Industrial Development and PoliciesNeeded to Build Productive Capacity in Laos

By: Kiengkham Rasachack (Mr.)

Director of Industrial Promotion

Department of Industry and Handicraft

Ministry of Industry and Commerce, Laos

ESCAP-UNCTAD Workshop « Promoting Structural Economic Transformation in Asia-Pacific Landlocked

Developing Countries».4-7 November 2019 in Bangkok, Thailand

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Points to be discussed

1. Lao PDR brief information

2. 8th NSEDP 2016-2020

3. Economic perspective

4.Industrial development

5.Ways forward for building production capacity and industrial development

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• Land area : 236.800 km2

• Population : 7.2 millions (2019)

• Density : 31 persons/km2

• GDP 2018 : 18,120 million USD

• GDP per capacita 2,566 USD (2018)

• GDP growth rate : 6.3 % (2018)

• Capital : Vientiane

• Currency : Kip (1 USD=8,831kips)

• Language : Lao

I. Lao PDR brief information

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II. 8th NSEDP 2016-2020

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Ten-year Socio-economic Development Strategy (2016–2025)

✓ The strategy to graduate from LDC status by 2020

✓ The strategy for the transition period of LDC graduation by 2025

➢ The Ten-Year Socio-economic Development Strategy (2016–2025) consists of seven strategies as follows:

i. Strategy on quality, inclusive, stable, sustainable and green economic growth

ii. Strategy on LDC graduation by 2020 and progress on the SDGs

iii. Strategy on human development

iv. Strategy on sustainable and green environment with effective and efficient use of the natural resources

v. Strategy to enhance government’s role in social management under the effective rule of law

vi. Strategy on regional and international integration

vii. Strategy on industrialization and modernization.

II. 8th NSEDP 2016-2020

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Some of Performance Indicators, Targets set

✓ Poverty rate 10% by 2020

✓ Composite score adequate for eligibility for graduation from LDC status (as advised by UNCTAD)

✓ GNI per capita higher than US$1,574 by 2018 and at or higher than US$ 1,810 by 2021

✓ By 2020 to achieve GDP per capita at US$3,190 and GNI per capita at US$2,520 (Atlas), applied exchange rate of 8,300 kip/US$

✓ Real GDP growth not less than 7.5% pa on average ✓ Agriculture growth 3.2%, 19% of GDP

✓ Industry growth 9.3%, 32% of GDP

✓ Services growth 8.9%, 41% of GDP (excl. import tariff)

✓ By 2020, non-resource sector contribution in the GDP increase to more than the average contribution in the GDP during the 7th NSEDP

II. 8th NSEDP 2016-2020

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Implementing measures

8th NSEDP implementation

measures

Macroeconomic

Framework

GDP growth average 7.5% per

annumFinancing

Plan

Revenue and

Expenditure Manageme

nt

PRODUCTION TRANSIT

SERVICES AND

LOGISTICS

SCIENCE AND

TECHNOLOGY

APPLICATION

PROMOTION OF

SMALL AND MEDIUM-

SIZED ENTERPRISE

S

CAPACITY BUILDING

II. 8th NSEDP 2016-2020

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Source: Lao Statistic Bureau/countyeconomy.com

❑ Strengthen the production foundation by promoting potential production encourage national and local comparative advantage

❑ Promote and diversify commercial production and services to reduce natural resource dependency

▪ Encourage investment in commercial production in the non-resource sector

▪ Promote businesses related to mining, forest resource (wood) utilization, export of processed minerals to create value addition in the ecosystem

▪ Develop services of clean, beautiful and eco-tourism in parallel with the improvement of services in accommodation

▪ Promote diversified production of handicraft and art works to supply the tourist demand and create income for the people and the nation

Implementation measure for Production

7.9 8.03 7.61 7.27 7.027.7

6.3

10.2

12

13.314.4

15.9

17.118.1

0

2

4

6

8

10

12

14

16

18

20

2012 2013 2014 2015 2016 2017 2018

2.1 Annual GDP and growth rate (2012-2018)

grow rate (%) Annual (B.USD)

III. Economic perspective

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Source: Lao Statistic Bureau/countyeconomy.com

2010 2011 2012 2013 2014 2015 2016 2017

Agriculture 28.8 27.2 24.3 23.5 22.2 23.7 17.23 16.2

Industry 28 30.6 35 33.2 33.1 32.7 28.76 30.91

Service 37.2 36.4 34.9 37.9 35.2 47.2 42.46 41.53

28.827.2

24.3 23.5 22.2 23.7

17.23 16.2

2830.6

3533.2 33.1 32.7

28.7630.91

37.2 36.4 34.937.9

35.2

47.2

42.46 41.53

0

5

10

15

20

25

30

35

40

45

50

2.2 Sectors contribution to GDP (2010-2017) %

Agriculture Industry Service

III. Economic perspective (cont.)

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Source: Lao Statistic Bureau

2763.5

3399.4

3998.8

4833.2

5440.9

6246

7456.4

6671.2

79098252

0

2000

4000

6000

8000

10000

12000

14000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Contribution by sectors 2006-2015 (T. Kip)

Mining and Quarrying Manufacturing Electricity and Water Supply Cocstruction

IV. Industrial development

1. Industrial contribution by sub-sectors

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food, 11

beverages, 22

textiles, 4

wearing apparels, 11

rubber and plastic, 5

non-metallic mineral, 21

fabricated metal, 4

furniture, wood&products, 9

Others, 0

Key subsectors contributing 88.4% manufacturing value-added (VA)

Source: DIH & UNIDO (2016), National Manufacturing Establishment Survey

2. Structural transformation and manufacturing

IV. Industrial development

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IV. Industrial development

Number of manufacturing establishment by size VA by size of establishment

Large

5.43%Medium

5.96%

Micro

37.60%

Small

51.01%

Large

61.46%Medium

15.70%

Small

15.16%

Micro

7.67%

Source: DIH & UNIDO (2016), National Manufacturing Establishment Survey

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3. Competitive Industrial Performance Index

IV. Industrial development

CIP 2017China Thailand

Viet Nam

Cambodia

Myanmar Laos

CIP rank 3 27 43 89 90 103

CIP quintile Top Top

Upper Middle Middle Middle

Lower Middle

Manufacturing Value Added per capita 2253.51 1704.27 308.92 193.77 291.98 193.1

Medium- and High-tech manufacturing VA share in in total manufacturing VA 0.41 0.41 0.39 0 0.08 0.04

Medium- and High-tech manufactured exports share in total manufactured exports 0.6 0.64 0.51 0.1 0.2 0.22

Manufacturing VA share in total GDP 0.31 0.28 0.17 0.17 0.23 0.11

Manufactured exports share in total exports 0.96 0.87 0.86 0.93 0.44 0.63

Source: https://stat.unido.org/database/

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V. Ways forward for building production capacity and industrial development

• Good governance• Leadership

• National direction

• Macroeconomic and financial strategies• Monetary policy/strategies

• Financial regulations

• Supports

International support is needed

• Social policy/strategy:• Health and education

• Environmental protection

• Industrial and sectorial strategies:• Agriculture

• Mining and energy

• Industry

• Trade and investment

• Infrastructure and logistics

Building production capacity needs integrated development plans:

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V. Ways forward for building production capacity and industrial development

Potential Industries for Laos

Promoting balanced development & local private development

(SMEs)

- Agriculture

- Agro/food processing

- Handicraft

- Tourism

Promoting labor intensive sector for employment

- Garment (Uniform, fast

fashion supply chain)

- Other labor intensive

(such as light products,

copper wire, casting?

Promoting higher value added sector for accelerate economic

growth

- Electronic/electric

machinery

- Transport equipment

- Processed mining products

Promoting supporting industries

- Energy & hydro-power

- Logistic services

& transportation

Supporting import-substitute industries

- Fertilizer

- Animal feed products

- Cement & construction materials

- Others

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V. Ways forward for building production capacity and industrial developmentIndustrial and Handicraft Development Plan (2019-2020)

Agro-processing industry

Textiles and wearing apparel industry

Construction materials industry

Supporting industries

(printing and packaging)

o Upgrade manufacturing infrastructure development

o Create enabling business environment

o Promote linkages with regional production networks

Work programmes4 Target subsectors

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V. Ways forward for building production capacity and industrial developmentManufacturing Infrastructure Development

Vientiane Industrial and

Trade Area (VITA)

Savan-Seno Special Economic

Zone

SaysethaDevelopment

Zone

Pakse-Japan SME special Economic

Zone

Thank you very much

Department of Industry and Handicraft

Ministry of Industry and Commerce

Website: www.moic.gov.la

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