In 2004, Lao PDR joined the IF and carried out a Diagnostic Trade Integration Study (DTIS) as part of efforts by Government to identify key barriers to becoming more competitive. The DTIS with the National Export Strategy later laid the foundation for developing Lao PDR's trade goals, including membership of the WTO. Under the EIF, public, private sector and development partners have come together to update the DTIS resulting in the Trade and Private Sector Development Roadmap, which has become the key reference document for the country's trade related technical assistance.
Description of the projects (objectives and interventions)
Under the EIF, Lao PDR's Tier 1 support to National Implementation Arrangements (NIAs) project is implemented by the National Implementation Unit ("NIU") since February 2010. The project's objective is to enhance Lao PDR’s national capacity to formulate, implement, manage and monitor a pro-poor trade policy that is consistent with, and supportive of, the country’s National Socio‐Economic Development Plan (NSEDP) and its Millennium Development Goals (MDGs). Lao PDR's 2006 DTIS and National Export Strategy (NES) were used to guide the implementation of the Sixth NSEDP 2006‐2010, Trade Strategy by the Ministry of Industry and Commerce (MOIC).
Likewise, the DTIS Update was launched in May 2012 with plans to identify it as a trade sector implementation strategy for the NSEDP. The key underlying theme of the 2012 Update was the need to enhance the diversification of exports into sectors with high social impacts in order to ensure that trade has the maximum impact on improving the livelihoods of the poor. Donors have also come together to support the Update and Lao PDR's trade goals through a multi-donor trust fund (the Trade Development Facility - TDF) implemented through the National Implementation Unit (NIU) as well as alignment of other bilateral projects.
Lao PDR has also benefitted from four IF projects related to capacity building and technical support for WTO accession; building up capacity for IF coordination; support to the garment industry; and capacity building at the Ministry of Industry and Commerce. The NIU was established with funding from the Government and the IFTF Window II project. To support the institutional foundations, the Government of Lao PDR established elaborate National IF Governance Structures that cover Ministerial levels collaborating closely with the NIU.
With IF support, five garment firms were able to obtain ethical WRAP certification and assistance was provided to develop the Association of Lao Garments Industry networks. This also helped contribute to the growing success of the garments industry as companies involved were able to upgrade their production procedures to international standards, were trained in export logistics, and the garments association and selected firms have since developed a strong presence online. In 2012, the garments sector was identified in the DTIS Update as a key competitive non-resource export sector, accounting for the largest share of manufacturing exports valued at around US$220 million and employing approximately 30,000 people, of which 80% were female workers.
Main progresses to date
The development of the DTIS under the EIF in 2006 was a key milestone to integrate trade into the national development plans and align Donor interventions with Government priorities. Priority areas of the Action Matrix of the DTIS were successfully implemented with support from the EIF, a multi-donor trust fund called Trade Development Facility (TDF), and support from other bilateral partners. Contributions to the TDF were received from Australia, the European Union, Germany, Ireland, and the World Bank. The accession of Lao PDR to the WTO on 2 February 2013 was the result of a strong commitment to the reform agenda by the Government and its partners.
The DTIS also laid the framework for building national trade mainstreaming mechanisms. A key component to support this institutionally was the establishment of the National Integrated Framework Governance Structure. The NIU, as the Foreign Aid Division, being part of the Department of Planning and Cooperation in the Ministry of Industry and Commerce, plays now an increasing role in the development of national trade and private sector development policy. Through continuous capacity strengthening, the NIU also coordinates all trade-related interventions and designs, monitors, and implements incoming Aid for Trade. Consequently, an increasing proportion of Aid for Trade is channeled through the NIU and national mechanisms.
Trade is mainstreamed in 7th National Social Economic Development Plan VII (NSEDP VII- 2011-2015). A number of trade strategic documetns and trade related facilities have been launched and under implementation to support the country's trade mainstreaming process. For instance, the National Export Strategy (2010) is under implemented and monitored through the results monitoring framework. Trade Facilitation Action plan was developed and adopted in August 2012 to implement the Trade Facilitation Strategy for Lao PDR 2011 – 2015. Lao PDR Trade Portal (LTP) was launched on 22nd June, 2012 to provide one-stop-shop for import/export procedures, including TBT and SPS Enquiry Points. The functioning and updating of LTP are supported by TDF through the NIU.
Development partners and Government have also worked in close cooperation to increase harmonization and simplification in various projects, allowing more time to be spent on implementation and concentration on results. With the adoption of the EIF governance structure, Donors now use Government mechanisms for monitoring progress towards development goals. Moreover, there has been harmonization across the board of the Steering Committees for the TDF, the EIF and the UN-CEB Cluster into a combined Programme Steering Committee (PSC), the Programme Executive Committee (PEC) under the newly formed Working Group on Trade and Private Sector Development, which now provides a critical forum bringing together various trade related departments, Development Partners and the private sector. The PEC helps to better align projects with Government priorities, and avoid overlap and duplication. Over time it is expected that more Development Partners will join the PEC within the context of the new Trade and Private Sector Working Group. A Trade and Private Sector Development Sub-Group was also established within the Round Table Mechanism as a key donor, Government and private sector forum, to meet on a periodic basis to share information and discuss related issues on trade and development.
Since 2006 the Government worked hard to increase the ownership and effectiveness of the trade programme by involving all key partners. Encouraged by the success of the programme, the Government developed the confidence to develop a completely nationally-led DTIS Update in 2012 ensuring strong and widespread national ownership in the process. National ownership and the use of harmonized trade forums have helped support the alignment of various projects to Government priorities. The DTIS Update Action Matrix has been integrated into the Roadmap for Trade and Private Sector Development for Lao PDR, which is currently being implemented with the support from the EIF, TDF, and Development Partners.
|Outcome 1: Sufficient Institutional and management capacity built in EIF countries to formulate and implement Trade related strategies & implementation plans|
|O1.1 Tier 1 ' Support to NIAs' project completed or under implementation||No||Yes|
|O1.2 EIF Country with complete, up-to-date validated DTIS Action Matrices||Yes||Yes|
|O1.3 Level of capacity of NIU to perform fiduciary programme management for Tier 1 project||N/A||1|
|O1.4 Country with up-to date trade strategies||Yes||Yes|
|O1.5 Country with quality trade strategy||N/A||1|
|O1.6 Country with quality trade strategy implemented||4||1|
|Outcome 2: EIF countries mainstream trade into their national development strategies and plans|
|O2.1 Trade in PRSP and/or National development strategies||4||1|
|O2.2 Existence of productive sector strategies integrating the trade dimension||Yes||Yes|
|O2.3 Functioning public/private consultation mechanism||1||1|
|Outcome 3: Coordinated delivery of trade related resources (funding, TA etc.) by donors & implementing agencies to implement country priorities following adoption of DTIS Action Matrix|
|O3.1 Availability of an annual rolling implementation overview integrating all trade-related government & donor-supported activities (including gender & environment)||Yes||Yes|
|O3.2 Frequency of government and donor consultations on trade-related matters||3||1|
|O3.3 UN CEB Cluster activities based on DTIS Matrix priorities in EIF Countries||Yes||Yes|
|O3.4 Country with joint donor initiatives in the trade area (such as need assessment; strategy formulations; programming; pooled funding; M&E; etc.)||No||Yes|
|Outcome 4: EIF Countries secure resources in support of initiatives that address DTIS Action Matrix priorities|
|O4.1 Country with implementation plan integrating DTIS/Action Matrix priorities and indicating financing needs to be met through ODA||1||1|
|O4.2 Country where a Government budget exists for implementation of its trade strategy||No||Yes|
|O4.4 Number of projects funded by donors related to the DTIS Action Matrix||2||18|
|O4.4.1 Amount of projects funded by donors related to the DTIS Action Matrix (Million USD)||12.9||77.1|
EIF-supported domestic reforms contributed to a more liberal trade and investment environment, increased competitiveness and facilitated WTO accession in February 2013.
Garment companies were assisted to develop the Association of Lao Garments Industry networks, upgrade production procedures to meet international standards, improve export logistics and develop online marketing tactics. Moreover, five garment firms were certified as complying with the Worldwide Responsible Accredited Production (WRAP) standards.
Ongoing Aid for Trade support to the Garments Skills Development Centre is now being managed by Lao PDR's National Implementation Unit (NIU) in the Ministry of Commerce. This project has helped to provide fresh skills development and knowledge through targeted training in the garments sector and has led to an average increase by 43% in supervisors' and sewing operators' performance and to a productivity growth of 20%.
Lao PDR's DTIS Update Action Matrix has been integrated into the Roadmap for Trade and Private Sector Development which provides the blueprint for trade mainstreaming in Lao PDR through three pillars: the trade and investment environment; competitiveness of the agribusiness, manufacturing and services sectors; and the AfT governance framework for mainstreaming trade and private sector development. To support the Roadmap, Government has allocated a yearly budget to support trade related activities. The budget for Fiscal Year 2012-2013 is equivalent to US$312,500, and in addition, the Government has increased full time seconded staff to the NIU as well as to various project activities.
The garments sector was identified in the DTIS Update as a key competitive non-resource export sector, accounting for the largest share of manufacturing exports valued around US$220M and employing approximately 30,000 people of which 80% were female workers. Ongoing Aid for Trade support, through the TDF, to the Garments Skills Development Centre is now being managed by Lao PDR NIU in the Ministry of Commerce. This project has helped to provide fresh skills development and knowledge through targeted training in the garments sector, and has enabled supervisors and sewing operators' performance to increase on an average of 43% and productivity has grown up to 20%.
NIA Support (T1 Phase 1 and 2)
Strengthening National Quality Infrastructure and Industrial Statistics
Lao PDR: Building trade capacity, fostering jobs and decent work for all
“Training is very important to improve the skills and knowledge. We can see that the performance is increased which gives more good results, more output and they feel confident to apply this to their jobs.” – Borivone Phafong, Director, Garment Skills Development Centre
Lao PDR's vision on trade is moving ahead with the aim to graduate from LDC status by 2020. As a country in transition from central planning to a market economy, Lao PDR has big aspirations to take a big step forward to having a well‑functioning market economy, which has been boosted with the accession to the WTO in 2013 and deeper engagement with ASEAN.
Against this promising backdrop, trade has been a motor, laying the foundations for growth across the country, and as early as 2004, this has been accompanied by EIF support. Through the EIF, it has been about developing a sustainable programmatic approach, national coordination efforts and setting up structures to facilitate effective management and implementation of Aid for Trade (AfT). This support has been focused on enhancing Lao PDR's national capacity to formulate, implement, manage and monitor a pro-poor trade policy that is consistent with, and supportive of, the country's National Socio‐Economic Development Plan (NSEDP) and its global development goals.
Lao PDR's success in building long-term capacity in institutional, financial and human resources has equally been important for Lao PDR to make headway on its trade goals. With an EIF‑supported trade mainstreaming project underway, a national trade strategy is being developed to be integrated into the next NSEDP VIII, 2010-2020. The project is also supporting the Ministry of Industry and Commerce (MOIC) to analyse trade potentials and develop strategies for key agricultural products, such as rice, coffee and vegetables.
The innovative Trade Development Facility (TDF) model, coupled with EIF support, has laid the basis for the sector-wide approach to trade and private sector development in Lao PDR. It has provided the framework for bringing together trade-related assistance of approximately US$20 million and mobilizing aid behind clear goals that all partners can buy into. The World Bank-managed TDF, which was set up with contributions from the European Union, AusAid, Germany and Japan, builds on the EIF framework to roll out priority actions identified in the Diagnostic Trade Integration Study (DTIS). These include putting in place activities that facilitate trade, increase cross-border movement of goods and boost regional and global economic integration. Lao PDR's approach has already been shared on the international stage and is being closely followed by other countries in the region and beyond.
The TDF's second phase (March 2013 to March 2017) has increased funding of US$14 million, up from the first phase's US$6.8 million. It also includes support from more partners, including Australia, the European Union, Germany, Ireland and the World Bank. Additionally, the EIF‑supported DTIS has helped Lao PDR develop a Trade & Private Sector Development Roadmap, which has served as the main instrument for Lao PDR's AfT harmonization, resource mobilization and coordination efforts. The Lao PDR Trade Portal has also been set up, providing a one-stop shop for import/export procedures.
Moreover, the political support shouldering this agenda has been the driving force for change, with the National Steering Committee for Economic Integration (NSCEI) chaired by the Deputy Prime Minister and the Minister of Industry and Commerce serving as vice-chair. The NSCEI is also composed of all Ministries represented at Ministerial level and the Lao National Chamber of Commerce and Industry. This is complemented by an active EIF National Implementation Unit (NIU) within the Foreign Aid Division in the MOIC's Department for Planning.
With EIF backing, interventions are aligned to the Government's financial year and Government procedures. A common Projects Executive Committee is chaired by the Minister of Industry and Commerce and co-chaired by development partners. There is a harmonized steering committee for the TDF, EIF and UN-CEB Cluster managed by the NIU, with joint work plans and reports and an upgraded donor coordination forum, the Trade and Private Sector Working Group. The private sector has also been supported through the Lao Business Forum, the Lao National Chamber of Commerce and Industry and in the opening-up of the provincial public-private sector dialogue. The EIF Donor Facilitator role led by the European Union has also been instrumental in building the skills development agenda and streamlining coordination, at the same time co-chairing the Working Group with Germany and overseeing additional informal donor meetings.
Earlier EIF support laid the basis for coordination efforts, starting with the first DTIS, helping with WTO accession and capacity building, as well as with assistance to the garments sector. Moreover, Lao PDR's DTIS Update has also been used to enhance Lao PDR's diversification of exports into sectors with high social impacts in order to ensure that trade has a positive impact on improving the livelihoods of the poor. For instance, the garments sector was identified in the DTIS Update as a key competitive non-resource export sector and accounts for the largest share of manufacturing exports valued at around US$220 million and employs approximately 30,000 people, of which 80% are female workers.
As a result, garment companies have been assisted to develop the Association of Lao Garments Industry networks, upgrade production procedures to meet international standards, improve export logistics and develop online marketing tactics. Moreover, through earlier EIF support, five garment firms were certified as complying with the Worldwide Responsible Accredited Production standards.
In Lao PDR, research estimates that 70% of factories need supervisory skills to compete internationally. Working in line with the Government's goal to double the number of workers and employ 60,000 people in the sector by 2017, the Garments Skills Development Centre has been equipped to provide innovative and cost-effective training at the highest standard to increase export competiveness. Alongside support from the TDF and Germany in machinery and expertise, courses are underway for garment operators and supervisors. This has helped to provide fresh skills development and knowledge in sewing operations, line supervising, quality control and management, pattern making and industry engineering and has enabled supervisors and sewing operators' performance to increase on average by 43%, and productivity has grown by up to 20%.
First Laos – Bhutan National Implementation Unit Exchange programme
The first NIU Laos-Bhutan Exchange programme held in Vientiane Lao PDR. There were about 40 people attended this exchange programme including the NIU staff from both side and the representative from implementation agencies and leaded by Director General of the Department of Planning and Cooperation, Lao PDR Mr. Sirisamphanh Vorachith and Mr. Sonam Tenzin, Executive Director of Trade Department, Ministry of Economic Affairs (MoEA) of the Royal Government of Bhutan.
This exchange program is to share experiences on Trade and Private Sector Development Program and Aid for Trade Governance Structure, and EIF Tier 2 project that includes project proposal development, the implementation and lesson learnt.
The meeting took place at critical juncture of two countries’ social economic development. While Laos is focusing its efforts in achieving 2020 vision of graduating from LDC status, Bhutan is making impressive progress in perusing an alternative development model based on the Gross National Happiness Philosophy. At the same time, both countries are also facing similar development challenges as both economies are experiencing rapid transformation from an agrarian based economy to resource based economy, primarily hydropower. In this regard, both sides have discuss and exchange how to better promote economic diversification and generate quality jobs for fast growing youth population in the coming years.
Speaking at the meeting, Mr. Sirisamphanh Vorachith expressed that “As an LDC, Lao PDR has been an active participant in the global "Integrated Framework" process to support the effective participation of LDCs into the multilateral trading system. Priorities in this area have been articulated in the 2006 Diagnostic Trade Integration Study (DTIS), and in the 2012 DTIS Update. Over the years, we have developed a strong aid-for-trade system with well-established coordination mechanism at both policy and program implementation level, and an experienced and high capacity National Implementation Unit (NIU), under the Department of Planning and Cooperation of the Ministry.”
Mr. Sonam Tenzin, also expressed his view that the EIF Project has been convened in Bhutan since 2009 and they are currently in the process of formulating the first Tier 2 Project. He explained that the Tier 2 project will covers 12 areas identified and endorsed by the National Steering Committee. He informed that the first Tier 2 proposal is expected to be submitted to the Board in Geneva in the next two months with a three year project proposal value about USD 2-3 million.
Apart from an interactive discussion during the meeting, the Bhutan delegations also take this opportunity to visit the Departments currently implementing the Tier 2 project for more in-depth discussion concerning the Tier 2 implementation.
Lao PDR: Quality infrastructure and access to market information key to regional integration and post WTO accession action plan
On 21 January 2014, Lao PDR’s Ministry of Industry and Commerce (MOIC) launched the first EIF Tier 2 project to strengthen national quality infrastructure and industrial statistics, in preparation for regional integration. The launched project responds to Lao PDR’s trade and development priorities as set out in the 7th National Socio-Economic Development Plan VII and is in line with Lao PDR’s Trade and Private Development Roadmap 2012.
The project supports the Government’s efforts in improving Lao PDR’s national standards infrastructure, statistical and analytical capacities, which have been identified among the country’s main development constraints. It will enable technicians to certify the standards of local producers and give production certification before goods and services are supplied to the market. This project will help in laying the groundwork for Lao PDR to implement the ASEAN Economic Community Agreement by 2015 and support Lao PDR to meet its commitments under the WTO Action Plan.
Former Deputy Minister of Industry and Commerce and now current Minister, H.E. Mrs Khemmani Pholsena welcomed the EIF support. “This assistance will be of advantage to our development, especially the preparation for the ASEAN Economic Community and the new, quality products that will be able to enter overseas markets,” H.E. Mrs Khemmani Pholsena said. “Once the state sector’s improvement is complete, it will have facilities to help the private sector with aspects such as the reduction of production costs and increased competition capacity,” H.E. Mrs Khemmani added.
The project will serve to strengthen the national system so that services in high demand can be carried out domestically. In addition, the project aims to increase quality, safety and reliability of domestically offered products and services, and improve competitiveness through implementing national standards, technical regulations, and formulating and implementing viable industrial development policies based on systematic, comparable and action oriented country analysis.
“This EIF Tier 2 project is another stepping stone for an improved business environment. While component A addresses market access issues for the private sector through providing better access to certification and testing services, component B aims to enhance the institutional capacity of Industry and Handicraft Department to establish the conditions for policy-oriented statistical analysis on the manufacturing sector,” said Director General of Planning and Cooperation Department, MoIC, Mr Sirisamphanh Vorachith.
In Lao PDR, these services are presently carried out abroad, mainly in Thailand and Vietnam, which is quite expensive, time-consuming, and requires extensive logistical efforts for Lao traders. This puts Lao traders at a competitive disadvantage and impairs the ability of the private sector to access new markets and participate in regional and global supply value chains.
The EIF is supporting this project with over US$2.5 million (20.16 billion kip) and the Government of Lao PDR with about US$871,200 (7 billion kip) of in-kind contribution. The EIF National Implementation Unit which is embedded in MOIC’s Planning and Cooperation Department will manage the project implementation. On the other hand, the respective technical departments, namely MOIC’s Industry and Handicraft Department in collaboration with UNIDO, and the Ministry of Science and Technology’s Standardization and Metrology Department, will implement technical project activities.
With this project the EIF continues its commitment in Lao PDR since 2006, starting under the EIF Tier 1 project. The Tier 1 project has supported extensive capacity building, trade mainstreaming and strategy, and assistance in establishing the National Integrated Framework Governance Structure. The EIF has also contributed to significantly advancing the present trade and private sector development programme.
Trading Stories, the Book, accompanies the film series to show just how trade is about acting local to go global in eight of the poorest countries worldwide.
Trading Stories, the Book, accompanies the film series to show just how trade is about acting local to go global in eight of the poorest countries worldwide. It’s a journey that tracks how, with the support of the Enhanced Integrated Framework (EIF) and Aid for Trade, realities are changing on the ground. Stronger trade roadmaps are being developed, partners are coming together to build the trade agenda and projects to overcome trade barriers are being rolled out. Now, it’s over to you to share the stories, get engaged in the debate and be part of the next chapter that’s still to be written on our global trade connections.
Click here to access the Book
Written by Elena Immambocus and Justine Namara
Photographs © Elena Immambocus and Justine Namara