee) information concerning the management, policy and the development plan for the citizens, making sure that all the citizens have easy and convenient access to the information resources. - Eliminate the complicated and overlapping paperwork processing system, which provides opportunities for corruption and the creation of difficulties for the people at large. - Apply severe punishment for corruption, luxury and non-transparent activities in the public budget management. Pay emphasis to educating, monitoring and punishing the staff and officials who break the rules and regulations. The focus has to be placed on the law enforcement organization in order to keep the staff transparent while on duty. Encourage the law enforcement, monitoring, evaluation and auditing of the organization within the Government organizations aiming at increasing the high level of responsibility and effectiveness in budget expenditure. - Reform the salary and bonus systems in order to encourage the staff and officials in performing promising, quality, efficient and effective work; and make every effort to make their salary their main income. Apply the other incentive programs for the hard working and outstanding staff and officials. - Ensure the strict regulation enforcement in the public works administration in order to create the open official duty activities, especially in the area of work with direct relation to the citizens, such as in income, property and land taxation. - Further develop the professional ability of staff at different levels by attending short- and long-term training courses either in the country or abroad. Select the most suitable staff that are well qualified, possess the right political and social class attitude, and have a common point view on the new changes of the Party’s guideline to be recruited in the key positions of the state and party organizations. - Strengthen the Party’s leadership responsibility at all levels in maintaining guidelines, and monitoring and evaluating the implementation of the Party’s direction on socio-economic development. - Strongly specify the roles and duties of the ministries and the other macro management bodies. Stabilize the organizational structure; and provide security for the staff in managerial tasks for a high work performance. Modernize the organizational structure, and change the managerial working methods and the state administration by applying the up-to-date technology. ### Critical tools against corruption - It is necessary to urgently enforce the law against corruption, the economic decrees and the decree against luxury. - A monitoring body in the National Assembly needs to be set up to monitor the implementation of such enforcement. - A report on the implementation of the above mentioned enforcement should be prepared every six months. - The National Assembly is responsible for evaluating the implementation of such an enforcement process by the Government. - Upgrade the working capacity of the auditing agency by transferring it to the National Assembly. The head of the national auditing agency is to be appointed directly by the National Assembly. - Compile the law concerning the auditing. - Conduct an auditing trial in certain ministries, local areas and enterprises, by inviting the international auditors to work with the national ones at the final stage of the Sixth five-year Plan. ### Responsibilities of the Government (auditing and enforcement) - Upgrade the status of the state auditing agency to be equivalent to a ministry, and provide the supplementary roles, rights and staff for the agency. - Assign the Deputy Prime Minister to act as the head of the state auditing agency in order to be the main assistant for the Government in the struggle against corruption and luxury, and in applying the national economical policy. - Apply the educating tools and severe punishment for those who break the rules. - Make a “four should nots” slogan campaign: should not do, should not want, should not be able to do and should not dare to corrupt; and communicate them to the staff and the officials and then put them into practice. ### Enhance public administration in execution of socio-economic plans - Ministers, heads of Government organizations, provincial governors and the Vientiane Capital City mayor have to be more responsible in providing guidelines for their subordinate sectors to be successful in their allocated duties. - They have to provide direct guidance on problem solving, confronting the obstacles as well as providing recommendations or solutions for the suggested situations and difficulties from the grass-roots level. - The management regulations have to be simplified. - The success and the effectiveness of the production and business activities and the existence of socio-economic security and safety can be used as the means to evaluate the success in every district and province. - The Committee for Planning and Investment (CPI) has to play a key role in coordinating the cooperation between the Ministry of Finance and the BOL in directing the operational management and expansion of the goods production, the direct investment in accordance to the harmonious and balanced fiscal and monetary policies and guarantee the continuous macroeconomic stability. - The national statistics system has to be effective, consisting of skilled staff in data collection and supplying the essential data for analysis as needed for the allocation of socio-economic development policy. There should also be statistic units in every ministry and locality. The central national socio-economic information has to be maintained by within the National Statistics Centre. - The Committee for Planning and Investment is assigned to be the assisting body for the Government in coordinating with the ministries, other sectors and local authorities, in monitoring the socio-economic development of the country, and from time to time write a report for the Government meeting. The Government meeting decides on the production, import and investment plans and resolves the existing obstacles. The Government then assigns the concerned minister to put into operation and report back to the Government meeting from time to time. ### Other implementation actions (action plan and three required documents) - All the sectors and localities have to be united and comply with the Party’s guidance in the implementation of the indicated duties and achieve the objectives in the Sixth five-year National Socio Economic Development Plan (2006-2010). - Based on such a policy, the Government has to draft the action plan immediately, aiming at achieving the objectives by stimulating the ideas and insights of all Party members, army officers and citizens. - In order to achieve the objectives and the duties as indicated in the Sixth Five-Year National Socio Economic Development Plan (2006-2010), commencing from October 2005, the Government has to draft the following three documents and seek their approval by the National Assembly: 1. A report on the focus priority goods production in the period 2006-2010 and the vision from now on to the year 2010, consisting of the list and the amount of focus priority goods together with the assigned production task for the concerned sectors and the locations of production. Besides, it is also necessary to allocate the general and specific operational mechanisms as well as the necessary capital; 2. A report on the overall investment plan comprising of the list of projects in different sectors and localities, expected locations and time allocation together with the capital resources; and 3. A report on the mechanisms, policies and detailed action plans, with the plan to be communicated periodically during 2006-2010, including the following: - Mechanisms and policies: Operational law of the plan should be written and approved by the National Assembly. The Government should indicate the policies and mechanisms. At the same time, ministries and concerned sectors should indicate their actual operational programs; - Improve the organizational structure and allocate the level of responsibility: Draft (write) the quality improvement project, work effectiveness, and the strictness of the government organization, different sectors and localities. There should also be a detailed allocation of responsibilities between central and local areas, and between different sectors. In addition, clear operational time limits should be indicated as well; and - Staff development: Indicate the staff quality improvement and efficiency programs. Indeed, the clear allocation of responsibilities should be indicated in order to achieve the given objectives. ### Monitoring and Evaluation Arrangements — A. Introduction - Monitoring and evaluation are integral elements of the National Socio Economic Development Plans as they are essential to assess progress, learn lessons and improve implementation on the one hand and planning on the other. - All levels of the Government from the centre to the localities (provinces, districts and villages) have been and are involved in the monitoring and evaluation process. - Progress in achieving the goals and targets of the Plans including those in the MDGs and the Brussels Programme of Action for Least Developed Countries is gauged through the monitoring and evaluation processes. - Monitoring can be seen at two broad levels: - (i) the monitoring of inputs and outputs or implementation monitoring, and - (ii) the monitoring of outcomes and impacts or impact monitoring. - Examples of inputs and outputs: number of ha irrigated, amount of improved seeds distributed, number of improved livestock distributed, number of improved tree saplings distributed, number of schools, health clinics and standpipes/wells for safe water, and kilometres of roads built. - Examples of outcomes and impacts: production of food, livestock and other agricultural products, forest replanting/restocking, usage of schools (including gross and net enrolment, dropout, repetition and /progression/graduation rates), health facilities, water supply and roads; impacts include educational attainment including literacy, health status and economic advancement. - The Government has been undertaking the monitoring and evaluation of both the implementation of the Plans and their impacts. - Main implementing entities compile information on implementation progress (monitor) identifying the flow of funds (by current and capital expenditures and from central and provincial and domestic and external partner sources), allocation of personnel, achievements and remaining challenges, and should utilise the information to overcome constraints through appropriate assistance from stakeholders (example: delay in release of funds). ### Monitoring and Evaluation Arrangements — B. Existing Arrangements - The Committee for Planning and Investment (CPI), in cooperation with the central ministries and agencies and the localities, is responsible for the coordination and formulation of the National Socio-Economic Development Plans (NSEDPs) and the Public Investment Programmes (PIPs). - The Government will increase cooperation among ministries, sectors, localities and the political authorities, in socio-economic management. It is necessary to have balance and stability in each major part of the fundamental economy. - The CPI is assigned as the focal point to coordinate the activities among the ministries and sectors to prepare the monthly, periodic and annual progress reports on the implementation of the Plan, which will continue to be presented to the monthly meetings of the Government. - The Prime Minister regulates the production framework, importation and investment, etc., in order to assign to the ministers accordingly. In each Governmental meeting, ministers and governors of each province appraise and report on the implementation in each ministry, sector and locality; together with the enhancement of the existing capacity, solving mechanisms, the policy of the socio-economic management as a whole, and the sectoral management in particular. - The CPI will be mandated to be responsible as the chairman to allocate the tasks to each ministry, sector, and locality and then generalize, conclude and report to the Prime Minister. - Meetings of the Government officials in accordance with the assignments will assist the Prime Minister to have a better understanding of the situation and enable the quality of leadership and upgrade development management. - This forum will also assist the ministries, sectors and localities to prioritise and appraise the implementation of the Plan regularly and more rigorously. - Based on the circumstances in each period and year, the assignment and allocation of tasks through the annual meeting of the Government can be organized in the Vientiane Capital. More frequent working level meetings may be organized in each province in order to reduce the amount of travel, with the CPI assigning the delegation to participate in the meetings. ### Monitoring and Evaluation Arrangements — C. Implementation Monitoring and Evaluation - The CPI through its Department of General Planning (DGP) has been undertaking the monitoring and evaluation of the progress on the implementation of the plans. - The Department relies on periodic reports (monthly, quarterly, semi-annual and annual) from the line ministries, agencies and localities (provinces, districts and villages) to gather information on progress on plan implementation. - The CPI compiles summary reports for submission to the Government and the National Assembly. - Present system challenges: - Provision of information (reports) by the line ministries, agencies and localities is patchy. - Coverage of the reports and the quality of the information vary widely. - Bulk of the information is often incomplete and descriptive. - Capacity limitations are significant at all levels. - Communications systems need improvement. - The Government is taking steps to build upon the existing system, strengthening the links and capacities (both skills and equipment including communications and computer facilities) at the CPI, in the line ministries, ministries, agencies and the localities. - The UNDP has been assisting and will continue to assist the DGP of CPI on this exercise covering most of the ministries and selected provinces. It is necessary to mobilize support from other partners to cover the rest of the provinces and central agencies. - The results of the exercise will feed into the Monitoring and Evaluation System for the Sixth Plan (2006-2010). ### Monitoring and Evaluation Arrangements — D. Impact Monitoring and Evaluation - The National Statistics Centre (NSC) in the CPI undertakes the monitoring and evaluation of the outcomes and impacts of the plans. - The NSC has begun to take steps to establish a uniform and consistent national database on economic, social and governance indicators. - In consultation with relevant Government agencies, it has facilitated the preparation of a list of about 100 core indicators that could be utilised to monitor the impacts of the NSEDPs, MDGs and the Brussels Programme of Action for Least Developed Countries (2001-2010). - Many of these indicators are incorporated in the LaoInfo 4.1,17 which has been launched in December *Source: _cr08341 - 5. Improve Effectiveness of State Organizations (Lao PDR: National Socio Economic Development Plan (2006-2010))_* ### 2005. The system allows for the decentralization of the inputting of information to the ### _cr08341 - 2005. The system allows for the decentralization of the inputting of information to the ### National statistical database and LaoInfo - The NSC compiles indicators drawing upon administrative data provided by ministries, agencies and localities, periodic surveys (such as the Demographic and Health Survey, the Lao Expenditure and Consumption Survey or LECS, and other surveys) and the decennial Census. - The NSC has been receiving technical assistance from SIDA, UNDP and other development partners to improve operations and establish a uniform and consistent national database on development indicators. - LaoInfo v.4.1: - Described as a user-friendly common indicator database system providing access to national data across sectors. - Integrated within Microsoft® Office Professional for presentation of development data in tables, graphs and maps. - Includes data from national census, surveys, and Government reporting systems by Ministries and Agencies. - Organizes key development indicators by sectors, goals, themes, sources, institutions and international covenants/conventions. - Has been adapted from DevInfo technology by the NSC with assistance of UNDP, UNICEF and UNFPA. - Provides data on national MDG indicators for Lao PDR as of September 2005. - An upgrade to LaoInfo v.5.1 is expected to be released in 2006 in both Lao and English languages. - Note: Extension of the national accounts system (1993 SNA) beyond benchmark FY2002/03 to provide timely national accounts would require substantial further technical assistance/support. ### Strengthening the statistical system (policy and capacity) - Government commitment: - Create a strong statistical system to collect and provide necessary information for policy formulation, monitoring and evaluation. - Provide appropriate equipment, accessories and training to analyze information and feed results into socio-economic management under Party guidance. - Human resource and institutional plans: - Increase the number of statistical researchers to a sufficient level for collection, compilation and analysis to meet current and emerging needs. - Plan to establish a statistics centre in each ministry, sector and region. - Organize the information system in relation to national socio-economic information in accordance with the NSC. ### Plan formulation process (Sixth Five-Year Plan 2006-2010) - Participatory preparation: - NGPES prepared with involvement of provinces, districts, villages, central ministries and agencies, development partners and other stakeholders. - Sixth Five-Year Plan formulation commenced in February 2004 with consultations on Fifth Plan progress, lessons and priorities. - Consultation workshop with line Ministries, Lao researchers and mass organizations held in September 2004. - Priority programmes for poverty reduction piloted in ten of the 47 poorest districts using participatory planning. - Central Ministries in four priority sectors costed priority programmes for 2006-2010. - Consultations and milestones: - CPI missions to line ministries, agencies and provinces in January 2005 to assist formulation. - Consultative workshop on research topics in March 2005. - Main ideas of preliminary draft shared with partners, investors and researchers in mid-June 2005. - Second round of consultations with localities in August 2005 on Plan elements and Annual Plan for 2005/06. - Results shared with Central Committee of the Party in September 2005; draft submitted to National Assembly in October 2005. - Draft shared and discussed at Annual Round Table Process Information Meeting on 29 January 2006. - Revised draft endorsed by the Party at the Eighth Congress in March 2006. - Final draft considered and approved by the Sixth National Assembly in its inaugural session in June - July2006. - Ongoing needs: - Continue to refine planning work, improve participatory planning capacities in ministries, agencies and localities, link planning to budgets and market developments. - Promote decentralization of planning functions to local authorities as capacities improve. - Establish monitoring and evaluation mechanism for planning; strengthen cooperation and coordination among relevant authorities. - Create an information system to improve forecasting, conversion of tasks into programmes, and implementation schedules. - Enterprise programmes to support people's participation and grassroots infrastructure needs, basic democracy expansion, and production of business plans. ### Situation anticipated in 2010 — Economy (projections and targets) - Growth and macroeconomy: - Economy projected to move from unstable and slow-paced development to fast growing and stable. - Projected growth "about 7.5-8% annually" or may be higher if growth continues sharply to 2020. - "Even though in some years, the socio-economic development faced certain obstacles, the economic growth may be more than 7% annually." - Production structure and investment: - Production structure and product quality to change toward market production principles, industrial and modern oriented production. - Key products in agriculture, industry and services to form basic foundation for expansion and national revenue collection. - Per capita consumption increases "at about 5-6% annually." - Monetary and currency situation and national budget expected to be basically improved; monetary policy adapted to market mechanism. - Budget deficit to be kept "at a certain level." - Investment rate relative to GDP at "the normal level" and expected to continue to grow. - Construction of infrastructure and mega-production projects completed and commissioned, increasing production capability for post-2010 expansion. - International integration: - Expanded international economic links, improved Laos role in international setting. - Increased gross national exports, investments, and international grants and loans after 2010. ### Situation anticipated in 2010 — Society (education, science, public services) - Education and human resources: - Education system reformed to improve quality of human resource development and reduce gaps between current quality and demand for industrialization and modernization. - Education management aims to upgrade Lao PDR education toward industrialization and modernization by 2020. - Science and research: - Social sciences and humanities to focus on political guidelines, policy, socio-economic planning and ethnic culture promotion. - Natural sciences to emphasize research surveying natural resource potential, biodiversity preservation and disaster prevention. - Science and technology research to be focused in certain areas and gradually receive more budget allocation. - Public health, culture and society: - Expansion of public health, culture and social activities aimed at job creation, improved citizen quality, poverty reduction, social assistance, propaganda and sports, and prevention of social misbehaviour. - Financial capability for cultural-social activities expected to be suitable to respond to diverse needs. - Governance and security: - Political and social stability with improved national defence and public security. - Evident progress in public administration effectiveness and work quality; ability to resolve difficulties and corruption. - Anti-terrorism action has been put in the national law. ### Roles of Lao PDR in the international setting (comparative development status) - UN least developed country criteria referenced: - (i) national income per head of less than 900 USD; - (ii) level of human resource development (nutrition, reproductive health, education); - (iii) economic risks (agricultural development, irregular exports, role of non-traditional sectors, centralized export levels). - Income comparisons and development benchmarks: - Lao PDR projected to be in a fast growing process but "is not yet out of the list of the least developed counties due to the fact that national income per head is less than 900USD." - Income per head in 2010 is compared to: Vietnam in 2008, Indonesia in 2003, China and Philippines between 1997-1998, Malaysia and Thailand in the 1980s, and South Korea, Taiwan, Singapore and Hong Kong at the end of the 1960s and the beginning of the 1970s. - Labor and GDP structure: - In 2010, the labour force structure and the GDP structure of Laos is compared to Vietnam at the beginning of the 1990s and China at the beginning of the 1980s; similar to developed Asian countries in the 1970s. - Remaining problems: - Development level still comparable to Vietnam in the 1990s and 2-3 decades behind other regional countries. - Main constraints: low economic foundation, low competitive capacity, low level of financial system, high internal and external debts, dependence on foreign capital, and limited role of internal private business. ### Conclusion and overall outlook - By end-2010, after implementing the Sixth Five-Year Socio Economic Development Plan (2006-2010), Lao PDR is expected to be ranked at a higher level on the UN human development index. - Despite progress across multiple aspects, development level remains low with persistent backward situations. - There is a demand for faster socio-economic growth with better efficiency, quality and effectiveness in the post-2010 period. *Lao PDR: National Socio Economic Development Plan (2006-2010) — extracted content* ### Annex I Lao PDR: Some Macroeconomic Projections (2004/05 – 2009/10) ### Annex I Lao PDR: Some Macroeconomic Projections (2004/05 – 2009/10) ### Population and GDP - Total Population (1,000): 5,610; 5,722; 5,833; 5,944; 6,056; 6,168 - Growth rate of population (%): 2.0; 2.0; 1.9; 1.9; 1.9; 1.9 - GDP at current prices (Billion kip): 28,682; 33,109; 37,916; 45,410; 53,746; 59,936 - GDP at current prices in USD (Million USD): 2,753; 3,184; 3,612; 4,054; 4,556; 5,097 - GDP deflator (%): 7.0; 7.0; 6.35; 6.36; 6.36; 6.37 - GDP at constant prices 1990 (Billion kip): 1,509; 1,622; 1,753; 1,884; 2,030; 2,196 ### Output growth and sectoral performance - Total GDP Growth Rates (%): 7.2; 7.5; 7.2; 7.5; 7.8; 8.2 - Growth by sector (%): - Agriculture: 3.5; 3.0; 3.3; 3.3; 3.3; 3.3 - Industry: 13.0; 15.7; 12.7; 13.0; 13.3; 14.0 - Services: 8.0; 6.2; 7.5; 7.6; 7.6; 7.6 - Sectoral shares of GDP (% of total = 100): - Agriculture: 45.4; 43.5; 41.3; 39.6; 37.8; 36.0 - Industry: 28.2; 30.5; 31.4; 33.0; 34.6; 36.4 - Services: 26.4; 26.0; 27.3; 27.4; 27.6; 27.6 ### GDP per capita - GDP per capita (Million kip): 5.11; 5.79; 6.50; 7.64; 8.88; 9.72 - GDP per capita (USD): 491; 556; 619; 682; 752; 823 ### Fiscal aggregates: revenue, expenditure, and deficits - Total Revenue (Billion kip): 4,085; 4,636; 5,602; 6,698; 8,030; 9,633 - Revenue (excluding Grants) (Billion kip): 3,586; 4,100.0; 4,932.0; 5,934.0; 7,157.0; 8,632.0 - Grants (Billion kip): 499; 536; 670; 764; 873; 1,001 - Expenditure (Billion kip): 5,764; 7,390; 8,333; 9,635; 11,193; 13,085 - Fiscal Budget Deficit (including Grants) (Billion kip): (1,679); (2,754.0); (2,731.0); (2,937.0); (3,163.0); (3,452.0) - Fiscal Budget Deficit (excluding Grants) (Billion kip): (2,178); (3,290.0); (3,401.0); (3,701.0); (4,036.0); (4,453.0) ### Monetary and price indicators - Broad Money (M2) (Billion kip): 5,632; 8,055; 9,505; 11,215; 13,234; 15,616 - Inflation rate (End of period) (%): 6.2; 7; 7; 7; 7; 7 - Inflation rate (Average) (%): 6.9; 7; 7; 7; 7; 7 - Exchange rate Kip / USD (kip): 10,420; 10,532; 11,007; 11,227; 11,452; 11,681 - Depreciate or (appreciate) (%): (1.39); 1.07; 4.51; 2.00; 2.00; 2.00 ### External sector: trade and current account - Trade Deficit (Million USD): (230); (310); (253); (262); (271); 0.77 - Exports (Million USD): 455.6; 621.7; 576.4; 634.0; 697.4; 1,046.1 - Imports (Million USD): 686.0; 931.4; 829.8; 896.2; 967.9; 1,045.3 - Current Account Balance (CAB) (Million USD): (72.2) ### Investment and saving - Total Investment (PIP+PI) (Billion kip): 8,457.0; 10,284.0; 12,000.0; 14,387.0; 16,847.0; 20,422.0 - Public Investment Programme (PIP) (Billion kip): 2,750; 3,649; 3,353; 4,121; 5,251; 7,216 - Private Investment (PI) (Billion kip): 5,707; 6,635; 8,647; 10,266; 11,596; 13,206 - Domestic Saving (Billion kip): 5,755; 6,311; 7,395; 9,130; 10,673; 13,701 ### Key ratios to GDP - Broad Money (M2)/GDP (%): 19.6; 24.3; 25.1; 24.7; 24.6; 26.1 - Revenue /GDP (%): 13.8; 14; 14.8; 14.8; 14.9; 16.1 - Expenditure/GDP (%): 20.3; 22.3; 22; 21.2; 20.8; 21.8 - Revenue (Excluding Grants)/GDP (%): (8.4); (9.9); (9); (8.2); (7.5); (7.4) - Budget Deficit /GDP (%): -6.5; -8.3; -7.2; -6.5; -5.9; -5.8 - Current Account Balance (CAB) /GDP (%): (0.3) - Trade Deficit / GDP (%): -8.4; -9.7; -7.; -6.5; -5.9; 0.0 - Exports/GDP (%): 16.6; 19.5; 16.0; 15.6; 15.3; 20.6 - Imports/GDP (%): 24.9; 29.3; 23.0; 22.1; 21.2; 20.6 - Total Investment / GDP (%): 20.4; 31.1; 31.6; 31.7; 31.3; 34.1 - Total Public Investment / GDP (%): 9.6; 10.5; 10.0; 10.9; 11.5; 13.8 - Total Private Investment / GDP (%): 19.9; 20.5; 20.3; 20.6; 21.1; 20.5 - Saving/ GDP (%): 20.1; 19.1; 18.7; 20.2; 20.6; 23.0 *Source: Annex I Lao PDR: Some Macroeconomic Projections (2004/05 – 2009/10)* ### Annex II: Localized Millennium Development Goals (MDG) Indicators and Targets ### Poverty, inequality and hunger - Proportion of population below national poverty line (%): 48; 39 (1997); 33.5; 25; 24 - Proportion of population below minimum level of dietary energy consumption (%): 31; 29 (2000); 20 ### Education - Net enrolment ratio in primary education, both sexes, (%): 58 (1991); 83; 90.6; 98 - Net enrolment ratio in primary education, girls, (%): 89.7 - Net enrolment ratio in primary education, boys, (%): 91.4 - Proportion of pupils starting grade 1 who reach grade 5, (%): 48 (1991); 62 (2001); 95 - Primary completion rate, both sexes, ((%)): 77.4 - Primary completion rate, girls, (%): 75.4 - Primary completion rate, boys, (%): 79.5 ### Gender equality in education and representation - Ratio of girls to boys in primary education, (%): 77 (1991); 84; 89; 100 - Ratio of literate women to men of 15-24 year olds, (%): 81 (1995); 90 (2001); 100 - Proportion of seats held by women in National Assembly, (%): 6.3; 23 (2003); 30 ### Maternal and child health - Maternal mortality ratio, per 100,000 live births: 750; 530; 350; 300; 185 - Infant mortality rate, per 1,000 live births: 134; 60; 55; 45 - Under-five mortality rate, per 1,000: 98; 75; 55 - Prevalence of underweight children, under five years of age, (%): Less than 30; 20 ### Water, sanitation, malaria, TB, environment - Proportion of population with sustainable access to an improved water source, Total, (%): 28; 58 (2000); 75; 80 - Rural access to improved water (%): 65 - Proportion of population with access to improved sanitation, Total, (%): 60 - Malaria morbidity (suspected cases per year per 1,000): 44; 48; 15 - Malaria death rate, per 100,000: 9; 3.5; 0.2 - Proportion of population in malaria-risk areas using effective malaria prevention measures, (%): 24 (treated bed nets); 100 - Prevalence rate associated with TB, per 100,000 population (excl. HIV positive): 144; 72; 50 - Proportion of tuberculosis cases detected under DOTS, (%): 24; 47; 70 - Proportion of tuberculosis cured under DOTS, (%): 72; 83; 85 - Proportion of land area covered by forest (%): 47; >50 *Source: Annex II LAO PDR: LOCALIZED MILLENNIUM DEVELOPMENT GOALS (MDG) INDICATORS AND TARGETS* ### Annex III: Consultation steps in formulation of the Plan (selected timeline) - February 2004: Start Mid-term Evaluation of implementation of Fifth Five-Year Plan (2001-2005); and organize Workshops in the three regions (Luang Prabang, Vientiane Capital, Champasack) - April 2004: Draft of Evaluation Report (three years of implementation completed) — Vientiane Capital - January–July 2004: Missions to Line Ministries and Provinces to guide methodology for formulation of the Sixth Five-Year Plan — Line Ministries and Agencies; Provinces - July 2004: Report to the Government meeting on three years of implementation of the Fifth Five-Year Plan — Vientiane Capital - September 2004: Consultation Workshops with line Ministries and Agencies, Lao Academics and Mass Organizations on frame of the Sixth Five-Year Plan — Vientiane Capital; Luang Prabang; Champasack - November 2004: Prime Minister’s order to formulate the Sixth Five-Year Plan and to conduct Research on priority topics — Line Ministries and Agencies and Provinces - January 2005: Missions from CPI to line Ministries and Agencies and Provinces to assist formulation — Line Ministries and Agencies; Provinces - February 2005: Consultation Workshops with Provinces, line Ministries and Agencies, Mass organizations and Academics in three regions — Luang Prabang; Vientiane Capital; Champasack - March 2005: Consultation Workshop on Research topics — Vientiane Capital - June 2005: Consultation Workshops with partners in development, Private Sector, Lao Academics and Mass Organizations on preliminary ideas — Vientiane Capital - August 2005: Finalize first draft of the Sixth Five-Year Plan in consultation with Provinces and line Ministries and Agencies through Workshops in three regions — Luang Prabang; Vientiane Capital; Champasack - September 2005: Submit first draft of the Sixth Five-Year Plan to Government Cabinet Meeting and to Central Party Meeting for comments — Vientiane Capital - October 2006: Submit a draft of the Sixth Five-Year Plan to National Assembly for comments — Vientiane Capital - January 2006: Circulate draft to Partners in Development and discuss at the Annual Round Table Process Information Meeting — Vientiane Capital - February 2006: Submit draft to the Central Party Meeting for comments — Vientiane Capital - March 2006: Consultative Workshop with Partners in Development, Private Sector, Mass organizations and Lao Academics — Vientiane Capital - March 2006: Submit revised draft to the 8th Party Congress for comments and endorsement — Vientiane Capital - July 2006: National Assembly adopted the Sixth Five-Year Plan — Vientiane Capital *Source: Annex III Some Consultation Steps in Formulation of the Plan* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08341.pdf_