AusAID-Laos Partnership

Over the past three decades, Laos has seen its economy grow and social conditions improve. The Southeast Asian country’s human development index value rose 57 percent from 0.346 in 1985 to 0.543 in 2012. In the same period, life expectancy increased by 16 years and gross national income per capita more than tripled. But despite this progress — and the country’s transition into a market economy — Laos remains one of the most poverty-stricken countries in the Mekong region. Wide income disparities between urban and rural areas remain a problem, and about one-third of the population lives below $1.25 a day. More than 80 percent of Laotians live in remote rural areas in the southeast, close to Vietnam, where access to all-season roads, basic services and markets are limited. The government of Laos has shown low institutional and financial capacity to provide basic services in rural areas. Environmental shocks like droughts and floods are also common in many rural areas. In addition, without the continuous effort to combat corruption and reinforce governance, Laos will fail to maximize development for future domestic and regional growth. Recent trends indicate that Laos will only be able to achieve one Millennium Development Goal: reduce child mortality by 2015. Strides have been made toward reducing the gender gap in education, but women in rural ethnic minorities continue to be at a disadvantage. Food insecurity and malnutrition also greatly affect 13 percent of the rural population in Laos. Half of the children under 5 years old are severely malnourished and almost 40 percent of the children experience stunted growth. Moreover, about one-third of Laos’ land area still needs to be cleared of mines and other unexploded ordnances. Not only are these weapons dangerous to the general population, they also prevent growth in the agricultural sector. About half of the affected land could potentially be arable. Although there has been slow but steady progress in clearing the land, about $1.6 billion is needed to demine priority areas and completely removing all of these unexploded weapons is estimated to take more than 100 years. Funding levels The Australian Agency for International Development is one of Laos’ biggest bilateral donors. From 2001 to 2013, the Australian government allocated $407.6 million Australian dollars ($361.4 million) in official development assistance to Laos, the bulk of which is handled by AusAID. For fiscal year 2013-14, Australia is projected to disburse AU$62.4 million in development aid to Laos. AusAID is still expected to handle the majority of funds, and only AU$3.4 million is likely to be coursed through other government departments. Click on the image to view a larger version Laos has relied heavily on donor support, with ODA accounting for about 6 percent of the country’s gross national income. But in recent years, significant growth in the resources sector has enabled the government to tap its coffers to fund development activities. AusAID works in close coordination with multilateral agencies, other donors, the private sector, civil society and Australian volunteers. Among key multilateral agency partners are the World Bank, Asian Development Bank, World Food Program, UNICEF and the European Union while Australia’s bilateral partners include Germany, Japan, South Korea and Switzerland. Depending on the performance of Laos’ government, Australia could increase direct budget support to the Southeast Asian country. Funding priorities Guided by the Australia-Laos Development Cooperation Strategy 2009-2015, AusAID’s work in Laos is closely aligned with the Asian government’s priorities: human-development driven growth, competitiveness, trade and regional integration, social development and focused poverty reduction interventions, and good governance. The aid agency’s key areas of support are: - Humanitarian disaster response. - Promoting opportunities for all. - Sustainable economic development. - Effective governance. - Saving lives. Click on the image to view a larger version More specifically, Australia works in areas critical to Laos’ long-term development: education, inclusive growth through trade and investment reform, and rural development. Some of Australia’s key initiatives in Laos are: - Laos-Australia Rural Livelihoods Program (AU$43 million, 2012-2016), which aims to improve the economic security of poor rural people in Laos through a range of initiatives, including programs to clear arable land of unexploded ordnance, provide short-term cash transfers and build financial services. - Education for All-Fast Track Initiative in Laos (AU$21 million, 2011-2013), which aims to build schools, train teachers, provide learning materials and support improvements to the management of the education system. - Public Financial Management Strengthening Program (AU$13.4 million, 2008-2012), which aims to provide advisory and support services through a multidonor trust fund to improve policy consistency, efficiency, transparency and accountability in public expenditure management. Devex analysis Because of weak coordination channels and minimal oversight, donors’ aid activities have yet to have a sustainable impact on Laos. Many donors operate standalone projects in different sectors, yet very few coordinate their work to minimize duplication of effort and maximize benefits to Laotians. Some programs are also managed remotely, which complicates donor coordination further. Other obstacles in delivering aid to Laos include excessive parallel aid-delivery systems instead of government systems, insufficient coordination and programming, and lack of performance assessment. As such, it is crucial for donors, including Australia, to improve their coordination channels to ensure effective and efficient aid delivery in Laos. Because of Laos’ strategic location in Southeast Asia, many Australian companies have invested in the country’s mining sector, which has provided a wealth of business and employment opportunities. Significant poverty reduction and development, however, will depend mainly on Laos’ commitment and ability to foster sustainable growth in the private sector. Contact: Australian Embassy in Laos Tel.: (856-21) 353-800 Fax: (856-21) 353-801 Join the Devex community and gain access to more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.