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

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  : Socialist or Centrally Planned Economy  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) 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( )  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 Strategy Connectivity The National Social-Economic Development Policy/Strategy(Cont.)

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9 The Geographic Focus East-West Corridor Sa Keo Beantey Meanchey Tay Ninh Svay Rieng Quang Tri Mukdahan Savannakhet North-South Corridor A- North-South Corridor-B North-South 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 Markets FY FY FY Thailand46%38%56% 2Australia6%10%18% 3Viet Nam7%12%8% 4China3%5%4% 5United Kingdom1%7%1% 6Japan1% 2% 7Germany3%4%2% 8Switzerland3%5%2% 9Netherland1% 10Italy2%1%

Top 9 Export Items from Laos Unit: million USD (share to total) No.Export Items FY FY FY Minerals (16%) (50%) 1, (59%) 2 Electricity (25%) (13%) (16%) 3 Garment (26%) (16%) (9%) 4 Agriculture and live animals ( 22%) (9%) (7%) 5 Other Industrial goods (3%) (7%) (6%) 6 Wood & wood products (19%) (7%) (2%) 7 Diamond (2%) (1%) 8 Forestry Products 8.67 (2%) 5.09 (1%) 1.01 (0%) 9 Handicraft 5.23 (1%) 1.03 (0%) 0.40 (0%)

Main Import Markets FY FY FY Thailand26%64%52% 2China5%9%12% 3Viet Nam4%12%8% 4France0% 4% 5Japan0%2%3% 6South Korea0% 1% 7Belgium0%2% 8Germany1%0% 9Denmark0%1%0% 10Taiwan0%1%0%

Top 10 Import Items to Laos Unit: million USD (share to total) No.Import Items FY FY FY Capital 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 )

Top 9 Export from Laos (FY )

Foreign Direct Investment (Mill USD)

FDI by Sector (%)

FDI by Country (%)

FDI by Sectors (Million US Dollars) Source: Ministry of Planning and investment Sector Electricity Generation 3601, ,0651, ,2321,086 Mining , , ,009 Hotel & Restaurant Construction Agriculture Banking Industry & Handicraft Services Wood Industry Telecom Trading Public Health Garment Consultancy Education Total 4211, ,2452,7001,1371,2162,3222,4993,5201,8572,450

FDI by Countries (Million US Dollars) Country Vietnam , , China ,03 3 Thailand Malaysia Cambodia Japan Taiwan South Korea England Russia Others Total Source: Ministry of Planning and investment

Year1992/931997/982002/032007/082012/13 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 (%) 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

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35 The Geographic Focus East-West Corridor Sa Keo Beantey Meanchey Tay Ninh Svay Rieng Quang Tri Mukdahan Savannakhet North-South Corridor A- North-South Corridor-B North-South 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