Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Ernesto Sánchez-Triana, Editor © 2021 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. 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Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Ernesto Sánchez-Triana, Editor Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Contents List of Acronyms xii Foreword xv Acknowledgments xvi EXECTIVE SUMMARY 1 Context 2 Highlights of Diagnostic Analyses 2 Key Findings Informing Environmental Health Intervention Options 3 Key Findings Informing Natural Resource Degradation Options 3 Institutional Findings and Selected Policy Options 4 Outlook 4 1 INTRODUCTION | Ernesto Sánchez-Triana 6 Chapter Overview 7 Objective 8 Methodology 9 Content of Report 9 Notes 11 2 LAO PDR’S INSTITUTIONAL FRAMEWORK FOR ENVIRONMENTAL MANAGEMENT | Santiago Enriquez 13 Chapter Overview 14 Introduction 15 Institutional Framework for Environmental Regulation 16 Organizational Framework 22 Policy-based Strategic Environmental Assessments 29 Conclusions and Recommendations 32 Notes 37 References 37 3 COST OF ENVIRONMENTAL DEGRADATION: ENVIRONMENTAL HEALTH ISSUES | Bjorn Larsen 440240 Chapter Overview 41 Introduction 43 Household Air Pollution 43 Ambient Air Pollution 50 Water, Sanitation, and Hygiene 53 Lead (Pb) Exposure 61 Conclusions 65 Notes 66 References 67 4 COST OF ENVIRONMENTAL DEGRADATION: NATURAL RESOURCE DEGRADATION AND NATURAL DISASTERS | Michael Brody and Elena Strukova Golub 72 Chapter Overview 73 Introduction 74 Mekong Basin and the Natural Capital of Lao PDR 76 Cost of Deforestation/Forest Degradation in Lao PDR 82 Agricultural Expansion and the Cost of Soil Degradation 92 Potential Cost of Hydropower Development 100 ii Cost of Natural Disasters in Lao PDR 104 Environmental Cost of Mining 109 Climate Change 112 Conclusions 119 Notes 121 References 122 5 ENVIRONMENTAL PLANNING AND ENVIRONMENTAL IMPACT ASSESSMENT | Santiago Enriquez, William Ward, and Ernesto Sánchez-Triana 126 Chapter Overview 127 Introduction 128 ESIA and the Green Growth Agenda in Lao PDR 130 Available Data on Environmental Assessment in Lao PDR 132 Role of ESIA in the Lao PDR Environmental Management Framework 137 Recent Developments and Recommendations 143 Notes 147 References 147 6 S OLID AND PLASTIC WASTE MANAGEMENT | Mayra Gabriela Guerra Lopez and Klaus Sattler 150 Chapter Overview 151 Introduction 152 Solid Waste Situation in Lao PDR 152 Institutional Framework and Stakeholders 157 Conclusions and Recommendations 159 Notes 161 References 161 7 POVERTY AND ENVIRONMENT | Bjorn Larsen 164 Chapter Overview 165 Introduction 167 Poverty in Lao PDR 167 Environmental Health and Poverty 171 Natural Resources and Poverty 178 Summary 190 Notes 192 References 193 8 M ODELLING ECONOMIC GROWTH AND ITS LINKAGES WITH GREEN GROWTH | Pasquale Lucio Scandizzo, Daniele Cufari, and Maria Rita Pierleoni 196 Chapter Overview 197 Introduction 199 Lao PDR’s Economic Structure 199 Social Accounting Matrix for Lao PDR 200 Impact on Income Distribution and Poverty 210 Conclusions 213 Notes 214 References 215 iii Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic 9 BENEFIT-COST ANALYSIS OF INTERVENTIONS TO ADDRESS PRIORITY ENVIRONMENTAL HEALTH RISKS | Bjorn Larsen 216 Chapter Overview 217 Introduction 218 Benefits and Costs of Household Air Pollution Control Interventions 218 Benefits and Costs of Improved Drinking Water and Sanitation Interventions 234 Benefits and Costs of Mitigating Arsenic in Drinking Water 242 Benefits and Costs of Ambient PM2.5 Air Pollution Control 247 Summary and Conclusions 253 Notes 258 References 260 BENEFIT-COST ANALYSIS OF INTERVENTIONS TO MITIGATE NATURAL RESOURCE 10 DEGRADATION | Michael Brody and Elena Strukova Golub 264 Chapter Overview 265 Introduction 266 Interventions to Reduce Deforestation Cost 266 Interventions to Reduce Agricultural Land Degradation 269 Interventions to Reduce the Impact of Large Dams on Fisheries 271 Interventions to Mitigate Flooding Disasters 275 Interventions to Prevent Degradation of Water Quality from Mine Drainage 278 Conclusions and Recommendations 281 Note 283 References 283 11 POTENTIAL USE OF ENVIRONMENTAL TAXES OR FEES IN LAO PDR | Richard Morgenstern 286 Chapter Overview 287 Introduction 289 Environmental Taxation 290 Environmental Tax on Fuels 294 Environmental Tax on Diesel Vehicles 300 Industrial Water Effluent Fee 306 Conclusions 313 Notes 315 References 316 12 POLICY OPTIONS FOR STRENGTHENING LAO PDR’S INSTITUTIONAL FRAMEWORK FOR GREEN GROWTH | Jack Ruitenbeek and Ernesto Sánchez-Triana 318 Chapter Overview 319 Context 320 Highlights of Diagnostic Analysis 320 Key Findings Informing Environmental Health Intervention Options 321 Key Findings Informing Natural Resource Degradation Options 322 Institutional Findings and Selected Policy Options 322 Outlook and Policy-Action Matrix 325 Notes 325 iv List of Boxes 4.1 Dependence on Nature of LMB’s Rural Communities 80 4.2 Adaptation Priorities in Lao PDR, Target Year 2020, Cost of Implementation US$0.97 Billion 118 List of Figures 2.1 Cost of Outdoor and Household Air Pollution in Selected Countries in 2017 14 2.2 Total Budget Distribution per Environmental Program, 2011–2015 (US$) 25 2.3 Distribution of GoL Development Budget per Environmental Program, 2011–2015 (US$) 25 2.4 Allocations to the Water Resources and Environment Sector (% of Total Budget) 27 2.5 Expenditure Items in the Water Resources and Environment Sector in Selected Years 28 3.1 Central Estimate of Annual Cost of Environmental Health Risks in Lao PDR, 2017 (LAK, Billions, and % Equivalent of GDP) 43 3.2 Population Prevalence of Solid Fuel Use, 2017 44 3.3 Use of Clean Energies for Cooking in 2000 and 2016 (% of Population) 45 3.4 Use of Clean Energies for Cooking in ASEAN Countries, 2016 (% of Population) 45 3.5 Population Use of Clean Energies for Cooking in Relation to GDP per Capita ($ PPP), 2016 45 3.6 Population Use of Clean Energies for Cooking in Relation to GDP per Capita (Current US$), 2016 46 3.7 Household Primary Cooking Fuel in Lao PDR and Vientiane Capital (% of Population), 2011–12 and 2017 46 3.8 Household Cooking Location in Lao PDR (% of Population), 2017 47 3.9 Relative Risk of Mortality from Long-Term PM2.5 Exposure, GBD 2017 49 3.10 Relative Risks of Major Health Outcomes Associated with PM2.5 Exposure 52 3.11 Sources of Household Drinking Water in Lao PDR (% of Population), 2011–12 and 2017 54 3.12 Use of Bottled Water for Drinking in Lao PDR (% of Population), 2011–12 and 2017 55 3.13 Household Treatment of Drinking Water in Lao PDR (% of Population), 2011–12 and 2017 55 3.14 Household Drinking Water with E. coli in Lao PDR (% of Population), 2017 55 3.15 Household Drinking Water with E. coli by Main Type of Drinking Water (% of Population), 2017 56 3.16 Household Drinking Water with E. coli by Quintile of Household Living Standard, 2017 56 3.17 Access to Sanitation in Lao PDR (% of Population), 2017 57 3.18 Access to Improved Sanitation in Lao PDR by Quintile of Household Living Standard, 2011–12 and 2017 57 3.19 Loss of IQ Points in Early Childhood 63 4.1 Natural Capital/GDP (in Constant 2014 US$) 76 4.2 National Wealth, Lao PDR 77 4.3 Adjusted Net Savings: Lao PDR 78 4.4 Components of Natural Resource Depletion and Air Pollution Damage in Lao PDR, 2016 78 4.5 Share of Value Added in Lao PDR 79 4.6 Mekong River Basin 81 4.7 Historical and Projected Forest Fragmentation in Greater Mekong Basin 82 4.8 Forest Cover Map in Lao PDR (2005–2015) 85 4.9 Major Agricultural Land Uses 94 4.10 Maize Production in Lao PDR 94 4.11 Paddy Rice Production 95 v Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic List of Figures 4.12 Growth in Paddy Rice Production and Yield, Lao PDR 2007–2015 96 4.13 Gap Between Attainable and Actual Paddy Rice Yields, 2012 96 4.14 Manure Applied to Soils 97 4.15 Location of Existing and Planned Dams in the Mekong Basin 103 4.16 Landslide Susceptibility in Lao PDR 105 4.17 Flood Events and the Directly Affected Population in Lao PDR 105 4.18 River Flood Risk in Lao PDR 107 4.19 Flood Risk Exceedance Curve for Lao PDR 107 4.20 Observed and Simulated Variations in Past and Projected Future Annual Average Temperature (Left) and Precipitation (Right) over Land Areas 117 5.1 Number of ESIAs Certified by MoNRE per Year (2011–2015) 129 5.2 Projects with ECCs at the Pre-Construction Phase of Operations 134 5.3 Projects with ECCs at the Construction Phase of Operations 134 5.4 Projects with ECCs in the Operations Phase of Project Development 134 5.5 Projects with ECCs in Closure or Unidentified Phases 134 5.6 GoL Environmental Monitoring by Type and Sector in 2018 136 5.7 GoL Environmental Monitoring by Budget Source and Sector in 2018 136 6.1 Per Capita Waste Generation 152 6.2 Solid Waste Composition 154 6.3 Waste Collection Coverage 154 6.4 Waste Disposal 154 7.1 Poverty Incidence and Distribution in Lao PDR, 2003–2013 167 7.2 Poverty Incidence by Economic Activity, 2003–2013 168 7.3 Provincial and District Poverty Incidence in Lao PDR: Provincial Level (2013, Top) and District Level (2015, Bottom) 169 7.4 Poverty Incidence and Distribution in GoL Priority Districts for Poverty Reduction, 2003–2013 170 7.5 Poverty Incidence and Distribution by Topography, 2003–2013 170 7.6 District-Level Indicators of Sanitation, Drinking Water, and Household Air Pollution (Top 3 Maps), and Poverty (Bottom Map), 2015 172 7.7 Household Cooking Energy Use in Lao PDR (% of Population), 2017 173 7.8 Household Cooking Energy Use in Vietnam (% of Population), 2014 173 7.9 Household Use of Improved Sources of Drinking Water (% of Population), 2017 174 7.10 Use of Bottled Water for Drinking in Lao PDR (% of Population), 2017 174 7.11 Household Treatment of Drinking Water in Lao PDR (% of Population), 2017 175 7.12 Household Drinking Water with E. coli by Household Living Standard (% of Population), 2017 176 7.13 Access to Improved Sanitation in Lao PDR (% of Population), 2017 176 7.14 Practice of Open Defecation in Lao PDR (% of Population), 2017 176 7.15 Under-5 Child Mortality Rates in Lao PDR, 2017 177 7.16 Prevalence of Underweight and Stunting among Children under 5 in Lao PDR, 2017 177 7.17 Natural Resource-based Sectors Contribution to GDP in 2017 (LAK, Billions) 178 7.18 Agriculture, Forestry, and Fishery Contribution to GDP, 2017 (LAK, Billions; % Share) 179 7.19 Forested Area by Type of Forest in Lao PDR, 2015 (Million ha; % of Territory) 181 7.20 Forested Area by Forest Classification in Lao PDR, 2015 (Million ha; % of Territory) 181 7.21 Food Consumption of the Rural Poor in Lao PDR (% of Consumption Value), 2012–13 182 7.22 Farm Households Engaged in Capture Fisheries in 2010/11, Place of Fishing 182 7.23 Farm Households Exploiting Pubic Forests in 2010/11, Type of Products 182 vi 7.24 Shares of Food Consumption among the Poor in Lao PDR, 2007/08 183 7.25 Population Density and Location of National Protected Areas (NPAs) in Lao PDR 185 7.26 Lao PDR Poverty Density (2015, Top); Location of National Protected Areas (NPAs, Bottom) 186 8.1 Value Added and Investment (Estimates) 206 8.2 Estimated Value-Added Impact of an Increasing Investment Shock 207 8.3 Estimated Impacts on Production 208 8.4 Estimated Impacts on Rents from Natural Resources (US$, Millions) 209 8.5 Estimated Impacts on Shadow Prices of Natural Resources (Relative Prices with Respect to the Base) 209 8.6 Estimated Impacts on Incomes (%) 211 8.7 Estimated Income Distribution and Lorenz Curve 212 9.1 PM2.5 Emissions from Selected Stoves 220 9.2 Health and Non-Health Benefits of Interventions (LAK per Household per Year), 2017 233 9.3 Benefit-Cost Ratios of Interventions for Control of Household Air Pollution, 2017 233 9.4 Benefit-Cost Ratios of Electric Stoves at Varying Electricity Prices, 2017 234 9.5 Health and Productivity Benefits of Interventions (LAK per Household per Year), 2017 241 9.6 Financial and Time Use Cost of Interventions (LAK per Household per Year), 2017 242 9.7 Benefit-Cost Ratios of Interventions for Drinking Water and Sanitation, 2017 242 9.8 Health and Productivity Benefits of Interventions (LAK per Household per Year), 2017 246 9.9 Financial and Time Use Cost of Interventions (LAK per Household per Year), 2017 246 9.10 Benefit-Cost Ratios of Interventions for Arsenic Mitigation, 2017 246 9.11 Benefit-Cost Ratios of Interventions for the Control of Ambient PM2.5 in Vientiane Capital, 2017 252 9.12 Central Estimate of Annual Cost of Environmental Health Risks in Lao PDR, 2017 (LAK, Billions, and % Equivalent of GDP) 254 9.13 Central Estimate of Annual Cost of Environmental Health Risks per Exposed Person (LAK, Millions) 254 9.14 Benefit-Cost Ratios of Household Air Pollution Control Interventions, 2017 255 9.15 Benefit-Cost Ratios of Electric Stoves at Varying Electricity Prices (/kWh), 2017 255 9.16 Benefit-Cost Ratios of Drinking Water and Sanitation Interventions, 2017 257 9.17 Benefit-Cost Ratios of Arsenic Mitigation Interventions, 2017 257 9.18 Benefit-Cost Ratios of Interventions for the Control of Ambient PM2.5 in Vientiane Capital, 2017 257 10.1 Benefit-Cost Ratios for Forestry Projects 269 10.2 Benefit-Cost Ratios of Projects for Mitigating Soil Degradation 271 10.3 Benefit-Cost Ratios of Projects for Mitigating Fishery Loss 274 10.4 Benefit-Cost Ratios of Projects for Mitigating Flood Damage 277 10.5 Number and Area of Projects by Main Products in the Mining Subsector 278 10.6 Benefit-Cost Ratios of Artificial Wetlands Construction on the Abandoned Mining Lands 280 11.1 Growth in Road Transport Fuel Consumption and Real GDP in Lao PDR, Index 2000–2015 295 11.2 Registered Vehicles in Lao PDR, 2013–2017 (Left: ‘000; Right: % Annual Growth Rate) 301 11.3 Registered Vehicles in Vientiane Capital, 2017 (Left: ‘000; Right: % of Vehicles in Lao PDR) 301 11.4 Transport Fuel Consumption in Lao PDR, 2000–2015 (Left: Million Liters; Right: % Annual Growth) 302 11.5 Estimate of Vehicle Engine Fuel by Vehicle Category in Vientiane Capital 302 11.6 Estimated Gasoline and Diesel Consumption by Vehicle Category in Lao PDR, 2015 (Million Liters) 303 11.7 BOD Water Pollution Intensities from Manufacturing Industries, Index 307 11.8 TSS Water Pollution Intensities from Manufacturing Industries, Index 307 11.9 Manufacturing Sector Water-Pollution Intensities of Toxic Chemicals and Metals, Index 308 11.10 Share of Industrial Value Added in Lao PDR, 2017 309 11.11 Share of Manufacturing Value Added in Lao PDR, 2017 309 vii Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic List of Tables ES.1 Annual Cost of Environmental Degradation in Lao PDR (% GDP) 2 ES.2 Range of Benefit-Cost Ratios of Interventions to Address Natural Resource Degradation and Natural Disasters 4 2.1 Key Elements of Lao PDR’s Legal Framework for Environmental Management 18 2.2 Budget Sources for the Natural Resource and Environment Sector Plan, 2011–2015 (US$) 24 2.3 Budget Allocations for the Water Resources and Environment Sector in Selected Years (LAK, Millions) 26 2.4 Changes in Budget Allocations between 2014–15 and 2017 26 2.5 Allocations to the Water Resources and Environment Sector in Selected Provinces, 2017 (% of Total Budget) 28 2.6 Recommendations for the Strengthening of Environmental Institutions in Lao PDR 35 3.1 Relative Exposure Levels by Household Member and Cooking Location 48 3.2 Long-Term Personal PM2.5 Exposure by Cooking Location in Households Using Traditional Cookstoves with Fuelwood or Charcoal (µg/m3) 48 3.3 Annual Health Effects of Household PM2.5 Air Pollution from Solid Fuels, 2017 49 3.4 Cost of Health Effects of Household Air Pollution from Solid Fuels (LAK, Billions), 2017 50 3.5 Monitoring Studies of Ambient PM10 Concentrations in Vientiane Capital, 2002–2008 50 3.6 Applied Population Exposure to Outdoor Ambient PM2.5 Air Pollution, 2017 51 3.7 Annual Health Effects of Outdoor Ambient PM2.5 Exposure, 2017 52 3.8 Cost of Health Effects of Outdoor Ambient PM2.5 Air Pollution (LAK, Billions), 2017 52 3.9 Attributable Fractions (AFs) of Diarrheal Disease from Inadequate WASH in Lao PDR, 2017 58 3.10 Annual Deaths from Inadequate WASH in Lao PDR, 2017 58 3.11 Cost of Health Effects of Inadequate WASH (LAK, Billions), 2017 59 3.12 Arsenic in Drinking Water and Use of Tubewells for Drinking in Central and Southern Lao PDR 59 3.13 Estimated Population Exposure to Arsenic (As) in Drinking Water in Central and Southern Lao PDR 60 3.14 Risk of Mortality from Arsenic in Drinking Water 61 3.15 Cost of Health Effects of Arsenic in Drinking Water in Central and Southern Provinces (LAK, Billions), 2017 61 3.16 Estimated Annual Losses of IQ Points (‘000) among Children <5 Years in Lao PDR, 2017 63 3.17 Estimated Health Effects among Adults from Lead Exposure in Lao PDR, 2017 64 3.18 Estimated Annual Cost of IQ Losses among Children under Five Years of Age in Lao PDR, 2017 64 3.19 Estimated Annual Cost of Health Effects of Adult Lead Exposure in Lao PDR (LAK, Billions), 2017 65 3.20 Annual Deaths and Days of Illness from Environmental Risk Factors in Lao PDR, 2017 65 3.21 Estimated Annual Cost of Environmental Health Effects in Lao PDR, 2017 66 4.1 Forest Classification in Lao PDR 84 4.2 Forest Cover Area by Type of Forest in 2015 85 4.3 Categories of Forests in Lao PDR 86 4.4 Annual Deforestation in Lao PDR 87 4.5 Annual Forest Degradation in Lao PDR 87 4.6 Non-Wood Value of Forest Land in the Lower Mekong Basin Countries (US$/ha) 88 4.7 Estimated Mean Values of Forest (US$/ha/yr) 88 4.8 Estimated Annual NTFP in Lao PDR (US$/ha) 89 4.9 Annual Average Carbon Emissions from Deforestation in 2005–2015 90 4.10 Annual Average Carbon Emissions from Forest Degradation in 2005–2015 90 4.11 NPV of Forest Ecosystem Value Loss (US$/ha) 92 4.12 Estimated Annual Deforestation/Forest Degradation Cost in Lao PDR 92 viii 4.13 Farm Area (ha) by Land Type, 2010–2011 93 4.14 Erosion Estimates in Lao PDR Studies Based on Land Use or Slope Gradient 98 4.15 Estimated Annual Cost of Agricultural Land Degradation in Lao PDR 99 4.16 Major Mainstream Hydropower Plants in Lao PDR 100 4.17 Structure of Capture Fish Production in 2007 102 4.18 Estimated Annual Cost of Externalities from Hydropower Development in Lao PDR 104 4.19 Mean Annual Losses from Floods and their Cost in Lao PDR 106 4.20 Estimated Annual Expected Economic Cost of Floods—Indicators in Lao PDR 108 4.21 Estimated Annual Cost of Natural Disasters in Lao PDR 109 4.22 Production of Mineral Commodities 110 4.23 Major Mining Operations in Nam Ngum River Basin, 2013 111 4.24 Total Annual Cost Attributed to Exposure to Mercury of Miners in Lao PDR 112 4.25 Disease Profiles of the Moderate and Severe Cases of Chronic Metallic Mercury Vapor Intoxication (CMMVI) 112 4.26 Drivers of Deforestation and their Contribution to the Total Annual Deforestation 115 4.27 Summary Costs of Environmental Degradation in the Lao PDR 121 5.1 Environmental Performance Index Rankings for Selected Countries, 2020 131 5.2 Statistics on ESIA by Economic Sector in 2018 133 5.3 Projects with ECCs According to their Phase of Operations 133 5.4 Projects with ECCs and a Commitment to GOL Environmental Monitoring 135 6.1 Waste Generation in Asian Countries/Economies, 2015 153 6.2 Waste Generated in Lao PDR, 2015 153 6.3 Regulatory Framework Related to Solid-Waste Management in Lao PDR 158 8.1 Estimated Backward and Forward Value-Added Multipliers (Capital Formation and Rest of the World Exogenous) 202 8.2 Estimated Backward Poor and Non-Poor Income Multipliers 202 8.3 Comparisons of Estimated SAM Production Data and the Base Solution Results (US$, Millions) 203 8.4 Comparisons of Estimated Public Investment in the Simulations (US$, Millions) 205 8.5 Comparisons of Estimated Impact on Value Added in the Simulations (US$, Millions) 205 8.6 Value-Added Investment Multipliers (Estimated) 207 8.7 Estimated Impacts on Production (%) 208 8.8 Estimated Impacts on Rents from Natural Resources (US$, Millions) 209 8.9 Estimated Impacts on Incomes 210 8.10 Estimated Impacts on Incomes and Poverty 211 8.11 Estimates of Ethnic People Moving above the Poverty Line after Project (SIM I NATRES Scenario) 212 9.1 Relative Exposure Levels by Household Member and Cooking Location 221 9.2 Long-term Personal PM2.5 Exposure by Cooking Location in Households Using Traditional Cookstoves with Fuelwood or Charcoal (µg/m3) 221 9.3 Household Member Exposure Reduction from ICS in Relation to Cooking Location 222 9.4 Household Member Air Pollution Exposure by Intervention and Cooking Location (µg/m3) 223 9.5 Initial Adoption and User Rates of Interventions 225 9.6 Cost of Stove and Equipment, LAK per Household, 2017 226 9.7 Cost of Stove Maintenance and Repair, LAK per Household, 2017 227 9.8 Cost of Promotion Program, LAK per Household, 2017 227 9.9 Estimated Household Energy Consumption for Cooking 228 ix Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic List of Tables 9.10 Cost of Energy per Household per Year, LAK, 2017 228 9.11 Costs of Interventions (LAK, Millions, per Household per Year), 2017 229 9.12 Reduction in Health Effects from Cookstove Interventions 229 9.13 Health Benefits of Interventions by Cooking Location (LAK, Millions, per Household per Year), 2017 230 9.14 Estimated Value of Household Fuel Savings, 2017 231 9.15 Estimated Value of Cooking Time Savings, 2017 231 9.16 Benefits of Interventions (LAK, Millions, per Household per Year), Average for All Locations, 2017 232 9.17 Benefit-Cost Ratios of Household Air Pollution Control Interventions by Cooking Location, 2017 233 9.18 Annualized Cost of Drinking-Water Interventions (LAK per Household per Year), 2017 236 9.19 Cost of Boiling Drinking Water (LAK per Household per Year), 2017 237 9.20 Relative Risk of Diarrheal Disease and Mortality for Household Point-of-Use Treatment (POUT) 238 9.21 Benefits of Drinking-Water Interventions (LAK per Household per Year), 2017 238 9.22 Benefit-Cost Ratios of Drinking Water Interventions, 2017 239 9.23 Cost of Household Sanitation (LAK per Household per Year) 240 9.24 Relative Risk of Diarrheal Disease and Mortality for Sanitation 240 9.25 Benefits of Household Sanitation Interventions (LAK per Household per Year), 2017 240 9.26 Benefit-Cost Ratio of Household Sanitation Interventions, 2017 241 9.27 Cost of Arsenic Mitigation Interventions, 2017 244 9.28 Annualized Cost of Arsenic Mitigation Interventions (LAK per Household per Year), 2017 244 9.29 Benefits of Arsenic Mitigation Interventions (LAK per Household per Year), 2017 245 9.30 Benefit-Cost Ratios of Arsenic Mitigation Interventions, 2017 245 9.31 Benefits of Ambient PM2.5 Emission Reductions in Vientiane Capital, US$, 2017 248 9.32 Costs and Benefits of Improved Fuelwood and LPG Cookstove, LAK Millions and BCRs 249 9.33 Costs and Benefits of Improved Solid-Waste Management, LAK Millions and BCRs 250 9.34 Costs and Benefits of PM2.5 Abatement from Ultra-Low–Sulfur Diesel (<50 ppm), LAK Millions and BCRs 251 9.35 Costs and Benefits of PM2.5 Abatement from DPFs, LAK Millions and BCRs 251 9.36 Benefit-Cost Ratios of Interventions for the Control of Ambient PM2.5 in Vientiane Capital, 2017 252 9.37 Annual Deaths and Days of Illness from Environmental Risk Factors in Lao PDR, 2017 253 9.38 Estimated Annual Cost of Environmental Health Effects in Lao PDR, 2017 253 10.1 Benefits and Costs of Rubber Plantations (US$/ha) 267 10.2 Benefits and Costs of Reforestation on Abandoned Lands (US$/ha) 267 10.3 Benefits and Costs of Reforestation on Protected Lands (US$/ha) 267 10.4 Benefits and Costs of Agroforestry Projects (US$/ha) 268 10.5 Assumptions for Benefit-Cost Analysis of Terrace-Based Paddy Production 270 10.6 Benefits and Costs of Terrace Construction for Paddy Rice Cultivation in Uplands (US$/ha) 270 10.7 Benefits and Costs of Improved Seed Utilization (US$/ha) 271 10.8 Costs of Different Upstream Fish Passage Interventions in the United States 273 10.9 Costs of Screening for Downstream Fish Passage in the United States 273 10.10 Summary of Costs of Fish-Passage Interventions 273 10.11 Benefits and Costs of Fish Passage Construction (US$, Thousands) 273 10.12 Two Types of Aquaculture Analyzed in Lao PDR 274 10.13 Benefits and Costs of Aquaculture (US$) 274 x 10.14 Cost of Mitigation Infrastructure to Manage Flooding in Vientiane (Adapted from Examples in Bangkok and Ho Chi Minh City) 275 10.15 Benefits and Costs of Flood-Mitigating Interventions in Vientiane (US$, Millions) 276 10.16 Benefits and Costs of Increased Population Responsiveness and Expansion of the Early Warning System (US$, Millions) 277 10.17 Cost Range per Hectare for Constructed Wetlands to Treat Municipal Wastewater 279 10.18 Estimated Costs to Treat 200 Mines of Various Ores with Constructed Wetlands 279 10.19 Benefits and Costs of Artificial Wetlands on the Abandoned Mining Sites (US$, Thousands) 279 11.1 Excise Tax Rates on Fuels in Lao PDR 295 11.2 Human Health and Welfare Effects of Pollutants Affected by Reduction in Fuel Use 297 11.3 Estimate of Corrective Tax on Gasoline, 2010 US$/liter 299 11.4 Estimate of Corrective Tax on Diesel, 2010 US$/liter 300 11.5 Excise Tax Rates on Road Transport Vehicles in Lao PDR 304 11.6 Current and Proposed New Excise Tax Rates on Small Vehicles 305 11.7 Share of Effluent Discharges of TSS and BOD in Lao PDR 310 11.8 Share of Effluent Discharges of Largest Enterprises in Lao PDR 311 11.9 Share of Effluent Discharges of Toxic Chemicals and Metals in Lao PDR 311 12.1 Annual Cost of Environmental Degradation in Lao PDR (% GDP) in 2017 321 12.2 Benefit-Cost Ratios of Interventions to Tackle Environmental Health Priority Challenges 322 12.3 Summary of Benefit-Cost Ratios for Interventions to Mitigate Natural Resource Degradation 324 12.4 Lao PDR Environment and Green Growth Policy-Action Matrix—Priorities and Timeline 327 xi Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic List of Acronyms AAP outdoor ambient air pollution AGFA Aqueduct Global Flood Analyzer ALRI acute lower respiratory infection ANS adjusted net savings AQG air quality guideline ARI acute respiratory infection BCC behavioral change communication BCR benefit-cost ratio BLL blood lead level BOD biological oxygen demand C charcoal CES constant elasticity of substitution CGE computable general equilibrium COD chemical oxygen demand CoNRD costs of natural resource degradation COPD chronic obstructive pulmonary disease CWP ceramic water purifier DHUP Department of Housing and Urban Planning DNEP Department of Natural Resources and Environmental Policy DNREM Department of Natural Resources and Environmental Monitoring DOCs diesel oxidation catalysts DPFs diesel particulate filters DW disability weight EC environmental certificate ECC environmental compliance certificate EIA environmental impact assessment EPA United States Environmental Protection Agency EPF Environmental Protection Fund EPL Environmental Protection Law ES electric stove ESI Economics of Sanitation Initiative ESIA environmental and social impact assessment ESMMP Environmental and Social Management and Monitoring Plan EU European Union FAO Food and Agriculture Organization FLEGT Forest Law Enforcement, Governance, and Trade program GDP gross domestic product GGDPO Green Growth Development Policy Operation GGGI Global Green Growth Institute GNI gross national income GNSS global navigation satellite system GoL government of Lao PDR GoS government of Sindh GS gasifier stoves xii HAP household air pollution HDVs heavy-duty vehicles ICS improved biomass cookstoves ICS-C improved charcoal cookstoves ICS-W improved fuelwood cookstoves IFI international financial institution IGES Institute for Global Environmental Strategies IHD ischemic heart disease IODB International Organizations and Development Banks IPCC International Panel on Climate Change IPPS Industrial pollution projection system ISIC International Standard Industrial Classification of All Economic Activities LAK official national currency of Lao PDR LC lung cancer LDC least-developed country LDVs light-duty vehicles LECS Lao expenditure and consumption surveys LENS World Bank Lao Environment and Social Project LMB Lower Mekong Basin LPG liquified petroleum gas LSIS Lao Social Indicator Survey LWWR 2017 Law on Water and Water Resources MAF Ministry of Agriculture and Forestry MDGs Millennium Development Goals MEM Ministry of Energy and Mines MoF Ministry of Finance MoH Ministry of Health MoIC Ministry of Industry and Commerce MoJ Ministry of Justice MoNRE Ministry of Natural Resources and Environment MPI Ministry of Planning and Investment MPWT Ministry of Public Works and Transport MRC Mekong River Commission MSW municipal solid waste NA National Assembly NEPA National Environmental Policy Act NEQS National Environmental Quality Standards NGGS National Green Growth Strategy NGO nongovernmental organization NHTSA United States National Highway Traffic Safety Administration NLTA non-lending technical assistance NPAs National Protected Areas NRESP Natural Resources and Environment Sector Five-Year Action Plan NRESV Resources and Environment Sector Vision NSEDP National Socio-Economic Development Plan NSEDS National Socio-Economic Development Strategy xiii Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic List of Acronyms NTFP non-timber forest products OD open defecation ODA official development assistance OECD Organisation for Economic Co-operation and Development O&M operations and maintenance PA protected areas Pb lead PDR People’s Democratic Republic PEN poverty-environment nexus PFA production forest areas PIF potential impact fraction POU point of use POUT point-of-use treatment PPP polluter pays principle PSFM participatory sustainable forest management PV present value RA risk adjusted RRs relative risks SAM social accounting matrix SBP systolic blood pressure SEA strategic environmental assessment SEPSA strategic environmental, poverty, and social assessment SESO standard environmental and social obligations SSWG subsector working group SWG sector working group SWM solid waste management TEG technical expert group ToR terms of reference TSS total suspended solids TWG technical working group UNDP United Nations Development Programme UNEP United Nations Environment Programme UNFCCC United Nations Framework Convention on Climate Change UXO unexploded ordnance VC village committee VCOMS Vientiane City Office for Management and Service VSL value of statistical life VUDAA Vientiane Urban Development Administration Authority W fuelwood WASH water, sanitation, and hygiene WHO World Health Organization WRI World Resources Institute YLD years lost to disease YLDs years lived with disability xiv Foreword The Lao People’s Democratic Republic was one of the fastest-growing economies in the world until the COVID-19 pandemic hit in early 2020. The economy was growing at an average annual rate of 8 percent since the beginning of the century and poverty was steadily declining. However, even before COVID-19 emerged, the Lao PDR government recognized that this strong economic growth was largely fueled by natural resource-based activities, including mining, logging, hydropower, and agriculture. It was clear that Lao PDR needed to shift to a new economic model based on the sustainable use of natural resources. This new approach would need to continue helping people out of poverty and guarantee more equitable income sharing, but it would also have to preserve the environment and improve resilience to natural disasters and economic shocks. These aspirations shaped the country’s National Green Growth Strategy, adopted in early 2019. While Lao PDR has already started taking steps to implement this new approach, this report helps to identify the environmental priorities that are most closely interwoven with poverty reduction and shared prosperity in the country. The report offers evidence-based recommendations, including specific actions that address these priorities. It also suggests institutional and governance reform that would provide government organizations with the mandate, incentives, and resources to support the transition toward green growth. This report presents compelling evidence of the need to act swiftly and decisively. Around 10,000 Lao die every year from preventable causes due to pollution. Lead exposure robs thousands of children of the opportunity to develop to their full potential. Even under conservative estimates, the environmental health risks generated by pollution and the depletion of natural resources result in costs equivalent to more than 19 percent of Lao PDR’s gross domestic product. There are solutions. This report examines how solutions have been applied in other countries and explains how Lao PDR can apply them to systematically address its challenges. The sudden onset of the novel coronavirus has dramatically underscored the need for a transition toward green growth, given the need to urgently improve the health and economic prospects of all Lao. As such, this report’s findings and recommendations can inform efforts to promote a cleaner, more resilient, and sustainable recovery from the pandemic and its economic impacts. We hope this work generates awareness about the severity of environmental challenges and strengthens support from across the spectrum of Lao society to support their country’s transition to green growth. Mariam J. Sherman Country Director for Myanmar, Cambodia, and Lao PDR xv Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Acknowledgments This report is the result of the fruitful collaboration between the Government of Lao PDR and The World Bank. This report was prepared by a team led by Ernesto Sánchez-Triana. The team included Michael Brody, Daniele Cufari, Stephen Danyo, Santiago Enriquez, Mayra Guerra Lopez, Bjorn Larsen, Richard Morgenstern, Viengkeo Phetnavongxay, Maria Rita Pierleoni, Jack Ruitenbeek, Klaus Sattler, Pasquale Lucio Scandizzo, Anita Soukhaseum, Elena Strukova Golub, Kaysone Vongthavilay, and William Ward. The task team is also thankful for the support of the World Bank management team including Victoria Kwakwa (Vice President, East Asia and Pacific), Karin Kemper (Global Director, Environment, Natural Resources and Blue Economy Global Practice), Benoit Bosquet (Regional Director, East Asia and Pacific), Christophe Crepin (Practice Manager), Mona Sur (Practice Manager), Mariam Sherman (Country Director for Myanmar, Cambodia, and Lao PDR), and Nicola Pontara (Country Manager of the Lao PDR Country Office). Peer reviewers Yewande Awe and Helena Naber provided valuable guidance. Editorial and manuscript preparation was provided by Stan Wanat. We would like to acknowledge the valuable contributions from representatives from the Government of Lao PDR, including H.E. Mr. Sommad Pholsena (Minister of Natural Resources and Environment), H.E. Mme. Bounkham Vorachit (Vice Minister of Natural Resources and Environment), H.E. Dr. Xaynakhone Inthavong (Vice Minister of Natural Resources and Environment), H.E. Dr. Kikeo Chanthabouly (Vice Minister of Planning and Investment), H.E. Mr. Thongphat Inthavong (Vice Minister of Energy and Mines), H.E. Mme. Vilaykham Phosarath (Vice Minister of Public Work and Transport), H.E. Mr. Phanthong Phitthoumma (Vice Minister of Industry and Commerce), H.E. Mme. Dr. Viengsavanh Douangsavanh (Vice Minister of Prime Minister Office), H.E. Mr. Thongphan Savanhphet (Vice Minister of Foreign Affairs), Mr. Saysamone Phothis (Deputy Director General of Department of Forestry, Ministry of Agriculture and Forestry), H.E. Mme. Monemany Gnoibouakong (Former Vice Minister of Natural Resources and Environment), H.E. Mr. Phouvong Louangxaysana (Director General, Department of Planning and Cooperation), Mr. Lonekham Atsanavong (Director General, Department of Environmental Quality Promotion), Mr. Onma Rassavong (Director General of Natural Resources and Environment, National Assembly), Mr. Somboun Inthapattha (Representative from the Ministry of Finance), Mr. Khouankham Vongkhamsao (Department of Planning and Investment), Mr. Inthavy Akkharath (Director General, Department of Water Resources), Mr. Phouvong Lungxaysana (Director General, Department of Planning and Cooperation), Dr. Virasack Choundara (Director General, Natural Resources and Environment Research Institute), Mr. Keosangkhom Phommaseng (Department of Enviromental Quality and Promotion), Mr. Kalamongkhoun Souphanohong (Representative from the Ministry of Foreign Affairs), Mr. Vansath Sisadeth (Ministry of Natural Resources and Environment), Mr. Aloune Sayavong (Director General, Natural Resources and Environment Inspection Office), Mr. Orlahanh Boungnaphalom (Ministry of Natural Resources and Enviroment), Mr. Siphandone Sihavong (Director General, Department of Finance), Dr. Somphone Inkhamseng (Head of Operation Unit, Environmental Protection Fund), Mr. Singsavanh Singkavongsay (Deputy Director General, Department of Environmental Quality and Promotion), Mr. Xatdamrong Davilayhong (Department of Environmental Quality and Promotion), and Dr. Viengnam Douangphachanh (Deputy Director General, Department of Housing and Urban Planning). We are particularly grateful to the government of the Republic of Korea for its kind support through the Korea Green Growth Trust Fund. xvi xvii  EXECUTIVE SUMMARY he Environmental Challenges for Green Among the most urgent priorities, however, are Growth and Poverty Reduction in the Lao the impacts of pollution on human health. The T People’s Democratic Republic report reveals assessments attribute some 10,000 deaths annually strong linkages among environmental to four environmental health risk factors—household quality, economic growth, and social well-being of air pollution alone represents 44 percent. The 10,000 the nation’s 7 million inhabitants. This report is a deaths were 21.6 percent of all deaths in the country. comprehensive presentation prepared after two years The risk factors also caused nearly 100 million days of targeted diagnostic research and analysis of issues of illness annually. Illness from these factors in turn and conditions within Lao PDR. The analysis was decreases enjoyment of life, increases costs of conducted by an international team of World Bank treatment, and lowers economic productivity. All told, researchers in cooperation with counterparts in lead the costs of such deaths and illnesses was equivalent government agencies in Lao PDR. Information from the to 15 percent of national gross domestic product (GDP) Ministry of Health, the Ministry of Natural Resources in 2017. and Environment—and others—provided an initial basis for the assessments, and this was complemented The urgent message of this report is that all the by other international information. The results can be identified issues must be—and can be—systematically regarded as a state-of-the-art contribution of information addressed. The scope of recommendations is informed to decision makers in Lao PDR having an interest in by benefit-cost analyses to help identify efficient achieving sustainable growth consistent with the 2019 interventions ranging from simple solutions already National Green Growth Strategy. successfully adopted in other countries to more complex approaches targeted at improving air quality. Innovative financial mechanisms associated with environmental Management of taxes or fees are also considered. connections between All recommendations are considered carefully within the environment and human scope of the effectiveness of existing laws (including the health is an urgent priority Environmental Protection Law), the division of authority within the current institutional framework, and the role of environmental and social impact assessments (ESIA) The report’s scope includes consideration of impacts in environmental planning. A number of reforms should on key economic sectors and on risk factors influencing be pursued—all are realistically achievable if there is the health of the population. The assessments political will. All can contribute meaningfully to improved encompassed the economic costs of degradation environmental quality, green economic growth that is in the forestry, agriculture, fisheries, mining, and more sustainable, and alleviated poverty. hydropower sectors. The report identifies solid waste management and plastics as an important priority to which the Government of Lao PDR has already pledged its support in regional and global initiatives. Within the context of the Mekong River and its watershed, this report addresses climate-change impacts including increased risks of flooding. 1 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic EXECUTIVE SUMMARY Context Highlights of Diagnostic Lao PDR has achieved rapid growth and poverty Analyses reduction since 2000. GDP has grown at an average annual rate of 8 percent since the beginning of the The most important environmental problems are century. Lao PDR has been the second-fastest growing associated with environmental health, representing economy in ASEAN and among the world’s 15 fastest- an annual cost equivalent to 14.6 percent of GDP in growing economies. Rapid economic development was 2017. The highest cost is due to household air pollution. associated with a fall in the national poverty line, from Inadequate water supply, sanitation, and hygiene; 46 percent in 1993 to 18 percent in 2019. outdoor ambient air pollution; and lead exposure also represent pressing challenges. Problems associated In recent years, income disparities have widened. The with degradation of natural resources and losses from Gini index increased from 31 in 1993 to 39 in 2019, natural disasters have an annual cost equivalent to according to Lao poverty assessments. Most of the 4.7 percent of GDP in 2017. wealth is concentrated in the Vientiane area, where only about 10 percent of the population lives. The top fifth Waste generation in Lao PDR stands at 0.15 kilograms of the population controls 44 percent of the country’s daily per person, making it among the lowest in Asia. wealth while the bottom fifth controls only 8 percent. Nonetheless, the quantities generated are poorly managed and present risks to human health and the Key economic activities underpinning Lao PDR’s Mekong River watershed. Open dumps constitute 60 economic dynamism included uncontrolled mining, percent of wastes. Plastics are currently recognized unregulated and illegal logging, hydropower-sector as a global issue and find their way into the Mekong expansion, and inefficient agriculture. While these watershed destined for global oceans. In Vientiane, activities provided important economic gains, they plastics constitute 12 percent of the total waste stream. have also resulted in significantly high rates of natural resource depletion and environmental degradation. The Annual cost of environment degradation in Lao annual cost of environmental degradation is estimated PDR (%GDP) in 2017. at 19.3 percent of GDP in 2017. Household air pollution 5.68% Ambient air pollution 3.50% Unsustainable use of Water, sanitation, and hygiene 2.89% natural resources and Microbiological pollution Arsenic in groundwater 2.62% 0.27% environmental assets Lead (Pb) exposure 2.52% has artificially driven Lead (Pb) exposure – children 1.87% economic growth Lead (Pb) exposure – adults Subtotal for environmental health 0.65% 14.6% Cost of deforetation 1.6% Cost of forest degradation 1.1% Cost of natural disasters 0.9% Soil degradation cost 0.6% Cost of hydropower development and fish- 0.5% habitat destruction Cost of AGM exposure to mercury <0.1% Substotal for natrual resource 4.7% degradation and natural disasters Total 19.3% 2 EXECUTIVE SUMMARY Three priorities are evident for combatting ambient air As elsewhere in the world, the distribution of pollution pollution: (i) implement ambient air quality monitoring impacts falls primarily on the vulnerable. Children first and foremost in Vientiane Capital; (ii) undertake bear the largest burden of lead pollution, suffering PM2.5 source-apportionment studies in Vientiane Capital an estimated annual loss of 340,000 IQ points. The to identify priority sectors for air pollution control, and impairment of learning capacity from lead pollution design cost-effective interventions; and (iii) implement has long-term implications such as lower incomes no-regret interventions including control of PM2.5 and compromised quality of life. Women suffer emissions from household cooking and diesel vehicles, disproportionately from household air pollution, as they halting of household burning of waste/debris, and traditionally prepare the meals. The degradation of combatting street dust. natural landscapes and soils undermines livelihoods of rural dwellers and pollution exposes them to diseases Two priorities are crucial regarding assessing the and heavy metals in regions where health services are status of lead (Pb) exposure: (i) undertake a study to unavailable or inadequate. measure children’s blood lead levels to determine exposure levels; and (ii) undertake a study to identify Climate-change hazards will exacerbate current human lead sources, including in the household environment, health issues and degradation of natural resources. The outdoor community environment, school environment, International Panel on Climate Change models suggest and specific sources such as lead-based paint, that maximum monthly flows in the Mekong Basin will toys, ornaments and jewelry, traditional medicines, increase by 35–41 percent, while minimum monthly cosmetics, and utensils. flows will drop by 17–24 percent by 2100, further exacerbating flood and drought risks. Rice production is also at risk to higher temperatures and shifts in rainfall. Key Findings Informing Natural Resource Key Findings Informing Degradation Options Environmental Health Intervention Options Economically viable means can be developed to address diverse issues, ranging from flood mitigation to adoption of new seed varieties. Agroforestry is Benefit-cost analysis is used to help identify appropriate an important potential intervention that mitigates interventions for addressing environmental health and degradation of forest quality and agricultural lands. natural resource degradation issues. Scale also plays a role in determining viability. Large- One overriding priority is to achieve 50 percent scale aquaculture provides opportunity for maintaining clean energy use for cooking over the next 10 years fishery productivity; family-scale aquaculture is by households increasing the use of gas (LPG) and not economic using standard criteria, but it would electric stoves. nonetheless provide a secure supply of nutrition to vulnerable populations in the event of emergencies. Four priorities emerge in the drinking-water and sanitation sector: (i) further investigation into the quality For natural hazard mitigation, it may also be noted that of household drinking water, (ii) a pilot promotion investments in early warning systems are generally program for household point-of-use treatment of warranted. This would include development of improved drinking water focusing on ceramic filtering and solar flood forecasts and education programs on how people disinfection, (iii) addressing arsenic contamination of should respond to warnings. drinking water in the center and south of Lao PDR, and (iv) rural sanitation to end open defecation. 3 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic EXECUTIVE SUMMARY Range of Benefit-Cost Ratios of Interventions Problems with ESIA in Lao PDR include inadequate to Address Natural Resource Degradation and screening, overly narrow scope for assessments that Natural Disasters are conducted, poor quality of reports, inadequate capacity to evaluate ESIA documents, insufficient Forestry: Rubber planations 0.8-2.2 public participation, and a general lack of monitoring Forestry: Reforestation 1.7-2.3 of the project’s compliance with the ESIA’s approval conditions. A better solution would be to create an Forestry: Agroforestry 1.2-4.9 environmental management system in which EIA is not Soil erosion: Terraced production 2.6-3.1 the only conduit through which the productive sectors Soil erosion: Improved seed varieties 2.1-2.2 are required to deal with environmental considerations. Soil erosion: Agroforestry 1.2-4.9 Draft reforms are underway, and these can be effective Fishery management: Fish passages 0.9-3.8 if competing pressures of quick processing and adequate public participation can be acknowledged Fishery management: Family aquaculture 0.3 and achieved. Fishery management: Large aquaculture 1.0-1.1 Flood management: Infrastructure 0.4-1.7 Environmental taxes provide an opportunity for Flood management: Early warning systems 2.2-2.6 applying the polluter pays principle to change behavior and raise revenues. The 2012 Tax Law provides the Mining mitigation: Artificial wetlands 1.2-3.1 legal framework to establish environmental taxes on individuals and organizations generating pollution and environmental degradation. The same law specifies that Institutional Findings and tax revenues will be used to treat, rehabilitate, or clean Selected Policy Options pollution. This report considers (i) fuel taxes and (ii) water-effluent charges as two realistic tax mechanisms that have proven successful in other jurisdictions In June 2011, the National Assembly of Lao PDR and could be similarly applied in Lao PDR. These endorsed the establishment of the Ministry of Natural mechanisms complement a green growth agenda that Resources and Environment (MoNRE). MoNRE was respects competitiveness of domestic industry and established by combining departments and divisions achieves other social goals such as reduced congestion related to natural resources and environment such as and reduced traffic fatalities. land, forest, geology-minerals, water resources, and environment from different ministries and agencies. The creation of MoNRE was based on the need to improve coordination, collaboration, and integration of natural Outlook resources and environmental management. MoNRE has a mandate as a secretariat and key regulator for World Bank support—through the Green Growth direct management of land, forest, water, air, and Development Policy Operations (GGDPO)—has biodiversity and minerals. Its mandate also includes contributed to the adoption of policy reforms that management of climate change, disaster, meteorology, already represent important steps in confronting Lao and hydrology throughout the country. PDR’s priority environmental challenges. Reforms adopted to date are aligned with key challenges Budget allocations for environmental protection in identified in this report. Lao PDR are insufficient to address severe pollution problems. Currently, there are no formal mechanisms in place that use analytical work to identify priorities or to incorporate priorities into multi-year planning processes. 4 EXECUTIVE SUMMARY 1 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic INTRODUCTION 1 6 Chapter Overview This report on Environmental Challenges for Green Growth and Poverty Reduction in the Lao People’s Democratic Republic consists of four main sections: Background and Context, Diagnostic of Current Issues, Socioeconomic and Efficiency Analyses of Current Issues, and Selected Policy Options and Recommendations. Economic analyses were used to quantify and prioritize the costs of environmental degradation, natural resource degradation, and natural disasters, and to represent the flows of transactions within the country’s economy. Lao PDR has achieved rapid growth and poverty reduction since 2000, with its GDP growing on average 8 percent annually. However, Lao PDR’s economic growth has been largely driven by the unsustainable use of natural resources and environmental assets. Such unsustainable use has severe implications for development, with resulting costs disproportionately affecting the poor and other vulnerable groups. The government of Lao PDR has initiated the transition towards a green economy. Its National Green Growth Strategy was adopted in early 2019 after having been developed with international assistance including that from the World Bank. This report provides analytical underpinnings to inform further policy reforms and investments needed to consolidate Lao PDR’s transition towards a green economy. The report focuses on (i) analyzing the policy and institutional adjustments required to address all dimensions of green growth, (ii) identifying the environmental priorities most closely linked to poverty reduction and shared prosperity, (iii) identifying cost-effective interventions to tackle identified priorities and overcome key obstacles for green growth, and (iv) making recommendations to strengthen governance and institutional capacity to manage the transition towards green growth. 7 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 1 1.1 Objective The Lao People’s Democratic Republic has achieved to natural hazards such as floods. The consequences rapid growth and poverty reduction since 2000. Gross are particularly severe because more than 70 percent Domestic Product (GDP) has grown at an average of Lao PDR’s population depends on forest resources, annual rate of 8 percent since the beginning of the soil, wetlands, and fish for income and nutrition. century. Rapid economic development was associated Many of the poorest live in and among degrading and with a decline in the percentage of the population living disappearing forests. Poor people are also often highly in poverty, from 34 percent in 2002/03 to 18 percent exposed due to their reliance on wood and charcoal in 2018/19. However, inequality widened during this for cooking, limited access to safe drinking water, and period, with the Gini index increasing from 33 to 39, inadequate sanitation. The poor also live closer to reflecting lower gains for the bottom 40 percent than contaminated soil, to contaminated surface water, and for the rest of the population. GDP stood in 2017 at to flood-prone areas. The poor often have limited means approximately US$2,500 per capita for the country’s 7 to cope and adapt, as was seen in the 2018 flooding. million population. At recent growth rates, Lao PDR is well on the path to catching up to its richer neighbors Faced with growing evidence of the limits of past within a single generation—Thailand’s GDP per development patterns, government leaders increasingly capita of US$6,600 would be attained in 13 years recognize that a green economy can be a catalyst for and China’s GDP per capita of US$8,800 would be sustainable development goals and poverty eradication. overtaken in 17 years. A green economy can be thought of as one that is low carbon, resource efficient, resilient, and socially Unsustainable use of natural resources and inclusive. It is driven by public and private investments environmental assets has largely driven Lao PDR’s that reduce carbon emissions and pollution, enhance economic growth. However, achieving 8 percent resource efficiency, prevent the loss of biodiversity and continued growth over the next generation should ecosystem services, and reduce environmental and not be taken for granted. Key economic activities climate risks. underpinning Lao PDR’s economic dynamism included uncontrolled mining, unregulated and The Government of Lao PDR (GoL) has initiated the illegal logging, hydropower-sector expansion, and transition towards a green economy. The National inefficient agriculture. While these activities provided Green Growth Strategy (NGGS) was adopted in early important economic gains, they have also resulted in 2019 after having been developed with international significantly high rates of natural resource depletion assistance including that from the World Bank. The and environmental degradation. The annual cost of strategy stresses the need to benefit from the nation’s environmental degradation (reduced natural capital ample natural resources more sustainably and from depletion and reduced human capital from efficiently, while taking a development path that is more pollution) is estimated at 19.3 percent of GDP in 20172. resilient to risks such as climate change. The strategy These figures point to the limitations of Lao PDR’s also underlines the need to protect people’s health. growth pattern .3 The World Bank is supporting this transition through Natural resource depletion and environmental the programmatic Green Growth Development Policy degradation have severe development implications. Operations (GGDPO). The World Bank’s support Their costs disproportionately affect the poor and other has targeted three interlinked pillars: (i) economic vulnerable groups, thereby limiting the contributions management actions to address key macroeconomic of economic growth to reduce poverty. In addition, risks; (ii) improved strategic planning and policies environmental stress undermines the ability of the to make growth greener; and (iii) sectoral actions to natural resource base to provide livelihoods and buffers improve the sustainability and climate resilience of 8 Chapter 1 river basins and hydropower, roads, forestry, protected case studies, helped to identify opportunities to align areas and tourism, and agriculture. The World Bank environmental management and planning tools with also supports actions to reduce pollution and improve GoL efforts to transition towards a green economy. environmental and human health. All three pillars interact to improve the country’s growth prospects. This report provides analytical underpinnings to inform 1.3 Content of Report further policy reforms and investments needed to consolidate Lao PDR’s transition towards a green This report comprises the following chapters organized economy. In particular, the report focuses on (i) in four sections. analyzing the policy and institutional adjustments required to address all dimensions of green growth, Background and Context: This section provides (ii) identifying the environmental priorities most closely relevant context for the macroeconomic and institutional linked to poverty reduction and shared prosperity in Lao situation in Lao PDR, while also providing the PDR, (iii) identifying cost-effective interventions to tackle background of the overall study process. identified priorities and overcome key obstacles for green growth, and (iv) making robust recommendations > Chapter 1 introduces the report, including its to strengthen governance and agencies’ institutional methodology and aims. capacity to manage the transition towards green growth4. > Chapter 2 describes the institutional framework for Comments provided by government officials have been green growth in Lao PDR. addressed in this revised version and are included as footnotes trhough the different chapters. Diagnostic of Current Issues: This section presents a diagnostic descriptive analysis of Lao PDR’s main environmental issues and how they link to the nation’s 1.2 Methodology economy6. The section commences with a diagnostic of linkages between environmental pollution and human health in terms of mortality and morbidity impacts and The analytical work presented in this report was the associated consequences on economic productivity. conducted by an interdisciplinary team. Economic The section then broadens the diagnostic discussion to analyses were used to quantify and prioritize the include a wider range of natural resource degradation costs of environmental degradation, natural resource issues, including those associated with natural degradation, and natural disasters. A different type disasters. The section then provides a diagnostic of economic analysis was used to develop a Social of environmental planning instruments. The section Accounting Matrix (SAM) representing the flows concludes with a look at a high-profile issue associated of all economic transactions that take place within with solid-waste disposal and associated impacts of the economy of Lao PDR. The SAM helped to mismanagement of solid wastes—plastics in particular. provide quantitative estimates on the environmental sustainability, economic contributions, and social > Chapter 3 examines the priority environmental implications of alternative development scenarios in health issues faced by Lao PDR. Lao PDR. Benefit-cost analyses were conducted to compare—and assess the economic feasibility of— > Chapter 4 discusses biodiversity values and priority alternative interventions that are readily available natural resource degradation and natural disaster to reduce the significant costs that environmental challenges in Lao PDR. degradation imposes on Lao PDR’s population.5 Policy and institutional analysis, and the preparation of 9 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 1 > Chapter 5 focuses on environmental planning > Chapter 7 assesses the linkages between poverty instruments in Lao PDR, particularly Environmental and environment in the country. and Social Impact Assessment (ESIA). > Chapter 8 models economic growth in Lao PDR and > Chapter 6 examines priority issues related to the its linkages with green growth. management of solid waste and plastic waste in both urban and rural settings. > Chapter 9 assesses and compares alternative interventions to address priority environmental Socioeconomic and Efficiency Analyses of Current health risks. Issues: This section reports a series of in-depth analyses to evaluate further the linkages between > Chapter 10 assesses interventions to tackle natural environmental degradation and other dimensions of resource degradation and natural disasters. economic development. The section commences with an examination of the linkages between poverty and Selected Policy Options and Recommendations: environment in Lao PDR. The section then assesses This short section provides additional insights into policy so-called backward and forward multipliers through options not previously evaluated and summarizes a the economic production process, described using a number of institutional interventions consistent with Social Accounting Matrix. The remaining two chapters promoting green growth7. in this section provide standard benefit-cost analyses to calculate BCRs for interventions associated with (i) > Chapter 11 identifies and reviews examples mitigating environmental health-risk factors, and (ii) of potential specific policy options relating to reducing impacts of environmental degradation from environmental taxes and fees. anthropogenic sources and natural disasters. > Chapter 12 presents policy recommendations to strengthen governance and institutional capacity to support the transition towards a green economy. 10 Chapter 1 1.4 Notes 1 This chapter was written by Ernesto Sánchez-Triana. 2 World Bank estimates. Household air pollution accounts for 38 percent, followed by water pollution, sanitation, and hygiene at 22 percent; outdoor PM2.5 ambient air pollution at 21 percent; and lead (Pb) exposure at 19 percent. 3 The Vice Minister of Planning and Investment, H.E. Dr. Kikeo Chanthabouly, indicated that “It is important to identify and reassess issues that might have impacts on natural resources and environment so that they can be mitigated immediately, and we must come up with measures to address the issues accordingly within the next 5 years (2021–2025).” 4 The Vice Minister to the Prime Minister’s Office, H.E. Mme. Dr. Viengsavanh Douangsavanh, mentioned that the Government of Lao PDR published the State of Environment Report (SOER) many years ago, which according to the law, must be published every three years. She also explained that government officials must follow Decree 177 regarding coordination between ministries and local authorities about information exchange. The Government of Lao PDR will be publishing the State of Environment Report in late 2020. 5 Benefit-cost analyses were conducted using a Benefit-Cost Ratio (BCR) as an indicator for comparing policy interventions to address specific issues. BCR is the ratio of the present value (PV) stream of benefits to the PV stream of costs, calculated using an annual discount rate. The discount rates used in this study are appropriate for the analyses being undertaken, but these discount rates may not be applicable for other purposes. That is, BCR calculations for interventions relating to one issue should not necessarily be compared to BCR calculations for another issue. Specifically, the environmental health BCR calculations in this study use a discount rate of 3%/yr. This discount rate permits comparison to other countries’ similar options relating to human health. For natural resource damages, various studies’ BCR calculations report a range of discount rates of 3%/yr, 5%/yr, and 10%/yr to compare options. Ranking results within a given set of options tend to remain robust for a wide range of discount rates, but comparative rankings between environmental health results and natural resource management results cannot necessarily be made based on the BCR indicator. 6 The Vice Minister of Planning and Investment highlighted the need to focus on priority issues that have the most-severe impacts on the environment. 7 The Vice Minister of Planning and Investment emphasized the need to highlight the report’s main recommendations on Lao PDR’s green growth priorities. 11 2 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic LAO PDR’S INSTITUTIONAL FRAMEWORK FOR ENVIRONMENTAL MANAGEMENT8 Chapter Overview This chapter focuses on the crucial role of institutions in addressing environmental challenges in the Lao People’s Democratic Republic. Institutions are essential in identifying the most urgent challenges, engaging stakeholders to develop solutions to such challenges, and ensuring that solutions are implemented. Although Lao PDR’s legal and regulatory framework has evolved rapidly over the last decade, the country’s institutions need further strengthening to perform these functions. Key recommendations to bolster environmental institutions in Lao PDR include the following: > Establishing a formal mechanism to define environmental priorities, align environmental expenditures with priorities, and continuously assess progress in achieving environmental goals. > Strengthening the monitoring of priority sites related to environmental quality and using collected data to design evidence-based interventions to reduce pollution and to publicly disseminate information that can help strengthen environmental constituencies. > Establishing systematic procedures to evaluate progress in responding to environmental priorities, incorporate lessons learned, and identify opportunities for continuous improvement. > Strengthening interagency coordination to address environmental priorities through the adoption of goals that are based on environmental-performance indicators and through public dissemination of information that presents and discusses progress in achieving such goals. > Improving public information and promoting transparency, accountability, and awareness through the publication of data, wider use of public forums, and a more detailed review and discussion on environmental-management tools. > Ensuring adequate funding and using result-based agreements to improve effectiveness and efficiency in the use of public resources in all sectors, including the environment. > Strengthening the capacity of environmental agencies to fulfill their mandate, including systematic monitoring and enforcement of environmental regulations, as well as creating specialized technical units to address priority challenges. > Continuing to develop the regulatory and policy framework using a comprehensive set of instruments such as (i) as command-and-control measures; (ii) economic and market-based instruments; and (iii) other means, including public disclosure, legal actions, and formal negotiation. 13 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 2.1 Introduction Environmental degradation poses significant As shown in Figure 2.1, the costs of household air development challenges for the Lao People’s pollution, measured as a share of GDP, are significantly Democratic Republic (Lao PDR). The negative effects higher in Lao PDR than in most other Asian countries. of pollution include a significant loss of lives, health, Although the cost of ambient air pollution is lower than and economic opportunities for advancement. In in neighboring countries, it still represents a very high 2017, environmental risk factors were responsible for share of GDP. 10,000 deaths in the country, or 21.6 percent of all deaths for that year. The costs of the health effects Tackling pollution and reducing its severe health of key categories of environmental degradation were effects is fundamental to achieve Lao PDR’s broader equivalent to around 14.6 percent of Lao PDR’s Gross development goals. Pollution causes illnesses that Domestic Product (GDP) for that year (see chapter 3). mainly affect low-income people, children, the elderly, Depletion of natural resources and natural disasters and other vulnerable groups. These illnesses reduce result in additional costs that represented 4.7 percent of the productivity of adults and, in the case of children, GDP in 2017 (see chapter 4). affect their ability to attend school and learn, which subsequently limits their opportunities for professional The health effects of air pollution in Lao PDR are more and human development. Thus, efforts to reduce severe than in most countries in South East Asia and pollution are an investment in human capital, leading to in other regions. The World Bank has applied similar higher productivity and economic growth. methodologies to estimate the costs of environmental degradation in several countries, including estimates of the cost of air pollution in several Asian countries. Figure 2.1 Cost (share of GDP) of Outdoor and Household Air Pollution in Selected Countries in 2017 8.0% 6.9% 7.0% 6.0% 5.0% 4.7% 4.5% 4.2% 4.1% 3.9% 4.0% 3.4% 3.3% 3.3% 3.1% 2.9% 3.0% 2.6% 2.5% 2.5% 1.9% 2.0% 1.1% 1.0% 0.0% China Lao PDR Myanmar Philippines Cambodia Viet Nam Indonesia Thailand Household Air Pollution Ambient Air Pollution Source: Based on GBD 2017 health risk functions. Note: Cost is for mortality only. Cost of mortality accounts for approximately 80–85 percent of total health cost in ASEAN and China. 14 Chapter 2 The Government of Lao PDR (GoL) has increasingly 2. Balancing interests, recognizing that solutions to recognized the need to integrate environmental and environmental problems generally require measures sustainability criteria into its development model, that can affect individuals or groups. This also calls but significant challenges remain. The institutional for ensuring that those who are most significantly framework for environmental management has been affected by environmental degradation can strengthened over the last few years, including through participate in the development of solutions, even if the creation of the Ministry of Natural Resources and they belong to groups that are generally excluded Environment (MoNRE) in 2011 and the amendment from such decision-making processes. of several laws. In addition, environmental protection goals have been included in a number of high-level, 3. Executing decisions or implementing the solutions strategic documents, particularly since 2016. However, to priority problems that have been agreed to by Lao PDR’s legal, policy, and organizational framework involved stakeholders. has yet to set environmental health and pollution management challenges as a priority, particularly in The rest of this chapter focuses on assessing the terms of specifically addressing the pollution challenges capacity of environmental institutions in Lao PDR to that result in the highest social and economic impacts. conduct these three functions. The approach used to develop this chapter consisted of a desktop review This chapter provides an analysis of institutions of official documents, as well as assessments from and organizations in Lao PDR, focusing on those recently completed donor-supported projects describing that are relevant to address environmental health their results and lessons learned. Consultations with and pollution management priority challenges. The public officials helped to complement this information. analysis understands institutions as humanly devised A preliminary version of the chapter was shared with constraints that structure political, economic, and social public officials of the GoL and discussed in meetings interactions. They include formal constraints, such as and workshops held in June 2019. The feedback laws, policies, or property rights, as well as informal received during those events was incorporated into the constraints such as customs, traditions, and codes of final version of the chapter. conduct. Institutions define the incentives that largely determine the choices individuals make, which in turn shape the performance of societies and economies over time (North 1991). In turn, organizations are groups 2.2 Institutional of individuals engaged in purposive activity. Whereas Framework for institutions are the rules of the game, organizations are the players (North 1990). Environmental Regulation Environmental degradation arises largely because 2.2.1 Strategies and Policies individuals and public and private organizations do not consider the effects of their individual actions on the Since the country’s foundation in 1975, the GoL has environment. Institutions perform three fundamental relied on different planning instruments to implement functions that support the coordinated actions needed to the Party’s guidelines, manage the economy, and address environmental degradation (World Bank 2003): achieve development goals. Long-term plans define national priorities and strategies over periods of 10 1. Picking up signals, or collecting information, based years or longer. Medium-term plans have a duration on scientific measurements or stakeholders’ of five years and are implemented through annual feedback that help to identify and prioritize plans (Somphanith n.d.). In 2016, Lao PDR’s National environmental degradation. Assembly approved three medium- and long- term instruments: the 8 th National Socio-Economic 15 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 Development Plan (NSEDP), the 10-Year Socio- 2.2.1.1 Natural Resources and Environmental Economic Development Strategy (2016–2025), and the Strategies 2030 Vision9. The Natural Resources and Environment Sector Vision Vision 2030 aims for the nation to reach the status of (NRESV) towards 2030 and the Ten-Year Strategy an upper-middle-income country with a green growth (2016–2025) provide more detail about the GoL orientation by 2030. Sustainable agriculture and approach to achieve the environmental protection goals forestry, effective environmental protection and natural of Vision 2030 and the NSEDS. Following is the sectoral resource use, and green and environmentally friendly vision for 2030 (MoNRE 2015a, 21): industrialization and modernization are envisioned as the key drivers of this new growth pathway (GoL Keeping Lao PDR Green, Clean, and Beautiful 2016a). This vision is complemented by the National based on green economic growth, to achieve Socio-Economic Development Strategy (NSEDS) 2016– sustainable development and industrialized country 2025, which describes how Lao PDR will graduate from and to ensure the resilience to climate change Least Developed Country (LCD) status by 2020 by impacts and disaster risks. balancing economic and sociocultural development with environmental protection (GoL 2016a). The NRESV is expected to guide the operations of different units under MoNRE at the central, provincial, The 8th NSEDP 2016–2020 constitutes Lao PDR’s and district levels, as well as to provide a framework strategic document to guide efforts over the medium that other sectors can use to build synergies with the term and advance towards the long-term objectives natural resources and environment sector. articulated in Vision 2030. The NSEDP includes priority targets and outcomes to be achieved within The NRESV provides an overview of the sector, its five-year period, and these constitute fundamental describing environmental conditions, improvements, directions for all governmental policies and programs. and challenges at the time of the strategy’s formulation. The formulation of the 8 th NSEDP was informed by The overview (MoNRE 2015a, 10) states that an evaluation of the 7th NSEDP (2011–2015). One of the key lessons learned from the 7th NSEDP was the [i]n general, Lao PDR has a good environmental importance of promoting sustainable development to quality and rich natural resources compared to other maximize balanced development and environmental countries in the Asian region that stimulated rapid protection (GoL 2016b). The NSEDP’s environmental growth in national socio-economic development. quality and pollution-control targets include (a) establishing a system to manage and reduce wastes It also describes urban environmental quality as follows and the use of chemicals, and toxic and hazardous (MoNRE 2015a, 15–16): substances; (b) collecting basic data on air and water pollution from industries and services; (c) monitoring In general, the urban environment is in good and controlling pollution in 10 priority basins; and (d) condition, with peace and safety. However, urban developing a full environmental database to support the cities are in rapid growth and tend to cause some monitoring and analysis of waste, chemicals, toxic and environmental concerns such as […] lack of public hazardous substances, air pollution, noise pollution, and utilities to meet the demands of many forms of wastewater (GoL 2016b). pollutants in the air, water, soil and nuisances (smoke, odor, noise), persistent chemical wastes […]. 16 Chapter 2 NRESV has multiple goals, including several that 2.2.1.2 The National Green Growth Strategy explicitly focus on pollution challenges. Key goals include (a) control of land, water, and air pollution, and The GoL is taking additional steps for the integration of noise from agricultural and industrial practices and of green growth principles into the country’s strategic services to meet environmental standards along the and development framework. It established the Green No 13 national road and the Mekong River; (b) protect Growth National Steering Committee (GGNSC) water quantity and quality in 10 river basins to satisfy mandated with overseeing green growth planning; water-quality and quantity standards and to ensure implementation of programs, policies, and projects; people’s livelihood, effective wetland management, and monitoring. The GGNSC is developing Lao PDR’s strict implementation of RAMSAR and the 1995 Mekong National Green Growth Strategy (NGGS), which defines River Conventions, and minimum negative impact on green growth as ecosystem; (c) reduce the use of chemical substances in the development of industrial and agricultural [t]he economic growth, poverty reduction, raising sectors by 15 percent across the country to meet the of living standards of the people in an inclusive chemicals and waste-reduction target in 2020; and (d) and equitable manner in conjunction with the reduce waste generation in the 18 municipal areas increase of efficiency and sustainability of the across the country by 15 percent through directed use utilization of natural resources which exist in limited of the 3Rs––reduce, reuse, recycle––to satisfy waste quantity, the decrease of pollution, wastes and reduction targets in 2030. greenhouse gas emissions and the mitigation of risks and vulnerability to natural disasters and global The Natural Resources and Environment Sector Five economic crisis. Year Action Plan (NRESP) includes several pollution- control and management-specific goals and focused The NGGS presents an agenda through 2030 for actions. These include collecting data on emissions and implementing the transition to greener growth. Key water pollution from industrial and services sectors, as elements include priority actions including some cross- well as from vegetation burning, pollution monitoring sector interactions such as tourism/conservation, the and management in 10 priority basins; implementing water/energy nexus, and climate-risk management, mechanisms for pollution control and reduction; indicators to measure progress, and financing promoting the reduction of chemical use in agricultural opportunities. Based on the NGGS, priorities can then be sectors; and developing a centralized pollution reflected in planning and budgeting instructions for national database covering solid waste, hazardous materials, and sector annual development and investment plans. emission of air and noise pollution, and wastewater disposal along Road No 13 across the country. The plan The NGGS does not aim to replace existing and local also included important capacity-development goals, strategies in place, but to supplement them with the including developing MoNRE’s institutional organization aim of mainstreaming a green growth agenda into and human resources, developing a sustainable them, and to promote sector and local authorities in financial mechanism to ensure effective and efficient the implementation of programs, projects, activities, implementation of MoNRE activities, and conducting or components related to green growth. In addition, staff-performance monitoring and evaluation to fulfil recognizing limited resources, the NGSS prioritizes human-resources allocation for designated positions to seven sectors: (i) natural resources and environment; effectively implement MoNRE activities at the central (ii) agriculture and forestry; (iii) industry and commerce; and local levels (provincial and district) (MoNRE 2015b). (iv) public works and transportation; (v) energy and mines; (vi) information, culture, and tourism; and (vii) science and technology. 17 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 2.2.2 Legal Framework The 1999 Environmental Protection Law (EPL), with its most recent amendments in 2012, constitutes Lao PDR’s legal framework has evolved rapidly the backbone of the country’s legal framework for since the adoption of the first legal instruments for environmental management (JICA 2013). The EPL environmental management in the 1990s. Lao PDR’s includes several provisions focusing on environmental Constitution of 1991 (amended in 2013) established in health risks. The law’s purpose is to balance the Article 19 that (GoL 2003) social and natural environment, sustain and protect natural resources and public health, and contribute …all organizations and citizens must protect the to socioeconomic development and climate-change environment and the natural resources: land, mitigation. The 2012 amendments introduced the underground [resources], forests, animals, water concepts of environmental health and impact on social sources, and the atmosphere. environment, recognizing the importance of protecting humans from the potential impacts of environmental The first legal instruments emerging from this degradation. Other provisions throughout the law constitutional provision included the 1994 Regulation explicitly refer to the protection of human health as a on Industrial Waste Discharge and the 1996 Law on key goal of environmental protection and pollution Water and Water Resources. Table 2.1 summarizes control (GoL 2012). Lao PDR’s evolving legal framework. This section summarizes the provisions in key laws. The EPL recognizes four main types of pollution: air, soil, water, and disturbance (noise, light, odor, vibration, and heat). National Environmental Quality Standards Table 2.1 Key Elements of Lao (NEQS) and National Pollution Control Standards PDR’s Legal Framework for (NPCS) control these pollution types. NEQS establish Environmental Management the concentrations of key pollutants as parameters of environmental quality for air, water, and soil, while Law on Water and Water Resources (1996; amended in 2017) NPCS set the limits for pollutant emissions from those Law on Electricity (1997) holding a permit from the authority. The EPL also establishes workers’ rights to operate in an environment Law on Mining (1997) free of toxic chemicals at their workplace and its Law on Road Transportation (1997) surroundings (GoL 2012). Environmental Protection Law (1999; amended in 2012) Law on Agriculture (1999) In February 2017, the GoL updated its NEQS for national air quality and water quality, and the NPCS Law on Urban Planning (1999) for vehicle emissions, through Decree No 81/PM Law on Roads (1999) and Ministerial Decision No 0485/MoNRE. The Law on Industrial Manufacturing (1999) updated NEQS set the annual final particulate matter Law on Hygiene, Disease Prevention and Health Promotion (PM2.5) concentration at 10 µg/m3, the same value (2001; amended in 2011) recommended by the World Health Organization (WHO) Land Law (2003) Air Quality Guidelines (AQG), which were developed Law on Chemicals (2017) based on the results of studies on the health effects of long-term exposure to PM2.5 (WHO 2006). The NEQS Source: Updated from JICA 2013. for air quality also set a one-year air quality standard for lead (Pb) of 0.15 µg/m3. This value aims to maintain children’s blood lead levels at less than 5 µg/dL, which is the level recommended by other established organizations, including the United States Centers for Disease Control and Prevention. 18 Chapter 2 The GoL, under the leadership of MoNRE, has involving chemicals with the purpose of encouraging taken steps to monitor and enforce compliance with and promoting a safe work environment and ensuring environmental standards. Ministerial Instructions No healthy living conditions, properties, and a healthy 5688/MoNRE and N 6439/MoNRE, adopted in late o environment. The Ministry of Industry and Commerce 2018, regulate standard procedures and parameters (MoIC) is responsible for the implementation and of methods for sampling and analyzing key air and supervision of most of the law’s provisions, including water pollutants. the approval of standards, regulations, and technical manuals to ensure safe use of chemicals. Industry The 2011 Law on Hygiene, Disease Prevention, and and commerce divisions and offices at the provincial Health Promotion refers to environmental health as and district levels, respectively, are responsible for an element of hygiene. It also includes provisions implementing and enforcing the law’s provisions within on the protection of human health from pollution their jurisdictions. The law established the National stemming from key economic activities. Based on Committee for Chemicals, whose membership includes the law, health authorities have a mandate to prevent representatives from line ministries associated with noncommunicable diseases, as well as to enforce industry and commerce, agriculture and forestry, health, compliance with technical standards for production, environment and natural resources, and science and waste disposal management techniques, and principles technology, as well as from the National Chamber of of hygiene to avoid potential health impacts. The law Commerce and Industry. This committee provides a also requires health authorities to conduct organized formal mechanism to promote coordination and build inspections and control to ensure that food products consensus on policies, plans, and regulations pertaining and consumer goods are free from toxic chemical to chemical use (GoL 2016c). substances, parasites, and microbes. Article 18 on labor hygiene establishes employers’ obligations to provide The Decree on Pesticide Management (2017) outlines safety equipment and working conditions that protect the parameters on how to conform to technical workers from diseases, toxic chemicals, and radioactive guidelines regarding the procurement, use, and materials. Article 19 includes specific provisions on disposal of pesticides. The decree lists the procedures hygiene in production to avoid the spread of germs for manufacturing, import, export, transport, use, and toxic chemicals, particularly in goods for daily and monitoring of pesticides. It prohibits the use of consumption, children’s toys and cosmetics (GoL 2011). pesticides that are not registered in Lao PDR. Sound The latter is particularly relevant, given that toys and pesticides management is needed to protect workers’ cosmetics are a main source of lead exposure in Lao health (and prevent associated labor-productivity PDR (see chapter 3). reductions) and can help boost trade in foods that are safe and do not pose a risk to consumers’ health. It MoNRE’s Ministerial Instruction on Hazardous Waste is also useful for the emergence of organics exports, Management (2015) established the procedures as Lao PDR identifies niche markets for expanding for classifying, identifying, and labeling hazardous agricultural exports. Labeling is an important factor, wastes and chemicals. These procedures were since Lao PDR does not produce any pesticides and later incorporated into the 2017 Law on Chemicals, farmers buy chemicals from traders with labeling in which describes the obligations of companies, users, languages other than Lao, especially in border areas. and authorities on the management, monitoring, Pesticides are also mislabeled to cover up banned transport, and disposal of chemical wastes. It also substances and often sold by unlicensed businesses. classifies chemicals into four categories based on their The decree provides the Ministry of Agriculture and potential harm to humans and the environment. The Forestry with a legal mandate to control businesses law’s provisions cover the management, monitoring, involved in the import, formulation, sale, and distribution inspection, implementation, and application of activities of pesticides. 19 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 The 2017 Law on Water and Water Resources (LWWR) 2.2.3 Financial Instruments includes several provisions addressing the linkages between environment, health, and development. This The 2012 Tax Law provides the legal framework to includes the obligation to maintain a minimum water establish environmental taxes on individuals and flow in watercourses to ensure that communities organizations generating pollution and environmental and ecosystems can meet their needs and the degradation. The same law specifies that tax revenues establishment of reserved areas to protect water for will be used to treat, rehabilitate, or clean pollution. drinking and consumption. The law also creates a Separate regulations establish taxable activities, exempt system of underground and superficial water rights to activities, taxable targets, taxable amounts, and rates manage the allocation of water to small, medium-scale, of environmental tax (Global Green Growth Institute and large-scale uses, including electricity generation, [GGGI] 2017). irrigation, mining, and industry. Medium- and large-scale users are required to pay charges that are funneled Article 63 and Article 34 of the 2017 Water Law into the Environmental Protection Fund (EPF), along also establish sources that will be used to fund the with charges for wastewater discharges and fees for Environmental Protection Fund (EPF). These include the restoration of water resources from investment (i) fees for the restoration of water resources from projects and other activities. The law also assigns investment projects and other activities, and (ii) rights and duties to health-sector authorities in areas service charges for water and water-resource use and such as inspection and surveillance of water quality for wastewater discharges. Fund resources must be used for drinking and consumption, and the supply of used to (i) draft and amend policies, strategies, plans, clean water to people living in rural areas. The law’s and legislation relating to water and water-resource provisions also give responsibilities to line ministries to management; (ii) support scientific and technological manage water use in the sectors they lead, including research for the protection of water and water sources; agriculture and forestry, energy and mines, public works (iii) support prevention, control, and elimination of water and transportation, industry and commerce, tourism, pollution and disasters through establishment of training and education and sports (GoL 2017). centers, information centers, and laboratories for water- quality analysis; (iv) support training, capacity building, The LWWR is a cornerstone of the country’s green and awareness raising; (v) manage priority issues; and growth program, with implications on environmental (vi) promote development of local knowledge. fiscal instruments, water pollution and waste, energy, agriculture, forest, watersheds, wetlands, flood and Since 2012, the government has made several attempts drought risk, climate change, groundwater, information to explore the possibilities of introducing various fiscal and data management, nutrition, and tourism. The measures for environmental management to develop LWWR also has implications for managing trade- the main contents of the Environmental Tax procedure. offs and harnessing mutual opportunities among Since then, different units in MoNRE and the Ministry these themes and sectors. This new legal framework of Finance (MoF) have assumed the responsibility for is based on international best practice and assigns developing the regulations on environmental taxes. implementation responsibilities to MoNRE while While continuing to work on the development of such recognizing cross-sectoral imperatives. regulations, the GoL has taken preliminary steps to develop green fiscal policies that can strengthen its ability to finance the transition toward green growth. Under the first GGDPO (GGDPO 1), the GoL instituted a reform to allow some revenues of the EPF to be channeled through the national treasury. The GoL eliminated tariff exemptions for fuel imports for investment projects in 2016. 20 Chapter 2 Efforts to increase financing for green growth priorities The institutional structure for environmental will be complemented with increased transparency and management in Lao PDR consists of (i) national effectiveness in use of funds, including by enhancing committees that guide inter-sectoral coordination among EPF management. With the support of GGDPO 1, agencies, (ii) national-level ministries and agencies the GoL strengthened the EPF, set up as one of the that play a core role in protecting and conserving the financing vehicles for environmental protection and environment, (iii) provincial and district entities that rehabilitation, through streamlining its operations in implement local-level environmental management, and line with the Environmental Protection Law. In 2018, (iv) mass organizations that support the government’s and supported by GGDPO 2, the EPF Board approved efforts to promote public participation and awareness. updated bylaws that establish priority investment In 2015, 18 provincial offices with 148 offices in windows for a range of implementers and environmental districts supported environmental management. The themes, including climate change. The GoL also set environmental sector had 4,479 government officers, up a transparency mechanism to disclose publicly, on 727 working at the central level and 3,752 at the local a regular basis, the EPF resources collected through level. Around 1,200 of these officers had a vocational each revenue source and the selection and justification education degree, 1,608 a technical diploma, 1,350 for resource allocation to environmental priorities. a bachelor’s degree, 241 a master’s degree, and 10 Future reforms would support increased and diversified officers had doctoral degrees (MoNRE 2015a). financing available to a better-managed and more transparent EPF. The Department of Environmental Quality Promotion is responsible for the Environmental Protection and Climate Change Programme, in coordination with 2.3 Organizational Department of Pollution Control, Department of Disaster Management and Climate Change, Department of Framework Environmental and Social Impact Assessment, Natural Resources and Environment Institutes, and other On June 24, 2011, the National Assembly of Lao PDR relevant sectors. The Department of Environmental endorsed the establishment of the Ministry of Natural Quality Promotion is obliged to report to Department Resources and Environment (MoNRE). MoNRE was of Planning and Cooperation on routine basis (MoNRE established by combining departments and divisions 2015b). related to natural resources and environment— such as land, forest (conservation and protected MoNRE has the main responsibility for implementing areas), geology-minerals, water resources and the LWWR at the national level, including the issuance environment—from different ministries and agencies. and management of licenses for the use of water and The creation of MoNRE was based on the need to water resources. Provincial, district, municipal, city, and improve coordination, collaboration, and integration village authorities have similar responsibilities within of natural resources and environment management their jurisdictions. The LWWR gives other agencies key (MoNRE 2015a). The Ministry of Natural Resources responsibilities regarding water resource management: and Environment has a mandate as a secretariat and key regulator for direct management of land, forest, > The Ministry of Agriculture and Forestry (MAF) water, air, and biodiversity and minerals. Its mandate is responsible for managing water resources also includes management of climate change, disaster, for irrigation, fishing, agricultural, and forestry meteorology, and hydrology throughout the country. production. > The Ministry of Energy and Mines (MEM) is responsible for managing water resources for hydropower and mineral exploitation processes. 21 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 > The Ministry of Public Works and Transportation Each governmental entity, including environmental (MPWT) has responsibilities related to water supply, departments and divisions, has its own Terms of navigation and waterway transportation, bank-erosion Reference (ToRs). The ToRs are one of the main protection, and wastewater collection and treatment. instruments that shape the direction of departments. The ToRs relate to the NSEDP with its MDG-related > The Ministry of Industry and Commerce (MoIC) indicators and targets. Sometimes, if one department is has a mandate on the use of water resources in considered to be overloaded, projects may be assigned industrial processing. to another department if it has key staff with experience in that area. Besides ToRs, Ministerial and Prime > Responsibilities of the Ministry of Health (MoH) Ministerial decrees and orders provide adjustments to include the inspection of water sources used for the authorities’ direction of work. drinking and clean water supply for people living in rural areas, and surveillance of water quality for 2.3.2 Oversight and drinking and consumption. Accountability > Local Administrations are responsible for the approval of river basin management plans, for Like all line ministries, MoNRE reports to and works determination of water and water reserved areas in closely with the Prime Minister’s Office. Article 19 of the their localities, and for combating and dealing with Law on the Government of Lao PDR states that one damage from water. of the rights and duties of the Prime Minister’s Office is “to study and analyze issues and submit reports to the Government and Prime Minister [PM] to assist in the 2.3.1 Inter-Sectoral Coordination development of policy on protecting natural resources and the environment,” as well as to “manage the career Coordination of sectors with environmental authorities areas which are not under the Ministries and Ministry- includes both formal and informal mechanisms. The equivalent organizations.” Hence, the PM’s Office is key formal forums include sector working groups (SWGs) and in providing oversight to environmental authorities and sub-sector working groups (SSWGs) on environment, in identifying gaps in the implementation of legislation. health, and the agriculture and forestry sectors. Informal information sharing, cooperation, and decision making The National Assembly (NA) holds regular sessions are important in Lao PDR. These exchanges occur often where all sectors, including the environmental and after working hours such as in sports and social events— health sectors are discussed. In addition, citizens for example, when playing petanque. can report their observations directly to their local NA representatives (personal communication with WBG For very specific topics in trade negotiations such as in Lao PDR office staff and consultants, March–April the case of the Forest Law Enforcement, Governance, 2018). The Ministry of Justice (MoJ) is the authority and Trade (FLEGT) program, there are also Technical through which all laws are reviewed before laws such Working Groups (TWGs) and Technical Expert Groups as those on environment and health are sent to the NA. (TEGs) where MoNRE and MAF work together. MoJ mostly ensures consistency with other laws and the During focused TWGs, stakeholders across ministries Constitution of Lao PDR. The MoJ can sometimes raise cooperate well with each other, following the Popular questions on specific points to MoNRE in case aspects Decree PM15. TWGs would also be needed in the of the policies would not be aligned with other laws or environmental health and pollution-control sector. overarching laws such as the Constitution, PM Decrees, TWGs could be a key forum to strengthen evidence- Presidential Decrees, or the National Socio-Economic based policy making and to close policy gaps as well as Development Plan. implementation gaps. 22 Chapter 2 Public reviews occur in the form of live broadcasting the field. For example, if there have been human health of NA sessions on the internet or on television. effects suspected to be caused by agrochemicals, local Environmental health issues are also discussed in authorities representing MAF and MoH are the focal the media, such as newspapers, the radio, and TV. points. Especially in rural areas, the first point of contact These tend to be the views of citizens, international for citizens is usually their Village Chief (Naiban). The organizations, and specific line authorities. In a recent Naiban presents grievances to the Village Committee case in Vientiane Capital, environmental authorities (VC) for joint analysis of the main impacts. Depending intervened in a case of ambient air pollution. This was on the personal relationships, the VC will include a case where a company was disposing plastic waste representatives of district or provincial authorities at an by open burning next to an international company, early stage, or only present the informal complaint to which is a subcontractor in the steel and pipe industry them. The VC usually consists of nonprofessionals as for the energy and mining sector. The company invited well as representatives of the police, the Lao Women’s environmental authorities to investigate the case. Union, and the Lao Front for National Construction. Subsequently, MoNRE authorities were able to enforce the EPL. If the source of pollution is a factory, the VC (and/or district authorities) will often also approach the factory Formal and informal feedback mechanisms help to to resolve any issues, especially in emergencies. identify areas of need relevant to the improvement of The presence of leadership such as village chiefs, environmental policies. Formal feedback is provided in village-management organizations, and Lao Women’s the SWGs and SSWGs, as well as in specific technical Union representatives—and having a Village Health working groups and committees. The NA hotline is Committee—have been noted as key factors for also a formal feedback mechanism (Slater and Keoka success (personal communication with Pollution 2012). More-informal feedback mechanisms include Control Department staff, System Science Consultants social media and website discussion forums, although Inc. 2016). The leadership group may also approach these tend to be more information-sharing mechanisms provincial authorities if the company is not locally amongst citizens, where the public and private represented or if its representatives are not easily sectors usually do not comment. However, these are approachable. good informal mechanisms for authorities to find out what their citizens are discussing and, based on that Most pollution cases are solved informally and locally information, authorities will often raise those citizen with compensation paid by the company. However, concerns and points in internal and public meetings. cases sometimes end up in provincial courts. One issue of concern in monitoring investments is the high level A good example is the development of stricter decrees of discretion written in the concession agreements. on pollution control, such as PM Decision 81. Sharing While in some cases this provides important flexibility of pictures by citizens of children who had accidentally to apply regulations in different local circumstances, eaten pesticides may have been a contributing factor in it can also lead to uncertainty (UNEP 2018). In some the application of stricter limits on accepted levels on cases, citizens publish their grievances on social pollution, as seen in the case of Decision 81 (personal media. There is also an emergency telephone line communication with environmental authorities; at the National Assembly for urgent cases, as well Hindustan Times 2017; Reuters 2017). Regarding the as a telephone hotline directly to the Prime Minister’s tackling of pollution-management and environmental Office. NA members are also active in touring villages protection priorities, the default counterpart to solve in their constituency. Hence, it is common for citizens the issues at the national level is MoNRE. However, to approach their representatives and provide feedback each instance is handled on a case-by-case basis in and suggestions when they visit in their villages. 23 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 Representatives of farmer organizations are invited to environmental programs during this period represented provincial consultations, and they have an opportunity to 10 percent of the plan’s budget (Figure 2.2). However, consult their National Assembly representatives to bring it represented less than 1 percent of the development up their issues at the national level. Poor and vulnerable budget provided by the GoL to the plan and, as a groups—such as farmers on poor soils—do not result, the environmental protection program was influence policy making to a considerable extent, unless highly dependent on donor support (Figure 2.3). Private their farmer representatives, farmer producer groups contributions were almost four times larger than that of active in collecting their views, or they themselves are the GoL. The comparatively large contributions from the active in reporting issues to their NA representatives private sector can potentially create a conflict of interest, and authorities. There are provincial consultations when since environmental authorities might be reluctant policies and laws are developed, but very few poor to sanction a private firm that does not comply with have the time to participate from their farm work and environmental standards if the environmental authority collection of natural resources. If they are aware of the is financially dependent on that firm’s payments. importance of environmental health concerns, their best way of participating is to contact local farmer producer Based on available information, environmental groups, National Assembly representatives, or local protection budgets have not been used to address authorities, or to call the hotlines. priority environmental health risks. The main achievements of the environmental protection program between 2011 and 2015 included 2.3.3 Resource Allocation development of environment-quality and pollution- monitoring systems for household and investment Budget allocations for environmental protection in projects; setting up the national laboratory in Lao PDR are insufficient to address severe pollution Vientiane Capital, Luang Prabang, Xiengkhouang, problems. The Natural Resources and Environment and Champasak; and the pilot implementation of 3Rs Sector Plan 2011–2015 had a total budget of US$199.6 practices in six pilot cities (Vientiane Capital, Kaisone million, including the GoL development budget, Phomvihanh, Luang Prabang, Paksan, Sayaboury, Overseas Development Assistance (ODA), and private- and Vanvieng) (MoNRE 2015b). sector investments (Table 2.2). The amount allocated to Table 2.2 Budget Sources for the Natural Resource and Environment Sector Plan, 2011–2015 (US$) Programs ODA Private GoL Total Land – – 12,026,003 12,026,003 Forest resources – – 91,800,000 91,800,000 Geology—mines 7,268,600 – 218,750 7,487,350 Water resources and Meteorology—Hydrology 43,430,776 – 21,484,678 64,915,454 Environment 17,180,000 2,000,000 570,000 19,750,000 Disaster and climate change 3,500,000 – 100,000 3,600,000 Total 71,379,376 2,000,000 126,199,431 199,578,807 Source: MoNRE 2015b. 24 Chapter 2 Figure 2.2 Total Budget Distribution per Environmental Program, 2011–2015 (US$) Land Disaster and 6% climate change 2% Environment 10% Forest resources 46% Water resources and Meteorology 32% Geology - mines 46% Source: MoNRE 2015b. Figure 2.3 Distribution of GoL Development Budget per Environmental Program, 2011–2015 (US$) Land Disaster and 10% climate change 0% Environment 0% Water resources and Meteorology - hydrology 17% Geology - mines 0% Forest resources 73% Source: MoNRE 2015b. 25 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 MoNRE’s own assessment is that the budget is In recent years, budget allocations to the water insufficient to implement its programs. The requested resources and environment sector have fallen. budget for the implementation of the 2016–2020 The sector’s total budget for 2014–2015, including Natural Resources and Environment Sector Plan was expenditures by central and local governments, was LAK 4,595.68 billion, while the actual budget was LAK LAK 257,712 million. This amount was reduced to 2,553.45 billion, including LAK 126.25 billion from the LAK 127,939 million in the planned budget for 2017 public investment budget and LAK 2,647.2 billion (Table 2.3). This reduction of about 50 percent of the from ODA. Thus, at the time of the plan’s preparation, allocations to the water resources and environment MoNRE faced a financing gap of LAK 2,042.23 billion, sector happened at a time when the total budget or approximately 45 percent of the resources needed for expenditure increased by about 5 percent. Whereas the the plan’s implementation (MoNRE 2015b). sector’s budget represented 0.83 percent of the total Table 2.3 Budget Allocations for the Water Resources and Environment Sector in Selected Years (LAK, millions) 2014–15 2017 Total (Central Total (Central Central Local Central Local + Local) + Local) Total expenditure (all sectors) 30,926,577 22,963,645 7,962,931 32,402,000 23,302,989 9,099,011 Water Resources and 257,712 168,660 89,052 127,939 49,456 78,483 Environment Salary and allowances 83,310 16,597 66,714 79,342 20,805 58,537 Compensation and policy 6,520 3,061 3,459 6,733 2,979 3,754 allowances Operational expenditure 23,639 14,927 8,712 24,943 15,809 9,134 Technical activities, subsidies 10,663 8,078 2,585 9,638 6,733 2,905 Other expenditures 1,585 1,585 3,362 3,130 232 New purchase for operation 9,365 9,099 266 Capital expenditure 122,630 116,898 5,732 3,921 3,921 Source: Based on MoF 2015; 2017. Note: Data for 2014–2015 are from budget implementation and those for 2017 are from the State Budget Plan. Table 2.4 Changes in Budget Allocations between 2014–15 and 2017 Total (Central + Local) 4.77% All sectors Central Expenditure 1.5% Local Expenditure 14.3% Total (Central + Local) –50% Water Resources and Environment Central –71% Local –12% Source: Based on MoF 2015; 2017. 26 Chapter 2 budget for 2014–15, it fell to less than 0.39 percent of Available data suggest that industrial pollution the total budget in 2017. Sectoral allocations for the emissions are highly concentrated in terms of sectors, central government fell the most during this period, numbers of facilities, and geographic locations. A shrinking from 0.73 percent to 0.21 percent of the 2015 study estimated that discharges of air pollutants central government’s expenditure in all sectors (Table from industrial sources were mainly concentrated in 2.4 and Figure 2.4). Vientiane Capital and Khammouane and Vientiane Provinces. Similarly, the majority of the toxic metal The composition of budget expenditure within the Water pollutants were primarily emitted in Vientiane Capital Resources and Environment sector has also changed and Khammouane and Savannakhet provinces (ADB significantly in recent years, particularly in the central 2015). The report could not use actual emission data, government. Salaries, allowances, and compensation which are largely missing in Lao PDR, and did not represented around 79 percent of sector expenditure in include pollution-dispersion models to assess the local governments in 2014–2015 and 2017. However, actual damages caused by industrial pollution. Yet, at the central level, this grew from 12 percent to 48 the report suggests that these provinces might receive percent during this period. Furthermore, while capital priority attention from environmental authorities to better expenditure at the central level was the largest understand the severity of industrial pollution. However, expenditure item in 2014–2015, representing more than available budget data do not show greater allocations to 69 percent of the sectoral budget, it fell to 0 in 2017 these potential hotspots. On average, the 18 provinces’ (Figure 2.5 Expenditure Items in the Water Resources allocation for the water resources and environment and Environment Sector in Selected Years). sector represents 0.9 percent of the resources allocated to all sectors. This share is significantly lower in Khammouane and Savannakhet provinces (Table 2.5). Figure 2.4 Allocations to the Water Resources and Environment Sector (% of total budget) 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.0% Total (Central + Local) Central Local 2014-15 2017 Source: Based on MoF 2015; 2017. 27 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 Figure 2.5 Expenditure Items in the Water Resources and Environment Sector in Selected Years Local 2017 Local 2014-15 Central 2020-17 Central 2014-15 Total 2017 Total 2014-15 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Salary and allowances Compensation and policy allowances Operational expenditure Technical activities and subsidies Other expenditures New purchase for operation Capital Expenditure Source: Based on MoF 2015; 2017. Table 2.5 Allocations to the Water Resources and Environment Sector in Selected Provinces, 2017 (% of total budget) Average for 18 Vientiane Vientiane Khammouane Savannakhet provinces Capital Budget for all sectors (LAK, millions) 639,400 625,615 552,096 866,041 Budget of Water Resources and 8,906 6,066 3,990 4,886 Environment (LAK, millions) Water Resources and Environment 0.90% 1.39% 0.97% 0.72% 0.56% Budget (% of total expenditure) Source: Based on MoF 2017. 2.4 Policy-Based With support from the World Bank’s first GGDPO, the GoL adopted the 2016 Prime Minister Order No. 55 and Strategic Environmental the 2017 Ministerial Decision No. 483/MoNRE, which Assessments introduced legal requirements for using SEA to integrate environmental and social sustainability, as well as Lao PDR’s institutional framework for environmental SDGs, into all policies, programs, and strategic plans. management has relied significantly on the use of These policies define the roles, responsibilities, and Environmental and Social Impact Assessments (ESIA) main procedures for establishing a SEA system. The as a regulatory tool for individual projects (see chapter GoL has also established detailed regulations and 5). Recently, Lao PDR has taken steps to incorporate procedures for conducting SEAs, including information the preparation of policy Strategic Environmental disclosure and public participation. By May 2019, the full Assessments (SEA) to integrate environmental and set of SEA regulations was ready to be implemented for sustainability considerations at strategic decision- a variety of policy-level topics, including hydropower, the making stages, including the preparation of policies, National Green Growth Strategy, and others priority topics. plans, and programs. 28 Chapter 2 The reforms adopted by the GoL are based on > Identifying environmental priorities for poverty international evidence showing that policy SEAs alleviation and analysis of the capacity of natural have been more effective than impact-centered resources and environmental services to support SEAs in mainstreaming green growth considerations sector-wide economic activities and sector growth; at the strategic level. Impact-centered SEAs were first introduced as instruments with the potential to > Highlighting institutional and governance gaps overcome many of the limitations of the project-based or constraints affecting environmental and social environmental impact assessment (EIA), including sustainability; the incorporation of environmental considerations in upstream decision-making stages and identification > Promoting capacity building and institutional, legal, of cumulative, synergistic, or induced impacts that and regulatory adjustments critical for environmental are difficult to consider at the project level (Thérivel and social sustainability of sector reforms; 2004). Still, the methodologies adopted by these ‘first generation’ SEAs were largely based on EIA practice > Strengthening accountability on the management of and were mainly used to assess the environmental environmental and social risks through increasing impacts of groups of investment projects clustered in transparency and empowering weaker stakeholders; programs, and of land-use zoning and regional plans and (Ahmed and Sánchez-Triana 2008; Dalal-Clayton and Sadler 2004; Partidario 2000). As such, they are based > Institutionalizing social learning processes around on the assumption that policy making is a rational, the design and implementation of public policies linear process that can be strengthened by simply (World Bank et al. 2011). providing better environmental information to policy makers (Kornov and Thissen 2000). Given that EIA- Policy SEAs have been effective in various countries like SEAs use the same procedures and methodologies across the world, because they (i) provided decision as EIAs, except for addressing cumulative and large- makers with better information, particularly with respect scale impacts of megaprojects, there are no significant to identifying environmental priorities and institutional differences between a comprehensive EIA and an EIA- roadblocks to address them; (ii) enabled attitudes like SEA in terms of methodologies and arguably, also to change through participation and involvement, in terms of influencing decision making (Tetlow and particularly by engaging a broad stakeholder base and Hanusch 2012). enhancing accountability; and (iii) changed established routines, notably through the adoption of social In contrast, policy SEA is defined as “an analytical and learning processes. participatory approach for incorporating environmental, social, and climate change considerations in Several policy SEAs developed in Pakistan after 2004 sector reforms” (World Bank et al. 2011). Policy illustrate the potential contributions of this type of SEAs focus on identifying environmental priorities, assessment to raise public awareness, promote debate assessing institutions and governance systems, and nationwide, and lead to the design of environmentally assessing alternative policy actions. Policy SEAs sustainable public policies. Influential policy SEAs are acknowledged to require “a particular focus on include the Sindh Environmental and Climate Change the political, institutional, and governance context Priorities SEA; the Strategic Environmental, Poverty underlying decision-making processes” (World Bank et and Social Assessment of Freight Transport Reforms al. 2011, 2). The objective of policy SEAs is different 10 (SEPSA); and the Mainstreaming Environmental from that of EIA-like SEAs, particularly since the Sustainability into Pakistan’s Industrial Development objective of policy SEAs includes SEA, which are summarized in the following paragraphs: 29 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 > Mainstreaming Environmental Sustainability degradation in the province. It also provided a into Pakistan’s Industrial Development SEA roadmap for carrying out investments, policy was initiated at the end of 2009 to mainstream reforms, and institutional strengthening activities sustainability into Pakistan’s industrial that would result in better environmental conditions. competitiveness. The SEA was steered by a High- The methodologies and approach adopted by the Level Committee set up by the Ministry of Industries, NLTA can be replicated in the future to evaluate representing the federal government, four provincial progress in improving environmental conditions, governments, academia, NGOs, the private identifying policy and intervention improvements, sector, and the World Bank. The SEA promoted and determining the most efficient use of scarce a consensus-building process that resulted in resources (Sánchez-Triana et al. 2015). the formulation of a coherent and sustainable industrialization strategy. The SEA stresses that > Strategic Environmental, Poverty and Social industrial structural change, spatial transformation, Assessment of Freight Transport Reforms and improvements in infrastructure in industrial (SEPSA). In order to ensure meaningful discussion clusters are needed if Pakistan is to realize gains in among key stakeholders in the identification economic efficiency and competitiveness, especially of specific sustainability criteria that would be in export markets. This, in turn, requires a cross- incorporated into freight-transport reforms, the sectoral approach that has been endorsed by the GoP and the Bank held a series of workshops Planning Commission and the Ministry of Industries, during 2009 to scope out the studies that would which has requested programmatic lending support be completed using methodologies developed for the implementation of Pakistan’s green industrial for policy SEA and poverty and social impact growth strategy (Sánchez-Triana, Ortolano, and analysis (PSIA). This gave rise to the Pakistan Afzal 2012; Sánchez-Triana et al. 2014). Strategic Environmental, Poverty and Social Assessment of Freight Transport Reforms (SEPSA). > Sindh Environmental and Climate Change The environmental management component of Priorities SEA. At the request of the Government SEPSA focused on the environmental aspects of Sindh (GoS) in 2010, the World Bank initiated of investments and reforms in the trade and a non-lending technical assistance (NLTA) in transport sector, particularly freight. The potential Sindh Province with the objectives of (i) creating a environmental effects of three strategic alternatives mechanism for ranking the province’s environmental were analyzed: (i) the “no reforms” alternative, (ii) problems; (ii) assessing the efficiency and cost- policy reform and investment in the road freight effectiveness of alternative interventions to address sector, and (iii) policy reform and investment in the priority environmental problems; and (iii) identifying rail freight sector. Each alternative was evaluated the policy reforms, technical assistance, and based on the set of priority issues identified jointly investments needed to strengthen environmental with stakeholders (climate change, air quality, sustainability in Sindh. As in the previous case, transport of hazardous materials, road and this SEA was steered by a High-Level Committee railway safety, urban sprawl and accessibility, and composed of representatives from the provincial environmental management systems) to assess government, business associations, environmental their potential environmental and social implications. NGOs, and other stakeholders. The SEA stressed that there was no priority-setting mechanism in The PSIA was prepared to identify potential social and Sindh, and the scarce available resources were not distributional impacts of transport-sector reforms on used to address the categories of environmental stakeholder groups, employing a computable general degradation that were causing the most significant equilibrium (CGE) model that uses actual economic effects. This SEA constituted the first formal data to simulate how an economy might react to assessment of the severity of environmental changes in policy or other external factors. The PSIA 30 Chapter 2 identified the main effects of proposed policy reforms a policy learning process through which responses and developed a menu of options to mitigate negative to identified environmental priorities can be impacts, incorporate poverty alleviation measures into progressively addressed. the design of transport reforms and projects, enhance positive effects on poverty alleviation, and address The SEA regulations adopted by the GoL provide key environmental and social priorities. Strong governance elements to guide public servants and practitioners and institutional capacity in sectoral and environmental on the best practices for designing and implementing agencies were highlighted as indispensable for the SEAs, developing institutional capacity over time, adoption of the options identified. Findings from the and supporting better decision making. By ensuring Pakistan SEPSA include that a modal shift from road- meaningful participation from relevant stakeholders, freight to rail-freight transport for long hauls would including vulnerable groups often excluded from have significant environmental and social benefits; decision making, policy SEA can contribute to make that environmental issues should not be considered in growth green, inclusive, and climate informed. The isolation from social ones, particularly in situations in GoL plans to use SEA to inform the preparation of which policy reforms could increase the risk of social the NGGS. This first experience using SEA will be conflict; and that understanding social patterns and an important step in building GoL capacity to lead conflicts illuminates the feasibility and weaknesses of the preparation of SEAs. Continuing to build such potential solutions and needed mitigation measures. To institutional capacity remains the main challenge to stimulate economic growth, employment, and poverty realize the full potential of policy SEAs. reduction, reforms to promote industrial competitiveness need to be made along with significant investments in increasing road density to improve the connectivity of industrial clusters to domestic and international markets. 2.5 Conclusions and Strengthening the infrastructure of urban centers Recommendations to receive rural and inter-provincial migrants is also required (Sánchez-Triana et al. 2013). Lao PDR’s institutional framework for environmental management has evolved rapidly, as discussed An analysis of the profiled policy SEAs identifies throughout this chapter. There are, however, similar features: robust stakeholder participation, client opportunities to further strengthen the framework and ownership, and temporal coordination with the county’s ensure it performs the three fundamental functions that development priorities and processes. They also tend support the coordinated actions needed to address to be done in ways that are collaborative, evolving, environmental degradation. These three fundamental and ongoing rather than as a safeguard-clearance functions—picking up signals, balancing interests, and requirement, which may receive more attention during executing decisions—are discussed below. project preparation than during project implementation (Slunge and Loayza 2012). 2.5.1 Picking up signals Several SEA practitioners have pointed out that the duration of the SEA itself is often too short to achieve Official documents suggest that the institutional results and that its main contributions are long-term, framework has not picked up the signals indicating that often indirect, outcomes (Axelsson et al. 2012; Jha- Lao PDR faces significant environmental challenges. Thakur 2012; Slunge and Loayza 2012). Therefore, The assessment of the costs of environmental a key contribution of policy SEAs to mainstream degradation presented in chapter 3 indicates that the green growth principles into policies and programs is health and economic effects of such degradation have to use the assessments to initiate a dialogue with a a cost equivalent to 14.6 percent of GPD, a higher broad stakeholder base and set the foundations for share than in any of the other countries in which the 31 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 Bank has conducted similar analyses. These findings design data-driven interventions to reduce pollution and contrast starkly with the way in which the high-level to publicly disseminate information. Continued support policy documents summarized in this chapter describe and commitment will be key to ensure that monitoring environmental conditions. For instance, the NRESV systems are well resourced and maintained over time. characterizes Lao PDR’s environmental quality as good and comparing favorably with other countries in the Another important step to strengthen environmental Asian region. planning would be to ensure that data collected through monitoring are used to inform a data-driven approach Chapter 3 also finds that the environmental health to identify environmental priorities, assess alternatives problems that require attention most urgently are to address them, and evaluate progress in achieving household air pollution; ambient air pollution; water, environmental goals. The Cost of Environmental sanitation, and hygiene; and lead exposure. However, Degradation presented in chapter 3 of this report is these issues have received minimal attention in the an example of a methodological approach to identify high-level policies, instruments, and budget allocations environmental priorities, while the cost-benefit analyses discussed in this chapter. This misalignment between presented in chapter 9 illustrate an approach to select environmental priorities, institutional efforts, and the priority interventions that are likely to benefit resource allocation is largely due to (a) the absence individuals and society the most. The GoL could of an integrated system of reliable data to provide also consider creating a group within MoNRE and in analytical support to the decision-making process; (b) coordination with other sectors to conduct analytical the lack of representation of vulnerable groups that work that would provide robust foundations for setting are mainly affected by environmental degradation; and environmental priorities across sectors and budget (c) the absence of a formal mechanism for allocating allocation in response to those priorities. financial and human resources according to clearly defined environmental priories that are linked to poverty The GoL might similarly conduct analytical work to alleviation and social priorities. assess progress in responding to environmental priorities, incorporate lessons learned, and identify Monitoring capacity is constrained by a lack of reliable opportunities for continuous improvement. The time-series data on the state of the environment and systematic establishment of baselines and the natural resources, the nonexistence of a system of evaluation of governmental interventions constitute results-focused indicators of environmental quality, an appropriate tool to gauge progress, incorporate and insufficient resources to ensure an adequate the lessons from past experience, and adjust policies institutional presence in the field. 11 The World Bank- based on new developments in science and technology. supported Green Growth Development Policy The information collected with this tool is crucial for Operations (GGDPOs) have contributed to establish the building performance-based indicators, which allow mechanisms that will allow for the regular monitoring organizations to set measurable goals, evaluate their of environmental data. For instance, with support from achievements, and engage in a process of reforming the second operation, MoNRE regulated standard and improving their practices. Performance-based procedures and parameters of methods for sampling indicators also have the potential to strengthen the and analyzing particulate matter (PM2.5 and PM10) in air, environmental sector by enhancing transparency and as well as arsenic, cyanide, lead, manganese, mercury, accountability, as well as by demonstrating the social fecal coliform, and total coliform (as part of pathogens) benefits of investing public resources in environmental in water. These actions will help to monitor air and protection. water pollution in priority sites, which will be key to both 32 Chapter 2 2.5.2. Balancing interests MoNRE has taken important steps recently to improve the dissemination of environmental information. Key Lao PDR has good examples of interagency efforts include posting environmental compliance coordination that has been instrumental to balance the reports on its website and developing a color-coded air interests of various sectors, such as the establishment quality index that can inform a wide audience about air of working groups in the context of trade negotiations. quality and the types of actions that are recommended However, major environmental issues still lack the for different air quality levels. These efforts can help to minimum coordination structure for defining priorities both raise awareness about the severity of air pollution and action plans, as evidenced by environmental and catalyze action to control pollution. They can also problems such as indoor air pollution, ambient air contribute to increased accountability. Currently, a key pollution, and lead exposure12. Efforts to foster accountability and oversight mechanism consists of closer interagency coordination could be based citizens reporting their observations directly to their on quantifiable goals. The process of developing local National Assembly representative. Having publicly environmental performance could be closely tied to available data would provide a more systematic and efforts requiring units from different organizations to evidence-based approach to complement citizens’ set specific quantifiable goals in their action plans, and observations. to systematically monitor their progress toward those goals. Ideally, this performance evaluation system Also missing in the current institutional framework are would measure direct impacts on environmental quality, mechanisms to incorporate the concerns of groups such as reduction in waterborne diseases or in outdoor most severely affected by environmental degradation and indoor concentrations of PM2.5. Disseminating such into Lao PDR’s planning processes, as well as clear data and publicly disclosing them can create strong criteria to efficiently allocate scarce financial and incentives for compliance with coordinated plans and for human resources for environmental management in the improved institutional performance. provinces14. The GoL might consider including criteria linked to poverty reduction and shared prosperity in its Responding to priority environmental challenges budget allocation procedures. in Lao PDR calls for a more systematic effort to raise awareness of environmental issues. Ways to 2.5.3. Executing decisions improve public information and promote transparency, accountability, and awareness include the publication of data in support of key environmental indicators Gaps in environmental policies, weak enforcement, and (including health statistics or pollution loads); wider deficient technical capacity have rendered Lao PDR’s use of public forums to air development initiatives; environmental management framework ineffective and broader and more detailed review and discussion to reduce environmental degradation in the country. of environmental management tools. In Colombia and Current environmental regulations only apply to (or Indonesia, among other countries, the publication of are only enforced for) a limited subset of activities or key environmental performance indicators has been in response to a public complaint, and environmental instrumental in raising environmental awareness and regulation systematically neglects some of the most placing environmental issues on the national agenda. polluting activities. Government regulators lack Mechanisms to disseminate information in a manner resources to enforce the regulatory framework. Because that is easily interpretable can allow communities to of this, enforcement is selective and compliance with serve as informal regulators; such mechanisms also regulations is extremely low. promote accountability on the part of those being regulated (World Bank 2005)13. 33 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 Weaknesses in executing decisions are associated NEQS. The GoL might consider creating specialized with inadequate funding for the environmental sector technical units to respond to identified environmental and decreases in the national government’s total priorities and ensuring that they have the necessary environmental expenditure. According to MoNRE’s own human, technical, and financial resources to fulfill their assessment, its budget was insufficient to implement mandate15. the 2016–2020 Natural Resources and Environment Sector Plan. The limited data that are publicly available As Lao PDR continues to develop its institutional indicate that environmental protection activities have framework for environmental management, it should been highly dependent on donor funding and that consider developing a wider range of environmental allocations to the sector have fallen even as total instruments. Currently, ESIA is the main tool used for government expenditure has risen. environmental management, as discussed in more detail in chapter 5. In many countries, ESIA has The GoL might consider adopting results-based become the main environmental management tool and agreements to improve effectiveness and efficiency is often the only instrument used to address complex in the use of public resources in all sectors, including environmental problems, serving as a “de facto” environment. This approach consists of the signing substitute for regulations in key areas, such as pollution of results-based agreements between the Ministry control, biodiversity conservation, and effective land-use of Finance and national agencies and subnational planning (Acerbi et al. 2014). Lao PDR could mitigate governments. MoF and the leading sectoral agencies the risk of placing an undue burden on its ESIA system (for example, MoNRE) monitor compliance of the by developing a comprehensive set of environmental agreement based on a small, clear set of critical policy and management instruments, including (i) standards indicators and milestones, which are part of direct government regulation through what are referred the agreement. Budgetary disbursements are subject to as command-and-control measures; (ii) economic to a given degree of compliance, and allocations in the and market-based instruments; and (iii) other means, following budget cycle are decided according to the including public disclosure, legal actions, and formal previous cycle’s results. negotiation. These instruments could initially focus on identified environmental priorities and gradually expand There is also an urgent need to strengthen the capacity to cover additional areas. of environmental organizations to execute decisions. MoNRE was established in 2011 and is still in the Table 2.6 Recommendations for the Strengthening of process of consolidation. Even though the sector had Environmental Institutions in Lao PDR summarizes a staff of more than 4,000 in 2015, environmental this chapter’s recommendations and their suggested authorities are largely unable to conduct essential timeframe. functions such as monitoring and enforcing the 34 Chapter 2 Table 2.6 Recommendations for the Strengthening of Environmental Institutions in Lao PDR Objective Policy Recommendation Timeframe* Establish a small group in MoNRE for analytical work and Short term environmental policy design Design and implement a policy (through laws and regulations) to set environmental priorities at the national and subnational levels, based Short term on learning mechanisms to periodically review and learn from the experiences of implementation of environmental policies Strengthen monitoring systems to comprehensively assess Setting environmental priorities environmental quality in priority sites and use collected data to inform Medium term decision making Install and implement systems to monitor and evaluate environmental management and the extent to which the objectives of environmental Medium term priorities are efficiently met Periodically evaluate progress on the implementation of policies to tackle environmental priorities with the support of the accumulation Medium term of data, results, and experiences achieved through interinstitutional coordination and learning Strengthening inter-institutional Set coordination incentives and quantifiable goals Medium term coordination Establish and strengthen public disclosure mechanisms for Short term environmental information Increasing public awareness and accountability Support the technical and financial capacity of accountability agencies, including the PM’s Office and the National Assembly, to oversee Medium term environmental performance, and create an enabling environment for public participation and social accountability Establish the leadership and institutional arrangements and capacities Short term to set priorities in environmental policy design and implementation Aligning environmental expenditure with priorities Align environmental expenditure with priorities and use results-based agreements to improve effectiveness and efficiency in the use of public Medium term resources Establish specialized technical units to respond to identified environmental priorities and ensure that they have the necessary Medium term human, technical, and financial resources to fulfill their mandate Strengthen the capacity of environmental agencies Develop a comprehensive set of environmental policy and management instruments, including (i) direct government regulation; (ii) economic Medium term and market-based instruments; and (iii) other means, including public disclosure, legal actions, and formal negotiation. Note: * = Short term: 1–3 years; Medium term: 3–7 years; Long term: 7 years and longer. 35 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 2 2.5 Notes 8 This chapter was prepared by Santiago Enriquez. 9 The Vice Minister of Planning indicated that this report will be used to prepare the 9th NSEDP. 10 A succinct presentation of insights and guidance on Policy SEA can be found in World Bank et al. (2011). 11 The former Vice Minister of Natural Resources and Environment, H.E. Mme. Monemany Gnoibouakong, underlined the importance of achieving the Sustainable Development Goals and of monitoring environmental data over time to gauge progress in achieving goals. 12 The former Vice Minister of Natural Resources and Environment pointed out the importance of promoting coordination for the design and implementation of green growth policies among different ministries and departments. 13 The Vice Minister to the Prime Minister’s Office recommended working with the Ministry of Information to raise awareness of environmental issues. She also suggested integrating environmental issues into Lao PDR’s education system to raise young people’s awareness. 14 The Vice Minister of Public Works and Transport, H.E. Mme. Vilaykham Phosarath, highlighted the importance of working with provincial and district public works and transportation offices to address key issues highlighted in the report. 15 The Vice Minister to the Prime Minister’s Office indicated that “We should build our human capacity continuously so that we can actually solve environmental problems.” 2.6 References Acerbi, M., E. Sánchez-Triana, S. Enríquez, R. Tiffer-Sotomayor, A. L. Gomes Lima, K. Siegmann, P. C. Fernández, and N. E. Nkrumah. 2014. Environmental Impact Assessment Systems in Latin America and the Caribbean. A World Bank Study. Washington, DC: World Bank. http://www.iaia.org/conferences/iaia14/IAIA14-final-papers/Acerbi,%20Marcelo.%20%20 EIA%20systems%20in%20Latin%20America%20and%20the%20Caribbean.pdf?AspxAutoDetectCookieSupport=1. ADB (Asian Development Bank). 2015. Estimating Industrial Pollution in Lao PDR. Final Report. Greater Mekong Subregion Core Environment Program. Ahmed, K., and E. Sánchez-Triana. 2008. 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Decree of the President of the Lao People Democratic Republic on the Promulgation of the Law on Hygiene, Disease Prevention, and Health Promotion. Decree No. 13/PO. Translation Endorsed by the Law Committee of the National Assembly of the LAO PDR. (Accessed May 28, 2018), http:// www.vientianetimes.org.la/Laws%20in%20English/46.%20Law%20on%20Hygiene,%20Disease%20Prevention%20 and%20Health%20Promotion%20(2001)%20Eng.pdf. GoL (Government of the Lao People’s Democratic Republic). 2012. Environmental Protection Law (Revised Version). Unofficial English Translation. (Accessed May 19, 2018), http://portal.gms-eoc.org/uploads/resources/951/attachment/Lao_Law_on_ Environmental_Protection_RevisedVersion_18_Dec_2012_En.pdf. GoL (Government of the Lao People’s Democratic Republic). 2016a. 2030 Vision and 10-Year Socio-Economic Development Strategy (2016-2025). Officially approved at the 8th Legislature of the National Assembly in its Inaugural Session held during April 20–22, 2016. 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Washington, DC: World Bank. 38 3 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic COST OF ENVIRONMENTAL DEGRADATION: ENVIRONMENTAL HEALTH ISSUES16 Photo credit: Wildlife Conservation Society Chapter Overview As many as 7.6 million people died worldwide (14 percent of all global deaths) from the four largest environmental health-risk factors in 2017 according to the Global Burden of Disease 2017 (Stanaway et al. 2018).17 About 7 million (92 percent) of these deaths were in low- and middle-income countries. The four risk factors are outdoor ambient air pollution (AAP); household air pollution (HAP) from the use of solid fuels for cooking and other household purposes; inadequate drinking water, sanitation, and handwashing; and exposure to lead (Pb). Air pollution accounted for 4.9 million deaths globally, or two-thirds of the deaths from the major environmental risk factors. Air pollution is the fifth-leading risk factor for mortality worldwide and causes more deaths than malnutrition, malaria, unimproved sanitation, or unimproved water sources, according to the Global Burden of Disease 2017. Air pollution not only causes pain, suffering, and reduced quality of life, but also loss of income of affected people from illness, premature death, and loss of productivity. Nine out of ten people globally breathe outdoor air containing levels of pollutants (PM2.5) exceeding the World Health Organization’s (WHO’s) annual air quality guideline (AQG), and 40 percent of the world population uses solid fuels as primary cooking fuels with household air pollution levels exceeding the WHO’s AQG by 10–20 times. In the Lao People’s Democratic Republic, most of the population is exposed to elevated pollution associated with at least two of the four environmental health-risk factors assessed in this chapter. Household air pollution: Over 93 percent of Lao PDR’s population relied on solid fuels (wood, charcoal) for cooking in 2017. In contrast, in Vietnam, a country whose per capita income is similar to Lao PDR’s, 33 percent of the population used solid fuels. The use of solid fuels for cooking and other household purposes causes severe household air pollution and health effects in Lao PDR. A recent study in Savannakhet province found that household cooks were exposed to 24-hour average PM2.5 concentration levels that are 12 times higher than WHO’s AQG for annual average outdoor PM2.5 of 10 µg/m3. Personal exposures of other adult household members and children are also very high. Average outdoor ambient PM2.5 in the villages was as high as 52 µg/m3, mainly due to the smoke from solid fuels used for cooking. Ambient air pollution: There is a severe lack of ground-level monitoring of outdoor ambient PM2.5 in Lao PDR, even in major population centers including Vientiane Capital. The limited available monitoring data suggest that the majority of Lao PDR’s population are exposed to PM2.5 outdoor concentrations exceeding WHO’s annual AQG, and that ambient PM2.5 in Vientiane Capital may exceed the annual WHO AQG by a multiple of 3–4, and possibly more in some sections of the city. Rising pollution from a rapidly increasing vehicle fleet—especially diesel vehicles—and continued air pollution from household burning of waste/debris, high level of dust from streets and other sources especially during the dry season, and cooking with solid fuels (that is, wood, charcoal) are likely some of the main sources of air pollution. Air quality monitoring and PM2.5 source-apportionment studies are much needed to confirm the situation, identify priority sectors for air pollution control, and design cost-effective interventions. 41 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Drinking water and sanitation: An estimated 84 percent of Lao PDR’s population used an improved drinking-water source in 2017, according to the Lao Social Indicator Survey II. Nearly 40 percent of the population reported that they treat (mainly by boiling) their water prior to drinking, and 48 percent of the population purchased bottled drinking water. Nevertheless, nationwide testing of drinking water revealed that as many as 86 percent of the household population had E. coli in their drinking water. The situation was not much better for households using bottled water, with 85 percent of users having E. coli in their bottled water. Over 70 percent of the population had access to improved, nonshared sanitation in 2017. However, 24 percent of the population continued to practice open defecation, predominantly in rural areas. Arsenic in drinking water from tubewells is a concern in central and southern Lao PDR. However, arsenic-measurement studies are very limited. One available study suggests that as many as 400 thousand people in these provinces may be exposed to arsenic in drinking water exceeding WHO’s guideline of 10 µg/liter. Lead (Pb) exposure: Lead is toxic to humans and has many known health effects. Although exposure to lead has globally declined substantially with the phaseout of leaded gasoline, multiple other sources of lead exposure remain. These sources include, among others, industry and mining; occupational exposure; contaminated drinking water, food, dust, soil, paint, cosmetics, utensils, several herbal medicines, children’s toys, ornaments, and jewelry. No measurement study of blood lead levels (BLL) in Lao PDR’s population is available. If BLLs are similar to the levels in neighboring countries, then over 90 percent of children and adults in Lao PDR may have BLLs that are detrimental to children’s neuropsychological development and adults’ cardiovascular health, according to recent research evidence. The impacts of environmental pollution in Lao PDR have profound short-term and long-term implications for the well-being of the Lao people, as well as profound implications for the country’s economic development and poverty alleviation. The analytical work presented in this chapter clearly shows that the impacts of pollution on human health are among the most urgent issues confronting Lao PDR. Quantitative assessments of the health impacts of pollution, both in physical and monetary terms, can be widely understood throughout government and the general public. Such assessments can therefore serve as an instrument for identifying environmental priorities, for mobilizing support for their implementation, and, more broadly, for moving forward towards realizing environmental goals and objectives. Developing the capacity within MoNRE to conduct such analytical work would support analytically sound foundations for setting environmental priorities across sectors and budget allocation in response to those priorities. The budgetary allocation for environment should be informed by a priority-setting mechanism such as analysis of the cost of environmental degradation—including analysis of the health-related costs of environmental degradation, as well as benefit-cost analysis of potential interventions, as presented in chapter 9. 42 Chapter 3 3.1 Introduction International research during the last decade has The report finds that the four environmental health-risk evidenced and confirmed that health effects associated factors are estimated to have caused 10,000 deaths in with major environmental risk factors are often Lao PDR in 2017. This was 21.6 percent of all deaths more severe and/or occur at much lower pollution in the country. The risk factors also caused nearly 100 concentrations or exposure levels than previously million days of illness and a loss of over 340 thousand documented. This is the case especially for household IQ points in children in 2017. The annual cost of these air pollution (HAP) from the use of solid fuels for which a health effects is estimated at LAK 17.6–23.6 trillion in health assessment now includes cardiovascular health 2017, with a central estimate of LAK 20.6 trillion. This effects. It is also the case for lead (Pb) exposure among is equivalent to 12.4-16.7 percent of GDP, with a central young children, for which neuropsychological effects estimate of 14.6 percent (Figure 3.1). are now understood to occur at much lower levels of exposure than previously thought. This chapter provides estimates of health effects in 3.2 Household Air Pollution Lao PDR from household air pollution (HAP); outdoor ambient air pollution (AAP)18; inadequate water supply The use of solid fuels for cooking causes serious (including arsenic in groundwater), sanitation, and household air pollution (HAP). Over 1.6 million people hygiene (WASH); and lead (Pb) exposure among died globally in 2017 from harmful exposure to PM2.5 children and adults. The social and economic costs of emissions from cooking with solid fuels, according to these health effects are monetized in Lao Kip (LAK) the Global Burden of Disease 2017 (Stanaway et al. and as a percentage of Lao PDR’s GDP in 2017. This 2018).19 This makes HAP one of the leading health-risk chapter also presents some perspectives on the current factors in developing countries. About 40 percent of the status of indicators related to environmental health. world population and 48 percent of the population in The report does not cover other environmental health low- and middle-income countries relied on solid fuels issues such as air, soil, and water pollution from mining, as primary cooking fuels in 2016 (World Bank 2019). industry, and pesticides, and occupational health risks The prevalence of solid-fuel use is especially high in from pesticide application. Sub-Saharan Africa and in several countries in South and South East Asia, including Lao PDR (Figure 3.2). Figure 3.1 Central Estimate of Annual Cost of Environmental Health Risks in Lao PDR, 2017 (LAK, billions, and % equivalent of GDP) 5.7% 10,000 6.0% 8,010 5.0% 8,000 4.0% 6,000 3.5% 4,933 2.9% 4,076 3.0% 3,558 2.5% 4,000 2.0% 2,000 1.0% 0 0.0% Household Ambient air Water, Lead (Pb) Household Ambient air Water, Lead (Pb) air pollution pollution sanitation exposure air pollution pollution sanitation exposure and hygiene and hygiene 43 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Figure 3.2 Population Prevalence of Solid-Fuel Use, 2017 Proportion of Population 0 to <0.069 0.069 to <0.22 0.22 to <0.47 0.47 to <0.76 0.76 to <1 No Data Sources: Health Effects Institute 2019; State of Global Air 2019. Data source: Global Burden of Disease Study 2017 (IHME 2018). Less than 6 percent of the population in Lao PDR show the expected use of clean energies in relation to used clean energies (for example, LPG, electricity, GDP per capita. There seems to be substantial scope and gas/biogas) as primary cooking energies in 2016. for promoting clean-cooking solutions in Lao PDR even This compares to 39-44 percent in other lower-middle- at the current income level. income countries, India, and South Asia. While the use of clean energies increased by nearly 20 percentage The analysis also indicates that the use of clean points from 2000 to 2016 in these groups of countries energies across countries accelerates with higher and India, the increase in Lao PDR was less than 2 GDP per capita. The use of clean energies is 1.5-1.75 percentage points (Figure 3.3). percent higher for every 1 percent increase in GDP per capita (or PPP GDP per capita). Within ASEAN, the use of clean energies for cooking is by far the lowest in Lao PDR. Rates of clean energy 3.2.1 Use of Solid Fuels use in countries with comparable GDP per capita (that is, the Philippines and Vietnam) are 43-67 percent. In Cambodia--whose GDP per capita is about half of Lao Over 93 percent of Lao PDR’s population used solid PDR’s—the use of clean energies for cooking is about fuels as their primary cooking fuel in 2017, with 67 three times as high as in Lao PDR (Figure 3.4). percent of the population relying on wood and over 26 percent on charcoal, according to the Lao Social An analysis of countries’ energy use in relation to Indicator Survey 2017 (LSB 2018). Cooking with clean income level indicates that 33-50 percent of the energies (for example, electricity, LPG, and gas/biogas) population in Lao PDR would be expected to use clean was practiced by less than 7 percent of the population energies as primary cooking energies in 2016 based on nationwide. In contrast, 67 percent of the population in the country’s per capita income level, rather than the Vietnam and 75 percent of the population in Thailand actual level of less than 6 percent. This can be inferred cooked with clean energies in 2016 (World Bank 2019). from the dotted lines in Figure 3.5 and Figure 3.6, which 44 Chapter 3 Figure 3.3 Use of Clean Energies for Cooking in 2000 and 2016 (% of population) 44% 41% 39% 2000 2016 24% 20% 22% 4% 6% Lower-middle-income South Asia India Lao PDR countires Source: Produced from World Development Indicator data in World Bank 2019. Figure 3.4 Use of Clean Energies for Cooking in ASEAN Countries, 2016 (% of population) 100% 100% 100% 96% 74% 80% 67% 58% 60% 43% 40% 18% 18% 20% 6% 0% Brunei Singapore Malaysia Thailand Vietnam Indonesia Philippines Myanmar Cambodia Lao PDR Source: Produced from World Development Indicator data in World Bank 2019. Figure 3.5 Population Use of Clean Energies for Cooking in Relation to GDP per Capita ($ PPP), 2016 y = 1E-07x1.7547 R2 = 0.6485 100% 90% 80% 70% 60% 50% 40% 30% 20% Lao PDR 10% 0% 0% 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Source: Produced from World Development Indicator data in World Bank 2019. 45 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Figure 3.6 Population Use of Clean Energies for Cooking in Relation to GDP per Capita (current US$), 2016 y = 2E-06x1.5473 R2 = 0.5778 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Source: Produced from World Development Indicator data in World Bank 2019. Nationally, the use of LPG increased marginally in The transition to clean energies for cooking has most parts of Lao PDR from 2011-12 to 2017. The advanced the most in Vientiane Capital where 27 use of charcoal increased substantially in rural areas, percent of the population used electricity or LPG in particularly in the south where nearly half of households 2017. The use of LPG doubled from 2011–2012 to used charcoal in 2017, compared to 32 percent in the 2017, the use of charcoal declined, and the use of central region and 3 percent in the north. electricity and wood remained constant (Figure 3.7). Figure 3.7 Household Primary Cooking Fuel in Lao PDR and Vientiane Capital (% of population), 2011–2012 and 2017 Lao PDR Vientiane Capital 76% 80% 60% 53% 67% 45% 60% 40% 40% 28% 27% 26% 19% 20% 21% 20% 9% 10% 9% 4.2% 2.2% 1.6% 1.8% 0% 0% Electricity LPG Charcoal Wood Electricity LPG Charcoal Wood LSIS 2017 LSIS 2011-12 LSIS 2017 LSIS 2011-12 Source: Produced from LSIS 2011–2012 (MoH/LSB 2012) and LSIS 2017 (LSB 2018). 46 Chapter 3 The use of clean energies is noticeably higher among 3.2.2 Household PM2.5 Exposure richer and better-educated households. Among the population from the richest wealth quintile in 2017, PM2.5 concentrations in the household environment over 26 percent cooked with clean energies, up from vary substantially in relation to type of solid fuel, 15 percent in 2011–2012. Similarly, among households cooking location, type of stove and ventilation with household heads having higher education in practices, cooking duration, and structure of dwelling. 2017, over 26 percent cooked with clean energies, up Household members’ personal exposure to PM2.5 from marginally from 22 percent in 2011–2012. the combustion of solid fuels depends additionally on their activity patterns inside and outside the household About 94 percent of Lao PDR’s population had access environment. to electricity in 2017, according to the LSIS II 2017 (LSB 2018); this is a commendable achievement at the Nearly 49 percent of households in Lao PDR use income level of Lao PDR, with its mountainous terrain, a manufactured solid-fuel stove, 21 percent use a low population density, and many remote populations. traditional solid-fuel stove, and 22 percent use a three However, only 2.2 percent of the nationwide population, stone stove/open fire, according to the LSIS II 2017. 5.3 percent of the urban population, and 9 percent of The survey contains no information on the extent the population in Vientiane Capital used electricity as to which any of these stoves are improved stoves. primary energy for cooking in 2017 (LSB 2018). This However, less than 1 percent of households have a is practically the same as in 2011–2012 but represents chimney or exhaust fan (LSB 2018). a marked decline from 1995 when over 10 percent of the urban population and 22 percent of the population A recent study in three villages in Savannakhet found in Vientiane Capital used electricity for cooking (World average 48-hour PM2.5 kitchen concentrations of 439 Bank 2016a). The decline is attributed to the rise µg/m3 in a sample of 72 households cooking with solid in residential electricity tariffs for cost recovery and fuels (UC Berkeley and Berkeley Air Monitoring Group financial viability of the national utility company. 2015). The average 48-hour personal exposure to the main cook was 119 µg/m3, which is 12 times the WHO As to household-cooking location, 54 percent of Lao annual outdoor air quality guideline (AQG) of 10 µg/m3. PDR’s population cooked in the house, 34 percent The average outdoor ambient PM2.5 in the villages was cooked in a separate building, and 12 percent cooked as high as 52 µg/m3, mainly due to the smoke from solid outdoors in 2017 (Figure 3.8). This pattern does not fuels used for cooking. vary much by region or by urban–rural location in Lao PDR, except for a very low rate of outdoor cooking in the north. Figure 3.8 Household Cooking Location in Lao PDR (% of population), 2017 54% 60% 34% 40% 20% 12% 0% In the house Separate building Outdoors Source: Produced from LSIS 2017 (LSB 2018). 47 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 In estimating the health effects of household air An average exposure level of 120 µg/m3 is applied to pollution, the exposure of the main cook is used as a adult women cooking in the house with wood over an reference point for personal exposure of adult women. open fire or a traditional cookstove. Average exposure This is because the person cooking in the household is levels of adult men and children under five years of most often a woman, and the exposure-measurement age and in various cooking locations are calculated in study discussed above is in reference to the person relation to the exposure level of adult women cooking cooking. Exposures of adult men and young children in the house. This calculation is made by applying the are set at 60 to 85 percent of adult women’s exposure, relative exposure factors in Table 3.1. For instance, the since adult men and young children generally spend exposure level of adult men in a household cooking less time in the household environment and the kitchen outdoors is 120 µg/m3 * H2 * L3 = 120 µg/m3 * 60% * than adult women spend there (Smith et al. 2014). 60% = 43 µg/m3 (Table 3.2). Regarding the cooking location, cooking in the house is used as a reference location. Personal exposures Very few measurements and studies have been from cooking outdoors or in a separate building are conducted of personal exposure from cooking with set at 60 to 80 percent of exposure from cooking in charcoal. This is mainly because charcoal is a primary the house (Table 3.1). The exposure levels reflect that cooking fuel in only a small minority of countries. a portion of biomass smoke from outdoor cooking or Cooking with charcoal is generally associated with cooking in a separate building enters the indoor living lower personal exposure levels of PM2.5 than cooking and sleeping areas. with fuelwood. Personal exposures from cooking with charcoal are set at 60 percent, 65 percent, and 75 percent of personal exposures from cooking with fuelwood in the house, in a separate building, and outdoors, respectively (Table 3.2). Table 3.1 Relative Exposure Levels by Household Member and Cooking Location Household member (H) Location (L) 1 Adult women 100% In house 100% 2 Adult men 60% Separate building 80% 3 Children <5 years 85% Outdoors 60% Table 3.2 Long-Term Personal PM2.5 Exposure by Cooking Location in Households Using Traditional Cookstoves with Fuelwood or Charcoal (µg/m3) Fuelwood Charcoal Traditional stove/open fire Traditional stove Adult Adult Children Adult Adult Children women men <5 years women men <5 years In house 120 72 102 72 43 61 Separate building 96 58 82 62 37 53 Outdoors 72 43 61 54 32 46 48 Chapter 3 3.2.3 Health Effects effects in Figure 3.9 are combined to estimate the health effects of household PM2.5 air pollution from the Health effects of long-term exposure to PM2.5 in the use of solid fuels. Annual deaths from household air household environment from the burning of solid pollution are estimated at 3,962–4,663 with a central fuels include (i) ischemic heart disease (IHD), (ii) estimate of 4,313. Household air pollution from solid cerebrovascular disease (stroke), (iii) lung cancer (LC), fuels also causes over 44–52 million days of illness (iv) chronic obstructive pulmonary disease (COPD), (v) (Table 3.3).21 diabetes Type II among adult women and men, and (vi) acute lower respiratory infections (ALRI) among children Table 3.3 Annual Health Effects of and adult women and men. These are all major health Household PM2.5 Air Pollution from effects evidenced by the Global Burden of Disease Solid Fuels, 2017 Project 2017 (GBD 2017) (Stanaway et al. 2018). Low Central High Figure 3.9 shows how the risk of these six health effects Deaths 3,962 4,313 4,663 in terms of mortality increases with increasing levels of Days of illness (million) 44 48 52 PM2.5 exposure. At the average exposure level of adult women cooking with fuelwood in the house (that is, 120 µg/m3 of PM2.5), the risk of these six health outcomes is 20–83 percent higher than if the exposure level were 3.2.4 Cost of Health Effects below a theoretical minimum risk exposure level of 2.4– 5.9 µg/m3,20. Even at the average exposure level of adult The health effects of household air pollution are men in households cooking with fuelwood outdoors (that monetized as a cost to society by using economic is, 43 µg/m3), the risk is 15–40 percent higher. valuation methods. The annual cost of the health effects is estimated at LAK 7,359–8,661 billion in 2017, with a The prevalence rates of solid-fuel use and cooking central estimate of LAK 8,010 billion. This is equivalent locations in Figure 3.7 and Figure 3.8, PM2.5 exposure to 5.2-6.1 percent of GDP in 2017, with a central levels in Table 3.2, and the relative risks of health estimate of 5.7 percent (Table 3.4). Figure 3.9 Relative Risk of Mortality from Long-Term PM2.5 Exposure, GBD 2017 2.0 1.9 1.8 LRI 1.7 COPD 1.6 LC 1.5 Diabetes T2 1.4 IHD 1.3 Stroke 1.2 1.1 1.0 5 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 PM2.5 (µg/m ) 3 Source: Produced from Stanaway et al. 2018 Supplement Appendix 1. Note: Age-weighted relative risks. 49 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Table 3.4 Cost of Health Effects of Household Air Pollution from Solid Fuels (LAK, billions), 2017 Low Midpoint High Cost of mortality 6,042 6,576 7,111 Cost of morbidity 1,317 1,434 1,550 Total cost 7,359 8,010 8,661 % equivalent of GDP, 2017 5.2% 5.7% 6.1% The cost of mortality is estimated using a value of 3.3.1 Ambient PM2.5 Concentrations statistical life (VSL) of LAK 1.52 billion in 2017 (74 times GDP per capita), calculated using the methodology in World Bank (2016b). The cost of morbidity is estimated Monitoring data of ambient PM in Lao PDR are scarce. at 50 percent of wage rates per day of illness. Table 3.5 summarizes two studies from 2002–2004 and 2008. 3.3 Ambient Air Pollution The first study involved a total of 30 measurements of ambient PM10 at seven sites in Vientiane Capital from September 2002 to April 2004 and showed an average The health effects of ambient air pollution (AAP) have of 87 µg/m3. Measurements were taken at the end of been studied across different countries and regions. the rainy season and during the dry season, generally Particulate matter (PM) and especially PM2.5 is the showing substantially higher PM10 concentrations during outdoor ambient air pollutant that globally is associated the dry season.23 with the largest health effects. A decade ago, WHO reduced its Air Quality Guideline (AQG) limits to an The second study involved measurements of PM10 annual average ambient concentration of 10 µg/m of 3 at seven sites in Vientiane Capital in 2008. Average PM2.5 and 20 µg/m3 of PM10 in response to increased 24-hour concentrations varied from 23 µg/m3 to 88 evidence of health effects at very low concentrations µg/m3, with an average of 55 µg/m3 across all seven of PM (WHO 2006). Since then, evidence shows that sites. These measurements were taken during July in serious health effects occur even at levels as low as the middle of the rainy season, during which time air 5 µg/m3, and WHO is now in the process of updating pollution concentrations are generally substantially and revising the AQGs (WHO 2016). Globally, over lower than during the dry season.24 2.9 million people died from outdoor PM2.5 in 2017, according to the Global Burden of Disease 2017 (Stanaway et al. 2018).22 Table 3.5 Monitoring Studies of Ambient PM10 Concentrations in Vientiane Capital, 2002–2008 Pollutant µg/m3 Season Monitoring study PM10 87 Dry (September–April) 30 measurements at 7 locations in 2002–2004 PM10 55 Wet (July) 24-hour measurements at 7 locations in 2008 50 Chapter 3 Combining the data from the dry seasons of 2002 3.3.3 Health Effects to 2004 and from the rainy season of 2008 gives an annual average of 75 µg/m3 of PM10. This may be about Health effects of long-term exposure to outdoor ambient 40 µg/m of PM2.5, given that the PM2.5 fraction of PM10 is 3 PM2.5 air pollution include (i) ischemic heart disease characteristically around 0.5–0.6. An annual average of (IHD), (ii) cerebrovascular disease (stroke), (iii) lung this magnitude is four times as high as the WHO AQG. cancer (LC), (iv) chronic obstructive pulmonary disease (COPD), (v) diabetes Type II among adult women and Ambient PM10 and PM2.5 are likely to be lower in other men, and (vi) acute lower respiratory infections (ALRI) urban areas of Lao PDR. However, seasonal burning among children and adult women and men. These are of waste and agricultural fields, and area-wide dust, all major health effects evidenced by the Global Burden may cause high concentrations during certain periods of Disease (GBD) Project 2017 (Stanaway et al. 2018). during the dry season both in urban and rural areas. Household use of solid fuels for cooking is also At the average pollution level that may prevail in contributing to elevated levels of PM2.5 in rural villages Vientiane Capital (that is, 40 µg/m3 of PM2.5), the risk as well as in urban areas. A study in three villages in of these six health outcomes is nearly 20-40 percent Savannakhet found outdoor ambient PM2.5 of 52 µg/m , 3 higher than if the pollution level were below a theoretical according to a recent report (UC Berkeley and Berkeley minimum risk-exposure level of 2.4–5.9 µg/m3 (Figure Air Monitoring Group 2015). Air pollution in hot spots 3.10).25 At the average pollution level that may prevail may also be high. in other urban areas of Lao PDR (that is, 20 µg/m3), the risk is 14-23 percent higher. Even at a level of 15 µg/m3, which may be the average in rural areas, the risk of the 3.3.2 Population Exposure health outcomes is 12-18 percent higher. A nationwide population-weighted exposure to A population-weighted exposure level of 20 µg/m3 is outdoor ambient PM2.5 concentrations of 20 µg/m3 is estimated to cause 2,693 deaths per year and 28 million applied for estimating health effects in Lao PDR. This days of illness per year.26 This is estimated by applying exposure level is based on the level in Vientiane Capital the PM2.5 population-exposure distribution in Table 3.6 discussed above, and on assuming half of this level in and the risk functions in Figure 3.10. other urban areas and 15 µg/m3 in rural areas (Table 3.6). The assumed level in rural areas may, however, not reflect outdoor ambient air pollution from household use of solid fuels. It is recognized that actual exposure levels are highly uncertain due to the scarcity of ground- level monitoring. Table 3.6 Applied Population Exposure to Outdoor Ambient PM2.5 Air Pollution, 2017 Population (millions) Population exposure (µg/m3) Vientiane Capital 1.1 40 Other urban areas 1.7 20 Rural areas 4.1 15 National (population-weighted average) 6.9 20 51 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Figure 3.10 Relative Risks of Major Health Outcomes Associated with PM2.5 Exposure 1.6 1.5 ALRI 1.4 COPD LC 1.3 Diabetes T2 1.2 IHD Stroke 1.1 1.0 5 10 20 30 40 50 60 Ambient PM2.5 (µg/m ) 3 Source: Produced from Stanaway et al. 2018 Supplement Appendix. Note: Age-weighted relative risks. However, the population-weighed exposure level in 3.3.4 Cost of Health Effects Lao PDR is highly uncertain, because of the lack of ground-level monitoring of PM2.5. Low and The annual cost of the health effects of ambient PM2.5 High estimates of health effects are therefore air pollution is estimated at LAK 4,344–5,571 billion in presented in Table 3.7 reflecting exposure levels of 2017, with a central estimate of LAK 4,933 billion. This 15 µg/m and 25 µg/m of PM2.5. Even at 15 µg/m of 3 3 3 is equivalent to 3.1-4.0 percen of GDP in 2017, with a PM2.5, annual deaths are as many as 2,371 and days of central estimate of 3.5 percent (Table 3.8). illness are nearly 24 million. The cost of mortality is estimated using a “value of statistical life” (VSL) of LAK 1.52 billion in 2017 Table 3.7 Annual Health Effects of (74 times GDP per capita), calculated using the Outdoor Ambient PM2.5 Exposure, 2017 methodology in World Bank (2016b).27 The cost of morbidity is estimated at 50 percent of wage rates per Low Central High day of illness. Deaths 2,371 2,693 3,041 Days of illness (million) 24 28 31 Table 3.8 Cost of Health Effects of Outdoor Ambient PM2.5 Air Pollution (LAK, billions), 2017 Low Central High Cost of mortality 3,616 4,107 4,638 Cost of morbidity 727 826 933 Total cost 4,344 4,933 5,571 % equivalent of GDP, 2017 3.1% 3.5% 4.0% 52 Chapter 3 3.3.5 Sources of Ambient PM2.5 3.4 Water, Sanitation, There are many sources of ambient PM2.5 in Vientiane and Hygiene Capital and other urban areas of Lao PDR. An apportionment study of PM2.5 would provide useful Health effects from inadequate drinking water, perspectives on the share of PM2.5 from main sources. sanitation, and hygiene (WASH) assessed in this report Key sources in Vientiane Capital, as well as other urban arise from two principal sources. First, health effects are areas, are likely to include estimated from fecal contamination or microbiological pollution in relation to drinking water, sanitation, and > Motor vehicles hygiene. Second, health effects are estimated from exposure to arsenic in groundwater tubewells used > Waste burning for drinking. > Road dust > Burning of wood and charcoal for cooking 3.4.1 Microbiological Pollution > Industry Inadequate drinking water, sanitation, and hygiene > Construction activities cause diarrhea and other infectious diseases (Prüss- Ustün et al. 2014; Wolf et al. 2014). Poor sanitation Urban areas may also be affected by long-range PM2.5 and hygiene increase the risk of parasite infestation. from seasonal agricultural burning. Main sources of Repeated diarrheal infections in early childhood ambient PM2.5 in rural areas include contribute to poor nutritional status (for example, underweight), as evidenced by research studies in > Burning of wood and charcoal for cooking communities with a wide range of diarrheal infection rates in a diverse group of countries (World Bank 2008). > Agricultural burning > Brick kilns in some areas Good hygiene practices—especially handwashing with soap at critical times—are also essential for preventing A major source of motor-vehicle pollution is highly infectious disease. These practices have globally polluting diesel vehicles. Most diesel vehicles in been found to reduce diarrheal illness substantially Lao PDR have no PM emission-control devices and (Cairncross et al. 2010; Curtis and Cairncross 2003; use diesel of variable quality. Highly polluting diesel Ejemot et al. 2009; Fewtrell et al. 2005; Freeman et vehicles include old, secondhand imported minivans, al. 2014; Waddington et al. 2009). Poor handwashing commercial trucks, and buses, as well as private practices are a major contributor to respiratory pickup trucks and SUVs. infections in children (Rabie and Curtis 2006). Attention is also needed to point-source pollution such as Estimates of some of the health effects of inadequate cement plants and metallurgical plants (smelters, metal water supply, sanitation, and hygiene in Lao PDR are recycling, and E-waste), as well as proactive prevention provided in this report. The estimates include diarrheal in relation to future coal-fired power plants and aluminum mortality and morbidity in children and adults, and smelters using local bauxite. It is also an opportune time child mortality from poor nutritional status caused by to address issues related to mining pollution. inadequate water supply, sanitation, and hygiene. 53 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Access to Improved Drinking Water and Sanitation About 37 percent of the household population reported treating their water by an appropriate method prior to An estimated 84 percent of Lao PDR’s population drinking in 2017.29 The main methods of treatment used an improved water source for drinking in 2017, were boiling of water (33 percent) and filtering of water according to the nationally representative Lao Social (4 percent). This represents a dramatic decline from Indicator Survey II 2017 (LSB 2018), up from 74 percent 2011–2012 when 57 percent reporting treating their in 2011–2012 (MoH/LSB 2012). The most prevalent water prior to drinking. source was bottled water. As many as 48 percent of the household population used this source of drinking water The prevalence of drinking-water treatment is in 2017, up from 26 percent in 2011–2012 (Figure 3.11). particularly low among the two richest quintiles of households, coinciding with these households mainly While the overall access to improved water sources using bottled water for drinking. Drinking-water in the country is important, there is almost a 20 treatment also declined among the two poorest quintiles percentage point gap between the urban and the rural from 2011–2012 to 2017 (Figure 3.13). population28. Nearly 97 percent of people living in urban areas use improved sources of drinking water versus 78 The LSIS II 2017 included testing for E. coli bacteria— percent in the rural areas (LSB 2018). an indicator of fecal contamination—in the drinking water of over 3,000 households throughout Lao PDR30. The use of bottled water for drinking is particularly As many as 86 percent of the household population prevalent among the two richest quintiles of households. had E. coli in their drinking water, and as many as 38 The use of bottled drinking water more than doubled percent had very high concentrations (>100 E. coli per among the second-richest quintile in a matter of five 100 ml). The prevalence of E. coli was not very different years from 2011–2012 to 2017 and quadrupled among for households using improved versus households using the middle quintile. The use of bottled water is minimal unimproved sources of drinking water (Figure 3.14).31 among the two poorest quintiles (Figure 3.12). Figure 3.11 Sources of Household Drinking Water in Lao PDR (% of population), 2011–2012 and 2017 Bottled water 48% 26% 16% Protected well/spring 13% 7% Tubewell/borehole 11% 5% Public tap/standpipe 13% Rainwater 4% 1% 4% Piped water 9% 16% Unimproved sources 26% 0% 10% 20% 30% 40% 50% 60% LSIS 2017 LSIS 2011-12 Sources: Produced from LSB 2018 and MoH/LSB 2012. 54 Chapter 3 Figure 3.12 Use of Bottled Water for Drinking in Lao PDR (% of population), 2011–2012 and 2017 Richest 93% 79% Fourth 82% 40% Middle 49% 11% Second 14% 2% Poorest 2% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% LSIS 2017 LSIS 2011-12 Sources: Produced from LSB 2018 and MoH/LSB 2012. Figure 3.13 Household Treatment of Drinking Water in Lao PDR (% of population), 2011–2012 and 2017 12% Richest 24% 18% Fourth 52% 41% Middle 69% Second 59% 72% Poorest 54% 70% 0% 10% 20% 30% 40% 50% 60% 70% 80% LSIS 2017 LSIS 2011-12 Sources: Produced from LSB 2018 and MoH/LSB 2012. Figure 3.14 Household Drinking Water with E. coli in Lao PDR (% of population), 2017 100% 92% 85% 80% 60% 49% 49% 43% 36% 40% 20% 0% Unimproved sources Improved sources >=1 1 – 100 >100 per 100 ml Source: Produced from LSB 2018. 55 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 The prevalence of E. coli across main sources of The household prevalence of one or more E. coli drinking water is also quite similar, with a somewhat per 100 ml of drinking water is very similar across lower prevalence among households using piped water household living standards. Only among the richest and bottled water for drinking. However, the situation quintile of households is the prevalence somewhat for bottled water—expected to have been treated with lower at 78 percent compared to 87–90 percent. reverse osmosis—was not substantially better than the However, the prevalence of more than 100 E. coli per other types of drinking water, with 85 percent of users 100 ml of drinking water gradually declines from 52 having E. coli in their bottled drinking water and 29 percent percent among the poorest households to 20 percent of users having very high concentrations (Figure 3.15). among the richest households (Figure 3.16). Figure 3.15 Household Drinking Water with E. coli by Main Type of Drinking Water (% of population), 2017 94% 100% 90% 88% 85% 72% 80% 56% 55% 52% 60% 45% 42% 43% 38% 35% 34% 40% 29% 20% 0% Tubewell/borehole Rainwater collection Protected well/spring Piped water Bottled water >=1 1 – 100 >100 per 100 ml Source: Produced from LSB 2018. Note: Piped water here includes public tap/standpipe. Figure 3.16 Household Drinking Water with E. coli by Quintile of Household Living Standard, 2017 100% 90% 87% 89% 88% 78% 80% 52% 57% 58% 60% 47% 50% 38% 40% 39% 40% 31% 20% 20% 0% Poorest Second Middle Fourth Richest >=1 1 – 100 >100 per 100 ml Source: Produced from LSB 2018. Note: Graph shows the percent of population from each quintile of household living standard with E. coli in their household drinking water. 56 Chapter 3 It is noteworthy that 29 percent of all households using About 71 percent of the population had access to bottled drinking water had E. coli of more than 100 per improved, non-shared sanitation in 2017, up from 100 ml, while only 20 percent of the richest quintile of 57 percent in 2011–2012. The predominant type of households had this concentration of E. coli, although sanitation facility is flush or pour-flush toilet connected the richest quintile almost exclusively used bottled water to a septic tank or pit. Less than 3 percent uses for drinking. This suggests that the richest quintile of other types of sanitation facilities such a dry pit, VIP, households is obtaining bottled water of better quality composting toilet, or bucket/hanging toilet. As many than other households, either by their location in as 24 percent practiced open defecation (OD) in 2017, the country or by the companies from which they are albeit down from 38 percent in 2011–2012 (Figure 3.17). purchasing bottled water. Figure 3.17 Access to Sanitation in Lao PDR (% of population), 2017 24% Open defecation 38% 2% Other non-improved 3% Shared facilities 3% 2% 0.4% Other improved 0.9% Flush/pour flush 71% 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% LSIS 2017 LSIS 2011-12 Sources: Produced from LSB 2018 and MoH/LSB 2012. Figure 3.18 Access to Improved Sanitation in Lao PDR by Quintile of Household Living Standard, 2011–2012 and 2017 100% 99% 97% 100% 87% 89% 90% 80% 70% 60% 60% 60% 50% 35% 40% 25% 30% 13% 20% 10% 0% Poorest Second Middle Fourth Richest LSIS 2011 – 2012 LSIS 2017 Sources: Produced from LSB 2018 and MoH/LSB 2012. Note: Graph shows the percent of population from each quintile of household living standard having such access. 57 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Access to improved sanitation varies greatly by do not include the share of diarrheal disease that may household living standard. Just about 100 percent be due to lack of a sewerage network and wastewater of the richest quintile of households have improved treatment. Pruss-Ustun et al. (2014) may also be sanitation, while only 25 percent of the poorest quintile underestimating the share of diarrheal disease from of households have improved sanitation (Figure 3.18). drinking water (see also Larsen [2019: annex 4]). Annual deaths from WASH are estimated at 1,379– 3.4.2 Health Effects 2,754 per year, with a central estimate of 2,074 (Table 3.10). The main source of death is diarrheal disease An estimated 46-95 percent of diarrheal disease including typhoid and paratyphoid. The second- mortality and morbidity is due to inadequate drinking largest source is infectious disease mortality from water, sanitation, and hand hygiene in Lao PDR (Table underweight caused by repeated diarrheal infections 3.9). The lower bound is based on risks of diarrheal in early childhood, followed by mortality from acute disease reported in a global review by Prüss-Ustün lower respiratory infections (ALRI) from inadequate et al. (2014). The upper bound is based on risks applied handwashing (see also Larsen [2019: annex 4]). by the Global Burden of Disease Project 2015 (see Inadequate WASH is also responsible for an estimated also Larsen [2019: annex 4]). Individually, inadequate 12–24 million days of diarrheal illness. drinking water is associated with the largest attributable fraction of diarrheal disease (Table 3.9). Cost of Health Effects The attributable fraction of diarrheal disease based Inadequate drinking water, sanitation, and hygiene is on Prüss-Ustün et al. (2014) may be a conservative estimated to cost in the range of LAK 2,449–4,923 billion estimate. This is because Prüss-Ustün et al. (2014) per year, with a central estimate of LAK 3,698 billion. This Table 3.9 Attributable Fractions (AFs) of Diarrheal Disease from Inadequate WASH in Lao PDR, 2017 Prüss-Ustün et al. (2014) GBD2015 Inadequate drinking water 25% 86% Inadequate sanitation 10% 57% Inadequate handwashing with soap 19% 35% Inadequate drinking water, sanitation, and hand hygiene (WASH) 46% 96% Source: Estimated values. Note: The joint AF of WASH is less than the sum of the individual AFs. Table 3.10 Annual Deaths from Inadequate WASH in Lao PDR, 2017 Low Central High Diarrheal disease 727 1,123 1,518 Typhoid/paratyphoid 93 143 194 ALRI from inadequate handwashing 272 376 477 Infectious diseases from underweight 287 432 565 Total* 1,379 2,074 2,754 Note: * Adjusted for multiple risk factors. 58 Chapter 3 is equivalent to 1.7-3.5 percent of GDP in 2017, with a Arsenic concentrations ranged from less than 0.05 µg/ central estimate of 2.6 percent (Table 3.11). liter to as high as 278 µg/liter. Concentrations exceeded the WHO guideline of 10 µg/liter (WHO 2011) in The cost of mortality is estimated using a value of 56 percent of the tubewells and exceeded 50 µg/liter statistical life (VSL) of LAK 1.52 billion in 2017 (74 times in 15 percent of the tubewells. Average concentrations GDP per capita), calculated using the methodology in of arsenic ranged from 0.4 µg/liter in Vientiane World Bank (2016b). The cost of morbidity is estimated Province to 40 µg/liter in Champasack. Four percent to at 50 percent of wage rates per day of illness. 41 percent of the population in the six provinces used tubewells for drinking in 2011–2012, according to the Lao Social Indicator Survey I (LSIS). This declined to 3.4.3 Arsenic 1–29 percent of the population in 2017, according to LSIS (Table 3.12).32 Arsenic Exposure If the study by Chanpiwat et al. (2011) is Arsenic in drinking water from tubewells is a concern representative of arsenic contamination, then an in central and southern Lao PDR. A study in six central estimated 400 thousand people in the central and and southern provinces of the country measured southern provinces were using tubewells for drinking arsenic concentrations in 61 tubewells in 2008. All in 2011–2012 with arsenic concentrations above the tubewells were of cement equipped with a lid and WHO guideline of 10 µg/liter. This figure declined handpump. Their depth varied from 4 meters to 55 to 300 thousand in 2017 as fewer people used meters (Chanpiwat et al. 2011). tubewells for drinking in 2017 than in 2011–2012.33 Table 3.11 Cost of Health Effects of Inadequate WASH (LAK, billions), 2017 Low Central High Cost of mortality 2,103 3,163 4,200 Cost of morbidity 346 534 723 Total cost 2,449 3,698 4,923 % equivalent of GDP, 2017 1.7% 2.6% 3.5% Table 3.12 Arsenic in Drinking Water and Use of Tubewells for Drinking in Central and Southern Lao PDR Number of Arsenic concentrations (µg/liter) Population using Population using tubewells tubewells for drinking tubewells for tested Mean Median Low High in 2011–2012 (%) drinking in 2017 (%) Champasack 26 40.0 19.4 0.8 277.8 41 21 Saravane 11 18.5 14.2 0.5 65.2 37 29 Savannakhet 4 23.4 19.0 13.2 42.3 10 11 Borikhamxay 7 14.7 4.2 0.1 58.4 7 4 Attapeu 10 11.0 6.8 0.1 37.4 34 7 Vientiane province 3 0.4 0.4 0.1 0.8 4 1 Sources: Arsenic concentrations are from Chanpiwat et al. 2011. Use of tubewells for drinking is from the Lao Social Indicator Survey 2011–2012 (MoH/LSB 2012) and 2017 (LSB 2018). 59 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Over one-third of the exposed population resides in Several studies have also documented the effect Champasack, a quarter resides in Saravane, and 38 of arsenic in drinking water on mortality: All-cause percent in Savannakhet (Table 3.13). The LSIS II 2017 and chronic-disease mortality (Argos et al. 2010); reports that the use of tubewells for drinking water nonaccidental mortality, cancers, cardiovascular- declined markedly in some of the provinces from 2011– disease mortality, and infectious-disease mortality 2012 to 2017 as the population increasingly changed to (Sohel et al. 2009); heart-disease mortality (Chen et bottled water and rainwater harvesting for drinking water. al. 2011); lung-disease mortality (Argos et al. 2014); mortality in children (Rahman et al. 2013); and stroke Research Evidence mortality (Rahman et al. 2014). Exposure to arsenic in drinking water has been found Mortality from Arsenic Exposure to be associated with various health effects. Health effects include skin lesions (Argos et al. 2011; Karagas Argos et al. (2010) assessed the association between et al. 2015) and various forms of cancer, kidney and arsenic exposure and all-cause mortality among liver failure, and ulcer (FAO et al. 2010). Increased risks adults 18+ years of age, and Sohel et al. (2009) of lung and bladder cancer and of arsenic-associated assessed the association between arsenic exposure skin lesions have been found from ingestion of drinking and all-cause nonaccidental mortality among people water with arsenic concentrations below 50 µg/liter 15+ years of age. Nearly 12,000 participants were (WHO 2011). There is also increasing evidence that recruited during October 2000 to May 2002 with prenatal arsenic exposure is associated with morbidity an average follow-up of 6.5–6.6 years in the study and mortality later in life (FAO et al. 2010). by Argos et al. Sohel et al. studied a population of 115,903 persons from 1991 to 2000. Both studies Various neurological impairments—such as poor were conducted in Bangladesh, a country with cognitive performance; reduced intellectual function, widespread arsenic contamination of tubewells. learning deficits, mood disorders; and visual, speech, attention and memory disturbances—from arsenic exposure have also been documented in many studies (Brinkel et al. 2009; Tyler and Allan 2014). Table 3.13 Estimated Population Exposure to Arsenic (As) in Drinking Water in Central and Southern Lao PDR Use of Tubewells Tubewells Tubewells Population Use of Population tubewell with with with exposed to tubewell for 2015 for As >10 µg/ As 10–50 As > 50 µg/ As > 10 µg/ drinking drinking liter µg/liter liter liter Champasack 694,000 21% 145,740 65% 38% 27% 95,292 Saravane 397,000 29% 115,130 64% 55% 9% 73,265 Savannakhet 969,700 11% 106,667 100% 100% 0% 106,667 Borikhamxay 273,700 4% 10,948 43% 29% 14% 4,692 Attapeu 139,600 7% 9,772 30% 30% 0% 2,932 Population 2,474,000 16% 388,257 282,847 231,579 51,268 282,847 Sources: Estimates based on Chanpiwat et al. 2011 and LSB 2018. 60 Chapter 3 Estimated hazard ratios from the two studies for all-cause 3.5 Lead (Pb) Exposure and nonaccidental all-cause mortality are presented in Table 3.14 in relation to arsenic concentrations in Lead (Pb) is toxic to the human body and was the participants’ drinking water. Both studies found an considered a major global health issue until a decade increased risk of mortality from exposure to arsenic at ago. A major source of lead pollution was leaded concentration levels above 10 µg/liter. gasoline. This source of exposure was first phased out in high-income countries and then in low- and middle- Health Effects and Costs income countries. A substantial decline in population blood lead levels (BLLs) was subsequently observed, Based on the arsenic-exposure estimate and mortality and the phaseout of leaded gasoline is an example of risks presented above, arsenic in tubewell drinking a global environmental achievement. Since then, lead water in Lao PDR’s central and southern provinces is pollution has received less attention. estimated to cause 169–248 deaths and 1.2–2.8 million days of illness per year.34 The health effects had a cost There are, however, reasons why lead continues to equivalent to 0.21-0.33 percent of GDP in 2017, with a be a substantial health problem in many countries. central estimate of 0.27 percent (Table 3.15). An increasing number of studies find that even very low levels of lead exposure have much larger impacts The cost of mortality is estimated using a value of on children’s neuropsychological development than statistical life (VSL) of LAK 1.52 billion in 2017 (74 times previously understood. Low exposure levels also have GDP per capita), calculated using the methodology in cardiovascular effects in adults, with 540 thousand World Bank (2016b). The cost of morbidity is estimated deaths globally per year according to the GBD at 50 percent of wage rates per day of illness. 2016.35 There are multiple sources of lead exposure contributing to elevated BLLs in many countries. Table 3.14 Risk of Mortality from Arsenic in Drinking Water Arsenic (µg/liter) Hazard ratio (95% CI) All-cause mortality* Nonaccidental all-cause mortality** ≤10 1.00 1.00 10–50 1.34 (0.99–1.82) 1.16 (1.06–1.26) 50–150 1.09 (0.81–1.47) 1.26 (1.18–1.36) >150 1.68 (1.26–2.23) 1.36 (1.27–1.47) Sources: *Argos et al. 2010; **Sohel et al. 2009. Note: CI=Confidence Interval. Table 3.15 Cost of Health Effects of Arsenic in Drinking Water in Central and Southern Provinces (LAK, billions), 2017 Low Central High Cost of mortality 258 318 378 Cost of morbidity 37 61 84 Total cost 296 379 462 % equivalent of GDP, 2017 0.21% 0.27% 0.33% 61 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Lead in the human body can originate from exposure Examples of lead (Pb) exposure in neighboring to lead in air, drinking water, food, dust, soil, paint, countries, which may also be the case in Lao PDR, cosmetics, utensils, several herbal medicines, children’s include (i) high lead content in some traditional toys, ornaments, and jewelry, and other sources. medicines in northern Vietnam in 2011–2012 (Nguyen et al. 2012), (ii) lead-acid batteries in Solar Home Known health effects of lead exposure include Systems in some rural villages in Thailand have been neuropsychological impacts such as impaired found to be associated with elevated blood lead levels intelligence in children (Fewtrell et al. 2003; Hong et al. (BLLs) in children (Swaddiwudhipong et al. 2013), and 2015; Jusko et al. 2008; Lanphear et al. 2005; Liu et al. (iii) several brands of Asian tongue powder applied to 2013; Mazumdar et al. 2011; Rothenberg and Rothenberg infants in Thailand were found to have very high lead 2005; Roy et al. 2011; Surkan et al. 2007); increased content (Woolf et al. 2008). blood pressure and cardiovascular disease among adults (Fewtrell et al. 2003; Lim et al. 2012; Nawrot 3.5.1 Neuropsychological Effects et al. 2002); and chronic kidney disease, anemia, and gastrointestinal symptoms (Fewtrell et al. 2003). Lead in Children exposure in early childhood has also been associated with antisocial, criminal, and violent behavior in adult A well-established effect of lead exposure is life (Dietrich et al. 2001; Mielke and Zahran 2012; neuropsychological impairment in children, measured Needleman et al. 2002; Nevin 2007; Reyes 2007; as IQ losses.36 The effect is found to occur even at Wright et al. 2008). very low BLLs (Jusko et al. 2008; Lanphear et al. 2005; Surkan et al. 2007). In fact, no BLL threshold below Anemia and gastrointestinal symptoms generally occur which there are no impacts on children’s IQ has been at high blood lead levels (BLL), for example, greater identified in the international research literature. Gilbert than 60 micrograms of lead per deciliter of blood (µg/ and Weiss (2006) argue for a BLL action level of 2 µg/dL, dL). These health effects of lead exposure are therefore Carlisle et al. (2009) for a benchmark of 1.0 µg/dL, and of minimal relevance today, since blood lead levels in the European Food Safety Authority uses a benchmark the general population have declined substantially in dose level of 1.2 µg/dL for neurotoxicity in children the last decades. However, there is no known lower BLL (EFSA 2013). threshold below which there are no neuropsychological impacts in children, impacts on blood pressure and Lanphear et al. (2005), based on a pooling of seven cardiovascular disease among adults, and impacts international longitudinal cohort studies, specified a on renal functioning (that is, kidney disease). This log-linear function that best describes the relationship report therefore provides estimates of impacts of lead between children’s IQ and their BLL. This relationship exposure on these latter health outcomes. is confirmed by Rothenberg and Rothenberg (2005) using the same pooled data as in Lanphear et al. No systematic measurement studies of population (2005). Thus, children 5–7 years of age with concurrent exposure to lead (Pb) have been conducted in Lao BLL of 5 µg/dL to 15 µg/dL have lost 3.25 to 6.2 IQ PDR. Blood lead levels (BLL) in neighboring countries points (Figure 3.19). These estimates are based on a may provide an indication of such exposure in Lao PDR. concurrent BLL lower-threshold value of 1.5 µg/dL as The median BLL in children in China is 4.5–5 µg/dL applied in this report and approximately corresponding (Li et al. 2014). The average BLL in Ho Chi Minh City is to a lifetime BLL lower-threshold value of 2.0 µg/dL (see 4.4 µg/dL (Havens 2012). The average BLL a decade also Larsen [2019: annex 2]).37 ago in the population of Phnom Penh and Hanoi was about 5 µg/dL (Agusa et al. 2006). 62 Chapter 3 Figure 3.19 Loss of IQ Points in Early Childhood Lost IQ points 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1.5 3 5 7 9 11 13 15 Concurrent BLL (µg/dL) Source: Produced from results reported in Lanphear et al. 2005. 3.5.2 Cardiovascular Health If the average BLL in children in Lao PDR is 4–5 µg/dL—as appears to be the case in neighboring Effects in Adults countries—then 50-60 percent of children in Lao PDR may have BLL in the range of 1.5–5 µg/dL, The main health effect of lead exposure among adults 30-40 percent may have 5–10 µg/dL, and 5-10 percent included in the Global Burden of Disease (GBD) Project may have BLL exceeding 10 µg/dL. 38 2017 is the effect on systolic blood pressure (SBP) and consequent risk of cardiovascular disease (Stanaway et Total annual losses of IQ points among children under al. 2018). The analysis in this report is therefore limited to five years of age in Lao PDR are estimated at 298–382 cardiovascular disease (see also Larsen [2019: annex 3]). thousand, with a central estimate of 342 thousand IQ points in 2017 (Table 3.16).39 About 60 percent of these The risk of cardiovascular disease from a change in IQ points are lost among children with a BLL of <5 µg/ SBP varies by age; estimating the cardiovascular- dL, and 35 percent are lost among children with BLL of disease burden among adults from lead exposure 5–10 µg/dL. requires BLLs by age groups. An estimate of mean BLLs by age group in Lao PDR is based on a mean BLL of 4–5 µg/dL among adults (as applied to children) and the observed BLL patterns across age groups in the United States.40 A BLL lower-threshold Table 3.16 Estimated Annual Losses of IQ Points (‘000) among Children <5 Years in Lao PDR, 2017 Concurrent BLL groups Low Central High 0–5 µg/dL 196 202 202 5–10 µg/dL 90 120 151 10–15 µg/dL 10 16 24 >15 µg/dL 2 3 6 Total 298 342 382 63 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 value of 2.0 µg/dL is applied to estimate the The present value of future lifetime income of a child cardiovascular disease burden. If the mean BLL under five years is estimated at LAK 566 million is 4–5 µg/dL, then an estimated 496–620 deaths and based on an estimated average annual labor income 2.0–2.5 million days of nonfatal cardiovascular disease in Lao PDR in 2017 of LAK 15.8 million.42 The cost of per year are caused by lead exposure among adults one lost IQ point is estimated at LAK 7.7 million. This (Table 3.17). 41 is estimated as the product of loss of income per lost IQ point (midpoint estimate in Schwartz [1994] and Table 3.17 Estimated Health Effects Salkever [1995]) and the percentage of children that among Adults from Lead Exposure in may be expected to participate in the labor force. Lao PDR, 2017 Expected labor-force participation is assumed to be the same as the current rate of participation. With an Low Central High estimated annual loss of 298–382 thousand IQ points Deaths 496 562 620 among children under five in Lao PDR, the estimated Days of illness (million) 2.0 2.2 2.5 annual cost is LAK 2,297-2,948 billion in 2017, with a central estimate of LAK 2,635 billion. This is equivalent to 1.6-2.1 percent of Lao PDR GDP that year, with a central estimate equivalent to 1.9 percent of GDP (Table 3.18). 3.5.3 Cost of Lead Exposure Among adults, the health effects had a cost equivalent An individual’s income is associated with the individual’s of 0.6-0.7 percent of GDP in 2017, with a central IQ score. This has long been empirically established estimate of 0.65 percent (Table 3.19). The cost of by Schwartz (1994) and Salkever (1995). These mortality is estimated using a value of statistical life two studies found that a decline of one IQ point is (VSL) of LAK 1.52 billion in 2017 (74 times GDP per associated with a 1.3-2.0 percent decline in lifetime capita), calculated using the methodology in World income. Studies of the cost of lead (Pb) exposure, or of Bank (2016b). The cost of morbidity is estimated at 50 the benefit of lowering BLL in children, have applied the percent of wage rates per day of illness. findings by Schwartz and Salkever in France and the United States (Gould 2009; Grosse et al. 2002; Muennig This brings the total estimated cost of lead exposure 2009; Pichery et al. 2011). among children and adults to an equivalent of 2.2-2.8 percent of GDP in 2017, with a central estimate of 2.5 percent. Table 3.18 Estimated Annual Cost of IQ Losses among Children under Five Years of Age in Lao PDR, 2017 Low Central High Present value of future lifetime income (15–64 years) (LAK) 566,389,353 566,389,353 566,389,353 Lifetime income loss per IQ point lost (% of lifetime income) 1.69% 1.69% 1.69% Labor force participation rate (15–64 years) 81% 81% 81% Cost per lost IQ point (LAK) 7,714,358 7,714,358 7,714,358 IQ points lost per year 297,789 341,615 382,088 Total cost (LAK, billions) 2,297 2,635 2,948 Cost % equivalent of GDP, 2017 1.6% 1.9% 2.1% Source: Estimated values. 64 Chapter 3 Table 3.19 Estimated Annual Cost of Health Effects of Adult Lead Exposure in Lao PDR (LAK, billions), 2017 Low Central High Cost of mortality 756 856 946 Cost of morbidity 59 66 73 Total cost of health effects 814 923 1,019 Cost % equivalent of GDP, 2017 0.58% 0.65% 0.72% Source: Estimated values. 3.6 Conclusions The health effects from the environmental risk factors can be monetized by using standard valuation The environmental health-risk factors assessed in this techniques to provide an economic perspective on report are estimated to have caused 10,000 deaths in the magnitude of these effects. The annual cost of the Lao PDR in 2017. This was 21.6 percent of all deaths health effects is estimated at LAK 17.6–23.6 trillion in in the country. The risk factors also caused nearly 100 2017. This is equivalent to 12.5-16.7 percent of GDP, million days of illness in 2017. Household air pollution with a central estimate of 14.6 percent. (HAP) from the use of solid fuels caused 44 percent of the deaths, while 23 percent was from drinking- Household air pollution (HAP) accounts for 39 percent water pollution and inadequate sanitation and hygiene of these costs, followed by outdoor PM2.5 ambient (WASH), and 27 percent from outdoor PM2.5 ambient air air pollution (AAP) at 24 percent, water pollution and pollution (AAP). Exposure to lead among adults caused inadequate sanitation and hygiene (WASH) at 20 the remaining 6 percent of deaths, and lead exposure percent, and lead (Pb) exposure at 17 percent of total among children caused the loss of 340,000 IQ points cost (Table 3.21). per year (Table 3.20). Table 3.20 Annual Deaths and Days of Illness from Environmental Risk Factors in Lao PDR, 2017 Deaths Days of illness (million) Low Central High Low Central High Household air pollution 3,962 4,313 4,663 44.1 48.0 51.9 Ambient air pollution 2,371 2,693 3,041 24.4 27.7 31.2 Water, sanitation, and hygiene 1,549 2,283 3,002 12.8 19.9 27.0 Microbiological pollution 1,379 2,074 2,754 11.6 17.9 24.2 Arsenic in groundwater 169 209 248 1.3 2.0 2.8 Lead (Pb) exposure—children (IQ points) 0.3 0.3 0.4 Lead (Pb) exposure—adults 496 562 620 2.0 2.2 2.5 Total 8,378 9,851 11,327 84 98 113 65 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 3 Table 3.21 Estimated Annual Cost of Environmental Health Effects in Lao PDR, 2017 Cost (LAK, billions) Cost (% equivalent of GDP) Low Central High Low Central High Household air pollution 7,359 8,010 8,661 5.22 5.68 6.14 Ambient air pollution 4,344 4,933 5,571 3.08 3.50 3.95 Water, sanitation, and hygiene 2,745 4,076 5,384 1.95 2.80 3.82 Microbiological pollution 2,449 3,698 4,923 1.74 2.62 3.49 Arsenic in groundwater 296 379 462 0.21 0.27 0.33 Lead (Pb) exposure 3,112 3,558 3,967 2.21 2.52 2.81 Lead (Pb) exposure—children 2,297 2,635 2,948 1.63 1.87 2.09 Lead (Pb) exposure—adults 814 923 1,019 0.58 0.65 0.72 Total 17,559 20,577 23,583 12.45 14.60 16.73 3.7 Notes 16 This chapter was prepared by Bjorn Larsen and draws upon additional material by the same author presented in a background report (Larsen 2019) containing a series of annexes in support of the estimates. 17 www.healthdata.org 18 The Vice Minister of Planning and Investment referred to the important linkages between air pollution and health. Air pollution is the fifth leading risk factor for mortality worldwide and causes more deaths than malnutrition, malaria, unimproved sanitation, or unimproved water sources. The World Health Organization estimates that over 7 million people died in 2016 worldwide as a consequence of household and ambient air pollution. 19 http://www.healthdata.org/ 20 The theoretical minimum risk exposure level applied in the Global Burden of Disease Project 2017 is a uniform distribution between 2.4 µg/m3 and 5.9 µg/m3 (Stanaway et al. 2018). 21 The Global Burden of Disease 2017 reports a central estimate of 3,807 deaths from HAP in Lao PDR in 2017 but has not reported the PM2.5 exposure levels applied. 22 www.healthdata.org 23 GiZ 2010. Clean Air for Smaller Cities in the ASEAN Region: Road Map towards a Clean Air Plan for Vientiane, Lao PDR. http://www.citiesforcleanair.org/ 24 LAO: Vientiane Sustainable Urban Transport Project. Initial Environmental Examination. 2014. Prepared by the Ministry  of Public Works and Transport for the Asian Development Bank (August). https://www.adb.org/sites/default/files/linked- documents/45041-002-ieeab.pdf 25 The theoretical minimum risk exposure level applied in the Global Burden of Disease Project 2017 is a uniform distribution between 2.4 μg/m3 and 5.9 μg/m3 (Stanaway et al. 2018). 26 The GBD Project 2017 reports a central estimate of 1,115 deaths from outdoor ambient PM2.5 in Lao PDR in 2017 based on a PM2.5 exposure level of 25 µg/m3. This estimate of deaths reflects adjustments to estimation of health effects of ambient PM2.5 that the GBD 2017 undertakes for the population exposed to both household air pollution from solid fuels and PM2.5 ambient air pollution. This is described in Stanaway et al. (2018) Supplementary Appendix 1 (pp. 74–75). 27 The value of statistical life (VSL) is a welfare measure derived from individuals’ willingness to pay (WTP) for a reduction in the risk of death. 66 Chapter 3 28 The Vice Minister of Public Works and Transport highlighted that the rural population has significantly lower access to water supply than the urban population. 29 Appropriate methods include boiling, bleaching/chlorination, filtering, and solar disinfection. 30 30The Vice Minister of Public Works and Transport mentioned that rivers are an important source of water supply. She also noted the potential impacts on human health when water sources are polluted. 31 The LSIS II 2017 reports the prevalence of E. coli both in the drinking-water source as well as in the actual drinking water. The latter is reported in this section. 32 No tubewells were tested in the province of Khammuane in central Lao PDR. The province has a population of about 400,000, and 11 percent used tubewells for drinking in 2017, according to LSB (2018). 33 This assumes that bottled drinking water is not sourced from tubewells that may be contaminated with arsenic. 34 Days of illness (D) is calculated from data on “years lived with disability” (YLDs) reported by the Global Burden of Disease Project for major causes of death associated with arsenic exposure—that is, in the range of 3.7–4.0 YLDs per death in Lao PDR. A disability weight (w) of 0.15 is applied to convert YLDs to days of illness. The calculation is D = YLDs per death * M * 365 / w where M is deaths from arsenic exposure. 35 http://ghdx.healthdata.org/gbd-results-tool 36 Intelligence quotient (IQ) is a score on standardized tests designed to assess intelligence. 37 Concurrent BLL is the BLL of a child at the time of IQ testing. 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World Development Indicators. A World Bank Study. Washington, DC: World Bank. Wright, J. P., K. N. Dietrich, D. M. Ris, R. W. Hornung, S. W. Wessel, B. P. Lanphear, M. Ho, and M. N. Rae. 2008. “Association of Prenatal and Childhood Blood Level Concentrations with Criminal Arrests in Early Adulthood.” PLoS Med 5 (5): e101. 70 4 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic COST OF ENVIRONMENTAL DEGRADATION: NATURAL RESOURCE DEGRADATION AND NATURAL DISASTERS43 Chapter Overview The Lao People’s Democratic Republic is one of the most resource-rich countries in Asia with respect to natural resources. This chapter addresses the costs of unsustainable uses of Lao PDR’s natural resources and provides estimates of the cost of natural resource degradation in Lao PDR. Many of the country’s people are poor, its human development ranking is 138th, and the poor in Lao PDR are very dependent upon the country’s natural resources. Economic development that depletes its natural resource base cannot be sustainable even when the total wealth of the country is increasing. Adjusted net savings (ANS) is an indicator that aims to assess an economy’s sustainability. ANS is based on the concepts of extended national accounts, which include natural and human capital accounts. Lao PDR’s ANS has been low and volatile over time. Despite a recent increase in adjusted net savings, natural capital depletion continues. Natural resource losses—mainly forest and mineral depletion as well as pollution damages—are substantial. Estimates of the impacts and costs of natural resource degradation in Lao PDR are shown in this chapter. These impacts and costs were estimated for the following sectors: deforestation, forest degradation, natural disasters, soil degradation, hydropower development and fish-habitat destruction, and exposure to mercury from mining practices. The costs of environmental degradation are calculated as economic damages of US$822 million annually, or 4.7 percent of GDP in 2017 US$. This chapter provides a suite of recommendations, with an emphasis on improving the quality of data on the country’s natural resources, to better inform decision-makers’ priorities regarding interventions to reduce the costs of natural resource degradation. Such data include more-accurate maps of forests, and improved estimates of soil erosion, agricultural land uses, productivity, and yield. Analyses would benefit from better information about the use of agricultural chemical pesticides and fertilizers. A comprehensive, transparent, and accessible system for monitoring water quality; a system for forecasting hydrological and habitat changes from hydropower development; and regionalized models for managing the risks of natural disasters would be very beneficial. All estimates of costs are limited by data quality, which accounts for the use of a range of estimates throughout these analyses. 73 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 4.1 Introduction 4.1.1 Objective and Context this goal. Tourism is only 4 per cent of the Lao PDR economy, so there is room for the Lao PDR’s green economy to grow, given that much of the demand for The objective of this chapter is to present estimates of tourism in Lao PDR is for experiences with landscapes, the cost of natural resource degradation in the Lao PDR. wildlife, and the cultures dependent on them. Lao Such estimates can guide decisions to mitigate damages PDR conservation forests possess globally significant in the sectors that are critical for the Lao PDR’s economy biodiversity and habitat integrity, which is a comparative and that are drivers of its economic growth. advantage for tourism. Other sources of revenue directly from biodiversity can include patents for Lao PDR (population of 7.14 million) is one of five pharmaceutical compounds, payments for ecosystem countries of the Lower Mekong Basin (LMB); many in services, sustainable legal timber, and food (World these countries are poor and traditionally dependent Bank 2019). Thus, biodiversity should be treated as upon agriculture (World Bank 2019). However, an asset, just like produced capital and human capital. development is reducing the contribution of agriculture Biodiversity needs to be managed more sustainably to economic growth, as the contribution of the and efficiently to improve the wealth and well-being of industrial and service sectors is rapidly increasing. All Lao PDR’s population, and to contribute to the global LMB countries are expected to have reached middle- stability of these assets that depend on ecosystems income status by 2030. The Mekong contributes preservation. significantly to this growth through the opportunities it provides, including water and wastewater services, Lao PDR is mountainous and landlocked, surrounded energy, agriculture, fisheries, transport and trade, and by Cambodia, China, Myanmar, Thailand, and Vietnam. ecosystems services (MRC 2016). While Lao PDR’s population was 78 percent rural in 2000, that number has decreased to about 60 percent The Lao PDR is situated in the center of the Indo- currently— indicative of the country’s rapid ongoing Burmese Hotspot, one of the world’s biologically richest urbanization (World Bank WDI 2018). The eastern and most endangered terrestrial eco-regions and one country’s eastern part is sparsely populated, and of the 10 most important global biodiversity hotspots. population density there is expected to remain less than Biodiversity is crucial to the Lao PDR economy for 5 inhabitants per km2 up to 202044. reducing poverty and securing livelihoods due to the basic goods and ecosystem services that biodiversity With a 2017 per capita GDP of US$2,468, Lao PDR provides. Consequently, biodiversity must be protected remains among the poorer countries in the East Asia and sustainably used for achieving poverty reduction and Pacific Region (World Bank WDI 2018). GDP and greener, more-resilient economic growth that can growth averaged 7.8 percent over the last decade, deliver sustainable development outcomes. Biodiversity with the use of the country’s natural resources— is also critical for reducing climate risks and greenhouse mostly hydropower potential, minerals, and forests— gas emissions. The careful management of biodiversity contributing around one-third of this growth (World and ecosystem services helps people to adapt to the Bank Lao PDR Country Overview 2018). The most adverse effects of climate change and reduces the risks recent (2015) estimate of life expectancy is 66.3 years of floods and drought (World Bank 2019). at birth (World Bank WDI 2018). The country’s human development ranking is 138th (UNDP 2018). With this Furthermore, biodiversity conservation can be a level of poverty, the country’s natural resource base is profitable endeavor, with potentially higher revenues critically important to poverty alleviation and growth. than those from extractive industries. Nature-based However, natural resource degradation, combined tourism is one of the most efficient ways to achieve with inadequate provision of environmental services, is 74 Chapter 4 disproportionately affecting the poor in Lao PDR (World and economic development, particularly for agriculture Bank LEM 2005). The country’s ongoing transformation and hydroelectricity generation. Agriculture is the most to a green economy aims to generate economic growth important economic sector for the country, while the and poverty reduction through sustainable solutions that generation of electricity from hydropower serves as the boost resilience, create jobs and livelihoods, and protect core of the national strategy to turn Lao PDR into the natural capital and human health. prime producer of electricity for Southeast Asia. Biodiversity is an important aspect of Lao PDR’s green Protecting the well-being of the Lao PDR economy growth ambitions, as articulated in the National Green and people will require environmental policies Growth Strategy, the 8th National Socio-Economic that protect the productivity and biodiversity of the Development Plan (NSEDP), and sector strategy Mekong Basin. Diversification of the economy will be (World Bank 2019). No other region of the world has necessary to achieve a more inclusive growth that so high a rate of endemism, or endangerment, among generates decent work opportunities. This includes its biota. Conservation forests, also referred to as protecting its extremely high biodiversity values, protected areas (PAs), total 15 percent of the country with four physiographic regions having very different and are home to some of the poorest households. agro-climatic characteristics. These region are (i) the As a result, nature-based tourism has become a high Northern Highlands—a rugged mountainous region with priority in the country’s most recent strategic policy a dry subtropical climate; (ii) the Annamites Range—a frameworks. Yet, these protected areas face serious mountainous topography with high monsoonal rainfall; challenges including illegal logging, infrastructure (iii) the Indo-Chinese karst landscapes of Central Lao expansion into them, and low revenues. As a result, PDR; and (iv) the Mekong Plain—an alluvial plain biodiversity is suffering. These potential costs are not along the Mekong and its larger tributaries with a accounted for directly in the study. However, all efforts tropical monsoon climate and variable rainfall. These should be made to improve and restore damaged characteristics combined give Lao PDR high levels of ecosystems to good ecological status to avoid tipping biodiversity and diverse production systems for food, points with catastrophic changes to biodiversity, and the fiber, and medicines. resulting significant reduction of the services to people it underpins, at a regional or global scale. In addition, The sections in this chapter describe the many all these analyses need to be considered within the contributions of the Mekong to Lao PDR’s economy and framework that serious tipping points due to climate the losses from various current practices. change may very well exist (Lenton et al. 2019). 4.1.2 Outline of Analyses Lao PDR stretches 1,700 km from north to south and 100 km to 400 km from east to west, for a total surface area of 236,800 km2. Some 80 percent of the This chapter provides diagnostic estimates of the country’s land area, largely in the north, is mountainous. impacts and costs of natural resource degradation The remaining 20 percent is low-lying plain along the exacerbated by climate change in Lao PDR. When Mekong River and threatened by annual floods. The investment decisions to reduce natural resource altitude ranges from 104 meters above sea level in degradation are made, it is of interest for society to Attapeu to 2,820 meters in Xiengkhouang, at Phoubia take the monetary value of losses to natural resources Mountain. More than two-thirds of Lao PDR’s population into account and include these monetized losses in lives in the country’s south and central parts. the decision process. The tool that allows comparing such interventions is benefit-cost analyses for policies The Mekong flows 1,898 km from north to south through and measures that reduce welfare losses attributed to Lao PDR. Water from many small rivers or tributaries natural resource degradation. Policies and measures represents a vital natural resource for national social for reducing natural resource degradation generally 75 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 imply additional costs for agriculture, industry, and 4.2 The Mekong Basin consumers. It may thus be important for the acceptance of the measure to show that the benefits—for example, and the Natural Capital from restored ecosystem services—outweigh the costs. of Lao PDR The benefit can be expressed as avoided cost of Lao PDR is one of the Asia’s most natural resource-rich natural resource degradation. To calculate the avoided countries. It has thousands of plant species, many of costs, it is necessary to create two scenarios: (i) a which are economically valuable (World Bank 2019). baseline scenario describing a development without Lao PDR has a substantial direct dependence on the implementation of the measure or policy, and (ii) natural resources for the livelihoods and incomes of a scenario including implementation of the measure its population, and for income for the national treasury. or policy. The impacts occurring for the two scenarios Natural capital is a major source of wealth for the are then calculated. The difference between the country. Figure 4.1 shows that if GDP is used as a impacts is monetized; this gives the avoided welfare measure, the natural capital of Lao PDR is significantly losses or benefits (provided that the degradation costs higher compared to its neighbors45. of the scenario with the measure are lower than for the baseline scenario). These benefits can then be The World Bank Group is using a new indicator—wealth compared with the costs of the policies and measures. per capita—to measure whether progress toward the If benefits are larger than costs and the benefit-cost two goals of eradicating poverty and promoting shared ratio (BCR) is greater than one, the policy or measure is prosperity is made in a sustainable manner in the country potentially beneficial for society’s welfare. A comparison (Lange et al. 2018). At the heart of determining whether of BCRs for a given issue can inform the optimum development in a country is sustainable is the issue of combination of measures to be taken. accumulation of wealth. Wealth is broadly defined to include produced capital and urban land46, natural capital The overall analysis is undertaken in two parts. (including forests)47, human capital48, and net foreign This chapter provides a diagnostic of the cost of assets49—all of which underlie the accumulation of wealth environmental degradation in each sector. Subsequent (Figure 4.2). Assessments of economic performance need analyses in chapter 10 outline policies and measures to be based on both measures of annual growth (such as that would reduce the costs of natural resource the traditional GDP) and measures of the comprehensive degradation and prioritizes them through the application wealth of a country, which indicate whether that growth is of benefit-cost analysis. sustainable in the long term. Countries should aim to Figure 4.1 Natural Capital/GDP (in constant 2014 US$) 16 14 12 Lao PDR Thailand US$/GDP 10 Viet Nam 8 Cambodia 6 4 2 0 2000 2005 2010 2014 Source: Estimated using World Bank World Development Indicators 2018. 76 Chapter 4 Figure 4.2 National Wealth, Lao PDR 45,000 40,000 Produced capital 35,000 Net foreign assets 30,000 Natural capital, subsoil assets US$/GDP 25,000 Natural capital, protected areas Natural capital, forests: timber 20,000 Natural capital, forests: non-timber 15,000 Natural capital, pastureland Natural capital, cropland 10,000 Human capital 5,000 0 2000 2005 2010 2014 -5,000 Source: World Bank World Development Indicators 2018. sustain per capita wealth by saving enough assets to human capital accounts. Adjusted net savings measures meet the needs of their growing population. Lao PDR’s the true rate of saving in an economy after taking into total wealth has been growing over time, with greater account investments in human capital, depletion of contributions from produced and natural capital, but natural resources, and damages caused by pollution. less from human capital. Natural capital has been Positive savings allow wealth to grow over time, thus growing since 1995, from US$42 billion to US$151 ensuring that future generations enjoy at least as many billion (constant 2014 US$), representing about a opportunities as current generations. 2.5-fold increase. While human capital has also increased in absolute value in the same period, human Adjusted net savings are equal to net national savings capital has decreased as a share of total wealth, relative plus education expenditure, minus energy depletion, to natural capital. These numbers indicate that Lao mineral depletion, net forest depletion, and carbon PDR is dependent on natural capital. Protected areas dioxide and particulate emissions damage. The make up the largest share of natural capital, followed adjusted net savings for Lao PDR (Figure 4.3) has been by cropland and subsoil assets. Protected areas and low and volatile over time, reaching about 3 percent other forest resources capital are an important source of of gross national income (GNI) as of 2003 and falling income for the poor and the bottom 40 percent of rural to minus 18 percent of GNI in 2012. It was at minus farmers and forest-dependent communities that rely on 1 percent of GNI in 2016. This path is driven partly by ecosystem services from land and forest resources. volatility in gross savings, which were relatively high for 2006, at 24 percent, compared to 9 percent in 2000 Economic development that depletes a country’s natural and 19 percent in 2016. Despite a recent increase resource base cannot be sustainable even when that in adjusted net savings, natural capital depletion is country’s total wealth is increasing. Consequently, nonetheless persistent. Natural resource (mainly forest) the new National Green Growth Strategy 2030 of Lao depletion and mineral depletion, as well as pollution PDR (World Bank 2019) charted a more sustainable damage, are substantial (Figure 4.4). Positive ANS development path that prioritizes nature-based tourism, indicates an investment in the future—that a nation is sustainable forestry, and downstream industries as accumulating the assets needed to build up its wealth important growth drivers (World Bank 2019). Adjusted and ensure its economic growth over the longer term. net savings (ANS) is an indicator that aims to assess On the other hand, years of negative savings suggest an economy’s sustainability based on the concepts of that a country is running down its capital stock and is on extended national accounts that include natural and an unsustainable growth trajectory. 77 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Figure 4.3 Adjusted Net Savings: Lao PDR 30 20 10 0 -10 -20 -30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Consumption of fixed capital Education expenditure Natural resource depletion Pollution damages Gross national savings Adjusted net savings Source: Adjusted Net Savings Database. Lange et al. 2018. Figure 4.4 Components of Natural Resource Depletion and Air Pollution Damage in Lao PDR, 2016 Particulate emission damage 16% CO2 damage 6% Net forest depletion 38% Mineral depletion 40% Source: Lange et al. 2018. 78 Chapter 4 At the same time, value added in the sectors Often lacking access to basic government services, that extract rent from natural resources has been people in the basin are, on average, less well off than declining over the years (Figure 4.5), suggesting that their fellow citizens outside the basin. About half of manufacturing and service sectors are becoming more all villages are inaccessible by all-weather roads. important for future growth. The mining sector is the However, what makes life tolerable for these people only exception. Extraction of subsoil assets is a very are the aquatic resources and non-timber forest important component of the Lao PDR economy and products (NTFP) provided by the basin’s forests, rivers, a major export. However, it adds to depletion of other and wetlands. At the same time, natural resource natural resources—notably, deforestation—and puts degradation exacerbated by climate change significantly additional pressure on the Mekong Basin. reduces their welfare (Box 4.1). Most of Lao PDR is in the Mekong Basin. The While all LMB countries are making good progress livelihoods and food security of most of the rural towards achieving the Millennium Development population are closely linked to the Mekong River Goals (MDGs), about 25 percent to 35 percent of the system, with over 60 percent of the economically active populations of Cambodia and Lao PDR have incomes population having water-related occupations that are below the poverty line, with much higher percentages vulnerable to water-related shocks and degradation. in many rural areas. Food security and malnutrition Most basin inhabitants are rural farmers/fishers and, exacerbated by unsustainable exploitation practices and while they may be resource-rich, they are money-poor. climate change pose great challenges (AQUASTAT 2011). Figure 4.5 Share of Value Added in Lao PDR 35% 30% 25% 20% 15% 10% 5% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Agriculture, hunting, and related service activities Electricity, gas, and water supply Forestry, logging, and related service activities Construction Fishing Wholesale, retail trade, repair of motor vehicles, motorcycles, and personal and household goods; hotels and restaurants Mining and quarrying Financial intermediation, real estate, renting, and business activities Manufacturing Source: Based on National Accounts Official Country Data, United Nations Statistics Division http://data.un.org 79 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Box 4.1 Dependence on Nature of LMB’s Rural Communities Livelihood portfolios are highly diverse. Regardless of principal occupation, all households are engaged in a range of activities. This observed diversity underlines the importance of considering the linkages between sectors. If the productivity of one sector weakens, a household is likely to seek productivity gains or increased production in another sector. Subsistence-based fishing is a common livelihood activity of most households across rural areas of the LMB. Subsistence-based fishing (and hunting) is a common secondary activity across all occupations. As fisheries are the key source of protein in the basin, households are sensitive to changes in the productivity of fisheries systems. In Lao PDR, fish provides at least 48 percent of protein intake. These trends are apparent throughout the basin, even in upland areas. Natural systems are critical to food security. Looking across the different groups, farmers, agro-pastoralists, and other groups are all between 40 percent and 60 percent dependent upon some combination of subsistence farming, fishing/hunting, and gathering. These are all productive sectors that are heavily dependent on healthy ecosystems. Source: ICEM 2013. The Mekong is an extremely complex system with high and industrialization. To protect the resources of the intra-annual and inter-annual flow variability caused basin and to promote its sustainable development, the by the Southwest Monsoon, bringing both great risks Mekong River Commission was established in 1995 and opportunities. It is also a rapidly changing river not (MRC 1995). The basin can be seen in Figure 4.6. only because of its contribution to the rapid economic development of the basin countries, but also because The MRC provides guidance for balanced development of this development on the river itself. This includes and equitable and sustainable use of Mekong the impacts of increasing population, urbanization, River resources. The commission responds to the and industrialization. To protect the resources of the transboundary and basin-wide impacts of planned basin and to promote its sustainable development, developments in the basin. Climate adaptation is one of the Mekong River Commission was established in MRC’s regional priorities. The MRC is required to take 1995 (MRC 1995). The basin can be seen in The a whole of basin approach, since cooperation with the Mekong is an extremely complex system with high upper riparian countries is crucial for the sustainable intra-annual and inter-annual flow variability caused management of the Mekong River Basin (MRC 2011b). by the Southwest Monsoon, bringing both great risks Sustainable development within the Lower Mekong and opportunities. It is also a rapidly changing river not Basin requires mitigating the risks and seizing the only because of its contribution to the rapid economic opportunities that the Mekong creates for its inhabitants development of the basin countries, but also because in a manner that conserves the river’s functions for of this development on the river itself. This includes future generations (MRC 2016). the impacts of increasing population, urbanization, 80 Chapter 4 Figure 4.6 Mekong River Basin Figure Source: 1: Hydropower Hortle and Nam 2017. dams and other large dams in the Lower Mekong Basin in 2013 The map shows all hydropower dams and other large dams labelled as in Table 1. Mekong mainstream dams are shown as large symbols; note that there are many smaller dams which are not shown (see Figure 2). 5 81 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 4.3 Cost of Deforestation in northern Myanmar, western Thailand adjacent to and Forest Degradation the Myanmar border, and northeast Cambodia (near the Cambodia-Lao PDR-Vietnam border). As a result, wildlife can no longer move from one part of the forest to 4.3.1 Process of Deforestation/ another, and their populations are separated. Sufficiently Forest Degradation in Lao PDR large breeding populations cannot be maintained, and the danger of extinctions increases. Forest fragmentation also makes it easier for poachers and non-native Forests cover a substantial part of the Mekong Basin in species to enter, increases the chances of fires, and Lao PDR. They form the foundation of the ecosystem leads to the accelerating rate of deforestation and loss services, since they store carbon, help protect of biodiversity. Lao PDR has a comparatively high communities and infrastructure from the impacts of international profile with respect to the illegal wildlife drought and flashfloods, supply clean water and food, trade. Its neighbors, China and Vietnam, have a heavy livelihoods, materials used in construction, trade, and demand for illegal wildlife products, including ivory, rhino ensure a healthy flow of the Mekong River. Sediment horns, and tiger and bear parts. Lao PDR is viewed as a and nutrient transport in the Mekong are critical soft transit country and is one of Asia’s main conduits for to ecological health and the distribution of aquatic illegal trade from Africa. Lao PDR also has rich, unique habitats, and are important for water quality, floodplain biodiversity of its own, including high-value tree species, processes, and overall basin productivity, particularly in freshwater turtles, orchids, NTFPs, and medicinal plants fisheries and agriculture (Piman and Shrestha 2017). highly sought after by neighboring countries. Large and medium-sized mammal populations have been severely The forests of the Greater Mekong are some of the affected by the illegal wildlife trade. Elephant populations most biologically diverse places on Earth. However, have also undergone major declines throughout the native forests are becoming increasingly fragmented country because of habitat loss, ivory poaching, and (Figure 4.7), and contiguous forest areas remain only human–wildlife conflicts (World Bank 2019). Ecosystems Ecosystems in the in the Greater Greater Mekong Mekong Ecosystems in the Greater Mekong Figure 4.7 Historical and Projected Forest Fragmentation in Greater Mekong Basin 200km 200km 200km Forest fragmentation Forest fragmentation type type Forest fragmentation type Core Kunming Core Kunming Core Kunming Perforation Perforation Perforation Transition Transition Transition Edge Edge Nanning Edge Nanning Nanning Patch Mandalay Patch Mandalay Patch Mandalay Fangcheng Gang Fangcheng Gang Fangcheng Gang Hanoi Hanoi Hanoi Vientiane Vientiane Vientiane Yangon Yangon Yangon Bangkok Bangkok Bangkok Phnom Phnom Phnom Penh Ho Chi Minh City Penh Ho Chi Minh City Penh Ho Chi Minh City Hatyai Hatyai Hatyai Figure 2.6a. Figure 2.3a. Potential fragmentation Fragmentation index for Figure 2.3d. index for forests in the forests in the GMS, 1973 Fragmentation index for GMS in an unsustainable forests in the GMS, 2009. growth scenario, 2030. 1973 2009 2030 Forest fragmentation type Core Perforation Transition Edge Patch Source: https://www.wwf.or.jp/eng/activities/2017/10/1388106.html 82 page 27 past trends, current status, possible futures Ecosystems in the Greater Mekong: page 30 Ecosystems in the Greater Mekong: past trends, current status, possible futures page 34 Chapter 4 To counter these trends, the government placed the irreplaceable. This forest ecosystem arguably has by protected area system under the direct management far the highest significance and biodiversity importance of the Department of Forestry within the Ministry of and priority in Lao PDR of any Lao forest ecosystem. Agriculture and Forestry (MAF). The National Protected This is so because (i) the wet evergreen forest Area system of Lao PDR has been the cornerstone ecosystems are particularly rich, with high proportions of of the nation’s ongoing efforts to protect terrestrial phylogenetically distinctive taxa; (ii) the wet evergreen biodiversity over the last 25 years. In 2019, the forest ecosystem has very minor representation globally government redesignated some NPAs, establishing with a very small total global area; and (iii) Lao PDR the nation’s first two national parks (World Bank 2019). accounts for a highly significant proportion of the global Urban ecosystems are also important in major cities range of wet evergreen forest. The second ecosystem and in smaller provincial and district capitals. Urban of high global biodiversity importance in Lao PDR centers are opportunities to set up conservation sites includes the massive karst formations of central Lao such as botanical gardens. Examples of urban parks PDR. The Greater Annamites is montane forests, which include Chao Anouvong Park, Chao Fa Ngum Park, has somewhat lower priority because the threats are Chao Saysetha Park, Natural Cultural Park, Patouxay somewhat lower in general. However, the significance Park, and That Luang Park in Vientiane Capital. Another of the Greater Annamites to global biodiversity outstanding site of nature education potential is Nong conservation is high, because they in general have a Kengsan in Haidsaphong District (World Bank 2019). high representation of species with restricted ranges (World Bank 2019). The Lao PDR government recognizes the value of forests50. The Lao PDR’s forestry strategy (MAF 2005) Although Lao PDR still has considerable forest states resources, significant deforestation and forest degradation have taken place during the past two The Lao PDR is particularly endowed with valuable, decades, as reported by a recent USAID study (Thomas productive and ecologically unique forests which 2015). The study cites available official statistics from are not only a vital economic resource but provide the MoNRE that, in the 1960s, national forest cover in essential contributions to the nutrition and income of Lao PDR amounted to around 71.6 percent (17 million the rural population and, in particular, the rural poor. hectares). However, due to the prevalence of traditional Forests also provide a habitat for the nation’s rich shifting cultivation—and the presence of vast areas natural biodiversity and protect its soils, watersheds of fallow forest in Lao PDR—it has been challenging and water resources. Some eighty percent of the to estimate annual average deforestation and forest population is heavily reliant on the forest for timber, degradation in Lao PDR. In Lao PDR, a significant food, fuel, fibre, shelter, medicines, condiments and area is covered under forest fallow in different stages spiritual protection. In rural areas, forests provide of shifting cultivation and regeneration through natural one of the few available economic activities and vegetative succession. In most cases, these forest non-timber forest products often provide more than fallow lands can regrow and recover into a stocked half of a family’s total income. mixed deciduous forest through natural vegetative succession. The latest document that defines forest and The wet evergreen forest in the Annamites has deforestation/forest degradation activities in Lao PDR great significance for the global conservation of wet (MAF 2018a) addresses this issue and comes up with evergreen forest biodiversity. The most important a consistent approach to estimate the extent of forests, area of wet evergreen forest in Lao PDR lies in the deforestation, and forest degradation in Lao PDR. It headwaters of the Nam Chat and Nam Pan rivers. The divides all forestland in the country by strata based on significance of this site for the long-term conservation carbon sequestration potential (Table 4.1). of wet evergreen forest in Lao PDR makes this site 83 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Table 4.1 Forest Classification in Lao PDR Level 1 Level 2 Area (ha) % of total Stratum Evergreen 2,605,557 11.3 1 Mixed deciduous Coniferous 9,437,688 40.9 2 Current forest Mixed coniferous and broadleaved Dry dipterocarp 1,188,198 5.2 3 Plantation forests Bamboo 6,300,445 27.3 4 Potential forest Regenerating vegetation Savannah Other vegetated areas Scrub Grassland Upland crop Rice paddy Cropland Other agriculture 3,522,370 15.3 5 Agriculture plantation Settlement Urban area Barren land Other land Other Wetland Above-ground water source River Total 23,054,258 100 Source: Lao PDR MAF 2018a. Figure 4.8 shows the forest cover map in Lao PDR cultivation also contributes depending on the scale of (2005–2015) developed with application of the above- its application, with a lesser impact if carried out on mentioned methodology. a smaller scale (patches of less than 1 ha). Natural forest fires may also contribute, but in both cases, Table 4.2 presents a breakdown of Lao PDR forests by regrowth of swidden and burnt forest areas can be forest type. This breakdown is based on a study by the surprisingly rapid. Wood harvesting by rural households Department of Forestry, 2018 (Lao PDR MAF 2018b). for domestic consumption most likely has a much less significant impact. The first two drivers, illegal logging, In Lao PDR, deforestation is caused by many drivers which continues in all protected areas (World Bank but, in particular, illegal logging, unsustainable 2019), and agricultural expansion probably have had timber extraction from commercial logging activities, the leading impact and are likely to continue to drive agricultural expansion, industrial tree plantation high rates of deforestation. Global Forest Watch (2018) development, hydropower development, mining, and estimated that 191,031 hectares of forests were lost in other infrastructure development. Pioneering shifting 2014, up from 80,543 lost in 2008. This threat has been 84 Chapter 4 Figure 4.8 Forest Cover Map in Lao PDR (2005–2015) Forest Type Map 2005 Forest Type Map 2015 Vientiane Vientiane Udon Thani Udon Thani Savannahket Savannahket High Medium Low Very Low Ubon Ratchathani Ubon Ratchathani Figure 6: Forest Type Map 2010 Figure 7: Forest Type Map 2015 Evergreen Forest Grassland Mixed Deciduous Forest Swamp Dry Dipterocarp Forest Upland Crop Coniferous Forest Rice Paddy Mixed Coniferous and Broadleaved Forest Other Agriculture Forest Plantation Agriculture Plantation Bamboo Urban Regenerating Vegetation Barren Land and Rock Savannah Other Land Scrub Water Source: Lao PDR MAF (2018a).11 12 Table 4.2 Forest Cover Area by Type of Forest in 2015 Forest cover (forested area) Total area % within Forest categories Million ha % of total land area (million ha) category Protection forest area 7.98 4.62 57.9 20.0 Conservation forest area 4.66 3.47 74.4 15.1 Production forest area 3.10 2.14 69.2 9.3 Areas outside the above three forest categories 7.31 3.14 40.5 13.6 Plantation (included in the forest areas inside – 0.14 0.6 and outside the above three forest categories) Total, all land types 23.05[a] – – Total, forest cover 13.37 58.0[b] Source: Lao PDR MAF 2018a. Note: [a] The total land area lying within Lao PDR’s internationally established boundaries is revised to 23.05 million hectares, as provided by the National Geographic Department, based on their remote sensing survey. [b]The forest coverage of 58 percent includes 0.14 million hectares of forest plantation. 85 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 greatly curtailed by the introduction of PM Decree No. (Lao PDR MAF 2018a) was based on a survey of the 15 to ban unprocessed timber exports, although illegal number of fallow years required for regeneration to logging still occurs at lower intensities at all sites (World meet the forest definition (that is, the threshold year). Bank 2019). The survey used the annual vegetation-loss dataset (Hansen et al. 2013) to detect the year of loss on forest Although there are strict rules that stipulate the use loss plots, and then measured the crown cover to find of each forest type (Table 4.3), there are no mapping whether it had reached the status of forest. The survey and corresponding forest management plans for all results showed that the threshold number of years for forests in the country. The EU study that addressed a forest fallow to reach the forest threshold was on forest exploitation in Lao PDR (Grace et al. 2012) average seven years. By adding one year for cropping, revealed that the areas mapped on the national level it was assumed that land that was subjected to as protection forest were often used for agricultural traditional slash and burn would regenerate into forest production, and even included major town areas. In status in eight years. one case, an entire district was mapped as protection and production forests, but in reality, contained the The survey (Lao PDR MAF 2018a) provided a district’s capital, large lowland agricultural areas, and conservative estimate of deforestation and land a coal mining concession. Thus, the information can degradation. Deforestation is defined as conversion of be lacking, low quality, or unreliable regarding the a forestland stratum (strata 1–3 in table 2.1) to non- deforestation of the different forest categories. forestland stratum (stratum 5 in table 4.1). Total annual deforestation in Lao PDR is estimated in Table 4.4. Due to shifting agricultural cultivation in Lao PDR, the Global Forest Watch (https://www.globalforestwatch. Forest degradation is defined as downward change org/country/LAO51) database cannot be applied by itself. from a higher classified stratum (by carbon content) to a The identification of annual deforested/degraded areas lower forest stratum (Table 4.5). Table 4.3 Categories of Forests in Lao PDR Category Definition Forests and forestland classified for the purpose of protection of watershed areas and prevention of soil erosion. This category also includes areas of forestlands that are significant for national Protection Forests security, areas for protection against natural disasters and the protection of the environment, and other areas. (Forestry Law: Article 10) Forests and forestland classified for the purpose of protecting and conserving animal species, plant Conservation Forests species, nature, and various other things that have historical, cultural, tourism, environmental, educational, and other specific research values. (Forestry Law: Article 11) Forests and forestland classified for the purpose of satisfying the requirements of natural economic Production Forests and social development, people’s livelihoods, and for timber and other forest products on a sustainable basis and without significant negative environmental impacts. (Forestry Law: Article 12) Young fallow forests classified for the purpose of regeneration and maintenance so that there is an Regeneration Forests increase in maturity towards a stage of natural equilibrium. (Forestry Law: Article 3) Forests that have been heavily damaged, such as land without forest on it or barren land classified for tree planting and/or allocated to individuals and organizations for tree planting, permanent Degraded Forests agriculture, and livestock production, or for other purposes, in accordance with national economic development plans. (Forestry Law: Article 3) Source: JICA 2013. 86 Chapter 4 Table 4.4 Annual Deforestation in Lao PDR Forest Amount (ha) Amount (ha) Amount (ha) Total deforestation Annual strata 2005 2010 2015 area, 2005–2015 (ha) deforestation (ha) Evergreen 1 2,618,169 2,613,226 2,605,557 12,612 1,261 Other forest 2 9,961,368 9,721,635 9,437,688 523,680 52,368 Dipterocarp 3 1,272,006 1,215,712 1,188,198 83,808 8,381 forest Total 13,851,543 13,550,573 13,231,443 620,100 62010 Source: Estimated based on Lao PDR MAF (2018a). Table 4.5 Annual Forest Degradation in Lao PDR Forest degradation Total degradation area, Share of carbon content loss Annual degradation area, ha (shift of forest strata) 2005–2015, ha 12 0.6 2,182 218 13 0.8 13 1 14 0.9 1,949 195 23 0.5 313 31 24 0.8 496,389 49,639 34 0.6 39,048 3,905 Total 53,989 Source: Estimated based on Lao PDR MAF (2018a). Forest gain, although significant in Lao PDR52, is not in (Siikamäki et al. 2015) provides an estimated value included in these estimates. Forest area increase, of non-wood forest ecosystem services (Table 4.6). achieved with rubber and teak plantations brings The paper analyzed 139 studies to derive a function of significant private benefits, but they are questionable if ecosystem services based on location-specific ecological other ecosystem services provided by forests are taken (for example, ecosystem type) and socioeconomic into consideration (CRILNR 2009). factors (for example, income per capita or population density). The values of forestland estimated for selected 4.3.2 Forest Values countries in Eastern Asia are presented in table 4.7. Quantification Forests yield five main categories of provisional economic benefits: commercial timber exploitation, Only some forest values were quantified for this analysis household wood consumption, fuelwood use, and non- for Lao PDR. These estimates are based on secondary timber forest products (NTFP) harvested at household information from a number of recent studies for tropical and commercial levels. Other mean forest values are forests in Lao and specifically in the Mekong Basin. adopted and derived from the studies for the tropical Meta-analysis of the non-timber forest values presented forest in Lao PDR (Table 4.8). 87 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Table 4.6 Non-Wood Value of Forest Land in the Lower Mekong Basin Countries (US$/ha) Lao PDR Thailand Vietnam Cambodia Recreation 7.9 25.2 16.2 4.6 Habitat/Species Protection 0.2 4.0 0.3 0.4 NWFPs 1.2 0.6 2.3 1.2 Water Services 4.4 49.0 5.1 1.1 Total 13.7 78.7 23.9 7.3 Source: Siikamäki et al. 2015. Table 4.7 Estimated Mean Values of Forest (US$/ha/yr) Type of service Per hectare Source EC FLEGT Facility, Baseline Study 2, LAO PDR: Overview of Forest Governance, Sustainable timber harvest US$4.2/yr Markets and Trade, July 2011; World Bank 2015 Fuelwood US$4.7/yr Rosales et al. 2005; World Bank 2013 Provisioning services Charcoal US$1.2/yr FAOSTAT 2016 Rosales 2005; adjusted by GDP deflator NTFP US$8.5/yr to 2017 Ministry of Information, Culture and Tourism US$10.1/yr Tourism, Lao PDR 2016 Carbon storage US$1,238–1,454/yr Lao PDR MAF 2018a Regulating services Watershed protection services US$183/yr Emerton 2013 Other services Other services US$0.20/yr Siikamäki et al. 2015 Nonetheless, the economic value of NTFPs is 4.3.2.1 Sustainable Timber Harvest impressive, but undervalued. Collectively these forest products constitute a vital economic resource and Harvesting timber at a low rate can be a sustainable use provide an essential contribution to the consumption of forest resources if regeneration and the long-term and income of the rural poor, as well as conserving well-being of the forest are taken into consideration. biodiversity, soil, and water values. Additionally, Production Forest Areas (PFAs) cover 3.1 million medicinal plants, a type of non-timber forest product, hectares in Lao PDR, with 51 legally established PFAs. are also of great importance, serving as the backbone The plan by the Department of Forestry is to complete of primary health care in the country. A database at the national inventories and to develop sustainable Institute of Traditional Medicine of the Ministry of Health management plans for all 51 national PFAs by 2013, (MIH) of Lao PDR houses between 2,000 and 3,000 but there is little information on progress towards this species of plants recorded to have been used to treat goal (EC FLEGT 2011). The total volume of sustainable diseases. New medicinal species are being recorded harvesting from the Participatory Sustainable Forest continuously (World Bank 2019). Management (PSFM) areas in Lao PDR for all 51 national PFAs could be maintained at approximately 88 Chapter 4 97,000 m3 annually, increasing up to about 244,000 4.3.2.3 Non-Timber Forest Products m3/yr under the more intensive commercial harvest scenario of 10 m3/ha per harvest cycle. With 25 percent Forests in this country are an important source of losses for the intensive commercial harvest scenario, income and subsistence for the population (Lao and $40/m3 stumpage fee, adjusted to 2016 with a GDP PDR MAF 2005). Lao PDR has an estimated 8,000– deflator of 1.19 (World Bank 2015; World Bank WDI 11,000 species of flowering plants, many of which are 2018) total sustainable timber harvesting is estimated economically valuable. These plants have a range of at US$14.5 million, or US$4.2/ha annually. Note utilities for people, and include NTFPs and medicinal that timber harvesting is prohibited in protection and plants, as well as economically important agricultural conservation forest; however, we do not have actual species, breeds and varieties. Among the fauna, deforestation rates in different forest types. The values there are between 150–200 species of reptiles and are attributed to all forest types in this report. amphibians, 700 species of birds, 90 species of bats, over 100 species of large animals, and 500 species of 4.3.2.2 Charcoal and Fuelwood fish (World Bank 2019). The ADB (2010) reports that the most important NTFPs currently being collected are (i) Timber is an important source of fuel for the Lao rattan, (ii) bamboo, (iii) resin, (iv) malva nut, (v) honey, population. World Bank (2013) reports that 66.9 percent (vi) palm leaf and grass leaf/broom grass flower, (vii) of population in Lao PDR use solid fuel for cooking. On medicinal plants/herbs, (vii) food (such as vegetables average, every household (5.3 people) uses about 2.16 and bamboo shoot), and (ix) fuelwood. Food and t of fuelwood per year. If one cubic meter of firewood fuelwood from the forests are the major consumption converts to 775 kg (Lao PDR MoNRE 2013), then goods for local people. Rosales et al. (2005) found the about 2.4 million m of fuelwood is used annually. The 3 annual value of non-timber forest products collected in fuelwood is priced at the opportunity cost of charcoal, the natural forests of Sekong province to be US$398– as in Rosales et al. (2005), and adjusted to 2016 at US$525 per household, or US$17/ha to US$23/ha. US$50/t of fuelwood. The total benefits of fuelwood Foppes and Samontry (2010) estimated cash income use in Lao PDR are estimated to be US$90 million. The from NTFPs in production forests to be worth on cost of fuelwood use is estimated with time spent for average US$204 per rural household, in 2010. The fuelwood collection by the rural population (6 hours of non-cash income—that is, the value of household work per household per week—as in World Bank [2013]) consumption—was estimated to be US$489. Together, at US$28 million. Net annual benefits from fuelwood use the total income per household comes to US$693 per are then US$62 million, or US$4.7/ha of forest. household. We apply a more conservative approach, using the same study and Lao PDR MAF (2005) and Charcoal net benefit is estimated at 50 percent (for profit (World Bank 2019) to show that an average rural margin) of the revenue from charcoal sales in Lao PDR household draws about 40 percent of its income (US$29 million—FAOSTAT 2018). Thus, the estimated from the forest (71 percent for poor households, and net benefit is US$15 million, or US$1.20/ha of forest. 36 percent for rich households)—every year rural Table 4.8 Estimated Annual NTFP in Lao PDR (US$/ha) Rosales 2005 NTFP per hectare Bouttavong 2002b ADB 2010 Average Low High At the time of the study 2 7 17 23 Adjusted to 2017 with GDP deflator 6 10 40 54 7.9 Sources: ADB 2010; Bouttavong et al. 2002; Rosales et al. 2005. 89 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 households extract US$182 million from forests. After US$1,454/ha for deforested areas and US$1,238/ha for taking out fuelwood, estimated at the time spent for degraded forest areas. collection, and applying the same benefit-cost ratio as for fuelwood, we estimate that on average households 4.3.2.5 Tourism and Habitat Protection get US$108 million as NTFP, or US$8.5/ha. This estimate is in the range of estimates that are obtained The estimates related to use of forest for recreation, from other studies. option value (bioprospecting when a forest can potentially serve as a provider of new medicines) and 4.3.2.4 Climate and Carbon existence value associated with preservation (non-use) of forests show a wide variety of values in the literature. The average carbon stock in Lao PDR forests is With over half of Lao PDR’s total wealth found in natural reported in Lao PDR MAF (2018a). The total value of capital, the country’s comparative advantage in tourism the carbon emissions due to deforestation and forest is its conservation landscapes and the wildlife and degradation and their cost is estimated in Table 4.9 people dependent on them. This endowment supports and Table 4.10. Carbon stock of forest in Stratum 5 is globally significant biodiversity and forest cover is estimated at 4.9 tons of C per hectare (Lao PDR MAF 58 percent of the country’s total area. Internationally 2018a). US$5 per ton of CO2 is the price used in the important biodiversity comprises the outstanding above report. On average, the value of carbon lost due natural ecosystems described above, which are further to deforestation/forest degradation is estimated to be augmented by world-class caves, rivers, and waterfalls. Table 4.9 Annual Average Carbon Emissions from Deforestation in 2005–2015 Carbon loss annual, Cost of carbon loss, Carbon t/ha CO2 release, t/ha CO2 t US$, millions Evergreen 200 715 901,758 5 Current other forest 88 305 15,956,530 80 Dipterocarp forest 43 140 1,173,871 6 Total 18,032,158 90 Table 4.10 Annual Average Carbon Emissions from Forest Degradation in 2005–2015 Forest Total area of % loss of Annual Cost of carbon degradation: degraded forest CO2 loss Total carbon carbon content degradation, loss, US$, change in in 2005–2015, t/ha loss, t of CO2 due to change ha millions strata ha 12 0.6 2,182 218 410 89,527 0.5 13 0.8 13 1 575 747 0.0 14 0.9 1,949 195 668 130,135 0.7 23 0.5 313 31 165 5,153 0.0 24 0.8 496,389 49,639 257 12,777,053 63.9 34 0.6 39,048 3,905 93 362,235 1.8 Total 53,989 13,364,851 67 90 Chapter 4 This wealth can be mobilized for green growth with Following the introduction of rubber plantations and their nature-based tourism (World Bank 2019). Tourism forest subsequent rapid expansion in the mountainous areas value was approximated from available information (Lao across the entire Mekong region, the area devoted to PDR MICT 2016). About 680 thousand international rubber plantations has been steadily increasing. It is tourists visited Lao PDR in 2016. Each tourist spent predicted that this expansion will lead to drier conditions about 7.6 days in the country and spent US$77 per at the local level and will increase surface erosion and day; 67 percent of tourists expressed interest in reduce soil quality. It will also increase sedimentation visiting nature sites. Assuming 50 percent share of and stream disruption and increase landslide risk the cost, net annual value of tourism in the forests of (Costenbader et al. 2015). These effects are difficult Lao PDR is estimated at US$134 million or US$10.1 to quantify. However, Emerton (2013) reviewed the per hectare. This estimate is close to the conservative studies that valued indirect ecosystem services of the recreational forest value estimate at US$7.9 per hectare forest in the Lower Mekong Basin, including Lao PDR. in (Siikamäki et al. 2015, table 6). The average estimate of US$183/ha/yr is derived in the study with the range US$3–399 ha/yr. We use a mean Habitat/Species Protection forest values are estimated value of US$183/ha/yr in this analysis. at US$0.20/ha in (Siikamäki et al. 2015, table 2.6). This estimate is close to the estimate provided in 4.3.3 Summary Costs of Rosales et al. (2005). Deforestation and Forest 4.3.2.6 Watershed Protection Degradation The benefits related to watershed protection are Table 4.11 summarizes the estimated annual forest particularly important for Lao PDR, given its economic ecosystem values. The cost of deforestation/forest dependence on the Mekong River. As ADB, 2010 degradation in Lao PDR is estimated as NPV of annual describes, forests protect watershed functions through forest values lost on deforested land and reduced on retention of water by the crown, trunk, undergrowth the degraded forestland in the same proportion as vegetation, forest litter and soil. Forests store and carbon release on the degraded land compared to regulate availability of surface water and runoff. The the initial forest strata. Carbon released as a result forest is often referred to as a sponge and green of deforestation is included as the value of carbon reservoir for its critical watershed protection capacity. stock released as a result of deforestation/forest By regulating runoff, forests can contribute to delays in degradation at the time of deforestation. Forest values flood peaks and to reductions in flood volume. During are estimated as NPV of forest services per hectare the dry season, forests gradually release absorbed listed in Table 4.11 (30 years, 5%/year discount rate). water thereby maintaining river flow and relieving Table 4.11 shows the NPV of forest ecosystem value droughts. Rainwater retained by forests can be of loss per hectare separately for deforestation and forest drinking water quality. Forests also prevent soil erosion degradation. and loss, thus reducing or minimizing sedimentation in reservoirs and rivers. This improves water quality and The annual cost of deforestation/forest degradation in can extend the life of a reservoir. Lao PDR is estimated as a product of the total values in table 4.11 and annual deforestation/forest degradation area (Table 4.4, Table 4.5). The estimated annual deforestation/forest degradation cost in Lao PDR is presented in Table 4.12. 91 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Table 4.11 NPV of Forest Ecosystem Value Loss (US$/ha) NPV deforestation, US$/ha NPV degradation, US$/ha Timber 62 49 NTFP 115 92 Fuelwood 66 53 Charcoal 17 13 Recreation 142 0 Total provisional values 402 207 Habitat preservation 3 2 Watershed protection 2,579 2,055 Carbon one-time value loss 1,454 1,238 Total 4,438 3,502 Table 4.12 Estimated Annual Deforestation/Forest Degradation Cost in Lao PDR US$, millions % GDP in 2017 Deforestation cost 275 1.6 Forest degradation cost 189 1.1 Total 464 2.7 4.4 Agricultural shifting agriculture systems dominated by upland rice through industrial plantations in the lowlands, including Expansion and the Cost smallholder intensive rice farmers. Rainfed agriculture of Soil Degradation is the dominant type of agriculture in the Lao PDR. Rainfed rice is the dominant traditional crop. Lao PDR is particularly rich in rice varieties, with at least five 4.4.1 Agricultural Production in wild species and some 3,000 varieties of cultivated Lao PDR varieties. Glutinous rice is the staple rice type favored by the Lao people, and around 85 percent of the samples are of glutinous varieties reflecting a potential Most of the people of Lao PDR rely on agriculture for impressive diversity. Some of local varieties, previously their livelihood, and the country’s households spend in decline, are now finding favor in national and the most on agricultural products. The population international markets. Locally almost 200 species found of Lao PDR has increased 2.5 per cent per annum in aquatic rice fields are consumed, supplying a range in recent years, a growth rate that can lead to food of nutrients needed by the villagers. Aquatic animals, insecurity, which in Asia is often equated with rice including fish, amphibians, crustaceans, mollusks production. The country has to feed almost 50 per and insects form part of the diet (World Bank 2019). cent more people now than 16 years ago (World Bank Other commercial crops such as maize, or cassava, 2019). Farming systems in the Lao PDR’s part of the which have growing importance in farming systems Mekong River basin range from traditional, sustainable in the region, are also mostly rainfed. Agriculture is 92 Chapter 4 highly dependent on climate and especially on rainfall Lao PDR has distinct lowland, upland, plateau, and frequency and distribution. With more than 1,000 mm mixed agricultural systems, of which lowland systems of rainfall per year in the Lao PDR, water shortage is are dominant. Farming systems in the lowlands are not the primary constraint for agriculture. Instead, it is predominantly based on rice, along with mixed cropping the unpredictability and variability of rainfall distribution systems of vegetables, groundnuts, and fruit trees. during the rainy season that can lead to drought, water Major livestock (cattle, buffalo, commercial chickens, stress, and low yields (ICEM 2013). and ducks) are also raised in the lowland areas. The highland areas are home to many ethnic minorities— Agriculture is central to growth in the country, and for example, the Lao Sung—whose main agricultural rural landscapes have been transformed over the past practices largely rely on shifting cultivation and decade from land use mosaics of subsistence and subsistence farming. Upland cropping systems often small farms to large-scale plantations dominated by a include maize, cassava, and vegetables. In recent few commercial crops (Wong et al. 2014). However, years, cultivation of commercial crops, such as rubber, agricultural performance has lagged, with limited sugarcane, cassava, and maize, has expanded in the productivity with growth mainly driven by expansion into uplands. Cultivation of commercial crops is practiced uncultivated lands (ADB 2017). Despite its potential, especially on degraded lands that are fallow. The most household survey data indicate that rice yields trail common livestock in this area are indigenous pigs and the rest of developing Asia. Livestock and other crop local chickens (ADB 2017). Upland agriculture is the production growth have remained mixed. (ADB 2017). most prone to erosion and degradation problems due Agriculture’s share of the Lao economy is currently about to slope, as will be discussed below. Table 4.13—and 20 percent of country’s GDP, it was about 60 percent of Figure 4.9, Figure 4.10, and Figure 4.11—show the GDP in the early nineties and still almost 80 percent of basic types and amount of agricultural land in Lao PDR. the total workforce in 2017 (World Bank WDI 2018). Table 4.13 Farm Area (ha) by Land The country’s total agricultural area, as defined by the Type, 2010–2011 Ministry of Agriculture and Forestry, covers about 4.5 million ha, of which 3.8 million ha is potentially suitable Lowland Upland Plateau Mixed Total for cultivation (Lao PDR MAF 2015 – cited in ADB 806,460 402,039 375,870 6,219 1,590,589 2017). Under international definitions of arable land, which refer to land already under temporary crops, Source: ADB 2017. transient meadows, and fallows of limited duration, about 1.5 million ha is classified as arable. FAOSTAT Major crops include rice, maize (commercial), and pigs. shows about a similar amount land classified as Production of maize has been increasing annually. This arable, but currently only about 2.4 million ha of total is due to both increased area of planting and increased agricultural lands. Under either definition, available yields. The country plans to increase cash crop agricultural land per rural inhabitant is greater than in production of maize in addition to its use as a domestic much of Asia. In addition to a generous arable land food source (Lao PDR MAF 2015) and as fodder for endowment, the Lao PDR has 650,000 ha of pasture the increasing numbers of pigs. Rice production is also and meadowlands that can benefit livestock. Along with expected to increase both for local food consumption land, water is the most important natural resource for and as a cash crop to be targeted to international agricultural potential, and this resource faces increasing markets such as China and neighboring countries (Lao demand. The Lao PDR is fortunate to have abundant PDR MAF 2015). water. Rainfall, which averages 1,600 millimeters (mm), is distributed relatively evenly across the country (FAO 2018). ADB (2017) estimates planted area of maize in 2007 to When surface waters are considered, the Lao PDR has have been approximately 150,000 ha; and in 2012, it far more freshwater available per hectare of arable land was approximately 200,000 ha. than other countries in the region (ADB 2017). 93 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Figure 4.9 Major Agricultural Land Uses 3,000 2,500 2,000 1000’s ha 1,500 1,000 500 - 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Arable land Fallow land (temporary) Permanent crops Permanent meadows and pastures Source: FAOSTAT 2018 Figure 4.10 Maize Production in Lao PDR 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Area harvested (1000’s ha) Production (tonnes) Yield (hg/ha) Source: FAOSTAT 2018 94 Chapter 4 Figure 4.11 Paddy Rice Production Paddy Rice 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Area harvested (1000’s ha) Production (tonnes) Yield (hg/ha) Source: FAOSTAT 2018. The ADB (2017) analysis suggests that nearly all rice While pioneering shifting cultivation in the uplands production growth in the Lao PDR is driven by area appears to have reduced, in its place, growth of expansion, which is a trend that is not sustainable, commercial agricultural concessions has put new given that land is a finite resource, and the government pressure on forests, as noted in the previous section. is actively seeking to expand forest cover. While the It has been estimated that commercial agricultural ADB survey results reflect no change in rice yields expansion led to 34,200 ha of annual loss, while between 2007–2008 and 2012–2013, rice area smallholder expansion drove 14,700 ha of loss each expanded by nearly 2 percent annually. According to year (Table 4.26). In addition, commercial concessions ADB (2017), the planted area of maize in 2007 was may drive shifting cultivation and other agriculture approximately 1,100,000 ha; in 2012, it was about into new forested lands when lands under existing 1,250,000 ha (based on data from Lao Statistics Bureau uses are allocated to commercial investors, and this (LSB) 2008. Lao Expenditure and Consumption Survey may indirectly lead to additional forest clearance. The 2007–2008. Vientiane; and LSB 2013. Lao Expenditure low level of performance for rice systems according and Consumption Survey 2012–2013. Vientiane). These to survey data is explained by the old traditional areas planted numbers are larger than the FAO estimates management practices by farmers, even when (~728,000 ha in 2007 and ~928,000 ha in 2012). The FAO biophysical conditions could allow similar yield levels to analysis (Figure 4.12) shows increases in yield in addition leading rice producers, such as Vietnam. Even without to area expansion, as opposed to the conclusions of the changing the extent of irrigation, attainable yields can ADB 2017 analysis. The ADB 2017 analysis also differs be doubled, and with irrigation in place, it could be in analysis of yield (Figure 4.13). This analysis based on tripled relative to survey-based estimates. The gap a number of sources shows relatively little change in yield, between actual and attainable rice yield in the Lao PDR although official numbers show similar production totals. It is the highest in the region (Figure 4.13). is not within the scope of this study to explain the reasons for the differences in these numbers. 95 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Figure 4.12 Growth in Paddy Rice Production and Yield, Lao PDR 2007–2015 4,500 4.5 4,000 4.0 3,500 3.5 Yield (tons/hectare) 3,000 3.0 Tons (’000) 2,500 2.5 2,000 2.0 1,500 1.5 1,000 1.0 500 0.5 0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 LECS (Production) LCA (Production) USDA (Production) Official (Production) LECS (Yield) LCA (Yield) USDA (Yield) Official (Yield) Sources: Estimated based on the following: FAOSTAT. Value of Agricultural Production. http://www.fao.org/faostat/en/#data/QV; Lao Statistics Bureau. Lao Expenditure and Consumption Survey 2007–2008. Vientiane; Lao Statistics Bureau. Lao Expenditure and Consumption Survey 2012–2013. Vientiane; Ministry of Agriculture and Forestry. Lao Census of Agriculture 2010/11. Vientiane. USDA, Foreign Agricultural Service. https://apps.fas.usda.gov/psdonline/app/index.html#/app/downloads; Note: LCA = Lao Census of Agriculture, LECS = Lao Expenditure and Consumption Survey, USDA = United States Department of Agriculture. Figure 4.13 Gap Between Attainable and Actual Paddy Rice Yields, 2012 4.0 3.5 Yield gap (tons/hectare) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 PRC Indonesia Bangladesh Viet Nam Malaysia Philippines India Thailand Myanmar Cambodia Lao PDR Irrigation Other factors Source: ADB 2017. 96 Chapter 4 4.4.2 Agricultural Inputs in both maize and rice yield seen in the FAO data in Figure 4.10 and Figure 4.11. Lao PDR MAF (2015) notes that producers and farmers have improved crop productivity and cultivation through For irrigation use, there are few years with data for Lao farmer’s groups and associations, with improved PDR (AQUASTAT 2011). Irrigation can be required to information access and access to markets. They have smooth out the variability in precipitation in this country. been using agricultural techniques and technologies The proposed increases for both food and cash crops that were promoted by improved agricultural extension by the Lao government signal a need towards more services. New and improved irrigation, research chemical use and better water system management. centers, seed centers, testing bodies, agriculture and forestry service centers have been very useful. 4.4.3 Soil Erosion and Land If the government is to achieve its aims of increasing Degradation agricultural production and protect its forests, it will need to increase yields significantly. Manure use has been Much of the land in Lao PDR is naturally susceptible increasing (Figure 4.14); however, this is not likely to be to soil erosion due to mountainous areas with a high sufficient. An increase in appropriate use of agricultural degree of slope, the types of soils and the high rainfall. chemicals will be required. According to FAOSTAT, there Soil erosion is compounded by shortened fallow periods, is no measurable chemical fertilizer use in Lao PDR; this resulting in lower productivity and ever-increasing is consistent with the analysis within the ADB 2017 report. demand for more land for agriculture. Traditionally, slash and burn agriculture was sustainable. However, Pesticides (both insecticides and herbicides) are changing agricultural practices can be bad for the soils, used in Lao PDR, and more than 120 tonnes of active because of these shortened fallow periods. Villages ingredients were used in 2013 (FAOSTAT 2018). In practicing shifting agriculture report substantial declines recent years, there has been almost no reported use of in agricultural land productivity (as much as a 50 percent pesticides. This year-to-year variation in the pesticide decline) due to shortening of fallow periods from 14–15 use data is probably far more reflective of data quality, years to as little as 3–4 years, causing serious nutrient rather than annual differences in actual use. Perhaps depletion (World Bank LEM 2005). the growing use of pesticides accounts for the increase Figure 4.14 Manure Applied to Soils 70,000,000 60,000,000 50,000,000 N content in kg 40,000,000 30,000,000 20,000,000 10,000,000 - 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: FAOSTAT 2018. 97 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 There have been several site-specific small-scale northern Lao, in a field with a mean slope of 60 percent, erosion studies in Lao. However, scaling up to country- soil losses due to tillage erosion were of the same order level estimations of soil loss has been extremely of magnitude as those due to water erosion. These soil difficult. It is not possible to simply extrapolate the losses affect the most fertile soil layer. Because of the runoff and sediment yield figures from micro-plots to increasing weed pressure, tillage erosion is likely to calculate sediment eroded at larger scales, because become very serious, especially on the steepest slopes, these processes are scale dependent. Erosion rates which will become more frequently cultivated (Dupin et measured from micro-plots are generally much higher al. 2002). There are various estimates of soil loss and than at the catchment scale, where sediments may be degradation, several of which can be seen in Table 4.14. deposited (Pierret et al. 2011). We estimate the annual cost of soil erosion by using Sediment loads in rivers, though, can be significant. data on substitution of maize production for traditional Sediment loads in tributaries vary considerably, from and sustainable shifting agriculture in the uplands. This 41–345 tonnes/km /yr, and sediments are the primary 2 is one of the major economic changes in agriculture pollutants in Lao PDR’s rivers. Tributaries and river in the Lao PDR. As described in Wong et al. (2014), reaches with high sedimentation include the upper upland shifting rice production is normally practiced and lower stretches of the Mekong (AQUASTAT 2011). on a rotational basis within the same landscape after Tillage erosion results from land preparation and from a lengthy fallow period. This rotational production repeated weeding operations. Erosion in in this context requires an extensive land area. As described above, is the movement of soil from higher elevations to, this is the predominant traditional farming system in the and then deposition at lower portions of the slope. In northern uplands of Lao PDR. Pressures from national Table 4.14 Erosion Estimates in Lao PDR Studies Based on Land Use or Slope Gradient Micro-catchment area (ha) Land use Soil loss (t/ha) 1.7 69% rotating land, 31% teak 0.5 29.3 76% rotating land, 6% upland rice 0.6 19.8 80% rotating land, 12% forest 0.0 27.7 61% rotating land, 11% job tear, 10% forest, 7% upland rice 2.1 13.1 53% rotating land, 35% forest, 8% upland rice 2.8 2.5 56% rotating land, 13% forest, 31% teak 2.0 Slope Gradient % Erosion (t/ha/yr) 30 2.1 40 3.1 50 3.9 60 4.1 70 8.7 80 11.8 90 14.8 100 18.6 110 23.7 Sources: Dupin et al. 2002; Maglinao 2002. 98 Chapter 4 policies that promote expansion of maize and rubber Wong et al. (2014) estimate the difference in public and plantations are shortening fallow cycles and affecting private NPV per hectare of planted area under maize the productivity, biodiversity, and ecosystem services and rubber (for two types of land management). Public from this land use system. Communities in the northern NPV is reduced by the environmental externalities that uplands actively cultivate fallow lands and use fallow are associated with maize and rubber production. For forests for food and non-timber products. Maize is example, public NPV excludes average health costs mostly grown in the mountainous regions and slopes, caused by environmental degradation (for example, and this expansion of maize and rubber plantations herbicide contamination), captured in terms of medical have come at the expense of old fallow and secondary costs and days of lost labor due to illness as reported forests. This is intensifying soil erosion. by farmers in the households’ surveys and translated into US$ per hectare. The costs of hospitalization and Maize plantations have dramatically expanded in medicines attributed to herbicide or pesticide related Lao PDR over the last 15 years. The average annual illness varied widely depending on the location and land increase in area under maize cultivation was about use, and the average cost is calculated at US$2.80/ 14,340 ha during the period from 2001 to 2016 ha. It is assumed that these costs rise by 5 percent (FAOSTAT 2018, figure 3.2). This number is very close per year after year 5 with rubber and maize plantations to the estimate of the annual agricultural expansion by when pesticide and herbicide use increase significantly. small landholders (Thompson 2015), who also reports In addition, public NPV excludes additional inputs that the annual increase in their agricultural expansion associated with soil erosion. The values are adjusted to is 14,700 ha. Maize is also a highly soil-depleting crop 2016 and corrected for NPV estimation (30 years, 5%/yr and farmers commonly report that harvests begin to discount rate). Table 4.15 presents the estimated annual decline drastically after year 5. Maize farming practice cost of agricultural land degradation in Lao PDR. is heavily dependent on chemical herbicides which, if used uncontrollably, leads to soil degradation, water The potential and now ongoing transition to a modern, contamination, and environmental health issues in production-oriented agricultural system using pesticides, livestock, fisheries and possible to farmers and local fertilizers and irrigation must be done carefully so as not communities. In addition, rubber plantations have to create other long-term problems. These problems expanded into uplands and hillslopes, further increasing potentially include other forms of soil degradation and soil erosion risks. environmental and human health problems. Table 4.15 Estimated Annual Cost of Agricultural Land Degradation in Lao PDR Per hectare, Total, US$, Share of GDP in 2017 US$ millions Soil degradation associated with maize 6,961 100 0.6% Soil degradation associated with rubber plantations 25–144 1 0.0% Total soil degradation cost 101 0.6% 99 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 4.5 Potential Cost of hydropower reservoirs and land lost to project structures Hydropower Development (for example, physical plant and transmission lines) may necessitate the relocation of households and villages. It has been shown that, in addition to moving from one 4.5.1 The Mekong River Dams: place to another, there may be other indirect impacts Social and Environmental Costs on resettled peoples such as loss of livelihood, loss of access to traditional food sources, loss of community and culture, negative health impacts from changes in The Mekong River dams that are crucial for future water water quality or food availability and increased social regulation in Lao PDR represent the single largest stress. Table 4.16 presents the displaced population threat to the local population, wetlands, fisheries, by each project. In total, about 39 thousand people and local livelihoods of the Lower Mekong. Table are estimated to be displaced during 15 years of 4.16 presents major mainstream hydropower plants construction time or about 2600 people annually. In in Lao PDR planned to be constructed by 2030. The the case of Nam Theun 2, (Laplante 2005) estimated total capacity of the 9 planned mainstream projects is this to be equivalent to an implicit per person one-time 9,370 MW which would produce about 47,000 GWh— resettlement expenditure of US$ 7,400 if adjusted equivalent to about 6 percent of forecast LMB power to 2017 with GDP deflator. Annual social cost of demand for 2030 (Intralawan et al., 2017). About 90 hydropower development will then amount to about US$ percent of the electricity from these projects would be 19 million in Lao PDR. exported to Thailand and Vietnam, which accounts for the bulk of LMB power demand. Lao PDR power demand Hydropower development will result in impacts to both is estimated at 16,000 GWh (Intralawan et al., 2017). the distribution and area of LMB wetlands primarily because of changes in flow and flooding. These MRC (2015a) presents major social and environmental impacts will affect, in turn, the quantity and quality of impacts of large-scale hydropower development in ecosystem services provided by those wetlands. The the Mekong River. Social costs for local population Mekong River and its associated wetlands (forests, are very important. The inundation of lands to create marshes, and grasslands that are flooded during the Table 4.16 Major Mainstream Hydropower Plants in Lao PDR Capital investment (US$, Destroyed freshwater Location Capacity (MW) Displaced population millions) wetlands, hectares Pak Beng 855 2,400 6,700 Luang Prabang 1,410 2,800 12,966 Xayaburi 1,285 3,700 2,130 Pak Lay 1,320 2,400 12,000 Sanakham 660 1,530 4,000 Pak Chom 1,080 2,700 535 Ban Khoum 1,870 4,400 700 Lat Sua 650 2,100 Don Sahong 240 720 66 Total 9,370 22,750 39,097 5,870 Sources: Intralawan et al. 2017; MRC 2015. 100 Chapter 4 rainy season) provide a wide range of ecosystem household income (FAO 2005). In Southern Lao PDR, services. These services are essential in sustaining up to 80 percent of rural households are involved in the the livelihood and well-being of the local people. The fisheries sector (FAO 2005). Lao PDR’s 945,000 ha of wetlands provide food, medicinal plants, honey, and rivers, water bodies and other natural and constructed insects, among other resources, which benefit local wetlands are found to provide fish and other aquatic people directly and nourish local spiritual and other animals worth an estimated US$101 million per year for cultural activities. Lao PDR has two Ramsar “Wetlands household subsistence, income and small-scale trade, of International Importance” comprising 14,760 hectares an average of US$106/ha. (World Bank 2019). In total, about 5,870 ha of wetlands are estimated (MRC 2015) to be lost during 15 years Approximately 70 per cent of all farming households, of construction time, or about 391 ha annually. The fish on a seasonal basis. Most of this fish catch is World Wildlife Fund report estimated the average value consumed within the household, but surpluses may of ecosystem services in the Lower Mekong Basin be sold, and this accounts for about a quarter of countries at US$1,639/ha/year for freshwater wetlands the total catch. About 48% of all animal protein in (Emerton 2013). However, a recent report estimated the Lao diets comes from inland fish and other aquatic average value of wetlands ecosystem services in the animals (World Bank 2019). Few data available on Lower Mekong Basin countries to be US$12,630/ha/yr the quantitative extent of fisheries in Lao PDR. Table (Mekong Region Futures Institute 2015). We estimated 4.17 estimates capture fish production in 2007 for the NPV (25 years, 6%/year discount rate) of ecosystem Mekong River Commission. These are the most recent services lost for each hectare of wetlands at US$21– data currently available. 162 thousand. The resultant average annual cost of wetlands lost is estimated to be US$8–63 million53. In the Mekong system, all its habitats, its tributaries, shallow lakes, wetlands and floodplains are important 4.5.2 Fisheries Abundance, for fish production. Additionally, it is thought that deep pools are critical refuges for feeding during the dry Catch, and Losses season and spawning and/or nursery habitats during the wet season for many migratory species (Box 4.2) Almost all the territory of Lao PDR is of enormous (Baran et al. 2007; Halls 2008; Poulsen et al. 2002). importance for its fishery resources and for its rich aquatic biodiversity (Phonvisay 2013). The Mekong and Sekong Food security at the household level derives principally rivers host more than 800 fish species that provide from forestry, livestock and fisheries, with freshwater fish income and food to the people living in the bordering being the principal source of animal protein for the rural provinces of Stung Treng and Kratie in Cambodia, and population. Estimates of an annual per capita consumption Champasak and Attapeu in Lao PDR (MRC 2017). vary from 15–57 kg/person/yr with an overall average for Diversity of fish species in the Mekong is approximately 3 most of the provinces at 25 kg/person/yr (an additional times higher than fish diversity of the Amazon River. The 4 kg/person/yr comes from other aquatic animals). Fish Mekong Fish Database of the Mekong River Commission consumption is even higher in the Central and Southern in 2003 listed 898 indigenous species and 26 exotic Lao PDR (Hortle 2007). Fish and aquatic organisms species in 2003 (World Bank 2019). provide about 48 percent of the total animal protein consumption in Lao PDR (Phonvisay 2013). Fisheries play an important role in rural livelihoods in virtually all regions of Lao PDR. Most fishing is carried Yet, the Mekong River faces threats such as out as part of a diverse rural livelihood strategy, unsustainable fishing practices with illegal fishing typically ranked as the second or third most important gear, accelerated infrastructure development with dam activity (after rice farming and animal husbandry) and construction, and climate change, which all lead to contributing on average about 20 percent to rural deterioration in fish habitats. 101 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Table 4.17 Structure of Capture Fish Production in 2007 Production Production Types of fisheries Water resource Total area (ha) (kg/ha/year) (tonnes) Mekong River and tributaries and five 304,704 70 21,329 northeast tributary rivers Large Reservoirs (hydropower): 96,030 8,405 Nam Ngum Reservoir 45,000 133 6,000 Nam Theun 2 Reservoir 45,000 33 1,500 Others: Houy Ho: 3,750 ha 6,030 150 905 Nam Leuk: 1,280 ha Nam Mang: 1,000 ha Capture fisheries Shallow lakes, small natural pools, peat 114,800 150 17,220 swamps, and wetlands Irrigation reservoirs and irrigation weirs 60,000 150 9,000 Rice fields, small streams, and floodplains: Wet-season rice fields 632,850 50 Dry-season irrigated rice fields 153,677 See note 31,643 Wet-season irrigated rice fields 344,820 See note 1,500 Flooded area 30,000 50 Total 1,238,384 – 89,097 Source: Phonvisay 2013. Note: It is assumed that irrigated rice fields produce few fish because of pesticide toxicity; more work is needed to test this as- sumption. Fisheries would benefit greatly from integrated pest management (IPM), which reduces pesticide use in rice fields. Dams and reservoirs block natural fish migration reduce the available habitat for fish and reduce the routes; dams also alter the amount, timing, and speed survival rates of eggs and juveniles. Changes in dry of flow of rivers; the river’s natural patterns of erosion season flows, and changes in the timing of the start and silt deposition; as well as water temperature and of the floods, can disrupt the spawning and migration water quality; all of which can have massive impacts on cues that trigger the changes in fish behavior needed aquatic life (Dudgeon 2011). Dams act as a barrier to for migration, reproduction and ultimately the survival of fish migrating upstream, and fish migrating downstream the species. generally have to pass through turbines, resulting in many of them being killed. Dams with large storage The lower Mekong Basin has three main upstream reservoirs affect river hydrology, including changes in migration systems (see Figure 4.15): a lower zone the onset of floods, the extent of the area flooded and below the Khone Falls, a zone upstream from the the duration of floods. Reduced transport of sediment Khone Falls (Don Sahong Dam) to Vientiane, and a into the floodplains reduces the nutrients available for zone upstream of Vientiane where the six-dam cascade aquatic plant growth and therefore fisheries productivity. is planned in Lao PDR (Poulsen et al. 2002). At the same time, smaller floods of shorter duration 102 Chapter 4 Figure 4.15 Location of Existing and Planned Dams in the Mekong Basin 1 3 2 4 Location of existing and planned dams. 5 China 7 6 8 1.Gongguoqiao 11. Xayaburi Vietnam 2. Xiaowan 12. PakLay Myanmar 3. Manwan 13. Sanakham 9 10 4. Dachaoshan 14. PakChim 5. Nuozhadu 15. BanKoum 11 Laos 6. Jinghon 16. LatSua 12 7. Ganlaba 17. Don Sahong 13 14 (at KhoneFalls) 8. Mansong 18. StungTren 9. Pak Beng Thailand 15 19. Sambor.Dams 10. LuangPrabang 16 Estimates of total annual catch aggregated 17 across all fish specie Cambodia 18 60 000 t 19 0.9–1.2 Mt 1.0–1.3 Mt N 400 km Source: http://www.mrcmekong.org/topics/sustainable-hydropower/ (accessed April 9, 2019). Note: Note that other estimates of catch (Barlow et al., 2008; MRCS, 2011a) differ slightly from these figures. A substantial number of commercially valuable Dams cause two main kinds of impacts requiring whitefish species migrate longer distances, as do all mitigation: (i) a barrier impact, where a dam blocks a five of the globally endangered Mekong fishes. There river or stream, and (ii) alterations to flow patterns, which is a considerable degree of interspecific variation in the then lead to other changes. Barriers to migrating fish can timing of up and downstream migration (or larval drift). sometimes be reduced with artificial fish passages. Only However, individual species migrations appear to be a few fish passes have been built in the LMB, so there triggered by particular components of the annual flood is a significant need to retrofit many dams as well as to cycle, such as rising water levels, with much of the design passage for new dams. Dams also drastically alter upstream migration in the early wet season and least flow patterns, and of course, upstream of a dam, water is activity in the middle of the dry season (MRC 2011a; impounded in a reservoir. This is an artificial environment Poulsen et al. 2002). Maintenance of the natural flood but may support fisheries, which can indirectly mitigate cycle and connectivity that allow unobstructed passage losses from the river fishery. Maintaining these reservoir along the river is essential for fish reproduction and hence fisheries also requires environmental management, such a productive fishery (Barlow et al. 2008; Dugan 2008). as artificial propagation and stocking of fish from nurseries. The impacts of large dams on fisheries are difficult to mitigate, so may require offsetting the impacts at other sites (Hortle and So Nam 2017). 103 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 At least 23 and probably >100 migratory fish species 4.5.3 Summary Costs of could be affected by the six Lao dams. Much of the Hydropower Development effect would be associated with construction of the first dam at Xayaburi, and the associated transition from prevailing fast and seasonally diverse flow regimes to Table 4.18 presents the estimated annual costs the limited water movement in a large reservoir. The of social, environmental and fishery externalities six-dam cascade would convert about 40 percent of associated with hydropower development in Lao PDR. the mainstream riverine habitat in the LMB into a series The resultant total annual cost is estimated to be US$91 of above dam lakes, representing a loss of 90 percent million per year (0.5 percent of GDP in 2017). The of the upper migration system (MRC 2011a). The potential hydropower development should be planned predicted fisheries loss to the basin-wide capture fishery and budgeted with mitigating interventions in mind. due to the reduction in the area accessible to fishes migrating upstream would be about 66,000 t or an Table 4.18 Estimated Annual Cost overall, basin-wide reduction of 6 percent of the annual of Externalities from Hydropower 2.5 Mt fishery yield (MRC 2011a). This conclusion Development in Lao PDR is supported by the recent (MRC 2015) report on the water development scenarios for Lao PDR, where Total, US$, Share of GDP in fish production is expected to be reduced by 38–52 millions 2017 thousand tonnes annually under different scenarios. We Social cost 19 0.11% will use this latter number to estimate the cost of fish Environmental cost 36 0.22% habitat destruction in Lao PDR. Fishery cost 36 0.21% Based on this fish catch reduction and the average Total cost 91 0.54% first-hand sale price adjusted to 2017 with the GDP deflator at US$1.58/kg (MRC 2003), an estimate of 38–52 thousand tonnes of fish in Lao PDR is worth about US$60–82 million per year. If the share of cost 4.6 Cost of Natural is 50 percent, then net benefit lost in fishery due to Disasters in Lao PDR hydropower development in Lao PDR is estimated at US$30–41 million per year (0.2–0.3 percent of GDP in 2017). Projected climate variation in several years of Monsoons are the most important cause of serious the 24-year projected time horizon, combined with the floods in the Mekong Basin, followed by the size, shape, loss of fish-based protein, is likely to create conditions and land use of the catchments, and by the drainage of acute levels of food insecurity in communities in Lao capacity of the corresponding streams. Additionally, PDR and Cambodia (MRC 2017a). The emerging trade- flood impacts are intensifying from climate change offs between hydropower and fisheries are substantial (see section 4.8); as well as by natural changes in and suggest a project-by-project assessment to identify river morphology; and anthropogenic processes such the most harmful and the most beneficial projects and as deforestation, and regulation. Floods intensify other choose the interventions that allow supporting the natural hazards, like hazards of landslides that are wellbeing of the Lao PDR’s rural population. especially dangerous on the eroded mountain slopes. Landslides’ most frequent consequence is the loss of life. Currently, there is very little information on losses from landslides in Lao PDR, although landslide susceptibility is high54. 104 Chapter 4 Lao PDR updates the UNISDR site DesInventar with 4.6.1 Annual Costs from Floods annual disaster data. The flood, storms, and flash flood annual events in Lao PDR, together with the directly Table 4.19 presents estimated expected average annual affected population are reflected in 4.16 and Figure cost that corresponds to annual losses as presented 4.17. Most of the floods occurred in the period 2007– in DesInventar. The reported information is deemed 2011. The maximum of the direct affected people was reliable starting 2001. The latest year available for the about 250 thousand in 2008. information on natural disasters is 2012. The mean and standard deviation for annual average physical losses Figure 4.16 Landslide Susceptibility in Lao PDR Source: https://resourcewatch.org/data/explore/dis_007-Landslide-Susceptibility-Map Figure 4.17 Flood Events and the Directly Affected Population in Lao PDR 250,000 500 450 200,000 400 350 150,000 300 Persons Events 250 100,000 200 150 50,000 100 50 0 0 2000 2008 2009 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Directly affected population Flood, storm events/year Source: UNISDR DesInventar. 105 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 and their cost equivalent is estimated in table 4.19. This method of estimating the cost of floods in Lao PDR Estimates for the average cost of house, education is based on short statistics from DesInventar. Another center, and hospital rebuilding in Lao PDR (US$10,000), approach to estimating an annual cost of floods is based cattle unit (US$500), nonfatal injury (US$950), and on a modeling of avoided risk of floods, while taking into rural road rebuilding (US$40/meter) are based on account infrastructure for flood protection in Lao PDR. various ADB reports. A damaged house is estimated at Such a system is designed to fully protect against small 0.1 of the house rebuilding, a directly affected person flooding events. However, it is very costly to protect is estimated to lose 1 month of an average GDP per against 50–year, 100-year, or even rarer catastrophic capita in Lao PDR in 2017, and an indirectly affected flood events, like the one that occurred in 2008. person—half of that. The average case of mortality and missing people are valued with the Value of Statistical There are models that allow for the estimation of Life (VSL) as in (Narain and Sal, 2016) that is estimated the cost of annual average flood events, given a at about US$175,000 per case in Lao PDR. The mean specific protection level achieved in the country. The annual cost of flooding in 2001–2012 is then estimated Aqueduct Global Flood Analyzer (WRI AGFA) is a to be US$86 million, with a standard deviation of the web-based interactive platform, which measures river estimate being US$155 million. flood impacts by urban damage, affected GDP, and affected population. The Analyzer allows estimation of The risk adjusted (RA) annual cost of floods is the current flood risk for Lao PDR taking into account estimated at US$148 million (0.9 percent of GDP in existing local flood protection levels (assumed at the 2017). Risk Adjusted (RA) value is calculated as a sum range of protection between 5- and 10-year events). of mean losses and an option value of flood losses in The tool also allows projection of future flood risk with the long term that currently is uncertain. Option Value is three climate and socioeconomic change scenarios. calculated as 0.4 of the standard deviation. Table 4.19 Mean Annual Losses from Floods and their Cost in Lao PDR Average in 2001–2012 Cost US$, millions SD* in 2001–2012 US$, millions Events 150 159 Deaths 13 2 13 2 Injured 3,523 3 12,165 12 Missing 3 0.5 8 1 Houses destroyed 1,415 14 3,338 33 Houses damaged 6,212 6 13,533 14 Directly affected 35,774 7 78,628 15 Indirectly affected 262,369 26 421,439 41 Education centers 29 0.3 59 1 Hospitals 4 0 10 0 Damages in crops (hectares) 102,906 26 136,361 34 Lost cattle 1,805 1 3,779 2 Damages in roads (meters) 4,383 0.2 7,253 0 Total 86 155 Note: *SD=standard deviation. 106 Chapter 4 River flood hazard in Lao PDR is presented in 4.18. In 10-year (10 percent probability of occurrence), 25-year most of the country river flood hazard is high. This means (4 percent probability of occurrence), 50-year (2 percent that potentially damaging and life-threatening river floods probability of occurrence), 100-year (1 percent probability are expected to occur at least once in the next 10 years. of occurrence), 250-year (0.4 percent probability of occurrence), 500-year (0.2 percent probability of The affected GDP for Lao PDR is calculated for floods of occurrence), and 1,000-year flood (0.1 percent probability the following magnitudes: 2-year (50 percent probability of of occurrence). The impact of a 2-year-flood event occurrence), 5-year (20 percent probability of occurrence), is estimated at zero. Scattered plot of risks that Figure 4.18 River Flood Risk in Lao PDR High Medium Low Very Low Source: http://thinkhazard.org/en/report/139-lao-peoples-democratic-republic/FL Figure 4.19 Flood Risk Exceedance Curve for Lao PDR 7 6 5 Billion US$ 4 3 2 1 0 0% 10% 20% 30% 40% 50% 107 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 corresponds to the event of each magnitude is a flood The Aqueduct Global Flood Analyzer also predicts the risk curve or exceedance probability-impact curve. The annual expected cost of floods under different climate risk curve for Lao PDR fitted using Aqueduct model is change scenarios by 2030. This projected value is presented in 4.19. significantly higher than the current estimate; because it takes into account both socioeconomic changes and Annual expected GDP loss due to floods in Lao PDR climate change in 15 years. With scenario B in place depends on the level of flood protection. We assume (severe climate change and current socioeconomic that, with existing local flood protection schemes and development trends) and using the same coefficients early warning systems, the country is protected from 5- to transform the annual expected affected GDP into to 10-year flood events. We can then use low and high the annual cost of floods in 2030, the estimate is values of annual remaining affected GDP and affected US$0.5–0.8 billion. Thus, annual cost of floods may population due to floods that are estimated from the increase 4 times by 2030. If the system of hydrological Aqueduct model (Table 4.20). installations in Mekong River will be constructed to achieve protection from 100-year events (the Mekong The analysis in this study calculates an annual cost that commission estimates US$119 million investment affects productive flows in the country. Thus, annual required (MRC 2017a) then remaining expected annual expected affected GDP that is actually lost reflects the flood cost is estimated at the level US$134 million, and economic cost associated with floods. Assume that the prevented annual cost at about US$330 million. 30 percent of the affected GDP is lost due to floods. Applying these losses to the annual expected affected 4.6.2 Annual Cost of Drought GDP, we then estimate that annual cost of floods in Lao PDR (with 5- to 10-year flood protection in place) is in the range US$112–211 million (0.66 percent to Another hazard in Lao PDR is droughts. If there 1.25 percent of GDP in 2017). Note that the annual is insufficient rainfall in the year, or very uneven expected cost of floods depends on the effective flood distribution of the rainfall, then drought sensitive areas protection in the country. The estimate takes into will be affected. For the period spanning from 2003 account probability and intensity of floods with different to 2013 the Lao PDR has already experienced 2 return periods in Lao PDR, as modeled by the Aqueduct years (2003 and 2007) with the devastating droughts Global Flood Analyzer (WRI AGFA 2018). The estimate (Mahachaleun and Phongpachith 2015). The CFSVA based on the DesInventar information is close to the estimated that 46 percent of the rural population lower bound of the Flood Analyzer based estimate. The (around 188,000 households) is vulnerable to drought. UNISDR Prevention Web 2018 reports the average Most of these households are in the lowlands, annual loss from floods in Lao PDR to be about US$220 especially in the Southern regions and in the provinces million, which is close to the upper bound of the Flood of Xayabury and Luang Prabang. Analyzer estimate. Table 4.20 Estimated Annual Expected Economic Cost of Floods—Indicators in Lao PDR High Low (with 5-year flood protection) (with 10-year flood protection) Annual expected affected GDP US$704 million US$374 million Annual expected affected population 214,000 114,000 Annual expected affected urban damage US$77 million US$49 million Source: Aqueduct Global Flood Analyzer http://floods.wri.org 108 Chapter 4 Table 4.21 Estimated Annual Cost of Natural Disasters in Lao PDR Low, US$, millions High, US$, millions Share (average) of GDP in 2017 Annual expected cost of floods 112 211 1% Annual cost of droughts 3 0.01% Total natural disasters cost 115 214 1.01% Since official information on droughts is not available, sandstone (68 percent), gold (23 percent), and silicon DesInventar provides self-reported estimates that are (20 percent) (Mining also contributes significantly to based on collection of information on annual crops the Lao GDP (Figure 4.2 and Figure 4.5) and mining affected by droughts. This estimate on a national level typically creates water quality problems and in the amounts to the annual average expected damage of Lao PDR can create additional pressure on its forests. US$3 million. This estimate is significantly lower than In 2014, Lao PDR produced a variety of mineral flood cost, but frequency of droughts could increase commodities, including barite, copper, gold, iron ore, with deforestation, altering of Mekong River flow, and lead, and silver (USGS 2017). There are a number of climate change, and so the cost of droughts. Table 4.21 undeveloped mineral resources, and the government presents the estimated annual cost of natural disasters recognized mining as a critical sector of the economy in Lao PDR. and continued to support the development of the sector by promoting domestic and foreign investment. in the mining sector, which comprised Employment
 4.7 Environmental Cost of about 0.3 percent of the total population of the country, was 15,381, which represented an increase of 3.8 Mining percent compared with 14,819 in 2013. The production of several mineral commodities increased significantly Mining also contributes significantly to the Lao GDP in 2014, such as clay (by 272 percent), barite (192 (Figure 4.2 and Figure 4.5) and mining typically creates percent), potash (144 percent), tin (50 percent), salt (43 water quality problems and in the Lao PDR can create percent), and silver (23 percent). On the other hand, additional pressure on its forests. In 2014, Lao PDR production decreased for limestone (by 80 percent), produced a variety of mineral commodities, including lignite (76 percent), sandstone (68 percent), gold (23 barite, copper, gold, iron ore, lead, and silver (USGS percent), and silicon (20 percent) (Table 4.22). 2017). There are a number of undeveloped mineral resources, and the government recognized mining The country’s total exports were valued at about $2.66 as a critical sector of the economy and continued to billion in 2014, which was an increase of 17.6 percent support the development of the sector by promoting compared with $2.26 billion in 2013. The value of all domestic and foreign investment. Employment
in the mineral commodity exports amounted to $1.29 billion mining sector, which comprised about 0.3 percent of (48 percent of total exports) and that of electricity the total population of the country, was 15,381, which exports amounted to $570 million (21.4 percent of total represented an increase of 3.8 percent compared with exports). Among the mineral commodities exported by 14,819 in 2013. The production of several mineral Lao PDR, copper was valued at $1.07 billion, or 40 commodities increased significantly in 2014, such as percent of total exports, and a 40 percent increase in clay (by 272 percent), barite (192 percent), potash (144 value compared with that of 2013. Gold was valued at percent), tin (50 percent), salt (43 percent), and silver $140 million, or 5.3 percent of total exports, which was (23 percent). On the other hand, production decreased about a 9 percent decrease compared with that of 2013 for limestone (by 80 percent), lignite (76 percent), (Bank of the Lao PDR 2014, cited in USGS 2014). 109 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Table 4.22 Production of Mineral Commodities Commodity (m tonnes) 2010 2011 2012 2013 2014 Barite 17,500 2,500 21,900 10,500 30,610 Cement 1,200,000 1,300,000 1,500,00 1,500,00 1,500,00 Clay 1,901,530 609,840 512,587 445,714 1,656,475 Copper content 67,806 59,897 63,285 64,885 71,155 Gold content (kg) 5,061 3,984 6,415 6,838 5,265 Iron Ore Gross 50,900 42,700 316,400 904,757 1,148,571 Lignite 501,622 511,700 578,068 403,925 99,144 Potash NA NA 42,798 86,499 210,983 Salt 13,421 23,395 11,980 6,099 8,706 Sandstone 3,695,838 339,331 1,214,668 1,211,899 391,186 Silicon 7,792 3,001 15,301 11,972 9,528 Silver 17,188 18,038 20,081 32,262 39,806 Tin 925 674 762 579 866 Source: USGS 2017. Lao PDR has three types of mining systems: medium- In Lao PDR and neighboring countries in the Mekong large mines with modern production systems, small delta floodplain, there are elevated concentrations of mines with obsolete machines, and traditional methods arsenic in drinking water tube wells, with a significant of artisanal gold mining without modern technology. percentage exceeding the WHO guideline of 10 μg/l Unregistered artisanal gold mines are probably leading (Chanpiwat et al. 2011). The lower Mekong delta to mercury being released to the watershed or directly generally features saline groundwater. However, in into the waters. Many thousands of rural people areas with lower salinities and where rural populations do this to supplement family income (World Bank started exploiting shallow groundwater as drinking 2006). Estimates of gold reserves are significant, so water in replacement of microbial-contaminated surface artisanal gold mining is likely to continue. There are water. In this groundwater, which is being used as also anecdotal reports of unregulated copper mines drinking water, 37 percent of the studied wells had creating serious water quality problems (Radio Free arsenic concentrations exceeding the WHO guidelines Asia 2018). The history of mining around the world (Buschmann et al. 2008). Table 4.23 shows examples has demonstrated that it often leads to serious metal of mining operations north of the capital, Vientiane, and pollution and acidic mine drainage into receiving waters. therefore the potential for water quality degradation. Mining operations almost always affect surrounding There is arsenic and other chemical contamination of water bodies. Acid mine drainage brings water of low pH surface water and drinking water sources. Chanpiwat et (high acidity) and high metal content into streams. This al. (2014) collected groundwater and hair samples from is true whenever mines are not properly regulated, and seven Lao provinces to determine the quantitative health best management practices are not implemented. impact of heavy metals through ingestion exposure. Contamination levels for arsenic (As; 46.0 percent) and barium (Ba; 16.2 percent) exceeded WHO guidelines, especially in Mekong River floodplains. 110 Chapter 4 Table 4.23 Major Mining Operations in Nam Ngum River Basin, 2013 Company Name Mineral type District Area (ha) Concession period (years) Phou Bia Mining Limited Copper, gold, silver Saysomboune 5,000.0 20 Qin Huang Dai Xin He Ferrous Saysomboune 15.0 20 Vangvieng Minerals Ferrous Kasy-Mat 220.1 10 Tangnay Ming Limited Copper Kasy 1.0 10 Bukane Limited Lead-Zinc Vangvieng 1.3 10 Lao First Pacific Limited Coal 17 Cement Lao Limited Coal Vangvieng 53.5 20 Cement Lao Limited (II) Limestone Vangvieng 0.7 30 Sino Hydro Mining Limited Potassium Xaythany/Pakngum 39.4 30 Lao-Chinese Potassium Mining Potassium Xaythany/Pakngum 78.0 30 Lao-Yong Zieng Ferrous Limited Ferrous Perk 26.6 7 Source: Kallio 2014. 4.7.1 Health Impact Attributed to methylmercury in Lao PDR. There is information about Artisanal Gold Mining an exposure of artisanal gold mining workers (AGM) to inorganic mercury that is linked to health risk in miners. Artisanal mining, traditional in rural communities, consists of panning for gold and precious stones Table 4.24 summarizes the health burden attributed and is largely undertaken to supplement agricultural to elementary inorganic mercury in artisanal gold and other rural income. Mercury contamination is an mining workers. Steckling et al. (2017) estimates YLD important negative consequence of artisanal small attributed to moderate cases of chronic metallic mercury gold mining that affects miners and water resources. vapor intoxication (CMMVI) (mortality and severe cases As Poulin and Gibb (2008) report, mercury could are not included in the analysis). Steckling et al.’s be absorbed in an inorganic and organic form as estimates are based on the annual prevalence rate of methylmercury. Inorganic mercury vapor inhalation CMMVI (24.2–29.9 percent) (Steckling et al. 2017), is the primary route of occupational exposure of gold and disability weights (DWs) for moderate cases (DW: miners, but mercury also can also be absorbed through 0.368, UI: 0.261–0.484) and severe cases (DW: 0.588, skin. The most common form of organic mercury is UI: 0.193–0.907) (Steckling et al. 2015). The DW of methylmercury, which is formed when mercury in moderate CMMVI, which is used in this analysis, is rivers is bio-transformed by aquatic microorganisms. based on the same disease description presented Methylmercury is present in most aquatic species and in table 4.25. Severe cases of CMMVI are excluded bio-accumulates in the aquatic food chain, which may because it is assumed that gold miners suffering from lead to high concentrations in fish, shellfish, and marine such severe health effects are no longer able to work mammals. Environmental hotspots can occur near and thus not included in the prevalence numbers. YLDs mining activities, where pollution of local water bodies are presented with UIs indicating the impact of the may result in elevated levels of methylmercury in fish. uncertainty of the DW. There is no information available about exposure to 111 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Table 4.24 Total Annual Cost Attributed to Exposure to Mercury of Miners in Lao PDR Low High Average %GDP US$, millions US$, millions US$, millions Mercury AGM 0.65 0.94 0.8 <0.1% Table 4.25 Disease Profiles of the Moderate and Severe Cases of Chronic Metallic Mercury Vapor Intoxication (CMMVI) Moderate case: Adults with high mercury body burden Severe case: Adults with a very high mercury body burden caused by chronic inhalation of metallic mercury vapor who caused by chronic inhalation of metallic mercury vapor who show several of the following symptoms: show several of the following symptoms: > Pronounced tremor in several parts of the body; severe > Slight tremor of fingers, hands, and limbs; coordination coordination problems; dysfunction of movement control; problems; dysfunction of movement control; weakness weakness > Reflexes abnormalities; peripheral nerve abnormalities; > Polyneuropathy sensory disturbances > Insomnia; hyperirritability; nervousness; fatigue; loss of > Sleep disorders; irritability; nervousness; fatigue; memory; difficulty in concentration; extreme shyness; memory impairment; difficulty in concentration; shyness; depression; loss of confidence; lack of self-control; social depressive mood; loss of confidence; lack of self-control avoidance > Renal effects like enzymuria, proteinuria, and glomerular > Abnormal renal function with enzymuria, high proteinuria, dysfunction, increased urinary excretion of N-acetyl-β- glomerular dysfunction, and rising urinary excretion of glucosaminidase (NAG) N-acetyl-β-glucosaminidase (NAG) > Loss of appetite; salivation > Anorexia; excessive salivation; gingivitis; stomatitis > Immunological changes > Immunological changes > Difficulty seeing Source: Adapted from Steckling et al. 2015. It is estimated that from 0.17 to 0.3 YLD is lost annually 4.8 Climate Change per each miner. Lost YLDs are valued at GDP per capita in Lao PDR to come up with the annual health Climate change will affect all natural, biological and burden attributed to mercury exposure. In total, about agricultural resources of Lao PDR. The Lao PDR is 3,000 miners in Lao PDR as in Steckling et al. (2017) located within the Southeast Asia Sub-region for the lose 262–378 healthy life years annually due to Fifth Climate Assessment Report of the International inorganic mercury exposure. The healthy life years lost Panel on Climate Change (IPCC 2014). According to are valued at GDP per capita in 2017. Health losses in the IPCC, warming trends and increasing temperature the mining sector due to mercury exposure then amount extremes have been observed with high confidence, to US$650–US$940 thousand. across most of the Asian region over the past century. There have been increasing numbers of warm days and decreasing numbers of cold days with the warming trend continuing. Precipitation trends including extremes are characterized by strong variability, with both increasing and decreasing trends observed in different parts and seasons of Asia. Water resources 112 Chapter 4 are important in Asia because of the massive population in rainfall, while others are drier; such variance occurs and these resources vary among regions and seasons. even within the same regions. Historical rainfall data However, there is low confidence in future precipitation indicate increasing trends of seasonal and annual projections at a sub-regional scale and thus in future rainfall in the country. These upward trends are freshwater availability in most parts of Asia. Population associated with the increased frequency of extreme growth and increasing demand arising from higher events related to heavy rainfall in the region. Using standards of living could worsen water security in many probability analysis, it was found that monthly rainfall parts in Asia and affect many people in the future. with an intensity of more than 600 mm has increased, Integrated water management strategies could help while intensities between 300–500 mm have declined adapt to climate change, including developing water- (Lao PDR MoNRE 2013). The warming climate has saving technologies, increasing water productivity, and already affected biodiversity at the species and water reuse (IPCC 2014). ecosystem levels, such as changing habitat conditions, and increasing vulnerability to pests and natural Rice production may be quite vulnerable to climate disasters (World Bank 2019). change. A range of general circulation models and emission scenarios show that higher temperatures Given that Lao PDR is particularly rich with water will lead to lower rice yields because of shorter resources, including the Mekong’s tributaries and growing periods. Several regions are already near the countless smaller water bodies, increasing intensity heat stress limits for rice. However, carbon dioxide of rainfall is of great concern. All Mekong tributaries fertilization may at least in part offset yield losses in rice contribute greatly to national macroeconomic and other crops. In addition, sea level rise will inundate development as well as livelihoods of local low-lying areas and will especially affect rice-growing communities, but they are vulnerable to floods and regions (IPCC 2014). While Lao PDR is not coastal, droughts. The Mekong’s 12 major tributaries in Lao some of its neighbors are, and Lao PDR is part of the PDR supply some 247 billion cubic meters of annual larger Mekong River system, which will be affected. surface runoff, representing 35 percent of Mekong water flowing into its alluvial basin (Lao PDR MoNRE 2013). 4.8.1 Climate Trends in Lao PDR WHO and UNFCCC (2015) and the World Bank Climate Portal identified the following climate trends in Given Lao PDR’s geographical location, its climate is Lao PDR:55 dominated by monsoon variability, with the southwest monsoon particularly contributing to high rainfall > Under a high emissions scenario, mean annual and high temperatures from May to September. The temperature is projected to rise by about 4.5C° on monsoon contributes to a seasonal cycle of rainfall average from 1990 to 2100. If emissions decrease where more than 70 percent occurs during the wet rapidly, the temperature rise is limited to about 1.4C°; season. In addition, the climate is driven by inter-annual rainfall variability that can be linked with extreme climate > Under a high emissions scenario, the number of events such as frequent floods, mostly in the south, and days of warm spells is projected to increase from droughts in the north (Lao PDR MoNRE 2013). less than 10 days in 1990 to about 170 days on average in 2100. If emissions decrease rapidly, Rainfall patterns indicate that some parts of the the days of warm spell are limited to about 50 on country tend to have relatively high rainfalls, including average; Phongsaly, Oudomxay, Bokeo, Xayabury, Vientiane, and Bolikhamxay. In contrast, relatively drier areas > Under a high emissions scenario, the number of days encompass some parts of Xayabury and Vientiane. In with very heavy precipitation (20 mm or more) could general, many parts of the country are relatively rich increase by about 7 days on average from 1990 to 113 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 2100, increasing the risk of floods. Some models Climate change has a wide range of increasingly less indicate increases outside the range of historical subtle impacts on biodiversity, including accelerated variability, implying even greater risk. If emissions ecosystem succession, raised average temperatures, decrease rapidly, the risk is much reduced. unseasonal frost on mountaintops, landslides and soil erosion, and flooding, amongst others. Observed > Under a high emissions scenario, the longest dry changes in climate have already affected biodiversity spell is indicated to increase by about 10 days on at the species and ecosystem levels, including average, from about 55 days on average in 1990, changing the timing of key life events, changing with continuing large year-to-year variability. If habitat conditions, and increasing vulnerability to emissions decrease rapidly, the increase is limited to pests and natural disasters. Through its contribution less than 1.5 days on average. to ecosystem services, the protection and sustainable use of the biodiversity play a key role in enabling > Maximum monthly flows in the Mekong Basin will Lao PDR to better adapt to climate change. With its increase by 35–41 percent, while minimum monthly sensitive mountainous terrain, and its large agrarian flows will drop by 17–24 percent by 2100, further population Lao PDR is particularly prone to climate exacerbating flood and drought risks. change and increasing climate risks are placing further pressure on the environment and biodiversity values, 4.8.2 Climate Hazards in Lao PDR including biodiversity. Floods, droughts, epidemics, and infestations occur regularly and, nationally, increasingly frequent climate-related hazards are anticipated Lao PDR is inherently vulnerable to climate and other because of climate change. natural hazards due to its geographic and geophysical characteristics. It has high mountains and hills (steep By maintaining high levels of biodiversity, the country slopes), considerable differences in elevation, narrow will be in a better position adapt to extreme weather catchment areas, enormous river, water and wind events that can be expected to increase in the future. forces (regular rain, raining season, river-flow dynamics, Local landraces have been shown to provide more floods, strong winds, typhoons) that are changing and resilience to climate shocks and more yields compared modulating the physical environment. Historically, to improved varieties in settings around the world. because of full and dense coverage by forest and other Genetic erosion, affected by land use change, is the protective vegetation, the landscape has exhibited main threat to landraces globally (World Bank 2019). considerable natural resilience to these influences, Climate risks in the Mekong Basin are aggravated by including climatic variability, occasional extreme a general forest cover reduction in the unique forest weather events and other major hazard events. Forests, of the Lao PDR. These forests are crucial for the in particular, have played an important role in protecting protection of the Mekong Basin. However, development mountain slopes, the banks of Lao’s wide network of in every sector of the economy contributes to this loss small and large rivers and other natural features from of forest cover and increases its vulnerability. Thomas the impacts of extreme weather events. The economic, (2015) analyzed major drivers of deforestation/forest biological, social—and climate related—values of degradation and estimated their relative contribution forests have long been recognized. The existing natural in the total forest cover loss/degradation in Lao PDR protective and regulatory functions of the forests as the (Table 4.26). country’s first line of defense against a range of natural hazards including climate risks are therefore a major economic asset of the country. 114 Chapter 4 With forest cover decreasing in the critical areas, estimated 48,200 annually affected population in 2010. climate hazards particularly floods, became apparently more frequent and have intensified in recent years. It Although not as frequent and devastating as floods, was found that about half of these hazards occurred drought hazards also have been more frequent and more between 1966 and 1992, a period of 26 years, while the intense in the last three decades. Between 1995 and other half occurred between 1992 and 2009, a period 2005, drought conditions were characterized by higher of only 17 years. Thus, the frequency of the climate and irregular increases in temperature. Abnormally high related hazards in Lao PDR increased from about once temperatures in 1996 and 1998 triggered the occurrence every two years before 1992 to every year or even twice of drought in various areas and ecosystems, including a year after 1992. Areas affected by floods also grew ponds, streams and lakes (Lao PDR MoNRE 2013). at an accelerated pace during the last two decades (1992–2009). Areas flooded before 2002 generally A recent thorough assessment of climate change in the were less than 1,200 km2. However, in 2009 alone LMB projected higher temperatures and reduced rainfall more than 2,500 km of land was flooded (Lao PDR 2 beyond suitability thresholds for many crops by 2050, MoNRE 2013; WHO & UNFCCC 2015). Climate and under several climate-change scenarios. The flowers of Health Country Profile—2015: Lao PDR) project that traditional rain-fed rice, for example, become sterile at by 2030, an additional 40,400 people may be at risk of temperatures higher than 35°C. This is in the context river floods annually as a result of climate change and of the IPCC’s (2014) general conclusion that rice 27,800 people due to socioeconomic change above the production is likely to decrease in this sub-region. Table 4.26 Drivers of Deforestation and their Contribution to the Total Annual Deforestation Sources Impact Annual rate of forest loss Remarks Includes commercial logging, illegal logging and Estimated between 0.97 Forest household consumption. The combined total represents Wood extraction to 1.57 million m3 per year degradation the primary driver of unsustainable deforestation and from 2002 to 2009 degradation and is a high GoL priority to control. Agricultural Commercial 34,200 ha/yr; Since 2007, GoL has placed several successive Deforestation expansion small-holder 14,700 ha/yr moratoriums on new concessions. GoL is prioritizing tree plantations; however, Industrial tree Deforestation 6,000 ha/yr deforestation occurs when plantations replace natural plantation forest. Pioneering Forest GoL continues to make efforts to control shifting shifting degradation and 57,300 ha/yr degraded cultivation. However, such areas regenerate quickly. cultivation deforestation The rate is likely to increase further as many more new Hydropower Deforestation 13,100 ha/yr hydropower projects are built. Only certain types of mining (for example, large-scale bauxite strip mining) are likely to cause extensive 5,100 ha/yr to Mining Deforestation deforestation, but the cumulative effect of thousands 14,100 ha/yr of smaller, local artisanal mines is a bigger driver of deforestation. Direct impact may be relatively small but indirect 1,000 ha/yr to Infrastructure Deforestation impact from increased accessibility (road construction, 2,000 ha/yr and so forth) is much higher. Source: Thomas 2015. 115 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 In MRC (2017b), three climate scenarios to 2040 hand, are reducing this health burden. Climate change examined climate change impacts on the Mekong negatively affects agricultural production and causes Basin. Each scenario had similar increases in breakdown in food systems. These disproportionally temperatures, but different changes in rainfall, which affect those most vulnerable people at risk to hunger is the main uncertainty for climate change forecasts in and can lead to food insecurity. Vulnerable groups risk this region. The three scenarios tested were designed further deterioration into food and nutrition crises if to cover the possible range of likely change based exposed to extreme climate events. WHO and UNFCCC on RCP4.5 (IPCC 2013). The analysis looked at food (2015) projections are as follows: security, including potential impacts to rice production. In different parts of Lao PDR, the study predicted only a > The Lao PDR population at risk of malaria will have a relatively small decrease in the rice surplus. The range greater decrease towards 2070 under a low-emissions in the change of rice surplus was from no impact to one scenario (300 thousand reduction of malaria scenario, which had an impact only of minus 7 percent compared to a high-emissions scenario annually). (MRC 2017b). These forecasts are quite different from what the IPCC (2014) expects regarding decreased rice > The mean relative dengue fever transmission production and are based on only one of the two lower is projected to increase under a high-emissions emission pathways from the four RCPs (IPCC 2013). scenario from the baseline of 0.55 to about 0.62 towards 2070. If global emissions decrease rapidly By 2050, maximum temperatures in many areas of the than dengue transmission could be limited to about LMB—such as Gia Lai in Vietnam’s Central Highlands— 0.57 by 2070; are projected to exceed this threshold during the growing season, significantly lowering rice yield if proper adaptation > Under a high-emissions scenario, heat-related measures are not taken (ICEM 2013). Modeling indicates deaths in the elderly (65+ years) are projected to that climate change will make land in the LMB less increase to about 72 deaths per 100,000 by 2080 suitable for rubber and coffee, to the likely detriment of compared to the estimated baseline of about 3 large rubber plantations in eastern Cambodia, southern deaths per 100,000 annually between 1961 and Lao PDR, and Vietnam’s Central Highlands. 1990. A rapid reduction in global emissions could limit heat-related deaths in the elderly to about 15 Worldwide, climate change and increased climate deaths per 100,000 in 2080. variability are also expected to have substantial impacts on forests and related ecosystem services. Climate 4.8.3 Adaptation to Climate change could have the following impact on forest ecosystem services in the LMB: (i) reduced plant and Change animal productivity, (ii) decline and loss of a range of non-timber forest products, (iii) reduced regulation of The Lao PDR National Green Growth Strategy is focused erosion and sedimentation, (iv) reduced regulation of on raising agricultural productivity to move away from flash flooding and landslides, and (v) reduced nutrient expansion of production areas into a gradual increase cycling (ICEM 2013). of productivity per hectare. This will require use of new infrastructure in an increasingly effective manner, such as Some of the most contagious infections are also irrigation infrastructure (Lao PDR NIER 2018). highly sensitive to temperature, precipitation, and humidity change. These aspects of climate have a The National Adaptation Action and Policies for strong influence on the life cycles of the vectors and Lao PDR (World Bank 2016) are drafted based on the infectious agents and influence the transmission information from submitted (Intended) Nationally of water and food-borne disease. Socioeconomic Determined Contributions ((I)NDCs). Five sectors development and health interventions, on the other are highly vulnerable to climate change and require 116 Chapter 4 priority adaptation measures: agriculture, forestry, (2014) illustrates the crucial uncertainties associated water resources, health, and urban development. The with future climate change in this region. Temperatures document aims to increase development planning and will steadily rise, although by an unpredictable scale the ability to adapt to the adverse impacts of climate amount. Evaporation rates will increase, affecting the change and foster climate resilience and low greenhouse overall hydrological system in some form. Long-term gas emissions development, in a manner that does not predictions for precipitation changes are extremely threaten sustainable development. Box 4.3 summarizes uncertain. It will be very difficult to predict whether and corresponding adaptation priorities in these sectors. how much worse flooding will be. Future damages will be difficult to predict. If floods and droughts are The cost of implementation of adaptation interventions more frequent or more severe, then the potential for is estimated at US$0.97 billion. About 70 percent of this agricultural losses will increase. cost is required to improve the resilience of agricultural production and agricultural productivity. This win-win How much worse might flooding and drought become, strategy addresses the needs of the poor, who are most and therefore what levels of infrastructure investment affected by climate change. Another 18 percent of the might be required? Managing the Mekong Basin system total cost is to be spent on sustainable urban planning will become a classic risk-management problem. where flood damage is relatively high and adaptation However, climate resilient sustainable development interventions will demonstrate higher efficiency. interventions will reduce cost of natural resource degradation, and simultaneously increase resilience to It is difficult to assess quantitatively effectiveness of climate change. This will require thoughtful and flexible adaptation interventions given high uncertainties of investment approaches to infrastructure development climate change scenarios. Figure 4.23 from the IPCC (Golub and Brody 2017). Figure 4.20 Observed and Simulated Variations in Past and Projected Future Annual Average Temperature (left) and Precipitation (right) over Land Areas Source: IPCC 2014. 117 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 Box 4.2 Adaptation Priorities in Lao PDR, Target Year 2020, Cost of Implementation US$0.97 billion Agriculture (climate smart agriculture)—Implementation cost US$709 million: > Improve appropriate resilient agricultural farming system practices and technologies, conservation of agricultural soil, animal health and disease outbreak monitoring and control, long term feed storage improvement, climate resilient crops, efficient water use cropping systems, short rotation cropping and maximize the use of indigenous climate resilient knowledge; > Develop and improve crops and animal diversification and resilience, especially in the risk, flood and drought areas; > Upgrade agricultural research and extension services. Forestry and LULUCF (sustainable forest management)—Implementation cost US$40.5 million: > Develop and enforce appropriate laws, regulations and implement guidelines for sustainable forest management; > Strengthen capacity in integrated land use planning, watershed, forest management, reduction of slash and burn practices to increase resilience of forests; > Promote integrated actions on watersheds, reservoir management, water storage for agroforestry, wildlife management, fisheries and tree varieties, prevention of drought; > Forest survey and allocation for sustainable management and rural development; > Strengthen the capacity of technical stuff and village forest volunteers; > Promote forest seed and seedling production for reforestation and forest restoration; > Research and select forest species resilient to pests, diseases, drought, and soil erosion. Health (health services and infrastructure)—Implementation Cost US$5 million: > Development of climate resilient health related infrastructure and facilities such as health care facilities, laboratories, rural water supply and sanitation systems; > Increase capacity on climate change impact assessments, estimating financial needs and implementing resilience plans in the health sector; > Improve education, research on climate change induced disease and health impacts, its treatment, monitoring and reporting; > Improve medical and food supplies, nutritional surveillance, drinking water improvement by better management of its supply network; > Increase public and vulnerable community awareness to climate change induced health risks and provide advisory and warnings, enhance first aid and promote self-help and access to health care services of communities; > Develop policies to increase the ability of vulnerable groups and the poor to access health services. Water (water infrastructure) – Implementation Cost US$44 million: > Strengthen information gathering, modeling and vulnerability assessment for climate change in priority river basins in Lao PDR; > Develop and implement reliable early warning systems, reporting and information dissemination services; 118 Chapter 4 Box 4.2 continued. Water (water infrastructure) – Implementation Cost US$44 million: > Strengthen the protection of watersheds to safeguards and moderate downstream flow during periods of high and low flow; > Study and promote conservation of wetlands as a part of climate resilient ecosystem-based approach; > Develop and strengthen standards and procedures to ensure the safety of dams and other water resource related infrastructure; > Design and build multi-purpose dam and reservoirs to ensure sufficient water supply in drought prone areas and seasons; > Construct/rehabilitate dykes and enhance riverbank protection and irrigation systems to increase climate resilience; > Increase awareness and technical capacity of stuff regarding climate change impact water resources and appropriate technologies, and wetland management; > Study water treatment that has ground water and ecosystem impacts. Urban (sustainable urban planning)—Implementation Cost US$190 million: > Conduct climate risk audits for key infrastructure services; > Ensure flood protection and drainage design for urban infrastructure; > Ensure that urban water supply systems have adequate design and operational standards for climate change impacts, including access to low flows in water sources, water treatment capability and flood protection; > Build storm surge/flood protection works for urban infrastructure. Source: Word Bank 2016. 4.9 Conclusions be resource-rich. When natural resources are depleted in the service of economic development, the poor lose Lao PDR is a country of great natural wealth, natural a significant share of their livelihoods and their food resources, and biodiversity. The majority of the Lao security is at risk. Food security risks and malnutrition PDR’s people base their livelihood on their homeland’s exacerbated by unsustainable exploitation practices natural capital. As the country modernizes and and climate change pose great challenges. The poor promotes economic development, there are serious bear most of the cost associated with natural resources problems of environmental degradation that have led degradation. The livelihoods of the rural poor include to quantifiable economic damages of US$822 million some combination of subsistence farming, fishing, annually, or 4.7 percent of GDP in 2017 US$. Table 4.27 hunting, and gathering. The rural poor depend heavily summarizes the estimated annual economic costs of on living resources that are health. Opportunities from environmental degradation across various sectors of the agricultural expansion are typically limited for most of Lao PDR economy. the rural poor. To assist the poor during developmental changes requires their access to, and adoption of Protected areas and other forest resources are an small-scale agroforestry, reforestation and forest important source of income for the poor. Most Mekong conservation projects, and biodiversity corridors. River Basin inhabitants are money-poor, but they can Additional fisheries mitigation to counter the negative 119 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 consequences of hydropower development is required. in village forest communities, as should research by These interventions can be specifically targeted to help relevant government research institutes, Lao universities, those who may lose out from the long-term economic and concerned NGOs. The national park and protected development and modernization in Lao PDR. area system could be strengthened by diversifying revenue into each reserve (World Bank 2019). Biodiversity protections are critical. Government decrees can further strengthen commitment to the Large-scale mining and hydropower developments nascent national park agenda and to the internationally can result in severe negative environmental and social recognized IUCN protected area categories. The MAF effects, even with implementation of standard control can clarify the roles at national, provincial, and district measures. Environmental sustainability of natural levels in supporting village forest management, as resource production will depend on the effective well as the role of private investments in socially and implementation of existing regulations. Environmental environmentally sustainable commercial plantations. sustainability must be an integral part of natural Continued support for Lao PDR MoNRE’s Department resource exploitation. While the legal framework is of Natural Resources and Environmental Policy to mostly adequate, there is a crucial need to strengthen strengthen the application of environmental and social the government’s capacity for implementing and impact assessment of infrastructure projects in and enforcing those laws (World Bank 2010). around protected areas could reduce the impact on biodiversity, ecosystem function, tourism development, To better manage the Lao PDR’s natural resources, this and local poverty reduction. Tourism concessions report recommends significant improvements to basic in PAs and other natural landscapes should provide natural resource and environmental data, information, clear steps and incentives for businesses to invest and analysis, including the following: and allow sustainable businesses to operate at a profit. The government should invest in capacity > Better and more-accurate maps of forests, both type building in protected area management, village forest and extent. management, and interagency law enforcement collaboration for mitigating illegal timber- and wildlife- > Better quantitative estimates of soil loss from related trade. Mainstreaming biodiversity into education erosion, not just in the uplands, but also especially and learning should be one of the country’s priorities. across all agricultural types of land and at the Outreach and environmental education on climate catchment level. change mitigation and adaptation should be promoted Table 4.27 Summary Costs of Environmental Degradation in the Lao PDR Total, US$, millions Share of GDP in 2017 Cost of deforestation 275 1.6% Cost of forest degradation 189 1.1% Cost of natural disasters 165 0.9% Soil degradation cost 101 0.6% Cost of hydropower development and fish habitat destruction 91 0.5% Cost of AGM exposure to mercury 0.8 <0.1% Total 822 4.7% 120 Chapter 4 > Resolving different estimates of agricultural land > Forecasting upstream and downstream hydrological uses, productivity, and yield. changes from hydropower development and changes to fisheries habitats. > Better information about the use of agricultural inputs, specifically chemical pesticides and > Developing regionalized probabilistic models of fertilizers. natural disaster risk management. > Developing a comprehensive and accessible water > Local/regional studies of climate that account for the quality monitoring system, especially downstream higher RCPs and not just the lower ones, and that from mining. account for the latest IPCC analyses. 4.10 Notes 43 This chapter was prepared by Michael Brody and Elena Strukova Golub and draws upon additional material by the same authors and John Parr. 44 The Gridded Population of the World, Version 4 (GPW v4), Population Density Adjusted to Match 2015 Revision of UN WPP Country Totals, produced by SEDAC, consists of estimates of human population density, based on counts consistent with national censuses and population registers with respect to relative spatial distribution but adjusted to match the 2015 revision of UN World Population Prospects country totals for the years 2000, 2005, 2010, 2015, and 2020. https://resourcewatch.org/data/explore/soc_031-Gridded-Population 45 The Vice Minister of Foreign Affairs, H.E. Mr. Thongphan Savanhphet, mentioned opportunities to learn about how other countries in the region, including Cambodia, have managed their natural capital. 46 Produced capital and urban land encompasses machinery, buildings, equipment, and residential and nonresidential urban land, measured at market prices (Lange et al. 2018). 47 Natural capital, including agricultural land and forests, is measured as the discounted sum of the value of the rents generated over the lifetime of the asset (Lange et al. 2018). 48 Human capital is measured as the discounted value of the lifetime earnings of a person participating in the labor force (Lange et al. 2018). 49 Net foreign assets are measured as the sum of a country’s external assets and liabilities (Lange et al. 2018). 50 The Deputy Director General of the Department of Forestry, Ministry of Agriculture and Forestry, Mr. Saysamone Phothisane, indicated that the GoL is trying to increase the forest cover to 70% of the national territory by 2020. 51 Deforestation estimates are based on Hansen, M. C., P. V. Potapov, R. Moore, M. Hancher, S. A. Turubanova, A. Tyukavina, D. Thau, S. V. Stehman, S. J. Goetz, T. R. Loveland, A. Kommareddy, A. Egorov, L. Chini, C. O. Justice, and J. R. G. Townshend. (2013) “High-Resolution Global Maps of 21st-Century Forest Cover Change.” Science 342 (November 15): 850–53. Data available from: http://earthenginepartners.appspot.com/science-2013-global-forest. 52 Lao PDR MAF 2005 target calls for the establishment of 500,000 ha of industrial tree plantations. Achieved tree cover of 300,000 ha when combined with the area of industrial tree plantation (ITP) applications of companies submitted to Ministry of Planning and Investment (MPI) would already be close to the FS2020 target for ITP (FRA 2015. Lao PDR). 53 The Deputy Minister of Energy and Mines, H.E. Mr. Thongphat Inthavong, indicated that his ministry is coordinating with line ministries to mitigate the impacts of hydropower and mining projects, and to implement measures to protect the environment. 54 http://thinkhazard.org/en/report/139-lao-peoples-democratic-republic/LS 55 https://climateknowledgeportal.worldbank.org/sites/default/files/2018-10/wb_gfdrr_climate_change_country_profile_for_ LAO_0.pdf 121 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 4 4.11 References ADB (Asian Development Bank). 2010. Greater Mekong Subregion Biodiversity Conservation Corridors (RRP REG 40253). Supplementary Appendix B: Valuation of Ecosystem Services of Biodiversity Conservation Corridors in Cambodia, Lao PDR and Viet Nam. Manila: Asian Development Bank. ———. 2017. Lao PDR Accelerating Structural Transformation for Inclusive Growth Country Diagnostic Study. 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WRI (World Resources Institute). 2018. Aqueduct Global Flood Analyzer (AGFA) (May). http://floods.wri.org/#/. 5 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic ENVIRONMENTAL PLANNING AND ENVIRONMENTAL IMPACT ASSESSMENT56 Chapter Overview The Lao People’s Democratic Republic adopted legally binding Environmental and Social Impact Assessment (ESIA) regulations that build on environmental provisions of the Constitution, the Environmental Protection Law (EPL), and other laws. The Department of Natural Resources and Environmental Policy (DNEP) of the Ministry of Natural Resources and Environment (MoNRE) is the central authority responsible for ESIA approvals, and the Department of Natural Resources and Environmental Monitoring (DNREM) is responsible for monitoring, compliance assistance, and oversight of ESIA-related projects in Lao PDR. Recent comparative analyses of ESIA capacity suggest that Lao PDR is showing leadership in reforms aimed at making ESIA an effective tool for managing project planning and environmental and social impacts. Several indicators place the Lao PDR ESIA regime among the most progressive in the region; however, there are still opportunities to improve information disclosure and public participation, and environmental management and monitoring. Taking advantage of these opportunities, an ESIA Decree enacted in January 2019 contains provisions to include cumulative and health impacts of investment projects. The 2019 Decree also has provisions aimed at enhancing disclosure of information and public participation, with increased emphasis on giving a voice to project-affected persons (PAPs) while respecting their culture, religion, traditional beliefs, and gender roles. By 2020, public consultations should be conducted for each phase of investment projects to ensure transparency, justice, and efficiency. Disclosure of information and public involvement are important parts of the project owner’s engagement and are essential to ensure the legitimacy of the ESIA and the acceptance of the project. Other important reforms that are being endorsed include provisions to clarify roles and responsibilities of MoNRE and other national, provincial, municipal, and local authorities and setting timelines for the review and approval of ESIA applications, as well as deadlines for preparation and submission of relevant documents. While DNEP has been assigned a leading role in implementing the ESIA system, a strong effort is underway to make sectoral ministries and provincial and local governments active in the ESIA oversight process. Under the new decree, the duties of the agencies responsible for the management and inspection of ESIA activities are clearly defined. 127 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 5.1 Introduction Environmental and Social Impact Assessment 120 days in advance and disseminated to the public (ESIA) is a now ubiquitous tool for environmental and (Wirth 1998, 66).60 Under the “Pelosi Amendment”, US social impact analysis for proposed projects around representatives on the IFIs’ boards of directors had to the world. The first ESIA program worldwide was promote the creation of “Environmental Departments” established by the United States Congress in the in all the multilateral development banks (Hicks et al. National Environmental Policy Act (NEPA) of 1969 2008). In October 1989, during the US Congressional (Park 2008). Section 102(2)(c) of NEPA established debates over environmental impacts of projects funded the basis for requiring US federal agencies to by IFIs, the World Bank released its environmental prepare an environmental impact statement for any assessment policy (Bowles and Kormos 1999). project that would “significantly affect” the quality of human environment, by assessing the environmental During the 1990s, other International Organizations consequences of development projects, analyzing and Development Banks (IODBs) adopted their ESIA alternatives, and ordering public disclosure of the report policies and practices. However, unlike NEPA, ESIA to affected groups (US CEQ 1997). policies and practices adopted by IODBs did not aim to open decision-making to public scrutiny, but to The main purpose of the US NEPA is to foster excellent mitigate the negative environmental impacts with the action by requiring that a process be undertaken to aim of ring-fencing IODB-financed projects. These “help public officials make decisions that are based policies are the basis of these organizations’ safeguards on understanding of environmental consequences, systems. The safeguard systems were developed and take actions that protect, restore, and enhance to address the general absence of corresponding the environment.”57 Thus, under NEPA, ESIA could be client safeguard systems (legal frameworks and described as a process to open up decision-making to implementing institutions). This general absence of public scrutiny (Ortolano et al. 1987). NEPA’s provisions safeguard systems produced instances of severe cover all US policies, regulations, and public laws, as adverse outcomes for the environment and project- well as recommendations or reports on proposals for affected peoples in IODB-supported projects (Rich legislation and other major federal actions 58 with the 1995). Environmental assessment practices are not potential to significantly affect the quality of the human uniform across IODBs; however, their approach to ESIA environment. 59 is similar in many ways, particularly with respect to ring-fencing internationally funded projects by using a During the 1980s, international nongovernmental methodology that mainly aims to “do no harm.” organizations (NGOs) pressured International Financial Institutions (IFIs) and their shareholders to make Many of the objectives and principles of the IODBs’ these organizations adopt environmental management environmental assessment policies are also reflected in policies (Keck and Sikkink 1998; Nielson and Tierney international conventions and legal instruments such as 2003; Wade 1997). In 1989, the US Congress passed the Aarhus Convention on Access to Information, Public the provision known as the “Pelosi Amendment,” Participation in Decision-Making and Access to Justice which, according to Bowles and Kormos (1999), played in Environmental Matters, and the Espoo Convention on an important role in the development of the World Environmental Impact Assessment in a Transboundary Bank’s ESIA policy. The amendment required the US Context. These conventions have been ratified by Executive Director to abstain from voting on proposed many governments. The “do no harm” approach to multilateral development bank loans with potentially many aspects of ESIA has been incorporated into best “significant” environmental impacts unless an ESIA practice guidance notes, such as those developed (including any relevant supporting documents such as by EIA practitioners, including the International environmental management plans, resettlement action Association for Impact Assessment and the Institute for plans, and so forth) had been made available at least Environmental Management and Assessment. 128 Chapter 5 Many governments around the world have adopted Instruction on ESIA 2013), and (ii) the Ministerial legally binding ESIA regulations similar to IODBs’ Instruction on the Process of Initial Environmental ESIA regulations, often with technical support from Examination of the Investment Projects and Activities these organizations. This is the case of most countries No 8029/MoNRE (MoNRE 2013a; 2013b). in Asia and in Latin America and the Caribbean. This is also the case in Lao PDR, where the ESIA system The Department of Natural Resources and has been two decades in the making. It dates back Environmental Policy (DNEP) of MoNRE is the central from requirements for ESIA preparation in the 1999 authority responsible for ESIA approvals, and the Environmental Protection Law, which were revised Department of Natural Resources and Environmental and updated in 2012, and then replaced by Lao PDR Monitoring (DNREM) is responsible for monitoring, Environmental Protection Law 041/NA. Lao PDR’s compliance assistance, and oversight of ESIA-related ESIA regime is similar to the ones in many developing projects in Lao PDR. To date, DNEP has focused on countries, and it is governed by a number of specific the review and approval of ESIA applications, with regulations that build on environmental provisions in comparatively less attention dedicated to other aspects Article 19 of the Constitution (2003), the EPL, and such as monitoring and oversight of approved projects. other laws. In addition to ESIA-preparation criteria, the DNEP issued an average of 22 ESIA approvals annually system includes provisions for an Initial Environmental between 2011 and 2015 (Figure 5.1). The number Examination (IEE) process, which, according to the of ESIAs under review and issued Environmental EPL, is the responsibility of the provinces (Earthrights Compliance Certificates (ECC), following approval of International 2016). an IEE at the provincial level or an ESIA at the ministry level, varies every year. However, there has been Within the EPL framework for environmental protection, a steady growth since 2012. In 2017, 30 ESIAs were ESIA requirements are contained in EPL Articles approved. Approved ESIAs include projects in the 17, 21, and 22. Under these articles, IEE and ESIA following sectors and areas: are designated new categories of tasks to prevent environmental damage. Article 19 details related > Energy (hydropower); provisions on Strategic Environmental Assessment. > Mining (active mines include copper, gold, barite, Soon after enacting the 2012 EPL, MoNRE issued two zinc, silver, lead, lignite, bauxite, iron, and potash); Ministerial Instructions to implement the provisions of EPL’s Articles 21 and 22: (i) Process of Environmental > Industrial production (for example, steel processing, and Social Impact Assessment of the Investment sulfuric-acid production, and pulp-paper production); Projects and Activities No 8030/MoNRE (Ministerial Figure 5.1 Number of ESIAs Certified by MoNRE per Year (2011–2015) 30 25 20 15 10 5 0 2011 2012 2013 2014 2015 129 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 > Infrastructure (roads, bridges, hotels, and airports); regulations to improve its effectiveness, including on information disclosure. MoNRE also aims to adopt > Agriculture and planted forests (for example, additional decrees to strengthen the quality and sugarcane and banana plantations, and commercial regulation of ESIAs, with provisions on screening, tree plantations); and scoping, public participation, information disclosure, assessment requirements, reviewing and approval of > Enterprises in special economic zones (SEZs). ESIA reports, and budgetary allocation for compliance monitoring. These elements are essential for resource The limited available data about ESIA deployment in efficiency and avoiding or minimizing negative social, Lao PDR suggest that ESIAs can be important tools in environmental, and climate impacts. educating stakeholders about the environmental and social implications of projects, both individually and To complete this task, MoNRE has cooperated closely cumulatively. Thus, ESIAs can provide stakeholder with the Office of the Prime Minister, the Ministry education that might otherwise be lacking. Educated of Planning and Investment (MPI), the Ministry of stakeholders potentially become problem solvers, Energy and Mines (MEM), the Ministry of Industry working with both the proponents of projects and the and Commerce (MoIC), the Ministry of Public Works authorities. Ideally, stakeholders could also act as and Transport (MPWT), the Ministry of Agriculture and regulators of developers and authorities and contribute Forestry (MAF), provincial and city governments, and to improve the overall capacity for ESIA preparation and other key stakeholders. These efforts have included a enforcement, although this is currently rare in practice clear emphasis on improving disclosure of information in Lao PDR. and public participation in the ESIA process, especially by potentially affected parties and disadvantaged In developing countries, the influence of public groups. This is a hallmark of best practice in ESIA participation or stakeholders’ concerns on the procedures worldwide. final outcome of ESIA has been found to be weak (Chompunth 2011; Naser 2012; Song and Glasson Policy reforms present an opportunity to improve ESIA 2010). The ultimate goal is to ensure that ESIAs procedures in Lao PDR, increasing ESIA effectiveness improve the environmental efficacy of projects to as both a planning and regulatory tool, in support of advance Lao PDR’s ambitious Green Growth Agenda. the current GG agenda. Such improvements have been deemed critical in most low- and middle-income countries, where self-assessment and accountability for 5.2 ESIA and the Green the performance of the primary government agencies are often lacking and are an impediment to successful ESIA Growth Agenda in Lao PDR implementation (Kolhoff, Driessen, and Runhaar 2018). As part of Lao PDR’s GG Development Policy MoNRE’s aspirations for improving ESIA processes Operations (GGDPO), the Lao PDR Ministry of come at a time when environmental and related social Natural Resources and Environment (MoNRE) has challenges are increasing in Lao PDR. According to led the development of new policies and implementing the 2020 Environmental Performance Index (EPI), Lao regulations to strengthen the application of ESIA PDR ranks 130th of 180 countries on 32 performance legislation by improving coordination among key indicators across 11 issue categories covering agencies during the review, approval, and monitoring environmental health and ecosystem vitality (Yale of ESIAs of investment projects, as well as through Center for Environmental Law & Policy, Columbia improved disclosure of information to the public. Center for International Earth Science Information The GoL has carried out a comprehensive review Network, and World Economic Forum 2020) (Table 5.1). of the existing ESIA system and complementing 130 Chapter 5 Table 5.1 Environmental Performance Index Rankings for Selected Countries, 2020 Position of Position of Position of Position of leader Indicator World leader Lao PDR Cambodia Vietnam in Southeast Asia Overall EPI ranking 130 139 141 Denmark Singapore (39) Environmental health 132 118 98 Finland Singapore (22) Air quality 135 125 115 Finland Singapore (24) Heavy metals 146 145 92 Denmark Singapore (19) Ecosystem vitality 126 145 176 Denmark Indonesia (98) Biodivesity & Habitat 62 92 150 Botswana Laos (62) Bahrain, Iceland, Malta, Micronesia, São Tomé Ecosystem services 165 163 166 Brunei (89) and Principe, and United Arab Emirates Denmark, Finland, Water resources 134 134 119 Netherlands, Singapore, Singapore (1) and Sweden Climate change 155 154 155 Denmark Indonesia (78) Source: Yale Center for Environmental Law & Policy, Columbia Center for International Earth Science Information Network, and World Economic Forum 2020. At the same time, Lao PDR is asserting regional and increase their productivity. Particularly in an leadership on environmental and social justice topics economy—such as Lao PDR—that is heavily based that will be supported by its strengthened ESIA system. on natural resources, the successful incorporation of For example, as host of the 28 th and 29 th ASEAN environmental factors into a country’s competitiveness Summits, Lao PDR oversaw the development of the structure makes the business climate more attractive ASEAN Plus Three (Japan, People’s Republic of to foreign investors, orients agriculture and industrial China, and Republic of Korea) Leaders’ Statement sectors toward higher market values, reduces the on Promoting Sustainable Development Cooperation pressure of productive sectors on the natural resources (Vientiane, September 7, 2016). Among the base, and offers new business opportunities in global commitments in that ASEAN Leaders’ Statement is markets (Lopez-Claros et al. 2005). rendering concerted efforts to fulfill the 17 Sustainable Development Goals (SDGs) over the next decades as In another important boost to business confidence, part of the ASEAN Plus Three cooperation framework. ESIA reforms may improve the reputation of Lao PDR Several SDGs, including sustainable production government entities working with project proponents and consumption, are supported by effective ESIA and the public as reliable and predictable regulators. processes in Lao PDR. ESIA reforms may also contribute to improving the competitiveness of the Lao PDR economy by Improved application of the ESIA system in Lao PDR increasing project proponents’ confidence in ESIA as is expected to help green growth by minimizing a project-planning tool, as well as informing project the environmental impacts of investment projects. planners about compliance costs for environmental Adopting strict and stable environmental procedures mitigation measures as an integral component for ESIA, and enforcing them in a clear and transparent of project operations. Progress in this arena will manner, has improved the business climate in the most likely improve economic prospects in the country, competitive countries. A country’s business climate particularly if these reforms enhance private-sector is crucial to enabling businesses to operate optimally confidence in the consistency of government actors. 131 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 According to the 2017–2018 World Economic Forum information disclosure and public participation, and Global Competitiveness Index, lack of confidence in environmental management and monitoring. Lack of government institutions is among several factors that transparency in the ESIA system allows opportunities contribute to Lao PDR’s low ranking at 98 th of 137 for unqualified and potentially corrupt actors to profit countries (a decline from Lao PDR’s ranking at 93rd in from the ESIA preparation process, thereby subverting 2016–2017) in the WEF survey (Schwab 2017). its environmental and social objectives to improve project design and implementation. In addition, project Recent comparative analyses of ESIA capacity in Lao developers are responsible for hiring the consultants PDR and other Asian countries suggest that Lao PDR who prepare the ESIA, resulting in a clear conflict of is showing leadership in reforms aimed at making ESIA interests. Developers’ main interests are meeting the an effective tool for project planning and for managing bare minimum legal requirements and overcoming any environmental and social impacts. In the 2016 report potential objections to the project. Consultants thus Strengthening ESIA in Asia, the Institute for Global have incentives to focus on these objectives, rather than Environmental Strategies (IGES) (see Sano et al. on conducting rigorous environmental studies. In many 2016) makes three recommendations for improving countries, ESIA has become the main environmental ESIA as a planning tool: innovations aimed at effective management tool and is often the only instrument used collaboration among ministries, better training and to address complex environmental problems, serving capacity development, and effective compliance as a de facto substitute for regulations in key areas, mechanisms. In all three areas, the IGES study praises such as pollution control, biodiversity conservation, and innovations in Lao PDR, including the development of effective land-use planning (Acerbi et al. 2014). This is a comprehensive online project-management database also a risk in Lao PDR. The following sections discuss between MoNRE and MPI, and training on ESIA these risks in the context of the most recent ESIA implementation for both national and local officials. In legislation and current ESIA practice in Lao PDR. the challenging arena of designing effective compliance mechanisms, Lao PDR is singled out for three of four noteworthy initiatives in Asia (Sano et al. 2016, vi): 5.3 Available Data innovative approaches to address this issue include on Environmental incorporation of the ESMMP [Environmental and Social Management and Monitoring Plan] as a Assessment in Lao PDR part of the concession agreement for the project (Lao PDR), regular review of the environmental This section summarizes relevant information shared by compliance certificate (Lao PDR), review of DNEP and MoNRE’s DNREM and provides statistics on monitoring reports by an external institution (Korea), ESIA and environmental monitoring up to December 2018. and establishment of independent monitoring bodies (Lao PDR). Environmental Assessment Yet, despite indicators that reforms in Lao PDR may Table 5.2 shows the number of projects by sector place its ESIA regime among the most progressive in with Environmental Compliance Certificates (ECCs) the region, recent international scrutiny of the ESIA according to the category of assessment and project regime in Lao PDR found several problems with the status. As of the end of 2018, there were 300 projects in current system. For example, Sano et al. (2016); the ESIA database, with ECCs covering seven different Wayakone and Makoto (2012); and Wayakone, Makoto, economic sectors. Energy projects make up just over and Harashina (2013) identify major challenges and a quarter (27%) of all projects listed that require some needs regarding implementation of the ESIA system type of environmental assessment, and over 80% of in Lao PDR with respect to the quality of ESIA, energy projects are considered to require an ESIA. The 132 Chapter 5 table also shows that 84 projects (28% of all projects) Figure 5.2 and Figure 5.3 provide a breakdown have obtained an ECC without having conducted an by sector of projects in the preconstruction and ESIA or Environmental and Social Management and construction phases, respectively. Energy and Monitoring Plan (ESMMP). This includes the majority mining projects together account for the majority of of construction, roads, and bridge-building projects, projects with ECCs at the preconstruction (83%) and airport projects, and special economic zones (SEZs). construction (84%) phases of project development. According to the statistics, four projects with ECCs have been cancelled, and a further 39 projects are not yet Agriculture and forestry projects account for more than operational. a quarter (27%) of projects with ECCs in the operations phase of project development, followed by energy Table 5.3 shows projects with ECCs according to (22%), mining (18%), and transmission lines (Figure their current phase of operations. Almost half of 5.4). Regarding projects in the closure phase, energy the projects with ECCs (46%) are currently in the and road/bridge projects make up the vast majority operational phase, and 28% have already been (84%). Road and bridge projects could be integrated decommissioned. Approximately one-third of the into either operation or closure categories when they projects with ECCs are either in the preconstruction are in use, so they have been classified as being in an or construction phase of development. unidentified phase (Figure 5.5). Table 5.2 Statistics on ESIA by Economic Sector in 2018 Type of Assessment* Projects with Cancelled Nonoperational Number of Sector ECC but no Projects Projects with Projects with ECC IEE ESIA ESMMP SIA/ESMMP with ECC ECC 1. Energy 80 15 65 – 12 2 20 2. Transmission lines 27 18 9 – 9 – 1 3. Old industry 19 1 15 3 2 – 3 3. New industry 2 – 1 1 – – 0 4. Old mining 49 4 40 5 – 2 11 4. New mining 10 – 8 2 – – 0 5. Road-bridge 29 26 3 – 27 – 0 6. Building, airport, 34 20 14 – 26 – 0 special economic zones 7. Agriculture-forestry 50 32 17 1 8 – 4 Total 300 116 172 12 84 4 39 Source: Department of Natural Resources and Environmental Policy, MoNRE 2019. Note: * Type of assessment required. As per the next column, 84 projects have been granted an ECC without having conducted ESIA or ESMMP. Table 5.3 Projects with ECCs According to their Phase of Operations Project Phase Preconstruction Construction Operation Closure / Unidentified Total 47 51 139 83 Source: Department of Natural Resources and Environmental Policy, MoNRE 2019. 133 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 Figure 5.2 Projects with ECCs at the Figure 5.3 Projects with ECCs at the Pre-Construction Phase of Operations Construction Phase of Operations Transmission lines Transmission lines 6% 2% Old industry Old industry 6% 4% New industry 4% Energy Energy 43% 55% Old mining Old mining 28% 25% Agriculture-forestry 9% Road bridge New mining 4% 16% Figure 5.4 Projects with ECCs in Figure 5.5 Projects with ECCs in Closure the Operations Phase of Project or Unidentified Phases Development Energy Transmission lines 3% Energy 16% Agriculture-forestry 22% 13% Road bridge 43% Old industry 10% New industry 1% Old mining 17% Agriculture-forestry 27% New mining Building airport, Building airport, 1% special economic zones special economic 41% zones 6% 134 Chapter 5 Environmental Monitoring Figure 5.6 and Figure 5.7 provide data on GoL monitoring of projects in the period January to The information provided by the DNREM in Table 5.4 November 2018. According to the data, a total of 50 shows that 173 of the 300 projects in their database monitoring missions were conducted over that period have committed to external monitoring by MoNRE including 27 regular monitoring activities, 17 emergency and line agencies at the provincial and district levels. monitoring events, 2 monitoring activities related to Of those 173 projects, 88 have already provided the biomass removal in hydropower dam inundation areas, corresponding budget to MoNRE, and monitoring is and 4 monitoring events as part of the ESIA review being conducted on a regular basis. The remaining process. Mining and industry accounted for 48% of all 85 projects had not provided budget as of May 2019. monitoring activities, including 8 out of 17 emergency MoNRE provided two reasons to explain why the monitoring events and all ESIA review monitoring. other 127 projects were not being monitored. The first was that many projects are not considered to require Regarding budget sources for monitoring, the majority ongoing monitoring after the construction phase (for of funding is sourced by the company either directly example, road/bridge projects). The second was that (72%) or via bank account (14%). The World Bank Lao some projects were developed long before the ESIA Environmental and Social Project (LENS) also provided process was strengthened, and a GoL monitoring funds to monitor one energy (regular monitoring) and one budget was not set as a requirement for the ECC at the mining project (emergency monitoring). Three projects time of project development. were subjected to emergency monitoring utilizing funding from the Environmental Protection Fund. Table 5.4 Projects with ECCs and a Commitment to GOL Environmental Monitoring Projects have ECC, monitoring budget for Projects have ECC, monitoring budget Sector GOL, and regular monitoring conducted committed but not provided 1. Energy 27 19 2. Transmission lines 2 15 3. Old industry 7 7 3. New industry 0 2 4. Old mining 25 11 4. New mining 0 10 5. Road-bridge 0 2 Building, airport, special 6.  4 4 economic zones 7. Agriculture-forestry 23 15 Total 88 85 Source: Department of Natural Resources and Environmental Monitoring, MoNRE 2019. 135 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 Figure 5.6 GoL Environmental Monitoring by Type and Sector in 2018 15 12 Number of Projects 9 6 3 0 Regular Emergency Biomass removal ESIA Review Energy and Infrastructure Monitoring Projects Mining and Industry Monitoring Projects General Environmental Monitoring Figure 5.7 GoL Environmental Monitoring by Budget Source and Sector in 2018 12 9 Number of Projects 6 3 0 ESMMP / EMP via ESMMP / EMP via LENS Project Environmental Bank Account Company Protection Fund Energy and Infrastructure Monitoring Projects Mining and Industry Monitoring Projects General Environmental Monitoring 136 Chapter 5 5.4 Role of ESIA in the Lao PDR, given the importance of the new green growth Lao PDR Environmental agenda, it is reasonable to expect more of MoNRE and other mandated agencies than simple fulfillment Management Framework of the steps of ESIA compliance. Recently enacted investment-oriented laws in Lao PDR explicitly require 5.4.1 Mandated Agencies adherence to environmental protection obligations, broadening the legal foundation for ESIA requirements on project proponents. Most noteworthy in this regard is MoNRE’s Department of Natural Resources and the 2016 Law on Investment Promotion, Article 74. Environmental Policy (DNREP) is responsible for the overall implementation and oversight of the 5.4.2 Screening ESIA system in Lao PDR. MoNRE’s prominent role is associated with the conception of ESIA as an environmental management tool. Under this conception, Screening refers to the process “to determine whether the environmental authority acts as an evaluator or not a proposal should be subject to EIA and, if so, that assesses whether the proposed action meets at what level of detail” (IAIA 1999). An effective and administrative criteria to obtain the environmental efficient screening process allows decision-makers to certificate (EC). identify the actions that have the potential to generate significant environmental impacts and use their limited However, a strong effort is underway to make sectoral resources to carry out ESIAs of adequate depth for such ministries and provincial and local governments projects. active in the ESIA preparation and oversight process. Thus, while DNEP has been assigned a leading role In contrast, an ineffective and inefficient screening in drafting the new Environmental and Social Impact process typically results in a massive number of actions Assessment (ESIA) Decree, this effort is in close being subject to an ESIA, with each type of action cooperation with the Office of the Prime Minister, the being subject to a similar ESIA regardless of different Ministry of Planning and Investment (MPI), the Ministry potential impacts. Consequently, the authority must of Energy and Mines (MEM), the Ministry of Industry stretch its limited resources to carry out a myriad of and Commerce (MoIC), the Ministry of Public Works ESIAs, resulting in lengthy delays in the issuance and Transport (MPWT), the Ministry of Agriculture of the permits and licenses needed to undertake and Forestry (MAF), the province/city, and other key the action. In this context, the usefulness of ESIA is stakeholders. reduced substantially, since it becomes a bureaucratic hurdle for the development of projects with limited or Under the new decree, the duties of the agencies negligible environmental impacts, while simultaneously responsible for the management and inspection of ESIA failing to address with adequate depth the significant activities are clearly defined. These organizations are environmental impacts of other actions. not limited to MoNRE, but include the provincial and district offices of natural resources and environment. The screening procedure most commonly used around the world are lists that define the types of projects It is important to move beyond measuring the success that require an ESIA. Evidence from other countries of mandated agencies according to their procedural suggests that lists are often too rigid, which limits their fulfillment of ESIA requirements and look at indexes ability to filter out the actions that would not generate of the substantive impact of the ESIA exercise on the significant environmental effects, and thus, a wide range environmental and social footprint of new projects. In of actions must complete the analysis. 137 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 In the case of Lao PDR, the new ESIA Decree classifies 5.4.3 Scoping investment projects into the following groups: Scoping is the stage of the ESIA process in which the > Group 1: investment projects and activities seen as issues and impacts likely to be important are identified causing less-severe or not-severe impacts on social and, based on those issues and impacts, the Terms of and natural environment and therefore requiring an Reference (TORs) for the ESIA are established (IAIA IEE; 1999). Whereas the screening mechanism is intended to help separate the actions likely to cause significant > Group 2: investment projects and activities seen effect from those that are not, the scoping phase aims as causing huge or severe impacts on social and to distinguish the impacts of a specific action likely to natural environment and therefore requiring an be significant from those that are not. Thus, the scoping ESIA. phase is critical for the ESIA process’s effectiveness and efficiency, since scoping enables the lead agency, the Projects estimated to have impacts on health also action developer, and the rest of the stakeholders to center require a health impact assessment. their resources where they are most needed, while limiting the attention that is given to nonsignificant issues. MoNRE, in coordination with concerned ministries and local administration agencies, determines Open scoping processes provide an opportunity for the types and sizes of projects that fall into each groups that may be affected by a proposed action to category. The 2013 Ministerial Agreement on the express their concerns and to ensure that the ESIA Endorsement and Promulgation of List of Investment duly considers the impacts that may be more significant Projects and Activities Requiring for Conducting the for them. In contrast, when public participation is not Initial Environmental Examination or Environmental contemplated in the scoping processes, the ESIA may and Social Impact Assessment lists the projects and focus only on the impacts that the action’s proponent or activities that are in Group 1 and Group 2, based on the responsible officials consider relevant. defined thresholds. If a project is not on the list, the natural resources and environment sector61 will conduct In the case of Lao PDR, the 2019 ESIA Decree gives the screening process and determine whether an the project developer the responsibility of determining environmental impact assessment is necessary. the scope of assessment and works prior to preparation of the ESIA. The scope of the project must be In addition, ESIA is required for all projects (irrespective consistent with the regulations issued by MoNRE and of type and size) that include resettlement and determined by an environmental service provider that compensation in accordance with the Prime Minister’s is duly licensed. MoNRE, in consultation with other Decree on Compensation and Resettlement of People concerned ministries and sectoral agencies, will review Affected by Development Projects No 192/PM. An ESIA and approve the scoping report within 15 working days is also required if the planned project is in a socially from the date of receiving the documents from the or environmentally valuable area, such as a National project owner. Protected Area or National Protection Forest—areas that also require project approvals by the Lao PDR The project owner is then required to prepare the National Assembly. comprehensive ESIA report and an Environmental and Social Management and Monitoring Plan (ESMMP). The ESIA report and the ESMMP are reviewed by MoNRE in conjunction with specialists from provincial and district offices. MoNRE collaborates with the project owner to convene consultation meetings with relevant stakeholders, including project-affected persons (PAPs). 138 Chapter 5 5.4.4 Preparation and Review as well as to potentially affected stakeholders. MoNRE of the ESIA Report and is then responsible for compiling all comments received Environmental and Social during the technical and consultation meetings and sending them to the project owner, which is then Management and Monitoring responsible for addressing the comments in a revised Plan (ESMMP) ESIA report. ESIA systems worldwide vary in their provisions MoNRE is then responsible for approving or rejecting regarding who is responsible for selecting and hiring the ESIA report. Reasons for rejecting the report the consultants that will prepare the required ESIA include the risk that the project would result in report and other documents (Wayakone, Makoto, substantial, unavoidable, and unremedied social and and Harashina 2013). In Lao PDR, as in most low- environmental impacts, or that the proposed project and middle-income countries, project owners are or activity would not be consistent with the national responsible for selecting and hiring duly-licensed environmental policies or strategic plans. As in many consultants. This might result in conflicts of interest, other countries, there is arguably significant discretion because developers are mainly concerned with in the government official that ultimately evaluates obtaining the ECC needed to develop the project. Given the ESIA. For instance, different officials might have MoNRE’s limited current capacity to monitor the ESIA different interpretations about whether a specific project process, it is largely up to the project owner to take the is consistent with the national environmental policy. This lead in the ESIA process. Yet, the project owner has challenge is exacerbated by the lack of transparency incentives to hire a consultant that is not necessarily in the process, which means that project developers interested in enhancing the authority’s decision-making and PAPs generally have little information about the process, but instead in meeting the minimum legal rationale supporting the authority’s decision. requirements set by the authority and overcoming any potential objections to the project. This does not The Ministerial Instruction contemplates a specific necessarily mean that consultants generally aim to procedure for evaluating projects that MoNRE considers deceive the authority, but that they lack incentives to Complicated Investment Projects and Activities. For include in their documents information that may be these projects, MoNRE must establish a technical relevant for the authority if such information may result expert committee consisting of experts and consultants in denial of the license or the setting of additional not involved in the project or activity. The committee conditions for the approval of the proposed action. provides comments to help MoNRE evaluate the proposed project. The 2019 ESIA states that foreign As in many other countries, Lao PDR’s ESIA system specialists may be hired to assist in reviewing relevant assigns the environmental authority (MoNRE) the documents. responsibility for evaluating the ESIA report and associated documents, while government agencies Most ESIA systems worldwide include a follow-up from other sectors and levels of government have an mechanism that helps authorities to ensure that the opportunity to provide comments on relevant projects, at conditions for approval are fulfilled, to monitor whether least as intended under current regulations (Wayakone the action’s environmental impacts are similar to those and Makoto 2012; Wayakone, Makoto, and Harashina predicted by the ESIA, to assess whether the selected 2013). In Lao PDR, MoNRE must coordinate with the mitigation measures are effective, and to generate project owner to organize technical and consultation information to improve other ESIAs. In Lao PDR, meetings at the provincial and central levels during the project developer is also required to prepare an the review period. In these meetings, the developer Environmental and Social Management and Monitoring has an opportunity to present the ESIA report to Plan (ESMMP) to be submitted (along with any other representatives from all relevant government agencies, required reports such as resettlement action plans, 139 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 gender and ethnic plans, public consultation and issued, mainly due to lack of resources. In Lao disclosure plans) as a separate report along with the PDR, this problem persists despite a requirement ESIA report. The ESMMP must be updated every two to that all ESMMPs include a budget for periodic GoL five years, in consultation with MoNRE. The reviewing monitoring by district, provincial, and central authorities. of the ESMMP has two phases: the first review is done Project developers or their consultants are generally along with the ESIA, while the second review can be responsible for evaluating and reporting on the done as the project changes and develops and may implementation of ESMMP and similar instruments. require development of Construction ESMMPs and Site- Specific ESMMPs later in the project. 5.4.5 Information Disclosure Once MoNRE has approved the ESIA report and the ESMMP, the project owner is granted an The EPL includes a general provision regarding access environmental compliance certificate (ECC). The ECC to information, and this has been a foundation for the is valid throughout the execution of the project, but the evolving public disclosure and participation provisions in ESMMP must be updated to reflect project changes subsequent regulations. In addition, Articles 16 and 20 and approved by MoNRE every two or five years. The of the Law on Media (2008) establish rights of access issuance of the certificate can be refused if the project to information about matters within the country, creating is believed to cause more damage than benefits or another legal foundation for disclosure requirements in suspended if the activity violated the laws or if the the ESIA system. project fails to comply with the conditions provided in the environmental certificate or the ESMMP. The 2019 ESIA Decree provides details about the information required for public disclosure, in conjunction Follow-up instruments, such as ESMMPs, are often with the 2013 Guidelines on Public Involvement in the used as remedies for the lack of legally established ESIA Process. Disclosure of information and public environmental standards or formal governmental involvement are important parts of the project owner’s programs. In many cases, such follow-up instruments engagement. Periodic disclosure of the data and serve as ad hoc regulations that set environmental information of the project must be made in both the Lao performance measures that could be more efficiently and English languages through newspapers and other established through general environmental standards. printed materials, television, radio, and internet. Both In many instances, the mitigation measures are not the relevant authorities and the project owner must necessarily related to the impacts that the action disclose and provide access to the data and information is expected to generate, but to activities such as related to the project, including the environmental reforestation or education that are socially desirable but impact, obligations, and mitigation measures; the that the authority is unable to carry out because of its preliminary/comprehensive environmental impact constrained resources. assessment report and the ESMMP; the outcomes of monitoring implementation; and other data. There A common feature of ESIA systems around the is, however, a provision that allows information to be globe is that, although ESIA is extensively used as withheld by MoNRE upon request by the project owner, an environmental management tool through which thus ESIA documentation may not always be made the authority aims to ensure that a wide number public. While this information should be contained in a of projects or activities operate within specific stand-alone Public Consultation and Disclosure Plan, environmental parameters, most low- and middle- it is often simply included as a chapter of the ESMMP, income countries rarely monitor the action’s impacts further limiting its profile and availability. after the corresponding license or permit has been 140 Chapter 5 5.4.6 Compensation 5.4.7 Inspection Under the EPL, the project proponent is responsible Technical inspections are intended to be conducted for any environmental damage caused by the project. throughout the project to ensure compliance with In addition, Article 58 requires the provision of financial environmental obligations, conditions for issuance guarantees “to restore, remove pollutants and clean of ECC, ESMMP, compensation plan, relocation the environment affected by its operations, from and resumption of occupations, and comprehensive commencement until completion.” management plan. Inspections are carried out during the construction and operation phases, and at the end The new ESIA Decree requires an environmental of the project. deposit to restore the environment as a condition of receiving the ECC and includes the restoration of the Project owners, the sectoral agency that regulates damaged environment as a project’s owner obligation. or supervises the investment project, and the natural In addition, project-affected parties have the right to resources and environment sector are the parties receive compensation, resettlement, and occupational responsible for conducting the environmental technical resumption benefits. When the project compensates inspection. In Lao PDR, this should occur at the losses and damages and relocates the place of district, provincial, and central levels, with a budget for living and occupation, a certification provided by the inspections provided by the project proponent. Resettlement and Livelihood Restoration Committee is requested prior to issuance of the ECC. 5.4.8 Consultation and Public In Lao PDR, private investment projects in the natural Participation resources sector—including hydropower projects, mining projects, and agriculture and forestry projects— The involvement of different stakeholders in the ESIA are required to enter into a concession agreement process, particularly the groups likely to be affected by with the Government of Lao PDR. The concession the development of a project, is crucial to ensure the agreement (CA) for such projects may contain specific legitimacy and credibility of the ESIA and the associated environmental and social obligations complementary decision-making process. Public participation within to, and in addition to, the statutory requirements. the ESIA process has multiple objectives, ranging from In particular, for the hydropower sector, MoNRE gathering data and information from the public about has developed Standard Environmental and Social their human and biophysical environment, to seeking Obligations (SESO), which forms the basis for the public input to identify potential impacts and mitigation project-specific environmental and social obligations in or compensation mechanisms, to enhancing the quality the concession agreement for the project. The SESO of the decision-making process and increasing public contains standard terms and conditions that in principle acceptance and support for the proposed action (André are non-negotiable, but the SESO also identifies the et al. 2006). areas or issues where the environmental and social obligations have to be custom-made to fit the project- Identified best-practice principles for public participation specific design, installations, layout, location, and include, among others, the following: adapting the surrounding social and environmental situation. process to the specific social, institutional, and cultural context in which the project would be developed; acknowledging the right that people have to be informed early and in a meaningful way about proposals that may affect them; ensuring that public input is considered in the decision-making process and that the public is aware of such process; defining clear rules and 141 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 procedures to guarantee that the consultation is During the review of the report, the relevant provincial credible, rigorous, and focuses on relevant, negotiable offices must liaise with the project owners to convene issues; facilitating access to information by making district-level meetings, technical-level meetings, and relevant, easily understandable documents available inspections trips. The ESIA consultation process for the public; and considering the heterogeneity of specifies formal consultations of draft ESIA at the stakeholders and the barriers that would limit the active village, district, provincial, and central levels, including participation of vulnerable or disadvantaged groups. a technical workshop and site visit. The ESIA draft needs to be updated after consultation at each level, Public involvement of potentially affected persons and culminating in a central-level confirmation meeting other stakeholders is required under Article 48 of the before ESIA final approval. EPL and reaffirmed in the 2013 Guidelines on Public Involvement in the ESIA Process and the 2019 EIA The project-affected parties, village administration, Decree. Involving the public in preparation of the ESIA district office of natural resources and environment, is fundamental to increase the acceptance of the project, sector that governs the investment project, related including the understanding of how the project may affect district-level and provincial-level sectors, and other living conditions and identifying impacts and issues not stakeholders will be welcomed to participate in the immediately obvious to the ESIA preparation team. meetings and inspections. Under the 2013 Guidelines on Public Involvement in 5.4.8.2 Construction and Operation the ESIA Process and the 2019 ESIA Decree, public consultation is conducted in each phase of investment Project owners are required to coordinate with projects to ensure transparency, justice, and efficiency. relevant agencies and authorities to regularly inform Project owners must make a public involvement plan for stakeholders of project activities that may affect the each phase and must ensure that public participation environment. Documents must be disseminated via includes gender equality, ethnic minorities, vulnerable newspapers, televisions, radios, or internet. Project- sectors, and so forth. affected parties and other stakeholders may express their opinions, concerns, or complaints regarding 5.4.8.1 Project Preparation the implementation of the project. Grievances can be submitted to the project owner or the relevant During preparation of an ESIA report, project governmental organization by phone, mail, e-mail, via a owners must disseminate the public involvement website, or through other means. In practice, however, plan and collect data on population, socioeconomic ESIA consultants often informally handle grievances variables, and social and natural environment during the ESIA development process. conditions in the project area and its surroundings. The project development plan, as well as information 5.4.8.3 End of the Project on environmental impacts and benefits, must be disseminated to people in the project area and other Project owners must notify the project-affected parties stakeholders. Dissemination activities will be held and other stakeholders of closure of the project through meeting or other forms, in both Lao and the and environmental restoration. Throughout this dialects of the ethnic minority, if necessary. phase, affected parties can express their opinions on completed or pending activities. The natural resources and environment sector must approve the implementation of the ESMMP as a condition for the project closure. 142 Chapter 5 5.5 Recent Developments Ministerial Instruction No 8030 on the ESIA Process of and RECOMMENDATIONS the Investment Projects and Activities (ESIA 8030) were upgraded to a Prime Minister-approved decree. This process was led by the DNEP of MoNRE and supported Sano et al. (2016) found important weaknesses in by the World Bank. This culminated in the January 31, three main components of Lao PDR’s ESIA policy and 2019, signing of the ESIA Decree. practice: This new ESIA Decree aims to ensure uniformity > The quality of the ESIA — The capacity of in the conduct of Environmental and Social Impact consultants to carry out ESIAs tends to be limited. Assessment by every proponent of investment projects The registration system for ESIA consultants is not and activities, both by domestic and foreign enterprises transparent nor impartial. Little monitoring actually operating in Lao PDR, that cause or are likely to cause occurs. Central and local officials do not have environmental and social impacts. The objective is that enough technical capacity to properly review ESIAs. proponents of investment projects and activities shall The capacity of Provincial/Capital Department of conduct effective ESIAs, thereby contributing to the Natural Resources to review IEE is still limited. country’s sustainable socioeconomic development while mitigating the effects of critical issues such as climate > Information disclosure and public participation — change. Many projects do not disclose information to the public, and it is difficult to acquire ESIAs for many The 2019 ESIA Decree also focuses on improving projects. MoNRE does not yet have the capacity/ coordination among key agencies during the screening, time to upload all ESIAs to the internet, or to provide scoping, review, approval, and monitoring stages ways in which the ESIAs can be queried by a wider of ESIAs for investment projects, including, notably, public. Most ESIAs are secret, unless they have to through improved disclosure of information to the be subject to the MRC’s PNPCA process. Political public and public participation in the ESIA review space for community members and CSOs is limited process. Indeed, under current practice, Lao PDR in Lao PDR. Many projects do not conduct public ESIA documents are rarely publicly available unless the participation, although the ESIA instruction said that developer is seeking to meet international standards. MoNRE shall hold the technical and consultation Even then, these documents are not made publicly meetings at the provincial/central level during the available until after they have been approved. review period. For the projects that do conduct public participation, consultations are often limited Several major themes are emphasized in the reforms to the government, excluding affected persons, civil introduced in the new ESIA Decree: society, NGOs, and the general public. One set of reforms focuses increasing attention on > Environmental management and monitoring — the kinds of investment projects that are subject Monitoring is often not conducted or is highly to ESIA analysis in Lao PDR, and how changes in superficial, in part due to lack of capacity by the scale and ownership of individual projects does government staff. and does not affect the project owner’s execution of ESIA responsibilities. Recent ESIA reform efforts have been focused on the design and implementation of a Ministerial Decree A second set of reforms focuses on the scope of to improve ESIA procedures to address identified ESIA analysis, with increased attention to proposed weaknesses. In essence, the requirements of Ministerial projects’ cumulative and health effects. Instruction No 8029 on the Process of IEEs of the Investment Projects and Activities (IEE 8029), and 143 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 A third set of reforms aims at enhancing the role progress in improving the effectiveness of the ESIA of the public in the ESIA process, particularly system. As this reform process proceeds, Lao PDR has those individuals and communities facing social an opportunity to incorporate global and regional best and environmental impacts, with an emphasis practices into its ESIA process, thereby improving ESIA on disadvantaged communities and those facing as both a planning and environmental management resettlement as a result of project implementation. tool to help address urgent environmental and social pressures of accelerating economic growth. A fourth set of reforms aims to clarify the rights and responsibilities of project proponents and Several provisions of the new ESIA Decree focus governmental actors in the ESIA preparation, review, on the range of investment projects subject to ESIA and approval process. review, and aim to ensure that changes in the scope, timing, ownership, or life cycle of a given project do A fifth set of reform efforts focuses on clarifying not interfere with compliance with ESIA requirements. the timetables for ESIA document preparation, In a diversifying economy with significant foreign comment, and approval by the myriad constituents investment, these reforms are critical to ensuring that participating in the robust ESIA process envisioned ESIA responsibilities are not sidelined when changes in by the decree. project ownership, scope, or other factors alter the initial conditions. Finally, the 2019 Decree tries to anticipate matters requiring further action to fully implement the ESIA Article 6 of the 2019 Decree reiterates that foreign and regime in Lao PDR, particularly training and budget domestic investors are on an equal footing with respect needs at all levels of government as they coordinate to ESIA responsibilities. Article 3 includes among its the enhanced ESIA public consultation and review definitions details about what Lao PDR defines as processes included in the decree, as well as the complicated projects that require particular scrutiny importance of technical review panels to ensure the under the ESIA regime, either because they deploy quality and consistency of ESIA reviews. sophisticated technologies or otherwise potentially have severe social and environmental impacts, either locally To improve the effectiveness of ESIA implementation or across borders. In total, these provisions make a in Lao PDR, the new ESIA Decree aims not only to significant contribution to avoiding inconsistencies in the improve the timeliness of ESIA document preparation implementation of ESIA responsibilities throughout each and review, but also to establish new procedures project’s unique life cycle. for enhanced information disclosure and public engagement, especially among affected populations In an area with multiple projects in concurrent and vulnerable groups. There is an inherent conflict development, cumulative impacts may result that between these two goals, since meaningful public require a different measure of social or environmental participation takes time and may increase ESIA impact mitigation. Finally, too often development is preparation and revision time for both investors assumed to be going forward in ESIA analysis, without and officials required to review and approve ESIA full consideration of a ‘no action’ alternative to project documentation. The new ESIA Decree requires analysis approval that may be important in understanding the full at a greater depth of environmental and social impacts, environmental and social impacts of a given proposal. including cumulative impacts. The 2019 ESIA includes multiple provisions aimed at addressing the proper scope of ESIA analysis by giving The current Lao PDR ESIA system combines the attention to these issues. function of an ESIA with an environmental planning tool. Further clarification of the policy objectives of ESIA reform will help DNEP set priorities and track 144 Chapter 5 Several references are made to the importance of religion, traditional beliefs, and gender roles. The 2019 considering cumulative and health impacts. In the case ESIA seeks to ensure that the public-participation of impacts to the Mekong River, a clear instruction process is fully funded by the project owner, a is given to comply with the terms and conditions in requirement that has been in place since at least 2013 the Agreement on the Cooperation for Sustainable but rarely implemented. Development of the Mekong River Basin 1995. In other cases, it is not clear how the assessment of cumulative In addressing the form and content of both the and health impacts is to be undertaken. In addition, project proponent’s and the government’s rights and provision is made for consideration of a least three responsibilities for the administrative and financial project options, including a ‘no project’ option. burden of implementing a robust ESIA system, the new decree includes several new provisions aimed Disclosure of information and engagement of the public at clarifying roles. MoNRE itself takes on many new in the ESIA review and revision process have always and significant responsibilities, such as committing to been a part of the Lao PDR ESIA system. However, work with provincial and local authorities in making a the new ESIA Decree goes even further than earlier list of existing projects already in the construction and regulation in this area, including several new provisions operation phases of development that have not yet aimed at enhancing public participation, with increased received an ECC. emphasis on giving a voice in ESIA decision-making to vulnerable groups. Giving full effect to Decree 84 on MoNRE also commits to develop technical guidelines Compensation and Resettlement (2016) is a priority of about the ESIA process for nationwide application several new public-participation provisions in the new and continues to support the project owner in several decree, including articles on submitting a separate social- areas related to ESIA preparation and approvals, impacts report in cases of resettlement, separate ethnic- including providing technical assistance directly and minority reporting, and the requirement that minutes of at consultation meetings at the district level as well the public-participation meeting must be included in ESIA as leading field inspections. Similar broad MoNRE application packages from the project owner. responsibilities are identified during the construction preparation phase and for monitoring activities. In addition, the 2019 new decree requires compliance While accompanying provisions for responsibilities with Decree 84, stating that attention must be paid to of provincial, municipal, and local/village authorities an open consultation with the project-affected persons may eventually assist MoNRE in meeting government (PAPs), especially ethnic groups, women and children, burdens for the smooth and timely operation of the and disadvantaged groups. The new decree gives ESIA preparation and review process, at least initially strong voice to PAP participation in consideration and these overlapping provisions will create an additional approval of the ESIA Report and ESMMP, suggesting burden on MoNRE as it builds capacity at lower levels that, beyond a robust public-participation process, a of government for ESIA review and monitoring capacity, majority of the people affected by development projects as well as dispute-resolution capability. will have a voice equal to relevant agencies and local administration in the approval process. It is not MoNRE is setting ambitious timelines for its review and specified, however, how this expansive role for PAPs approval of ESIA applications, as well as deadlines would be implemented. for project proponents to prepare and submit ESIA documentation. For example, project owners must Perhaps most importantly, the new decree includes carry out the comprehensive ESIA within six months expansive provisions for the rights of the public, after approval for the scope of assessment and works. particularly PAPs, including a right to health MoNRE is required to complete a preliminary review examinations and participation in field inspections, and of new ESIA applications within ten working days the right to receive promotion and respect for culture, of submission and advise the project proponent if 145 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 5 additional documentation will be necessary and review only ensure timely ESIA approvals, but also investor the comprehensive ESIA report within ninety working confidence in the ESIA system. Overall, however, days from the date of receiving the documents from the the GoL is looking at the temporal dimension of ESIA project owner. processing and approvals; timeliness of ESIA reviews is one of the most common criticisms of ESIA systems, yet Attention to both timeliness of decisions for applicants it is rarely studied and given too little attention in reform and giving the public adequate time to review ESIA efforts (Loomis and Dziedzic 2018). This is a key issue documents is the best way to ensure advancement of to be addressed in engaging both project proponents the social and environmental protection goals of the and the public in full implementation of the 2019 ESIA ESIA system in Lao PDR, and the final version of the Decree mandates. ESIA Decree should seek this balance. For example, for large-scale, high-impact projects, six months may The comments that follow anticipate implementation be too short a time to carry out wet- and dry-season challenges with the new ESIA in light of this tension baseline studies. Moreover, MoNRE may lack resources between a thorough review of environmental and to meet review and approval deadlines. social impacts, and timeliness of decisions. The following recommendations may serve as a roadmap to At the same time, the 2019 ESIA Decree sets review implement the new decree: and approval deadlines for ESIA applications, it also broadens the scope of matters to be considered in > Encouraging attention by project owners, assessing social and environmental impacts, most government reviewers, and the public to widely notably heightening the importance of considering available information that will improve the accuracy the possible cumulative impacts of proposed projects. of ESIA assessments of social and environmental These are critically important factors in assessing the impacts, including already approved ESIA full potential of a project’s environmental and social documentation for similar or related projects made impacts. More generally, the responsibility of all levels widely available through new databases or other of government to give the public access to information technological innovations; and and an opportunity to comment is heightened in the new decree, suggesting that MoNRE must carefully > As noted above, the 2016 Law on Investment consider whether the public will have adequate time Promotion, Article 74, requires investors to meet to review and comment on proposals during a finite environmental protection goals in Lao PDR through period for the review and approval process. Meaningful their activities. Continued attention in Lao PDR to public participation often requires lengthening review the inclusion of environmental protection provisions timeframes before project approvals. in laws critical to the economic interests of current and future investors may be the most important At a minimum, meeting tight timetables for project means of providing government-wide support to reviews will tax the capacity of DNEP to manage the effective implementation of ESIA reforms in Lao workload. Therefore, a critical component of effectively PDR. The ESIA Decree should be cited in future implementing ESIA reforms will be increasing staff investment laws. capacity at DNEP. Such increased staff capacity will not 146 Chapter 5 5.6 Notes 56 This chapter was prepared by Santiago Enriquez, William Ward, and Ernesto Sánchez-Triana. 57 40 C.F.R. § 1500.1. 58 Federal actions are defined as those that require the approval of a governmental agency at the federal level. 59 42 U.S.C. § 4332. 60 This amendment applies exclusively to the action of the US Executive Director and does not preclude Board approval but requires the US Executive Director to abstain. 61 This sector consists of (i) the Ministry of Natural Resources and Environment, (ii) the provincial offices of natural resources and environment, and (iii) district offices of natural resources and environment. 5.7 References Acerbi, M., E. Sánchez-Triana, S. Enríquez, R. Tiffer-Sotomayor, A. L. Gomes Lima, K. Siegmann, P. C. Fernández, and N. E. Nkrumah. 2014. Environmental Impact Assessment Systems in Latin America and the Caribbean. A World Bank Study. 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J., and M. Dziedzic. 2018. “Evaluating ESIA Systems’ Effectiveness: A State of the Art.” Environmental Impact Assessment Review 68: 29–37. Lopez-Claros, A., M. Porter, and K. Schwab, eds. 2005. Global Competitiveness Report 2005–2006. London: Palgrave Macmillan. Meyer, John W., David John Frank, Ann Hironaka, Evan Schofer, and Nancy Brandon Tuma. 1997. “The Structuring of a World Environmental Regime, 1870–1990.” International Organization 51 (4): 623–51 DOI: 10.1162/002081897550474. MoNRE (Ministry of Natural Resources and Environment). 2013a. Process of Environmental and Social Impact Assessment of the Investment Projects and Activities No 8030/MoNRE. Vientiane. MoNRE (Ministry of Natural Resources and Environment). 2013b. Ministerial Instruction on the Process of Initial Environmental Examination of the Investment Projects and Activities No 8029/MoNRE. Vientiane. MoNRE (Ministry of Natural Resources and Environment). 2018. Personal communication. Naser, H. 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Geneva. http://www3.weforum.org/docs/ GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport2017%E2%80%932018.pdf Yale Center for Environmental Law & Policy, Columbia Center for International Earth Science Information Network, and World Economic Forum. 2020. 2020 Environmental Performance Index. https://epi.yale.edu/ 148 6 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic SOLID AND PLASTIC WASTE MANAGEMENT62 Chapter Overview Solid waste generation will continue to increase with economic development, rapid urbanization, and changes in consumption patterns. In the Lao People’s Democratic Republic, solid waste generation is expected to increase 20 percent by 2030 and 46 percent by 2050. While the country’s per capita generation rate is among the lowest in the region, Lao PDR faces challenges related to solid-waste management; these challenges derive from deficient collection systems and inadequate disposal methods. Limited economic resources restrict collection services to urban areas, leaving many remote locations underserved. Collection rates reach 60 percent in urban areas and 35 percent in rural areas. Insufficient collection systems and lack of awareness push citizens to turn to open burning, household burying, and dumping in vacant lands. Open dumps receive 60 percent of the collected waste while 30 percent is disposed of in landfills and only 10 percent is recycled. The country’s landfills are operated as uncontrolled open dumpsites, since they do not meet sanitary standards and lack leachate-collection systems and monitoring wells. Hazardous waste is not collected or treated separately from general waste, resulting in toxic materials and medical waste being disposed of with municipal waste. Inadequate solid-waste management practices such as open dumping and burning can harm human health and the environment. The burning of waste releases dangerous toxins like dioxins and furans into the air; such toxins are associated with cancer, neurological problems, hormonal disruptions, and reproductive issues. In addition, emissions such as greenhouse gases and short- lived climate pollutants are released when waste is burned; these emissions are also associated with climate change. Plastics are among the wastes that are burned and openly dumped. Plastic waste can accumulate on the banks of waterways and clog drains, leading to increased flooding and river pollution. Since rivers discharge into the sea, plastic pollution in waterways is directly linked to marine pollution. Although data are lacking, it can be assumed that Lao cities situated along the Mekong River and its tributaries significantly contribute to plastic waste pollution of the river and subsequently of the ocean. Until the enactment of its National Sword policy in 2018 banning the import of plastic waste and other materials, China was the world’s largest importer of plastic waste. With the ban, around a third of China’s 1,700 importers have relocated to neighboring countries including Malaysia, Thailand, and Vietnam. Displaced facilities often relocate illegally and lack environmental controls, further increasing local pollution. As imports have shifted from China to these countries, governments have started to suspend import permits and impose restrictions on imported materials. Several measures can be implemented to improve solid-waste management in Lao PDR. Recommendations include legislation to prohibit waste burning along with campaigns to educate the public on the health impacts of open waste burning; banning of imports of plastics, e-waste, and other recyclables; establishment of standards for landfills in urban areas; promotion of circular economy practices to improve resource-use efficiency; and legislation on hazardous and medical waste management. These actions require improving the institutional and regulatory framework. While environmental legislation has progressed in Lao PDR, the regulatory framework for solid- waste management is still limited and the responsibilities of different governmental agencies are not clearly defined. 151 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 6 6.1 Introduction This chapter analyses the status, shortfalls, and potential and others, which are toxic or non-toxic.” For this actions to improve solid-waste management in Lao analysis, municipal solid waste (MSW) encompasses PDR. It first discusses the current solid waste situation residential, commercial, and institutional waste. in Lao PDR, followed by an overview of the institutional Generation of industrial, medical, hazardous, and framework and actors in solid-waste management. electronic waste is reported separately from MSW for Subsequently, this chapter addresses the emerging topic comparative purposes.63 Lao PDR per capita generation of plastic pollution and provides recommendations for of waste is among the lowest in Asia and in the world improving solid-waste management and reducing plastic (Figure 6.1). In 2015, 351,900 tons of MSW were waste pollution in Lao PDR. generated at an average rate of 0.15 kg per person a day. By comparison, in Singapore and Thailand, the per capita generation was 3.76 kg per day and 1.07 kg per 6.2 Solid Waste Situation day, respectively (Table 6.1). In addition, in 2015, Lao PDR generated 7,500 tons of electronic waste, 5,200 in Lao PDR tons of hazardous waste, 49,500 tons of industrial waste, and 1,200 tons of medical waste (Table 6.2)64. 6.2.1 Waste Generation and During the last decade, waste generation has doubled Composition in Vientiane. With economic development and changes in consumption patterns, under a business as usual The Environmental Protection Law amended in 2012 scenario, waste generation in Lao PDR is expected to defines waste as “objects, chemical substances or any reach 0.18 kg/capita/day in 2030 and 0.22 kg/capita/day things that persons or legal entities do not want and in 2050 (Kaza et al. 2018). cannot recycle such as used oil, rubbish, wastewater Figure 6.1 Per Capita Waste Generation 5 4.5 4 3.5 3 kg/capital/day 2.5 2 1.5 1 0.5 0 ge d e es ng a nd a n a a am R ar s an or si re pa si di ne PD nm at ra Ko la ay ne bo N ap Ko el Ja pi St ai ve ya al do et o Ic am ilip ng g Th La lA d M on Vi M In Si te Ph C ba H ni U lo G Source: Kaza et al. 2018 152 Chapter 6 Table 6.1 Waste Generation in Asian Countries/Economies, 2015 kg/capita/day Type of waste China Hong Kong SAR Lao PDR Singapore South Korea Thailand Municipal waste 0.4196 2.1300 0.1447 3.7643 0.9836 1.0716 Electronic waste 0.0144 0.0263 0.0031 0.0489 0.0308 0.0153 Hazardous waste 0.0692 0.0206 0.0021 0.2183 NA 0.1375 Industrial waste 6.5351 NA 0.0204 NA 2.1493 1.4924 Medical waste NA 0.0009 0.0005 NA NA 0.0021 Source: Kaza et al. 2018. Table 6.2 Waste Generated in Lao PDR, 2015 Type of waste tons/yr kg/capita/day Municipal waste 351,900 0.1447 Electronic waste 7,500 0.0031 Hazardous waste 5,200 0.0021 Industrial waste 49,500 0.0204 Medical waste 1,200 0.0005 Source: Kaza et al. 2018. As in many other developing countries, the major trucks made available by the municipality and the waste portion of municipal waste generated in Lao PDR is collection fees paid by the residents. Due to lack of composed of organic materials (Figure 6.2). Food, financial resources, collection services do not reach garden, wood, and green waste make up 57 percent of many remote areas. the waste while dry recyclables such as glass, plastics, metal, paper, and cardboard are produced in smaller In Lao PDR, open dumps receive 60 percent of the quantities, accounting for 22 percent of the waste. waste, remaining the principal mechanism for final disposal. As shown in figure 6.4, around 30 percent is 6.2.2 Waste Collection and disposed of in landfills and only 10 percent is recycled (Kaza et al. 2018). Disposal Given municipalities’ limited resources, the country’s Collection and disposal of municipal solid waste take landfills do not have leachate collection systems place in the four major cities: Vientiane, Luang Prabang, or monitoring wells. Sometimes, waste is burned Savannakhet, Pakse and Champasak. While collection at landfills to reduce the volume of waste and rates reach 60 percent in the urban areas, only recover landfill space (IGES 2012). Due to the lack about 35 percent of waste is collected from the rural of appropriate collection systems, open burning, areas (Figure 6.3). In urban areas, waste is generally household burying, littering along roadsides and collected once or twice a week from each household. streams, and dumping in vacant lands are widespread The collection coverage depends on the number of practices in both urban and rural areas (CCAC 2015). 153 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 6 Figure 6.2 Solid Waste Composition Food and green 19% Wood 38% Glass 9% Metal 4% Rubber and leather Other 1% Plastic 20% 6% Paper and cardboard 3% Source: Kaza et al. 2018. Figure 6.3 Waste Collection Coverage 70% 60% 60% 48% 50% 40% 35% 30% 20% 10% 0% Urban Rural Total collection Source: Kaza et al. 2018. Figure 6.4 Waste Disposal Recycling 10% Landfill 30% Open dump 60% Source: Kaza et al. 2018. 154 Chapter 6 In some rural areas as Khammouane province, most transfer station twice a day, where neither informal residents confirm burning their garbage, including pickers nor the private companies are allowed. The hazardous waste such as batteries, near their houses facility has two mixing machines used to transfer waste (Henderson 2017). Open burning further contributes to from the small vehicles to three larger trucks (20 tons/ the air pollution issue in the country. Recent World Bank unit) that transport waste two to three times a day to a studies estimate that the cost of household and outdoor landfill located 32 km from the city center (GGI 2018; air pollution combined accounted for 9.4 percent of the World Bank 2018). country’s GDP in 2017 (see chapter 3). The landfill KM32 does not comply with standard Waste segregation takes place either during the collection operating conditions; instead, it is used as an open process or at the landfill. Separation at source is not dumpsite. The facility receives around 352 tons/ practiced. Hazardous waste is not collected or treated day of waste and does not have a leachate collection separately from general waste; therefore, toxic materials system; as a result, liquids from the facility flow into a such as batteries, aerosols, and medical wastes are often natural pond. The landfill depends on a medical waste disposed of with municipal waste, increasing health risks incinerator that is functional and in use; however, it is and resulting in natural resource degradation, such as the only incinerator in the country. The annual amount surface and ground water contamination (MoNRE 2013; of solid waste increased from 90,000 tons in 2014 to MPWT 2013; World Bank 2018). 127,000 tons in 2018 (World Bank 2018). Although the recycling industry is not fully developed in 6.2.3 Plastic Pollution Lao PDR, there are small and medium-sized enterprises that produce different products from washing, crushing, and breaking up recyclables into smaller pieces. Preliminary estimates indicate that plastic makes up Plastics, glasses, papers, cardboard, and metals that around 12 percent of municipal solid waste in Vientiane. are collected are often exported for further treatment. In 2016, the recycling rate in the city reached 10 percent, including plastics, paper, and metals (Kaza et al. 2018). 6.2.2.1 Waste Management in Vientiane Data on the scale of plastic waste pollution in the In Vientiane, the Vientiane City Office for Management country are not available. However, primary data and Service (VCOMS) offers annual contracts to private suggest that most of the plastic in Lao PDR is either companies for collection services, specifying the districts burned, contributing to air pollution, or openly dumped, where they can operate. Private companies charge often near waterways. The consequences include a collection fee directly to their customers. In 2017, plastic waste scaling the banks of waterways, clusters the fees were increased from KN 25,500/month to of plastic waste floating in streams and polluting KN 41,550/month (US$3/month to US$5/month) (GGI the waters and ultimately oceans, and plastic waste 2018).65 Households and the commercial sector are clogging canals, leading to increased flooding. charged different rates. As of 2015, offices were charged KN 30,000–50,000/month (US$3.5/month to US$5.8/ An estimated 30 million people depend on the month); markets were charged KN 150,000–180,000/ Mekong Basin for their livelihoods. However, the container (US$1.7–21.2/container) (CCAC 2015). river, flowing through Lao PDR, is increasingly loaded with plastic pollution and is among the ten waterways Part of the collected waste is first brought to a transfer that contribute most of the plastics in the ocean. station that operates solely as an unloading and Plastic pollution coming from rivers is linked to that reloading point where recyclables can be recovered by of the marine environment, because rivers ultimately the station’s workers. Seventeen small waste collection discharge into the sea (Schmidt et al. 2017). Of the VCOMS trucks (3 tons/unit) enter the premises of the total mismanaged plastic waste, Lebreton et al. (2019) 155 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 6 estimate that 91 percent is transported via watersheds emphasized the need to work together to prevent and larger than 100 km , suggesting that rivers are the major 2 reduce marine debris (ASEAN 2019). At the national pathways for plastic litter to the ocean. level, the GoL encourages the use of recyclable bags in cafes and markets. Green Vientiane, a private initiative, All Lao PDR’s major cities—including Vientiane, Pakse, has started to sell recyclable bags in downtown cafes Savannakhet, and Luang Prabang—are situated on and markets. However, more action is required in Lao the banks of the Mekong River. Although sound data PDR, particularly at the national and municipal levels, are lacking, considering the inadequate solid-waste to address the continuously increasing amounts of management systems in those cities and taking into plastic and solid waste. Although no plastic policy, account most-recent global knowledge, it can be regulation, or action plan is currently in place, during a assumed that Lao cities situated along the Mekong bilateral meeting with the World Bank, the government River and its tributaries significantly contribute to plastic expressed its willing to ban all single-use plastics by waste pollution of the river and subsequently the ocean. 2025. In addition, MoNRE intends to prepare a National Plastics Management Roadmap (World Bank 2018). Plastic can take hundreds to thousands of years to biodegrade. Plastic waste causes floods by clogging 6.2.4 Impact of China’s Ban on drains, respiratory issues when burned, shortens animal lifespans when consumed, and contaminates Imports of Plastic Waste waterbodies when dumped into canals and oceans (Baconguis 2018). Plastic waste has additional adverse During the last decades, China was the world’s largest impacts on food chains, as well as threatening a importer of plastic waste, dealing with 95 percent of the wide range of marine life that ingests plastic waste or plastics collected for recycling in the European Union, becomes entangled in plastic debris (Frias 2019). 70 percent of U.S. recyclables and other recycled materials from around the world. In January 2018, Although several studies provide first-order estimates China enacted a National Sword policy that restricts the of the amount of plastics entering the oceans and import of plastic waste and other materials, closing the which countries and rivers are the key contributors, market for exporting nations and causing several cities there is still significant variance in the available data. to incinerate or landfill recyclable waste. Consequently, there is an urgent need for more-reliable information on the quantities, sources, and types of With the ban, several plastics recyclers have relocated plastics getting into the waterways. Lao PDR is no to other Southeast Asian countries. Displaced facilities exception when it comes to this lack of data. Detailed often relocate illegally and lack environmental controls, information on waste quantities, sources, and types further increasing local pollution. It is estimated that at is lacking. Even so, key stakeholders agree that more least a third of China’s 1,700 licensed importers have action is needed. relocated to neighboring countries. Within months after the policy was passed, countries including Indonesia, As an ASEAN member state, Lao PDR is supporting Malaysia, Thailand, and Vietnam have increased their the development of the Bangkok Regional Declaration plastic imports. Between the first half of 2017 and the on Marine Litter. ASEAN members are also planning to first half of 2018, imports of plastic have doubled in develop jointly an ASEAN Action Framework on Marine Vietnam, while Indonesia and Thailand have seen an Debris. At the ASEAN Ministerial Meeting on Marine increase of 56 percent and 1,370 percent, respectively. Debris in Bangkok in March 2019, member countries’ In the same period, Malaysia has become the biggest ministers underscored their great concerns regarding importer of plastic in the world. As imports have the high levels of marine plastic debris in the region, shifted from China to these countries, governments and potential negative impacts on marine biodiversity, have started to suspend import permits and impose environment, health, society, and economy. They further restrictions on imported materials. 156 Chapter 6 6.3 Institutional control the utilization of compost in agriculture (Global Framework and Growth Institute 2018). Stakeholders 6.3.1.2 Municipal Government This section gives an overview of the institutional At the municipal level, Urban Development framework and key stakeholders involved in solid-waste Administrative Authorities are responsible for the management in Lao PDR. collection, transport, and disposal of municipal solid waste. Provincial decrees provide the legal framework 6.3.1 Regulatory Framework for for waste management within each city. They define the responsible agencies and fees charged to households, Waste Management among others. While environmental legislation has progressed in In Vientiane, the Vientiane Cleansing Unit under the the country, the regulatory framework for solid-waste Vientiane Urban Development Administration Authority management is still limited; consequently, many gaps (VUDAA) is the agency charged with solid-waste need to be filled. In addition, despite the existence management. VUDAA delegates the collection of solid of regulations, lack of resources has made their waste to a public company established under VCOMS implementation difficult. Table 6.3 gives an overview of and ten private companies directly contracted by the regulatory framework and various laws related to VCOMS (Global Growth Institute 2018). solid-waste management in Lao PDR. Actors 6.3.1.3 Waste Pickers Key actors in solid-waste management include the national government, municipal government, private Informal waste pickers can recover recyclable waste sector, and informal sector. Their main roles and either from the source of generation, through door-to- characteristics are outlined below. door collection, or from unsegregated waste directly from the landfill. Some public buildings, households, 6.3.1.1 National Government and hotels sell recyclables to waste pickers who sell the recovered waste to buying centers. The waste pickers At the national level, through the Department of Housing receive only a daily fee from these buying centers upon and Urban Planning (DHUP), the Ministry of Public delivery of the recovered waste. Apart from receiving Works and Transport (MPWT) has been the main body this daily fee—which is determined by the buying regulating the solid-waste management sector in Lao centers—the waste pickers receive no other benefits PDR. While the Ministry of Natural Resources and and have no employment security. Environment (MoNRE) is the main authority responsible for preparing environmental laws and regulations, Waste pickers also scavenge in the disposal site for it has not been specifically engaged with the waste their livelihoods, picking out metal, plastic, or other management sector (UNCRD 2012). materials of value. The recovered materials are sold at lower rates than clean recyclables to a buying center The Industrial Environment Division in the Ministry that operates in the landfill site. of Industry and Handicraft oversees industrial waste coming from factories (FAO 2011). The Ministry of The World Bank estimates there are around 300 waste Public Health is responsible for regulating medical pickers in Vientiane whose contribution reaches 10 waste management, including its collection and storage. percent of the collected waste. It is estimated that 50 The Ministry of Agriculture and Forestry (MAF) is percent of waste pickers are women (Kaza et al. 2018). charged with delivering policies and regulations that 157 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 6 Table 6.3 Regulatory Framework Related to Solid-Waste Management in Lao PDR Date Legal framework Name Purpose Stipulates that all organizations and 1991 Constitution National Constitution citizens must protect the environment and natural resources. Industrial Waste Discharge Prohibits the discharge of toxic or November 1994 Regulation harmful waste to public water sources. Regulation Defines protection measures for pollution control. It prohibits all littering and requires the allocation of waste April 1999 Law Environmental Protection Law disposal sites and separation of waste before its disposal, incineration, or burial. Includes waste management in hygiene considerations for production processes, Hygiene, Disease Prevention and April 2001 Law hospitals, public spaces, markets, and Health Promotion Law so forth. It refers to environmental hygiene and pollution control. Requests proper management of health care waste, including separation Waste Management from Health July 2004 Decree (infectious, sharp, and general waste), Care Facilities collection and storage, handling, and disposal. Introduces environmental management considerations of household businesses, Environmental Protection Law December 2012 Law national pollution control standards, (Revised) and management and disposal of toxics and hazardous waste. Identifies hazardous waste classification and regulates its import, export, transfer, storage, use, recycling, February 2015 Ministerial Instruction Hazardous Waste Management and disposal. It defines the roles and responsibilities of government agencies and waste generators. Regulates soil pollution and defines the February 2015 Ministerial Instruction Pollution Control roles and responsibilities of the public, private sector, and the community. Targets the reduction of raw materials and waste generation, and the May 2015 Vision Vision Toward 2030 implementation of proper waste separation practices. Aims to promote green production and National Natural Resources the implementation of the 3R concept May 2015 Strategy and Environmental Strategy, (reduce, reuse, and recover) within the 2016–2025 country. Defines the principles, regulations, and measures regarding the use of August 2017 Decree Pesticide Management pesticides, including their management and disposal. 158 Chapter 6 6.4 Conclusions and carbon. In addition, waste burning is a significant Recommendations source of dangerous toxins like dioxins and furans that are associated with cancer, neurological problems, hormonal disruptions, and reproductive issues (Cogut Due to rapid urbanization and economic development, 2016). Aside from campaigns to educate the public solid waste amounts are increasing throughout Lao on the hazards of open waste burning, legislation to PDR. A specific regulatory framework on solid-waste prohibit burning should be introduced and rigorously 66 management is still missing . The responsibilities enforced. The use of pollution charges for transgressors of different governmental agencies in solid-waste should be explored, particularly in urban areas. management are not clearly defined. Ban on imports of plastics, e-waste, and other The number of landfills in the country is limited, and the recyclables. After China’s National Sword policy was existing landfills are substandard or are operated as enacted, recyclable wastes have been diverted towards uncontrolled open dumpsites. Regulations for control of Southeast Asian countries, overcoming their treatment leachates and landfill gases do not exist. capacities and imposing high environmental costs. Recycling processes often include washing and heating Because of the lack of a proper waste management practices that produce wastewater and emissions, system, disposal and burning of waste in open negatively impacting communities and the surrounding dumpsites or into rivers is widespread throughout the environment. To protect the country from this country. The regular burning of waste has significant unsustainable waste trade, GoL might consider issuing health impacts on residents, aggravating the already a ban on imports of all waste (including e-wastes, pressing air pollution issue, and pollutants ending up plastics, paper, aluminum, and glass)67. in rivers and aquifers damage ecosystems and present significant health risks to the public (CCAC 2015). Improving the institutional and regulatory framework for solid-waste management. Institutional There are many ways to curb solid waste: by producing capacity for planning, monitoring, and enforcement is less, consuming less, and better managing the waste. limited in the country. To promote accountability, the Taking these actions requires engagement from body that regulates the waste management sector numerous stakeholders in society, including citizens, should be separate from the entity that operates the governments, community organizations, businesses, and service. Therefore, responsibilities among the different manufacturers. Policy solutions, increased awareness, ministries—Health, Public Works and Transport, and and improved waste management, among other Natural Resources and Environment—should be approaches, can minimize the impact of waste on society. more clearly defined. The capacity of the Department of Housing and Urban Planning (DHUP), which is The implementation of the following measures is dedicated to solid-waste management within MPWT, recommended to improve solid-waste management: should be strengthened—within the context of a National Solid-waste management Strategy and Ban on open burning waste. Lack of public awareness Investment Plan (see below)—to ensure that planning and deficient collection and disposal systems are the activities are well coordinated and resources efficiently leading causes for waste burning, which continues to used. At the municipal level, a regulatory agency for be among the most widespread practices for waste solid-waste management should be clearly defined disposal in Lao PDR. Waste burning releases emissions and the role of Urban Development Administrative that contribute to climate change as greenhouse Authorities overseeing private contractors should be gases and short-lived climate pollutants like black enforced. 159 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 6 A solid waste regulatory framework at the national level, the end of their service life. This approach replaces the which includes specific laws and regulations for solid- end-of-life concept with restoration, shifts towards the waste management and considers all shareholders, use of renewable energy, eliminates the use of toxic should be developed. Efforts to enforce laws, including chemicals, and aims for the elimination of waste. With the implementation of fees and other penalties, should a circular economy approach, Lao PDR can leapfrog be deployed. At the municipal level, local regulations into a model where resources are efficiently used, and that cover specific aspects of waste management— the environment protected. Several strategies could such as source separation, household fees, and be implemented within the country’s circular model, disposal sites—should be enacted. including recovery and reuse, circular design, economic instruments, and material substitution, among others. Strengthening planning, information systems, Goods manufactured in the country should be designed and citizen engagement. The eventual development to be easily recovered, reused, or recycled, and the use of a National Solid-waste management Strategy of materials that are biodegradable should be prioritized. and Investment Plan—laying out targets, required Internalizing the environmental costs associated with activities, selection of priority low-cost investments, waste management into the process of production and budget, and actor responsibilities—would help to pricing can lead to cleaner production and responsible streamline solid-waste management activities in Lao consumption. Decentralized waste separation and PDR. Such a strategy could develop in a phased collection for small communities, increased resource manner focusing first, for example, on those areas with recovery, composting, recycling, and waste reduction high levels of environmental issues. In addition, the are other forms of promoting a circular economy that can establishment of solid waste information systems to improve solid-waste management. provide sound data on collection rates, waste quantities by categories, dumping amounts at landfill sites, Legal requirements for hazardous and medical tracking of waste, financial data, and related matters, is waste management. Despite the existence of a decree recommended. Data collection improves planning and for waste management from health care facilities, non- monitoring processes as well as decision-making and compliance continues to prevail, since medical waste establishment of waste policies. is often disposed of at the landfills. Similarly—due to lack of regulations—hazardous wastes such as toxic, Waste management often starts at the household corrosive, and inflammable materials are mixed with and individual levels, and strategies to educate and municipal waste. Specific regulations for medical and motivate citizens can dramatically change behaviors hazardous waste management, along with monitoring and outcomes. Awareness-raising campaigns can result and enforcement practices, should be developed. in residents consciously reducing the amount of waste they produce, separating waste at home, and disposing Establishment of standards for landfills in urban of waste properly. areas. Development of common standards will establish minimum requirements to mitigate risks Promotion of a circular economy to improve to the environment and public health, including (i) resource use efficiency. A circular economy transitions restriction on landfill locations, (ii) use of bottom liners, from a traditional linear economy—in which resources (iii) operation of leachate collection systems, (iv) are used to produce goods for use and disposal—to a monitoring of groundwater quality, and (v) installation of circular model that keeps resources in use for as long composting platforms and landfill gas capture systems as possible and recovers and regenerates materials at to reduce methane production. 160 Chapter 6 6.5 Notes 62 This chapter is based on a background report prepared by Mayra Gabriela Guerra Lopez and Klaus Sattler. 63 Categories of waste discussed in this chapter include the following: (i) Municipal waste—waste coming from residential, commercial, and institutional sectors; municipal waste includes, but is not limited to, food waste, paper, cardboard, plastics, textiles, leather, yard wastes, wood, and glass; (ii) Industrial waste—nonhazardous solid waste generated by industrial processes such as light and heavy manufacturing, fabrication, power, and chemical plants. Such waste may include, but is not limited to, organic and inorganic chemicals, iron and steel, nonferrous metals, plastics and resins from manufacturing facilities, paper, rubber, and transportation equipment; (iii) hazardous waste—wastes that are flammable, reactive, toxic, or corrosive (hazardous waste includes, but it is not limited to, solvents, paints, pesticides and other garden chemicals, batteries, and compact fluorescent lamps); (iv) medical waste—waste coming from healthcare facilities or laboratories, including, but not limited to, sharp materials such as needles and scalpels, pathological and infectious waste, and pharmaceutical and biological waste; and (v) electronic waste—including electronic products such as, but not limited to, computers, televisions, cellphones, stereos, copiers, fax machines, printers, and radios. 64 The Director General of Natural Resources and Environment, and Chief of Economic, Technology and Environment Committee, National Assembly, Mr. Onma Lathsavong, pointed out the need to find solutions to address problems with the use of chemicals and waste management. 65 KN = Lao Kip. US$1.00 = LAK 8,580 (exchange rate in effect on February 28, 2019). 66 The Vice Minister of Planning and Investment highlighted the importance of developing rules and regulations. As an example, he mentioned that the Extended Producer Responsibility policy approach would give business owners who import products such as batteries the responsibility for ensuring that used products are recycled and wastes are managed adequately. 67 The Vice Minister of Industry and Commerce, H.E. Mr. Phanthong Phitthoumma, mentioned that the Ministry of Industry and Commerce has signed an MoU to conduct a study on banning imports of plastic and waste. He also indicated that the ministry has plans to build a facility to manage electronic waste. 6.6 References APEC (Asia-Pacific Economic Cooperation). 2009. Understanding the Economic Benefits and Costs of Controlling Marine Debris in the APEC Region. 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Solid Waste Management City Profile: Vientiane Capital, LAO People’s Democratic Republic. http://www.waste.ccacoalition.org/sites/default/files/files/vientiane-_city_ profile_vientiane_capital_lao.pdf CCAC (Climate and Clean Air Coalition Municipal Solid Waste Initiative). n.d. Municipal Solid Waste Management Assessment Report: Vientiane Capital. http://www.waste.ccacoalition.org/sites/default/files/files/waste_mnmt_report_vientiane_laopdr_ by_rrcap.pdf Cogut, A. 2016. Open Burning of Waste: A Global Health Disaster. R20 Regions of Climate Action. FAO (Food and Agriculture Organization of the United Nations). 2011. Irrigation in Southern and Eastern Asia in figures – AQUASTAT Survey – 2011. 161 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 6 Frias, J. P. G. L., and Roisin Nash. 2019. “Microplastics: Finding a Consensus on the Definition.” Marine Pollution Bulletin 138: 145–47. 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Hook. 2018. “Why the World’s Recycling System Stopped Working.” Financial Times. https://www.ft.com/ content/360e2524-d71a-11e8-a854-33d6f82e62f8 Sánchez-Triana, E., K. Ahmed, and Y. Awe. 2007. Environmental Priorities and Poverty Reduction A Country Environmental Analysis for Colombia. Washington, DC: World Bank. Sang-Arun, J., and K. Pasomsouk. 2012. A Guide for Improving Municipal Solid Waste Management and Promoting Urban Organic Waste Utilization in Lao PDR. Institute for Global Environmental Strategies. Storey, D., J. Aleluia, and S. K. Kim. 2018. Solid Waste Management in Vientiane, Lao P.D.R. Seoul: Global Green Growth Institute. https://gggi.org/site/assets/uploads/2018/09/Solid-Waste-Management-in-Vientiane-Lao-P.D.R_Publication-3.pdf UN Habitat. 2010. Collection of Municipal Solid Waste in Developing Countries. Nairobi: United Nations Human Settlements Programme. UNDP (United Nations Development Programme). 2017. Circular Economy Strategies for Lao PDR. UNDP. World Bank. 2005. Lao PDR Environmental Report. Washington, DC: World Bank. 162 7 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic POVERTY AND ENVIRONMENT68 Chapter Overview The chapter’s findings reveal strong linkages between environmental quality and poverty in the Lao People’s Democratic Republic. Lao PDR has achieved rapid gross domestic product (GDP) growth and poverty reduction over the last two to three decades: Its rapid economic development was associated with a fall in the national poverty rate from 46 percent in 1993 to 18 percent in 2019. Agriculture development in the last two decades has contributed to household poverty reduction through expansion of arable land, and through increased size of household land holdings for agriculture, intensification and mechanization, commercialization, and crops of higher value-added. However, income disparities have widened. The Gini index increased from 31 in 1993 to 39 in 2019, according to Lao poverty assessments. Rural areas’ poverty incidence was over three times as high as in urban areas in 2019, and about 88 percent of the poor lived in rural areas. Poverty-alleviation efforts in Lao PDR need to be cognizant of the fact that the country’s poverty-environment linkages are mainly rural. The poor continue to depend on natural resources, since most of the poor are rural small holders. Non-timber forest products (NTFPs) are an important source of food consumption and income for the rural population and the poor, but some NTFPs are being over-harvested and are on the decline in several provinces. While Lao PDR still has substantial forested lands, degradation and deforestation disproportionately affect the poor. The poor are vulnerable to climate risk. Household surveys point to how droughts are disproportionately affecting the poor, pointing to the need for more interventions for risk reduction and management in poor communities affected by droughts. Lao PDR’s national protected areas (NPAs) including three national parks cover about 16 percent of its territory. Many people reside within, or bordering, the NPAs and tend to be poorer than the average. This points to the importance of balancing the objectives of poverty reduction and conservation in the NPAs. Participatory approaches to resource management can enhance sustainability and reduce encroachment by outside commercial interests. Land concessions and land leases in Lao PDR expanded rapidly from the early 2000s. Some large concessions harmed local communities, and moratoriums were implemented. More recently, banana-plantation expansion was halted because of health effects from pesticides and other agrochemicals as well as water pollution. Lao DECIDE Info—a joint initiative of the Lao PDR and Swiss governments—has developed a methodology for assessing the quality of land-concession investments to ensure sustainability and local-community benefits. Analysis of household data along with maps of unexploded ordnance (UXO) contamination shows how UXO disproportionately affects the poor. Further targeting UXO clearance towards the poorest and most contaminated districts is needed, along with complementary poverty-reduction policies, programs, and projects. 165 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 The poor depend heavily on agriculture, capture fisheries, and NTFPs from local forest resources. The poor are also highly dependent on forest and vegetation covers that regulate water services and mitigate flash floods and soil erosion. Consequently, the protection, productivity, and quality of natural resources; the poor’s access to these resources; and their sustainable management are essential for the poor’s livelihood, food security, balanced nutrition, and poverty alleviation. The poor suffer disproportionately from household air pollution (HAP), since they rely almost exclusively on highly polluting energies for cooking—that is, fuelwood—in contrast to better-off households’ use of somewhat less-polluting energies such as charcoal as well as clean cooking energies such as LPG/electricity. Vietnam’s experience transitioning to clean cooking energies suggests that a much larger share of Lao PDR’s population, including among lower-income households, can make this transition from cooking with fuelwood to clean cooking energies. The poor have far less access to improved sources of drinking water and sanitation than better-off households. The poor rely on the boiling of drinking water, using fuelwood for boiling that causes substantial negative health effects. Potential solutions include using clean treatment methods such as ceramic filtering or solar disinfection of drinking water (see chapter 9). The drinking water available to the poor is of lesser quality than for better-off households, underscoring the need for clean point-of- use treatment methods. The largest disparity between the poor and better-off households is lack of access to improved sanitation and the practice of open defecation. While the situation has improved over the last decade, much remains to be achieved. Environmental pollution often disproportionately affects young children, and poor children are more likely to die from pollution-caused illnesses, in part due to their poorer nutritional status and lesser access to health care. Mortality rates for children under five years of age from Lao PDR’s two poorest population quintiles are more than twice those for children from the two richest quintiles. Children from the poorest quintile are nearly four times as likely to be underweight and nearly three times as likely to be stunted as children from the richest quintile. Household air pollution and inadequate drinking water and sanitation contribute to these disparities. 166 Chapter 7 7.1 Introduction 7.2 Poverty in Lao PDR Economic growth, targeted programs, and assistance to Poverty-environment linkages in Lao PDR are largely the poor have resulted in rapid poverty reduction in Lao a rural phenomenon, with as many as 88 percent of PDR over the last two to three decades. The population the poor living in rural areas in 2019. National poverty living below the national poverty line declined from 46 incidence declined by 45 percent, or from 34 percent percent in 1993 to 18 percent in 2019. Yet, disparities to 18 percent, of the population from 2003 to 2019. persist, and poverty incidence remains high in some Poverty reduction was most rapid in urban areas, with geographic areas and among some population groups. a decline of 65 percent—that is, dropping from 20 percent of the urban population in 2003 to 7 percent of The poor suffer disproportionately from environmental the urban population in 2019. Poverty reduction in rural pollution and from degradation of, loss of, and reduced areas was more modest at 37 percent—that is, dropping access to natural resources that traditionally have from 38 percent in 2003 to 24 percent in 2019. This formed the basis of their livelihood systems. The poor resulted in a rural poverty incidence that was over three can less afford clean energies for cooking, have less times as high as the incidence in urban areas in 2019 access to safe drinking water and sanitation, and are (Figure 7.1). excessively exposed to occupational environmental health hazards. The livelihood systems of the poor are Poverty incidence by household economic activity highly reliant on natural resources for agricultural food reflects the rural-urban disparity. Poverty incidence and livestock production, wild food and income from among self-employed in agriculture was about four the forest, and aquatic resources. Degradation of, loss times as high as it was among self-employed in non- of, or reduced access to these resources often cause agriculture and paid workers in 2019, and poverty increased hardship and deeper poverty. reduction was slowest among self-employed in agriculture from 2003 to 2019 (Figure 7.2). Figure 7.1 Poverty Incidence and Distribution in Lao PDR, 2003–2019 40% 100% 38% 88% 34% 80% 30% 24% 60% 20% 20% 18% 40% 10% 20% 12% 7% 0% 0% 2003 2008 2013 2019 Rural Urban Rural National Urban Sources: Produced from LSB and World Bank 2014 and World Bank 2020. 167 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Figure 7.2 Poverty Incidence by Economic Activity, 2003–2019 45% 40% 39% 35% 30% 25% 24% 20% 20% 17% 15% 10% 6% 5% 5% 0% 2003 2008 2013 2019 Self-employed agriculture Self-employed, non-agriculture Paid worker Source: Produced from LSB and World Bank 2014 and World Bank 2020 Large disparities in poverty incidence prevail across Lao PDR is highly mountainous, sparsely populated provinces and districts. Provincial poverty incidence in with a density of less than 30 people per km2 and has 2019 ranged from 5-10 percent in Vientiane Municipality many remote areas with that are difficult to access and four provinces to over 30 percent in Sekong. At the and lack all-season roads. These features represent district level in 2015, poverty incidence ranged from added challenges to poverty reduction. The country’s five percent in a district in Vientiane Municipality to 73 topography can be categorized as lowlands with 56 percent in a district in Saravane. Poverty incidence is percent of the population living near the Mekong generally highest in districts from north to south that River from Vientiane Province in the central region to border, or are near, Vietnam (Figure 7.3). 69 These Champasack in the south; midlands with 18 percent districts tend to coincide with the Government of Lao of the population at medium elevation; and uplands PDR’s (GoL’s) 72 priority districts for poverty reduction. with 26 percent of the population in the mountainous areas of the northern region and along the border with The GoL identified 47 first-priority and 25 second- Vietnam, covering 70 percent of the country’s land area. priority districts for poverty reduction (GoL 2003). The first-priority districts are concentrated along the border Poverty incidence is highest in the uplands and declined with Vietnam and in the northern region of Lao PDR. by only about 20 percent from 43 percent in 2003 to 34 Poverty incidence in the first-priority districts declined percent in 2013. In contrast, poverty incidence declined from 50 percent in 2003 to 35 percent in 2013—that is, by 40 percent in the midlands and 35 percent in the to the rate in the second-priority districts. Over half (53 lowlands over the same period. Well over one-third of percent) of the poor lived in the 72 priority districts in the poor now live in the uplands (Figure 7.5).71 2013, although these districts accounted for only one- third of the population of Lao PDR (Figure 7.4).70 168 Chapter 7 Figure 7.3 Provincial and District Poverty Incidence in Lao PDR: Provincial Level (2019, top) and District Level (2015, bottom) Phongsaly Luangnamtha Oudumxay Bokeo Luangprabang Huaphanh Xiengkhuang Xayabury Xaysomboon Vientiane P. Borikhamxay Vientiane C. Khammuane Poverty headcount rate (%) Savannakhet [5, 10] [10, 15] [15, 20] [20, 25] Saravane [25, 30] [30, 35] Sekong No data Champasack Attapeu Sources: Province level from World Bank 2020. District level from LSB 2016a. 169 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Figure 7.4 Poverty Incidence and Distribution in GoL Priority Districts for Poverty Reduction, 2003–2013 47% 60% 50% 45% 50% 50% 40% 35% 41% 35% 40% 35% 30% 34% 30% 25% 26% 18% 20% 20% 15% 17% 10% 10% 5% 0% 0% 2003 2008 2013 1st priority 2nd priority Non-priority districts districts districts 1st priority districts 2nd priority districts Non-priority districts Source: Produced from LSB and World Bank 2014. Figure 7.5 Poverty Incidence and Distribution by Topography, 2003–2013 50% 50% 45% 43% 37% 40% 40% 37% 34% 30% 30% 29% 22% 17% 20% 20% 19% 10% 10% 0% 0% 2003 2008 2013 Upland Midland Lowland Upland Midland Lowland Source: Based on LSB and World Bank 2014. 170 Chapter 7 7.3 Environmental Health according to the Lao Social Indicator Survey 2017 (LSB and Poverty 2018a). As much as 98 percent of the rural population used solid fuels, and only two percent used clean energies. Even in urban areas, only 16 percent used The cost of damage to health from pollution in Lao clean energies. The use of clean energies, as well PDR is estimated as equivalent to 14.6 percent of as charcoal, increases with living standard. Among GDP in 2017 (see chapter 3). A disproportionate the poorest quintile of the population, less than half a share of this cost is borne by the poor. With as many percent used clean energies, while among the richest as 88 percent of the poor living in rural areas in 2019, quintile, 27 percent used clean energies and 51 percent the major environmental health issues affecting the used charcoal (Figure 7.7). While charcoal is a polluting poor are mainly rural. The main issues are household fuel, it causes substantially less household air pollution air pollution (HAP) from the use of solid fuels, and than fuelwood and is often considered a transition fuel inadequate drinking water and sanitation (WAS). on the energy ladder towards clean energies. The percentage of the district population that lacked improved sanitation, an improved drinking water Geographically, the use of clean energies is highest in source, and used wood for cooking in 2015 very much Vientiane Capital followed by Bokeo and Borikhamxay. corresponds to the districts with high poverty incidence, The use of charcoal is almost entirely in Vientiane especially in the southern half of the country (Figure 7.6). Capital and Xayaburi, and in the provinces from Borikhamxay to Attapeu (LSB 2018a). Its use is highly Outdoor ambient air pollution (AAP) is also affecting concentrated along the Mekong River, as shown in the rural population, but pollution-exposure data the maps in the Socio-Economic Atlas of the Lao PDR are practically absent, making an analysis of AAP’s (Epprecht et al. 2018), based on data from the Lao effects on the poor very difficult. Major sources of rural Population and Housing Census 2015 (LSB 2016b). A ambient air pollution include burning of agricultural highly active charcoal-production industry and trade has fields, burning of regrowth vegetation on fallow land developed, including regional exports, in these southern in rotational agriculture, outdoor air pollution from and south-central provinces (Barney 2016). household use of solid fuels, burning of waste, rural brick and charcoal kilns, and air pollution from other The limited use of clean energies for cooking in Lao industry located outside urban areas. As to lead (Pb), PDR is in stark contrast to the situation in Vietnam, a little, if anything, is known about the socioeconomic country with very similar GDP per capita (Figure 7.8). dimensions of exposure in Lao PDR. Harmful exposure About 48 percent of the rural population and 81 percent to pesticides has not been assessed in this report, but of the urban population used clean energies for cooking many cases of severe health effects in the country have in Vietnam in 2014, in contrast to two percent and been reported, mainly affecting low-income workers. 16 percent, respectively, in Lao PDR. Almost every The focus of this chapter is on household air pollution, household (99 percent) in the richest quintile use clean drinking water, and sanitation. energies in Vietnam, compared to 27 percent in Lao PDR. Even in the second-poorest quintile in Vietnam, 7.3.1 Household Air Pollution as many as 26 percent use clean energies, or as many as in the richest quintile in Lao PDR. This underscores the potential for increased use of clean energies—even Household use of solid fuels ( wood and charcoal) among lower-income households in Lao PDR—by causes severe air pollution and health effects in raising awareness of the health benefits, providing the Lao PDR. However, the transition to clean energies right financial incentives, and removing market and non- (LPG, electricity) and cooking technologies has been market barriers to adoption of clean energies. remarkably slow. Over 93 percent of the population used solid fuels as their primary cooking fuel in 2017, 171 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Figure 7.6 District-Level Indicators of Sanitation, Drinking Water, and Household Air Pollution (Top 3 Maps), and Poverty (Bottom Map), 2015 Source: LSB 2016a. 172 Chapter 7 Figure 7.7 Household Cooking Energy Use in Lao PDR (% of Population), 2017 2% 16% 100% 100% 9% 4% 27% 20% 29% 80% 80% 98% 42% 40% 91% 60% 60% 70% 51% 78% 40% 40% 54% 43% 20% 20% 22% 0% 0% Rural Urban Poorest Second Middle Fourth Richest Wood Charcoal Clean energy Wood Charcoal Clean energy Source: Produced from LSIS II 2017 (LSB 2018a). Note: Poverty quintiles are wealth quintiles based on household assets. Figure 7.8 Household Cooking Energy Use in Vietnam (% of Population), 2014 100% 100% 3% 26% 80% 80% 48% 81% 60% 60% 90% 72% 91% 99% 40% 40% 62% 45% 20% 20% 14% 20% 4% 0% 0% Rural Urban Poorest Second Middle Fourth Richest Other Wood Charcoal Clean energy Other Wood Charcoal Clean energy Source: Produced from Vietnam MICS 2014 (GSO and UNICEF 2015). Note: Poverty quintiles are wealth quintiles based on household assets. 7.3.2 Household Drinking Water population in Bokeo (63 percent) and Luangprabang and Sanitation (68 percent), and is in the low 70s in Savannakhet (72 percent) and Saravane (71 percent), due to the use of unprotected springs in the north and unprotected wells An estimated 84 percent of the population in Lao PDR in the south (LSB 2018a). used an improved water source for drinking in 2017, according to the Lao Social Indicator Survey II 2017 Perhaps the most significant development in the (LSB 2018a). However, use of improved sources ranged drinking-water sector in Lao PDR over the last decade from 58 percent among the poorest quintile of the has been the rapid increase in the purchase of bottled population to practically 100 percent among the richest water. Bottled water is now the most prevalent source quintile (Figure 7.9).72 of drinking water, with as many as 48 percent of the household population using this source of drinking water Geographically, the variation across provinces in in 2017, up from 26 percent in 2011–12 (LSB 2018a; the use of improved water sources for drinking is not MOH/LSB 2012). The use of bottled water is particularly very pronounced, but dips below 70 percent of the prevalent among the two richest quintiles of households. 173 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Figure 7.9 Household Use of Improved Sources of Drinking Water (% of Population), 2017 97% 100% 100% 89% 75% 80% 58% 60% 40% 20% 0% Poorest Second Middle Fourth Richest Source: Produced from LSB 2018a. However, the use of bottled water is minimal among the The boiling of drinking water provides protection against two poorest quintiles (Figure 7.10). diarrheal disease, if water is not recontaminated prior to drinking. However, boiling of drinking water for all In 2017, about 37 percent of the household population household members can involve the use of substantial reported treating their water by an appropriate method amounts of fuelwood, equivalent to as much as one- prior to drinking it. 73 The main method of treatment fourth of fuelwood used for cooking. Boiling of water was boiling (33 percent) and filtering of water (4 using fuelwood, as the poorer households in Lao percent). The prevalence of drinking-water treatment PDR do, therefore causes substantial household is particularly low among the two richest quintiles of air pollution and associated negative health effects, households (Figure 7.11). This coincides with these underlining the importance of promoting clean households mainly using bottled water for drinking. alternatives for drinking-water treatment such as However, drinking-water treatment also declined from ceramic filtering or solar disinfection. over 70 percent among the two poorest quintiles from 2011–2012 to 2017. Figure 7.10 Use of Bottled Water for Drinking in Lao PDR (% of Population), 2017 93% 100% 82% 80% 60% 49% 40% 14% 20% 2% 0% Poorest Second Middle Fourth Richest Source: Produced from LSB 2018a. 174 Chapter 7 Figure 7.11 Household Treatment of Drinking Water in Lao PDR (% of Population), 2017 70% 54% 59% 60% 50% 41% 40% 30% 18% 20% 12% 10% 0% Poorest Second Middle Fourth Richest Source: Produced from LSB 2018a. The Lao Social Indicator Survey II 2017 included However, the prevalence of more than 100 E. coli per testing for E. coli bacteria—an indicator of fecal 100 ml of drinking water gradually declines from 52 contamination—in the drinking water of over 3,000 percent among the poorest households to 20 percent households throughout Lao PDR. As many as 86 among the richest households (Figure 7.12). percent of the household population had E. coli in their drinking water, and as many as 38 percent had very About 71 percent of the population in Lao PDR had high concentrations (>100 E. coli per 100 ml). access to improved, non-shared sanitation in 2017, while 24 percent practiced open defecation (OD), The household prevalence of one or more E. coli according to the Lao Social Indicator Survey II 2017 per 100 ml of drinking water is very similar across (LSB 2018a). However, access to sanitation and household living standards. Only among the richest prevalence of open defecation varied greatly by quintile of households is the prevalence somewhat household living standard. Just about 100 percent of lower at 78 percent compared to 87–90 percent. the richest quintile of the population have improved Figure 7.12 Household Drinking Water with E. coli by Household Living Standard (% of Population), 2017 100% 80% 52% 47% 39% 31% 20% 60% 40% 20% 38% 40% 50% 57% 58% 0% Poorest Second Middle Fourth Richest 1-100 per 100 ml >100 per 100 ml Source: Based on LSB 2018a. 175 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 sanitation, while only 25 percent of the poorest quintile 2015 (LSB 2016b) with maps presented in the Socio- have it (Figure 7.13). However, this is an improvement Economic Atlas of the Lao PDR (Epprecht et al. 2018). from 2011–2012 when only 13 percent of the poorest The lack of household sanitation coincides with high and 35 percent of the second-poorest quintile of the incidence of poverty, but the lack is also prevalent population had improved sanitation, according to data in provinces that now have achieved relatively low from MOH/LSB (2012). As to open defecation, as many incidence of poverty such as Attapeu and Pongsaly; as 72 percent of the poorest quintile and 36 percent of these findings are shown in the Socio-Economic Atlas the second-poorest quintile of the population practiced of the Lao PDR. this form of sanitation in 2017, underlining the disparity in access to household sanitation facilities (Figure 7.14). 7.3.3 Some Health Indicators Geographically, the lack of household sanitation—that is, households practicing OD—is especially prevalent Data on the health status of the population by living in Phongsaly and the central and southern provinces standard are limited in Lao PDR. However, the Lao from Khammuane to Attapeu, reaching a high of 65 Social Indicator Survey (LSIS) II 2017 (LSB 2018a) percent in Saravane (LSB 2018a). This is confirmed provides some perspectives for young children. Young by data from the Lao Population and Housing Census children are often disproportionately affected by Figure 7.13 Access to Improved Sanitation in Lao PDR (% of Population), 2017 97% 99% 100% 87% 80% 60% 60% 40% 25% 20% 0% Poorest Second Middle Fourth Richest Source: Based on LSB 2018a. Figure 7.14 Practice of Open Defecation in Lao PDR (% of Population), 2017 80% 72% 60% 36% 40% 20% 10% 1% 0% 0% Poorest Second Middle Fourth Richest Source: Based on LSB 2018a. 176 Chapter 7 environmental pollution and poor children are more likely years of age are about 75 percent higher among children to die from illnesses caused by pollution, in part due to from the two poorest quintiles of the population than poorer nutritional status and lesser access to adequate among children from the richest quintile. The incidence of treatment and health care. Under-five child mortality acute respiratory infections (ARI) seems to show no such rates in Lao PDR ranged from 62–63 per 1,000 live births pattern, but the fatality rate of ARI is substantially higher among children from the two poorest quintiles of the among the poor because of poorer nutritional status and population, to 23–27 among children from the two richest lesser health care, as previously stated. quintiles according to the LSIS II 2017 (Figure 7.15). As to nutritional status, children from the poorest quintile Diarrheal disease and acute respiratory infections (ARI) of the population are nearly four times as likely to be are among the leading causes of child mortality in Lao underweight and nearly three times as likely to be PDR. Inadequate drinking water and sanitation and stunted as children from the richest quintile (Figure household air pollution contribute substantially to these 7.16. While there are multiple reasons for the high rates diseases. Data from the LSIS II 2017 indicate that the of poor nutrition status among poor children, repeated incidence of diarrheal disease among children under-5 infectious disease, and especially repeated diarrheal Figure 7.15 Under-5 Child Mortality Rates in Lao PDR, 2017 80% 63% 62 60% 35 40% 27 23 20% 0% Poorest Second Middle Fourth Richest Source: Produced from LSB 2018a. Note: Child mortality per 1,000 live births in the five years preceding the LSIS II 2017 survey. Figure 7.16 Prevalence of Underweight and Stunting among Children under 5 in Lao PDR, 2017 80% 63% 62 60% 35 40% 27 23 20% 0% Poorest Second Middle Fourth Richest Source: Produced from LSB 2018a. Note: Prevalence of moderate and severe underweight and stunting 177 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 disease in early childhood, is often one of the causes 7.4.1 Natural Resource (Fewtrell et al. 2007; World Bank 2008). Poor nutritional Contribution to GDP status in turn substantially increases the risk of mortality from infectious disease (Olofin et al. 2013), setting in motion a vicious circle disproportionately affecting the Natural resource sectors contributed one-third of GDP poor. in Lao PDR in 2018. Agriculture, forestry, and fishing contributed the largest share, followed by electricity production and mining and quarrying (Figure 7.17). 7.4 Natural Resources While value added per worker is many times higher in electricity production and mining and quarrying than and Poverty in agriculture, forestry and fishing, the latter sectors provide for two-third of total employment and form the The poor are highly dependent on agriculture, capture basis of the livelihood of the vast majority of the poor fisheries, and non-timber forest products (NTFPs) from (World Bank 2019a). local forest resources. They are also highly dependent on forest and vegetation covers that regulate water However, the contribution of these sectors does services and mitigate flash floods and soil erosion. not provide a full view of the contribution of natural The protection, productivity and quality of these natural resources to GDP and household income and resources, the poor’s access to these resources, and consumption. Natural resources, such as NTFPs and their sustainable management are therefore essential fish, are important sources of household self-collected for the poor’s livelihood, food security, balanced energy and food that may not be adequately reflected nutrition, and poverty alleviation. in GDP. Natural resources are also important for foreign tourism to Lao PDR as well as for domestic tourism and recreation. There are over 1,300 natural sites for tourism and 4.2 million foreign tourists visited Lao PDR in 2018 (LSB 2019). Tourist revenues were US$811 million for the year, an amount equivalent to 4.5 percent of GDP (MOICT 2019). Figure 7.17 Natural Resource-based Sectors Contribution to GDP in 2018 (LAK Billion) 30,000 20% 23,943 15.7% 25,000 15% 20,000 16,530 10.8% 15,000 10% 9,160 6.0% 10,000 5% 5,000 0 0% Agriculture, Electricity Mining and Agriculture, Electricity Mining and forestry, fishing quarrying forestry, fishing quarrying Source: Produced from LSB 2019. 178 Chapter 7 Natural resources also provide an indirect contribution 7.4.2 Agriculture to GDP. Forests provide regulation services that reduce flash floods, flooding, landslides and droughts The agricultural sector in Lao PDR has undergone with damages to productive assets, and prolong the substantial changes over the last two decades, useful life of productive assets (for example, reduced contributing to poverty reduction across the country. sedimentation of reservoirs). The value of these These changes include a substantial expansion of regulation services has not been quantified. agricultural cropland, larger land holdings per farm household, crop diversification, a transitioning from Agriculture, forestry, and fishing contributed 15.7 subsistence to commercial agriculture, intensification, percent of GDP in 2018. Two-thirds of that 15.7 and mechanization with increased reliance on modern percent came from crop cultivation, followed by inputs (that is, improved seeds, chemical and organic fishing, livestock, and forestry (Figure 7.18). While fertilizers, and pesticides) and machinery (that is, the agricultural, forestry, and fishing share of GDP tractors), and a substantial increase in cattle and pigs has declined substantially over the past two decades (LSB 2019; MAF 2012). Nevertheless, crop productivity from 34 percent in 1999 to 16 percent in 2018, total remains far below potential (see section 4.4) and most of employment in the sectors increased by 12 percent and the rural poor in Lao PDR are agricultural small-holders. the real value added from the sectors increased by 80 percent (World Bank 2019a). This has contributed to a Cultivated land increased by two-thirds from 0.85 million rise in farm population income, but agricultural, forestry hectares in 1998/99 to 1.4 million hectares in 2010/11 (5.9 and fishery GDP per worker in Lao PDR is only one- percent of total territory), according to the Lao Census of tenth of industrial and service sector GDP per worker,74 Agriculture 2010/11 Highlights (MAF 2012).75 While farm shedding light on the poverty in the sectors, the need households declined from 84 percent to 77 percent of all for increased agricultural productivity, access to off-farm households over this time period, the farming population natural resources, and off-farm income opportunities to increased from 4 million to 4.5 million due to population alleviate poverty. growth. But average farm household land holding nevertheless increased from 1.6 ha to 2.4 ha; the share of farm households with less than 1 ha of land declined from 36 percent to 22 percent; the share of households with more than 2 ha increased from 27 percent to 46 percent; and the share of households with 1–2 ha remained relatively constant at about one-third (MAF 2012). Figure 7.18 Agriculture, Forestry, and Fishery Contribution to GDP, 2018 (LAK Billion; % Share) 20,000 12% 10.7% 16,231 10% 15,000 8% 10,000 6% 4% 5,000 2,984 3,252 2.0% 2.1% 2% 1,476 1.0% 0 0% Cropping Livestock Forestry Fishing Cropping Livestock Forestry Fishing Source: Produced from LSB 2019. 179 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Practically all farm households cultivated at least some under maize cultivation by 50 percent, the total cattle rice. Maize was the second most common crop, grown holding by another 25 percent, and holdings of pigs by nearly 1/4th of all farm households in 2010/11, with a has quadrupled according to the Lao PDR Statistical five-fold increase in area under cultivation from 1998/99. Yearbook 2017 (LSB 2018c), all while total employment As many as 40 percent of farm households cultivated in the sector (including own farm labor) has remained vegetables in 2010/11, up from 35 percent in 1998/99. constant and the sector’s share of employment declined As to permanent crops, 24 percent of farm households by 9 percentage points as employment increased in the grew mango, 8 percent grew banana, and 6 percent industrial and service sectors (World Bank 2019a). grew rubber in 2010/11, representing a less than 20 percent increase from 1998/99. 7.4.3 Forestland The share of farm households producing mainly for sale increased from six percent in 1998/99 to 30 percent Forested area in Lao PDR stood at 13.37 million in 2010/11, underscoring the transformation that the hectares, or 58 percent of total territory in 2015, agricultural sector is undergoing from subsistence to according to the new forest classification system by commercial farming. The share of farm households the Ministry of Agriculture and Forestry (GoL 2018; producing mainly for sale was about the same in MAF 2018). This constituted mostly mixed forest lowlands, midlands and uplands, and in urban and rural (mixed deciduous, coniferous, and mixed coniferous villages with road access, but somewhat lower at about and broadleaved), but also evergreen forest, dry 20 percent in rural villages without road. dipterocarp, and plantation forest (Figure 7.19).76 Agricultural intensification was also evident over this Per the forest classification in Article 9 of the Lao period. Chemical fertilizers were used by 42 percent PDR Forestry Law 2007, forested areas of protection of farm households in 2010/11, up from 29 percent in forest, conservation forest, and production forestlands 1998/99; organic fertilizers were used by 41 percent, up constituted over 44 percent of total territory in 2015 while from 34 percent; and 17 percent used pesticides, up from other forest constituted nearly 14 percent (Figure 7.20). 11 percent. Ownership of 2-wheeled tractors increased from 7 percent to 34 percent of farm households while These forested areas are important sources of food use of 2-wheeled tractors increase from 20 percent and cash income, especially for the poor and semi-poor to 61 percent by 2010/11. Tractor ownership among households, as discussed below. Deforestation and rural households increased to 44–46 percent in 2017 forest degradation, as detailed in section 4.3, therefore according to national household surveys carried in disproportionately affect these households. 2017—that is, the LSIS 2017 (LSB 2018a) and the Lao PDR Labour Force Survey 2017 (LSB 2018b)—with 7.4.4 Food and NTFPs ownership even higher among farm households. Cattle ownership increased from 31 percent of farm The rural poor in Lao PDR are highly dependent on households in 1998/99 to 38 percent in 2010/11, with a their local natural resources for their food supply, from 68 percent increase in total cattle to an average holding both on-farm agriculture and livestock, as well as from of 5.3 animals. The share of farm households with forests and water resources. These resources are also buffalos, pigs, chickens and ducks somewhat declined important sources of cash income. from 1998/99 to 2010/11. The rural poor’s own produced food accounted for as The agricultural sector has continued to expand much as 82 percent of their total food consumption in since the last agricultural census in 2010/11. Paddy 2012/13. Nearly half of the food consumption of the rice area has increased by another 10 percent, area rural poor was rice. Meat, fish, and vegetables and 180 Chapter 7 Figure 7.19 Forested Area by Type of Forest in Lao PDR, 2015 (Million ha; % of Territory) 9.44 10 12% 40.9% 10% 8 8% 6 6% 4 2.61 4% 11.3% 2 0.14 1.19 5.2% 2% 0.6% 0 0% Evergreen Mixed Dry Plantation Evergreen Mixed Dry Plantation Dipterocarp Dipterocarp Sources: Produced from MAF 2018 and GoL 2018. Note: Mixed forest refers to mixed deciduous, coniferous, and mixed coniferous and broadleaved. Figure 7.20 Forested Area by Forest Classification in Lao PDR, 2015 (Million ha; % of Territory) 4.62 5 25% 20.0% 4 20% 3.47 3.14 15.1% 13.6% 3 15% 2.14 9.3% 2 10% 1 5% 0 0% Protection Conservation Production Other forest Protection Conservation Production Other forest Forest Forest Forest Forest Forest Forest Source: Produced from GoL 2018. Note: “Other forest” is “forest outside the above three forest categories.” tubers accounted for about 45 percent (Figure 7.21). Nearly nine percent of farm households engaged This includes food both from their agricultural production in aquaculture in 2010/11, also nearly unchanged as well as food from the forest and water resources. from 1998/99. About two-thirds of these households produced only for their own consumption. About 67 percent of farm households engaged in capture fisheries in 2010/11, about unchanged from 1998/99. Nearly 70 percent of farm households exploited public About 77 percent of these households produced only for forestland for various products in 2010/11. The most own consumption. Of the farm households engaged in common products were fuelwood, mushrooms, fruits and capture fisheries, almost all households fished in rivers vegetables, and bamboo (Figure 7.23). Nearly 40 percent and as many as 37–40 percent also fished in lakes/ of these households sold some of these products to reservoir or rice fields (Figure 7.22). supplement their income. 181 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Figure 7.21 Food Consumption of the Rural Poor in Lao PDR (% of ConsumptionV), 2012–13 100% 60% 82% 48% 50% 80% 40% 60% 30% 40% 18% 20% 15% 13% 18% 20% 7% 10% 0% 0% Own produced food Food from market Rice Meat Fish Vegetables, Other tubers Source: Produced from LSB and World Bank 2014. Figure 7.22 Farm Households Engaged in Capture Fisheries in 2010/11, Place of Fishing 92% 100% 80% 60% 40% 37% 40% 29% 21% 14% 20% 10% 0% River Lake/reservoir Rice field Swamp Other Irrigation Village pond canal Source: Produced from MAF 2012. Figure 7.23 Farm Households Exploiting Pubic Forests in 2010/11, Type of Products 93% 100% 80% 80% 71% 64% 59% 60% 40% 20% 5% 0% Fuelwood Mushrooms Fruit and Bamboo Other Timber vegetables Source: Produced from MAF 2012. 182 Chapter 7 A detailed analysis of the Lao Expenditure and was reported as important in nearly 70 percent of the Consumption Survey 2007/08 (LECS IV) confirms districts, and rattan in almost 60 percent. Only benzoin, the importance to the poor of the food they produce an important local species, was absent in this analysis, themselves and of wild food (Fenton et al. 2010). As because the producing districts in northeastern Lao much as 76 percent of all food consumption among PDR did not respond to the survey. the poor is either on-farm own produced or wild food from forests and local water resources (Figure 7.24). The PEN Study reports that NTFP species in Lao This ranges from 54 percent of meat consumption to PDR are harvested from three clearly differentiated 85 percent of rice consumption. Rice consumption is domains: old-growth natural forests, secondary forests, practically exclusively from on-farm production while and young fallows. Only three of the thirteen main the source of vegetables and fruits and meat is evenly nationwide and regional species were reported as split between the farm and forests. Almost all fish fully harvested from the natural forest. Four species consumption is from local water resources, mostly rivers. were described as secondary forest species and two as fallow species. The remaining four species were This points to the importance of the forests and water classified as harvested in more than one domain. resources as sources of protein, dietary variety, and overall nutritional value. About 17 percent of all food The districts reported a noticeable decline in the consumption of the poor came from the forest and local availability of forest NTFP species and an increase water resources. Perhaps most importantly, forests and in the two fallow species. Declining quality of NTFPs rivers are an essential safety net during times of crisis was also reported. District respondents attributed the and low agricultural periods (Fenton et al. 2010). NTFP resource decline primarily to overharvesting and the practice of rotational cultivation. Northern districts A Poverty-Environment Nexus (PEN) Study in the reported active market developments, especially close lower Mekong subregion carried out a district survey to the China border. Price increases were noted for of non-timber forest products (NTFPs) in Lao PDR in forest species, together with declining availability of 2005 (World Bank 2006; 2012). The PEN Study reports many species. Conversely, the two fallow species that the 39 districts responding in the survey reported showed an increase in availability and marketed a total of 37 different marketed NTFP species. Eight quantities. Some domestic cultivation, predominantly in species were reported as important marketed species the Northern provinces, was reported for seven of the in at least two of the three regions of Lao PDR and five thirteen main species and for five secondary species. other species were important in one region. Cardamom Figure 7.24 Shares of Food Consumption among the Poor in Lao PDR, 2007/08 100% 80% 17% 41% 60% 68% 85% 27% 40% 59% 20% 35% 27% 3% 0% All Food Rice Fruits and vegetables Fish Meat Own produced Wild Source: Produced from Fenton et al. 2010. 183 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 The PEN Study report concludes that market pressure main reason and 7.5 percent reported drought as the from China and Vietnam is an important factor triggering main reason (LSB 2018b).79 NTFP resource decline. Communities’ customary regulations are still in place but are weak in the face The Lao Expenditure and Consumption Surveys (LECS) of high market demand and in the absence of a formal conducted every five years by the Lao Statistics Bureau regulatory framework. The disappearance of some shed some light on the issue of flooding and drought of the NTFP resources would substantially affect in relation to poverty. Nearly 20 percent of households broad numbers of upland communities, where poverty surveyed in LECS 2002/03 lived in villages that reported incidence remains high (World Bank 2006; 2012). that recurrent drought is a major restriction on earnings, and about 30 percent lived in villages that reported that More recently, an NTFP database has been developed recurrent flooding is a major restriction. Analysis of by the TABI project. 77 The database is continuously the data found that poverty incidence was significantly updated and contains several sub-databases. As of higher among villages that reported recurrent drought the first half of 2017, the sub-databases contained (i) being a major restriction on earnings than among primary NTFP database with nearly 10,800 entries villages that did not report this. Furthermore, poverty from 231 villages in 22 districts in 9 provinces; (ii) wood incidence was lower in villages that reported recurrent database with over 7,800 entries from 102 villages in flooding being a major restriction on earnings.80 3 districts in Luangprabang Province; and (iii) aquatic database with over 8,400 entries from 257 villages, but In the LECS 2007/08 survey, about 15 percent of had not been cleaned or maintained. villages reported that recurrent drought is a major restriction on earnings, and 21 percent reported that Analysis of the NTFP database in 2016–2017 shows recurrent flooding is a major restriction. Drought as a major that over 500 NTFP species were collected in forests, restriction on earnings is again correlated with poverty and over 200 in riparian areas, over 200 in bush fallows, most prevalent in the GoL’s 47 priority districts for poverty and over 300 species on other lands. As much as 50 alleviation, the group of districts with the highest poverty percent of total collected NTFPs are used for food, 30 incidence.81 There are, however, none of these relations percent are sold, and 205 are for medicinal and other with flooding as a major restriction on earnings.82 purposes. Various mushrooms, orchids, bamboo, and palm generate the most household income. Thus, from a perspective of alleviating poverty, an increased focus is needed on mitigating and managing 7.4.5 to Climate Risks climate and natural disaster risks in terms of drought among the poorer communities. The LECS surveys can serve as an important instrument in identifying Natural disasters are imposing a substantial cost on Lao priority communities. PDR each year, as discussed in section 4.6. Databases such as DesInventar and EM-DAT provide the basis for 7.4.6 National Protected Areas estimating these costs.78 The large majority of natural disasters in Lao PDR recorded by these databases are flood and storm events. However, silent disasters— The system of National Protected Areas (NPAs) in Lao such as droughts—may be underreported. As many PDR was established in 1993. It consists of 20 NPAs as 31 percent of rural villages reported in the Lao PDR and 3 National Parks areas covering about 38,600 km2 Census of Agriculture 2010/11 that they are prone to or 16 percent of the total territory of Lao PDR. Most of flood and 70 percent reported they are prone to drought the NPAs have low population densities of less than 10/ (MAF 2012). According to the Lao PDR Labour Force km2, some have low-medium densities of 10–30/km2, Survey 2017, 15 percent of rural households reported and in rare instances do population densities exceed that their income declined from the previous year, of the national average of 29/km2 (Figure 7.25). which nearly 5 percent reported that flooding was the 184 Chapter 7 Poverty status in the NPAs is, however, somewhat 7.4.7 Land Concessions different. Poverty density—that is, number of poor people per km2—is relatively high in some of the NPAs in the Natural resource sectors are often competing against Mekong Corridor in the provinces of Savannakhet and one another for land and water. Agriculture and forestry Saravane, and of medium density in several NPAs in the plantations, mining, and hydropower development can northern region and south/central regions (Figure 7.26). provide high economic returns per hectare of land and water use, but potentially at the expense of the This points to the importance of balancing the objectives local population in terms of loss of access to natural of poverty reduction and conservation in the NPAs. resources for their livelihood, relocation, and pollution Participatory approaches to resource management and health impacts. can enhance sustainability, enhance new sustainable sources of income, as well as contribute to reducing This underscores the importance of sustainable encroachment by outside commercial interests. development of natural resource sectors with protection of the poor, including adequate and timely In a conservation and sustainable resource management compensation for loss of natural resources that project in the Hin Nam No National Protected Area in underpin the poor’s livelihood. Khammuane Province, communities shortlisted NTFPs for income generation through sustainable management and marketing. The marketing and demand potential of these NTFPs were then assessed, and a final NTFP selected for sustainable income generation (AFC 2013). Figure 7.25 Population Density and Location of National Protected Areas (NPAs) in Lao PDR Sources: Population density in 2015 (left) from Epprecht et al. 2018. Map of NPAs (right) from World Bank 2019b. 185 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 Figure 7.26 Lao PDR Poverty Density (2015, left); Location of National Protected Areas (NPAs, Right) Sources: Poverty density in 2015 is from LSB 2016a. Map of NPAs (dark green) is from World Bank 2019b. Land concessions in Lao PDR have not been without hectares were in tourism (75,000 ha), manufacturing/ controversy. As it became evident that many land processing (23,000 ha), and various industrial and concession projects were having negative effects on service sectors (6,000 ha).84 the environment and the local population, GoL issued moratoria on land concessions, the latest in 2012 for Agriculture: The inventory contains 360 agricultural mining, rubber, eucalyptus, and some other plantations projects covering 140,000 hectares. Sugarcane, (Hett et al. 2018). The moratorium on eucalyptus and jatropha, coffee, and cassava constituted 94,000 acacia plantations was lifted in 2018. hectares, followed by livestock with over 31,000 hectares, and other concessions and leases with less The State Land Leases and Concessions Inventory than 15,000 hectares. Domestic investors stood for was the first national inventory of land concessions and 40 percent of the projects covering 20 percent of the leases and was prepared by the GoL between 2007 area of the concessions and leases. The largest foreign and 2010 with collection and analytical support from investors are Thai with 40 percent of the area. Germany and Switzerland. The inventory is detailed in Schoenweger et al. (2012). It contains a total of 2,642 Forestry: The inventory contains 367 tree plantation land concessions and leases with a land area of 1.1 projects covering 306,000 hectares. As many as 225 million hectares, or almost as much as all land under of the projects are rubber plantations (130,000 ha), agricultural crop cultivation in Lao PDR at that time. followed by 49 eucalyptus projects (96,000 ha), 5 acacia Nearly half, or 1,291 concessions and leases, covering projects (40,000 ha), and 23 rubber and other species an area of 1.0 million hectares were in agriculture (15,000 ha). Another 65 projects invest in other species (140,000 ha), forestry (306,000 ha) and mining with an area of 26,000 hectares. exploitation (549,000 ha).83 The remaining 104,000 186 Chapter 7 Foreign investment projects cover 79 percent of areas concessions and leases, 36 percent for mining under forestry concessions and leases (ca. 242,000 ha), concessions and leases, and 39 percent for forestry domestic projects cover 11 percent (34,000 ha), and concessions and leases. Thus, any negative effects joint ventures cover 10 percent (30,000 ha). The largest on these communities only exacerbate their economic investors are Chinese (87,000 ha), Vietnamese (63,000 hardship and undermines the natural resource base of ha) and Indian (54,000 ha). China dominates in acacia their livelihood. plantations, Vietnam in rubber, and India in eucalyptus. Lao DECIDE Info—a joint initiative by the governments Mining exploitation: The inventory contains 564 mining of Lao PDR and Switzerland—has been updating the exploitation concessions and leases with a total land inventory of land concessions and leases and has area of 549,000 hectares. Nearly three-fourths, or 413, developed a methodology for assessing the quality of these projects were by domestic investors covering of investments. This methodology was applied to 114,000 hectares. A total of 127 projects were by foreign an updated inventory of agricultural and mining investors covering 355,000 hectares, of which 69 projects concessions in Luangprabang Province (Hett et al. (97,000 ha) by Chinese investors and 32 projects 2018). The updated inventory showed a 77 percent (233,000 ha) by Vietnamese investors. Joint ventures increase in the number of land concessions in the constituted 24 projects with an area of 80,000 hectares. province from 2010 to 2014. Most of the concessions were domestic investments and were small-scale A total of 365 concessions and leases (57 percent) mining of sand and gravel, mostly with less than 1 are sand/gravel, gravel/stone, and limestone projects hectare per project. Only 17 percent of the projects mostly owned by domestic investors and of small and were foreign investment but occupied 81 percent of total moderate size. Thereafter follows 116 zinc/tin, copper, land concession area. Rubber was the most dominant iron, gold, bauxite, and coal projects (21 percent) with a product in these concessions with an average area of total area of 453,000 hectares (83 percent of area). nearly 3,000 hectare per project. The assessment found At the time of the preparation of the concession and > All livestock projects, 90 percent of sand projects, lease inventory, there were an additional 111 mining and 60 percent of gravel projects were generally exploration concessions covering 1.0 million hectares, perceived as positive by the affected villagers. dominated by exploration for gold and copper, followed by iron, potash, bauxite, lead/zinc, and coal > In contrast, four out of five rubber plantation projects (Schoenweger et al. 2012). were perceived as predominantly negative. One dimension of interest is the geographic distribution > Rubber plantations were associated with land of land concessions and leases in relation to the conflict, inadequate consultation of affected socioeconomic status of villages in the areas of the villagers, and loss of access to forest products. concessions and leases. This dimension was assessed by mapping land concessions and leases with small > Small concessions were generally perceived as area estimates of poverty incidence. 85 Schoenweger more positive than large concessions. et al. (2012) found that poverty incidence in the areas with domestic invested concessions and leases in Since the time of the preparation of the inventory of land agriculture, forestry, and mining was substantially below concessions and leases, banana plantations, mainly the national average poverty incidence of 34 percent. involving Chinese investors, took hold in Lao PDR. Total But the total area of these concessions and leases is area harvested reached 28,600 hectares in 2016 and only a small fraction of the areas with foreign invested declined to 22,605 in 2017, according to FAO.86 On the concessions and leases. Poverty incidence in the areas order of two-thirds of this area may be foreign invested with foreign investments was 32 percent for agricultural plantations using imported banana species. The sector 187 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 has been suffering from complaints of pervasive health Hydropower development with reservoirs is very effects among workers and pollution of land and water land intensive. To provide a perspective on the land resources due to elevated use of pesticides and other requirement, 28 hydropower projects in Lao PDR in agrochemicals. Provincial government authorities operation or under construction were analyzed during began prohibiting new banana plantations and closure the preparation of this report for which size of reservoir of existing ones already two years ago. is published. The total installed capacity of these projects is over 6,200 MW and are currently or will 7.4.8 Hydropower Development eventually inundate an area of more than 1,700 km. The size of the reservoirs of the 28 hydropower plants Hydropower development in Lao PDR has facilitated an ranges from 1.5–9.6 km2 for eight of the plants, to increase in household electrification from 15 percent in 105–450 km2 for five plants. From another perspective, 1995 to 94 percent in 2018 (EDL 2019). Electric power reservoir size ranges from 2–9 hectares per MW for generation has developed at a rapid pace in Lao PDR eight power plants, to over 40 hectares per MW for four over the last decade with installed capacity increasing power plants. On average, reservoir area is 27 hectares nearly ten-fold from 2009 to over 7,000 MW in 2018, per MW, or about 5.1 hectares per GWh per year.87 with a majority of electricity production being exported to neighboring countries. In contrast, utility-scale PV solar plants would, in many locations in Lao PDR, require only about 1 hectare per Around 75 percent of installed power generation GWh per year of electricity production.88 So as the cost capacity in 2018 was derived from hydropower on the of utility scale PV solar electricity production continues tributaries of the Mekong River spread over more than 60 to decline, hydro-solar hybrid solutions will become hydropower plants and one large coal fired power plant— increasingly attractive. This will include floating PV Hongsa Thermal Power with 1878 MW—that came into solar plants on hydro reservoirs. Over 1 GW of floating operation in 2015/16. The first hydropower plant on the solar was installed worldwide by mid-2018 (World Bank Mekong River in Lao PDR—Xayaburi Hydroelectric et al. 2018). In Lao PDR, utilizing on the order of 20 Power with 1,285 MW—commenced operations in late percent of the reservoir surface for floating utility-scale 2019 and Don Sahong with 260 MW in 2020. PV solar plants has the potential to double the electricity generation in the country.89 Floating PV solar plants have Most of Lao PDR’s hydropower plants are based already been proposed on a number of hydropower on dams with reservoirs. Total inundated area by reservoirs in the Sekong River Basin (IFC 2018). hydropower plants in operation, under construction and at planning stage is projected to be over 3,000 km2, or Utility-scale PV solar power is less land-intensive than 300,000 hectares, with an estimated total resettlement hydropower, and it has far fewer environmental and of 280,000 people (Fenton and Lindelow 2010). This social impacts. Solar power produces more electricity in population is generally poorer than the national average. the dry season during which hydropower production in Poverty incidence among the population living in areas Lao PDR declines. to be inundated by hydropower development for which area of reservoirs is published was 47 percent in 2005, Hydropower can nevertheless provide high economic compared to a national average of 34 percent (Fenton benefits per hectare of land. The economic rent and Lindelow 2010). Given the mixed experience with accruing to hydropower in Lao PDR—that is, the value resettlement from hydropower development in the past of hydropower electricity above capital expenditure, in Lao PDR, it is therefore essential that resettlement variable cost, and normal return to capital—has practices receive full attention. been estimated at an average of about US$30/MWh (Boungnong and Phonekeo 2012). Two-thirds of this rent may accrue to Lao PDR, one-third to the importing 188 Chapter 7 country for the electricity that is exported, and some and Consumption Survey 2002/03 (LECS III), district of the rent that accrue to Lao PDR is shared with level poverty incidence in 2005 derived from the Lao the project developer (MacGeorge et al. 2010). For Housing and Population Census 2005 and LECS III, and illustration, if half of total rent is accrued by GoL, then village level UXO contamination data from the national the economic value of hydropower is on average about UXO survey 1997. Findings from these data are that US$3,000 per hectare per year of inundated land. districts with a high share of villages affected by UXO However, most of the projects have an economic value had substantially higher poverty incidence than less in the range of US$3,000–13,000 per hectare per year, affected districts, had less cultivated land per capita, had with only five projects having an economic value less higher rate of rice insufficiency, had to spend more time than US$3,000 per hectare per year. Four of the five on fuelwood and water collection, and had less access projects with reservoir larger than 100 km2 have the to improved water supply and sanitation (World Bank lowest economic value per hectare—that is, US$330– 2006; 2012). According to the Lao Census of Agriculture 1,875 per hectare per year. 2010/11 Highlights, UXO affect agricultural land in 16 percent of villages (MAF 2012). In contrast, agricultural land values, in terms of rental value, have been reported to be about US$600 per The relation between UXO contamination and poverty hectare per year, illustrating the substantially higher has continued since 2005. The correlation between value of most hydropower projects. However, this high district poverty incidence and high percentage of illustration does not account for environmental and villages affected by UXO was just as pronounced in social impacts of hydropower, nor does it reflect 2015 as in 2005. Reduction in poverty incidence from variation in economic value of hydropower across 2005 to 2015 in districts affected by UXO has been project locations. 90 no faster than in less or not affected districts, despite increased efforts and funding for UXO clearance in 7.4.9 Unexploded Ordnance Lao PDR.91 This suggests that further targeting of UXO clearance towards the poorest and most contaminated (UXO) Contamination districts is needed, along with complementary poverty reduction policies, programs and projects. Lao PDR has included Sustainable Development Goal (SDG) 18 on reducing unexploded ordnance (UXO) The GoL recognizes that UXO contamination poses obstacles to development. UXO affects 14 of Lao severe threats to the population and represents a PDR’s 17 provinces and more than 25 percent of the major barrier to green growth. The National Regulatory total land area. Nationally, over 25 percent of all villages Authority for UXO and Mine Action in Lao PDR (NRA) and close to 25 percent of the total population in Lao was established in 2005 and become operational in PDR are affected by UXO. About 14 percent of villages 2006. NRA is tasked with coordinating and regulating are classified as having a high UXO contamination the overall management of the UXO sector in Lao problem. UXO contamination affects agricultural land PDR, including national, commercial and humanitarian development and implementation of development operators. The NRA leads the country’s policy projects, increases the cost of development, restricts formulation with regards to the UXO/Mine Action sector, movements between villages, slows transportation accredits operators, coordinates operational activities, and communication work, undermines social and manages information and data on UXO, and manages economic development, and has resulted in thousands quality of operations in the sector. of casualties since 1975 (World Bank 2012). UXO Lao was established in 1996 by the GoL, with The Poverty-Environment Nexus (PEN) Study in a mandate to reduce the number of accidents and Lao PDR found that poverty incidence and UXO casualties from UXO and to increase the amount of land contamination are highly correlated. This finding is from available for food production and other socioeconomic analysis of household data from the Lao Expenditure development. UXO Lao’s approach includes educating 189 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 people on the risks of unexploded ordnance, surveying 7.5 Summary land to find UXO, and destroying the found UXOs. UXO Lao works in the nine most-contaminated provinces in Poverty reduction has been rapid, albeit uneven, in Lao Lao PDR: Huaphanh, Luangprabang, Xiengkhuang, PDR over the last two decades. Poverty incidence in rural Khammuane, Savannakhet, Saravane, Sekong, areas was more than three times as high as in urban Attapeu, and Champasack. 92 areas in 2019. About 88 percent of the poor consequently lived in the rural areas, and the poverty-environment Before 2014, UXO Lao focused on areas that were linkages in Lao PDR are therefore mainly rural. selected based on requests for clearance of land boundaries and UXO reports from villagers. As a 7.5.1 Environmental Health result, the number of UXOs per hectare that was found was small. However, in 2014 UXO Lao adopted an evidence-based survey for cluster munitions, which The poor suffer disproportionately from household were approved by NRA as national procedures in 2015. air pollution, since the poor rely almost exclusively on Using the evidence-based approach led to a more more-polluting energies for cooking—that is, fuelwood— systematic development of surveys and destruction of in contrast to better-off households’ use of less- UXOs. Between July 2014 and April 2017, 43,837 UXOs polluting energies such as LPG/electricity and charcoal. were destroyed. 93 However, the experience of the transition to clean cooking energies in Vietnam suggests that a much Several governments and international organizations larger share of the population in Lao PDR, including have supported Lao PDR’s UXO clearance agenda. among lower-income households, should be able to The United Nations Development Program (UNDP) is transition to clean energies. currently implementing the project “Moving Towards Achieving SDG 18: Removing the UXO Obstacle The poor have much less access to improved to Development in Lao PDR.”94 The Project, to be sources of drinking water and sanitation than better- implemented from 2017 to 2021 will include additional off households. The use of purchased bottled water improvements in the approach used to find UXO, such has increased rapidly in Lao PDR but is still beyond as using data and prioritization to focus clearance in the means of the poor. The poor therefore rely on the high priority and high contamination areas, thereby boiling of drinking water, using fuelwood that causes resulting in more UXO finding. substantial negative health effects. Potential solutions to this problem include the use of clean treatment methods Given that UXO contamination is a significant obstacle such as ceramic filtering or solar disinfection of water to poverty reduction and green growth, further efforts prior to drinking. The poor are also facing drinking to address it are required, in particular to focus on water of lesser quality than better-off households, again technical assistance to help UXO Lao and other underscoring the need for clean point-of-use treatment organizations to use more-innovative UXO detection methods. The largest disparity between the poor and technologies. For instance, Sato and Kadoya (2018) better-off households is the lack of access to improved propose using an innovative visualization system for sanitation and the practice of open defecation. While a metal detector that does not use Global Navigation the situation has improved over the last decade, there is Satellite System (GNSS) information. These would still much to be achieved. be particularly useful in areas where dense bushes constrain the use of GNSS/GPS. They also noted that Young children are often disproportionately affected by the metal detectors used by staff on the field were environmental pollution, and poor children are more outdated, resulting in inefficiencies for UXO detection. likely to die from illnesses caused by pollution, in part UXO Lao has also identified the need to train its staff, due to their poorer nutritional status and less access particularly in areas such as use of computers and to adequate treatment and health care. Under-5 child data analysis. mortality rates in children from the two poorest quintiles 190 Chapter 7 of the population are more than twice as high as The poor are vulnerable to climate risk. A high share children from the two richest quintiles. Children from of the population is at risk of periodic flooding and the poorest quintile of the population are nearly four drought. While major flooding events are well recorded, times as likely to be underweight and nearly three times silent disasters such as droughts seem to be under- as likely to be stunted than children from the richest recorded, and household surveys point to how droughts quintile. Household air pollution and inadequate drinking are disproportionately affecting the poor, pointing to water and sanitation contribute to these disparities. the need for more interventions for risk reduction and management in poor communities affected by droughts. Potential interventions to address major environmental health risks in Lao PDR are assessed in chapter 9. These Lao PDR has many national protected areas (NPAs) interventions, if also benefiting the poor, have the potential that cover about 16 percent of its territory. Many to provide more equity in environmental quality and health. people reside inside and at the boundary of the NPAs and tend to be poorer than the average. This points to 7.5.2 Natural Resources the importance of balancing the objectives of poverty reduction and conservation in the NPAs. Participatory approaches to resource management can enhance Natural resource sectors contributed one-third of GDP sustainability and enhance new sustainable sources of in Lao PDR in 2018. Agriculture, forestry, and fishing income, as well as contribute to reducing encroachment contributed the largest share, followed by electricity by outside commercial interests. production, and mining and quarrying. However, the contribution of these sectors does not provide a full view Land concessions and leases expanded at a rapid of the contribution of natural resources to GDP in terms pace from the early 2000s in Lao PDR, especially for of the value of non-marketed goods, tourism, and the agriculture, forestry plantations, and mining. Especially regulation services that forests provide for the protection large concessions were not without negative impacts of productive assets. on local communities and moratoria were implemented. More recently, the expansion of banana plantations has Agriculture development in the last couple of decades been halted due to numerous reports of negative health has contributed to rapid household poverty reduction effects from pesticides and other agrochemicals as well through expansion of arable land, increased size of as water pollution. Lao DECIDE Info—a joint initiative household land holdings for agriculture, intensification by the governments of Lao PDR and Switzerland—has and mechanization, commercialization, and crops of developed a methodology for assessing the quality higher value added. of land-concession investments that may have the potential to be applied successfully to new projects to The poor continue to depend on natural resources ensure sustainability and benefits for local communities. about as much as before, since most of the poor are rural small-holders. A substantial share of their food is Hydropower has proceeded rapidly over the last decade from the forest and local water resources. Own-caught and a half. While the economic value of hydropower fish and wild meat are important sources of protein per hectare often is higher than many other uses of the for the poor, and forest food contributes substantially land, large land areas have been and will be inundated to dietary variation and nutrition. NTFPs are also an with resultant relocation of communities. Hydropower important source of income for the rural population and development often also has numerous other negative the poor, but some NTFPs are being over-harvested effects on communities, the environment, and natural and are on the decline in several provinces. While Lao resources that need to be carefully mitigated and PDR still has substantial forested lands, degradation properly compensated, as well as fully internalized in and deforestation disproportionately affect the poor. calculations of its economic value relative to alternative development scenarios. Hydropower with reservoirs 191 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 is land intensive, on the order of five times more than poorest and most contaminated districts is needed, PV solar plants in Lao PDR. As the cost of PV solar along with complementary poverty reduction policies, continues to decline, there are likely to be substantial programs, and projects. Furthermore, strengthening the opportunities to incorporate PV solar (and other use of data-driven analysis and incorporating the use of renewables) in electricity generation, and in particular new technologies can potentially increase the efficiency hybrid solutions with floating PV solar on existing and of UXO clearance interventions. planned hydropower reservoirs. The poor are highly dependent on agriculture, capture UXO contamination continues to affect communities in fisheries, and NTFPs from local forest resources. The many parts of the country. Analysis of household data poor are also highly dependent on forest and vegetation along with UXO contamination maps has shown how covers that regulate water services and mitigate flash UXO disproportionately affects the poor. Reduction in floods and soil erosion. The protection, productivity, poverty incidence from 2005 to 2015 in districts affected and quality of natural resources, the poor’s access to by UXO has been no faster than in less affected or these resources, and their sustainable management unaffected districts, despite increased efforts and are therefore essential for the poor’s livelihood, food funding for UXO clearance in Lao PDR. This suggests security, balanced nutrition, and poverty alleviation. that further targeting of UXO clearance towards the 7.6 Notes 68 This chapter was prepared by Bjorn Larsen. 69 Provincial poverty incidence is from LECS V (2012/13). District poverty incidence is a small-area estimation using a combination of LECS V and the Lao PDR Population and Housing Census 2015. 70 World Bank (2020) does not present poverty incidence in the GoL priority districts. The most recently available data are therefore from 2013. 71 World Bank (2020) does not present poverty incidence by topography. The most recently available data are therefore from 2013. 72 Improved sources of drinking water include delivered and packaged water (for example, bottled water), based on the new Sustainable Development Goal (SDG) definition (LSB 2018a). 73 Appropriate methods include boiling, bleaching/chlorination, filtering, and solar disinfection. 74 Workers in agriculture, forestry, and fishing include farmers’ own labor. Calculated from World Bank (2019). 75 Temporary and permanent crops. 76 Forestlands (that is, as stated in the Lao PDR Forestry Law 2007: “all land plots with or without forest cover, which are determined by the state as forestlands”), however, constitute a much larger share of total territory in Lao PDR. For instance, current forest (58 percent) and potential forest (28 percent) (bamboo and regenerating vegetation) constituted 85 percent of total territory in 2015 (MAF 2018). 77 http://www.tabi.la/activity/ntfp/ 78 See https://www.desinventar.net/ and https://www.emdat.be/ and https://www.preventionweb.net/english/ 79 Other main reasons among rural households included enemy crop (8.4 percent), epidemics (2.3 percent), no agricultural production (20.6 percent), unemployment (18.5 percent), and price inflation (8.2 percent). 80 The correlations between poverty and drought and between non-poor and flooding are statistically significant at 99% confidence level. 81 The correlation is statistically significant at 99% confidence level. 82 No analysis of this issue has been undertaken of LECS V (2012/13). 192 Chapter 7 83 Mining exploration concessions and leases were not included in the inventory; all reported areas are approximate. 84 The inventory did not include concessions for hydropower development; all reported areas are approximate. 85 Epprecht et al. (2008) prepared small-area estimates of poverty incidence for the year 2005 based on the Lao PDR Housing and Population Census 2005 and the Lao Expenditure and Consumption Survey 2002/03 (LECS III). 86 http://www.fao.org/faostat/en/#data/QC 87 Applying a plant factor of 0.6 reflecting an average for hydropower in Lao PDR. 88 Estimated based on an annual horizontal global solar irradiation of 1,850 kWh/m2. World Bank et al. (2018) reports a global estimate of 0.8 hectares per GWh per year of electricity production from floating PV solar. 89 Calculated based on solar electricity production of 1 GWh per year per hectare. 90 Recall that the analysis assumes a fixed rent of US$30/MWh for all projects. 91 This analysis was undertaken as part of preparing this report, using district poverty incidence data from LSB (2016a). The district poverty incidence data were produced by combining data from LECS 2012/13 and the Lao Housing and Population Census 2015. 92 https://www.la.undp.org/content/dam/laopdr/docs/Project%20Briefs_Fact%20Sheets/UXO/UNXO%20Lao%20brochure.pdf 93 https://www.jmu.edu/cisr/_pages/CMRS/cmrs-pdfs/UXO-Lao.pdf 94 http://www.la.undp.org/content/lao_pdr/en/home/projects/Moving-Towards-Achieving-SDG-18-Removing-the-UXO- Obstacle-to-Development-in-Lao-PDR1.html 7.7 References AFC. 2013. Piloting Sustainable Management and Marketing of NTFPs in the Hin Nam No Region. Summary Report. Prepared by the Agro Forestry Consulting Company. Project managed by GIZ and IP-Consult. Barney, K. 2016. “Sparking Development or Consuming the Countryside? Lao Charcoal Commodity Networks in the Mekong Region.” Asia Pacific Viewpoint 57 (2): 194–206. Boungnong, C., and D. Phonekeo. 2012. “Economic Rent from Hydropower Development in the Case of Lao PDR.” GMSARN International Journal 6: 35 – 44. DOF (Department of Forestry). 2019. Master plan for the National Protected Areas of Lao PDR 2020-2025. Ministry of Agriculture and Forestry. Prepared by the LENS 2 Sub-Project Institutional Capacity Building in Protected Area and Protection Forest Management and Wildlife Conservation. Vientiane: DOF. EDL (Electricite du Laos). 2019. Electricity Statistics 2018. Vientiane: EDL. Epprecht, M., N. Minot, R. Dewina, P. Messerli, and A. Heinimann. 2008. The Geography of Poverty and Inequality in the Lao PDR. Swiss National Centre of Competence in Research (NCCR) North-South, University of Bern, and International Food Policy Research Institute (IFPRI), Geographica Bernensia, Bern. Epprecht, M., N. Bosoni, A. Ehrensperger, et al. 2018. Socio-Economic Atlas of the Lao PDR: Patterns and Trends from 2005 to 2015. Centre for Development and Environment, University of Bern, and Lao Statistics Bureau. Fenton, F., J. Krahn, B. Larsen, and M. Lindelow. 2010. “Household Reliance on Natural Resources in Lao PDR: Some Evidence from the LECS Surveys.” Background Paper for the Lao PDR Development Report 2010, World Bank. A World Bank Study. Washington, DC: World Bank. Fenton, N., and M. Lindelow. 2010. “The Socio-Geography of Mining and Hydro in Lao PDR: Analysis Combining GIS Information with Socioeconomic Data.” Technical Note for the Lao PDR Development Report 2010, World Bank. A World Bank Study. Washington, DC: World Bank. Fewtrell, L., A. Prüss-Üstün, R. Bos, F. Gore, and J. Bartram. 2007. Water, Sanitation and Hygiene: Quantifying the Health Impact at National and Local Levels in Countries with Incomplete Water Supply and Sanitation Coverage. Environmental Burden of Disease Series 15. Geneva: World Health Organization. GoL (Government of Lao PDR). 2003. The National Poverty Eradication Program (NPEP): A Comprehensive Approach to Growth and Development. (September) 193 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 7 GoL (Government of Lao PDR). 2018. Lao PDR Voluntary National Review on the Implementation of the 2030 Agenda for Sustainable Development. July 2018. Government of Lao PDR in Consultation with National and International Partners in Lao PDR. GSO (General Statistics Office) and UNICEF. 2015. Viet Nam Multiple Indicator Cluster Survey 2014, Final Report. Hanoi: GSO and UNICEF. Hett, C., V. Nanhthavong, M. Kenney-Lazar, K. Phouangphet, and S. Hanephom. 2018. Assessing Land Investment Quality: A Methodology to Assess the Quality of Land Concessions and Leases in the Lao PDR. Centre for Development and Environment, University of Bern. IFC (International Finance Corporation). 2018. Final Inception & Scoping Report: Cumulative Impact Assessment and Management of Renewable Energy Development in the Sekong River Basin, Lao PDR. A World Bank Study. Washington, DC: World Bank. LSB (Lao Statistics Bureau). 2016a. Where Are the Poor? Lao PDR 2015 Census-Based Poverty Map: Province and District Level Results. Ministry of Planning and Investment. Vientiane: LSB. LSB (Lao Statistics Bureau). 2016b. Results of Population and Housing Census 2015. Vientiane: LSB. LSB (Lao Statistics Bureau). 2018a. Lao Social Indicator Survey II 2017, Survey Findings Report. Vientiane: LSB and UNICEF. LSB (Lao Statistics Bureau). 2018b. Lao PDR Labour Force Survey 2017: Survey Finding Report. Vientiane: LSB. LSB (Lao Statistics Bureau). 2018c. Statistics Yearbook 2017. Vientiane: LSB. LSB (Lao Statistics Bureau). 2019. Statistics Yearbook 2018. Vientiane: LSB. MacGeorge, R., J. B. Stewart, and E. Vostroknutova. 2010. Fiscal Regime in the Hydro Power Sector. Technical Note for the Lao PDR Development Report 2010. A World Bank Study. Washington, DC: World Bank. MAF (Ministry of Agriculture and Forestry). 2012. Lao Census of Agriculture 2010/11 Highlights. Agricultural Census Office. Vientiane: MAF. MAF (Ministry of Agriculture and Forestry). 2018. Forest Reference Emission Level and Forest Reference Level for REDD+ Results Payment under the UNFCCC. Department of Forestry. Vientiane: MAF. MoH/LSB (Ministry of Health and Lao Statistics Bureau). 2012. Lao Social Indicator Survey (LSIS). Multiple Indicator Cluster Survey / Demographic and Health Survey. Vientiane: MoH and LSB. MOICT (Ministry of Information, Culture and Tourism). 2019. Statistical Report on Tourism in Laos 2018. Tourism Development Department. Vientiane: MOICT. Olofin, I., C. M. McDonald, M. Ezzati, et al. 2013. “Associations of Suboptimal Growth with All-Cause and Cause-Specific Mortality in Children under Five Years: A Pooled Analysis of Ten Prospective Studies.” PLoS ONE 8: e64636. Sato, Motoyuki, and Yoshihiko Kadoya. 2018. “UXO Clearance Operation in Laos.” Proc. 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Clean and Improved Cooking in Sub-Saharan Africa. ESMAP and Africa Renewable Energy Access Program. A World Bank Study. Washington, DC: World Bank. World Bank. 2019a. World Development Indicators. A World Bank Study. Washington, DC: World Bank. World Bank. 2019b. Lao Biodiversity: A Priority for Resilient Green Growth. Green Growth Advisory Program for Lao PDR. World Bank. 2020. Lao PDR Poverty Assessment. World Bank. Vientiane, Lao PDR. World Bank Group, ESMAP, and SERIS. 2018. “Where Sun Meets Water: Floating Solar Market Report—Executive Summary.” Washington, DC: World Bank. 194 8 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic MODELLING ECONOMIC GROWTH AND ITS LINKAGES WITH GREEN GROWTH 95 Chapter Overview This chapter presents the preliminary results of a study of the Lao economy, using a Computable General Equilibrium CGE model, based on a Social Accounting Matrix (SAM). The study focused on the two key dimensions of economic growth in the Lao People’s Democratic Republic: natural capital and poverty. While both these dimensions lack a sufficiently detailed and reliable database, the model estimates that are obtained from available data capture some important features of the country’s development pattern. These features include the widespread nature of poverty and the exclusion of the poor from most sources of, and prospects for, increased income and economic improvement. These features are quantified in this chapter by several indicators based on the SAM as well as by the policy simulations performed with the CGE model. These indicators show that the poor are only scantly connected through the value chains for all activities. On the contrary, the non-poor appear to benefit greatly from backward-induced increases in demand for all industries, from agriculture to tourism. In this respect, the most pro-poor activities, where investment is likely to have the largest impact, appear to be agriculture, mining, public administration, and social services. Rents from natural resources also appear to play a largely positive role in complementing the income of the poor. For an economy based on natural resources, such as the one that characterizes Lao PDR, the CGE methodology adopted here enables the study of a state whose economy is assumed to be at a market equilibrium, but whose supply and demand prices are not necessarily equal to each other. Rather, the basic SAM accounts register a persistent divergence between rents collected by households and firms. This divergence is attributable to the supply of regulatory and provisionary services, and payments to maintain and restore natural capital in order to conserve natural resources’ regulatory and productive capacity. The wedge between demand and supply prices is a consequence of the externality nature of the services provided by the environment. In large part, these environmental services are also public goods that can benefit a variety of sectors of the economy, institutions, and segments of the population, without being appropriated or marketed. In this regard, CGEs allow various market equilibrium solutions to be explored by running different policy experiments that internalize, to a lesser or greater extent, these externalities. The services provided by the environment and their contribution to economic development are important for Lao PDR, which has been the second fastest growing economy in ASEAN and among the world’s 15 fastest growing economies. This growth, however, has entailed progressive environmental losses through massive deforestation and land degradation, and the uncontrolled spread of poverty across Lao PDR’s population. The model design and the policy simulations presented in this chapter aim to capture the idea that environmental deterioration and poverty can be seen as the result of a distorted mechanism of capital accumulation, based on short-term perceived equality between the marginal productivity of capital and its opportunity cost. According to this interpretation, failure to invest in long-term projects and to take into account the nonmarket consequences of economic choices results in unequal distribution of real wealth over time, with the poisonous fruits of past and present pursuit of short-term riches hanging over future generations. 197 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Conversely, strategies that combine investment in produced and natural capital are likely to enjoy important synergies and economies of scale as well as positive impacts on poverty reduction. In particular, the results of the simulations show that increases in the supply ecosystem services not only create values by directly increasing their flows for a wide range of beneficiaries, but also have a positive impact on the productivity of factors such as capital and land. The same results indicate that investing in natural resources may boost development and bring the economy to a higher path of value added and production. This in turn suggests the need to invest in natural resources to maintain the economy on a sustainable path, which could be put at risk by outright rent extraction not accompanied by appropriate maintenance and restoration activities. In general terms, the simulations performed with the CGE model are consistent with two main indications for the economy’s future evolution and for policy actions: First, under increasing investment and progressive commitment to sustainable development (in the form of a greater share of resources devoted to conservation and restoration activities), Lao PDR’s economy will be likely to expand according to a pattern more balanced across sectors and natural and physical capital than in the past. This development should be encouraged by conservation and land-use policies with these aims: (i) lowering the pressure on natural resources, and (ii) achieving better economic performance and greater environmental sustainability both in the short run and in the long run. Second, while investments in both physical and natural capital are critical factors for the promotion and enhancement of economic growth, they are not sufficient to address the problem of non-inclusive development that has plagued the country despite its aggregate growth success in the recent past. To reach poor people and make economic development more inclusive and socially sustainable, public investment policies and appropriate incentives should be directed towards two major goals: (i) lessening the dependence of the poor on subsistence agriculture and rents from natural resources, and (ii) lessening the conditions of spatial and cultural isolation that presently tend to exclude the poor from participating in the economy’s growth. 198 Chapter 8 8.1 Introduction Lao PDR’s economy is undergoing a rapid detailed and reliable database, the model estimates transformation that is especially challenging for public obtained from available data capture some important policies aiming to create the conditions for sustainable features of the country’s development pattern. These and inclusive growth. As a landlocked country bordering features include the widespread nature of poverty and the Cambodia, China, Myanmar, Thailand, and Vietnam, exclusion of the poor from most sources and prospects Lao PDR shares many of the problems of the difficult of income increase and economic improvement. These transition process of its neighbors toward a fuller features also relate to the largely positive and crucial role market-based economy. The country is divided into 18 played by the distribution of rents from natural resources in provinces and has a total population of about 7 million complementing the income of the poor. people, most of whom still live in rural areas. According to recent UNDP data96, this condition is changing rapidly, since urbanization is occurring at a rate of 4.9 percent each year. The country is largely mountainous, 8.2 Lao PDR’s Economic with the most-fertile land found along the Mekong Structure plains. The economic situation in Lao PDR is affected by many climate hazards such as flooding, drought, Recent economic growth in Lao PDR has been landslides, storms, and typhoons. characterized by a shift away from the agriculture sector. The shares of value added of industry and As reported by Henderson (2018), from 1970 to 2010, services sectors in 2014 accounted for 28.8% and 33 natural hazard events occurred in the country, 44.2% and in 2019 30.9% and 42.6% respectively, particularly floods and droughts, which affected almost while agriculture, forestry and fishing accounted for 9 million people and caused economic damages of about 17.8% in 2014 and 15.3% in 2019 (World Bank over US$400 million. In 2013, five major monsoon data.worldbank.org/country/lao-pdr)”. Initially, the value storms hit the country between July and September: added of industry was mainly driven by growth in 12 provinces were severely flooded, and the disaster manufacturing, particularly in textiles and garments. affected 347,000 people. The official estimated loss However, starting in 2000, the value added was driven and damage from the disaster was US$219 million by non-manufacturing industries such as mining, (OCHA 2017). July 2018 was characterized by heavy construction, electricity, water, and gas. Agriculture rains due to the southwest monsoon and Tropical remains largely subsistence-based, although in recent Storm Son-Tinh, which damaged one of seven dams years investments in technology, connectivity, and in a large hydroelectric network along the Xe-Pian capacity building are trying to transform the sector into a River, in Attapeu Province. The collapse of the dam had dynamic one (IFAD 2018). devastating effects on 13 villages and more than 16,000 people—over 10% of the province’s population. The Poor people in Lao PDR are engaged mainly in heavy rains hit other provinces, and according to the agriculture: About 60 percent of the workforce is Lao PDR government, there was flooding in 373 villages employed in this sector (IFAD 2018). However, located in 10 provinces, and roughly 1.5 million people employment in trade, tourism, and food-related services were affected (Henderson 2018). has risen to about 25 percent (Coulombe et al 2016). Agricultural production has steadily grown due to This chapter presents the preliminary results of a study higher crop yields and increases in production areas, of the Lao PDR economy, using a Computable General while productivity is trailing. Rice cultivation accounts Equilibrium CGE model, based on a Social Accounting for 72 percent of the total cultivated area; the farmers Matrix (SAM), focusing on the two key dimensions also cultivate corn, taro, fruits, and vegetables. Coffee, of Lao PDR’s economic growth: natural capital and cassava, sugarcane, and rubber are the main cash poverty. While both these dimensions lack a sufficiently crops (IFAD 2018). According to IFAD’s report (2018), 199 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 the main factors limiting agricultural production and value added was 21% in 2017, according to the Lao productivity typically involve secure access to land, farm Statistical Yearbook 2017. Lao PDR has continued to inputs, technologies, and services, including markets legalize mining and processing activities along with the and rural finance. At the same time, both agriculture capitalization of assets in the mineral sector. During and industrial sectors face the problem of the difficult the 2000s, growth was driven by mining; however, business environment that hampers investment, keeps 97 more recently, a decline in prices and lower-grade firms small and informal, and thereby limits job creation reserves, as well as sector-regulation issues, lowered (Coulombe et al. 2016). its contribution. The power sector has expanded significantly since the mid-2000s, and the associated Lao PDR has made significant progress in poverty construction activities and subsequent commercial alleviation over the past two decades: Poverty rates operation, largely expected to meet demand in have declined from 46% in 1993 to 23% in 2013. While neighboring countries, drove growth. Lao PDR’s the country achieved the Millennium Development installed capacity increased ten-fold between 2000 and Goal target of halving poverty, today the main goal is 2016 to above 6,000MW, mostly through engagement to ensure that the benefits from high economic growth with the private, mostly foreign, investors. are evenly distributed—that is, the pursuit of inclusive and sustainable growth is crucial (UNDP 2019). The The main development challenge facing the country evidence shows that while the poverty rate in Lao is to ensure that the benefits from high economic PDR has declined, the pace of reduction has been growth are more evenly distributed and translated into considerably slower than in regional peers such as inclusive and sustainable human development. This Cambodia and other resource-rich countries—such as means poverty reduction through high and inclusive Chile, Mongolia, Tajikistan, and Uzbekistan—where growth, but also investment in conservation and greater poverty reduction is being achieved through restoration activities in natural capital, which has been the effective use of redistribution policies. Between severely taxed by mining, agricultural expansion, and 1990 and 2015, Lao PDR’s main progress in human deforestation. In fact, Lao PDR’s economic boom has development has been in (i) life expectancy, which been driven primarily by foreign direct investment increased by 13 years; and (ii) GNI per capita, which in natural resource extraction and hydropower. increased by over 200 percent (UNDP 2019). Contamination of the environment is worsened by the presence of unexploded ordinance (UXO) from the Lying along the bank of the Mekong River, Lao PDR Second Indochina War; this UXO continues to destroy has the highest per capita water supply in Asia and lives and limits agricultural production and expansion98. has benefitted enormously from this abundant water resource. Hydropower production has made a large contribution to national output, and multiple hydropower plants are under construction. There is also interest in 8.3 Social Accounting developing small hydropower projects that could create Matrix for Lao PDR economic value and efficiency. One GoL goal is for hydropower to become the country’s biggest source To estimate the 2016 Social Accounting Matrix99 (SAM) of revenue by 2025. However, neighboring countries of Lao PDR in a way that reflects key characteristics of such as Cambodia, Thailand, and Vietnam have raised its economic structure relevant to some of the country’s concerns about the environmental impact of the dam- unique challenges, we have used two input-output building projects. tables, respectively estimated by the LAO Statistics Bureau for 2007 and by the Asian Development Bank In addition to water, other natural resources such as for 2016, as well as a national SAM (Khanal et al. mines and forests were a key driver of growth. The 2014; Lao PDR Statistics Bureau 2016; OECD 2011; average share of mineral exploration in the industry’s Sayto and Kabayashi 2007), integrating data on 200 Chapter 8 households, poverty, ethnicity, and environmental data describe the direct and indirect connections between from various sources (Coulombe et al. 2016; Ministry the different actors of the economy, whose accounts of Environment 2019; World Bank 2018 [World Bank are represented in the SAM. Introduced by Hirschman Development Indicators]) 100 . The SAM has been (1958) for the input output table, the indexes of estimated by calibrating it to the 2016 data, valued backward linkages are based on the average multipliers at millions of US dollars, using the entropy algorithm from the columns of the SAM inverse and can be described in Scandizzo and Ferrarese (2015) and is interpreted as the increase in output of all activities, consistent with the official estimates of GDP for 2016 in response to an increase in the final demand for the (respectively US$13,983 million and US$15,806 million products of one activity by one unit (Rasmussen 1957). in current prices). The SAM results presented in Table 8.1 can be re- The SAM estimates include fourteen production sectors, interpreted as the increase in value added (or green with the ecosystem components representing general value added, including the value of the ecosystem provisioning services (labeled as “ecosystem services”), services) of all activities in response to an increase in plus carbon catch and water. The values of the demand for the products of one activity. The indexes ecosystem services add to value added directly through of forward linkages are instead based on the row the payments (if any) made by the various sectors, or multipliers and quantify the extent to which a given indirectly through the increases in productivity of other activity depends on the entire economic system. They factors (land, capital, and labor) and the corresponding are indexes of sensitivity of dispersion, since they rents created for factor owners. Thus, water incomes measure the increase in the value added produced by come from payments made by agriculture, water an activity driven by a unit increase in the final demand distribution, and tourism, while its rents go to agriculture for all activities in the system. and factors of production. The results presented above indicate that the backward Primary sectors include agriculture and forestry, while linkages are stronger than the forward ones, denoting the industrial sectors include manufacturing, energy a higher level of backward connectedness of the value distribution, and construction. The service sectors chains in the economy, and a low dependence of include transport, financial, and public services. The individual sector value added formation from the level of “carbon catch” sector accounts for the capture and activity of the rest of the economy. In terms of green value release of CO2 on the part of various sectors/activities. added, nature-based sectors, such as agriculture and Total emissions for the country in 2016 were estimated forestry, are highly connected both backward and forward. at 33 million tons of CO2. Four production factors are accounted for value added formation: unskilled Table 8.2 presents the backward income multipliers for labor, skilled labor, capital, and land. To estimate the the poor and non-poor groups, respectively indicated distribution between skilled and unskilled labor, a as BP and BNP. They are defined respectively as recent enterprise survey (World Bank 2016) was used; the increase in all incomes of the poor (BP) or non- this survey classifies labor according to formal level of poor (BNP) in the different ethnic and social groups education and employment sectors. in response to an increase in production of a specific industry. These indicators show that the poor are only 8.3.1 Backward and Forward scantly connected through the value chains for all activities. On the contrary, the non-poor appear to benefit Multipliers greatly from backward-induced increases in demand for all industries, from agriculture to tourism. In this respect, Table 8.1 below shows the indexes of backward and the most pro-poor activities, where investment is likely to forward linkages101 computed from the estimated have the largest impact, appear to be agriculture, mining, SAM for the value-added components. These indexes public administration, and social services. 201 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 Table 8.1 Estimated Backward and Forward Value-Added Multipliers (Capital Formation and Rest of the World Exogenous) BW VA BW Green VA FW VA FW Green VA Multipliers Multipliers Multipliers Multipliers Agriculture 1.8032 2.3913 1.2866 4.2397 Forestry and logging 1.2048 1.5952 2.2537 2.9178 Mining and quarrying 1.9125 2.5253 0.1752 0.1579 Food and beverage manufacturing 1.0961 1.4505 0.7271 0.7097 All other manufacturing 1.3848 1.8535 0.5773 0.5166 Electricity and water supply 1.8213 2.4358 0.7221 0.6225 Construction 1.4731 1.9823 1.1111 1.0469 Transport and communication 1.0455 1.4016 0.5243 0.4854 Wholesale and retail trade 1.6168 2.1267 1.3599 1.5188 Banking, finance, and insurance 1.9323 2.5189 0.1946 0.2041 Real estate and business services 2.0514 2.6723 0.5965 0.6302 Public administration 1.8379 2.4183 1.2809 1.1754 Personal, community, and social services 1.8745 2.4624 0.1473 0.1281 Tourism 1.6165 2.1884 0.4377 0.4096 Table 8.2 Estimated Backward Poor and Non-Poor Income Multipliers BP BNP (poor income multiplier) (non-poor income multiplier) Agriculture 0.1524 1.5776 Forestry and logging 0.0843 1.0461 Mining and quarrying 0.1516 1.7541 Food and beverage manufacturing 0.0765 0.9760 All other manufacturing 0.0938 1.3105 Electricity and water supply 0.1207 1.5509 Construction 0.1043 1.4449 Transport and communication 0.0721 1.0174 Wholesale and retail trade 0.1028 1.4094 Banking, finance, and insurance 0.1009 1.5318 Real estate and business services 0.1171 1.6581 Public administration 0.1388 1.6874 Personal, community, and social services 0.1439 1.7182 Tourism 0.1095 1.6286 202 Chapter 8 8.3.2 CGE Model residual variable, ensuring equilibrium between demand and supply. Investment as fixed capital formation is To perform an impact analysis of investment, a mapped into the sector production functions according Computable General Equilibrium (CGE) 102 model was to a capital distribution matrix, so that the model constructed based on the calibration of values provided reproduces in a one-shot (long-term) equilibrium both by the SAM estimates discussed in the previous the impact of investment expenditure on demand from paragraph. The CGE model is based on the standard capital producing sectors and its effects on increased architecture described in Perali and Scandizzo (2018) production capacities of capital proprietary sectors. and includes CES (Constant Elasticity of Substitution) production functions for production factors and ecosystem Table 8.3 shows the SAM data and the base solution of services, input output coefficients for intermediate the CGE results after calibration, given the SAM values goods, and CET (Constant-Elasticity-of-Transformation) for the investment vector. For natural resources, in line functions quantifying limiting substitutability between with the SAM estimates, the model recognizes three domestic and international commodities. distinct sets of provisioning and regulatory services: (i) water services derived directly from the availability of The simulations conducted with the CGE model underground and surface water; (ii) ecosystem services, adopt a “Keynesian” closure of the economy, with an including forestry, fishery, and other miscellaneous autonomous and exogenous investment component, services provided mainly by forests and natural habitats; wage as a numeraire, and the balance of trade as a and (iii) carbon catch services. Table 8.3 Comparisons of Estimated SAM Production Data and the Base Solution Results (US$, Millions) Fixed capital Capital demand SAM Base solution formation by by proprietary producing sector sector Agriculture 3,959.65 4,038.54 889.04 538.19 Forestry and logging 4,443.94 4,442.32 349.58 38.81 Mining and quarrying 2,258.34 2,071.66 46.59 457.04 Food and beverage manufacturing 1,208.81 1,245.64 514.29 233.90 All other manufacturing 931.59 947.84 225.07 350.47 Electricity and water supply 1,342.01 1,355.42 66.41 659.89 Construction 2,100.46 2,131.12 244.25 550.16 Transport and communication 579.85 594.14 287.81 163.47 Wholesale and retail trade 2,384.30 2,434.96 632.52 897.86 Banking, finance, and insurance 547.89 556.61 164.46 367.53 Real estate and business services 1,400.31 1,437.90 177.94 972.10 Public administration 3,166.58 3,209.69 329.07 230.45 Personal, community, and social services 356.92 367.72 161.60 32.88 Tourism 746.27 767.11 156.64 179.22 Total 25,426.92 25,600.67 4,245.27 5,671.97 203 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 All these components can be considered flows of Following the broad outline of the government natural capital and are mostly linked to forests, water strategy, the CGE model was used to simulate two sources, and other features characterizing a country’s policy scenarios and their impacts on the economy. natural habitat. As explained for the SAM estimates, The simulation was conducted using two alternative but more specifically modelled in the CGE equations, hypotheses on investment increases: rents accrue to households through the increases in productivity determined by the water and the other > Business as usual (BAU) scenario ecosystem services, and by the reduction of carbon catching capacities determined by deforestation and the > Natural resource scenario (NATRES) increase of agriculture or urban areas. Natural capital formation, in the form of investment in conservation, The first set of simulations (BAU) explores the impact restoration, and maintenance, is modeled to counter of increasing investment by US$600 million per year these effects through both mitigation and adaptation in three subsequent phases (for example, years) activities. Increased pressure on natural resources according to the historical investment pattern. The from their increased demand and fixed supply is also second set of simulations (NATRES) instead assumes registered by the model shadow prices. These can that, along with the BAU investment, an additional be interpreted as the increased values of ecosystem amount of public investment is spent for programs services for the holders of rights (the households) to of conservation and restoration of natural resources, benefit from the rents that they provide. according to the pattern envisaged in the Environmental Sector Plan and reaching about US$320 million per 8.3.3 Policy Simulations year in the highest scenario (corresponding to the third simulation). The total amount of investment envisaged thus ranges from 3 percent to 5 percent of GDP, which According to OECD (2013), Lao PDR’s long- corresponds to the range of public investment estimates term development agenda is based on its gradual in Lao PDR (https://www.ceicdata.com/en/laos/public- transformation from a closed and centrally planned investment). Table 8.4 shows the breakdown of the economy to an open, private-sector–led economy. investment pattern simulated under the alternative However, the report claims that the range of scenarios. instruments—defined in NSEDP 2011–2015—is broad and it is difficult to assess the impact expected Table 8.5 presents the main simulation results of the from specific measures. The strategies of the plan different hypothesized investment scenarios, in terms of involve diversifying and deepening economic activities, value-added effects103. significantly scaling up human capital, improving labor productivity, and promoting the inclusion of women, In addition to the impact on factor incomes as the ethnic groups, and those living in remote areas. main components of value added at market prices, Moreover, the environmental sectoral plan provides ecosystem services effects are also estimated as for a set of restoration and conservation policies to determinants of “green value added” at shadow prices. safeguard ecosystem services, stop deforestation and These values are estimated as external effects in the land degradation, and restore natural sites. These model. Once added to value added at market prices, strategies should also be combined with selected they yield an estimate of and extended form of value investment actions to boost the economy and achieve creation comprising market and non-market effects of higher inclusiveness through a progressive integration value creation of the investment policies examined. As of household and enterprise activities in efficient table 8.5 shows, value added from additional labor and markets (OECD 2013). capital employment and higher remunerations of both factors significantly rise under the impact of increased investment in all scenarios. In the NATRES scenario, 204 Chapter 8 the highest increases are up to 51 percent (entirely from this is due only to the increase in their shadow prices; larger employment) for unskilled labor, and up to 103 however, in the NATRES scenarios, the value of the percent for skilled labor. natural resource services produced by the investment in natural resource conservation/restoration programs For natural resources, it is assumed that their supply increases up to 197 percent of their base-year values. is fixed to the levels estimated for the base solution in This results from the increased volume and unit values the BAU scenarios while it increases in proportion to the (shadow prices) of the services rendered. The rise in natural resource investment in the NATRES scenarios. the value of natural resources is matched by a parallel Consequently, the value of natural resource services increase in natural capital formation (conservation, (ecosystem services, water, and carbon catch) rise maintenance, and restoration activities). significantly in all these scenarios. In the BAU case, Table 8.4 Comparisons of Estimated Public Investment in the Simulations (US$, Millions) Base BAU I BAU II BAU III NATRES I NATRES II NATRES III solution Public investment in 4,001 4,601 5,201 5,801 4,601 5,201 5,801 infrastructure Public investment in 4,455 4,455 4,455 4,455 4,586 4,672 4,777 natural capital Total 8,456 9,056 9,656 10,256 15,500 16,242 17,075 capital formation Table 8.5 Comparisons of Estimated Impact on Value Added in the Simulations (US$, Millions) SIM I SIM II SIM III BAU NATRES BAU NATRES BAU NATRES Unskilled labor 4,573.14 4,640.25 5,069.42 5,261.48 5,846.80 6,479.95 Skilled labor 2,988.94 3,054.11 3,561.15 3,779.00 4,549.33 5,407.44 Capital 6,702.03 6,881.32 7,550.05 8,082.80 9,088.43 10,974.25 Land 1,431.62 1,417.23 1,469.30 1,477.77 1,600.17 1,817.92 Value added (GDP) at factor cost (A) 15,695.74 15,992.92 17,649.93 18,601.05 21,084.72 24,679.56 Ecosystem services 6,136.68 6,436.27 8,101.76 8,992.79 11,630.16 14,749.28 Carbon catch 659.40 738.42 910.14 1,113.59 1,346.18 1,936.60 Water services 599.19 664.06 823.67 992.12 1,215.09 1,712.41 Green value added (B) 7,395.28 7,838.75 9,835.57 11,098.51 14,191.44 18,398.29 Extended value added (A) + (B) 23,091.01 23,831.67 27,485.51 29,699.56 35,276.16 43,077.85 205 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 Figure 8.1 Value Added and Investment (Estimates) 50,000 45,000 40,000 35,000 30,000 US$, millions 25,000 20,000 15,000 10,000 5,000 – Base solution BAU I BAU II BAU II NATRES I NATRES II NATRES III Total Value Added Green Value Added Total Green Value Added Public investment in infrastructure Public investment in natural capital Total Public investment Table 8.6 and Figure 8.2 compares the different value- for the green multipliers depend mostly on the positive added multiplier paths of the investment simulations in externalities associated with ecosystem services, and the BAU and NATRES cases. The multiplier indicates the limited substitutability between natural resources the increase in value added, through both direct and production factors as well as between domestic and and indirect effects, in response to different levels of internationally tradeable commodities. investment in the three scenarios considered. Therefore, increases in the supply ecosystem services In all the investment scenarios examined (see Figure not only create values by directly increasing their benefit 8.2), investment multipliers (which in this case are flows, but also a positive impact on the productivity a measure of economy-wide productivity of public of factors such as capital and land. These results investment) increase more than proportionally with the suggest that investing in natural resources may boost increase in investment, although the BAU multiplier development and bring the economy to a higher path of simulated with only the historical investment in natural value added and production. The results presented here resources is almost flat. However, both the value- also indicate the need to invest in natural resources added NATRES multiplier (the VA multiplier in response to maintain the economy on a sustainable path, to the additional investment in natural resources) and which could be put at risk by outright rent extraction the total green multiplier (the multiplier on factor and not accompanied by appropriate maintenance and natural resource value added of the investment with restoration activities. the additional investment in green resources) are much larger and increasing exponentially. Table 8.7 and Figure 8.3 show the production effects of the different simulations. While all production in all The increasing returns suggested by these results are sectors increases at positive rates, forestry production is mainly due to the fact that generally equilibrium effects stationary in all simulations, while mining and quarrying tend to amplify the impact of investment by increasing falls drastically—up to 60% in the highest natural not only factor employment for all factors, but also the resource simulation. For forestry and for mining and remunerations of non-labor factor incomes and rents quarrying, the result is due to short land supply and from natural resources. On the other hand, the results the destruction of natural capital through deforestation 206 Chapter 8 Table 8.6 Value-Added Investment Multipliers (Estimated) SIM I SIM I SIM II SIM II SIM III SIM III BAU NATRES BAU NATRES BAU NATRES Unskilled labor 0.49 0.60 0.66 0.82 0.87 1.22 Skilled labor 0.54 0.65 0.75 0.93 1.05 1.52 Capital 1.17 1.47 1.29 1.74 1.72 2.76 Land -0.14 -0.17 -0.04 -0.03 0.05 0.17 Total 2.05 2.55 2.66 3.45 3.68 5.67 Figure 8.2 Estimated Value Added Impact of an Increasing Investment Shock Multiplier Comparison 12.00 10.00 8.00 Multiplier 6.00 4.00 2.00 0 730.31 1417.22 2121.49 600.11 1200.22 1800.33 Investment Multiplier BAU Multiplier NATRES Multiplier Green VA NATRES and depletion. Mining is modeled as having negative economy. Once the environmental measures are effects on natural capital by reducing the country’s introduced in the NATRES scenarios, the same shadow endowment of exhaustible resources and damaging the prices at first decline as conservation and restauration environment. This result emphasizes the importance of activities progressively undertaken tend to expand the Lao PDR government maintaining its commitment to supply. However, as the economy expands, the sustainable mining (http://mric.jogmec.go.jp/kouenkai_ parallel increase of production and incomes tends to index/2012/briefing_120316_1.pdf). increase demand and usage of eco-services more than proportionally, so that the shadow prices rise again and Table 8.8 and Figure 8.4 show that rents from natural reach higher levels than in the BAU case. Investing in resources grow smoothly from the low natural capital the environment to the extent simulated in the NATRES (NC) simulation to the high one. As Figure 8.5 shows, scenarios thus appears to be beneficial on the market shadow prices as indicators of the marginal values of and the environmental sides, but ultimately insufficient ecosystem services grow smoothly under the three to prevent an increasing scarcity of natural resource phases of the BAU scenarios, since natural resource services. services tend to increase with the expansion of the 207 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 Table 8.7 Estimated Impacts on Production (%) BAU NATRES Industries SIM I SIM II SIM III SIM I SIM II SIM III Agriculture 5. 12 19 8 16 25 Forestry and logging 0 1 1 0 0 1 Mining and quarrying -18 -32 -48 -24 -42 -60 Food and beverage manufacturing 8 20 36 8 21 39 All other manufacturing 6 19 36 6 20 39 Electricity and water supply 4 19 37 4 19 39 Construction 5 17 31 5 17 34 Transport and communication 7 22 40 8 24 46 Wholesale and retail trade 8 23 43 9 25 48 Banking, finance, and insurance 9 24 44 9 26 47 Real estate and business services 7 22 41 8 24 46 Public administration 4 9 18 4 11 22 Personal, community, and social services 10 23 39 11 25 47 Tourism 7 20 37 9 24 46 Total 3 10 19 3 11 21 Figure 8.3 Estimated Impacts on Production 60% 40% 20% 0% -20% -40% -60% -80% g g re g g ly n n de n es m e rin in in rin io io nc tio pp is tu ic tra gg ry at ct tu ur ra tra tu ul rv su ru ar ic ac To lo ric ac su il Se is un st ta qu er uf d in Ag uf in on re m an at an al m an d nd m w C ci an d ad m ry m an So co ,a d st ge g an ic er ce in le d re bl ra th an in sa ty an Fo Pu ve lo M ci le rt fin tri be Al o ho sp ec g, W d an in El an nk Tr od Ba Fo BAU SIM I BAU SIM II BAU SIM III NATRES SIM I NATRES SIM II NATRES SIM III 208 Chapter 8 Table 8.8 Estimated Impacts on Rents from Natural Resources (US$, millions) Base BAU I BAU II BAU III NATRES I NATRES II NATRES III solution Ecosystem 4,970.82 6,136.68 8,101.76 11,630.16 6,436.27 8,992.80 14,749.28 services Carbon catch 510.48 659.40 910.14 1,346.18 738.42 1,113.59 1,936.60 Water services 468.89 599.19 823.67 1,215.09 664.06 992.12 1,712.41 Total 5,950.19 7,395.28 9,835.57 14,191.44 7,838.75 11,098.51 18,398.29 Figure 8.4 Estimated Impacts on Rents from Natural Resources (US$, Millions) 16,000 100% 90% Rents (US$, millions) Percentage variation 14,000 80% 12,000 70% 10,000 60% 8,000 50% 40% 6,000 30% 4,000 20% 2,000 10% 0 0% NATRES III BAU III NATRES II BAU II NATRES I BAU I Base solution Figure 8.5 Estimated Impacts on Shadow Prices of Natural Resources (Relative Prices with Respect to the Base) 4.50 shadow price Indexes (base prices=1) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Base BAU I BAU II BAU III NATRES I NATRES II NATRES III Ecosystem services Carbon catch Water services 209 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 8.4 Impact on Income increasing share of total growth, hovering around Distribution and Poverty 6 percent. The increase in their incomes per unit of investment would also be rather low (the multiplier would be only slightly more than 0.5 in the best scenario Table 8.9 and Figure 8.6 show the impacts that and about 0.24 in the worst one). Nevertheless, the different simulations have on the incomes of different income per capita of the people who are now below the households.104 Most of the benefits accrue to the non- poverty line, including the rents obtained from natural poor income groups, who hold the largest portion resources, would increase considerably, reaching more of total income (about 90 percent compared with a than US$1,800 per year in the best scenario. population share of 23 percent). While we lack specific data on the income distribution Table 8.10 presents the estimated impacts that different by ethnic groups, the model simulations may be used investment approaches may have on incomes and to give some overall indication of the investment impact poverty. The simulations carried out for this chapter in terms of poverty count and average poverty levels. show that these different approaches affect poor and To this aim, we utilize the income distribution estimates non-poor population groups differently. The results under the poverty line from the World Bank Poverty indicate that, in both the BAU and NATRES scenarios and Equity Data Portal POVcal (http://povertydata. poor people would account for only a low and slightly worldbank.org/poverty/home/). Table 8.9 Estimated Impacts on Incomes % Change % Change % Change % Change % Change % Change SIM I SIM II SIM III SIM I SIM II SIM III BAU BAU BAU NATRES NATRES NATRES Lao-Tai urban poor 9 22 44 12 29 68 Lao-Tai urban non-poor 12 28 58 14 37 88 Lao-Tai rural poor 10 27 57 12 35 86 Lao-Tai rural non-poor 14 38 81 18 50 122 Mon-Khmer urban poor 7 18 37 8 23 51 Mon-Khmer urban non-poor 11 26 53 14 35 83 Mon-Khmer rural poor 9 27 58 12 35 88 Mon-Khmer rural non-poor 16 45 96 21 59 144 Chino-Tibet urban poor 16 42 87 23 60 141 Chino-Tibet urban non-poor 11 24 49 13 32 76 Chino-Tibet rural poor 12 32 66 15 41 96 Chino-Tibet rural non-poor 16 44 94 21 58 142 Hmong-Lu Mien urban poor 7 18 37 8 23 51 Hmong-Lu Mien urban non-poor 11 25 50 13 33 78 Hmong-Lu Mien rural poor 12 32 66 15 41 97 Hmong-Lu Mien rural non-poor 16 45 95 21 59 144 Total 13 36 76 17 47 115 210 Chapter 8 Figure 8.6 Estimated Impacts on Incomes (%) Lao-Tai urban poor Total 160 Lao-Tai urban non-poor 140 Hmong-Lu Mien rural non-poor 120 100 Hmong-Lu Mien rural poor 80 Lao-Tai rural non-poor 60 40 Hmong-Lu Mien urban non-poor 20 Mon-Khmer urban poor 0 Hmong-Lu Mien urban poor Mon-Khmer urban non-poor Chino-Tibet rural non-poor Mon-Khmer rural poor Chino-Tibet rural poor Mon-Khmer rural non-poor Chino-Tibet urban non-poor Chino-Tibet urban poor % Change SIM I BAU % Change SIM II BAU % Change SIM III BAU % Change SIM I NATRES % Change SIM II NATRES % Change SIM III NATRES Table 8.10 Estimated Impacts on Incomes and Poverty Model Variables SIM I SIM II SIM III BAU Increase in per capita income of the poor (US$/year) 1,068.85 1,237.95 1,531.77 Total Increase in the income of the poor (US$, millions) 1,662.07 1,925.01 2,381.90 Poor income share of total growth (%) 6.00% 6.29% 6.32% Poor income investment multiplier (total income increase 0.24 0.34 0.48 divided by investment) Total Non-poor income increases (US$, millions) 18,846.74 22,651.56 29,392.61 Non-poor income share of total growth (%) 94.00% 93.71% 93.68% Non-poor income investment multiplier (total income 3.77 5.06 7.11 increase divided by investment) NATRES Increase in per capita income of the poor (US$/year) 1,095.16 1,317.53 1,813.72 Total Increase in the income of the poor (US$, millions) 1,702.98 2,048.75 2,820.33 Poor income share of total growth (%) 6.02% 6.26% 6.28% Poor income investment multiplier (total income increase 0.31 0.44 0.72 divided by investment) Poor green income multiplier (total income increase 0.24 0.35 0.55 divided by green investment) Total Non-poor income increases (US$, millions) 19,477.40 24,536.60 36,029.28 Non-poor income share of total growth (%) 93.60% 93.68% 91.96% Non-poor income investment multiplier (total income 4.82 6.63 10.80 increase divided by investment) Non-poor green income multiplier (total income increase 3.73 5.25 8.28 divided by green investment) 211 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 Figure 8.7 below shows the distribution of income under Projecting the model results for the NATRES scenario the international poverty line (1.90 PPP$ [Purchasing (first year), the distribution of incomes is estimated to Parity Dollars] per day in 2012) corresponding to a vary in a way that makes the number of people below poverty headcount of 22.7 percent of the population. the poverty line fall from 1.55 million to around 1.41 According to our estimates, the poverty headcount million, with about 140,000 people going above the yields a range of 1,487,851 to 1,555,165 people and poverty line. Given the estimates of the distribution between US$1,549.42 million and US$1,641.21 million, of people between rural and urban areas and the including rents from natural resources (the average distribution by ethnic group from LECS 5 (World Bank values would be 1,521,508 people and US$1,595.32 2014), we obtain a rough estimate of the number million). Thus, the poverty income adjusted for natural of people crossing the poverty line by ethnic group resource rents can be estimated at around US$1,055 (Table 8.11). per year or US$2.9 per day. Figure 8.7 Estimated Income Distribution and Lorenz Curve 10,00% 100% 9.00% 90% Percentage variation 8.00% 80% 7.00% 70% % of income 6.00% 60% 5.00% 50% 4.00% 40% 3.00% 30% 2.00% 20% 1.00% 10% 0 0% 0% % 1% 0% 0% 1% 0% % 1% 2% 1% % % % % % 0% 0% % % % 2% 0% 0 2 01 01 01 01 06 01 2 1 .0 .0 .0 .0 .0 0 0 0 0 .0 .0 .0 .0 .0 .0 .0 01 . . 9. 8. 7. 5. 4. 3. 2. 1. 23 15 14 13 12 11 10 22 21 20 19 18 17 16 6. Table 8.11 Estimates of Ethnic People Moving above the Poverty Line after Project (SIM I NATRES Scenario) Number of people moving Share of people moving above the poverty line by above the poverty line by Rural (000) Urban (000) ethnic group (000) ethnic group Lao-Tai 90.58 0.65 79.71 10.87 Mon-Khmer 32.90 0.24 28.95 3.95 Chino-Tibetan 4.06 0.03 3.57 0.49 Hmong-Lu Mien 12.46 0.09 10.96 1.50 Total 140.00 1.00 123.20 16.80 212 Chapter 8 8.5 Conclusions Regarding green value added, nature-based sectors such as agriculture and forestry are highly connected This chapter has examined the economic impact both backward and forward, indicating that they are of public investment policy in Lao PDR according important inputs for many key sectors and that, in turn, to two alternative hypotheses: (i) a “business as their contribution to economic activity is larger when usual” scenario, in which public investment increases the economy’s total growth is larger. The estimates gradually, reproducing the composition of expenditure of the income multipliers show that the poor are only realized in the recent past; and (ii) a natural resource scantly connected through the value chains for all oriented scenario, in which an environmental set activities—even for those such as agriculture, mining, of policies is added to address problems such as public administration, and social services whose output conservation and restoration of natural capital. The appears to be accruing to them in the largest relative impact of the two scenarios has been simulated using proportions. On the contrary, the non-poor appear to a Computable General Equilibrium (CGE) model, benefit greatly from backward-induced increases in based on a Social Accounting Matrix (SAM), estimated demand for all industries, from agriculture to tourism. to account not only for the basic industrial structure of the economy, but also to capture some of the relevant The simulations performed with the CGE model show details and relations across income distribution, poverty, that investment, modeled in accordance with its and natural resources. historical composition, is rather effective in promoting growth across a broad spectrum of sectors and factors The results suggest that the Lao PDR’s economy of production, and that its impact on the economy is dominated by agriculture and rents from natural increases more than proportionally with its size. The resources, but with locally developed value chains having ensuing economies of scale are mostly due to the significant forward and especially backward connections. externalities produced by natural resources, through Factor markets also show strong connections, especially their contribution to total factor productivity, especially through their forward linkages as inputs in the production in the nature-based sectors such as agriculture and process. As in most countries, income distribution is its value chains. However, natural resources are also characterized by stronger forward linkages of middle- important factors in constraining the expansion of and high-income groups, with the highest groups the different sectors, since they are available in fixed appropriating a large part of any income increases. supply, and some of their effects may be higher relative The poorest groups appear to have the potential for costs of expansion of some activities compared to contributing more than average spillover effects to the others. expansion of the economic system through the increase in their final demand. Under increasing investment and progressive commitment to sustainable development (in the form of The results obtained for the value-added multipliers a greater share of resources devoted to conservation indicate that both backward and forward linkages of and restoration activities), the economy expands some primary sectors, such as agriculture, mining, according to a balanced pattern. However, while and forestry, are stronger than the industrial sectors. production in all other sectors increases at positive This suggests a segmented economy, with a relatively rates, forestry production is stationary in all simulations, high degree of integration within the rural areas, and a while the mining and quarrying sector falls drastically somewhat higher dependence of the urban economy on in the highest-investment scenario. For forestry, this imports, rather than on domestic supply of intermediates is due to the historical negative investment from and raw materials. However, agriculture and forestry are deforestation and degradation, while the fall in mining characterized by very high forward multipliers, indicating production depends on its negative effects on natural that they would benefit most by a balanced increase in capital, through reduction of the country’s endowment of the activity level of the whole economy. exhaustible resources and damages to the environment. 213 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 8 The results of the simulations also suggest that the value chains, and dependence on direct uptake and investments in both physical and natural capital are natural resource rents. Natural resources play a key role critical factors for the promotion and enhancement in ensuring the survival and a minimum of well-being for of economic growth. At the same time, such the largest part of the population, which is mostly poor investments are not adequate to address the problem by international standards. Natural resources increase of non-inclusive development that appears to have total factor productivity and provide much-needed characterized the country in spite of its aggregate payoffs to all income groups and especially the poor. growth success in the recent past. Poor people tend to However, natural resources are clearly not sufficient in be excluded from participating in the economy’s growth their present supply, as well as under the natural capital for different reasons, including spatial and cultural enhancing scenarios explored by the model, to promote isolation. In the model, this isolation takes the form of substantial improvements in the country’s pursuit of low connections with the markets, low participation in inclusive and sustainable growth. 8.6 Notes 95 This chapter was written by Pasquale Lucio Scandizzo, Daniele Cufari, and Maria Rita Pierleoni. 96 http://www.la.undp.org/content/lao_pdr/en/home.html 97 Lao PDR ranked 134th out of 189 economies on the 2016 Ease of Doing Business rankings (World Bank 2016). 98 Between 1964 and 1973, more than 2 million tons of bombs were dropped on all provinces, with 30 percent of those failing to detonate. According to UNDP, 42 of the 46 poorest districts have UXO contamination, signaling a high correlation between UXO and poverty. 99 A Social Accounting Matrix (SAM) is a representation of an economic system (at the national, subnational, or local level) capturing the circular flow of incomes and expenditures across producing sectors and institutions (households, enterprises, government, finance, and international trade actors). The SAM accounts are organized in the form of a square matrix (with payments along the columns and receipts along the rows and are generally consistent with the United Nations Standardized National Accounting (SNA) Guidelines. 100 The “National Accounts System of United Nations, 1993 (NAS93)” and the 2003 UN Manual, named SEEA03 (System Environmental and Economic Accounting), provide prescriptions to collect and incorporate in national accounts the costs of physical flows linked to the environment and their connection with the monetary flows associated with production activity and consumption. The manual includes the design of a hybrid Social Accounting Matrix, called SAMEA and subsequently SEAM, which combines economic and environmental flows in an integrated set of accounts. 101 The SAM accounts quantify a set of connections between purchasing and selling sectors that are characterized by a series of reciprocal exchanges (transactions) along and across value chains. The detailed accounting of these transactions allows the researcher to quantify the linkages across sectors and institutions in an economy through the so-called multipliers. These are measures of the increase, through direct and indirect effects, of the money inflows (revenues) or outflows (expenditures) of each sector/institution in response to exogenous shocks (for example, an increase in public investment) of different types. 102 A Computable General Equilibrium (CGE) model is a mathematical representation of an economy. The CGE has a SAM as a core set of data, but it adds to the static information on the transactions recorded by the system of accounts, a detailed set of hypotheses and quantitative estimates on the technologies adopted, the preferences and the behavior of households, firms, and other institutions. A CGE thus aims to represent, in a way consistent with the economic theory, the reaction of the economic system to changing external or internal conditions. 214 Chapter 8 103 Value added is the notion utilized in the UN system of national accounts to compute GDP. Value added at factor cost is defined as the sum of the remunerations accruing to the basic factors of production (labor, capital, and land) in the period considered (for example, a year). The notion of green value added is an extension of this definition that includes the value of the ecosystem services rendered in the factors of production. 104 Households in the model are disaggregated according to three criteria: (I) Ethnicity: 49 different ethnic groups, divided into four main categories: Lao_Tai; Mon_Kmer; Cino_Tibetan and Hmong lu Mien. (II) Area (rural/urban). (III) Poverty (poor/ non_poor) . 8.7 References ADB (Asian Development Bank). Data Library. Lao People’s Democratic Republic: Input-Output Economic Indicators. Manila: ADB. https://data.adb.org/dataset/lao-pdr-input-output-economic-indicators Coulombe, H., M. Epprecht, O. Pimhidzai, and V. Sisoulath. 2016. Where are the Poor? Lao PDR 2015 Census-based Poverty Map: Province and District Level Results (English). Washington, DC: World Bank Group. http://documents.worldbank.org/curated/en/477381468415961977/Where-are-the-poor-Lao-PDR-2015-census-based- poverty-map-province-and-district-level-results Henderson, D. 2018. Disaster-Risk Management in Laos. San Francisco: Asia Foundation. Hirschman, A. O. 1958. The Strategy of Economic Development. New Haven: Yale University Press. IFAD (International Fund for Agricultural Development). 2018. Lao People’s Democratic Republic Country Strategic Opportunities Programme 2018–2024. Rome: IFAD. Khanal, B. R., C. Gan, and S. Becken. 2014. “Tourism Inter-Industry Linkages in the Lao PDR Economy: An Input—Output Analysis.” Tourism Economics 20 (1): 171–94. Lao Statistics Bureau. Statistical Yearbook 2017. Vientiane: Lao Statistics Bureau. https://www.lsb.gov.la/en/home/ MoNRE (Ministry of Natural Resources and the Environment) 2016. National Biodiversity Strategy and Action Plan for Lao PDR 2016–2025. Vientiane: MoNRE. OECD (Organisation for Economic Co-operation and Development). Input-Output Tables. Paris: OECD. http://www.oecd.org/sti/ ind/input-outputtables.htm OECD (Organisation for Economic Co-operation and Development). 2012. Aid Effectiveness: Progress in Implementing the Paris Declaration. Paris: OECD. Perali, F., and P. L. Scandizzo, eds. 2018. The New Generation of Computable General Equilibrium Models: Modeling the Economy. New York: Springer. Pimhidzai, O., N. C. Fenton, P. Souksavath, and V. Sisoulath. 2014. Poverty Profile in Lao PDR: Poverty Report for the Lao Consumption and Expenditure Survey, 2012–2013. Vientiane: Lao Statistics Bureau. Rasmussen, P. N. 1957. Studies in Inter-Sectoral Relations. Amsterdam: North-Holland. Saito, K., and S. Kobayashi. 2007. The International Linkage of Economic Policy in Lower Mekong Subregion Countries CGE Models. Tokyo: University of Tokyo and Mekong Project. Scandizzo, P. L., and C. Ferrarese. 2015. “Social Accounting Matrix: A New Estimation Methodology.” Journal of Policy Modeling 37 (1): 14–34. Schultz, S. 1977. “Approaches to Identifying Key Sectors Empirically by Means of Input-Output Analysis.” Journal of Development Studies 14: 77–96. UNDP (United Nations Development Programme). 2019. Human Development Report 2019: Beyond Income, Beyond Averages, Beyond Today: Inequalities in Human Development in the 21st Century. New York: UNDP. UN-OCHA (United Nations Office for the Coordination of Humanitarian Affairs). 2017. LAO PDR Country Profile. https://reliefweb. int/report/lao-peoples-democratic-republic/lao-pdr-country-profile-23-06-17 World Bank data.worldbank.org/country/lao-pdr 215 9 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic BENEFIT-COST ANALYSIS OF INTERVENTIONS TO ADDRESS PRIORITY ENVIRONMENTAL HEALTH RISKS104 Photo credit: Nam Kat Yorla Pa Chapter Overview In the Lao People’s Democratic Republic, the annual cost of environmental pollution associated with four major environmental health risk factors is estimated at the equivalent of 14.6 percent of gross domestic product (GDP) in 2017, as noted in chapter 3. The present chapter provides an analysis of the benefits and costs of potential interventions to mitigate the health effects of these risk factors. This analysis helps identify appropriate interventions for these environmental health issues. Estimates of benefits and costs of twenty-five interventions for mitigating the leading environmental health risks in Lao PDR are presented. Eight interventions are assessed for controlling household air pollution, which is the leading cause of environmental health effects in Lao PDR. Eleven interventions, including arsenic mitigation in some parts of the country, are assessed for improving drinking water quality and for providing improved household sanitation to the population that still practice open defecation. Six interventions are assessed for controlling ambient PM2.5 air pollution in Vientiane Capital. While lead exposure may be continuing to impose a significant toll on health, sufficient data are not available to conduct a meaningful assessment of benefits and costs of interventions for lead exposure. The setting of priorities is a powerful lever for addressing the intersection of environmental pollution and the health of the Lao people. Developing MoNRE’s capacity to conduct benefit-cost analysis—in addition to cost of environmental degradation assessments—would further support analytically sound foundations for setting environmental priorities across sectors and budget allocation in response to those priorities. The budgetary allocation for environment should be informed by a priority-setting mechanism such as analysis of the cost of environmental degradation and benefit-cost analysis of potential interventions. 217 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 9 9.1 Introduction Benefits and costs of interventions in this chapter are > BCRs of 6 ambient PM2.5 air pollution control compared by using their ratio: A benefit-cost ratio (BCR) interventions in Vientiane Capital are the range greater than one indicates that benefits exceed costs of 0.2–6.6. The largest BCRs are for improved and that it therefore would be beneficial to undertake fuelwood cookstoves (6.6) and LPG or electricity the intervention. For instance, a ratio of three means (2.9) for households cooking outdoors. The lowest that benefits are three times larger than the costs of BCRs are for retrofitting of in-use diesel vehicles the intervention, or, equivalently, the benefits are LAK with diesel particulate filters (DPFs) (0.2–0.4)106. 3 for every LAK 1 spent on the intervention. The ratio is calculated as the present value of benefits over the present value of costs, or, alternatively, as annualized benefits over annualized costs. An annual discount rate 9.2 Benefits and costs of of 3 percent is used in the calculations the present value Household air pollution of benefits and costs. control interventions > Benefit-cost ratios (BCRs) of eight interventions for the control of household air pollution are in This section assesses benefits and costs of cookstove the range of 2.1–4.0. The largest BCRs are for interventions that help reduce household PM2.5 air gasifier stoves (3.9–4.0) and improved fuelwood pollution from the use of solid fuels for cooking in Lao cookstove (3.4). The lowest BCRs are for improved PDR. The interventions are promotion programs for charcoal cookstove (2.1). The BCRs for cooking household adoption of cooking with improved biomass with LPG and electric stove are somewhat higher cookstoves, gasifier stoves, and LPG and electric at 2.7. However, at electricity tariffs paid by smaller stoves. residential users, the BCR of using electricity for cooking rises to 4.9105. Over 93 percent of the population in Lao PDR used solid fuels as their primary cooking fuel in 2017. > BCRs of 7 drinking water and sanitation Approximately 67 percent of the population relied on interventions are in the range of 1.5–7.5. The largest wood and 26 percent on charcoal, according to the Lao BCRs are for rural sanitation (7.5), and ceramic Social Indicator Survey 2017 (LSB 2018). Cooking with filtering (6.5) and solar disinfection of drinking water clean energies (for example, electricity, LPG, and gas/ (5.1). The lowest BCR is for boiling of drinking biogas) was practiced by less than 7 percent of the water using fuelwood (1.5) due to the large health population nationwide. damages of household air pollution from the use of this fuel. BCRs for boiling water with electricity Not many households in Lao PDR cook with improved or LPG are 2.7–2.8. However, the BCR for using biomass stoves of high standard in terms of energy electricity rises to 4.4 for small electricity users that efficiency and reduced PM2.5 emissions. A survey pay a lower tariff rate for electricity. The BCR for in three provinces in the north—Luangprabang, high quality bottled water is 2.3 due to the high cost Oudomxay, and Xiengkhuang—found that more than of this intervention. one-third of households used rudimentary cooking devices such as iron tripods and three stones with > BCRs of 4 arsenic in drinking water mitigation open fire. The most common stoves were Tao Dum interventions are in the range of 8.5–23. The largest for charcoal and wood (33 percent), Tao Prayat (or BCRs are for deep tubewells (23), household filtering Tao Thai) for wood (17 percent), and Tao Cement for of drinking water (18), and pond sand filter (17) while wood (8 percent). These stoves are inexpensive single- the BCR for high quality bottled water is 8.5. burner portable bucket stoves with low durability. 218 Chapter 9 Testing of the stoves showed that they provide little or These interventions are assessed independently in no improvement over three-stone stoves for indoor PM three household cooking environments with different air emissions, although they do offer improved thermal pollution exposure levels: efficiency (GERES-LIRE 2013). A survey of rural and peri-urban households in Vientiane Capital and the > Cooking in the house; provinces of Vientiane, Borikhamxay, and Khammuane found that only 9 percent of households had stoves > Cooking in a separate building; and with a chimney or hood (World Bank 2013). However, the LSIS 2017 found that less than one percent of > Cooking outdoors. households nationwide have a chimney or exhaust fan (LSB 2018). The intervention stoves need to have at least two burners, in contrast to single-burner stoves, so that 9.2.1 Pollution Control households are less likely to continue using their traditional stove(s) along with the intervention stove Interventions for their cooking needs. The interventions have the following characteristics: The solid fuel use situation in Lao PDR differs somewhat from the majority of developing countries > The improved fuelwood cookstove (ICS-W) that insofar as charcoal is widely used in Lao PDR as a is assessed is a Rocket stove that burns biomass cooking fuel. Consequently, improved fuelwood stoves more efficiently and emits less harmful smoke. and improved charcoal stoves are assessed separately to provide an adequate perspective on the economic > Several improved charcoal stoves (ICS-C) are and public health merits of household air pollution being promoted by various enterprises and with mitigation options. international donor support globally. This chapter assesses the benefits and costs of the > Biomass gasifier stoves turn biomass at very high following household cooking interventions for household temperatures into clean burning gas. These stoves air pollution (HAP) control among households cooking are being promoted in Asia and Africa (World Bank with biomass fuels over open fire or traditional, 2014; 2015). unimproved cookstove: > The LPG and electric stoves have at least two > Promotion of cooking with improved fuelwood burners. cookstoves (ICS-W); This chapter discusses pre- and post-intervention > Promotion of cooking with improved charcoal stoves assessments with respect to (i) household member (ICS-C) PM2.5 exposure reduction; (ii) health benefits of reduced PM2.5 exposure; (iii) non-health benefits (that is, fuel > Promotion of cooking with biomass gasifier stoves savings and cooking time savings); (iv) stove and (GS) for fuelwood or charcoal users; energy costs of interventions; and (v) comparison of benefits and costs of each intervention (that is, benefit- > Promotion of cooking with LPG stoves (LPG) cost ratios). instead of fuelwood or charcoal; and Household use of solid fuels has community effects. > Promotion of cooking with electric stoves (ES) Smoke from fuel burning enters dwellings of other instead of fuelwood or charcoal. households and contributes to outdoor ambient air pollution. An improved stove with a chimney, or 219 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 9 simply the venting of smoke through a hood from any 9.2.2 Pre-Intervention PM2.5 stove or open fire, may be effective for the household Exposures installing these devices, but contributes to increased outdoor ambient pollution and indoor pollution in nearby dwellings. Only clean energies and technologies The stoves that are most commonly used by prevent these negative effects. households, according to a survey in northern Lao PDR, have been laboratory tested for PM2.5 emissions. To achieve the maximum benefits per unit of This included the Tao Dum, Tao Concrete, and Tao expenditure on household energy and stove Thai stoves. These stoves are all inexpensive portable interventions, all households would need to participate, single-burner bucket stoves with relatively low durability. and thus achieve a clean energy community or, in PM2.5 emissions ranged from nearly 1,000 mg/MJ to the interim, an improved cookstove community. This over 1,200 mg/MJ of delivered energy to the pot. This concept may be especially applicable to rural areas is 3 to 4 times as high as emissions from an improved where communities are spatially clustered and is stove with Rocket technology (Rocket #1 stove) or like the concept in the sanitation sector of an open traditional charcoal stove, and 10 to 12 times higher defecation free community (a community free of open than a forced-draft gasifier stove (Gasifier #1) according defecation), a goal often promoted and achieved to Figure 9.1. An inexpensive Cambodian woodstove through community-led or total sanitation campaigns. model (NKS) was also tested and showed somewhat better performance than the stoves used in northern Lao PDR. Figure 9.1 PM2.5 Emissions from Selected Stoves High Power 20 Traditional Charcoal CO (g/MJ Delivered to Pot) Charcoal 0 Traditional Stove 15 1 Tao Concrete Tao Oum-August 2013 10 Tao Thai 2 3 Rocket NKS 4 Gasifier Elbow Natural Draft Gasifier 5 Gasifier Liquid Rocket Fuel 0 0 200 400 600 800 1000 1200 PM2.5 (mg/MJ Delivered to Pot) *Liquid fuels include LPG, kerosene, and ethanol Source: GERES 2014. 220 Chapter 9 The laboratory tests demonstrate that there is plenty Table 9.1 and Table 9.2 present the pre-intervention of opportunity to reduce household air pollution by personal exposures to PM2.5 used for estimating health using high-quality improved biomass cookstoves, benefits of intervention exposure reductions of PM2.5. gasifier stoves, and clean energies (for example, LPG Exposure of the main cook is used as a reference and electricity). However, PM2.5 concentrations in the point for personal exposure of adult women. This is household environment depend on many factors and because the person cooking in the household is most vary substantially, not only in relation to type of fuel and often a woman, and the exposure measurement study stove, but also in relation to cooking location, ventilation discussed above is in reference to the person cooking. practices, cooking duration, and structure of dwelling. Exposures of other household members (that is, adult Household members’ personal exposure to PM2.5 from men and young children) are set at 60 percent to 85 combustion of solid fuels depends additionally on their percent of adult women’s exposure, since adult men activity patterns in the household environment. and young children generally spend less time in the household environment and the kitchen than adult A recent study in three villages in Savannakhet found women (Smith et al. 2014). Cooking in the house is that average 48-hour PM2.5 kitchen concentrations used as the reference location. Personal exposures were 439 µg/m in a sample of 72 households cooking 3 from cooking outdoors or in a separate building are set with solid fuels (University of California, Berkeley, and at 60 percent to 80 percent of exposure from cooking Berkeley Air Monitoring Group 2015). Average 48-hour in the house (Table 9.1). The exposure levels reflect personal exposure of the main cook was 119 µg/m3, or that a portion of biomass smoke from outdoor cooking 12 times the WHO annual outdoor air quality guideline or cooking in a separate building also enters the indoor (AQG) of 10 µg/m3. Average outdoor ambient PM2.5 in living and sleeping areas. the villages was as high as 52 µg/m , mainly due to the 3 solid fuels used for cooking. Table 9.1 Relative Exposure Levels by Household Member and Cooking Location Household member (H) Location (L) 1 Adult women 100% In house 100% 2 Adult men 60% Separate building 80% 3 Children <5 years 85% Outdoors 60% Table 9.2 Long-term Personal PM2.5 Exposure by Cooking Location in Households Using Traditional Cookstoves with Fuelwood or Charcoal (µg/m3) Fuelwood Charcoal traditional stove/open fire traditional stove Adult Adult Children Adult Adult Children women men <5 years women men <5 years In house 120 72 102 72 43 61 Separate 96 58 82 62 37 53 building Outdoors 72 43 61 54 32 46 221 Environmental Challenges for Green Growth and Poverty Reduction: A Country Environmental Analysis for the Lao People’s Democratic Republic Chapter 9 An average exposure level of 120 µg/m3 is applied to cooking with solid fuels in the community is larger for adult women cooking in the house with wood over an households cooking in a separate building or outdoors open fire or traditional cookstove. Average exposure than for households cooking in the house. Thus, levels of adult men and children under five years of exposure reductions of 35 percent and 25 percent are age and in various cooking locations are calculated in applied to households cooking in a separate building relation to the exposure level of adult women cooking and outdoors, respectively. in the house by applying the relative exposure factors in able 9.1. For instance, the exposure level of adult men Table 9.3 summarizes the percentage exposure in a household cooking outdoors is 120 µg/m3 * H2 * L3 reductions from ICS. The reductions are relative to the = 120 µg/m * 60% * 60% = 43 µg/m (Table 9.2). 3 3 exposure levels using traditional cookstoves (TCS) presented in Table 9.2, and are applied to adult women, Very few measurement studies globally have been men, and children. conducted of personal exposure from cooking with charcoal. This is mainly because charcoal is a primary Table 9.3 Household Member Exposure cooking fuel in only a minority of countries. Cooking with Reduction from ICS in Relation to charcoal is generally associated with lower personal Cooking Location exposure levels of PM2.5 than cooking with fuelwood. Personal exposures from cooking with charcoal are set In house 40% at 60 percent, 65 percent, and 75 percent of personal Separate building 35% exposures from cooking with fuelwood in the house, in a Outdoors 25% separate building, and outdoors, respectively (Table 9.2). 9.2.3 Post-Intervention PM2.5 Combustion of LPG results in very little PM2.5 emissions and is therefore considered a relatively clean cooking Exposures fuel. However, studies have found that household PM2.5 concentrations among users of LPG often remain as The use of improved biomass cookstoves (ICS), gasifier high as 40–60 µg/m3, presumably due in part to the stoves, and LPG and electric stoves is expected to community pollution from neighboring households using reduce household members’ exposure to PM2.5 from solid fuels, but also the continued use of solid fuels as cooking. A review of personal exposure studies before secondary cooking fuels. It is therefore stipulated here and after installation of an ICS indicates a median that exposure levels associated with cooking exclusively reduction in exposure of greater than 50 percent with LPG are on average 30 µg/m3. This exposure level (Larsen 2017). However, studies of exposure reductions is applied to adult women and children. A somewhat are most often measured within a relatively short time lower exposure level of 20 µg/m3 is applied to adult after the installation of the ICS. Exposure reductions men, since this household-member group often spends over the life of the ICS are likely to be somewhat less, considerable time away from the immediate community, since the quality of the ICS deteriorates over time. and presumably in locations with less pollution. These exposure levels are also applied to the use of gasifier A 40 percent exposure reduction from an ICS—using and electric stoves. wood or charcoal—over its lifetime is therefore likely to be more realistic even with good stove maintenance The exposures associated with LPG and gasifier and and is applied in this chapter to households cookin