Lao People's Democratic Republic

Laos, known historically as the Kingdom of Lan Xang (“land of a million elephants”), boasts a rich cultural heritage and breathtaking natural beauty. Though a communist one-party state, Laos has seen decades of relative peace and political stability following past conflicts. French colonisation in the early 20th century left a lasting mark on Lao infrastructure and development.

Once considered the least developed and most mysterious of the three former states of French Indochina, Laos adopted significant economic and political reforms in the late 1980s. Since 1989, the country has opened up to free trade and foreign investment, with the hammer and sickle disappearing from the national flag for good in 1991. Laos seems keen to maintain political stability and further spur economic growth to catch up with its powerful neighbours.

A landlocked country, Laos spans more than 1 000 km from north to south in the heart of the Mekong sub-region and has an area of 236 800 km2 (barely larger than Great Britain). The south and centre of the country are bordered to the east by the Annamite Mountain range. Almost in parallel, the Mekong, the country’s major communication axis, defines most of the territory to the west over 1 865 km. The Mekong Valley and its fertile plains are the focus for almost all of Laos’ rice fields and are the country’s leading agricultural region. At its narrowest point, in the central province of Khammouane, Laos is no more than 120 km wide.

The country is home to over 7.5 million inhabitants, with a remarkable diversity of some 50 ethnic groups that can be categorised into four main groups: Lao-Tai, Mon-Khmer, Hmong-Mien and Chinese-Tibetan. Laos also has one of the youngest populations in the region, with potential for a substantial demographic dividend in the years to come.

According to the Lao PDR Poverty Profile in 2019, almost a fifth of Lao people are still living on incomes below the national poverty rate of  1 USD per day, even though the country is rich in natural resources, including mineral (tin, gold, copper, zinc, bauxite, etc.) and energy resources. Thanks to its powerful water network, Laos produces and mainly exports electricity to Thailand.

In 2022, Laos generated around 264.50 million USD in the tourism sector alone. This corresponds to 1.74% of it’s the GDP and approximately 1% of all international tourism receipts in Southeast Asia. Prior to the COVID-19 pandemic, the tourism sector represented the country’s third biggest earner of export revenue behind mining and hydropower. International tourism arrivals reached a peak in 2019 as 4.79 million visitors came to Laos and spent 934 million USD. This marked a key contribution to the Lao economy, accounting for 10.4% of GDP and the employment of 300 000 people in the country. 2024, with the Visit Laos campaign, is expected to reach again pre-pandemic numbers in the tourism sector.

Lao PDR has lately enjoyed consistent economic growth of between 6-8% over the last decade, although the COVID-19 pandemic has negatively affected this trend. In 2021, Laos posted a growth rate of 2.5% driven by a recovery in services. According to World Bank forecasts, the average annual growth will be around 3.7% in 2023 and 4.0% in 2024. Gross national income per capita rose from 1 970 USD in 2015 to over 2 500 USD in 2021, although current inflation rates of over 25% year on year have led many people on the brink of poverty again.

Despite the progress made to meet the Sustainable Development Goals (SDGs), Lao PDR still has much work to do in some areas, especially in health and nutrition: 33% of children under the age of five suffer from stunting, and 21% are seriously underweight. Although Lao PDR has greatly reduced maternal death rates over the past decades, the number is still high with 185 maternal deaths per 100 000 live births, according to UN estimates.

In February 2021 Lao PDR was recommended to graduate from Least Developed Country status with an extended preparatory period until 2026. The country hopes to achieve the lower middle-income status if they manage to maintain steady economic growth, mainly by exporting its natural resources to neighbouring countries and by expanding its tourism sector.

Laos stands at a crossroads. Its abundant natural resources, coupled with a young and growing population, offer significant economic potential. However, the country must navigate challenges like income inequality and environmental protection. By addressing these issues and fostering sustainable development, Laos can achieve a prosperous and equitable future. The government of Lao PDR outlined its poverty reduction strategy and meeting the SDGs by 2030 in its 9th National Economic and Social Development Plan for 2021-2025. The plan aims:

• to prepare the country for the graduation from Least Developed Country status;
• to ensure employment and improve living standards with inclusive, equal and fair access to benefits;
• to ensure political stability, building a peaceful, united, democratic, just, civilised and orderly society;
• to achieve socio-economic development while ensuring a balance between economic, social and environmental development; and
• to effectively implement the National Green Growth Strategy and the SDGs.

The projects and programmes currently being implemented in Lao PDR through LuxDev form part of the Indicative Cooperation Programme V established between the two countries for the period 2023-2027. The main areas of intervention in Laos are as follows:

• health and nutrition;
• skills development in the tourism sector and agricultural sector;
• local development;
• good governance;
• rule of law and access to justice.