ADB's Work in the Lao PDR

The economy of the Lao People’s Democratic Republic (Lao PDR) gradually recovered in 2022, supported by the reopening of the country’s borders and improved mobility after a 2-year closure to contain the spread of the coronavirus disease (COVID-19). Services recovery will continue to drive growth momentum in the next 2 years. However, inflationary pressures, linked with currency depreciation and high public debt, will continue to have an impact on consumption and domestic investment.

To date, the Asian Development Bank (ADB) has committed 364 public sector loans, grants, and technical assistance totaling $2.6 billion to the Lao PDR. Cumulative loan and grant disbursements to the Lao PDR amount to $2.41 billion. These were financed by regular and concessional ordinary capital resources, and the Asian Development Fund. ADB’s current sovereign portfolio in the Lao PDR includes 12 loans and 10 grants worth $610 million.

While the Lao PDR is rich in natural resources, and has dynamic mining and hydropower industries, economic diversification is needed to expand private sector investment, generate employment in services and industry, and promote regional cooperation and integration. Under its 9th Five-Year National Socioeconomic Development Plan (NSEDP9), 2021–2025, the Lao PDR aims to promote quality, sustainable, inclusive, and green growth in the context of recovery from the COVID-19 pandemic and to graduate from least developed country status in 2026. The Government of the Lao PDR in August 2021 supplemented the NSEDP9 with the national agenda for resolving economic and financial difficulties in 2021–2023.

To support the implementation of the NSEDP9 and strengthen macroeconomic management per the national agenda, the government plans to revisit the law on investment promotion to improve tax policy coordination while upgrading the regulatory environment for public-private partnerships through tabling a new law.

To accelerate the pace of economic recovery, domestic reforms are needed to improve the business environment and strengthen the financial sector. More can be done to leverage benefits from regional cooperation to escalate development progress, including measures to boost trade, increase agriculture production, and harness the power of its cities to promote inclusive and equitable growth.

Nonsovereign operations. Total outstanding balances and undisbursed commitments of ADB’s nonsovereign transactions in the Lao PDR as of 31 December 2022 was $124.91 million representing 0.98% of ADB’s total private sector portfolio.

Operational challenges. Project implementation returned to normalcy due to eased COVID-19 restrictions and the reopening of borders. Challenges in 2022 included lack of quality of audited project financial statements, weak contract management, and risk to health and safety of workers at project sites. Project teams supported the government in identifying the implementation issues’ root causes and resolving them right at the project sites; this approach has resulted in a notable improvement in the overall portfolio performance in 2022. The government and ADB also continued to collaborate to improve portfolio performance through the annual and quarterly portfolio review meetings, in which actions to resolve broad project issues are agreed and implemented.

ADB remains committed to improving the capacities of executing and implementing agencies and has provided financial management training in 2022. ADB has also issued a guidance note on contract management and reminded executing and implementing agencies of the importance of workers’ health and safety in construction sites.

Technicians and workers assemble electronic products in one of the factories inside the Savan Park Special Economic Zone in Savannakhet. The growth of industry and cross-border trade is bringing jobs to the area. ADB supported the training of Lao officials to manage the zone and promote its attractions to foreign investors. Photo: Ariel Javellana/ADB

Knowledge Work

ADB, along with the Ministry of Commerce and Industry and the Lao National Chamber of Commerce and Industry, launched a report that explores ways to improve the local business environment and provides an index to measure support to private sector development from the provinces. Another study commissioned by ADB in collaboration with the Lao Women’s Union provides gender analysis of national laws and policies in the Lao PDR to inform efforts to strengthen women’s resilience to climate change and disasters. ADB prepared a report that provides insights into the support needed to further develop the country’s sustainable finance market. Another report explores how a local currency government bond market can strengthen economic recovery from COVID-19 pandemic. ADB also led the preparation of papers related to macroeconomics and infrastructure development for the government’s 2022 Annual Round Table Implementation Meeting with development partners. To promote regional connectivity, ADB actively collaborated with the government and development partners in preparing a report that represents an effort to better understand how the Lao PDR may leverage benefits from regional cooperation and integration in driving forward its development agenda.

Cooperation with civil society organizations in 2022 was extended through consultations with international nongovernment organizations (INGOs) working on governance to inform the preparation of ADB’s new country partnership strategy (CPS) for the Lao PDR. World Wildlife Fund and Oxfam, also contributed to ADB’s safeguard policy statement review and update.

  ADB Projects in the Lao PDR Project data sheets for loans, grants, TAs

Future Directions

ADB’s CPS for the Lao PDR, 2017–2020, as extended on 9 December 2021, will remain in effect until a new CPS is approved on March 2024. Under the current CPS, ADB operations focus on improving physical connectivity to catalyze private sector investment, generate employment, and boost incomes; developing skills that will promote non-resource sectors such as tourism and logistics; and expanding access to health services to enhance labor productivity.

ADB investments also help ensure sustainable management of natural resources and bolster climate resilience, while gender equality and effective governance remain crosscutting themes.

ADB assistance for regional cooperation and integration builds on the bank’s long-standing support for the Greater Mekong Subregion Economic Cooperation Program, especially in enhancing connectivity, promoting trade and investment, ensuring health security, and encouraging policy dialogue for effective environmental management.

Regional investments place an emphasis on developing economic corridors to open up the landlocked Lao PDR and narrowing development gaps in the country’s poorer provinces.