Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR
5. Development Programmes

DEVELOPMENT PROGRAMMES

This section discusses government and international and local agency activities in business development and financing, development of a policy and regulatory framework, and equitable participation by female entrepreneurs and entrepreneurs with disabilities.

In 2001 it was estimated that 39 per cent of Lao people lived in poverty, 53 per cent in rural and 24 per cent in urban areas. With its limited infrastructure, narrow human capital base, and relatively new economic and social institutions, Laos is at an early stage of socio-economic development. More than 80 per cent of the population live in rural areas and 90 per cent of income comes from subsistence agriculture. Per capita income in 2000 was US$350.

5.1 Government Objectives

The Seventh Party Congress in March 2001 committed itself to removing the country from the list of least developed nations by 2020. To do so the Government developed an eight point National Socio-Economic Priority Programme: (1) food production, (2) commodity production, (3) stabilization of shifting cultivation, (4) rural development, (5) infrastructure development, (6) expansion of external economic relations and cooperation, (7) human resource development, and (8) services development. (Interim Poverty Reduction Strategy Paper/Joint IDA-IMF Staff Assessment of the Interim Poverty Reduction Strategy Paper, 2001.)

Economic Development objectives of the Party show a role for micro/small enterprises:

• "Explore and exploit those sectors endowed with potential in order to promote production;
   
• Set forward a policy that looks for funds and distributes investment appropriately;
   
• Shift from a nature-based economy to a production economy by focusing on integrated agricultural development;
   
• Concentrate on the interaction between farming production and distribution, and the application of new techniques;
   
• Ensure the promotion and expansion of the family business sector;
   
• Link agricultural expansion with rural development by stimulating production, and encourage family businesses;
   
• Put family and village plans into practice, organise development funds, and establish village service cooperatives;
   
• Extend support in terms of budget, techniques and technical skills to ethnic groups in mountainous areas and encourage their participation in society." (Vientiane Times, Party Congress Special: Report to the Seventh Party Congress, Vol. 8, No. 21, p. 10-12, March 16-19, 2001.)

Socio-cultural Development objectives also show the relevance of micro/small enterprises:

• Development of the national education system including eradication of illiteracy, moving towards compulsory primary school education, increased educational opportunities at all levels for girls, children of the poor, and ethnic groups, and improvement of vocational and technical skills.
   
• Improvement of health and hygiene including expansion of basic health care at grassroots level through programmes focussing on the mother and child and nutrition, provision of free health services for disadvantaged people and orphans, and training to upgrade medical personnel.

The Congress report indicated that the state economy, the people's cooperative economy, and other economic sectors, including those with infrastructure development projects, are all key to the country's economic transformation from a subsistence economy to one of commodity production. (ibid, p. 11.) However it emphasised that the state economy is to be the central mechanism. (ibid, p. 11.) The report noted the need to promote a people-based "cooperative economy", particularly in agriculture, handicrafts and services, through policies on finance, credit and marketing.

The report spoke of decentralizing the development process. Provinces, districts, and villages would become "strategic, budgeting, financial, and implementing units." (Interim Poverty Reduction Strategy Paper and Joint IDA-IMF Staff Assessment of the Interim Poverty Reduction Strategy Paper, 2001.) This would require them to have the necessary technical and managerial capacity. The Congress noted that international cooperation would be necessary for successful development project (approximately 80 per cent of public investment comes from donor assistance). (Medium-Term Expenditure Framework and the Public Investment Programme, State Planning Committee, 2000.)

The government also restated its commitment to participate in the Association of South-East Asian Nations (ASEAN) free-trade area and join the World Trade Organization. Since April 2001, the Lao government is able to borrow from the International Monetary Fund (IMF) under the Poverty Reduction and Growth Facility (PRGF), while observing a long-term commitment to economic reform.

The five-year national socio-economic development plan, 2000 to 2005 includes ambitious targets: (1) halving the current poverty figure, (2) completely eliminating opium cultivation, and (3) achieving an average GDP growth rate of 7 per cent per year. Individual line ministries and other government agencies have elaborated on these targets in their development plans for each sector.

5.2 Government Activities

As noted there is no national agency involved specifically in micro/small enterprise policy. There are no specific laws and regulations, and no policy for promoting micro/small enterprises or coordinating local and international inputs initiatives for small business development. The one major successful intervention is probably that of NGO 'income generating activities', which provide small amounts of credit.

Government agencies that support the private sector and micro/small enterprises include:

The Ministry of Industry and Handicraft which takes the leading role in the industry and handicraft sectors and includes the departments of Handicraft, Industry, and Geology and Mines. Such enterprises may be in the state sector, the private sector, or in a combination of both. Many matters however require other Ministries to be involved (e.g. regulations for exporting handicrafts means the Department of Handicraft must work with the Ministry of Commerce). The lines of demarcation in relation to micro/small enterprises are not clear and this results both in overlaps of work and in significant gaps.

The Ministry of Labour and Social Welfare which has a direct role in promoting employment, works also with the Ministries of Agriculture and Forestry, Industry and Handicraft, Health and Education, as well as the Youth Union, the Women's Union, and the international organizations that support employment development.

The budgets of these two main responsible Ministries however are very limited and their few services are of poor quality.

5.3 Government Policy and Regulatory Framework

Several major international agencies have been working towards a more favorable environment for private sector development in Laos.

The German Technical Cooperation Agency has cooperated with the National Organization for the Study of Policy and Administration in organizing workshops and in providing advice to middle and high-level government officials to develop a market-oriented economy through effective economic policies at national and provincial levels.

The Asian Development Bank has financed projects to develop potential markets, such as tourism, and helped promote enterprise through improved sub-regional linkages, rural access roads, power generation, and distribution services. The Bank has also helped improve the corporate governance of state-owned commercial banks and reduce administrative barriers to private investment.

The World Bank has assisted in land titling and is working on a social safety net project for retrenched public sector workers, which includes vocational training and small enterprise development.

The United Nations Development Programme (UNDP) and the United Nations Capital Development Fund (UNCDF) have supported rural microfinance development.

Other major donors such as the governments of Australia, France, Germany, Japan, and Sweden, and the European Union (EU) have assisted physical infrastructure development.

In March 2002 the Asian Development Bank, with the Bank of Laos, held a workshop on private sector development for public and private sector participants and international agencies. After the workshop a UNIDO development programme continued consultations in collaboration with Ministry of Industry and Handicraft.

5.4 Business Development Services

Business Development Services (BDS) provide entrepreneurship and skills training, advisory services on market and technology, business opportunities and assist in business linkages and associations. From 1995 to 1999, the Lao-German Small Enterprise Development Project, with the Ministry of Industry and Handicraft, ran the only entrepreneurship development training in Laos. The project was discontinued in 1999, and there has been no replacement.

Other agency programmes are oriented to technical skills:

The German Technical Cooperation Agency provides capacity and quality assistance to formal and informal vocational training centres. It has subcontracted the delivery of entrepreneurship development courses in these centres to Lao Enterprise Development Consultants (the successor of the Lao-German Small Enterprise Development Project).

The Finnish Government has supported the Youth Skills Training Centre in Vientiane to give training in management including computing and foreign languages.

The Mekong Project Development Facility was established in 1999 to provide services to medium and large businesses.

The Chamber of Skilled Crafts of Koblenz (Germany) has worked with the Lao Chamber of Commerce to promote handicrafts, and give training in sector-specific business management, product design in bamboo, rattan, silverwork and pottery, and exporting.

The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) works with medium and large businesses in the garment/handicraft sectors to help develop exports. UNESCAP also conducts workshops on quality improvement and export marketing and assists Lao businesses to participate in international trade fairs.

The Japanese Overseas Volunteer Cooperation (JOVC) has provided skills training to villagers in rural Laos, particularly in weaving and natural dying.

5.5 Access to Credit

Many international agencies and NGOs are involved in the development of the finance sector. The Asian Development Bank has helped in the corporate governance of state-owned commercial banks and the restructuring of the banking sector. Seven state commercial banks have now merged into three. These steps have still not generated expected results and the Bank is considering further governance and capacity support.

In addition, there are many international agencies and NGOs engaging in the informal financial sector, principally: the World Bank, the International Fund for Agricultural Development (IFAD), La Caisse Française du Dévéloppement (CFD), Swedish International Development Assistance (Sida), the Asian Development Bank (ADB), the European Commission (EU), Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) Gmb, German Agro Action (GAA), Family Planning Australia (FPA) and the United Nations Development Programme.

These projects are mostly in agricultural and integrated rural development. However, they also cover credit schemes and revolving funds.

The International Fund for Agricultural Development funds the Xieng Khouang Agricultural Development Project, which has two credit components: cattle banks and irrigation loans.

La Caisse Française du Dévéloppement supports various projects, such as the Phongsaly Rural Development project and the Boloven Plateau Development Project, which provides loans for animal banks, and mobilizes savings deposits as part of a community development credit and savings scheme.

Swedish International Development Assistance (Sida) supports the Lao-Swedish Forestry Programme that initiated a village-based credit programme. This programme also promotes income-generating activities in agriculture, forestry, or home-based activities, with the aim of encouraging sustainable land use.

The Asian Development Bank has implemented its Tree Plantation Project, which has provided loans for farmers and for farm enterprises through the Agriculture Promotion Bank (APB). ADB also expects to launch a Rural Finance Development project, which will help reform and improve the services of the APB and develop credit unions as an alternative source of rural financial services.

The European Commission, GTZ and the UNDP also have various rural agricultural projects that provide Village Revolving Funds, rice banks, animal banks and help form credit unions. They also provide loans directly and/or through APB or other NGOs.

The World Food Programme (WFP) provides capital to NGOs, CARE International, Adventist Development and Relief Agency (ADRA), ZOA who then establish rice banks.

In addition to international agencies, NGOs are also active in the field of microcredit and Village Revolving Funds. ADRA, CARE International, Coopération Internationale Pour le Dévéloppement et la Solidarité (CIDSE), the Mennonite Central Committee (MCC), Norwegian Church Aid (NCA), Oxfam Solidarity-Belgium, Quaker Service Laos (QSL-American Friends Service Committee), Save the Children-Australia (SCA), World Vision (WV), ZOA-Lao PDR, and German Agro Action (GAA) are some of the NGOs that help organize rice banks and animal banks for buffalo, pigs and poultry raising. They also organize revolving funds for activities such as seed purchase, drug purchase, nurseries, planting mulberry trees, feeding silk worms, and weaving.

Other NGOs also provide loans for a range of purposes. Community Aid Abroad (CAA) gives loans for community and women's development. Concern - Lao PDR provides loans for repatriation and resettlement. CONSORTIUM provides income generation loans for repatriation. Canadian Volunteer Organization (CUSO) offers agriculture, pig rearing and fish culture loans. World Concern (WC) gives loans for agriculture, pisci-culture, small animal raising and land clearance. The Écoles Sans Frontières (ESF), Action Nord SUD (ANS), Pact, and SIPSACRES are involved in cash community credit and savings, credit union, and microfinance activities, respectively.

The Coopérative des Crédits pour le Soutien aux Petites Unités de Production is a credit union organized by a private cooperative. It provides loans to groups of small entrepreneurs with an interest rate slightly higher than banks, but much lower than the Houay, or the moneylenders.

5.6 Support for Female Entrepreneurs

Aside from the dimensions of international NGO programmes that address gender needs there are two main coordinating agencies that have different degrees of responsibility for the support available to female entrepreneurs.

The Lao Women's Union (LWU)

This is a long established government agency, and acts as the official representative of Lao women, and children, from the various ethnic groups and promotes equal rights, freedom from discrimination, and a better life for Lao women.

While promoting female-owned micro/small enterprises was part of the LWU's 1998-2003 Development Programme, it has had limited resources and a very broad coverage (600,000 LWU members throughout the country). The promotion of women in micro/small enterprises appears to be a relatively unimportant part of the LWU's overall programmes. Of the 19 projects in the LWU's Development Programme only two have links to micro/small enterprises: the 'Income Generation Project for Women and their Families', and 'Vocational and Skills Training for Women.' In these the LWU, in cooperation with international agencies such as UNDP, UNICEF, JICA, and Family Planning Australia, provides training in gender issues, small-scale business, accounting, and weaving. Priority is given to rural women engaged in agriculture-related micro business and inherited weaving.

A project that has been successful was the Small Enterprise Development Project, a joint Lao-German government project that directly promoted micro/small enterprises through intensive training and counseling with specific consideration of gender issues. Unfortunately, it no longer exists.

The National Chamber of Commerce and Industry (NCCI)

The chamber also supports the development of enterprises. It has 350 member companies covering a broad cross-section of the Lao business community in Vientiane and in provincial cities. (National Chamber of Commerce and Directory, Membership Directory, 2001.)

The NCCI consists of nine business groups, eleven sectors, and one association: the Lao Textile and Garment Industry Group, the Lao Handicrafts Group, the Foodstuff and Consumer Group, the Construction Material Group, the Construction Group, the Hotel Group, the Vehicle and Spare Parts Group, the Medicine Group, the Petroleum Group, the Association des Exportateurs de Caf?, the Travel Industry Sector, the Agriculture and Forestry Sector, the Consultancy Sector, the Transportation Sector, the Banking and Insurance Sector, the Mining Sector, the Restaurant Sector, the General Industry Sector, the General Trading Sector, and the Education Sector.

Of these the main group involving women is the Lao Handicrafts Group. Through it, female entrepreneurs receive training in marketing and production, and some involvement in domestic and international trade fairs. However the assistance is very limited and is still not accessible by many female owners of micro/small enterprises in textile and weaving.

5.7 Support for Entrepreneurs with Disabilities

More attention is now being paid to the needs of persons with disabilities. There are four government agencies and several NGOs which work in cooperation with local partners mainly under the umbrella of the Ministry of Health and the National Center for Medical Rehabilitation.

The Ministry of Health (MoH)

This Ministry oversees all development projects for people with disabilities in Laos. The Ministry is also responsible for the prosthetics and orthotics, particularly for civilians that are delivered through the National Center for Medical Rehabilitation, a Department of the MoH.

The National Centre for Medical Rehabilitation (NCMR)

This was set up in 1962 within the MoH. Its 14 sections include medical rehabilitation, orthopedic surgery, production and assembly of orthopaedic prostheses and orthoses, staff training, vocational training for persons with disabilities, and a special school for children who are visually and hearing impaired. The NCMR has also a Community-Based Rehabilitation Unit at the centre itself, and four in the provinces where disability cases are more prevalent: in the North: Xieng Khouang, and Louang Prabang; and in the South: Sekong, and Champasack.

The Ministry of Labour and Social Welfare (MLSW)

This Ministry plays a similar supervisory role to the Ministry of Health for projects related to disabilities. Through a central department of War Veterans and Social Welfare, the MLSW is in charge of supporting disabled people at the grass roots level, including war veterans. Most of the staff has some kind of disability themselves or were soldiers during the war. This department also is responsible for the control, management and funding of the prosthetic centre at Ban Keun in Thoulakhom District, and the Provincial Labour Departments. The Ban Keun centre is relatively large with two buildings for prosthetic operations.

The National Committee for Handicapped Persons (NCHP)

The Committee was established in 1995 following the signing of the Proclamation of the Asian and Pacific Decade of Disabled Persons by the Lao government. Its job is to coordinate efforts to promote full participation of disabled Lao people and to provide a link between the two ministries, of Health, and of Labour and Social Welfare to coordinate government policy and programmes. The President and Vice President of the Committee are the Minister of MSLW and the Vice-Minister of MoH respectively.

The NCHP Strategic plan for 2000-2003 includes twelve key areas such as improving coordination between the government, and international and local organizations, reviewing legislation that addresses inequalities for people with disabilities, promoting education, and ensuring employment for disabled people. (Strategy Plan for Disabled People Rehabilitation and Development, 2000-2003, National Committee for Handicapped Persons, Ministry of Labour and Social Welfare, 2000.) It aims to develop support for vocational training in agriculture, handicrafts, electronics, and mechanics, and to promote both enterprise development for people with disabilities (Douangngot, B., Head Secretariat, National Committee for Handicapped Persons, 2001.) and the capacity development of Lao personnel working with disabled persons. (Report on Performance of National Committee for Handicapped Persons from 1995-2002, Ministry of Labour and Social Welfare.)

The Lao Handicapped Women and Children's Association (LHWCA)

This is a volunteer-based mass organization under the overall supervision of the Lao Women's Union. It advocates the common rights of Lao handicapped women and children. The association also seeks funds, support, and training from donors for training disabled women and children in order to encourage self-sufficiency and reduce the 'burden on the party, government, parents and society'.

The Lao Disabled People's Association (LDPA)

This is the only local agency working to support people with disabilities. It was formed in 1990, and became an Association in 1995. In July 2001, it was officially recognized by the government as a non-profit NGO and self-help organization, representing people with all types of disabilities. LDPA's activities include advocacy and representation at local and international levels, workshop organization, and management and leadership development for provincial leaders with disabilities. It offers vocational training to its members and courses such as computer studies, office management, accounting, sewing, and making handicraft products. It has more than 400 members. (Sivila, C., Board of Directors, Lao Disabled People's Association, Vientiane Municipality, 2002.) The Association has recently established a Disabled Women Development Centre that provides vocational skill training for women with disabilities. It expects to develop 32 skilled persons every year through four different skills training courses: dress-making, stationery products and home deco from banana paper weaving and computer.

Handicap International Organization (HI)

This is a well-known international NGO working in rehabilitation services. In 1997, it conducted a national socio-economic survey in cooperation with UXO Lao. Since then it has provided technical and institutional assistance to UXO Lao, and was also involved in clearance activities in Savannakhet. It assists the physical therapy unit of Mahosot Hospital and three other hospitals in Vientiane. It also provides training programmes for hospital physical therapists. In the future, it plans to provide similar assistance in the provinces.

POWER-COPE

This operated under the NCMR in 1995 with a programme to reconstruct and re-equip the NCMR Prosthetics Department. In 1996, POWER conducted a nation-wide survey of disabled people focusing on amputation. It estimated there were approximately 4,000 amputees in Laos. In 1997, POWER joined with World Vision, MoH-NCMR, and the Cambodian School of Prosthetics and Orthotics to form the Cooperative Orthotics and Prosthetic Enterprise (COPE), to provide a national service in prosthetics and orthotics free of charge. COPE plans to increase awareness of its services. Accommodation will be constructed in five provincial centres and the patients' subsistence and travelling expenses will be provided. It is estimated approximately 1,200 limbs and 4,000 orthotic devices are needed each year.

The Leprosy Mission International (TLMI)

This agency is assisting the National Center for Dermatology and Venereology (NCD) to rehabilitate people with Hansenite's disease. TLMI aims to improve people's standard of living via community-based interventions and its work covers prevention, health, education, referral for treatment and surgery, and footwear production. It plans to have the rehabilitation team travel to the field, see people in hospitals, trace people who were driven from their villages into the forests, and eventually assess the rehabilitation needs of each individual.

World Concern

This agency initiated a Community-Based Rehabilitation Project in Salavan Province in 1992. It promotes physical rehabilitation and income generation for persons with disabilities. This project however, as noted earlier, reported misunderstandings about the concept of credit, resulting in poor loan repayment.

Save the Children Fund UK

This agency working with the Ministry of Education and the Ministry of Health, particularly the NRMC, and with support from UNESCO, piloted the first Inclusive Education Project in the academic year 1993-1994 in one primary school in Vientiane Municipality. In the academic year 2000-2001, the project was expanded to all provinces, and covered 41 districts out of the total of 141. 636 children with mental and physical disabilities attended the 162 schools that are under the project. They comprise 49 kindergartens, 104 primary, and 9 lower secondary schools. The SCF-UK aims to expand the project to all 141 districts by 2005, and to include 441 more schools under the Inclusive Education Programme. These will be: 134 kindergartens, 279 primary, and 28 lower secondary schools . (Save the Children UK, Inclusive Education Annual Conference: Report on Inclusive Education 1993-2001, and Inclusive Education 5-year Plan, 2001-2005, Vientiane, 2001.)

Sisters of St. Paul de Charters of Thailand

This agency contributed funds for the building of a vocational training centre for students with disability in Ban Sikert, 14 kilometers outside Vientiane, according to a plan proposed by the NCMR. The centre started operating in 2000 and now offers six courses in secretarial skills, accounting, computing, English language, tailoring and electronic appliance repair.

5. Development Programmes
Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR

top of the page