ko WORLD BANK GROUP REPORT NO. 2 February - March 2021 Monitoring COVID-19 Impacts on Households in Lao PDR Results Snapshot from a Rapid Monitoring Phone Survey (Round 2) INTRODUCTION One year into the COVID-19 pandemic, global prospects remain uncertain. Economic recovery differs across countries, reflecting, amongst other factors, variation in the level of pandemic- induced disruptions, policy support, and vaccination roll-out. Lao PDR has a relatively low number of recorded COVID-19 cases compared to other countries despite the recent outbreak in April 2021: the first case was confirmed in March 2020, and 757 cases had been identified by the end of April 2021, with no deaths thus far. However, international borders remain closed and the vaccination rollout is slow. Despite successful efforts to contain the pandemic, the economic impact is unavoidable. GDP was estimated to grow by 0.4% in 2020. To monitor the social and economic impacts of the pandemic, the World Bank is conducting a series of COVID-19 Rapid Monitoring Phone Surveys of Households in Lao PDR. This monitoring data helps provide insights into the effects of the pandemic on household well-being. The first-round survey was conducted from June 20 to July 16, 2020, when Lao PDR had just exited the nationwide lockdown. The second-round survey was conducted from February 26 to March 24, 2021, one year into the pandemic. This note provides a snapshot of results from the second-round survey. More survey results on public service delivery and citizen's expectations from the government in response to COVID-19 are available in a separate note. MAIN FINDINGS The labor market showed signs of recovery. Nearly three-quarters of respondents who did not work during July 2020 had returned to work by March 2021. Hospitality, transport, and manufacturing have continued to be adversely affected while construction has rebounded. A large share of workers laid off in hospitality, transport, and manufacturing switched to construction. By March 2021, one year into the pandemic, 2.6% of businesses had permanently closed while 7.4% remained temporarily closed. Half of the businesses experienced a further decline in revenue relative to July 2020. Around 31% of households experienced a decline in household income relative to the pre-lockdown period in March 2020 - a significant drop from 48% of households in July 2020. Food insecurity remained elevated. More than half of households experienced a certain degree of food insecurity during the previous 30 days. 87% of respondents would receive a COVID-19 vaccine if provided for free. 16% of respondents reported that their households benefited from personal income tax exemption while 23% of family businesses benefited from business tax relief measures. 1 WORLDs BAN GOU Eqitbl Grwh Finnc an ntttinEs Asi 8E Pa*fc ego Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 EMPLOYMENT The labor market showed signs of recovery. Nearly three-quarters of respondents who did not work during July 2020 had returned to work by March 2021. Almost all respondents who worked in construction during the pre-pandemic period were able to return to work while only half of those who worked in hospitality and transport and personal services did. Nevertheless, around 10% of respondents who worked during July 2020 switched or lost their jobs between then and March 2021. Table 1. Changes in employment status. June - July 2020 and February - March 2021 Round 2 (February- March 2021) Round 1 (June - July 2020) Working in same job Working in different job Not working Working 90.3 2.9 6.8 Not working 73.1 26.9 Notes: Panel subsample. % of respondents by emp oyment status during June - July 2020. Work is defined as those who worked at east an hour in the last 7 days. Results are weighted. Table 2. Employment status by sector, June - July 2020 and February - March 2021 Sector (February - March 2021) 0 0 Sector - 0 a 0 U5 (June - July 2020) 2 0a - 0 0 <~ 0 Agriculture 88.0 0.0 0.0 0.9 0.0 0.0 0.0 0.4 10.7 Industry 0.0 82.8 6.6 3.2 0.0 0.0 0.0 0.0 7.3 Construction 0.0 0.0 95.2 1.4 0.0 0.0 0.0 0.0 3.4 Wholesale/retail trade 1.2 0.0 0.0 93.6 0.0 0.0 0.0 0.0 5.2 Hospitality/transport 0.0 0.0 4.1 0.0 82.0 2.2 0.0 0.0 11.8 Personal services 1.2 0.0 1.1 1.2 0.0 89.0 0.0 0.0 7.5 Public administration 0.0 0.0 0.4 0.0 0.0 0.0 93.4 0.0 6.2 Other services 0.3 0.0 0.0 0.0 0.0 0.4 0.0 95.7 3.6 Notes: Panel subsample. % of respondents working in each sector during June - July 2020. Results are weighted. Hospitality, transport, and manufacturing have continued to be adversely affected. In the early days of the pandemic, construction, hospitality, transport, and manufacturing were the hardest hit sectors. The first-round survey results show that between March and July 2020, around one- third of jobs in the hospitality, transport, and manufacturing sectors were shed while 44% of construction workers switched or lost their jobs. Between July 2020 and March 2021, only hospitality, transport and manufacturing continued to experience widespread job loss: 18% of workers in these sectors either switched or lost their jobs, compared to only 5% of construction workers. A large share of workers laid off in hospitality, transport, and manufacturing also switched to construction. 2 k WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 Around 17% of respondents interviewed in February - March 2021 reported they had not worked during the past 7 days, compared to 30% of respondents interviewed in June - July 2020. Only 11% of them cited business closures, layoff, and furlough as the reasons for not working. Other reasons included seasonality, sickness, vacation, study, pregnancy, and retirement. Rural workers were as likely as urban workers to report not working, but the reasons they cited differed. Rural workers were more likely to report seasonality as a reason (45%), whereas 28% of urban workers cited business closures, layoff, and furlough as a reason. Low-skilled workers were able to bounce back strongly from the pandemic, thanks partly to a recovery in the construction sector. They were hit hard by economic disruption in the early days of the pandemic. In June - July 2020, 36% of workers with less than secondary education did not work, compared to 26% of workers with completed secondary education or higher. In February - March 2021, half that share (18%) of low-skilled workers reported they had not worked during the past seven days. Male workers fared slightly better in terms of employment recovery than their female counterparts. While 27% of male respondents interviewed in June-July 2020 had not worked during the past 7 days, only 13% of them were not working in February-March 2021. Meanwhile, the share of female respondents not working during the past week declined from 35% to 22%. Table 3. Employment status. February 2020 - March 2021 % respondents Less than Secondary All Urban Rural secondary education Male Female education and higher February 2020 Working 80.2 81.9 79.3 75.9 83.0 83.2 75.6 Not working 19.8 18.1 20.7 24.1 17.0 16.8 24.4 Last 7 days (June -July 2021) Working 69.9 70.9 69.4 64.3 73.7 73.2 65.1 Not working 30.1 29.1 30.6 35.7 26.3 26.8 34.9 Last 7 days (February - March 2021) Working 83.0 83.6 82.7 82.4 83.2 87.0 77.8 Not working 17.0 16.4 17.3 17.6 16.8 13.0 22.2 Notes: Full sample. For February 2020, work is defined as those who worked before the pandemic. For June - July 2021 and February - March 2021, work is defined as those who worked at least an hour in the last seven days. The last seven days varies by the date of interview. Results are weighted. FAMILY FARMS Family farms remain resilient to the pandemic. Around 77% of Lao households have a family farm and in March 2021, an overwhelming majority (94%) of these households were able to operate their family farm normally. Among those who were not operating normally or had stopped farming, travel restrictions and inability to transport inputs and outputs were the primary reasons. Rural and Lao-Tai farming households were more likely to be affected by disruptions in agricultural value chains: 47% of rural 3 WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 family farms and 46% of Lao-Tai farming households cited travel restrictions and difficulties in transporting inputs and outputs as reasons for disrupted farm activities, compared to 33% of urban family farms and 36% of non Lao-Tai farming households. Instead, labor shortages were commonly cited as a challenge by these households (40% of urban family farms and 32% of non Lao-Tai farming households). Overall, 10% of family farms experienced an increase in seed and fertilizer costs compared to the pre-lockdown period in March 2020. Table 4. Family Farms % of family farms stopped farming or unable to perform normal farm activities, by challenge % of % of family Required to Restrictions on Labor households farms STOPPED stay home travel and shortage with a farming or NOT transport of inputs family farm able to perform and outputs normal activities All 77.0 6.2 12.5 43.1 26.6 Urban 58.9 7.0 7.8 32.5 39.7 Rural 86.7 5.9 14.3 47.0 21.5 Highly educated 76.7 6.6 12.5 43.1 26.7 Low educated 78.0 5.1 12.6 42.9 26.0 Lao-Tai majority 74.7 6.6 6.8 46.2 24.2 Ethnic minority 83.9 5.1 28.2 36.1 31.9 Notes: Full sample. Highly-educated households are headed by a person with completed secondary education or higher. Results are weighted. FAMILY BUSINESS Nearly 30% of Lao households owned a family business in 2020. One year into the pandemic, 2.6% of businesses had permanently closed by March 2021. while 7.4% remained temporarily closed. Urban areas were most affected, with 3.8% of family businesses permanently closed, compared with 1.7% in rural areas. Almost half of family businesses in urban areas (48%) experienced a fall in revenue relative to July 2020. compared to 40% of businesses in rural areas. Three-quarters of businesses that were closed cited demand and transport disruptions as reasons for the closure. Since the outbreak in March 2020, the most affected sectors were construction, and hospitality and transport, in which 30% and 23% of family businesses were either temporarily or permanently closed in February - March 2021, respectively. Nevertheless, the overall impact was estimated to be modest as these sectors accounted for only 4% and 7% of family businesses, respectively. Wholesale and retail trade, in contrast, accounts for 46% of family businesses and 9% of these were closed, constituting 40% of the family businesses closed in that periods, 4 ko WORL BAN GRU Eqial Groth Fiac anntttin,Es Asi &E Paifc ego Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 Table 5. Famly businesses Operating status of family businesses % of family From July 2020 to March 2021 (% of family businesses) businesses experiencing % of households w af famihlys Remain New Temporarily Permanently a revenue busines fiy open business closed closed decline business in 2020 All 28.5 88.1 2.0 7.4 2.6 43.1 Urban 33.6 86.6 2.0 7.6 3.8 48.0 Rural 25.7 89.1 1.9 7.3 1.7 39.7 Highly educated 28.2 87.1 2.3 8.0 2.7 43.3 Low educated 29.2 90.9 1.0 5.8 2.3 42.5 Lao-Tai majority 30.7 87.0 1.9 8.4 2.8 45.9 Ethnic minority 21.9 92.8 2.3 3.3 1.6 32.5 Notes: Full sample. Highly educated households are headed by a person with completed secondary education or higher. Family businesses experiencing a revenue decline include businesses that remained open in February - March 2021. Results are weighted. HOUSEHOLD Around 31% of households experienced a decline in household income relative to the pre-lockdown INCOME period in March 2020. This share is a significant change from 48% of households in July 2020 thanks to improvements in all sources of income. Notable improvements were observed among farm income and domestic remittances, in which the share of households experiencing income reduction significantly decreased. A reduction in income from international remittances and non- farm family business income relative to the pre-lockdown period remained prevalent. Around 46% and 44% of households experienced a drop in international remittances and non-farm family business income respectively. Wages proved to be the most stable source of household income. Nevertheless, one-quarter of households with wage-earners reported they had experienced wage loss. Table 6. Income reduction % of households that experienced income reduction compared to the pre- lockdown period in March 2020 Household Farm Non-farm Wage International Domestic income income family income remittances remittances business income All 31.0 35.1 43.6 26.1 46.1 37.7 Urban 32.8 36.2 48.5 27.4 36.7 45.4 Rural 30.1 34.8 40.1 25.2 50.5 33.0 Highly educated 31.7 35.7 44.9 26.2 43.7 37.9 Low educated 29.3 33.7 39.8 25.7 49.6 37.4 Lao-Tai majority 32.9 37.4 45.6 25.9 47.4 37.4 Ethnic minority 25.5 29.6 35.3 26.7 36.6 38.7 Notes: Full sample. Highly educated households are headed by a person with completed secondary education or higher. Results are weighted. The incidence of income loss varied across socio-economic groups for all sources. Urban households were more likely than rural households to experience a decline in income from family 5 k WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 businesses, wages, and domestic remittances. While 49% of urban households with non-farm family businesses reported a reduction in business income, only 40% of their rural counterparts did. The impact of declining international remittances was more notable in rural areas. Whereas international remittances to urban households bounced back strongly between July 2020 and March 2021, the decline lingered in rural areas. This is because many migrants who originated from rural villages had returned from neighboring countries amid the pandemic. In March 2021, 14% more rural than urban households experienced a decline in international remittances relative to the pre- lockdown period in March 2020. Households whose heads had completed secondary education were more likely to report a reduction in income from family businesses than were their counterparts. While 45% of households whose head had completed secondary education experienced a fall in family business income, only 40% of those headed by a person without completed secondary education reported the same. This phenomenon is different from that observed in July 2020, when households with low educated heads fared worse. This is because businesses operated by low-skilled households, such as in the personal services sector, were more likely to be hit harder by the lingering effect of COVID-19 containment measures in 2020. These businesses were, however, able to resume operations after the lockdown. Overall, ethnic minority households were less likely than Lao-Tal households to experience a decline in household income during the pandemic, especially for income from farming, family businesses and international remittances. FOOD SECURITY The most common shocks faced by households during the pandemic were food shortages and rising food prices resulting from supply chain disruption, border closures, and the depreciating kip. Around 5% of households reported that they had not been able to buy chicken or pork in the past seven days. More than half of respondents (56%) reported that they experienced an increase in the price of rice relative to the pre-pandemic level, while 81.6% and 66.5% of households reported an increase in the price of chicken and pork respectively. Rising food prices were more notable in urban areas: 32.9% and 21.6% of urban households experienced a surge of more than 20% in the price of chicken and pork, respectively, compared to 28.8% and 17% of rural households.1 Table 7. Food insecurity In the past 30 days, you or other household members ... % of households worried about not having enough food to eat because of a lack of money or other resources 43.5 were unable to eat healthy and nutritious food because of a lack of money or other resources 46.2 ate only a few kinds of foods because of a lack of money or other resources 52.4 had to skip a meal because there was not enough money or other resources to get food 35.7 ate less than before the pandemic because of a lack of money or other resources 40.8 ran out of food because of a lack of money or other resources 0 were hungry but did not eat because there was not enough money or other resources for food 0 went without eating for a whole day because of a lack of money or other resources 0 Notes: Full sample. Results are weighted. 1 In contrast, Consumer Price Index (CPI) data show that between February 2020 and March 2021, the price of rice fell by 6%, and the price of pork and chicken rose by 15% and 2%, respectively. 6 k WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 About 52% of households experienced a certain degree of food insecurity. At least one member of one-third of households had to skip a meal during the past month because there was not enough money or resources to acquire food, and around 41% of households ate less than they did before the pandemic due to a lack of money. Nevertheless, no household reported experiencing severe food insecurity during the past month. Concerns over food insecurity in the community were highest among ethnic minorities. Nearly 20% of non Lao-Tai respondents expressed that they were very concerned about food insecurity for people in their community, compared to 14.5% of Lao-Tai respondents. Table 8. Concern about food insecurity for people in the community % of respondents Mostly Somewhat Not concerned at all uocre conerned Very concerned unconcerned concerned All 49.1 12.2 23.0 15.7 Urban 51.8 11.1 22.7 14.4 Rural 47.7 12.8 23.2 16.4 Highly educated 49.0 12.3 23.5 15.3 Low educated 49.4 12.1 21.8 16.7 Lao-Tai majority 51.4 12.5 21.6 14.5 Ethnic minority 42.3 11.2 27.3 19.2 Notes: Full sample. Highly educated person is a person with completed secondary education or higher. Results are weighted. HEALTH Most respondents would receive a COVID-19 vaccine if it were to become available at no cost. About 6.2% of respondents would refuse to get a vaccine, and 6.7% would be hesitant. The share of vaccine refusal is higher among urban respondents (16.9%). Among those refusing to or not sure about receiving a vaccine, the most cited reason was vaccine safety and side effects (81.3%). Other reasons include fear of injections, anti-vaccination views, and worry over becoming infected at healthcare facilities. Table 9. COVID-19 vaccination % of respondents Reasons (% of respondents refusing to or hesitant about getting a vaccine) Agree to be Safety and side Effectiveness vaccinated Yes No Not sure effects of the of the vaccine Others vaccine All 86.9 6.2 6.7 81.3 6.4 11.3 Urban 84.0 7.1 8.8 88.9 5.4 5.3 Rural 88.5 5.7 5.6 75.6 7.2 15.7 Highly educated 85.8 6.8 7.4 83.5 6.7 9.5 Low educated 90.1 4.7 4.8 72.4 5.4 18.2 Lao-Tai majority 85.1 7.0 7.7 81.6 6.7 10.5 Ethnic minority 92.2 3.9 3.9 79.5 5.0 15.5 Notes: Full sample. Highly educated person is a person with completed secondary education or higher. Results are weighted. 7 k WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 ASSISTANCE AND To mitigate the negative impacts of COVID-19, in April 2020 the government issued Individual and SUPPORT business tax relief measures, as well as an unemployment compensation program. The individual tax relief measures include tax exemption of the first 5 million kip of the monthly salary for a three- month period (April to June 2020). The business tax relief measures included tax exemption for microenterprises and postponement of tax payments in the tourism sector. The unemployment compensation program targeted employees who lost their jobs due to COVID-19. Around 16% of respondents reported that their households benefited from personal income tax exemption, while 10% of households benefited from business income tax exemption for microenterprises and postponement of tourism sector tax payments. In particular, 23% of family businesses, 21% of family businesses with fewer than five employees, and 26% of family businesses in the hospitality and transport sectors benefited from these measures. Disbursement of unemployment compensation had covered 7.8% of households by March 2021. Child- and school- based programs proved to be the main channel through which households received assistance and support. Table 10. Social assistance % of households Reasons for not receiving benefits Since March 2020 receiving (% of households not receiving benefits) benefits 0 -0 > Government measures E - Tax relief measures (for individual) 16.2 89.4 1.6 4.5 4.5 Tax relief measures (for business) 10.2 91.2 2.6 3.1 3.1 Unemployment compensation 7.8 92.8 1.9 2.9 2.4 Children/student benefit 27.3 92.2 1.9 3.1 2.8 Notes: Full sample. Results are weighted. OUTLOOK One year into the pandemic, the Lao economy shows signs of recovery. The labor market has slowly recovered thanks to a rebound in construction activities. Nevertheless, hospitality, transport, and manufacturing continue to suffer. The prolonged pandemic challenges the ability of businesses to remain open. Overall, household income improved compared to the post-lockdown period in July 2020. Food insecurity remains elevated. Supply chain disruption, border closures, and the depreciating kip have led to food shortages and rising food prices. Economic recovery will depend on vaccine rollout, which so far has been lagging. Most of the population would be willing to receive a COV D- 19 vaccine if provided for free. Coverage of the pandemic response programs has been mostly restricted to formal workers. While Lao PDR has managed the spread of COVID-19 well so far, a prolonged crisis will prove more challenging. Continued monitoring of the social and economic impact of the pandemic on households is thus important. 8 k WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region Monitoring COVID-19 Impacts on REPORT NO. 2 Households in Lao PDR February - March 2021 Survey Methodology This brief summarizes results from the COVID-19 Rapid Monitoring Phone Survey of Households in Lao PDR - Round 2. Fieldwork lasted from February 26 to March 24, 2021. Round 1 fieldwork ran from June 20 to July 16, 2020. Fieldwork was administered by ndochina Research. The sample was drawn using Random Digit Dialing. The final sample of 2157 households is nationally representative. Of these respondents, 1,139 were also interviewed in Round 1, creating a panel dataset for tracking employment dynamics. Some retrospective questions were asked to new respondents in order to obtain household information during the pre-lockdown and Round 1 survey periods. The survey weights were adjusted to match the share of households by urban and rural area, region, and household size, and the dependency ratio, to strengthen representativeness. One main respondent aged 18 years or older was interviewed from each household. About 57% of respondents were male, and 75% were Lao-Tai. Around 38% and 48% of respondents were aged 18-34 and 35-54, respectively. About 54% of the respondents were household heads, 24% were spouses, and 17% were sons or daughters. The main respondent who was not the head of the household was asked about the employment status and education of the household head. The survey instrument includes modules on employment, income loss, food security, COV D- 19 vaccination, public service delivery, and social assistance. March 2020 was the reference month for the onset of the COV D-19 pandemic in Lao PDR. Responses about pre-pandemic status referred to February 2020. 9 k WORLD BANK GROUP Equitable Growth, Finance and Institutions, East Asia & Pacific Region