Foreign Aid on the Decline

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Prime Minister Thongloun Sisoulith has called for central and local departments to do more to pursue the development agenda and strive for greater self-reliance as foreign aid to Laos declines.

The premier gave the advice at a two-day meeting held last week to instruct officials on the implementation of the socio-economic development plan and budget for 2017.

The trend in the reduction of foreign aid over the coming years is the result of Laos enjoying greater development and donors moving their assistance to other, poorer countries.

“We shouldn’t expect much [from the assistance]. We should try to be self-sufficient,” Mr Thongloun told the meeting.

He made the comment as Laos approaches the 2020 deadline for graduation from Least Developed Country status.

An official from the Ministry of Planning and Investment in charge of Official Development Assistance (ODA) said it is a common trend globally that foreign aid provided to a country decreases when that country achieves a certain level of development and self-reliance.

However, the official, who asked not to be named, said that even if foreign aid declined this did not mean Laos would suffer financially because the country expected to obtain more loans.

“Growing development means a country has a growing capacity to repay debt, so it could expect to secure more loans,” he said.

The official added that though the number of grants might decrease, ODA, which comprises both grants and loans, could increase in the form of loans.

In the 2015-16 fiscal year, Laos received more than 6,462 billion kip in ODA, of which almost 2,000 billion kip was given as grants and the rest as loans.

Despite the expected decline in foreign grants, in 2017 the government anticipates it will receive more ODA worth 8,629 billion kip, which will represent 23.73 percent of total expenditure planned for 2017.

In light of the decreasing availability of grants, Mr Thongloun stressed the need for state departments to work harder to attract foreign investment as a source of finance.

To achieve this, he told central and local authorities attending the meeting to enhance the investment climate by simplifying and expediting the investment proposal process in a transparent manner.

“Mechanisms must be quick, timely and transparent. It [the investment proposal] must be passed through only a single window,” he told the meeting, adding that the current process was too slow and not transparent.

In addition, the premier told the meeting to ensure the macro-economy remained stable along with the inflation rate. The price of goods sold in markets should also be regulated to prevent fluctuation, he added, noting that these were important factors in attracting investment.

Central and local departments were asked to incorporate the 2017 Socio-Economic Development Plan into their work plan and programmes based on local potential.

Source: Vientiane Times

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