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Rural Poverty Reduction in Lao PDR: Drivers and Challenges

Conference on Smallholders and Poverty Alleviation in the Asia-Pacific Region October 30-31, Beijing, China. Rural Poverty Reduction in Lao PDR: Drivers and Challenges. Vongpaphane Manivong （ v.manivong@gmail.com ） , Director Thatsaka Saphanthong , Deputy Director General

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Rural Poverty Reduction in Lao PDR: Drivers and Challenges

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  1. Conference on Smallholders and Poverty Alleviation in the Asia-Pacific Region October 30-31, Beijing, China Rural Poverty Reduction in Lao PDR:Drivers and Challenges VongpaphaneManivong（v.manivong@gmail.com）, Director ThatsakaSaphanthong, Deputy Director General SammMusoke, Senior Agricultural Economist and Policy Advisor Department of Policy and Legal Affairs Ministry of Agriculture and Forestry, Lao PDR

  2. Outline • Government policy, priority and strategy • Government initiatives towards poverty reduction • Poverty status and trends • Drivers for poverty reduction • Issues and challenges • Ways towards poverty reduction in Lao PDR

  3. Government policy and priority • Lao PDR is one of the Least Developing Countries • Poverty reduction is the top priority of the Government of Lao PDR • The Government issues National Growth and Poverty Eradication Strategy (2013) • Poverty in Lao PDR is rural phenomena

  4. National Growth and Poverty Eradication Strategy (NGPES) • NGPES is at the centre of the national development agenda • Framework under which the government plans to develop and implement its initiatives to end poverty and sustain national growth • Focuses on eradicating poverty in Lao PDR by 2020, particularly in rural areas • Reflects the Government’s policy and strategy framework to achieve the country’s 2020 goal of exiting Least Developed Country status

  5. Government initiatives towards poverty reduction • Established the Lao National Committee for Rural Development and Poverty Eradication (NCRDPE) and the Poverty Reduction Fund (PRF) under the Prime Minister Office • Identify 64 Focal Areas nationwide as a learning model • Decree 201/PM (2009) Poverty and Development Criteria • Established the Village Development Fund (VDF) and later the Nayoby Bank for support rural financial services • Create a specific item for RDPE on the public investment programs and allocate a certain amount of budget for the Rural Development and Poverty Eradication (RDPE) projects • Cooperation with Development Partners, International Organizations and International Non-Government Organizations to implement the internationally financial support projects in rural areas • Involvement of Private Sectors

  6. Poverty status and trends (1/3) • Poverty continues to decline in Lao PDR • Poverty in Lao PDR declined from 33.5% to 23.2% in the past decade lifting half a million people out of poverty • The country has met the Millennium Development Goals (MDGs) target of halving extreme poverty Source: World Bank, compiling from Lao Expenditure and Consumption Surveys (LECS) 3, 4, 5

  7. Poverty status and trends (2/3) • Improvements in living conditions are evident • Households are living in better houses and significantly more of them own more assets, even among the poor • 80 percent of households were connected to electricity and 70 percent have access to an improved toilet - this is a significant increase especially in rural areas • Net enrollment in lower secondary school increased too Source: World Bank, compiling from Lao Expenditure and Consumption Surveys (LECS) 4 & 5

  8. Poverty status and trends (3/3) • The overall improvements in welfare cover large differences between regions and socio-economic groups. • Poverty is substantially higher in rural areas (28.6%) compared to in urban areas (10%). This gap increased over the past five years when poverty declined faster in urban areas. • Poverty is concentrated among minority (non-LaoTai) ethnic groups, the less educated and primarily depend on family farming. Source: World Bank, compiling from Lao Expenditure and Consumption Surveys (LECS) 4 & 5

  9. Drivers for poverty reduction (1/3) 1. Increasing labor income with education attainmentand off-farm job creation • Labor and access to land are the main assets owned by the poor In Lao PDR. • Improvements in human capital (thus augmenting labor assets) can raise labor productivity. • Improved skills and knowledge through the increase in education attainment was especially critical in facilitating the transition to non-farm incomes. • Complete primary education was associated with higher productivity in agriculture while lower secondary education facilitated the transition into non-farm activities.

  10. Drivers for poverty reduction (2/3) 2. Raising agriculture income • Increasing access to agriculture land and water was important for poverty reduction in Lao PDR. • Agriculture income growth can be driven by increases in agricultural productivity, prices or both leading to higher profitability of farming. 3. Access to road • Access to roads is important for reducing poverty in rural areas. • Rural households with access to a road had a 10 percent higher chance of exiting poverty compared to similar households without access to a road in the same regions. • Better connectivity is associated with higher market access and more off-farm opportunities.

  11. Drivers for poverty reduction (3/3) 4. Improved rural amenities and attractiveness • Availability of clean drinking water prevent diseases, increase health and productivity. • Access to energy especially electricity help rural communities raise farming production and productivity, processing facilities. • Access to health care services to decrease mobilities and increase productivity. • Good housing attracts rural communities to remain in their areas and investment to rural areas.

  12. Issues and challenges (1/3) 1. Poverty reduction rate has been slow • The rate of poverty reduction has been slow relative to the high rate of economic growth experienced in Lao PDR in recent years. • For every 1% increase in GDP per capita, poverty fell by around 0.5%, compared to growth in other ASEAN countries has resulted in a proportionately higher rate of poverty reduction. 2. Consumption levels remain low • Despite living conditions in Lao PDR is improving, consumption levels for the majority of the population are quite low compared to international standards. • Economic growth in Lao PDR has not been matched by a proportionate growth in household consumption, contributing to the small impact of growth on poverty.

  13. Issues and challenges (2/3) 3. Many household are vulnerable to falling back into poverty • Many people escaping poverty remain vulnerable to falling back into poverty as they are close to the poverty line. • About 80% of the population in 2013 live on less than $2.5 a day and face a 10% chance of falling back into poverty. • Agriculture and health shocks are the main drivers of household vulnerability. • Farming households are twice as likely to fall back into poverty compared to non-farming households. 4. Growth has been more favorable to the non-poor and urban areas • Economic growth was more beneficial to the non-poor than the poor. • This leads to inequality increase in the last decade. • Significant poverty reduction at national level does not mean the improvements are distributed equally

  14. Issues and challenges (3/3) 5. Enclave type development • Most of growth in production and income in recent decades from few enclave sectors – hydropower, mining and timber • The enclave sectors are capital intensive and generate relatively little employment • There are limited multiplier effects in local rural economies • This has been a complicating factor for all challenges mentioned above

  15. Ways towards poverty reduction in Lao PDR (1/2) • Higher poverty reduction in Lao PDR can be achieved by creating better economic opportunities for the poor and non-poor, including rural industries and services i.e. agrotourism • Creating jobs, increasing productivity, and improving the quality of jobs in the non-farm sector provides a pathway for reducing poverty • Increasing investment in education is needed to provide people with the necessary skills to obtain good jobs outside agriculture and also improve the productivity of farmers

  16. Ways towards poverty reduction in Lao PDR (2/2) • Improving the business environment will be necessary to attract investment to create non-farm jobs and raise wages without hurting competitiveness – improved amenities, streamlined business registration, improved banking and other finance services in rural areas • Strengthening the social protection system is important to ensure sustainable poverty reduction, especially putting in place social welfare programs that target the vulnerable and the chronically poor

  17. Most recent Government initiatives • Decision 65/PM (2015) identifies 91 prioritized areas for rural development and poverty eradication, 145 prioritized areas for resettlement and livelihoods, 213 prioritized areas for creating larger villages as small rural townships • Restructure of Rural Development and the Poverty Reduction Fund (PRF) to be more attached and responsible by Ministry of Agriculture and Forestry • Decree 348/PM (2017) Criteria for Poverty Graduation and Development • In an attempt to continue alleviate poverty, the Government plans to spend more than 1,375 billion LAK on poverty reduction programmes

  18. Wellbeing and development criteria (Decree 348/PM, 2017) Focus of Decree • Provides the basis for defining goals for poverty reduction • Building families, developing villages, making large villages into towns in rural areas and strengthening districts according to the Party Congress and the National Socio-Economic Development Plan Implementation of Decree • Guidelines developed and questionnaires tested with relevant sectors and support from World Bank • Plan to conduct nationwide survey • Requires adequate and sustainable budget funding Challenges • Likely to render results indicating higher poverty incidence and level • Some sectors are ready but others are not • The budget is not in place and support from development partners and donors required Opportunities • Provide a more comprehensive baseline on poverty levels and eradication efforts • Goes beyond poverty incidence at district and village levels providing data on wellbeing and development starting at household level • Common understanding and approaches across government, development partners, donors and civil society

  19. Thanks for your kind attention!

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