National Strategies and Development Financing
http://www.unlao.org/Country%20Background/page.htm

Since 1975 the Government has endeavoured to strengthen the stability of society and has instituted national development policies on a 'step by step' basis. The basic tenet underlying the 'step by step' approach is to ensure that changes are introduced gradually, and at a rate that does not make them counterproductive or disruptive to society. The Lao PDR seeks to preserve national values and cultural heritage and to maintain a united society, whilst simultaneously taking part in regional integration and globalization. The essence of the New Economic Mechanism has been to introduce reforms aimed at the gradual transformation from a centrally planned command economy to a more market-orientated economy. Specifically, the Government has undertaken structural transformations designed to promote national integration, develop a sustainable resource base and build-up the economic, physical and social infrastructure of the country. Such steps have included a particular focus on the development of transport and communication networks.

In 2003 the Government of the Lao PDR launched its Poverty Reduction Strategy Paper, known locally as the National Growth and Poverty Eradication Strategy (NGPES) . The UN system and donor partners established working groups to support its implementation and operationalization. MDG goals and targets were localized to fit with the NGPES priorities. The strategy provides the framework under which all of the Government's future growth and poverty eradication programmes are mandated for development and implementation. Poverty Eradication Strategy commenced in 1996 when the country's sixth Party Congress defined its long-term development objective as freeing the country from the status of least developed country by 2020. Following a long consultation and drafting process, the National Assembly mandated the Government to implement NGPES in October 2003.

The NGPES has dual objectives: promote sustainable growth and alleviate poverty, particularly in the 72 poorest districts (from which 47 are priority districts) within four main sectors (Agriculture, Health, Education and Infrastructure). Although the NGPES is clearly represented in the plans of the four main sectors, an appropriate budget is often missing. Further, there is a lack of strategic and transparent monitoring mechanisms for implementation. While efforts are underway to cost sector plans and finally sequence/prioritize them in accordance with available budget envelops, further work is required to optimally implement the NGPES.

In 2005 the Government of the Lao PDR prepared its sixth five year National Socio-Economic Development Plan (2006-2010) NSEDP that will subsume the operationalization of the NGPES and thus the MDGs. Such commitment will need to be accompanied by a clear reflection of priorities in annual budget allocations. Domestic revenue is increasing however the rate of increase is slowing. Improvements to revenue collection are central to the affordability of development activities and this must be a complementary focus of development planning. External development financing remains high. Current costing analyses predict a shortfall between combined development funding and necessary expenditure, further emphasizing the importance of privatization and sound economic management.

Official Development Assistance (ODA) resources play a central role in the Lao economy, constituting a major part of the Public Investment Programme (PIP). In the financial year 2002/03, ODA amounted to 61 percent of the total amount of the PIP. The majority of donor assistance is concentrated in the economic sectors such as agriculture, forestry and communication (63 percent of ODA in 2002/03). Although only 10.3 percent and 7.8 percent of foreign funds are allocated to the education and health sectors respectively, these funds make up 72.4 percent (41.2 percent for Education and 31.2 percent for Health) of the total public expenditure in the socio-cultural sectors. Any failure to maximize the full potential of ODA represents a considerable loss of resources. The challenge for the Government and its partners is to balance distribution of ODA and secure basic social services for the people, whilst at the same time planning for a future less dependent on aid.

Efforts are currently underway to clarify further the governmental roles and responsibilities in donor coordination. These efforts will increase effective planning and delivering of assistance in a timely manner. Similar challenges also relate to ranking priorities, coordination between the provinces and districts and adequate monitoring of resource allocation. Continued efforts are required to streamline follow-up, reporting and approval processes in partnerships with donors. Donor coordination also requires attention and whilst 'Donor Working Groups' bring together various development partners, more careful and sustained collaboration is required. In particular, development partners need to deepen the dialogue and tighten the alignment between ODA and national development strategies.

Top