Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR
1. Introduction

INTRODUCTION

1. Background

In 1986 the Government of the Lao People's Democratic Republic adopted an open door market-oriented approach to the Lao economy. Since then there has been significant growth in the private sector and in particular among micro/small enterprises. These now dominate handicrafts, small-scale agricultural processing, timber production, textiles manufacturing, and trading.

A national Small and Medium Enterprises Survey published by the Ministry of Industry and Handicraft (MIH) and the German Development agency (GTZ) in 1996 estimated there were 146,000 micro/small enterprises, of which about 50 per cent were no larger than one person and only 7 per cent had paid employees.

These micro and small enterprises together with cooperative and group enterprises have the capacity to generate significant levels of employment. This is important because it has been difficult for Laos to attract investment for larger level enterprises, mainly as a result of the country's lack of trained personnel, the extent of bureaucratic red tape, and the fact that Laos is landlocked and so without direct access to seaports.

The 1996 MIH-GTZ survey estimated that approximately 55 per cent of micro/small enterprises close within four years. Specific impediments to growth include an unsupportive regulatory environment and the lack of access to credit, and to technical, and business skills. Local and international agencies working in this field continue to express concern at these obstacles (Expressed most recently by an ILO fact-finding mission to Laos, November 2001.) which are even more severe for sections of the population that are vulnerable to various kinds of inequalities, such as women entrepreneurs, marginalized rural groups, and women and men with disabilities.

Objectives

Specifically, the report:

• Brings together available data on the Lao micro/small enterprise sector to give an overview of the current status of the sector;
   
• Builds on the last comprehensive study, the 1996 MIH-GTZ survey, and reviews smaller studies and available literature on the sector with regard to size, geographical distribution, main economic sectors and sub-sectors, varieties of organization, and other factors such as gender, disability and rural location;
   
• Identifies the opportunities and constraints in developing micro/small enterprises and cooperatives, both in general terms and also with specific reference to minorities, gender, and disability;
   
• Examines the plans and activities for micro/small enterprise development on the part of government, local and international agencies and identifies their strengths, weaknesses, and areas for further development;
   
• Recommends measures to develop micro/small and cooperative enterprises, as means for creating employment and generating income and in ways that are inclusive of groups that are in danger of being marginalized.

Methodology

There is very limited data available in fields relevant to this study. Nor did the study have the resources necessary to create a fresh database through comprehensive primary research.

Its basic statistical data is therefore drawn from the national survey of Small and Medium Enterprises in Lao PDR carried out in 1995 and published in 1996 by MIH-GTZ, which is referred to throughout as the 1996 MIH-GTZ survey. The data from more recent issue-specific studies has been added and final updates were provided through in-depth interviews with a range of concerned persons and organizations.

However it is strongly recommended that further primary research is undertaken, perhaps as part of initiatives that emerge from discussion of this paper. Such initiatives could include pilot projects and recommendations for new government policy and regulations.

Structure of the Paper

This report is divided into six sections:

1. Introduction : the report's background, purpose, and methodology.
    
2. Micro and Small Enterprises : the characteristics of Lao micro/small enterprises; their size, role and contribution to employment generation, household income and the national economy; the diversity of micro/small enterprises and factors such as rural context, female ownership, and disability.
    
3. Cooperatives : the current state of cooperatives in Laos.
    
4. Opportunities and Constraints : the sector's potential growth areas and limitations.
    
5. Sector Development Programmes : the activities, priorities and plans of government, and of international and local organizations.
    
6. Conclusions and Recommendations : a summary of the report's key findings together with recommendations to promote micro and small enterprises and ensure integration of the rural, disability, and gender dimensions of the sector.

1. Introduction
Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR

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