How Economic Integration Can Promote Inclusive Growth

Lao PDR's Experience

12 November 2014

Leeber Leebouapao(Ph.D)Director Genral

National Economic Research Institute(NERI)Ministry of Planning and Investment

Lao PDRE-mail: leeberleebouapao@yahoo.com

Points of Discussion

Lao PDR’s National Economic Development Strategy

and Economic Integration Policy Framework

Recent Macroeconomic Performance

Poverty Incidences and Policy

Opportunities and Challenges of Lao PDR’s Economic Integration ( AEC by and after 2015 )

Policy Recommendation

Lao National Socio-Economic Development Policy/Strategy

and Economic Integration Policy Framework

Process of Economic Reforms

1975-1986: Socialist or Centrally Planned Economy

1986: NEMShifting from centrally planned

economy to a market oriented economy( Price liberalization, fiscal reform, SOE

reform, banking reform, government employee reform, more open economy )

1997: Member of ASEAN 2008: AFTA 2012: Member of WTO 2015: Member of AC(APSC, AEC, ASCC)

Economic Integration Policy Framework

Key Targets of NSEDP/S: Vision 2020

Target: To graduate from the status of LDC

by 2020 VII Five Year NSEDP(2011-2015)

To achieve MDG’s To join AEC by 2015 GDP growth: more than 8% per year

The National Social-Economic Development Policy/Strategy

Industrialization Strategy: Electricity Industry Agro-processing Industry Mining Industry Tourism Industry Construction Material Production

Industry

The National Social-Economic Development

Policy/Strategy(Cont.)

Land-Linked StrategyConnectivity

The National Social-Economic Development

Policy/Strategy(Cont.)

8

9

The Geographic Focus

East-WestEast-West Corridor Corridor

Sa Keo

Beantey Meanchey

Tay Ninh

Svay Rieng

Quang TriMukdahan

Savannakhet

Nor

th-S

outh

Cor

rido

r A

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Nor

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outh

Cor

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orth

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dor

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orth

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North-South

North-South Corridor-C

Corridor-C

Recent Macro Economic Performance

GDP growth (%)

Source: Lao Bureau Statistics

GDP Growth by Sectors (%)

Source: Lao Bureau Statistics

Contributions and GDP growth (%)

Source: Lao Bureau Statistics

GDP per capita in US$

Inflation (%)

Source: Lao Bureau Statistics

The Current Status of the Lao Foreign Trade

Main Exporting MarketsFY 1999-

2004FY 2004-

2009FY 2009-

2012

1 Thailand 46% 38% 56%

2 Australia 6% 10% 18%

3 Viet Nam 7% 12% 8%

4 China 3% 5% 4%

5 United Kingdom 1% 7% 1%

6 Japan 1% 1% 2%

7 Germany 3% 4% 2%

8 Switzerland 3% 5% 2%

9 Netherland 1% 1% 1%

10 Italy 2% 1% 1%

Top 9 Export Items from Laos

Unit: million USD (share to total)

No. Export Items FY1999-2004 FY2004-2009 FY2009-2012 1

Minerals 6177. (16%)

49557. (50%)

10485, . 2(59%)

2

Electricity 9493 (25%)

12793. (13%)

28900.(16%)

3

Garment 9614. (26%)

15253. (16%)

16730.(9%)

4

Agriculture and live animals

8249.( 22%)

8851. (9%)

11924.(7%)

5

Other Industrial goods 1077. (3%)

6957. (7%)

11362.(6%)

6

Wood & wood products 7313.(19%)

6932. (7%)

3711.(2%)

7

Diamond 0 1883. (2%)

1274.(1%)

8

Forestry Products 867. (2%)

509. (1%)

101.(0%)

9

Handicraft 523. (1%)

103. (0%)

040.(0%)

Main Import MarketsFY 1999-

2004FY 2004-

2009FY 2009-

2012

1 Thailand 26% 64% 52%

2 China 5% 9% 12%

3 Viet Nam 4% 12% 8%

4 France 0% 0% 4%

5 Japan 0% 2% 3%

6 South Korea 0% 0% 1%

7 Belgium 0% 2% 2%

8 Germany 1% 0% 0%

9 Denmark 0% 1% 0%

10 Taiwan 0% 1% 0%

Top 10 Import Items to Laos

Unit: million USD (share to total)

No. Import Items FY1999-2004 FY2004-2009 FY2009-2012

1Capital goods (ODA, Loan projects, FDI)

179 (33%) 319 (32%) 700 (42%)

2 Fuel and Gas 93 (17%) 206 (21%) 333 (20%)

3 Vehicles and space parts 25 (5%) 75 (8%) 107 (6%)

4 Food stuff 19 (3%) 24 (2%) 92 (5%)

5 Luxury goods 3 (1%) 9 (1%) 71 (4%)

6 Clothing and daily use commodities 14 (3%) 22 (2%) 54 (3%)

7 Agriculture Inputs 16 (3%) 17 (2%) 48 (3%)

8 Electricity 7 (1%) 21 (2%) 47 (3%)

9 Eletricit Appliances 4 (1%) 10 (1%) 38 (2%)

10 Construction materials 27 (5%) 27 (3%) 32 (2%)

Top 10 Import Items to Laos( FY 2009-2010)

Top 9 Export from Laos (FY 2009-2010)

Foreign Direct Investment (Mill USD)

FDI by Sector (%)

FDI by Country (%)

FDI by Sectors (Million US Dollars)

Source: Ministry of Planning and investment

Sector 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Electricity Generation 3601,29

5 86 61,06

51,77

7 361 640 218 457 251,23

21,08

6

Mining 9 2 24 596 94 12 181 241,05

5 2691,75

7 4181,00

9Hotel & Restaurant 1 10 49 12 13 32 58 29 44 126 24 48 110Construction 1 14 3 31 2 131 0 67 27 81 257 0 100Agriculture 19 14 19 51 17 74 115 102 290 551 609 126 70Banking 5 0 0 10 5 0 0 32 84 12 106 0 70Industry & Handicraft 5 60 81 35 15 459 184 78 290 325 361 1 5Services 10 17 60 17 21 123 134 157 199 551 234 16 0Wood Industry 3 5 6 9 6 0 25 43 77 24 4 15 0Telecom 0 13 0 27 0 1 57 21 14 1 45 1 0Trading 3 8 140 19 8 86 14 13 17 75 32 0 0Public Health 0 0 0 0 0 0 0 0 0 8 50 0 0Garment 4 4 3 3 0 4 6 5 1 1 8 0 0Consultancy 1 1 1 2 0 2 2 4 7 14 7 0 0Education 0 0 0 0 0 0 0 0 0 5 2 0 0

Total 4211,44

2 471 8191,24

52,70

01,13

71,21

62,32

22,49

93,52

01,85

72,45

0

FDI by Countries (Million US Dollars)

Country 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Vietnam 3 7 9 63 43 261 156 149 1,421 658 1,653 274 158

China 13 63 120 28 58 423 496 107 933 474 546 722 1,033

Thailand 1 6 96 57 451 655 93 375 909 44 155 171 260

Malaysia 2 5 71 3 3 3 53 0 11 5 2 23 98

Cambodia 2 0 0 0 0 0 0 0 8 0 0 0 83

Japan 1 0 3 5 4 402 6 1 4 12 14 15 60

Taiwan 0 1 0 4 1 7 1 4 1 1 0 0 18

South Korea 10 13 14 14 10 164 82 60 75 70 27 202 5

England 0 0 0 0 1 5 11 0 16 0 28 0 4

Russia 0 1 3 1 0 1 11 33 2 4 2 3 1

Others 18 37 110 334 395 416 63 227 69 31 130 38 395

Total 50 133 426 509 966 2337 972 956 3449 1299 2557 1448 2115

Source: Ministry of Planning and investment

 Year 1992/93 1997/98 2002/03 2007/08 2012/13

Total population (Person )4,626,00

04,905,69

05,435,41

65,927,20

36,524,92

5

Number of poor people below poverty line(Person )

2,127,960

1,918,125

1,820,864

1,635,908

1,513,783

Percentage of poor people below poverty line (%) 46

39.1

33.5

27.6

23.2

Poverty Incidences and Poverty Reduction

Key Poverty Reduction Policy

Rural Development Policy: Irrigation development

Road infrastructure development

Primary school buildings

Primary health care services

Opportunities and Challenges

For Economic Integration ( AEC )

OPPORTUNITIES

34

35

The Geographic Focus

East-WestEast-West Corridor Corridor

Sa Keo

Beantey Meanchey

Tay Ninh

Svay Rieng

Quang TriMukdahan

Savannakhet

Nor

th-S

outh

Cor

rido

r A

-

Nor

th-S

outh

Cor

rido

r A

-N

orth

-Sou

th C

orri

dor

-BN

orth

-Sou

th C

orri

dor

-B

North-South

North-South Corridor-C

Corridor-C

Better Market Access for Lao Export to

ASEAN Market

More tourist from ASEAN countries

Cheaper Import from ASEAN Market

More FDI to Lao PDR

Freer Skilled Labor Movement

Opportunities (Cont. )

CHALLENGES

Key Challenges in Joining AEC

Increased competition for domestic investors due to more cheaper imports

Increased competition for domestic investors due to more competitive foreign investors

Challenges of labor movements ( Social challenges )

Policy Recommendation

Make use of the opportunities and maximize the benefit from joining AEC Mitigate the negative impact and deal

with the challenges

Strengthen competitiveness

Inclusive growth and sustainability

Achieve MDG’s, LDC-Graduation, Post- MDG’s and SDG’s

Thank You for

Your Attention

Q & A