1. 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 E-mail: leeberleebouapao@yahoo.com

2. 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

3. Lao National Socio-Economic Development Policy/Strategy and Economic Integration Policy Framework

4. Process of Economic Reforms  1975-1986: 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

5. Key Targets of NSEDP/S:  Vision 2020  Target: To graduate from the status of LDC by 2020  VII Five Year NSEDP(2011-2015)  To achieve MDG’s  To join AEC by 2015  GDP growth: more than 8% per year The National Social-Economic Development Policy/Strategy

6. Industrialization Strategy:  Electricity Industry  Agro-processing Industry  Mining Industry  Tourism Industry  Construction Material Production Industry The National Social-Economic Development Policy/Strategy(Cont.)

7. Land-Linked Strategy Connectivity The National Social-Economic Development Policy/Strategy(Cont.)

8. 8

9. 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

10. Recent Macro Economic Performance

11. GDP growth (%) Source: Lao Bureau Statistics

12. GDP Growth by Sectors (%) Source: Lao Bureau Statistics

13. Contributions and GDP growth (%) Source: Lao Bureau Statistics

15. GDP per capita in US$

16. Inflation (%) Source: Lao Bureau Statistics

17. The Current Status of the Lao Foreign Trade

18. Main Exporting Markets FY 1999- 2004 FY 2004- 2009 FY 2009- 2012 1Thailand46%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%

19. Top 9 Export Items from Laos Unit: million USD (share to total) No.Export Items FY1999-2004 FY2004-2009 FY2009-2012 1 Minerals 61.77 (16%) 495.57 (50%) 1,048.52 (59%) 2 Electricity 94.93 (25%) 127.93 (13%) 289.00 (16%) 3 Garment 96.14 (26%) 152.53 (16%) 167.30 (9%) 4 Agriculture and live animals 82.49 ( 22%) 88.51 (9%) 119.24 (7%) 5 Other Industrial goods 10.77 (3%) 69.57 (7%) 113.62 (6%) 6 Wood & wood products 73.13 (19%) 69.32 (7%) 37.11 (2%) 7 Diamond 0 18.83 (2%) 12.74 (1%) 8 Forestry Products 8.67 (2%) 5.09 (1%) 1.01 (0%) 9 Handicraft 5.23 (1%) 1.03 (0%) 0.40 (0%)

20. Main Import Markets FY 1999- 2004 FY 2004- 2009 FY 2009- 2012 1Thailand26%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%

21. Top 10 Import Items to Laos Unit: million USD (share to total) No.Import Items FY1999-2004 FY2004-2009 FY2009-2012 1 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%)

22. Top 10 Import Items to Laos( FY 2009-2010)

23. Top 9 Export from Laos (FY 2009-2010)

24. Foreign Direct Investment (Mill USD)

25. FDI by Sector (%)

26. FDI by Country (%)

27. FDI by Sectors (Million US Dollars) Source: Ministry of Planning and investment Sector 2001200220032004200520062007200820092010201120122013 Electricity Generation 3601,2958661,0651,777361640218457251,2321,086 Mining 92245969412181241,0552691,7574181,009 Hotel & Restaurant 110491213325829441262448110 Construction 114331213106727812570100 Agriculture 19141951177411510229055160912670 Banking 50010500328412106070 Industry & Handicraft 5608135154591847829032536115 Services 1017601721123134157199551234160 Wood Industry 356960254377244150 Telecom 0130270157211414510 Trading 3814019886141317753200 Public Health 00000000085000 Garment 4433046511800 Consultancy 11120224714700 Education 0000000005200 Total 4211,4424718191,2452,7001,1371,2162,3222,4993,5201,8572,450

28. FDI by Countries (Million US Dollars) Country2001200220032004200520062007200820092010201120122013 Vietnam3796343261156149 1,42 1658 1,65 3274158 China13631202858423496107933474546722 1,03 3 Thailand1696574516559337590944155171260 Malaysia257133353011522398 Cambodia20000000800083 Japan1035440261412141560 Taiwan01041714110018 South Korea101314 1016482607570272025 England0000151101602804 Russia013101113324231 Others183711033439541663227693113038395 Total50133426509966233797295634491299255714482115 Source: Ministry of Planning and investment

29. 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 (%)46 39.1 33.5 27.6 23.2 Poverty Incidences and Poverty Reduction

30. Key Poverty Reduction Policy Rural Development Policy:  Irrigation development  Road infrastructure development  Primary school buildings  Primary health care services

31. Opportunities and Challenges For Economic Integration ( AEC )

32.  OPPORTUNITIES

34. 34

35. 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

36.  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. )

37.  CHALLENGES

38. 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 )

39. 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

40. Thank You for Your Attention Q & A