INDUSTRIAL DEVELOPMENT STRATEGY FOR LAO PDR. IF and WTO Accession: Challenges and Opportunities for Poverty Reduction Phnom Penh, 1-3 May 2003

Chareune Inthavy DDG of Permanent Secretariat Ministry of Industry and Handicraft

BASIC DATA I GDP Growth Rate 6.4 % (1996-2000) I Growth Rate for Industry to GDP 9-10% I Share of Industry 2002=23% I Employment

in Industry almost 85,000 people, 4% of total labour force I Major Exports : Electricity , Textiles and

Garments, Wood and Forestry products, Mining products, Handicraft, 90% of total export

I Imports of consumer goods > 60%

Weaknesses and Opportunities I Weaknesses:

• Landlocked country • Lack of physical infrastructure • Small domestic market • Inadequate availability of semi-skilled and skilled labour • Labour productivity among the lowest in the world • Facing of severe competition

OPPORTUNITIES Low wages I Traditional handicraft skills I Large potential of natural resources (availability of land, forests, water) I Hydropower potential of over 18,000 MW (only about 2% currently exploited) I Closeness to large regional markets I LAO PDR being transformed into land-linked country I Investment incentive has been improved I

Enhancement of Investment Regulations I Set out clear rules for consideration and

approval of FDI I Create one stop service I 1% of import duties on equipments and raw materials I Three groups of profit tax : 20%, 15% and 10%

Long term Economic Development Plan for the Year 2020 I Government Goals and Strategies:

• Promotion of Agricultural Development, and Its linkage to Industry and Services by Setting up Special Economic Zones • Encourage the National and Regional SocioEconomic development while aiming at supporting production power with higher productivity • Graduate from lease developed countries and population income will increase by 3 folds by the year 2020

Industrial Development Strategy I Good governance I Creation of enabling business

environment, in particular for SMEs

I Support for productivity and

competitiveness improvement I Improving access to finance I International trade integration

Targeted Figures for the Year 2020 I Average GDP

Growth Rate 7% I Growth Rate for industry 10-20% I Share of Industry to GDP >30% I Domestic savings > 15% of GDP I Population income will increase by 3 folds

Importance of an integrated industrial approach focussing on a sustainable business cycle I 1. APPROACH :

• The integrated industrial planning is based on initiating a deep-rooted, sustainable industrial development process enhancing a well-functioning business cycle employing the existing the comparative advantages of LAO PDR In this context

Importance of ….(cont.) I

Sustainability refers to a dynamic process

which may need some external initiatives in the short term, but should be self supporting in the medium and long term, I Industrial Development Process refers to systematic view of industrial development in it`s broadest sense and how those sectors and activities may develop with time and in response to changing demands,

Importance of ….(cont.) I

BUSINESS CYCLE refers to the

interdependencies between the different sectors and sub sectors of the economy which have to be promoted and utilized in favor of a mutual sectors development.. I To adoption of the business growth approach described above requires consideration and initiation of long term processes.

VISION TO THE YEAR 2020

Economic

Social

Environmental

Classification of sector in Laos I Key-sectors :

• Can be seen as sectors able to utilize comparative advantages and to be a source of ( Increased ) Income.

IDENTIFIED KEY- SECTORS I AGRICULTURE

( AGRO PROCESSING INDUSTRIES ) I TOURISM AND HANDICRAFT I ENERGY INDUSTRIES ( HYDROPOWER, OIL, GAS , COAL ...) I MINING INDUSTRIES I CONSTRUCTION PRODUCT INDUSTRIES

Model of the integrated Industrial planning Approach Key sectors Agriculture ( Agroprocessing) Energy Mining (Improvement of Production

Supporting Sectors Human Resource Dev. Physical Infrastructure Agriculture,Energy Sciences and Tech.

Key sectors

Tourism ( Quantitative and Qualitative Improvement)

SOME PROMISING INDUSTRIES NEED TO BE DEVELOPED IN LAO PDR I WOOD

PROCESSING INDUTRIES ( timber, parquet flooring,furniture,pulp,paper...) I AGRICULTURAL PRODUCT PROCESSING INDUSTRIES HAND WEAVING INDUSRIES I SILK REELING AND COTTON SPINNING INDUSTRIES I ANIMAL FEED INDUSTRIES I

Some promising …(cont.) FERTILISER INDUSTRIES I CONSTRUCTION MATERIAL INDUSTIES (cement, bricks, block…) I

SOME IMPORTANT CONDITIONS AND MEASURES : MAINTAINING SOCIO ECONOMIC STABILITY z IMPROVING PHYSICAL INFRASTRUCTURE z IMPROVING SKILL MANPOWER z STRENGTHENING LAWS AND REGULATIONS, FACILITIES... z

CONCLUSIONS : I Industrial strategy,policies and the

action Plan are cross--- ministerial issues. I Export orientation complemented by efficient import substitution I Creation of business environment

Thank you I

Thank you very much for attention.