The Lao People’s Democratic Republic (Lao PDR) is in a period of dynamic change. In 2015, Lao PDR was one of the fastest growing economies in the Southeast Asia and Pacific region with 7% gross domestic product (GDP) growth. Much of the progress can be attributed to increased foreign direct investment (FDI), and the transformation of the Lao PDR into a regional provider of natural resources, such as energy (hydropower), minerals, timber and cash crops.
However, economic growth has not been accompanied by effective regulations to manage growth and ensure distributional equity. Income disparity is a persistent, and growing, challenge. The top fifth of the population controls 44% of the country’s wealth, while the bottom fifth controls only 8%. Additionally, much of the wealth is concentrated in the Vientiane area, where only about 10% of the population lives.
As a result, the current growth path is introducing social and environmental challenges that are hindering the achievement of sustainable development objectives. The few regulations in place are often inconsistently implemented and enforced. This makes meeting the long-term objectives of sustainable development challenging. While substantial advances toward graduating from a least developed country (LDC) status have been attained, Lao PDR has been less successful in translating economic growth into poverty reduction and job creation, when compared with peer countries in the Greater Mekong Subregion (GMS). Furthermore, rapid urbanization has introduced an additional layer of policy and planning complexity, leading to increased pollution and poor urban planning.
Lao PDR’s historical growth trajectory has also been associated with environmental degradation. Key economic activities underpinning Lao PDR’s economic dynamism included uncontrolled mining, unregulated and illegal logging, hydropower-sector expansion, and inefficient agriculture. While these activities provided important economic gains, they have also resulted in significantly high rates of natural resource depletion and exposure to significant environmental health risks. The annual cost of environmental degradation (reduced natural capital from depletion and reduced human capital from pollution) is estimated at 19.3% of GDP in 2017.
Natural resource depletion and environmental degradation have severe development implications. Their costs disproportionately affect the poor and other vulnerable groups, thereby limiting the contributions of economic growth to reduce poverty. In addition, environmental stress undermines the ability of the natural resource base to provide livelihoods and buffers to natural hazards such as floods.
Key policies and governance approach
The Government of Laos has initiated its transition towards a green economy, having recognized that its strong economic growth was largely fueled by natural resource-based activities. In 2019, Laos adopted the National Green Growth Strategy (NGGS), developed with international assistance. The strategy stresses the need to benefit from the nation’s ample natural resources more sustainably and efficiently, while taking a development path that is more resilient to risks such as climate change. The strategy also underlines the need to protect people’s health.
The main objectives are to develop the potential to integrate green growth into the formulation and implementation of sector and local strategies and plans to ensure achievement of long-term goals of national socioeconomic development set out by the Party and Government, such as moving toward becoming an upper middle-income economy in accordance with green and sustainable direction and achieving the Sustainable Development Goals (SDGs) by 2030.
To achieve these objectives and goals, the NGGS identified four cross-cutting areas: (i) improving the investment environment and management system to make it more efficient and effective; (ii) ensuring rural development and poverty reduction to raise the living standard of the rural people and decrease the disparity between urban and rural areas, and to enable poor people in the rural areas to receive the benefits from the economic growth in an inclusive and fair manner; (iii) gender roles that will particularly focus on raising the roles and promoting the advancement of women to decrease the differences between men and women in all socio-economic fields; and (iv) decreasing the risks and vulnerability of the economy to the climate change and natural disasters.
The NGSS prioritizes seven sectors: (i) natural resources and environment; (ii) agriculture and forestry; (iii) industry and commerce; (iv) public works and transportation; (v) energy and mines; (vi) information, culture, and tourism; and (vii) science and technology
The GoL has also established the Green Growth National Steering Committee (GGNSC) mandated with overseeing green growth planning; implementation of programs, policies, and projects; and monitoring.
SUCCESSES AND REMAINING CHALLENGES
Much of the work towards the development of the National Green Growth Strategy was funded by the World Bank. This illustrates that, as government funding for these activities is very limited, the implementation of green economy depends on external funding from development partners. On top of the inadequate financing, there are important obstacles to green economy development at the institutional level, for example in working practices of cross-sectoral collaboration and coordination. It is hoped that such obstacles will be ameliorated in the future by the Green Growth Centre that is being designed by the Ministry of Planning and Investments to support the ministries’ work in “greening” the sector activities.
The NGGS details the need to review and improve the laws, regulations and mechanisms relating to the promotion/facilitation and management of investment, to make them more efficient and effective and, at the same time, close the loopholes in the laws, regulations and investment management mechanisms that make investment approval inefficient, ineffective and incapable to ensure economic efficiency and mitigation of environmental and social impacts.
Upgrading the technical capacity of organizations and staff of the agencies and units which are involved in the consideration, approval and management of public, domestic, and foreign private investments is needed to facilitate and manage investments efficiently and effectively. Increasing the capacity of these organizations and staff at the local level (provincial level and district level) is particularly urgent.
An analysis of green economy policies in Lao PDR and Cambodia, found that at the sectoral level there are still many unaddressed trade-offs. In the energy sector, large-scale hydropower is incorporated in the green economy discourse despite its environmentally and socially harmful impacts. In comparison, the targets and actions for the development of more sustainable energy options are modest. In the forest sector, the ambitious forest cover targets are missing funds for implementation. To avoid re-enforcing the inequitable and ecologically damaging growth pattern of today, the increased use of natural resources should be matched with strong policies to both limit the environmental impacts and to ensure the rights of local communities and distributive impacts.
Initiatives and Development Plans
In the framework of Laos’ 9th National Socio-Economic Development Plan (NSEDP), the European Union (EU), Finland, France, Germany, Hungary, Ireland, Luxembourg, and Switzerland, working together as Team Europe, committed to contributing an estimated EUR 550 million in support of a green and inclusive economy, human capital development, and good governance. The European Partners agreed to focus the Team Europe Strategy 2021-2025 for Laos on six main cooperation sectors: agriculture and rural development; natural resources and environment; private sector development, trade and tourism; education, including technical vocational education and training; health; and good governance, following a broad consultation process.
In the next five years, Team Europe will continue to support Laos in its recovery from the COVID-19 pandemic and smooth LDC graduation toward reaching the Sustainable Development Goals. This collaboration honors Lao PDR’s dedication to green and inclusive growth, as well as the active role Lao PDR can play in accomplishing the global goals of poverty reduction, peace, and stability, combating climate change, and protecting our planet for future generations.
Goals and Ambitions
The National Green Growth Strategy of Lao PDR has set relevant target indicators including (i) average rate of growth of GDP at 7% during 2020-2025 and 2025-2030; (ii) average per capita income from US$1,860/person in 2015 to US$3,000/person in 2025 and US$3,500/person in 2030; (iii) poverty rate to decline from 20% in 2015 to less than 10% in 2025, and less than 5% in 2030; (iv) percentage of female members of the National Assembly 25-35% in 2030, and percentage of female members of the Government from 5-25% in 2030; (v) proportion of export of natural resources in the gross value of exports to decline from 51.2% to 30% in 2030; (vi) proportion of GHG emissions to GDP to decline from 83.3 tonnes/GDP-million to less than 70% in 2030; and (vii) the rate of forest cover to increase from 40.3% in 2010 to 70% in 2025.
- Strengthen the demand side of accountability and create an enabling environment for social accountability. It is crucial that a more systematic effort be made to raise awareness of environmental issues.
- Promote community participation in climate-smart agriculture and forestry, invest in agricultural modernisation through targeted small-scale irrigation and the introduction of modern seed/fertilizer technologies, and offer training in ecologically-based, climate-adapted farming approaches.
- Develop and train the Lao PDR agency staff in tools for spatial analysis to support decision-making and manage the sustainable use of natural resources, with the aim to improve the capacity of relevant ministries to effectively review, monitor, and enforce concession compliance as well as carry out EIAs and SIAs.
- Set up tourism management programs to develop high-value and sustainable tourist sites that better correspond with consumer demands.
- Establish a shared planning vision and objectives for urban centers and align urban planning with a green growth model in order to balance current and projected urban growth with conserving/establishing green spaces.
- Increase waste collection rates and divert waste from landfills by promoting recycling, including by supporting public-private partnerships (PPPs) that develop sustainable business models to overcome current disincentives for private companies.
- Promote off-grid renewable energy, such as small-scale (less than 1 MW) micro-hydro and solar installations, and facilitate the provision of microfinance services to assist households and communities with these installations in order to increase electricity access in rural and remote areas.
- Promote vocational training programs on processing and adding value to natural resources products through PPPs to improve the match between labor skills and business demands, improve household incomes, and increase economic output and tax revenues.
- Commit to mainstreaming gender in the design, implementation, and monitoring and evaluation of green growth by developing a gender action plan for the NGGS and monitoring the progress of its implementation.
- Partner with the Lao Women’s Union (LWU) to tap into their expertise to help mainstream gender in the green growth agenda. Simultaneously, build capabilities to improve gender equality, promote more inclusive green growth and maximize economic growth opportunities.
- Monitor female labor force participation in quality, green jobs.
 Vuola, M. et al., 2020. What is a Green Economy? Review of National-Level Green Economy Policies in Cambodia and Lao PDR. Sustainability, 12(16), p.6664. Available at: http://dx.doi.org/10.3390/su12166664.
 [Online]. Available: https://e-nnw.com/team-europe-announces-partnership-with%E2%80%AFlaos-worth%E2%80%AF550-million-euro/.