The chief aims of this paper are to understanding foremost the Laos authorities policy toward Official Development Assistant related to economic state of affairs in Laos, secondly to understanding the current state of affairs on ODA execution, eventually decision.

Laos was declared a People ‘s Democratic Republic in 1975. It is a land-locked state holding a multiethnic and multi-lingual society, and a population denseness of 25 persons/square kilometer. There are 49 recognized cultural sub-groups talking varied idioms and linguistic communications and keeping its cultural, spiritual and lingual individuality. Most Lao people earn their supports from land and natural resources. Lao PDR is a low-income state with a population of 6.5 million people and an mean income of 906 USD per capita in 2008. It ranks the lowest of the South-East Asiatic and Pacific states in footings of the UN Human Development Index ( 131st out of 182 states )[ 1 ]. The population of the state is really diverse, with 49 different cultural groups, and poorness decrease remains the chief challenge peculiarly in rural and unaccessible, cragged countries where cultural minorities are concentrated. Lao PDR is extremely dependent on development assistance, with ODA financess doing up more than half of the province budget.

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Therefore ODA financess are of import beginnings of investing finance for low income developing states like Laos. As Laos is long facing twin shortages, trade and budget shortages, foreign beginnings such as FDI ( Foreign Direct Investment ) and ODA ( Official Development Assistant ) are really of import for economic development in Laos. On the other manus, monolithic foreign capital influxs besides may hold inauspicious economic effects. This may go on if, foremost, capital influxs are directed to some particular sector like excavation, and secondly, an addition in authorities budget grosss due to a sudden addition of production in the particular sector. This syndrome is called “ Dutch Disease ”[ 2 ]( Gregory, 1976 ; Corden and Neary, 1982 ) . In general with planned and satisfactory with good end products and results, the undertakings have greatly helped develop socio-economic development in the Lao PDR. Specifically, Lao PDR has achieved the rapid economic growing with an one-year GDP growing rate of 7.6 % per twelvemonth, GDP per capita in the FY 2008-09 of US $ 906, low rising prices rate and entire investing making an norm of 28.8 % of the GDP per twelvemonth[ 3 ]. Even with great part of ODA undertakings and accomplishments made, there are still a figure of restraints and jobs impacting undertaking execution. In order to guarantee the effectivity of ODA coordination and direction and guarantee the efficient usage of financess in Laos, taking at speed uping the accomplishment of the in agreement undertakings ‘ development consequences, exciting and greatly lending to the socio-economic development, Therefore, it of import to surveies on effectivity of ODA undertakings in Laos.

General information and Government policies

The economic reforms that began in 1986 with the New Economic Mechanism ( NEM ) have bit by bit shifted the economic system from socialist cardinal planning towards greater market-orientation. Ongoing economic reforms aim to further liberalise the economic system, to make an enabling environment for the private sector and to excite trade and investing. Early reforms under the NEM included monetary value liberalisation and exchange-rate fusion, the remotion of the Government ‘s monopoly on trade and the enlargement of foreign and inter-provincial trade. Private farms were encouraged alternatively of collectives and private houses were allowed to merchandise. Structural reforms continued into the 1990s with limited restructuring of the banking sector and other State-Owned Enterprises ( SOEs ) . The Asiatic economic crisis of 1997-1998 was a terrible blow to the Laotian economic system. Growth fell, rising prices rose and pecuniary and financial direction broke down. By 2001, nevertheless, stableness had been restored and rising prices was back under control. In the period since so there has been some acceleration in the rate of reforms, while the stabilisation programme has remained house. Attempts are presently being made to beef up public outgo direction, better banking and the proviso of rural fiscal services, continue the reform of SOEs, and go on betterments in forestry, trade and the publicity of the private sector.

After release of the state in 1975, the authorities of Lao PDR has paid high attending to socio-economic development so as to carry through ends and aims of authorities, viz. to speed up the betterment of the public assistance of the people, achieve the Millennium Development Goals ( MDG ) by 2015 and to liberate the state from the position of least-developed state ( LDC ) by 2020[ 4 ]. To accomplish these, the authorities of Laos has doing great attempts in socio-economic development by mobilising financess from authorities budgets and Development Partners through Official Development Assistance ( ODA ) in the signifiers of grant and soft loans to implement assorted undertakings and plans countrywide by chiefly concentrating on four prioritized countries, viz. Education, Agriculture & A ; Forestry, Health and Transport and Public Work and other back uping sectors as indicated in National Growth and Poverty Eradication Strategy ( NGPES ) .

It is reported that about 70 % of authorities budget for the National Socio-Economic Development in Laos is from Official Development Assistance ( ODA ) , whereas merely 30 % is from its local fund. In this respects, ODA plays a major function in the development of the Lao PDR by supplying important part to public investing and to the National Budget. In add-on, ODA is besides important and required as a chief foreign capital influx to the state in both grants and soft loans.

The ODA is playing important function in developing in Laos, it of import for societal economic development and indirect back uping the investing clime, which it described in the 6th Five-Year Socio-Economic Development Plan ( 2006-2010 ) as “ The investing in development strategies is a major make up one’s minding factor for the economic growing public presentation including employment coevals and service bringing to cut down poorness. Therefore, mobilisation of financess to implement the Plan is really of import. In the five-year period, it is expected that on norm an one-year part of about USD 357 million in ODA would be required. The foreign direct investing or FDI is expected to average at approximately USD 600 million per twelvemonth. The mobilisation of domestic nest eggs is expected to make about 51.3 per centum ; and the staying fund of 48.7 per centum will be straight invested by the local enterprisers ( people ) . ”[ 5 ]

Table 1




As per centum of GDP

( 5-Year Average )

Entire investing

73,900 billion Kip

100 %

32 %

Public investing

31.25 %

10 %

Government budget

23.1 billion Kip


USD 1,785 million

Private investing

50.8 billion Kip

68.75 %

22 %


USD 3,000 million

The exchange rate in November 2006 is USD 1= 10,000 Kip.

Beginning: PUBLIC INVESTMENT PROGRAMME ( 2006-2010 )

Laos ‘s authorities, by accommodating the Paris Declaration through The Vientiane Declaration on Aid Effectiveness which was signed by the authorities and the developing spouses in November 2006, the Vientiane Declaration aims to better the effectivity of assistance based on the five cardinal rules such as:




Pull offing for the consequences

Common answerability

Figure 1

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The Government of Lao PDR and Development Partners had been developed The Country Action Plan ( CAP ) . The CAP focuses on the ends, activities and schemes used to come on development in Lao and are based on the understandings and rules of the Vientiane Declaration.

The Vientiane Declaration and Country Action Plan ( VDCAP ) are monitored through:

1. 8 Sector Working Groups ( Health, Macroeconomic Issues and Private Sector Development, Education, Infrastructure, Governance, Drug Prevention, Mine Action, Agriculture, Rural Development and Natural Resources )

2. VD/CAP Review Meeting

3. Round Table Meeting/Round Table Implementation Meeting

Round Table Procedure

The Round Table Process serves as the primary platform for substantial duologue between the authorities and its development spouses on cardinal development issues. The RTP is led by the authorities and co-chaired by the UNDP, and common answerability of all stakeholders helps guarantee assistance effectivity. The Round Table Process has facilitated the preparation of the 7th NSEDP Plan with full engagement by, and audience with, Development Partners. It is the first clip in the history of the Lao PDR that Development Partners have been involved in explicating the strategic model for the development of the Lao PDR to this extent

Lao PDR exits Least Developed Country position by 2020.

National Development Strategies and Budget Planning

The Socio-Economic Development Strategy ( 2001-10 ) , the five-year National Socio-Economic Development Plan, the National Budget and the Public Investment Program

MDGs 2000

Eight ends to be achieved by 2015 that respond to the universes chief development challenges, Agreed by 192 states across the universe, including Lao PDR

Vientiane Declaration on Aid Effectiveness 2006

Based on the 2005 Paris Declaration on Aid Effectiveness with a peculiar focal point on the Lao PDR-specific issues

Agreed rules steering assistance effectives in the Lao PDR: Ownership ; Alignment ; Harmonization ; Pull offing for Results and Mutual Accountability

Round Table Meetings

( Every three old ages )

Support pledges are made, every bit good as reexamining plans/strategies/ plans of authorities of Laos and Development Partners in line with development and planning schemes.

Round Table Implementation Meetings

( Every twelvemonth )

Reviews accomplishments and recommends accommodations and farther actions

Country Action Plan 2007

Focuss on the ends and schemes to come on development in Laos

8 Sectors Working Groups

Common accomplishments on the execution of the Sixth Five-Year Socio-Economic Development Plan

aˆ? Political stableness, peace and security were maintained.

aˆ? The economic system expanded continuously and at 7.6 % GDP growing, exceeded the original mark of 7.5 % ) . The macro-economic stableness has been maintained. The state was able to efficaciously safeguard itself from the planetary fiscal crisis. The economic construction is traveling towards industrialisation and modernisation. Production for commercial intents is progressively happening following the market mechanism.

aˆ? Poverty degrees have decreased. The living conditions of Lao people have improved. To a certain extent, societal jobs have every bit good been solved.

aˆ? Because of the correct and stable foreign policy, friendly relationships with other states and international organisations have been maintained, which in bend heightening economic cooperation and international integrating.

The ADB ‘s undertaking life rhythm

Figure 2

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Country Partnership Strategy ( CPS ) , The CPS with the alliance of state ‘s development program and poorness decrease ends

Preparation processs which are: Project Identification/Preparation and Project Examination, which help the state to fix and happen out the possibility of the undertaking ; investigative mission and so through an appraisal mission, eventually describe the consequence of the appraisal to ADB head-quarter

Appraisal/Approval, there are 4 processs as: Appraisal, Loan Negotiation, Board Approval, Loan Signing, and Loan Effectiveness

Execution: ADB-assisted undertakings are implemented by the authorities bureau harmonizing to the agreed agenda and processs, therefore the readying would take around 6-12 months as minimal requirement period for enrolling advisers, fixing stamp paperss and elaborate designs, securing equipment and selecting contractors for building.

Evaluations: after all the processs are completed, by the appraisal to happen outcome and impact of the undertaking to mensurate the efficiency and effectivity of the undertaking.

Analyses the troubles on execution ODA ‘s fund:

In general the ODA fund had been implemented and utilised rather good but there are some restraint and failing such as:

The blessing period for the undertaking to be active is still excessively long, and some troubles in process because it has to affect many Ministries

Overlaping in responsibilities between line Ministries for undertaking execution

The failing of Monitoring and Evaluation System, deficiency of understanding from the local authorities, which has merely entering many informations but can non measuring for the consequence, and most of the undertakings with hard in utilizing package which different undertakings utilizing different soft ware, therefore it is non the same formations

The procurement process, with deficiency of apprehension of the authorities ‘s ordinances and hard to implementing the developing spouses regulations. Over all will consequence to the undertaking execution

There are spreads of Lao authorities ordinance, which need to rechecking to avoiding corruptness jobs

The undertaking reappraisal and fact happening mission in rural country which conducted by developing spouses and Lao authorities sometime has troubles due to climate status particularly in raining season

The proposed of utilizing fund still non in proper manner toward the public assistance of the people

Lack of capacity edifice and qualities human capital to implementing.

Government ‘s policies and development spouse ‘s policies need to be align to each other for better consequence in implementing undertaking


The ODA fund is playing of import function in developing state like Laos, the authorities of Lao PDR has paid high attending to socio-economic development so as to carry through ends and aims of authorities, viz. to speed up the betterment of the public assistance of the people, achieve the Millennium Development Goals ( MDG ) by 2015 and to liberate the state from the position of least-developed state ( LDC ) by 2020. Even with great part of ODA undertakings and accomplishments made, there are still a figure of restraints and jobs impacting undertaking execution. In order to guarantee the effectivity of ODA coordination and direction and guarantee the efficient usage of financess in Laos, the authorities and the developing spouses should paid more attending in execution to transport out the positive result and impact through the state.