National Human Development Report
National Human Development Report - Lao PDR 2006:
International Trade and Human Development
Since the decision in 1996 to join the ASEAN Free Trade Agreement, the Lao PDR is committed to increasing international trade. There is no going back.
The increasing international trade is affecting the Lao economy, the employment of Lao workers, the role of Lao women, the education requirements of Lao children, the consumption patterns of Lao families, even Lao culture. The impacts will increase in the future. This National Human Development Report looks at the multiple impacts of international trade on “human development” in the Lao PDR. Human development puts the emphasis on people - on the quality of their lives, their education, skills and health, their environment, their choices, the prospects for their children. The overall finding is that - on balance - the increasing international trade has benefited Lao people and Lao development. Recent economic growth has been equitable and pro-poor. The income distribution has improved. In addition to economic growth, international trade benefits human development via five “pathways”: cross-border trade, labour migration and remittances, employment, rural electrification, and improved information. There are, of course positive and negative impacts, both ways.
Low levels of development and human development hurt trade. Low levels of education, persistent health problems, lack of an integrated national economy, weak infrastructure, a weak banking system, and problems of information, and missing markets have impeded international trade and the competitiveness of Lao exports. Some exports (manufactured exports, handicrafts, tourism, agricultural exports and labour exports) are labour-intensive, favourable to employment, to backward linkages, and to reduction of poverty and other improvements in human development. Agriculture is the most important sector, employs more people in the export trade, and has the highest potential to enhance human development. Many of these Lao exports benefit from regional trade agreements and from trade preferences from the Peoples’ Republic of China ( China), the European Union (EU), Japan, and the Kingdom of Thailand (Thailand). World Trade Organisation (WTO) membership would not improve market access for Lao exports, and WTO accession under unfavourable terms could hurt human development. Other Lao exports (minerals, timber, electricity, transit trade, and over-flights) use much less labour, and some pose threats to the environment. But these exports will also greatly increase the government budget which can be used to enhance human development and reduce other impediments to trade. Some imports (capital goods and intermediate goods) are vital for sustaining and increasing exports. Some imports create employment in cross border trade and retail sales, and some improve the quality of life and access to information. Some imports - particularly Thai television - may threaten Lao language and culture. And some imports, as AFTA tariff reductions are completed, may pose serious competitive challenges to some Lao manufacturers, for example of cement, roof panels, and motorcycles.
The composition of Lao exports is changing rapidly. Exports of minerals and electricity will increase from 20 percent of Lao exports in 2004 to more than half and perhaps even two thirds of all Lao exports in 2010. The more labour-intensive exports will lose relative shares but could still grow rapidly with the right policy and support. Good policy is important to increase the positive benefits of international trade, and reduce the negative impacts. Some suggested changes will cost the government budget nothing and may save money. These suggestions include: fewer restrictions on exports and imports, leaving informal patterns of cross-border trade alone, normalizing Lao labour exports to Thailand, and taking it slow on WTO entry. Suggestions that require government expenditures from its trade increased revenues include: education and human resource development - the top priority, support for solving information problems and supply constraints in agriculture and for obtaining organic certification in major export markets, support for improving the productivity and competitiveness of other labour-intensive exports, and improving the quality of Lao television.
Documents for download:
Technical Background Papers for the third NHDR: