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 PDR

E-mail: [email protected]

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

Economic Integration Policy Framework



1975-1986: Socialist or Centrally Planned Economy

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1986: NEM Shifting 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)

The National Social-Economic Development Policy/Strategy Key Targets of NSEDP/S:



Vision 2020

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Target: To graduate from the status of LDC



by 2020 VII Five Year NSEDP(2011-2015)

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To achieve MDG’s

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To join AEC by 2015

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GDP growth: more than 8% per year

The National Social-Economic Development Policy/Strategy(Cont.) Industrialization Strategy:

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Electricity Industry

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Agro-processing Industry

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Mining Industry

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Tourism Industry

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Construction Material Production Industry

The National Social-Economic Development Policy/Strategy(Cont.)

Land-Linked Strategy Connectivity

8

Mukdahan

The Geographic Focus

Quang Tri East-West Corridor Beantey Meanchey Savannakhet Sa Keo Tay Ninh Svay Rieng

9

Recent Macro Economic Performance

GDP growth (%)

GDP Growth 8,40 8,20 8,20 8,03 8,00 7,89 7,80 7,80 7,57 7,60 8,09 7,40 7,20 7,00 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 8,32 7,97 2011-12 2012-13 Source: Lao Bureau Statistics

GDP Growth by Sectors (%)

20,00 18,00 16,00 14,00 12,00 10,00 8,00 6,00 4,00 2,00 0,00 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Services Industries Agriculture Source: Lao Bureau Statistics

Contributions and GDP growth (%)

9,0 8,0 7,0 6,8 6,8 8,2 8,0 1,1 7,8 7,6 7,9 8,1 8,3 8,0 0,7 0,6 0,3 0,8 0,7 0,6 1,40 Taxes on products and Import duties, net 6,0 5,0 6,3 6,4 0,3 0,3 0,6 0,8 3,5 3,7 2,7 2,0 2,7 3,0 5,0 1,9 3,6 Services 0,6 3,60 3,5 4,0 4,1 3,7 Industry 1,4 3,0 4,1 3,9 3,9 4,0 3,2 1,9 3,6 2,0 1,4 2,7 2,12 1,8 1,0 1,4 2,4 Agriculture 1,3 1,6 1,0 0,5 0,7 1,0 0,9 0,9 0,8 0,85 0,0 GDP Source: Lao Bureau Statistics

GDP per capita in US$

Inflation (%)

18 15,5 16 6 4 2 0 14 12 10 8 7,8 10,7 10,5 7,2 6,8 4,5 7,6 0,0 6,1 7,5 4,3 6,4 Source: Lao Bureau Statistics

The Current Status of the Lao Foreign Trade

Main Exporting Markets

FY 1999 FY 2004 2004 2009

1 2 3 4 5 6 7 8 9 10 Thailand Australia Viet Nam China United Kingdom Japan Germany Switzerland Netherland Italy 46% 6% 7% 3% 1% 1% 3% 3% 1% 2% 38% 10% 12% 5% 7% 1% 4% 5% 1% 1%

FY 2009 2012

56% 18% 8% 4% 1% 2% 2% 2% 1% 1%

Top 9 Export Items from Laos

No.

1 Export Items Minerals 2 Electricity 3 4 5 Garment Agriculture and live animals Other Industrial goods 6 Wood & wood products Diamond 7 8 Forestry Products Handicraft 9

Unit: million USD (share to total)

FY1999-2004 61.77 (16%) 94.93 (25%) 96.14 (26%) 82.49 ( 22%) 10.77 (3%) 73.13 (19%) 0 8.67 (2%) 5.23 (1%) FY2004-2009 495.57 (50%) 127.93

(13%) 152.53 (16%) 88.51 (9%) 69.57

(7%) 69.32

(7%) 18.83 (2%) 5.09 (1%) 1.03 (0%) FY2009-2012 1,048.52 (59%) 289.00 (16%) 167.30 (9%) 119.24 (7%) 113.62 (6%) 37.11 (2%) 12.74 (1%) 1.01 (0%) 0.40 (0%)

Main Import Markets

FY 1999 FY 2004 2004 2009

1 2 3 4 5 6 7 8 9 10 Thailand China Viet Nam France Japan South Korea Belgium Germany Denmark Taiwan 26% 5% 4% 0% 0% 0% 0% 1% 0% 0% 64% 9% 12% 0% 2% 0% 2% 0% 1% 1%

FY 2009 2012

52% 12% 8% 4% 3% 1% 2% 0% 0% 0%

Top 10 Import Items to Laos

4 5 6 7 8 No.

1 Import Items Capital goods (ODA, Loan projects, FDI) 2 Fuel and Gas 3 Vehicles and space parts Food stuff Luxury goods Clothing and daily use commodities Agriculture Inputs Electricity 9 Eletricit Appliances 10 Construction materials

Unit: million USD (share to total)

FY1999-2004 179 (33%) 93 (17%) 25 (5%) 19 (3%) 3 (1%) 14 (3%) 16 (3%) 7 (1%) 4 (1%) 27 (5%) FY2004-2009 319 (32%) 206 (21%) 75 (8%) 24 (2%) 9 (1%) 22 (2%) 17 (2%) 21 (2%) 10 (1%) 27 (3%) FY2009-2012 700 (42%) 333 (20%) 107 (6%) 92 (5%) 71 (4%) 54 (3%) 48 (3%) 47 (3%) 38 (2%) 32 (2%)

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

5% 6% 4% 3% 3% 3% 2% 2% 20% 42%

Capital goods (ODA, Loan projects, FDI) Fuel and Gas Vehicles and space parts Food stuff Luxury goods Clothing and daily use commodities Agriculture Inputs Electricity Eletricit Appliances Construction materials

Top 9 Export from Laos (FY 2009-2010)

2% 1% 0% 0% 9% 16% 7% 6% 59%

Minerals Electricity Garment Agriculture and live animals Other Industrial goods Wood & wood products Diamond Forestry Products Handicraft

Foreign Direct Investment (Mill USD)

FDI by Sector (%)

100,00 80,00 60,00 40,00 47,05 31,54 20,00 21,41 0,00 2000 2,12 4,43 2001 Agriculture Services 2,75 5,10 85,61 4,84 4,28 89,78 2002 18,91 5,80 14,50 0,73 1,65 3,90 17,13 18,85 10,42 26,60 8,53 9,07 5,06 15,84 4,29 17,62 0,69 13,88 23,36 37,40 24,46 53,72 85,54 72,80 18,21 5,13 4,04 2003 6,17 2004 7,51 1,39 2005 Mining Manufacture 2006 65,81 56,17 31,71 15,94 10,14 2007 52,65 23,55 52,88 14,28 21,24 1,94 8,40 2008 2009 8,93 2010 2011 Electricity Generation

FDI by Country (%)

100% 90% 80% 30% 20% 10% 0% 70% 60% 50% 40% 46,16 11,54 36,71 5,58 2000 66,08 1,19 26,09 43,03 4,77 47,03 6,64 2001 5,17 2002 5,37 23,34 33,92 26,35 42,71 42,95 47,25 9,54 70,81 27,06 39,24 28,02 51,06 22,60 46,57 11,23 28,12 5,54 12,42 2,03 2003 2004 Vietnam 6,00 4,47 2005 41,22 11,22 18,10 16,05 15,63 11,17 2006 2007 China 2008 2009 9,53 3,37 36,46 50,64 2010 7,95 6,05 21,34 64,66 2011

FDI by Sectors (Million US Dollars) Sector

Electricity Generation

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

360 1,295 86 6 1,065 1,777 361 640 218 457 25 1,232 1,086 Mining Hotel & Restaurant Construction Agriculture Banking Industry & Handicraft Services Wood Industry Telecom Trading Public Health Garment Consultancy Education 9 1 1 19 5 5 10 3 0 3 0 4 1 0 2 10 14 14 0 60 17 5 13 8 0 4 1 0 24 49 3 19 0 81 60 6 0 140 0 3 1 0 596 12 31 51 10 35 17 9 27 19 0 3 2 0 94 13 2 17 5 15 21 6 0 8 0 0 0 0 1 86 0 4 2 0 12 32 131 74 181 58 24 1,055 269 1,757 418 1,009 29 44 126 24 48 110 0 67 27 81 257 0 115 102 290 551 609 126 100 70 0 0 459 184 32 78 84 12 106 290 325 361 123 134 157 199 551 234 0 25 43 77 24 4 0 1 16 15 70 5 0 0 57 14 0 6 2 0 21 13 0 5 4 0 14 17 0 1 7 0 1 75 8 1 14 5 45 32 50 8 7 2 1 0 0 0 0 0 0 0 0 0 0 0

Total

421 1,442 471 819 1,245 2,700 1,137 1,216 2,322 2,499 3,520 1,857 2,450 Source: Ministry of Planning and investment

FDI by Countries (Million US Dollars)

Country Vietnam China Thailand Malaysia Cambodia Japan Taiwan South Korea England Russia Others Total

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

3 13 7 9 63 63 120 28 43 261 156 149 1,42 1 658 1,65 3 274 158 58 423 496 107 933 474 546 722 1,03 3 1 6 96 57 451 655 93 375 909 44 155 171 260 2 2 1 0 10 5 0 0 1 13 71 0 3 0 14 3 0 5 4 14 3 0 4 1 3 0 402 7 53 0 6 1 10 164 82 0 0 1 4 60 11 8 4 1 75 5 0 12 1 70 2 0 14 0 23 0 15 0 27 202 98 83 60 18 5 0 0 18 0 1 37 0 3 0 1 1 0 5 1 11 11 0 33 16 2 110 334 395 416 63 227 69 0 4 28 2 0 3 4 1 31 130 38 395 50 133 426 509 966 2337 972 956 3449 1299 2557 1448 2115 Source: Ministry of Planning and investment

Poverty Incidences and Poverty Reduction Year 1992/93 1997/98 2002/03 2007/08 2012/13

Total population (Person )

4,626,0 00 4,905,6 90 5,435,4 16 5,927,2 03 6,524,9 25 Number of poor people below poverty line

(Person )

2,127,9 60 1,918,1 25 1,820,8 64 1,635,9 08 1,513,7 83 Percentage of poor people below poverty line (%) 46 39.1

33.5

27.6

23.2

Key Poverty Reduction Policy

Rural Development Policy:



Irrigation development



Road infrastructure development



Primary school buildings

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Primary health care services

Opportunities and Challenges For Economic Integration ( AEC )



OPPORTUNITIES

34

Mukdahan

The Geographic Focus

Quang Tri East-West Corridor Beantey Meanchey Savannakhet Sa Keo Tay Ninh Svay Rieng

35

Opportunities (Cont. )



Better Market Access for Lao Export to ASEAN Market



More tourist from ASEAN countries

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Cheaper Import from ASEAN Market



More FDI to Lao PDR



Freer Skilled Labor Movement



CHALLENGES

Key Challenges in Joining AEC



Increased competition for domestic investors due to more cheaper imports

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Increased competition for domestic investors due to more competitive foreign investors

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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