The main development goal of the Lao People's Democratic Republic (Lao PDR) – and of EU assistance to this least developed country – is poverty reduction for the country's diverse population of many ethnic groups. EU support has shifted from targeted project aid to more sector-based support – a holistic approach which strengthens the country’s own measures to improve governance, roll out economic reforms and facilitate its integration into regional and global economies.
Covering the first four years of EU-Laos Strategy Paper (2007-13) , a €33 million EU multi-annual programme (2007-10) has supported:
- The government’s reform agenda under the National Development Strategy (in the form of budget support)
- Sustainable development in the uplands
- Governance and human rights
- Trade and economic cooperation.
The EU bases its current development cooperation in Lao PDR on a response strategy that is fully aligned with the Lao government’s own National Development Strategy. The overarching objective of development cooperation between the EU and Lao PDR is poverty reduction and achievement of the Millennium Development Goals (MDGs). Strengthening the government’s own governance and economic reforms and facilitating the country's integration into regional markets and the global economy are other priorities.
The EU is focusing its support on the Poverty Reduction Support Operation (PRSO) – a government reform programme supported by an IDA grant from the World Bank – mounted as part of the reform agenda of the government's National Development Strategy. The PRSO – fully in line with EU development goals – is a results-oriented budget support instrument for policy reforms, delivered over consecutive three-year cycles. It involves strong government ownership, offers opportunities for donor coordination and participation in policy dialogue with government, makes disbursements based on outcomes/results and is great added value for EU cooperation.
The EU's sustainable development initiatives benefit the most vulnerable populations – those in the northern uplands the majority of whom are ethnic minorities in remote, mountainous areas. Strategies to address poverty and gender inequality issues are targeting forty-seven districts. In these areas, the government has put in place development programmes and is providing poverty reduction funds under a broad rural development policy of “stabilisation” of settlement. The latter extends to land allocation directives, the eradication of slash-and-burn agriculture and elimination of poppy cultivation and attempts to bring people closer to services such as education, health care and water and sanitation.
Governance and human rights are of key importance for the democratic development of Lao PDR. Over the past decade, the government has embarked on wide-ranging public administration reforms, designed to create an effective, efficient, accountable and low-cost public administration, together with the requisite institutional and legal framework. Much remains to be done. The legal sector is in its infancy and access to the legal system is costly. At every level, a basic understanding of justice and human rights issues is lacking, as are vital equipment and infrastructure. Priorities in this field are public-service reforms, people’s participation, the rule of law and sound financial management.
Support for the Lao government's trade policy greatly contributes to the country's sustainable development. While the government has acknowledged that trade development has a big role to play in eradicating poverty, the benefits of such a policy cannot be fully obtained by more market access and a better trading environment alone. Improved government capacity, infrastructure and human resources are required to make the most of trade opportunities. Recent accession to the World Trade Organisation (WTO) and rapid development of a network of preferential trade agreements in the Asian region have provided Lao PDR with an increased opportunity to boost external trade.