1. Ensuring Sustained and Inclusive Economic Growth

EUROPEAN UNION

DELEGATION TO LAOS

Laos 16

Technical Comments from the European Union on Specific Sectors of draft 8th NSEDP

1. Ensuring Sustained and Inclusive Economic Growth
The 8th NSEDP has foreseen the development of a mega project on Railway Boten – Vientiane which will have significant impacts on the budget, macro-economy stability as well as on social and environmental sustainability. This however is not sufficiently reflected in the 8th NSEDP and in particular in its financial projection (whether this project will be financed by government investment or private sector investment budget and under what conditions).

 There is no reference to the action plan on anti-money laundering and counter terrorism. Given its important contribution to the improvement of the financial market and possible impact on Lao economy, this action plan should be reflected in the 8th NSEDP.

Under the 8th NSEDP, Lao economic growth will rely mainly on the investment in and export of natural resources (in the 7th NSEDP, about 70% of Lao total export is from minerals and hydro power). This will continue making Laos vulnerable to external shocks.

The need to expand hydro power development along the Mekong mainstream will create more pressures on social and environmental impacts and might escalate tensions with neighbouring countries and mainly with Thailand, Cambodia and Vietnam.

Outcome 1 aims to limit importation to 12%. The implementation of this target however should be supported by detailed analysis and be carried out with caution by taking into account that the country still needs and relies on import of capital investment for infrastructure development, new technology and raw materials to feed its processing industries, agro processing, garment, electronic appliance, assembling vehicle, spare parts, diamond cutting etc. In addition, this initiative should not overlook Laos’ commitments to ASEAN and WTO.

Despite the efforts made to improve the business environment and promote private sector investment in the non-resource sector, Laos is still ranked very low by the Doing Business survey 2015, as 148th out of the 189 surveyed countries. The 8th NSEDP should focus on the implementation of regulations and policy that have direct impacts on improving the business environment.

In order to establish a system that facilitates wider public consultation for legislation formulation, it is particularly important that the upcoming regulations are consulted with the private sector.

It is important to strengthen the Public Private Sector dialogue under Lao Business Forum in order to demonstrate the Government’s commitment to support private sector investment in the country and to gain the confidence of foreign investors (FDI that operate under a transparent environment).

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