The Lao People’s Democratic Republic (Lao PDR or Laos) is a landlocked country in the heart of mainland Southeast Asia, bordering China, Vietnam, Cambodia, Thailand, and Myanmar. Almost the entire country lies in the lower watershed of the Mekong River which traverses Laos from north to south. Its total land area is 236,800 km². Approximately 80% of the area is composed of hills and mountains; the highest point is the Phu Bia at 2,820 m above sea level. The predominantly mountainous terrain of Laos focuses population pressure on limited agricultural land and lowland urban areas. The country has a tropical monsoon climate, with a wet season from June to September/October.
Administratively, Lao PDR is divided into 16 provinces (khoueng) with one capital city (nakhon luang) which is Vientiane (Viangchan).
Laos has achieved rapid economic growth and poverty reduction over the past 20 years, having been the second-fastest growing economy in ASEAN and amongst the 15 fastest growing economies in the world. However, Laos remains as one of the poorest countries in Asia, and economic growth has now slowed. In addition, the government is faced with high debt distress following years of intense deficit financed growth and weak revenue collection. Lao PDR’s poor economic situation is expected to be compounded by the effects of the COVID-19 pandemic.
In Laos, pockets of wealth have emerged in urban areas, and poverty has become increasingly associated with rural and ethnic groups. The spillover effect of such economic growth has contributed to the improvement of livelihoods in peri‐urban and nearby rural areas while, indirectly, migrants’ remittances have enhanced the development of rural areas. However, economic inequality has increased and is predicted to widen further in future years.
The growth of the past two decades was predominantly driven by large-scale investments in capital intensive sectors, particularly in mining and hydropower. However, these investments have failed to support job creation and have resulted in high rates of natural resource depletion and environmental degradation. The annual cost of environmental degradation was estimated at 19.3% of GDP in 2017. Even before the COVID-19 pandemic emerged, the Government recognized that growth was fuelled by natural resources and that a new economic model was needed to reduce poverty, conserve the environment, and strengthen resilience to natural disasters and economic shocks.
Laos is experiencing the most rapid rate of urbanization in Southeast Asia, as identified by the UN-Habitat World Cities Report (2016). Rapid urbanization is expected to create new development challenges for the country. To meet those challenges, and to build more inclusive, safer, resilient, and sustainable cities, development programming in Laos must aim for a transition from a traditional focus on poverty eradication in remote, rural areas to one that also supports well-planned and well-managed urban spaces, societies, and economies. Laos has already made considerable investments in its transformation from a land-locked disadvantaged country into an opportunistic land-linked country, with major improvements in transportation linkages both within the country and with neighbouring countries.
To set the country on a more sustainable development path, Laos needs to diversify its productive system by encouraging the production of higher-value goods and services. Currently, Laos is lagging in terms of skilled human resources and cutting-edge technologies to produce quality products for the competitive Asian markets. Up until now, neither the public, nor the private sector have prioritized human resource development. The “Mapping Research and Innovation in Lao People’s Democratic Republic” report demonstrates the need to develop a range of operational policy instruments to encourage research and development (R&D) and innovation, including human resource development. There is no operational policy instrument in place yet to foster networking among the business, government, and university sectors and to achieve sustainable growth and development.
The Government of Laos has increasingly recognised the need to integrate environmental and sustainability criteria into its development model. Over the last few years, the institutional framework for environmental management has been strengthened, including through the creation of the Ministry of Natural Resources and Environment (MoNRE) in 2011.
In addition, environmental protection goals have been included in several high-level, strategic documents. In 2016, Lao PDR’s National Assembly approved three medium- and long-term instruments: the 8th National Socio-Economic Development Plan (NSEDP), the 10-Year Socio Economic Development Strategy (2016–2025), and the 2030 Vision. Vision 2030 aims for the nation to reach the status of an upper-middle-income country with a green growth orientation by 2030, and includes, among others, sustainable agriculture and forestry, effective environmental protection, and natural resource use as key drivers of this new growth pathway.
2020 and 2021 marked the conclusion of the 8th National Socio-Economic Development Plan (NSEDP 2016-2020) and the commencement of the next five-year plan (9th NSEDP 2021-2025). This transition was dominated by the challenges associated with COVID-19, sustainability and climate change, quality and inclusive growth, human capital, infrastructure development and the transition from Least Developed Country status, which Laos hopes to achieve.
The Natural Resources and Environment Sector Vision (NRESV) towards 2030 and the Ten-Year Strategy (2016–2025) provide greater detail regarding the Government’s approach to achieving the environmental protection goals of Vision 2030 and the NSEDP.
The EU is one of the most important development partners of Laos in terms of granting aid for development, cooperation, and humanitarian assistance. The EU programme for the period of 2016-2020 was synchronised with the Lao PDR NSEDP, and allocated €162 million in 3 sectors, nutrition, education, and governance, under the framework of the European Joint Programming 2016-2020.
The EU also works closely with Laos under the framework of the EU-ASEAN Cooperation Agreement to ensure an effective environment for trade and investment relations. In 2020, total trade between the two partners was €436 million. The EU imported €307 million in goods from Laos, mainly textiles, footwear, and agricultural products.
Deforestation and forest degradation
About 70% of Laos PDR's population depends on forest resources, soil, wetlands, and fish for income and nutrition. Despite this, forest cover is declining at an alarming rate. Over the last 50 years, forest cover has declined from 70% to 43% of Laos’ land total area. In addition, forest quality has deteriorated, with dense forests declining from 29% in 1992, to 8.2% in 2002, and open forests increasing from 16% to 24.5% in the same period. The main causes of deforestation are the conversion of forests to plantations and cash crops by commercial companies, hydropower, mining, infrastructure development, illegal logging and shifting cultivation. Declining forest resources affect the lives of many of the poorest people, who live in and among the degrading and disappearing forests.
Surface water is the major water resource for urban water supply as most towns are situated alongside rivers, whereas groundwater is the main source for the rural population. While it remains within acceptable limits, water quality in Laos is declining. Laos’ water problems are mainly related to infectious water-borne diseases, especially in rural areas. Malaria, pneumonia, gastritis, influenza, and diarrhoea are the major causes of mortality and morbidity in the country.
Rapid urbanization, increasing industrial pollution, and highway construction pose additional threats to the urban environment. Poor vehicles and road maintenance are the main causes of outdoor air pollution. Indoor air pollution is mainly caused by the extensive use of wood stoves due to a high dependence on forest resources. The monitoring of air pollutants and the legal framework for managing air pollution are also unsatisfactory. Outdoor air pollution monitoring is performed for only three consecutive days in a year. As the industrial capacity of the country develops, it is expected that hazardous chemicals will become an increasingly important issue in the future.
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