Japan-Laos Relations

September 6, 2016

1 Basic understanding

 Amid the launch of the ASEAN Economic Community (hereinafter referred to as the “AEC”) and progress with economic integration, the development of the Lao People’s Democratic Republic (Lao PDR), the only landlocked country in ASEAN, goes hand in hand with progress in the integration of ASEAN. The stability and prosperity of Lao PDR is also vital to ensuring the unity of ASEAN and ensuring the peace and prosperity of the region as a whole.

 Based on this recognition, Lao PDR has start-up the new Five Years of the National Socio-Economic Development Plan VIII (2016-2020) (hereinafter referred to as the “8th NSEDP”) which presented “3 Outcomes (Outcome 1: The Economy: A strong economic foundation and reduced economic vulnerability; Outcome 2: Society: Human resources development, poverty eradication, access to high-quality education and healthcare, and the preservation and development of Lao PDR’s unique culture; and Outcome 3: The Environment: Green and sustainable natural resources and environmental protection and management, and preparedness for natural disasters and climate change)”. Lao PDR formulated a national plan for ensuring sustainable development toward attaining the Sustainable Development Goals (SDGs), and achieving its goal of graduating from least developed country (LDC) status by 2020, through the realization of these Outcomes. Japan and Lao PDR will work vigorously together to achieve the goals of the 8th NSEDP, based on their mutually-beneficial “Strategic Partnership.”

 For attaining the “3 Outcomes” the three most important challenges for Lao PDR will be: I. Achieving greater connectivity with neighboring countries; II. Lifting competitiveness through industry diversification, the development of small- and medium-sized enterprises (SMEs) and training the industrial workforce; and III. Rectifying disparity through balanced regional and urban development that takes environmental and cultural preservation into account. Japan expresses its strong determination to continue to cooperate with Lao PDR as it works valiantly on these challenges.

 The two countries confirm that they will pursue the following objectives through this Joint Plan, based also on the “New Tokyo Strategy 2015” for Mekong-Japan Cooperation adopted at the Seventh Mekong-Japan Summit Meeting in July 2015.

2 The future vision for Lao PDR that the Joint Plan envisages

 In this Joint Plan, Japan and Lao PDR will seek to bring about Lao PDR’s graduation from LDC status by 2020 and make progress toward achieving the SDGs as a result of realizing the following points:

  • Land and air routes will be developed as a transportation network that meets ASEAN and international standards and is resistant to natural disasters. This will ensure safe and smooth flows of goods and people and form the basis for a distribution hub for the Mekong region.
  • Promoting the development of power generation that utilize Lao PDR’s abundant water resources and developing the electricity networks will lead to infrastructure sustainable development and enhanced industrial competitiveness. Therefore, electricity exports to the Mekong region will be promoted, thus contributing to the economic development of Lao PDR and neighboring countries of neighboring countries as well as stronger domestic finances.
  • An environment conducive to the development of the industrial human resources will be prepared so that increased competitiveness and the establishment of diverse companies that contribute to green growth will be encouraged. The investment and business environment will be streamlined with the goal of vitalizing private-sector companies’ activities.
  • Irrigation agriculture will be made possible so that agricultural commodities that are safe and have a regional flavor can be produced, and they will be supplied freshly and safely to domestic and overseas markets through a cold chain, which will ultimately serve to establish agriculture as an industry that employs a large number of citizens and lift farmers’ incomes.
  • Public social infrastructure such as health, medical care, education, waterworks and sewerage systems, electricity and public transport will be put in place in a balanced manner in cities and regions, and green growth will be promoted throughout the country. This will enable each region’s unique cultural and lifestyle base to be preserved.

3 The three pillars of cooperation

 In order to achieve the above-mentioned points, the following strategies will be deployed as three pillars of cooperation.

I Strengthen connectivity with countries in the region on the tangible and intangible fronts

 In its 8th NSEDP, Lao PDR states that it will promote integration in the region and the international community in order to achieve a strong economic foundation and reduced economic vulnerability (Outcome 1).

 In order to contribute to Lao PDR’s sustainable development, Japan will implement high-quality support on both the tangible and intangible fronts to strengthen Lao PDR’s connectivity with its neighboring countries, based on “the Partnership for Quality Infrastructure” and “Expanded Partnership for Quality Infrastructure,” and under “the Japan-Mekong Connectivity Initiative”.

 On the basis mentioned above, the two countries will implement the cooperation outlined below.

  • Lao PDR’s inland distribution will take on an increasingly important role in the Mekong region as a result of the launch of the AEC. In light of that, Japan and Lao PDR will jointly engage in the following programs.
    • Develop the road and bridge infrastructure for making Lao PDR a transportation hub of the Mekong region.
    • Develop the systems and infrastructure (improve customs clearances, international border check-point etc.) for making Lao PDR a distribution network base of the Mekong region.
  • As a result of Japan’s support, the Project for the Expansion of Vientiane International Airport is making progress, and on that basis the following programs for developing Lao PDR’s airports will be jointly pursued from a medium- to long-term perspective.
    • Develop and operate Vientiane International Airport in order to strengthen the connectivity of the sky
    • Develop safe operating structures at regional airports
  • Japan and Lao PDR will jointly engage in the following program in order to make maximum use of Lao PDR’s abundant water resources and promote the development of infrastructure for industrial development by ensuring stable electricity supply.
    • Develop power sources and the electricity transmission network in Lao PDR, which is being counted on to become the “battery” of the Mekong region

II Develop the industrial human resources in order to diversify Lao PDR’s industries and enhance their competitiveness

 In its 8th NSEDP, Lao PDR states that it will promote areas such as developing the capacity of its public and private labor force and making local companies more competitive in domestic and international markets in order to realize a strong economic foundation and reduced economic vulnerability (Outcome 1). In addition, it vows to pursue goals such as ensuring food security and improving nutrition in order to achieve Outcome 2, the promotion of social development.

 Under the banners of the “Industrial Human Resource Development Cooperation Initiative” and “Innovative Asia,” Japan will support the development of Lao PDR’s industrial human resources and the enhancement of its industrial competitiveness, and will also implement measures that enable Lao PDR’s competent human resources to have first-hand experience in Japan’s innovative environment, thereby contributing to enhancing innovation in both countries.

 On the basis mentioned above, the two countries will implement the cooperation outlined below.

  • In order to diversify Lao PDR’s industries and increase their competitiveness, there is a need to comprehensively engage in developing its industrial human resources. Additionally, to develop the employment environment for the human resources that are trained, it will be necessary to move ahead with formulating industrial policies, promoting the establishment of SMEs and increasing their competitiveness, and encouraging the attraction of foreign investment. Therefore, Japan and Lao PDR will jointly engage in the following programs.
    • Strengthen basic education in such areas as science and mathematics, and enhance higher education and develop vocational training
    • Develop the investment environment, enhance the capacity for formulating industrial policy, and promote public-private sector dialogues
    • Improve access to the funding needed to establish and nourish SMEs
  • Agriculture is one of Lao PDR’s core industries, with promising markets in neighboring countries and strong development potential thanks to the country’s fertile agricultural land. In the interests of establishing agriculture as a competitive industry and ensuring food security, developing Lao PDR’s agricultural infrastructure is a priority issue. Japan and Lao PDR will jointly engage in the following programs while drawing on the experience and expertise that Japan possesses on both the tangible and intangible fronts in connection with promoting agriculture.
    • Promote areas such as irrigation agriculture in order to encourage commercial crops, and clean agriculture that offers safety and peace of mind.
    • Build a food value chain that meets the standard for the markets of neighboring countries

III Rectify disparity through balanced urban and regional development that takes environmental and cultural preservation into account

 In its 8th NSEDP, Lao PDR states that it will seek to reduce poverty through improved living conditions, boost access to high-quality education, health and medical care and social welfare, as well as protect traditions and culture, with the aim of achieving the promotion of social development (Outcome 2). Additionally, the 8th NSEDP cites a green, clean policy and states that sustainable natural resources management will be promoted in order to achieve environmental conservation (Outcome 3). Japan possesses a large amount of experience and expertise in urban development and high-quality social services, and in making environmental conservation and development compatible.

 From these standpoints, the following cooperation will be implemented.

  • In order to cope with rapid urban development and population growth in the capital city of Vientiane and regional cities, and to improve the urban environment, protect scenery and culture and enhance public services for citizens on the basis of green growth, Japan and Lao PDR will jointly engage in the following programs.
    • Develop public transportation modes such as buses, including formulating strategies for transport development in the capital.
    • Develop basic public infrastructure, such as waterworks
    • Pursue sustainable development in regional cities, including Luang Phabang, a World Heritage City
  • Preserving the Mekong River and the Mekong River basin will benefit not only Lao PDR but also the green and clean development of the entire Mekong region, and the following program will be jointly implemented on that basis.
    • Conserve the environment and develop it sustainably, including by preserving the forests of the Mekong River basin.
  • The following program will be jointly implemented in order to achieve the SDGs and bring about the improvements in the poverty reduction and human resources development indices that will be required to graduate from LDC status by 2020, and to attain Universal Health Coverage in 2025.
    • Improve the quality of healthcare, education and other sectors, and rectify domestic disparity

IV Cross-sectoral issues

 To ensure these three pillars of cooperation are steadily implemented, it will be vital to stabilize the macro economy and achieve financial stability, coordinate development plans with the compilation of budgets, and strengthen governance. The Government of Lao PDR cites improved mechanisms for stabilizing the macro economy, stronger financial planning and the strict implementation of the constitution and laws (national development based on the rule of law) as important issues in the 8th NSEDP. From that perspective, Japan and Lao PDR will jointly engage in the following programme, as areas that will supplement the three pillars of cooperation.

  • Reinforce the annual government revenue, improve and disseminate for the citizen, entrepreneurs and private sector awareness related to custom clearance and tax-payment and strengthen the planned management and monitoring of development budgets in order to stabilize the macro economy and finances [P].
  • Formulate the laws required to promote the rule of law and strengthen the capacity for disseminating and enforcing them, while striving to enhance central and regional administrative capabilities so that development projects can be executed appropriately based on the Sam Sang Policy.
  • Seek to develop the facilities and equipment needed for removing unexploded ordnance and enhance the capabilities of the relevant organizations, while coordinating with other development partners.

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