| Project Detail |
Project Name Building Resilience and Reducing Rural Poverty Project
Project Number 57225-001
Country / Economy Lao Peoples Democratic Republic
Project Status Active
Project Type / Modality of Assistance Grant
Loan
The project will be aligned with the following impact: social welfare system strengthened to build resilience and promote human and social development. The outcome will be: health, resilience, and socioeconomic profile of beneficiary households improved.
Project Rationale and Linkage to Country/Regional Strategy
Macroeconomic vulnerabilities. The annual economic growth of the Lao Peoples Democratic Republic (Lao PDR) was high, averaging 8% between 2006 and 2016, but the pandemic, vulnerability to climate change and external shocks, and worsening macroeconomic imbalancesnotably steep currency depreciation, high inflation, and rising public debtmoderated average growth from 2017 onwards. Economic growth in the country has been narrow, driven primarily by export-oriented, capital-intensive foreign investment in natural resources, largely hydropower and mining, and more recently in transport. The growth slowdown in recent years narrowed fiscal space for investing in human capital, resulting in increased vulnerability to a range of economic, climate and disasters, environmental, and health shocks. The coronavirus disease (COVID-19) pandemic caused income and job losses estimated to equal 5% of gross domestic product (GDP), with GDP contracting by 0.5% in 2020 as tourism collapsed, demand for energy and other exports fell, and fiscal woes constrained economic stimulus (footnote a). Debt distress has also emerged as a constraint on the Lao PDRs development, requiring urgent attention as it stymies progress on the Sustainable Development Goals and related climate commitments.
Poverty and food insecurity. The official national poverty rate of the Lao PDR stood at 18.3% in 2018 prior to the pandemic but remains high for a lower-middle-income country and leaves many at risk when shocks strike. The majority of the countrys poor continue to reside in rural areas, where the poverty rate is close to 24%, compared to 7% in urban areas. High-frequency data collected during the pandemic revealed significant adverse impacts on income, employment, food security, and nutrition, particularly among rural households and those in the bottom 40% of the income distribution. High inflation has further eroded household purchasing power and given rise to food insecurity. As of June 2023, one in seven households across the country were food-insecure, while some provinces saw food insecurity reach as high as 30%.e In the absence of social protection, 60% of the population is having to adopt livelihood-based coping strategies such as spending savings, cutting critical health expenditure, or borrowing to buy food. Almost 45% of households are relying on food-based coping strategies such as consuming less diverse and preferred food, limiting portion sizes, and sacrificing adult meals so children can eat.
Rural women and children face heightened risks. Food insecurity and malnutrition are particularly common among rural households, women, and children. Almost half of women of reproductive age suffer from anemia. Childhood chronic undernutrition (stunting) levels among children under 5 years old are the highest in the Greater Mekong Subregion, increasing from 31% in 2019 to 37% in 2023.g The combination of seasonal incomes, climate-sensitive livelihoods, and limited social assistance continues to leave rural households, especially women and children, disproportionately vulnerable to external shocks (footnote f). Moreover, the forced adoption of risky coping strategies may depress health and development outcomes over the long term.
Addressing the root causes of malnutrition. The root causes of malnutrition include poverty and cross-cutting gender and cultural dimensions such as womens socio-economic status, agency, and empowerment. Several studies note that the likelihood of stunting in the Lao PDR is lower when women have greater autonomy and decision-making power over their own health and the health care of their children as well as control over financial resources. Similarly, higher levels of self-esteem among women are associated with better nutritional outcomes nationally. Global evidence demonstrates that safety nets and poverty graduation programs can significantly reduce poverty and food insecurity, empower women, and increase womens social capital. In turn, these programs help improve health, nutrition, and educational outcomes, build resilience to shocks, and significantly reduce gender-based violence (GBV).j
Inadequate social protection. The Lao PDR lacks adequate social protection to protect incomes and livelihoods and build long-term resilience to shocks, including increasing climate-related shocks. Only 12% of the population is covered by any form of adequate social protection, one of the lowest coverage rates in Asia and the Pacific. Similarly, social protection expenditure is less than 1% of GDP, significantly lower than neighboring Viet Nam (7%), the Philippines (2.6%), Indonesia (1.3%), Cambodia (0.9%), and Myanmar (0.8%). The country faces three fundamental challenges in social protection.
Under-coverage of targeted social protection programs. Targeted social assistance such as cash transfer programs helps improve the efficiency of public expenditure and makes public spending more pro-poor. However, at present, there is no large-scale national safety net program targeted to the poor and vulnerable. Social assistance of any kind reaches just 0.9% of intended beneficiaries, the lowest in Asia and the Pacific. A promising nutrition-sensitive conditional cash transfer program is operational only in 12 districts in four provinces. The country does have a near-universal social registry managed by the Ministry of Agriculture and Forestry (MAF) which can be utilized for targeting social assistance more efficiently.
Additionally, there is an absence of holistic poverty graduation programs to help vulnerable groups such as rural women overcome the multiple facets of poverty and vulnerability. Poverty graduation programs, also known as the graduation approach, are an innovation in social protection that assist the poor and vulnerable to pursue sustainable livelihoods, build resilience, and progress towards economic self-sufficiency. These programs build on the strong foundation of social assistance by transferring economic and productive resources to women and deliver dedicated coaching and training to help establish and maintain diverse livelihoods. They are particularly relevant in the context of the Lao PDR, which experiences regular flooding, storms, droughts, and landslides, with the rural poor often losing entire income streams. Dependent on rainfed agriculture, rural communities face significant climate and disaster risks, which are further expected to increase in the future due to climate change. Women comprise over half of the agriculture workforce and contribute significantly to agriculture production. However, female-headed farming households often lack crop diversification, rendering them less resilient to climate change impacts and disasters.
Insufficient digitization, integration, and shock-responsiveness of social protection systems. The Lao PDRs social protection system is still in nascent stages of development, with limited use of digital technology solutions or interoperability across systems such as the social registry, the national ID, and civil registration systems. Similarly, social protection lacks shock-responsive and adaptive features, with limited links with disaster and climate risk information and early warning systems. This makes it harder for the government to scale up social protection horizontally and vertically in a timely manner in anticipation of, or immediately after, a shock. Individual components along the social protection delivery chain also remain underdeveloped. These include underdeveloped monitoring and evaluation systems, digital government-to-person payments, and grievance redressal systems that promptly address the needs of women, ethnic minorities, and other vulnerable groups.
Inadequate data and capacity to implement integrated, gender-smart, and evidence-based programs. The Lao PDR suffers from a lack of sex-disaggregated data and analysis on poverty, vulnerability, and GBV, particularly in the context of disasters and climate change. This makes it harder to design evidence-based policies that address womens unique constraints. The last national study on womens health and life experiences including violence against women, for example, was conducted in 2014.p Climate-induced shocks can expose women and girls to significant risks, particularly when they are unable to access social protection schemes and other essential services (e.g., shelter, rehabilitation, and legal services). The Lao PDR also suffers from weak project management and operational capacity for key functions such as coordination, communication, procurement, financial management, safeguards, and rigorous monitoring and evaluation of social protection programs. Finally, the limited capacity of program implementers impedes the quality delivery of interventions linked to cash transfers such as social and behavior change communication (SBCC).
Impact
Social welfare system strengthened to build resilience and promote human and social development |
