Laos Poverty Alleviation Efforts by China
Photo Credit: World Bank
By Tai Wei Lim

Laos Poverty Alleviation Efforts by China

Aug. 16, 2018  |     |  0 comments

According to the World Bank, the poverty rate in Lao People’s Democratic Republic fell from 33.5 to 23.2 percent of the population in the previous ten years, lifting 500,000 individuals out of poverty, with the country satisfying the Millennium Development Goal of reducing extreme poverty and enhancing the population’s welfare.[1]

The Laotian government had made an important effort towards this end. Traditionally, Laos enjoyed socialist support from Vietnam and Soviet Union during the Cold War era in the name of ideological fraternity. After the Cold War, it became one of the four CLMV (Cambodia, Laos, Myanmar and Vietnam) economies to join the Association of Southeast Asian Nations (ASEAN), and the regional organization also worked hard to help Laos develop and catch up with the older ASEAN members.

Vietnamese companies have invested more than USD 466 million in Laotian farming, energy and natural resources in 2015 generating 40,000 jobs, followed by Malaysia which provided USD 430 million worth of investments. Singapore is coming up fast with 70 industrial, property, and farming projects in Laos worth USD 175 million, and in 2015 was the 11th largest foreign investor in the country.[2] As a component of ASEAN and bilaterally, Laos also obtained developmental help from the West and Japan as well as the Washington consensus institutions like the World Bank. Laos also began to accept Beijing’s offer of connectivity assistance under China’s Belt and Road Initiative and Chinese multilateral funding institutions like the Asian Infrastructure Investment Bank.

Continued support from China, the West, Japan, and ASEAN are crucially needed to prevent Laotians from reverting back to the poverty line. Approximately 80 percent of the population in 2013 live on not more than USD 2.50 daily and have a 10 percent chance of going back into poverty.[3]

Poverty alleviation is a major priority for the Laotian government which is keen to see Laos graduate from the ranks of the world’s Least Developed Countries by 2020. The range of measures to achieve this can be classified into micro, meso and macro level policies. At the macro level and on a longer-term basis, Laos is keen to diversify its economy away from reliance on natural resources to other higher value-added industries. At the meso industry sector level, Laos is capitalizing on industry sectors in which it is still competitive, for example, by tapping into their low-cost labor for manpower intensive manufacturing industries. At the micro level, complementing this state priority, the minimum wage in Laos went up in April 2018 to mitigate rising costs in the country. Wage increases may have originated partly from the desire to use policy to stem the flow of Laotian workers to neighboring countries where wages are higher, so as to maintain a healthy level of labor supply in Laos. It also deters Laotians from working illegally in locations like Thailand.

In 2016, the Chinese government provided 34 billion Laotian Kip (over RMB 33 million) for the Pilot Project for Poverty Reduction Cooperation in East Asia which is based on technical and financial support from China for the specific purpose of tackling poverty in Laos. It targets Xor village in Sangthong district in Vientiane and Xienglom village in Luang Prabang and impacts more than 2,700 people from 595 families. The project provides equipment and expertise to build basic infrastructure and promote agricultural development through the construction of highways and roads, increasing the water supply, and technical assistance in agriculture and livestock breeding.[4] The project complements Laotian national strategies and the government’s 8th Five-Year National Socio-economic Development Plan (2016-2020) on eradicating poverty. The accent appears to be on customized poverty reduction approaches, which conforms to the contemporary emphasis on promoting people-centered approaches to poverty alleviation.

The efforts veer as closely as possible to Laotian ambitions for emerging from the world’s Least Developed Countries.

In 2017, China and Laos signed a slew of agreements specifically targeted at poverty alleviation. From 2017 to 2020, China intends to construct highways and roads as well as water supply infrastructure in two villages located in the Lao capital Vientiane and Xienglom in northern Luang Prabang to augment plantation, husbandry, skills training, expertise sharing and other agriculturally-related activities.[5] Healthcare is another important area of concern for the Laotians. Chinese President Xi Jinping visited Vientiane in November 2017 and broke ground on a new medical facility (USD 90 million provided by a Chinese grant) to replace the old French colonial-era Mahosot Hospital, and China will staff the new hospital with doctors in its first three years of operation.[6] These are showcase projects with the persuasive power of alleviating poverty through demonstrative purposes and will have a snowball effect on other villages. As such the key challenge is to ensure all planned developmental objectives and agendas are implemented faithfully and successfully. If these projects are successfully implemented, the results will speak for themselves. The accent here is on delivering aid at the community level, in accordance with contemporary trends in the provision of developmental aid, technical assistance, and funding.

One example is Yunnan State Farms Group’s Laotian subsidiary founded in 2006. The Group launched a project to develop Laos’ natural rubber plantation to help locals alleviate poverty by developing 18 rubber planting bases in nine counties in Laos with a plantation area of approximately 6,000 hectares, employing about 6,000 villagers and more than 100,000 short-term workers with the resulting annual income per villager going up from RMB 2,000 to RMB 20,000.[7] This development has had spin-off and snowball effects, pulling in members from the community to cultivate 7,300 hectares of their own rubber trees, driving demand for employment in the industry. In Pentong village, the Village Head Bin Parasi said the industry as a whole had brought greater income to his villagers and spurred the construction of roads and water facilities.[8]

The Group’s Deputy Manager He Jian Chun emphasized sustainability through adequate skills that can allow rubber tappers to accumulate latex without harming the trees, thereby allowing the trees to be useful for up to three decades. In addition, to promote the use of the correct harvesting techniques, from 2010 to 2017, the Group provided 800,000 sets of rubber tapping tools and trained 4,500 villagers.[9] 24-year-old villager Naingwin and her husband switched from farming in Pentong Village in 2007. From living in a small thatched cottage and living off nearly subsistence farming with no additional income, they now earn RMB 50,000 in annual salary, and have a renovated house and a motorcycle after they switched to rubber tapping in Xayabouly.[10]

From these Chinese efforts to assist with poverty alleviation, there appears to be several features that are discernible. First, the efforts target specific rural villages as demonstrative showcases for testing out poverty alleviation measures. Second, the efforts veer as closely as possible to Laotian ambitions for emerging from the world’s Least Developed Countries. This is done to shore up political complementarity in the relations between the two. Third, healthcare, water provision, agricultural assistance, and human resource training are given priority by the Chinese. These three elements are people-centered and interface at the community level.

[1] The World Bank, “Drivers of Poverty Reduction in Lao PDR,” October 1, 2015.

[3] The World Bank, “Drivers of Poverty Reduction.”

[5] Xinhua, “China provides aid.”

[6] Hutt, David, “China’s aid a matter of life and death for Laos,” Asia Times, December 12, 2017.

[8] Xinhua, “China’s Poverty Relief.”

[9] Xinhua, “China’s Poverty Relief.”

[10] Xinhua, “China’s Poverty Relief.”