Between History and the Future: Ensuring Successful Development By Minh H. Pham

Nov 5, 2012

It is an historic moment for Lao PDR as leaders from at least 46 nations, the European Commission and the ASEAN Secretariat gather in Vientiane today for the 9th Asia-Europe Meeting (ASEM) on development issues of common interest. In hosting this summit for two of the world’s largest trading blocs, the country and its own soaring development trajectory will be in the spotlight.  

The role is a fitting one. Already Lao PDR has recorded impressive economic growth: In less than 10 years, Gross Domestic Production (GDP) doubled twice from $2.02 billion in 2003 to $4.22 billion in 2007 and again to $8.29 billion by 2011. In the last five years alone, Gross National Income (GNI) has also nearly doubled, to $7.1 billion in nominal terms.  Foreign Direct Investment in the country has seen a similar dramatic increase, from $33 billion in 2000 to $318 billion by 2009. In retrospect, it can be said that Lao PDR has embarked on a growth path similar to Asian “tiger” economies such as Japan and the Republic of Korea, where GDP also doubled every 10 years during their peak growth periods.

Lao PDR is actively integrated into the regional economy via ASEAN and the Greater Mekong sub-regional economic cooperation mechanism. In another sign of mounting economic success, in January 2013 it will realize a longstanding ambition and become a member of the World Trade Organization (WTO).       

All these are remarkable achievements. Moreover, national progress on human development has been equally significant, with Lao PDR considered a “top mover” in UNDP’s Human Development Index between 1970 and 2010. Poverty has steadily declined, from 46 percent in 1992 to 27.6 percent in 2008. Life expectancy has increased by some 20 years, to 67 years in 2011. Adult literacy, only 60 percent some 15 years ago, now stands at 81.6 percent according to the latest data.   

However, all this is only the starting point of a much longer journey. To sustain the considerable national development achievements thus far and secure success on this new journey as well, it will be important to keep in mind a number of upcoming opportunities.

Most immediately, a key opportunity exists to complete the remaining agenda of the Millennium Development Goals (MDGs) after 2015. While the country will halve extreme poverty and hunger by that time, it is important to ensure that those who will still be struggling to attain sustainable, dignified livelihoods and food security – the “other half,” as it were – are not forgotten.

Second, addressing inequalities will be central to this vision. Balanced development and broad-based growth will require strong efforts to close the persistent gaps in development outcomes between rich and poor, between urban and rural dwellers, between different regions in the country, and between women and men.  Likewise, ensuring environmental sustainability and addressing vulnerability to natural disasters will be central to a sustainable and better future. 

Third, sustaining the growth momentum will be vital as well. Here the opportunity exists to use the national vision of graduation from Least Developed Country (LDC) status by 2020 as a platform for another economic takeoff and diversification. This can serve not only as a manifestation of strong achievements in lifting living standards and human development, but also encouragement for the nation to continue toward a development path less dependent on foreign assistance.

Fostering a robust private sector –particularly the small and medium enterprises- and a strong business environment that stresses transparency, accountability and job creation will prove crucial in this regard. A second generation of FDI contracts can also improve the quality of investment by ensuring that environmental protection is given due prominence in the quest for economic growth. 

Investing in human resource development represents a further key dimension in keeping the growth momentum going. With half the population younger than age 20, the country must capitalize on the huge potential “demographic dividend” and give special attention to nurturing its youth.

Fourth, mobilize world opinions and support to clear the unexploded ordnance (UXO) and help its victims. While UXO is a legacy of the last conflict, it remains a living development challenge for Laos. UXO action often is a prerequisite and an important ‘multiplier’ for improvements in overall rural development. Clearing nine years of intensive bombing is a gargantuan task. The country and its people should not have to wait for another century until the last ‘bombie’ is removed from their soil. Clearing UXO is about creating opportunities for the future.

A fifth opportunity exists in the realm of managing public finance. While Official Development Assistance (ODA) has been on the rise over the past two decades, its percentage in GNI has steadily declined owing to the significant progress in incomes as well as in increasing investment. In view of the transition from grants to more concessional loans after LDC graduation, and of future borrowing, a strengthened public financial management system can ensure macroeconomic sustainability, as can monitoring of debt distress levels. The Government has made an excellent start through setting up of the State Accumulation Fund as a buffer against future shocks.

Lastly, a sixth opportunity exists to deepen economic integration through not only accession to the WTO but also to regional groupings such as ASEAN+3, which may be poised to build an “East Asian Community”. Lao PDR stands in a strategic position in the region, with both the north-south economic corridor that links Thailand and China and the west-east economic corridor that links Myanmar to Viet Nam crossing its borders. Proactive preparation of the private sector to fully embrace this opportunity, as well as stringent alignment of domestic legislation to international commitments, will lead to more rapid growth and more openness.

In all, it is an exciting time for development in Lao PDR, and not only because of the ASEM summit. If managed well, the country can make history again.

Minh H. Pham is the Resident Coordinator of the United Nations in Lao PDR and the Resident Representative of the United Nations Development Programme.

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