The Lao PDR is one of the few countries which combine a market economy with a single party ‘socialist’ political system. The Lao PDR is off track to meet seven MDG targets, mostly relating to hunger, education and health. Income inequality is increasing. The population is largely rural, with most of the poor concentrated in seven remote provinces and among ethnic minorities. About half of the population is under 20 years old, and those under 15 are expected to form almost 1/3 of the population in 2020.
Investments are not creating sufficient work opportunities, leading to massive migration to urban centres and abroad (principally to Thailand, which has close linguistic and cultural affinities). In earlier years, Lao could blend into Thai society, but they are now increasingly vulnerable as undocumented migrants. There are well established trafficking networks delivering young Lao for dirty and dangerous work in Thailand, for fishing and plantation work, domestic labour and into the sex trade. There are anecdotal reports that increasing repression of child sexual exploitation in Thailand is leading to a relocation of sex tourism services to the Lao urban areas, most of which are on the Mekong river border with Thailand.
Despite 8% growth rates since 2006, development cooperation accounts for almost two thirds of all public investment. The size of the civil service has increased rapidly, with development partner funds often used to pay for non-salary costs. Most stakeholders believe that there is also a systematic diversion of donor funds to provide additional income to civil servants. The most common forms of such corruption are weakly or not at all stigmatised in Lao society, and the more extreme forms are so wideplace as to evoke reactions of despondency rather than outrage. In 2012 the Lao PDR had a Corruption Perceptions Index (CPI) score of 21, which placed it alongside Democratic Republic of Congo in joint 160th position (from 176 countries and territories).
According to the EU’s MIP 2014-2015, “there is a very limited respect of the right of association. There are considerable restrictions on the public discussion of corruption, peasant land rights and expropriation, and human rights in general. The disappearance of civil society activist Sombath Somphone in 2012 remains unexplained, and has contributed to a climate of fear within civil society. Laos has ‘mass organisations’ that carry out many typical roles of civil society but are integrated into the Party-State. The authorities have recognised the role of civil society in poverty reduction and in disaster relief. Some civil society organisations (CSOs) also provide useful expert advice. There are very few opportunities for other forms of CSO activity. The legislative and regulatory environment does not yet enable CSOs to play their full role in mobilising citizens for national development and good governance, and exercising the rights guaranteed by the constitution and the country’s international commitments. Reform of the legislative and regulatory environment for civil society has tended to increase control without significant areas of liberalisation.”
The EU MIP 2014-2015 has three focal sectors, governance (5.5 MEUR), education (10 MEUR) and nutrition (10 MEUR). There are also regular allocations of funds using the thematic programmes CSO-LA and EIDHR, as well as programmes for food security, and disaster preparation and management. The education component will focus on primary education, and will be implemented through a delegated authority to Australia, which is contributing approximately 4 times more to this sector. The governance component is currently under development and is expected to focus on public accountability, and dialogue between ministries and civil society on a wide range of development and governance issues.
As a small country with few European DPs present (EU, Germany, France and UK have permanent missions, Belgium, Finland, Ireland and Luxemburg have development cooperation activities managed from either Bangkok or Hanoi) Laos has been selected as the Asian pilot country for joint European programming from 2016 onwards. A joint analytical and strategic framework is being developed, within which each DP will develop its own programming. Some joint programming is being explored in the sector of governance, human rights and civil society.
 Save the Children Australia (2010) Primary Health Care Program Strategy, Lao PDR