Small, landlocked, and resource-rich Lao PDR has been quietly maintaining its place as one of East Asia and Pacific’s fastest growing economies for nearly 20 years. Since 2000, the average economic growth rate of the country has been nearly 8 percent. This growth has propelled Lao PDR through many positive milestones, including meeting the criteria of Least Developed Country graduation for the first time this year. Meanwhile, poverty declined from 34 percent in 2003, to 23 percent according to most recent data, and incomes for many have risen.
Now, in the wake of these impressive and positive developments, the country is reaching a crossroads. Historically, economic growth has been driven by resource-rich sectors with limited job creation. Despite the reduction in poverty, inequality has risen, even though, with a Gini index of about 36.4, the level of inequality is still comparable to other countries in the Mekong region. The pattern of growth, in short, has not been as inclusive as it could have been, while putting natural resources under pressure. For instance, forest cover is at 56%, down from 70% a generation ago.
Moving forward, there is a development path with potential to lead to greener and more sustainable growth. Green growth means reducing dangerous air and water pollution that harm human health, ensuring sustainable expansion of the power sector, managing river basins, making agriculture and infrastructure more resilient, and better protecting natural heritage, including Lao PDR’s rich and globally important wildlife. Taking this path will open different growth opportunities, those that depend on healthy ecosystems, such as ecotourism, forest value chains, and renewable energy.
Changing course is also cost effective. Annual expected losses from natural disasters are estimated between 3.3 percent and 4.1 percent of GDP and are exacerbated by changing weather patterns and poor natural resource management. Impacts of climate change will affect key economic sectors like agriculture, freshwater fisheries, forestry, and hydropower.
But changing course is not only about protecting trees and wildlife or boosting the economy. Natural capital is inseparable from human capital. Sustainable natural resource management can have a major human impact, especially in Lao PDR, where over 50 percent of the country’s wealth is natural capital, and 70 percent of the population depend on forest resources, soil, wetlands, and fish for income and nutrition. Many of the poorest live among forests and have the least access to basic services or resilience to natural disasters. Poor people are often highly exposed to pollution, due to their reliance on wood and charcoal for cooking, limited access to safe drinking water and inadequate sanitation, and living closer to contaminated soil and surface water, as well as flood prone areas.
The good news is that the Government of Lao PDR is now guiding the country to take initial steps along the path of green growth. Key policy makers are recognizing the costs of unsustainable growth. The Government has been implementing an ambitious reform program. One action being taken is the preparation of a National Green Growth Strategy, in line with an ASEAN decision taken in 2014. In 2017, a new water law was passed that sets the legal framework for river basin planning and management and helps make energy production and other development activities more sustainable. Lao PDR is expected to declare its first national park before the end of the year. New approved reforms on pesticides management and Strategic Environmental Assessment, plus incoming reforms in such areas as Environmental and Social Impact Assessment, pollution and chemicals management, and more climate-resilient infrastructure, will set the stage for the Lao economy to take a greener, more resilient path.
It’s important to many of us working across various sectors in the World Bank that we actively support these reforms to help Lao PDR transition to clean, efficient, and resilient growth, which is needed during a time of rapid climate change. We are taking an active part in this effort both through our Green Growth Development Policy Operation series, and through all of our engagements in the country, from Disaster Risk Management, to Agricultural Competitiveness, and many others, which seek to support climate sensitive, sustainable and green development solutions. Two notable examples include our projects providing support to protected areas management and conservation, and participatory sustainable forest management.
With a healthier environment and healthier citizens, we look forward to seeing the development potential that green growth can nurture in Lao PDR.