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Lao PDR: Second Trade Development Facility 1

Aide Memoire Mid Term Review Mission, June 2015

Lao People’s Democratic Republic

SECOND TRADE DEVELOPMENT FACILITY

Mid Term Review Mission - June 1-11, 2015

AIDE MEMOIRE

KEY PROJECT INFORMATION

Project Number P130512 IDA Grant Number H8190

Signing Date March 28, 2013 MDTF Grant Number TF014189

Effectiveness Date May 8, 2013 Grant Amount US$ 14.0 million

Closing Date March 31, 2017 Disbursements US$ 6.8 million

1. The Mid Term Review (MTR) Mission for the Second Trade Development Facility

(TDF-2) Multi Donor Program took place in Vientiane, Lao PDR during June 1-11, 2015. The

mission team was led by Julian Clarke (Senior Economist and Task Team Leader) and included

technical staff from the World Bank as well as representatives from Australia/DFAT, the

European Union, Germany/GIZ and the United States/USAID. A full list of mission members

is provided in Annex 2.

2. The team would like to express its sincere gratitude to H.E. Mme. Khemmani Pholsena

(Minister), H.E. Mr. Somchit Inthamith (Vice Minister), Mr. Sirisamphanh Vorachit (Director

General, Department of Planning and Cooperation) and Mr. Phouvieng Phongsa (Deputy

Director General, Department of Planning and Cooperation) for their guidance and critical

support during the mission. Our sincere thanks also to the members of the many departments

within the Ministry of Industry and Commerce who kindly met with and invested significant

time in working with the mission team, prior to and during the mission period.

3. In accordance with the mission announcement letter dated May 12, the purpose of the

MTR was to:

a. Take stock of implementation performance and the quality of activities undertaken over

the first two years of the project;

b. Review the extent to which activities remain relevant and appropriate to the

government’s trade and integration strategy;

c. Review the multi-donor trust fund management, both Recipient and Bank-executed

portions;

d. Agree any changes that need to be made to support implementation of the TDF-2 during

the remainder of the project, including changes to activities, implementation

mechanisms and component budget allocations and the closing date; and

e. Explore options for the next phase of donor assistance.

4. The Mid Term Review mission was the third full implementation support mission

undertaken since the beginning of the project. The Aide Memoire covers all project activities

undertaken since the start of TDF-2 in April 2013. As part of the World Bank’s Access to

Information policy, the team sought guidance from the implementing agencies as to whether

the Aide Memoire would be publicly disclosed. It was agreed that it would be publicly

disclosed.

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I. OVERALL PROGRESS

5. The mission notes that project implementation is proceeding at an encouraging

pace, with significant progress being made right across TDF-2 components and sub-

components. Lessons learned from TDF-1 have been incorporated into TDF-2 and have

resulted in attention to the early launch of procurement for major consultancy packages and the

establishment of key frameworks to support implementation, which have led to effective

implementation progress during the early stages of the project. The overall ratings for

implementation performance and for progress towards the achievement of the Project

Development Objective are considered to be ‘Satisfactory’.

II. STATUS OF PROJECT COMPONENTS

6. The Second Trade Development Facility (TDF-2) is a multi-donor program financed

by Australia, the European Union, Germany, Ireland, the United States and the World Bank

focusing on improving trade and private sector development in Lao PDR. The development

objective of TDF-2, which is implemented by the Ministry of Industry and Commerce, is to

support the implementation of Government’s trade and integration priorities outlined in the

2012 Diagnostic Trade Integration Study (DTIS) Roadmap, and in particular to contribute to

improved competitiveness and diversification, focusing outside the natural resource sectors.

TDF-2 has three main components:

(A) Trade facilitation, trade policy and regulations;

(B) Diversification and competitiveness; and,

(C) Mainstreaming aid for trade.

7. The appraised value of the project is US$ 14.0 million, with implementation over a

period of four years, commencing in April 20131. Financing is pooled and provided via an IDA

grant of US$ 4 million equivalent and a Multi Donor Trust Fund grant of US$ 10 million2. The

IDA Financing Agreement and the MDTF Grant Agreement were signed by the World Bank

and the Government of Lao PDR on March 28, 2013 and the agreements became effective on

May 8, 2013. The scheduled closing date for the project is March 31, 2017.

8. The following section summarises the main findings by component. A detailed review

of the three components, the fiduciary issues and the monitoring and evaluation is provided in

Annex 3.

COMPONENT A: TRADE FACILITATION, TRADE POLICY AND REGULATIONS

A1: Trade Facilitation Support

9. Key progress. The Trade Facilitation Secretariat (TFS) is operating effectively and

private sector participation has improved. Several training programs have been conducted and

the capacity of managers in trade related agencies has improved. The Lao Trade Portal (LTP)

1 All information on TDF-2 can be found on the project website at: http://www.worldbank.org/projects/P130512/lao-pdr-

second-trade-development-facility-project?lang=en. 2 The IDA grant is SDR 2.6 million, which at the time of appraisal was equivalent to US$ 4.0 million, but now is nearer to

US$ 3.7 million. The MDTF grant was appraised at US$ 10.0 million. However, since the MDTF donors only pay in gradually,

the final amount of the MDTF will be known once all donor contributions are paid in.

http://www.worldbank.org/projects/P130512/lao-pdr-second-trade-development-facility-project?lang=en

http://www.worldbank.org/projects/P130512/lao-pdr-second-trade-development-facility-project?lang=en



is updated regularly and the number of domestic and international users has been increasing

constantly.

10. Implementation Challenges and Recommended Actions. TFS still faces challenges in

encouraging private sector participation in the TFS forum, providing adequate secretariat

services, including inter agency coordination and preparation of relevant policy and issues

papers. There is therefore a need to further strengthen inter-ministerial coordination and

enhance private sector participation in the Secretariat. On the LTP, DIMEX would like to

improve the appearance of the portal as well as upgrade its search facility. It also needs to have

more up-to-date information on some functional areas including market access, value added

tax and excise in the portal. It is also essential to accelerate the implementation of electronic

certification of origin (E-CO) being financed under the TDF-2 Challenge Fund as an effort to

upgrade the portal with additional functionality including downloads of forms, electronic

submission and approval of certification via the portal. The mission notes there is potential

overlap between the enhancements sought for the portal and the Lao National Single Window.

The mission recommends DIMEX consult with the LNSW team to ensure the proposed

activities are not also being included as functionality in the LNSW.

A2: Non-Tariff Measures review and rationalization

11. Key Progress. During the first year of the program, a comprehensive dataset was

collected and classified by DIMEX. As of June 2015, all line ministries vetted the information

and authorized its publication on the LTP. All 370 measures were uploaded and published in

LTP. Within these, 226 measures are NTMs, based on the UNCTAD NTM Classification

System (see Annex 6) and 144 measures are considered as national standards measures—

voluntary standards. The main challenge now is to design a mechanism to periodically update

this information. On NTMs faced by exporters, after longstanding delays with the procurement

of this activity, it was formally launched in April 2015 and an international expert of NTM

business surveys is currently on the ground supporting this activity.

12. Implementation Challenges and Recommended Actions. On NTM Streamlining, the

formal establishment of the NTM Review Sub Working Group (NRSWG) under the umbrella

of the National TFS is still pending. This step is fundamental to initiating the review of priority

NTMs.

A3: Trade in services

13. Key Progress. The Horizontal Regulatory Assessment and the Telecom Sector

Assessment have been completed. Also, a needs assessment for the implementation of ASEAN

Mutual Recognition Agreements (MRAs) on professional services is underway. After some

initial delays, the work to establish a Services Trade and Investment Portal (STIP) has started.

14. Implementation Challenges and Recommended Actions. The FTPD should elaborate a

detailed action plan to implement the recommendations of the Horizontal Regulatory

Assessment, in particular those related to procedures under the Enterprise Law, as well as other

improvements related to the business environment. In addition, the project needs to accelerate

work on setting up the STIP so it can go live before the end of TDF-2.



A4: Trade in goods

15. Key progress. Good progress has been made on improving the national trade policy

coordination body. Indeed, the WTO accession secretariat has been transformed into a

technical secretariat for the National Steering Committee for Economic Integration (NSC), in

charge of ensuring coordination, work programing, and regulatory conformity with

international trade obligations in all goods and services areas. Disseminating commitments

under WTO and ASEAN has been carried out for stakeholders including both the public and

private sector at the national and local levels. Good progress has also been made on

strengthening the Sanitary and Phytosanitary (SPS) legal framework including revisions of the

laws on Plant Protection and Livestock & Veterinary Matters and work on 5 pieces of

ministerial-level legislation is close to completion. Concept notes and drafts have also been

prepared for 16 other areas. The legislative work promises improved compliance with WTO

and ASEAN requirements, simplification of procedures that will facilitate trade, and enhanced

protection of health.

16. Implementation Challenges and Recommended actions. The Secretariat’s annual work

program should be finalized in November 2015 before the next NSC Conference. It is essential

that all working procedures for the Secretariat are also finalized to ensure the Secretariat

functions effectively. On the SPS legal framework, the FTPD should prepare a work program

to support further processing of the draft Plant Protection and Livestock & Veterinary Laws in

order to support legislative approval before the end of TDF-2.

COMPONENT B: DIVERSIFICATION AND COMPETITIVENESS

B1: Business assistance facility

17. Key Progress. The BAF team has achieved substantial impact and work is largely on

track. As of June 7, 69 grants had been approved, already well in excess of the PAD target of

50 for September 2015. The total value of approvals (commitments) so far is $369k, and is well

on track to achieve the September 2015 target of $400k. The BAF team has reached out to

SMEs operating in Vientiane and also in other provinces such as Oudomxay, Luang Prabang,

Sayaboury, Savannakhet and Champasack.

18. Implementation Challenges and Recommended Actions. As of June 7, the average size

of approved grants is $5400 which is only 67% of the $8000 figure assumed in the PAD.

Disbursements so far are $130k, well down on what would be required to meet the September

2015 target of $300k. This may be partly due to the fact that the Ministry of Finance is

monitoring grants to ensure companies receiving them are tax compliant. Given the

significantly lower-than-expected disbursement figures so far, the mission’s best estimate is

that total disbursements by the end of the contract will reach around $650,000. WB and

NIU/DoSMEP will discuss how the remaining funds will be used within the next months. BAF

team should coordinate with the Tax Department and district offices to seek practical solutions

to ensure the tax requirements do not act as a disincentive to grant applicants. There is also a

need to enhance outreach and support to businesses owned by women. As BAF business

advisors increasingly work to identify companies outside Vientiane, they may need to invest

additional effort in ensuring that the percentage of female-owned company beneficiaries

remains at least at 30%.



B2: Labour standards and manufacturing productivity

19. Key Progress. Sub-component B2.1: after a long delay, the Factory Standards

Improvement Scheme was launched in January 2015 with the arrival in Lao PDR of the ILO

Chief Technical Advisor. The first annual work program has been approved by the supervisory

committee and implementation has commenced. Sub-component B2.2: the Garment Skills

Development Centre (GSC) was established under TDF-1. The objective was to ensure that the

GSC be financially and operationally independent by the end of TDF-2, and that GSC would

begin a gradual phase-out of project financing towards self-financing of its revenue generating

activities.

20. Implementation Challenges and Recommended Actions. The remaining time for the

implementation of the Factory Standards is very limited (less than 2 years) as this sub-

component has suffered delays in implementation. Regarding the GSC, it seems there is a

problem in the design of the training programs offered, which are not attracting sufficient

attention from industry. In terms of its financial performance, the GSC is well behind its goal

of earning sufficient fees to cover operational costs. The mission advised GSC to prepare and

submit a strategic roadmap by end of October 2015 to become operationally independent. This

will involve considering all options to maximize fee income, including the provision of services

to clients outside the initial focus segment of the garments sector, and/or to make a case for

support from the Government of Lao PDR, based on the services it is providing to the public.

The mission feels that is should progressively reduce TDF-2 funding to GSC during the

remainder of the project.

COMPONENT C: MAINSTREAMING AID-FOR-TRADE

C1: National Implementation Unit and Trade and Private Sector Development Working

Group

21. National Implementation Unit. The NIU has now reached a level of maturity and

sophistication that ensures TDF-2 can deliver at a high level of efficiency. The NIU may

therefore no longer need the services of a full time international advisor and could instead

consider short term consultants as required to build capacity in targeted areas.

22. Trade and Private Sector Working Group (TPSWG). TPSWG meetings take place

regularly; the most recent of which took place on June 9th, 2015. The NIU has proposed several

revisions to the existing ToRs to encompass the rotation of co-chairs among development

partners and to streamline the Program Executive Committee (PEC). The NIU has also

recommended the formulation of a Project Review Committee to review projects in advance

of the PEC meetings.

23. Program Executive Committee (PEC). PEC has successfully evolved into a program

level steering committee, overseeing not only MoIC implemented initiatives (such as TDF-2

and the EIF), but also a range of bilateral/externally implemented initiatives (e.g. GIZ and

USAID). The proposed restructuring of the PEC would reduce the number of co-chairs so that

only MoIC Minister or Vice-Minister would chair the meetings, with development partners as

participants only. The NIU has delegated the coordination of all bilateral projects attached to

MoIC to the Department of Planning and Cooperation in order to ensure harmonization of

development funds.



C2: DTIS action matrix/roadmap challenge facility

24. Key Progress. There has been strong demand for the Challenge Facility to support

priorities under the updated DTIS Roadmap for Trade and Private Sector Development. The

Challenge Facility has matured into a mechanism by which implementing agencies can swiftly

and efficiently gain funding for analytical inputs into policymaking. Six proposals have already

been approved for a total budget commitment of $640,000. The Challenge Facility could be

enhanced in the future by encompassing additional activities, perhaps with an enhanced budget

allocation.

25. Implementation Challenges and Recommended Actions: Completing approved proposal

implementation on time has proved to be a challenge. The mission noted that most sectoral

implementing agencies need additional time to implement their activities. The NIU has

suggested extending the duration of activity implementation from 12 months as stipulated in

the CF guideline to 18 months which it considers a more realistic timeline. The mission noted

the importance of implementation and quality of activities and agreed that the proposed

extended timeline is sensible.

C3: Research and policy analysis

26. Key Progress. ERIT has developed capacity building programs through the intervention

of an embedded international advisor who has provided training and hands-on capacity

building to ERIT staff focusing on research methodologies. The advisor has also formulated

policy briefs, organized events and workshops, and facilitated regular publication of the Lao

Trade Digest. ERIT has approved seven proposals for funding through the research facility all

of which are due for completion by the end of 2016. ERIT foresees an additional four proposals

to be approved over the remaining life of the program.

27. Implementation Challenges and Recommended Actions. The challenge is now to ensure

that the approved research proposals are delivered on time and at the required quality. It is

recommended that ERIT use the international advisor to provide hands-on advice and guidance

to researchers to achieve high quality research outputs and subsequently to ensure the research

is appropriately disseminated to target audiences. A research fellowship program was

envisaged at the outset of the TDF-2, but there has been no progress in implementing this

program because ERIT has instead allocated funds towards research proposals. The research

fellowship program is no longer a priority for ERIT and the funds originally designated for the

visiting research fellow can now be more usefully deployed towards an extension of the

international capacity-building advisor’s contract and additional research proposals.

MONITORING AND EVALUATION

28. The mission is satisfied that based on currently available data there has been good

progress in the achievement of the Project Development Objective (PDO). It is, however,

recommended that the team add an indicator better linked to activities on diversification so that

the team can measure success in meeting of the PDO at the end of the project. The mission also

found that there is a need to clarify and modify some intermediate indicators in line with the

scope and content of actual project activities. The proposed update of the Results and

Monitoring Framework is in Annex 4 of this document.



FIDUCIARY ISSUES

Procurement

29. The mission reviewed progress on procurement under the project as well as the capacity

of the implementing agency and found that the overall procurement performance has been

‘Satisfactory’. All procurement packages in the procurement plan were reviewed and discussed

and found to be satisfactory with approximately 80% percent completed in accordance with the

approved procurement plans. However, there are some pending procurement packages which

need to be finalized through discussions between the WB technical team and implementing

agencies.

Financial Management

30. The overall financial management performance remains ‘Satisfactory’. Results of

reviews of the controls and transaction disclose that controls are working as intended. Interim

unaudited Financial Reports (IFRs) and the external audit have been submitted to the Bank on

a timely basis. The audit report for FY14 was submitted to the Bank by the due date of 31

March 2015. The auditor’s opinion is unmodified (clean).

Disbursements

31. As of 18 October 2015, cumulative disbursements, including DA balances, for TDF-2

are:

No. Currency Allocations Disbursements % of

disbursement

Undisbursed

amounts

IDA H8190 XDR 2,600,000 1,380,771 53% 1,219,229

TF14189 US$ 9,900,000 4,826,720 49% 5,073,280

32. The total disbursements as of 18 October 2015 are US$6.8 million, which represent

49% of the total allocation. Compared with the total disbursements recorded in the previous

mission (November 2014) – US$3.9 million, there is an increase of about 25 percentage points

of the total disbursement rate. In comparison with projected disbursement in PAD,

disbursements are now slightly behind estimates (expected disbursements by end of June 2016

are US$11 million). However, it is expected that the project will accelerate its disbursements

in the next six months due to increased activities planned by each implementing agency.

33. At appraisal stage, the IDA Financing Agreement was SDR 2.6 million (US$ 4 million

equivalent) and the MDTF Grant Agreement was US$ 10 million. It is important to note the

risks of a funding shortfall due to the strength of the USD. Indeed, the funding commitments

in non USD currencies, such as IDA in SDR, Australia in AUD, EU and Germany in EUR, are

now worth less than estimated at the time of appraisal. The NIU’s FM team will prepare a

budget working sheet for both IDA Grant and TF to identify the impact of the $US appreciation

and share it with the Bank by mid November 2015.

III. CONCLUSIONS

34. The mission notes that project implementation is proceeding at an encouraging pace.

Clearly TDF-2 continues to benefit from implementation by a now experienced team in both



in the NIU and implementing agencies across MoIC. As a mature program, TDF-2 has also

benefited from having established mechanisms, including for work planning and coordination,

to support effective implementation. Government ownership over TDF-2 continues to be

exceptionally strong. Activities are moving ahead across all components and sub-components

of the project and disbursements are broadly on track. Funds are now close to being fully

committed. Early results suggest that the project is playing an important role in supporting Lao

PDR’s trade and integration agenda.

35. Results focus during the second half of the project. As TDF-2 now enters the second

half of its project life, it is appropriate that the focus increasingly shifts from getting activities

started, work planning, capacity building, procurement, and resource mobilization; to one that

focuses on results and impact. It is therefore time to move from technical preparation to

approved regulatory reforms (SPS laws, NTM, etc.). This will mean that the implementing

agencies focus more closely on the linkages between their activities and work to follow through

and maximise development impact as measured in the TDF-2 results and monitoring

framework. More focus could also be given to communication and outreach work in order to

better “sell” TDF-2 progress and its impact on improved competitiveness, private sector

development, and diversification of the Lao economy. In addition, the link between the project

and gender empowerment and poverty reduction should also be more clearly demonstrated.

Part of the success of TDF-2 to date has been the fact that it has been largely driven by MoIC,

however, it will be increasingly difficult for MoIC to achieve results on its own. Therefore,

improving the quality of interagency coordination during the second half of the project will be

critically important. During the second half of TDF-2, there should also be a better review of

the capacities of trade related ministries and how their capacities have been enhanced to

facilitate trade.

36. Adjustments to the scope of activities and restructuring. While TDF-2

implementation is proceeding broadly on track, there are a number of activities that would

benefit from some additional time to fully complete and to maximize impact and results. In

particular, this would include the BAF (where average grant size is smaller than initially

expected, and the gap between committed and disbursed sub grants is larger than initially

expected); the ILO/Factory Standards Improvement Scheme (which took longer than initially

expected to commence, thus reducing the time availably for actual implementation); and the

SPS legal work (where the legislative approval process is now taking longer than expected).

An extension of the closing date of TDF-2 from March 31, 2017 by 12-15 months might be

appropriate.

37. Similarly, with the possibility of providing additional resources to the project, there is

scope to scale up activities to increase impact, or to add some new and complementary activities

that could support key elements of the 8th National Socio-Economic Development Plan. These

could include work to improve the complex business environment which currently generates

significant costs for new investments and existing enterprises, providing support to Lao PDR’s

chairmanship of ASEAN during 2016, or for high profile tasks such as MoIC’s new

coordination responsibilities for the Lao Business Forum. In addition, currency depreciation of

non-USD commitments to TDF-2 (in Australian Dollars, Euros and Special Drawing Rights)

has resulted in a shortfall in available resources. This can be partially addressed by reallocations

within and across components, but may also require some further additional financing into the

project.



38. Possible next phase project. As TDF-2 moves towards completion, attention is

beginning to shift to a possible next phase project to follow on from TDF-2. This will require

further discussion between existing and potential development partners and MoIC, as well as

with beneficiaries in the private sector. As with TDF II, it will be important to learn lessons

from the experience of the project and to revisit assumptions to ensure any future support

closely aligns with the government’s priorities.

39. The well-functioning implementation mechanism that has been established under

TDF-II as well as encouraging development results and successful institutional strengthening

of MoIC suggests a continuation of the current implementation model is desirable. As with the

transition from TDF-1 to TDF-2, it would be important to commence preparation of a successor

project well ahead of completion of TDF-2 so that a smooth transition can be maintained

without gaps in implementation or loss of capacity. Work will need to be undertaken over the

next 12-18 months to identify possible areas for future development partner support. Early

indications suggest there is significant potential to broaden the focus of a future project to issues

associated with regulatory governance and private sector development, as well as an increased

use of programmatic mechanisms similar to the DTIS Challenge Facility.

40. The table of agreed actions below summarizes key issues and priorities that will need

management attention:

TABLE OF AGREED ACTIONS

Action Responsible

entity

Proposed

timeline

Comments

Component A: Trade facilitation, trade policy and regulations

1 Prepare terms of reference

and commence selection of

(1) an international trade

facilitation specialist and

(2) a part-time

international NTMs

advisor

NIU/

DIMEX

Submitted by

mid- July

Need revision

and

resubmission

by end of

October

To fill capacity gaps

2 Endorse terms of reference

of NTMs Review Working

Group

DIMEX By end of

November

To advance NTMs

review progress.

Remark: long delay.

Need decision from

senior management of

the MOIC.

3 Prepare work program of

follow up actions based

upon services horizontal

assessment

FTPD By end of

October

To maintain

momentum on the

services agenda

4 Finalize the Trade Policy

Secretariat annual work

plan and working

procedures for the National

Steering Committee for

Economic Integration

TPS/FTPD By November To activate the

Secretariat to support

monitoring of trade

policy and regulatory

conformity



5 Process no-cost time

extension of FAO SPS

Legal Services Advisory

contract

NIU/FTPD By end of July;

in progress

To provide for

completion of

activities

6 Prepare work program to

support further processing

of draft Plant Protection

and Livestock and

Veterinary Laws

MAF/FTPD By December To support legislative

approval

Component B: Diversification and competitiveness

7 Prepare GSC strategic

plan, including financial

projections

GSC By end of

October

Prepare for TDF-2

exit - Recommend

external assistance be

available to support

analysis.

8 Prepare review of GSC

governance structure to

better reflect current and

likely future sources of

income

NIU/GSC By end of

October

To prepare for TDF-2

exit

9 Coordinate with Tax

department and district

offices to seek practical

solutions to current

disincentives concerning

tax compliance

NIU/BAF Ongoing To address

disincentives among

SME BAF recipients

10 Harmonize scope of

technical assistance to

SMEs under SME Access

to Finance Project with that

provided by BAF

WB/

DoSMEP/

NIU

Ongoing To ensure alignment

of approaches

Component C: Mainstreaming Aid-for-Trade

11 Extend ERIT’s

international advisor’s

contract for additional 12-

15 months

ERIT By end July;

completed

Ensure completion of

capacity building

program

12 Ensure that the DTIS

Challenge Facility is fully

committed so that

approved activities can be

fully implemented over the

remainder of the project

life

NIU By May 2016

Fiduciary



14 Finalize and update the

Procurement Plan to be

submitted to the WB

NIU By end July;

completed

15 Prepare a budget working

sheet for both IDA Grant

and TF on exchange rate

depreciation

NIU By mid-

November

Identify if there are

any remaining funds

or a short of funds.



ANNEX 1:

List of representatives of Government Agencies and Organizations met during the Mid-

Term Review Mission

The mission would like to thank all the officials met for their excellent collaboration and

warm hospitality.

Ministry/Agency Department/Unit Name Title

Ministry of

Industry and

Commerce

H.E.Mme. Khemmani

Pholsena

Minister

H.E. Mr. Somchith

Inthamith

Vice Minister

Planning and

Investment Department

Mr. Sirisamphanh

Vorachit

Director General

Mr. Phouvieng Phongsa Deputy Director

Official Development

Assistance Division

and NIU

Mr. Sengphanomchone Director

Ms. Lattanaphone

Vonsouthi

Deputy Head of

Division

Ms. Vilavanh Bounleuth Deputy Head of

Division

Ms. Pakou Va Officer

Mr. Sengxay Phousinghoa PSD Advisor

Mr. Somsanith

Ninthavong

FM Specialist

Ms. Amphaphone

Thongsawath

Procurement Specialist

Ms. Nitnida Phongsavath Trade Officer

Ms. Thipphapvone

Chanthapaseuth

Trade Analyst

Ms. Pinphakone

Xayavong

Trade Analyst

Ms. Suripaphone Meys Trade Analyst

Ms. Viengxay Praphasiri M & E Officer

Mr. Nils Koenig Consultant

Mr. Anousan Onsauath Officer

Ms. Sonevilay Intern

Mr. Phoutsavong PR

Ms. Viengsavanh PR Assistant

Ms. Toutou Admin

Ms. Manithip Champasak Admin

Mr. Marcel Nenita Procurement Adviser

Department of Small

and Medium Enterprise

Promotion (DOSMEP)

Mr. Sa Siriphong Deputy Director

General

Ms. Sitthiphone Vilaysom Technical Officer

Foreign Trade Policy

Department

Dr. Laohoua Cheuching Acting Director

General




Ms. Kingsadone

Phetdaoheuang

Deputy Director

General

Ms. Vilayphone

Xindavong

Deputy Director of

Multilateral Trade

Division

Ms. Onida Vinavong Deputy Director of

Trade in Services

Division

Dr. Sirisena Dahanayake Trade Policy Advisor

Mr. Sonethanou Singdala Deputy Director of

Trade in Goods

Division

Ms. Tavanhphone

Luanglath

Project Coordinator

Imports and Exports

Department

Mme. Banesaty

Thepphavong

Director General

Mr. Vangchai Vang Deputy Director of

Import and Export

Management Division

Mr. Phoxay Inthaboualy Deputy Director of

General and Planning

Division

Mr. Sonemala

Nouanthasin

Deputy Head of Trade

Facilitation Division

Economic Research

Institute for Trade

(ERIT)

Mr. Xaysomphet Norasing Deputy Director

General

Dr. Mana Southichak Research Advisor

Ms.

Malaykham Philaphone

Director of Training

Division

Ministry of Labour

and Social Welfare

Labour Management

Department

Mr. Khamphat Onlasy Director of

Occupational Safety

and Health Division

Ministry of

Agriculture and

Forestry

Department of

Planning

Dr. Somphanh

Chanphengxay

Deputy Director

General

Ministry of Finance External Finance

Department

Mr. Angkhansada

Muangkham

Deputy Director

General

SOE Financial

Management

Department

Mr. Akhavone

Louangsouvannavong

Deputy Director

General

Mr. Russel Leith Insurance Regulatory

Advisor

LNCCI Mr. Oudeth

Souvannavong

Vice President

Ms. Sengdavone Bang-

onsengdeth

Secretary General




ILO Sommany Sihathep NPL

Ms. Madeleine Susan

Jones

CTA

GSDC

Ms. Borivon Phafong Director

BAF Mr. Michael Headen Manager

Ms. Soukphaphone

Thongsavanh,

Advisor

Embassy of

Australia

Development

Cooperation

H.E. Mr. John Williams Ambassador

Ms. Rachel Jolly First Secretary

Ms. Phanthakone

Champasith

Program Manager

Mr. Mark Taylor

Ms. Annemarie Reerink Sr Gender Specialist

Mr. Justin Gain Sr Program Officer

Ms. Henni Arup Sr Policy Officer

Mr. Tom Parks Governance Specialist

GIZ Dr. Hartmut Janus Director

Christian Olk First Secretary, German

Embassy

EU Mr. Michel Goffin Charge d’Affaires

Ms. Khankeo Moonvong Program Officer

Ms. Juliana Hyjek Program Officer

Embassy of the

United States

Mr. Paul Mayer Deputy Chief of

Mission

USAID

Mr. Curtis Borden USAID Representative

Mr. Joshua Templeton Economist

LUNA II Ashok Menon Project Director



ANNEX 2: List of mission members

1 Julian Clarke Senior Economist, GTCDR

(Task Team Leader)

World Bank

2 Richard Record Senior Economist, GMFDR World Bank

3 Konesawang

Nghardsaysone

Trade Economist, GTCDR World Bank

4 Martin Molinuevo Trade Specialist, GTCDR World Bank

5 José-Daniel Reyes Trade Economist, GTCDR World Bank

6 Elizabeth Ruppert Bulmer Lead Economist, GCJDR World Bank

7 Claire Hollweg Trade Economist, GTCDR World Bank

8 Andrew Singer Consultant, BAF Advisor World Bank

9 Kees van der Meer Consultant, SPS Advisor World Bank

10 Deven Padiachy Consultant, BAF Advisor World Bank

11 Maika Watanuki Portfolio Officer, GTCDR World Bank

12 Latharo Lor Procurement Specialist, GGODR World Bank

13 Reaksmey Keo Sok Financial Management, GGODR World Bank

14 Elise Vanormelingen Operations Consultant, EACLF World Bank

15 Phet Udom Mainolath Program Assistant, EACLF World Bank

16 Rachel Jolly First Secretary DFAT

17 Phanthakone Champasith Program Manager DFAT

18 Tom Parks Governance Specialist DFAT

19 Henni Arup Senior Policy Officer DFAT

20 Mark Taylor Private Sector Development Specialist DFAT

21 Anne Marie Reerink Gender Specialist DFAT

22 Khankeo Moonvong Program Officer EU

23 Don Taylor Consultant, ARISE Plus Formulation EU

24 Shumon Khalid Consultant, TDF-2 MTR EU

25 Hartmut Janus Program Director GIZ

26 Curtis Borden Representative USAID



ANNEX 3: DETAILED REVIEW PER COMPONENT

COMPONENT A: TRADE FACILITATION, TRADE POLICY AND REGULATIONS

A1: Trade Facilitation Support

1. The trade facilitation component has three subcomponents: (A1.1) Trade Facilitation

Secretariat and action plan implementation support; (A1.2) capacity building for managers in

trade related agencies; and (A1.3) Lao PDR Trade Information Portal support and

development. The TDF-2 trade facilitation agenda builds on the success of TDF-1 with the

establishment of the Trade Facilitation Secretariat, Trade Facilitation Strategic and Action

Plan, Lao Trade Portal (http://www.laotradeportal.gov.la) and the Roadmap for Harmonization

and Simplification. There are also close linkages with the ongoing IDA Customs and Trade

Facilitation Project, implementation by the Lao Customs Department, Ministry of Finance3.

A1.1. Trade Facilitation Support and Action Plan Implementation

2. This subcomponent was designed to support the Trade Facilitation Secretariat (TFS)

housed in DIMEX to fully achieve its objective of serving as the principal vehicle for

discussing national trade facilitation issues and priorities and ensuring effective coordination,

monitoring and implementation of Lao PDR’s National Trade Facilitation Strategy and Action

Plan.

3. Key progress. The TFS has made some progress with its efforts to resolve trade

facilitation issues and bottlenecks that have emerged since March 2013, however greater efforts

will be needed to address identified problem areas. The TFS also conducted a qualitative survey

of stakeholders in central Vientiane in June 2014 and the southern part including Bolikhamxay,

Khammouane, Savannakhet and Champasak provinces in July 2014, focusing on the

bottlenecks facing the private firms at international checkpoints. Field notes were made

available during the mission, but a final report has not yet been produced. The TFS also made

available to the mission some issue papers available in Lao language.

4. The mission was informed that the following bottlenecks were reviewed and monitored

by the TFS:

a) The lengthy process associated with obtaining an import permit for medicine due to a

requirement imposed since late 2013 that each permit be approved by the Health

Minister. TFS engaged in dialogue with the Health Ministry since the issue has

emerged but the situation has not yet been resolved. It recently produced a comparative

analysis on import permit practices in Thailand and Vietnam for medicine and has

suggested the Ministry of Public Health abolish the current practice. The Ministry of

Public Health has agreed to take into account the recommendation but a satisfactory

solution has not yet been reached;

b) Informal exporters of white charcoal. TFS facilitated the dialogue and coordinated

with the Tax Department and the Enterprise Registry Department to ensure that the

informal exporters are compliant with their tax and other obligations associated with

exports of white charcoal;

3 The Customs and Trade Facilitation Project is financed via two IDA grants for a total of US$ 12.5 million equivalent, and

supports the automation and modernization of Lao PDR’s customs systems.

http://www.laotradeportal.gov.la/



c) Transit charges imposed by Ha Tinh Province in Vietnam on Lao exports in transit to

China. In spite of bilateral exchanges of information, the practice whereby the

Vietnamese province of Ha Tinh applies transit charges on Lao exports to China are

still being applied. In response, the Khammouan Provincial Authority has also

imposed a counter measure (equivalent to the Vietnamese transit charges) on

Vietnamese exports in transit through Lao PDR;

d) Redundancies and unnecessary requirements for an export permit in order to export

wood products for trade fairs. TFS was responsible for lobbying the Minister to drop

the export permit requirement and set clear criteria on wood products qualifying for

trade fairs. The Minister subsequently issued a direction to drop the requirement.

e) Impact of the Bureau Veritas (BIVAC) concession contract to implement the Lao PDR

National Single Window system. TFS completed a thorough analysis of the impact of

the contract focusing on transaction fees proposed by BIVAC in the contract.

Implementation challenges. TFS still faces challenges in encouraging private sector

participation in the TFS forum, providing adequate secretariat services including inter-agency

coordination and preparation of relevant policy and issues papers. The Lao private sector

representatives informed the mission that they have little knowledge of the TFS’s forum. The

forum has not been organized as frequently as it should and TFS has had a relatively low profile

in engaging in effective dialogue with its stakeholders, members and the private sector.

TFS/DIMEX staff need to demonstrate strong commitment on secretariat matters and closely

track and monitor emerging issues. The mission noted that TFS/DIMEX has not yet

implemented a small scale information system to support effective communication and

collaboration amongst the secretariat members. This activity is critical to assisting private

sector representatives to effectively engage with members of the secretariat.

5. Based on available reports and field notes in Lao language, the mission concluded that

TFS/DIMEX still lacks the capacity to carry out in-depth analysis of trade facilitation issues

and is not adequately presenting policy recommendations to its members. The field notes from

the Southern survey suggested some key bottlenecks; however, there was no thorough analysis

of these bottlenecks and they did not led to any published report or issues papers for discussion

at the TFS. The mission also found that there is a need to improve the assessment and

presentation of identified bottlenecks and their presentation into a report and issue papers for

consideration by TFS members. TFS has been staffed with one private sector coordinator and

one national trade facilitation specialist recruited in 2013 and 2015 respectively to support the

TFS in undertaking research and analysis on key policy issues, to encourage private sector

participation as well as providing active administrative assistance. During the meeting with the

Minister, it was recommended that that the Bank develop linkages and synergies between the

Trade Facilitation Secretariat and the Lao Business Forum.

6. Inter-agency coordination has also been a challenge given changes to the National

Steering Committee for Economic Integration (NSCEI) which has been restructured to focus

mainly on trade policy coordination. TFS has been in absence of an institutional umbrella for

strategic guidance and overall direction since January 2015. DIMEX assured the mission that

the change in focus of the NSCEI has had minimal impact on the TFS’s functional and technical

operations but high level direction remains unclear. The mission cautioned TFS/DIMEX that

TFS may become inactive if there is no clear institutional structure that TFS will report to and

be accountable for at the highest levels of the Government - Prime Ministerial level.

TFS/DIMEX informed the mission that a new Decree will be prepared to ensure an appropriate

institutional structure is in place for the TFS.



7. Recommended actions.

a) TFS/DIMEX is in need of external support to build its capacity and provide adequate

secretariat services to its members and other stakeholders, including the private sector.

The mission recommended that an international trade facilitation expert should be

recruited to support TFS/DIMEX in overseeing all trade facilitation issues, capacity

building and regulatory compliance reforms including the non-tariff measures work

program. The proposed international trade facilitation expert will be required to provide

overall guidance and in-depth research and analysis on policy development and

preparation of issue papers as well as help DIMEX implement the review and

streamlining of the NTMS (A2). The two local consultants will carry out the policy and

issues analysis under close guidance from the international expert and will work more

closely with its members, stakeholders and the private sector to ensure their full

participation and inclusion in the TFS processes and forum.

b) DIMEX should urgently reactivate the TFS’s forum to discuss key trade facilitation

issues and bottlenecks. The next work plan should include an indicative date for the

next forum to be conducted. Issues papers must be shared with stakeholders and

members in advance. It is recommended that the proposed information sharing system

be implemented in order to foster closer and more effective communication and

engagement between members and the private sector. In addition, the development of

a closer relationship with the Lao Business Forum should be explored.

c) DIMEX should prepare a new institutional/governance framework to ensure issues

identified by the TFS reach senior policy makers at the highest levels of government.

Such a framework will ensure the effective functioning of the TFS and support its long

term sustainability and relevance as a forum to identify and resolve trade facilitation

issues.

A1.2. Capacity Building for Managers in Trade Related Agencies

8. Subcomponent A1.2 is designed to strengthen the long term sustainability of reform by

supporting the development of a critical mass of skilled and motivated senior and middle

managers across all trade facilitation agencies to ensure effective inter-agency collaboration

and implementation of the Lao PDR Trade Facilitation Strategy and related initiatives. This

component is contracted to the Center for Customs and Excise Studies (CCES) which has

carried out a training need assessment, designed the training program and is preparing to deliver

training programs for both senior and middle managers in trade related agencies.

9. Key progress. DIMEX has made good progress on implementing the capacity building

program for trade related agencies and the program is now on track to commence with delivery

of executive training. The training needs assessment report was delivered in November 2014

and was of high quality. It identified a series of relevant recommendations for the content and

scope of the proposed training programs. CCES submitted its train the trainer program in

January 2015 and completed its first two training of trainers programs in March 2015. The train

the trainer program has five modules including techniques and skills for orientation, adult

learning, lesson presentation and training evaluation. DIMEX and all relevant agencies are

satisfied with the quality of the training of trainers. All trainees provided good feedback on the



course. CCES is now planning to deliver the first two executive training programs in June and

July 20154.

10. Implementation challenges. DIMEX is facing some challenges in identifying staff with

the requisite English language proficiency to participate in the training. Trainees were selected

based on defined criteria including English language proficiency and education qualifications

but it has proved difficult to get sufficient numbers of qualified trainees. Attendance is also

another challenge for most senior executives at the Director-General and Deputy Director

General level in trade related agencies. These senior managers are often traveling and are

frequently overwhelmed with managerial tasks and heavy workload and they are not available

to attend full-time training. Effective absorption and transfer of knowledge between trainers

and trainees is also challenging for staff attending the technical training. In addition, some

trainees come from quite different backgrounds and have mainly worked in administrative

areas and have little practical knowledge of trade facilitation issues. These officials have faced

some difficulty in fully comprehending and putting into practice what they have learned.

11. Recommended actions. Trainees should be selected based on the staff profile identified

in the needs assessment not their language proficiency. As such, DIMEX should consider

offering simultaneous interpretation. The mission stressed that the training of executive

managers remains critical to achieving the objectives of the program. The mission informed

DIMEX that the availability of senior staff was identified at the design stage and attention was

paid to isolating participants to ensure the location facilitated full time participation. The

mission also suggested that for each training program participants should be asked to prepare

a work based assignment to complete after the training. These topic for the assignment should

be related to their work in their respective departments. Such an approach will ensure

participants are able to apply lessons learned in their day to day work. These projects or

assignments could then be evaluated as part of a follow up activity.

A1.3. Lao PDR Trade Portal Support and Development.

12. This subcomponent is designed to ensure that all the information provided on the Lao

Trade Portal (LTP) is kept strictly up to date and that system reliability is good. The component

finances one content coordinator, maintenance and upgrade of the portal and the deployment

of additional enhancements.

13. Key progress. DIMEX has maintained and ensured that the portal is fully operational,

content is up-to-date, and the portal platform is stable and remains relevant to the needs of

users. Similar portals are now being implemented by the Bank in several developing countries

including Lesotho, Bangladesh, Cambodia, Nepal, Malawi and Botswana and work will soon

commence on one in Vietnam. The LTP complies with the ATIGA’s National and ASEAN

Trade Repository Requirements. The trading community continues to provide positive

feedback on the LTP. As of end of March 2015, cumulative hits on the home page total 211,007

since its launch in June 2012 with 42.5 percent representing hits that dive down into rich portal

content. Content searches for legislation made of 17.2 percent, commodity search (14.4

percent) and import and export manual (10.2 percent). By country of origin search, more than

56 percent of hits were from Lao PDR, followed by Thailand (8.1 percent), Vietnam (4.3

percent) and USA (4.2 percent). Between January and March 2015, there were 28 queries

4 The executive training program covers full ranges of modular topics such as trade facilitation, human resource management,

ICT management, risk management, managing regulatory compliance, industry consultations and cooperation, leadership,

planning in trade facilitation program, project management, policy practice and process redesign and organizational change.



posted on the feedback facility regarding import, export and transit information and procedures.

DIMEX responded to these inquiries almost instantly. These operational statistics clearly

demonstrate that the LTP remains relevant and useful to the trading community.

14. Implementation challenges. DIMEX would like to improve the appearance of the portal

as well as upgrade its search facility. It also needs to have more up-to-date information on some

functional areas including market access, value added tax and excise in the portal. It was agreed

that such information can be added using the existing functionality of the portal depending on

availability of such data in a systematic set. Both VAT and excise are non-discriminatory

domestic measures that are applied equally across the board for imports and exports.

15. Recommended actions. DIMEX should upgrade the portal by improving both the

appearance and key functionality necessary to enhance the usefulness of the portal. The

existing maintenance and support services for the portal can easily scale up to include relevant

upgrades. Noteworthy here is the implementation of electronic certification of origin (E-CO)

being financed under the TDF-2 Challenge Fund. It is also essential to accelerate the

implementation of electronic certification of origin (E-CO) being financed under the TDF-2

Challenge Fund as an effort to upgrade the portal with additional functionality including

downloads of forms, electronic submission and approval of certification via the portal. The

mission notes there is potential overlap between the enhancements sought for the portal and

the Lao National Single Window. The mission recommends DIMEX consult with the LNSW

team to ensure the proposed activities are not also being included as functionality in the LNSW.

Likewise, DIMEX wants to upgrade the portal to include the capacity to download forms, and

provide electronic submission and approval via the portal. The mission discussed with DIMEX

the importance of conducting a user-perception survey on the impact of the portal and be

consistent with the M&E framework. The statistical methodology and scope of the proposed

survey still needs to be defined.

A2: Non-Tariff Measures review and rationalization

16. The Non-Tariff Measures (NTM) component of TDF-2 includes three main

subcomponents: (A2.1) NTM data collection and classification; (A2.2) consolidated efforts to

streamline domestic NTMs; and, (A2.3) identifying the most binding foreign NTMs faced by

Lao exporters. It is also expected that the implementation of this component will progressively

build the capacity of officials to master the key issues covered by each subcomponent.

17. A2.1. NTM Data Collection and Classification. During the first year of the program,

a comprehensive dataset was collected and classified by DIMEX. As of June 2015, all line

ministries vetted the information and authorized its publication in the LTP. All 370 measures

were uploaded and published in LTP. Within these, 226 measures are NTMs based on the

UNCTAD NTM Classification System (see Annex 6) and 144 measures are considered as

national standards (i.e. voluntary measures). The main challenge now is to design a mechanism

to periodically update this information. A sustainable mechanism could be implemented via a

connection with the Official Gazette. In this way, any new regulation published in the official

journal would be analyzed by DIMEX and, if appropriate, updated in the LTP. An alternative

option is to approach periodically the NTM focal points at each line ministry to inquire about

regulatory changes in each agency before they are included in the official journal. Given the

relative low empowerment of focal points, the first option is more viable, though the latter

option would be optimal from a regulatory review perspective.



18. A2.2. NTM Streamlining. The formal establishment of the NTM Review Sub Working

Group (NRSWG) under the umbrella of the National Trade Facilitation Secretariat has not yet

been completed. This step is fundamental to the review of priority NTMs. In addition, in the

absence of the proper legal framework to rationalize NTMs, DIMEX faces three main

constraints to fulfill its mandate. First, focal points at line ministries are not empowered to

discuss the role and processes of regulations pertained to each agency. Focal points are mostly

young staff who lack expertise and experience. Second, technical constraints related to the

capacity of DIMEX to collate and categorize NTMs according to the UNCTAD classification

system may impair any robust revision of NTMs before they are enacted into law. Even though

the World Bank organized a week-long training in NTM streamlining in Vientiane in March

2015, which included the participation of other ASEAN member countries, there are still

capacity gaps than need to be filled. Software to properly manage and analyze trade data also

remains unavailable for the technical team in DIMEX. Third, there is no strategy to

communicate with the private sector to identify priority regulatory problems. It is advisable

that the identification of problematic NTMs occurs through close interaction with the trading

community rather than through discussion between government agencies. A possible synergy

with the existing structure of the Lao Business Forum will be explored.

19. A2.3 NTMs Faced by Exporters. After longstanding delays with the procurement of

this activity, it was formally launched in April 2015. An international expert on NTM business

surveys is currently working with a local firm to design the questionnaires, train interviewers,

and implement the survey on the ground. The WB has provided comments and advice on the

first version of the questionnaires. It is important that one member of DIMEX be closely

involved in this activity so the NRSWG starts building a network of contacts in the private

sector that can be used later for the regulatory work of the committee.

20. Other important issues to improve the implementation of the NTM component are5:

a) DIMEX requires the continuous support of an international expert on NTM

streamlining. The nature of this work and the inexperience of the technical team

requires constant support on the analytical process of NTM review. The WB will

continue supporting DIMEX on this activity through analytical and advisory activities.

However, having access to an international consultant working closely with the team

on this process is needed.

b) Assess the relevance of training on mutual recognition agreements. Based on this

assessment decide whether such activity is needed.

c) Forge closer collaboration with the Foreign Trade Policy Department at the MoIC that

is leading the strengthening of the SPS legal framework component (subcomponent A4-

3). This activity aims at enacting (and removing) new SPS regulations, which will

ultimately have to be incorporated in the LTP. Ideally, the NRSWG will provide a

platform for public and private sector consultation about regulatory changes in the SPS

framework

d) Develop a formal outreach campaign to increase the visibility of the NTM agenda with

public and private stakeholders. This activity will raise awareness and empower focal

points in line ministries.

5 These issues were already raised in the implementation support mission carried out in November 2014.



A3: Trade in services

21. Lao PDR’s services sector is at an early stage of development. The trade in services

sector faces important challenges in its three main areas; skills, connectivity, and governance.

The trade in services component of the TDF-2 includes several elements related to the

regulation and governance of the services sector – a matter central to Lao PDR competitiveness

as well as compliance with international trade obligations. Activities are grouped into two main

areas: (i) enhancing regulatory capacity in services trade; and (ii) improving access to services

regulations.

22. The WB team welcomed the progress made during the last year on the various

components, and commended MoIC for its leading role in engaging other line ministries to

ensure compliance with WTO commitments and improving the regulatory framework for the

services sector.

23. Horizontal Regulatory Assessment. During the first half of TDF-2, an international

advisor on trade in services, in close cooperation with the Foreign Trade Policy Department

(FTPD), performed a broad regulatory assessment on the services sector. The assessment

identified laws, regulations and administrative practices that are limiting the potential of the

services sector in Lao PDR. In particular, the regulatory assessment included the following

elements: i) a mapping of laws and regulations relevant to trade in services; ii) their assessment

in light of Laos’ WTO and ASEAN commitments, and iii) the identification of areas where

laws and regulations need to be adopted or amended in order to fully reap the benefits of

services reforms. The assessment was validated in a workshop on October 16, 2014 and was

well received by representatives from multiple policy and regulatory bodies.

24. The assessment found that while some important formal restrictions on the services

sector remain in place, services in Lao PDR is mostly hampered by limitations due to weak

governance. The assessment offered a number of specific recommendations for action in

different areas, including on horizontal matters that affect services sectors across the board.

25. The mission discussed with FTPD the recommendations of the report and identified a

number of recommendations that would be valuable for the improvement of the general

business environment, including issues such as business registration and licensing procedures.

It was noted that many of these matters fall under the purview of MoIC. It was agreed that

FTPD will seek to implement these recommendations in priority areas. To this end, the WB

mission recommends that FTPD elaborate a detailed action plan to implement the

recommendations, in particular those related to procedures under the Enterprise Law, as well

as other improvements related to the business environment.

26. The WB mission recognizes that comprehensive implementation of the horizontal

regulatory assessment recommendations, and more broadly, improvement of the general

business environment, may require the use of specific technical assistance. The WB mission

estimates such activities, including follow-up on the RASTI and improvement of business

environment, fall within the scope of TDF2 component A3 – Trade in Services. With support

of the Trade Advisor, FTPD is drafting a work program to prioritize and implement

recommendations in the next Annual Work Plan of TDF-2.

27. FTPD informed the mission that at this time, the Trade Advisor has been solely funded

by budget under component A4 - Trade in Goods, and is considering using budget under



component A3 to partially fund this position. This would allow the freeing up of some budget

from component A4 to be used by FTPD to implement additional activities related to sectoral

policy, regulatory conformity, compliance with the WTO commitments and other priorities

under component A4-Trade in Goods.

28. Telecommunications. An international telecommunications expert conducted, with the

support of the FTPD and the Ministry of Post and Telecommunications (MoPT), an evaluation

of the current telecommunications regulatory and institutional framework in light of Lao PDR’s

WTO obligations. The assessment concluded that the two main priorities for compliance with

the WTO Telecom Reference Paper are: i) the effective establishment of a sector regulator

independent from the policy-making role, and ii) the implementation of a licensing framework

to allow the authorization of telecommunications operators. The project also provided support

to MoPT in the drafting of regulatory instruments, in particular, on the framework for

competition, interconnection, licensing rand spectrum management.

29. It was noted the discussions with MoPT are already ongoing and that there has been a

preliminary agreement towards the establishment of an independent regulatory body. It is been

decided that, as an initial step, a decree will establish the National Communications Authority

as a specialized agency within the MoPT, separating regulatory and policy-making capacities.

The decree has been drafted and is now under consideration of the Government.

30. It was agreed that TDF-2 is to support the efforts to improve compliance with WTO

obligations on telecommunications, in particular through providing technical assistance and

capacity building for the Lao National Telecommunications Regulatory Authority. The mission

acknowledged, however, that the effective implementation of the Lao National

Telecommunications Regulatory Authority lies beyond TDF-2 scope and budgeted funds. The

WB team committed to liaise with the specific ICT teams within the WB to analyze how to

further support MoPT in this task.

31. Insurance. With the support of FTPD and a national consultant, an international expert

is currently performing an evaluation of the current institutional capacity and is supporting the

Ministry of Finance (MoF) to improve the regulatory and monitoring framework for insurance

services. The consultant is also providing guidance to MoF in drafting key regulations. In

addition, the consultant has facilitated discussions and provided technical support to

stakeholders, including drafting of by-laws, towards the establishment of a national Insurance

Association, that will exercise a degree of self-monitoring and self-regulation, for the industry.

A final report and policy recommendations, including validation on draft regulations and

establishment of the Insurance Association, is expected in August 2015.

32. The mission foresees that further progress on the insurance services sector will require

improving the institutional setting of the insurance services regulator –currently being hosted

under the Department of Financial Administration of State-owned Enterprises in MoF. The

WB team will seek guidance from Financial Markets Global Practice from the WB in how to

advance this sector.

33. Professional Services. This component has suffered some delays, however an

international expert on the regulation of professional services is currently conducting a needs

assessment for the implementation of ASEAN Mutual Recognition Agreements (MRAs) on

professional services. A final report is expected in the second half of 2015. The report will

identify key priority sectors for further institutional and regulatory work. The mission



suggested that progress on the implementation of the MRAs on accounting / auditing services,

or the one on surveying services would be particularly valuable, given the substantial

downstream effects of these activities.

34. Services Trade and Investment Portal (STIP). An international and a national expert

on business regulation are currently conducting the collection and classification of the

regulation on services. An inception report was submitted in early 2015, and a STIP

coordination workshop is being planned for July 2015 with a view to developing a sustainable

inter-agency procedure for information flows. The mission welcomed the progress that has

been made to date and offered continued support and technical guidance.

A4: Trade in goods

35. This component was designed to address the key challenges associated with

implementation of WTO obligations, effective participation in ASEAN, and taking full

advantage of trade opportunities available through Lao PDR’s participation in the multilateral

trading system. Activities build on work undertaken during TDF-1 and focus on: (i)

strengthening trade policy coordination mechanisms; (ii) disseminating commitments and

building capacity on trade remedies; and (iii) further strengthening the legal framework for

Sanitary and Phytosanitary measures.

A4.1. Strengthening trade policy coordination mechanism.

36. Key progress. Good progress has been made on improving the national trade policy

coordination body. The FTPD has informed the mission that the revised Government Decree

of the National Steering Committee for Economic Integration (NSC) was approved and signed

by the Prime Minister in January 2015. The NSC is to be chaired by Deputy Prime Minister

and Minister of Foreign Affairs, deputy chaired by Minister of Industry and Commerce, and

FTPD will serve as the Secretariat of the NSC. In respect to the restructuring, the Decree

introduces the following guidelines: First, the NSC will be the main body responsible for trade

policy coordination in the multilateral and regional trading system; and second, FTPD will act

as the Trade Policy Secretariat, in charge of ensuring coordination, work programing, and

regulatory conformity with international trade obligations in all goods and services areas.

37. Implementation challenges. The mission was informed that Secretariat/FTPD has

assumed significant new responsibilities as the result of NSC restructuring. These tasks

include: establishing working procedures; preparing agenda for the NSC Conference (twice a

year); managing a consultation process with the private sector and establishing an information

exchange mechanism; preparing an annual work program; keeping track of work and assessing

progress of decisions initiatives undertaken by the authorities; and ensuring effective

coordination across ministries and public entities. The mission noted that FTPD has gradually

built up its capacity in trade negotiation and policy formulation especially in WTO accession

negotiation. However, Secretariat needs to have staff and capacity to provide adequate

secretariat services to NSC members, inter agency coordination activities and administrative

tasks. Global experience suggests that the effectiveness of such body is highly dependent on

the quality and commitment of the secretariat staff and their capacity to work exclusively on

secretariat matters rather than managing such responsibilities alongside their normal duties.



38. Recommended actions. The mission suggested that the Secretariat must have access to

competent people able to assist in carrying out the secretariat tasks. FTPD reported that an

international Trade Advisor was recruited recently, funded by TDF-2. The Secretariat should

utilize as much as possible the support and advisory guidance from the advisor to carry out the

above mentioned tasks. The mission was advised that the Secretariat’s annual work program

will be finalized in November 2015 before the next NSCEI Conference. It is essential that all

working procedures for the Secretariat are also completed to ensure the Secretariat is

functioning effectively. The mission and FTPD has also discussed the preparation of the annual

work program of trade in goods and agreed that it should be closely coordinated with the

Secretariat’s task on trade in services (A3).

A4.2. Disseminating commitments and building capacity on trade remedies

39. Disseminating commitments under WTO and ASEAN has been carried out for

stakeholders including public and private sectors at the national and local levels. FTPD

recognized the challenge to reach out to the public and private sectors more effectively in

improving their general understanding of WTO commitments and ASEAN integration

processes. A study tour was conducted for FTPD officials to Thailand to learn and exchange

good communication practices with the Thai Ministry of Commerce in April 2015. FTPD will

restructure its communication and dissemination activities based on MoIC’s review on

communication, which started in June 2015, and is being conducted by an international

consultant. The findings and recommendations of the communication review will be completed

in September 2015. Priorities should be given to activities that support ASEAN processes as

Lao PDR will have the ASEAN Chairmanship in 2016. Preparatory workshops and

consultations are necessary to prepare Lao PDR for the Chairmanship. It is essential that FTPD

program these needs into the current and next work plans.

40. FTPD has made some progress in the drafting of trade remedies legislation. The mission

was informed that the draft Law on Safeguards that was scheduled for approval at the end of

2015 is now rescheduled for approval by the National Assembly in June 2016 due to the tight

agenda of the National Assembly. FTPD advised that there have been some delays in the

consultation processes in complying with the Law on Making Legislation. In respect to the

draft Law on Anti-Dumping and the draft Law on Subsidies, FTPD reported that it has

combined the two draft Laws into one draft Law on Anti-Dumping and Subsidies. According

to the indicative work program of FTPD, the newly combined draft Law is expected to kick in

for consultation and following steps of the Law on Making Legislations in July 2015. The draft

Law aims to be submitted for approval by the National Assembly in June 2017. The mission

noted that the combined draft Law’s expected approval point at the National Assembly will go

beyond the project life of TDF-2. The mission recommended that FTPD will drop the financial

support of TDF-2 for consultation of the draft combined Law given that the LUNA-2 has plenty

of resources to support in parallel. The resources of TDF-2 will focus on high priority activities

including draft the Law on Safeguards and SPS regulatory measures that will produce results

and impact during the life of the project. Separation of funding source and avoid overlapping

activities will ensure that project resources are to be used to really achieve the project

development objective.

41. In respect to capacity building for trade remedies, FTPD reported that a study tour to

Vietnam took place in March 2015 for FTPD to learn about experiences and lessons of

Vietnam’s efforts in developing its capacity as well as the drafting process of the Vietnam

Safeguard Law. The Vietnam Competition Authority under the Vietnamese Ministry of



Industry and Trade is responsible for trade remedies. The Authority has built its capacity since

Vietnam became member of WTO. The capacity of the Authority has strengthened for which

it has two divisions: (1) Trade Remedies Investigation Division and (2) Trade Enforcement

Division. There are 40 staff in the two divisions who are in charge of monitoring the

enforcement of trade remedies. Staff have full capacity and knowledge of International Trade

Law, Economics and Accounting. The mission was informed that the visit helped clarify

questions on capacity building and new Safeguard Law drafting.

A.4.3 Further Strengthening of the Sanitary and Phytosanitary (SPS) Legal Framework.

42. The project was designed to improve SPS legislation by removing gaps and

inconsistencies, and strengthening compliance with WTO and ASEAN. It also strengthens

capacity in the SPS departments and contributes to closing the gap in SPS management

capacity between Lao PDR and other countries, and thus it contributes to improved economic

integration. The project work plan includes revision of two existing Laws6, and providing

notes/outlines and ministerial-level legislation for about 21 areas. A two-year contract with

FAO for support of implementation of the project was signed in December 2013 and field

operations started in February 2014. There is a small excess financial commitment to the FAO

contract of approximately US$ 20,000 that will need to be financed from the broader Trade in

Goods component. From March 2-10, 2015, a WB team conducted a review to measure the

overall achievements of the sub-component7.

43. Key progress. Much progress has been achieved on SPS Legal Framework through hard

work and dedication by Government staff, with effective support provided by the FAO team.

In summary achievements are:

a) Good progress on the revisions of the Laws on Plant Protection and Livestock and

Veterinary Matters. Work on 5 pieces of ministerial-level legislation is close to

completion. Concept notes and drafts have been prepared for the other 16 areas.

b) Training provided on drafting SPS legislation and technical consultations contribute

effectively to quality of legislation and capacity building.

c) Four policy notes on cross cutting issues have been prepared.

d) The legislative work promises improved compliance with WTO and ASEAN,

simplifications that can facilitate trade, and better protection against health risks.

44. Implementation challenges. (1) Project implementation is a few months behind

schedule because of the late start of field work and some management issues. Through

strengthened management and coordination timely organization of consultation meetings can

be enhanced. (2) Emerging experience with the Law of Making Legislation (2012) shows that

submission of laws to the National Assembly is more costly and time consuming than

anticipated. Submission of the two revised laws can at best be achieved by June 2016, which

is significantly after the end of the FAO contract. (3) During implementation much additional

support has been requested by SPS departments and MAF for activities not covered by the

FAO contract8.

6 The Laws are: 1) Law on Plant Protection and 2) Law on Livestock and Veterinary Matters 7 Report is available separately. 8 These activities are: (i) processing the submission of draft Laws to the NA; (ii) strengthened project coordination by MAF;

(iii) update of the 2007 SPS Action Plan; (iv) implementation of SPS legislation; (v) TA for improving SPS border handling;

and (vi) technical support for improving SPS coordination and alignment.



45. Recommended actions:

a) Continued guidance by the Vice Minister of Agriculture and Forestry on SPS policy

and coordination issues and continued support from DoP for coordination.

b) DoP will be responsible for coordinating, monitoring and communicating with

Department of Agriculture, Department of Livestock and Fisheries in MAF and the

Department of Food and Drug in MOH on implementing actions plans for the two draft

Laws on Plant Protection and Livestock and Veterinary Matters. DoP will review the

progress and output of SPS legislation (LEG2) and report to the National Steering

Committee for Economic Integration.

c) FTPD continues to ensure policy and regulatory conformity of SPS legislations and

measures with WTO commitments. In some circumstances, SPS Departments may

articulate specific issues and problems if they are in doubt about compliance and

conformity.

d) FTPD reported that SPS Departments will need small financial support for

consultations, workshops in order to process the two revised draft Laws. DoP, DPC,

FTPD and the mission discussed extensively on work planning and budget within the

Subcomponent A4—Trade in Goods to provide support to the SPS Departments.

Improvement of SPS legislations is critical for closing the gaps and ensure conformity

in Lao trade policy on goods, especially agriculture exports. For this reason, the mission

recommended that small budget can still be allocated within the Subcomponent A4.

These two revised draft Laws on Plant Protection and Livestock and Veterinary Matters

must be a priority.

e) FAO Legal Specialist will coordinate its work program with NIU (legal contractual

relationship), DoP (policy coordination and focal point for SPS legislation) in

supporting the SPS departments on SPS legislation drafting and consultations. DoP will

confirm with NIU the progress and quality of output delivered by FAO for payment

processing. FTPD remains in the loop regarding all forms of communications on project

implementation progress, challenges and issues in order to oversee the overall

implementation performance of component A4-Trade in Goods towards its

development objective.

f) Mitigate delays in implementation by accepting FAO proposal for no cost contract

extension to 29 February 2016 and the related updated work plan (with minor

adjustments) prepared by FAO in consultation with the SPS departments

g) Provide additional support for (i) processing the submission of draft Laws to the NA;

(ii) strengthened project coordination by MAF.

h) SPS Departments should secure advice from the FAO Legal Advisor on issues and legal

texts that may arise from consultations and processing of the draft Laws towards

National Assembly.

i) The SPS Action Plan may need to be updated as there have been several developments

over the past years with donor supports. The update of the plan was not foreseen as a

need in TDF-2. However, having a proper and updated action plan will help guide SPS

departments in terms of prioritization and strategic direction for capacity building and

further improvements of SPS conformity at post WTO accession as well as towards

ASEAN Economic Community.



COMPONENT B: DIVERSIFICATION AND COMPETITIVENESS

B1: Business assistance facility

46. The objective of this subcomponent is to support individual firms in building their skills

and experience to become more competitive internationally. Activities include: (i) direct

consulting services advising individual firms on business growth plans; (ii) matching grants to

assist individual firms financially in purchasing specialized business development services in

support of growth plans; and (iii) rigorous impact evaluation of services provided. BAF is open

to all private firms in Lao PDR, employing Lao nationals, irrespective of size, nationality of

ownership or of management.

47. Key Progress. The mission’s evaluation is that the BAF team has worked hard to

achieve substantial impact. All beneficiaries of the BAF program receive technical assistance

in the form of business advice to help them grow their business, whether or not the firms apply

for a BAF grant. As of June 7, 69 grants had been approved, already well in excess of the PAD

target of 50 for September 2015. The total value of approvals (commitments) so far is $369k,

well on track to achieve the September 2015 target of $400k.

48. What is noticeable is that the average approval size to date of $5400 is only 67% of the

$8000 figure assumed in the PAD. In other words, the BAF team has had to reach out to about

50% more clients than expected, in order to achieve the value of approvals largely in line with

what was expected. There have been positive gender results, also, with female headed firms

disproportionately and positively represented in the balance of firms that have applied to the

BAF. In addition, the pre-MTR impact survey referenced a median of $3550 per grant (out of

15 BAF firms) and a few very small dollar value approvals. This factor is likely, for the future,

to adversely impact on overall BAF impact. The private sector in Laos clearly has substantially

less capacity to absorb this type of assistance than what was anticipated.

49. Disbursements (as of June 7) are $130k, well down on what would be required to hit

the September 2015 target of $300k9. This substantial divergence between the value of

disbursements and the value of approvals is a matter of concern to stakeholders. For this reason,

the mission undertook some more detailed analysis of the underlying reasons. We examined in

detail a sample of approvals out of the 69 where disbursements were less than expected at this

stage.

50. It is clear that there are firstly general expected factors that create disbursement

divergence: (a) the strong growth in approvals over the past two Quarters means that a

disproportionate number of approvals has not yet been converted into disbursements; (b) clients

drop specific activities, because their plans change, and in fact two large cases reduced

expected disbursements by around $32k; (c) because the approved sum is the maximum that

can be disbursed, inevitably actual costs are regularly 5-20% below the maximum, even when

activities have been completed exactly to plan; and (d) there are unexpected but justifiable

internal delays in implementation of approved activities.

51. Then there are the unexpected factors. In nearly all cases the issue is that BAF/NIU

requires unsophisticated and unsystematic local private firms to provide detailed verifications

that they are not used to, and which they find troublesome and time-consuming. Clients lose

9 The September 2016 target for commitments is $800k.



boarding passes; a staff member leaves so that a certificate of attendance at a training course

cannot be provided; and the like. But the verification that has, so far, caused by far the most

problems is the requirement to provide a VAT invoice for every service delivered within Lao

PDR. This has been confirmed by the findings of the recent EMC firm survey10.

52. Recently, the Ministry of Finance has started to insist on compliance with two further

taxes, as a condition of re-imbursement. This can only make this problem worse, but at this

early stage, it is unclear how much worse. The tax issue is dealt with at more length in a later

section.

53. In other respects, the BAF Unit is largely on track. Costs are running in line with

budgets. The new enlarged team is now fully functioning, and working well together. At this

stage, the arrangements put in place earlier this year for the BAF Manager to oversee operations

from his new base in Ireland appear to be working satisfactorily. Internal systems are working

well. The BAF client database system is being upgraded with the help of an outside IT

contractor.

54. There is a need however to enhance outreach and support to women owned businesses.

As BAF business advisors increasingly work to identify companies outside Vientiane, they

may need to invest additional effort in ensuring that the percentage of female-owned company

beneficiaries remains around 30 percent. BAF management may also need to instruct business

advisors clearly regarding the need to invest sufficient time and attention in guiding female

entrepreneurs during the grant application process and the valuable mentoring and dialogue

that this seems to involve on a common basis. Given that the average grant size obtained by

female-owned companies is said to be smaller on average, BAF staff may want to focus on

helping female-owned companies that wish to apply for a second grant to obtain a larger

amount.

55. Given the significantly lower-than-expected disbursement figures so far, and given that

the tax problem is likely to get worse, then the mission’s best estimate is that total

disbursements by the end of the contract will reach around $650,000. WB and NIU/DoSMEP

will discuss how the remaining funds will be used within the next months.

56. Impact Evaluation. The preliminary results from the recent pre-MTR impact survey are

very encouraging11. Of the 14 client firms responding, 9 rated BAF’s initial advice to be high

quality, with the remaining 5 rating it medium quality. 11 out of the 14 rated the quality of the

BAF team as high, with respect to the whole process, with the other 3 rating it of medium

quality. Encouragingly, 14 out of 15 intend to make further applications for BAF support in

the future. There were very few complaints, but clearly the VAT documentation issue

dominated. Early effects on individual firms included the first overseas bookings from an

improved website; a firm already having restructured into divisions, as a result of business

management training; and a more targeted marketing strategy arising from market research.

These effects are very likely, in time, to lead to increased sales volume. The benefits of BAF

to women – both as entrepreneurs or as workers – could be analysed and conveyed more clearly

through the production and dissemination of case studies. In addition, it would be interesting

to include the recommendations from the draft Impact Assessment report by EMC, such as in

10 11 out of 14 respondents have challenges with tax, and all 11 cite VAT. 11 The survey has interviewed 15 BAF firms and 15 non-BAF firms. Some results are reported for only 14 of the 15

respondents, because 1 respondent did not deal directly with all BAF procedures.



the area of awareness and outreach plans. More proactive targeted outreach to high potential

grantees would be logical based on recent developments.

57. Link between TDF-2 and the SME Access to Finance project. The prime objective of

the SME Access to Finance Project (SMEAFP) is to extend the lending term of commercial

bank credit available to SME’s. It consists of three components: (a) a $12m line of credit;

channeled through participating commercial banks; (b) a $3m risk sharing facility (RSF), or

partial credit guarantee, enabling participating banks to offload 50% of the repayment risk on

longer-term loans to SME’s; and (c) supporting TA, primarily for DoSMEP, which is the

implementing agency, but including an allocation of $0.5m for TA direct to SME’s, intended

for pre-investment work such as feasibility studies, business plan preparation and

environmental impact assessments. The project became effective last September, but has been

slow to start, due to failures to agree on detailed terms, affecting both the line of credit and the

RSF. As a result, the project is currently rated “Moderately Unsatisfactory.” We understand,

however, that agreement in principle has recently been reached for the line of credit, so that

this, at least, should start to move within the coming weeks.

58. The mission’s view is that, in principle, the SMEAFP is of a fundamentally different

nature to BAF. It seeks to address a totally different market failure, which concerns access to

longer-term finance for SME’s. However, there are two specific areas where co-ordination and

co-operation would be beneficial.

59. With respect to the TA direct to SME’s, the details of implementation are apparently

still to be worked out. However, the documentation indicates that this TA is intended to be

free of cost for the SME recipient, and, at the same time, the intention is that this allocation

will not “crowd out other donor support.” The mission has requested the SMEAFP project team

to take full account of the fact that BAF is already making available to SME’s grant support

for pre-investment activities, however on a strict 50/50 cost-sharing basis and on a strict re-

imbursement basis. The mission has shared the BAF Manual with the SMEAFP project team.

60. Once participating commercial banks are on-stream, there are opportunities for co-

operation between BAF and this project. If BAF has clients requiring longer-term bank

financing, it could refer them to participating banks. If a bank has an SME client requiring

grant support to improve its performance, and thus, its capacity to repay its loan, then it could

refer this client to BAF.

61. Tax enforcement issue. Tax compliance in Lao PDR is low, particularly amongst the

self-employed; small family businesses and small cross-border traders. Back in 2013, it

became clear that re-imbursement claims payments from Ministry of Finance (MoF) would be

made conditional on verification that VAT had been properly applied to any invoices from

Lao-based service suppliers. For that reason, the final version of the BAF Manual included a

provision (para. 3.21.4) that “NIU will assume all tax and regulatory obligations arising solely

and directly from the provision of services supported by BAF.” At that time, the assumption

was that having NIU pay the VAT would remove any disincentive from using BAF, resulting

from the tax compliance issue.

62. However, it soon became clear that the problem was deeper. A significant proportion

of small firms and self-employed service providers (important in the small Lao BDS market)

are careful to minimize their contact with the tax authorities. Even having their participation in

the program reported to MoF, with the taxes paid by NIU, creates a serious disincentive.



63. In March this year, BAF was informed that similar verification requirements would be

enforced by MoF with respect to an Imputed Profits Tax of 4.8%, to be withheld from any

invoice from a non-Lao based supplier, supplying services within Lao PDR; and also with

respect to an Individual Progressive Income Tax, levied on a sliding scale, varying from 5% to

24%, to be withheld from any invoice from a Lao-based self-employed supplier.

64. The mission is encouraged that BAF and NIU will continue to work on this issue, so

that hopefully, within a few weeks, a mechanism can be agreed with the tax authorities, which

at least reduces the disincentive impact of these tax measures. In grant schemes elsewhere, the

authorities have accepted that such schemes help to develop the taxpayers of the future, and

that it is therefore counter-productive to burden them with a tax compliance role.

65. In order to make sure that NIU and DoSMEP management team is provided sufficient

information on BAF recipients before signing the grant agreements, BAF team may be

requested to provide additional information on background of potential recipients’ businesses

and nature of BAF support.

66. As noted earlier, using BAF as an agency to increase tax compliance is already

adversely impacting impact, an effect that is likely to get worse, now that BAF’s role is being

extended to cover two additional taxes. Given that larger firms are more likely to be tax

compliant, the mission’s view is that it is reasonable to expect that, from now on, the proportion

of larger and medium-sized firms in the total mix of supported firms is likely to increase.

However, with respect to outreach, the mission encourages BAF to continue to make its support

as widely available as possible to all eligible private firms.

B2: Labour standards and manufacturing productivity

67. Building on activities in the garments sector under TDF-1, as well as the wider

experience of the "Better Work" approach, this subcomponent aims to improve productivity,

competitiveness and labor standards focusing on the garments manufacturing sector, an

industry where a majority of workers are female. Activities include: (i) a factory standards

improvement scheme; and (ii) the transition of the Garment Skills Development Centre towards

financial and operational independence.

68. B2.1 Factory Standards Improvement Scheme. After a very long delay, this component

was finally launched in January 2015 with the arrival in Vientiane of the ILO Chief Technical

Advisor (CTA) engaged to lead the work. Only three months into the work program, the CTA

and her team at the NIU and in the Labor Inspectorate at the Ministry of Labor have updated

the timeline of deliverables of the component to meet the shortened implementation period.

The team engaged in a series of meetings with the Garment Association and other stakeholders

and inaugurated the Project Advisory Committee on March 5, 2015. The team is currently

finalizing a needs assessment of the Labor Inspectorate, which is based in part on interviews

with regional and district level inspectors. There are three planned engagements that will be

piloted: pilot training of 9 inspectors, pilot training programs for 10 factories, and 10 pilot

workplace improvement committees (WICs). The various pilot participants have been partly

identified. The team has initiated the hiring of consultants to conduct a preliminary review to

examine if the legal framework (laws and regulations) are compliant with ILO principles on

labour inspection. The ILO will then provide a final report to the Government of Lao PDR

outlining recommendations with a view to supporting the ratification of C81. The project is

also supporting a review of Ministerial Agreement 5523 to clarify the functions and procedures



of the Labour Inspectorate. Pending the recommendations of this assessment, the team will

draft new regulations that can be implemented expeditiously and effectively. The ILO team is

also encouraged to develop the option of forming bipartite Workplace Improvement

Committees in participating factories (i.e. management and workers) – instead of tripartite

(with participation of the Labour Inspectorate), in case the Labour Inspectorate is slow to

strengthen its capacity and credibility.

69. Implementation challenges. Existing capacity in the Labor Inspectorate and among labor

inspectors is extremely low, and hampered by limited budget. There are 341 inspectors, but

only 2,500 inspections were carried out last year (7.5 inspections/inspector) even though each

inspection takes about 3 hours. The main reason for this very low output is extreme budget

constraints that keep inspectors in their offices and largely unable to communicate with

factories. Inspectors demonstrated limited knowledge of the Labor Code, nor did they have

access to a copy of it. There was confusion among inspectors on minimum wage requirements,

a basic standard that should be central to their inspection mandate. Moreover, inspectors

currently perform only advisory rather than enforcement functions, and tend to make no follow-

up visits to assess progress on compliance. The Labor Inspectorate lacks a strategy, and has no

labor inspection plan.

70. Recommended Actions. In addition to the planned activities mentioned above, it is

recommended that the team explore the most appropriate and timely format for issuing new

regulations. The team also acknowledged that they had not yet begun to design the M&E

framework for assessing the program, and they were advised of the urgency to define

appropriate indicators upstream rather than waiting until the second or third phase of the

project. The team was advised to consider labor standards in the context of CSR requirements

of major international brands, going beyond national standards. Finally, the team was also

requested to begin strategizing about how to address the challenge of incorporating broader

issues of productivity and with the objective of developing a facilitating partnership with

factories. Specifically on gender, the ILO team should proactively develop and provide

workers’ education packages that include maternity protection, reproductive rights and health,

and sexual harassment, for workers in the garment manufacturing sector. The team should also

plan to measure and report whether there is a link between improved compliance with gender-

specific labour standards and productivity and profitability of participating companies.

71. B2.2 Garment Skills Development Centre. This subcomponent focuses on support to

the Garment Skills Development Centre (GSC) established under the supervision of the

Association of Lao Garments Companies with support from the TDF-1. The objective is that

the GSC be financially and operationally independent by the end of TDF-2, and the expectation

from November 2014 was that GSC would begin a gradual phase-out of project financing

towards self-financing of its revenue generating activities. However, it seems there is a problem

in the design of the trainings, which are not drawing enough attention of the industry. There is

a mismatch between the training offer from the GSC and the market demand. The financial

performance of GSC was again reviewed in the mid-term review. Despite recent increased

revenue from training-to-trainees activities, GSC continues to be well behind in its primary

expectation to earn fees through the provision of training on supervisory and technical skills to

the garment industry sufficient to cover operational costs. Projected revenues and expenditures

to the end of TDF-2 were deemed unrealistic, and the mission advised GSC to revise projected

revenue and in particular expenditure streams to more realistically assess the ability to reach

operational independence.



72. A strategic assessment was conducted after November 2014 by an industry expert who

reviewed the performance of GSC, and a new business plan to ensure the center’s strategic

offering better meet skills training demand of the garment industry. The results, however, were

not realistic given the budget and timeframe of the end of the TDF-2. The mission advised GSC

to put forth a strategic roadmap by August to become operationally independent. This involves

considering all options to maximize fee income, including the provision of services to clients

outside the garments sector, or to make a case of offering a public service and be supported by

the Government of Lao PDR. The likely outcome will be to reduce TDF-2 funding to GSC at

40 to 60 percent of the current allocation, as to facilitate this transition.

COMPONENT C: MAINSTREAMING AID-FOR-TRADE

C1: National Implementation Unit, and Trade and Private Sector Development Working

Group

73. Building stronger technical capacity on trade and private sector development policy

within MoIC is a key objective of TDF-2. This is to support more effective implementation of

activities not just financed under TDF-2, but more widely as part of a movement towards a

program based approach. This subcomponent includes further capacity investments in the NIU,

including support to its role as secretariat to the Trade and Private Sector Development

Working Group.

74. National Implementation Unit. The NIU has reached a level of maturity and

sophistication that ensures TDF-2 can deliver at a high rate, as shown by the high disbursements

and satisfactory fiduciary ratings. The NIU has risen to the challenge of coordinating multiple

projects within World Bank guidelines. The NIU may require short-term support from external

consultants, rather than embedded long-term advisors, to build capacity in targeted activities

such as the DTIS Roadmap update, the communications and outreach activities from the NIU

to stakeholders.

75. Trade and Private Sector Working Group. The Trade and Private Sector Working

Group (TPSWG) meetings take place regularly, the most recent took place on June 9th, 2015.

The NIU has proposed several revisions to the existing TORs to encompass the rotation of co-

chairs among development partners and streamline the Program Executive Committee (PEC).

The NIU has also recommended the formulation of a Project Review Committee (PRC) to

review projects in advance of the PEC meetings. A structured discussion that includes a

presentation of each project along with discussants for each project may be a useful vehicle for

discussion of projects in advance of the PEC.

76. Over time, the PEC has successfully evolved into a program level steering committee,

overseeing not only MoIC implemented initiatives (such as TDF-2 and the EIF), but also a

range of bilateral/externally implemented initiatives (such as GIZ RELATED and USAID

LUNA). The proposed restructuring of the PEC would reduce the number of co-chairs so that

only MoIC Minister or Vice-Minister would chair the meetings, with development partners as

participants only. The NIU has delegated the coordination of all bilateral projects attached to

MoIC to the Department of Planning and Cooperation (DPC) within the framework of the PEC,

in order to ensure harmonization of development funds towards agreed outcomes.



C2: DTIS action matrix/roadmap challenge facility

77. A DTIS challenge facility has been established under TDF-2 making resources

available to support implementation of smaller priority activities identified within the DTIS

action matrix/roadmap on a demand-driven basis. Resources are not pre-identified under this

subcomponent, but remain available to support pro-poor activities proposed on an ongoing

basis. The challenge facility is open to funding applications from any public sector ministry or

department from across the Government of Lao PDR.

78. Key Results. There has been strong demand for accessing the Challenge Facility to

support priorities under the updated DTIS Roadmap for Trade and Private Sector Development.

The Challenge Facility has matured into a mechanism by which implementing agencies can

swiftly and efficiently gain funding for analytical inputs into policymaking, and as such it

represents a refreshing programmatic tool through which funds can be swiftly designated

towards relevant research. The six proposals that have already been approved address issues

including (i) an e-Certificate of Origin system, (ii) an ICT strategy for the MoIC; (iii) a Trade

and Gender study; (iv) Development of Implementing Regulations for the Industrial Processing

Law; (v) Assessment of Barriers to Free Movement of Goods in Domestic Markets; (vi)

development of legislation on the control of toxic chemicals. The total budget committed for

these proposals is $640,000. As a programmatic facility that is configured to deploy funds

quickly for consulting services, the Challenge Facility has successfully developed legislation,

built capacity and provided input into policy making. To that end, the Challenge Facility could

be enhanced in the future to encompass additional activities, perhaps with an enhanced budget

allocation.

79. Implementation Challenges. A key challenge is to complete approved proposal

implementation on time. The mission noted that most sectoral implementing agencies need

additional time to implement the activities. The NIU has proposed to extend the time duration

of activity implementation to 18 months from the original 12 months as agreed in the CF

guideline. The mission noted the importance of implementation and quality of activities and

agreed that the proposed extended time duration appears sensible. It is crucial that sub-proposal

implementation be completed before the closing date of the TDF-2 (i.e. March 2017) in order

to deliver results and measure impact.

80. Recommended Actions. The mission recommends that the Challenge Facility should

encourage access to funding by other agencies outside of MoIC, in order to be consistent with

the objective of the Facility to be open to all Government ministries. For example, we could

consider funding for emerging priorities such as the Laos ASEAN Chairmanship.

C3: Research and policy analysis

81. The objective of this subcomponent is to support improved trade and private sector

development policy formulation, and better measurement of the impact of policy. Activities

include investments in (i) research methodology and capacity building; and (ii) a research

facility to commission high quality policy relevant research.

82. Research methodology and capacity building. The ERIT is a mature research agency

that provides input to policy makers. Under TDF-2 funding, ERIT has developed capacity

building programs through the intervention of an embedded international advisor. The advisor

has provided training and hands-on capacity building to ERIT staff focusing on research



methodology. The advisor has also formulated policy briefs, organized events and workshops

and facilitated regular publication of the Lao Trade Digest. The advisor’s current contract will

end in August 2015.The ERIT team has indicated that an extension of the international

advisor’s contract for an additional 12-15 months would be useful in order to assist ERIT to

achieve the significant list of proposed studies with overseas partner institutes, as indicated

below.

83. Research facility. ERIT has approved seven proposals for funding through the research

facility that are due for completion by the end of 2016. ERIT foresees an additional four

proposals to be approved over the remaining life of the program. The proposals that have been

approved to date, and for which work is underway, are as follows: (i) Cluster formation for Lao

SMEs in three sectors, for which the research partner will be the Mekong Institute; (ii)

Assessment of Cattle Trade Development in Lao PDR, for which the research partner is

NAFRI; (iii) Study of the Emerging Flowers and Decorative Plants and its role in agribusiness

value chains, in partnership with CMU and NUOL; (iv) the Utilization of Preferential Trade

Agreements, in partnership NUOL; (v) Value Chain and SME development, to be carried out

by ERIT; (vi) the role of human capital in Lao’s participation in regional production networks,

in partnership with ANU and NERI, (vii) improving the Economic Vulnerability Index (EVI)

for Laos: the determinants of export earning instability, in partnership with NERI. In addition,

a proposal expected to be submitted soon is on an analysis of starting a business in Lao PDR,

with NUOL. The challenge is now to ensure that the approved research proposals will be

delivered with high quality and on time. It is recommended that ERIT should use the

international advisor to provide hands-on advice and guidance to researchers to achieve as

much as possible high quality research outputs and subsequently to ensure research impacts

through dissemination and communication. The proposals will be used by policymakers to

shape their legislative and procedural responses to shifting regional trade patterns.

84. Research fellowship program. A research fellowship program was envisaged at the

outset of the TDF-2.The mission found that there has been no progress in implementing the

fellowship program, as agreed in the PAD, because ERIT has allocated funds towards research

proposals. The mission team was informed that the research fellowship program is no longer a

priority for ERIT and that the funds originally designated for the visiting research fellow could

be more usefully deployed towards an extension of the international capacity-building

advisor’s contract and additional research proposals.

MONITORING AND EVALUATION

85. The mission noted that there is good progress in activities that contribute to the

achievement of the Project Development Objective (PDO) with currently available data

sources. On PDO indicators, since a newer Enterprise Survey is not available at the MTR, the

team will wait for the latest data from the upcoming World Bank Enterprise Survey 2015,

which is expected to be available later in the year. Although the mission does not consider other

sources as an official source for our indicators, the mission observed the slight improvement in

a similar indicator in other business perception survey. Overall Logistic Performance score

slightly deteriorated; however, the customs specific score of LPI has improved from 2.38

(2012) to 2.45 (2014). In terms of the relevance of PDO and project activities, on-going

activities are more directly contributing to enhance competitiveness and improve business

environment than diversification. However, the mission members agreed that competitiveness

and diversification are intertwined. Therefore, it is recommended that the team would add an



indicator better linked to activities on diversification so that the team can prove the achievement

of PDO at the completion of the project.

86. While the mission has confirmed some progress in both PDO and intermediate

indicators, the mission considered the mid-term review as an opportunity to modify and clarify

indicators, adjust targets to be aligned with the actual activities. The mission found that there

are some needs to clarify and modify some intermediate indicators in line with the actual

activities.

87. On component A, the mission confirmed that everyone is interested in how the Lao

Trade Portal (LTP) is useful for not only traders but also other businesses. Therefore, keeping

the indicator on the number of user hits (indicator 2), the mission agreed with NIU that the

project will conduct a survey to measure the usefulness of the portal as well as who are

accessing to the portal from which countries. In case the data source for results would not be

available at the completion of TDF-2, the mission recommends that the NIU and DIMEX

conduct surveys by using same methodology of WBES and LPI to confirm the results.

Moreover, the mission proposes a correction in target for indicator (4) “Frequency and

participation of National Trade Facilitation Secretariat meetings”. According to the agreement

on the structure and role of Trade Facilitation Secretariat No 023/NSCEI dated 20/10/2010

National Trade Facilitation Secretariat meetings shall be organized regularly in response to

policy needs and to ensure relevant stakeholder dialogue. On Trade in Services, the mission

understood that the regulatory reform would take much time as approval process for decrees

are out of control of the project team. Regulatory reform would contribute to (6) reduction in

number of days required for services firms to obtain operating licenses, but the current activities

(regulatory framework) would not directly achieve the results for this indicator. In order to

monitor more actual steps that the team can observe, the mission proposes to add one

intermediate indicator ‘No. of regulations prepared on telecom sector / insurance sector /

professional services for a monitoring purpose’.

88. The mission noticed that indicators and targets need to be adjusted for Component B.

On B1 (BAF), the original implementation plan was for 5 years while actual implementation

period has been cut off to 3 and half years due to delay at setting up BAF. Therefore, the

implementation agency proposes the clarification of indicators “Cumulative number of BAF

grant approvals” and modifying the target from 150 to 100 approvals as end target. In addition,

another indicator (8a) “Increase in % share of female owned/managed businesses supported

using advisory services” turned out to be unrealistic because the BAF started with good

participation of female owned business (about 30 %) from the very beginning. Given this

positive situation, the mission proposes to modify the current indicator to “Average Percentage

of female owned business reached by BAF outreach activities 30 % maintained”. With this

indicator, BAF will not miss out on businesses owned by women in other provinces. At the

same time, the mission proposes to drop (8b) “Within those businesses, percentage of women

employed – end target 30 %”. Because BAF cannot intervene the employment policy by each

employer (BAF supported enterprises), the mission would consider that we would take this

indicator out as the original indicator is a useful measure of the degree to which BAF targets

and is able to attract companies with a substantial percentage of female employees. Suggest to

retain indicator, with target of 30% average female employment.. Although BAF is not a

gender-specific component, the indicator to capture 30% of female owned business

participation. Finally, it is too early to tell the actual sales grow (indicator 8) due to the delay

in implementation.



89. The mission proposes minor changes for clarification on indicators of Component C.

With qualitative indicators (11) “Improved aid for trade governance moving towards a program

based approach operating under the TPSWG”, (12) “Increased focus in government planning

documents on the poverty, social and gender impact of increased trade and integration”, the

mission confirmed that the Aid for Governance has been strengthened. To prove this, all of 8

TRTAs have adopted the single governance under PEC. Also, gender has been included in the

5 year Industry and Trade Development Plan of MoIC. In order to clearly demonstrate the

progress made for this Component C, the mission proposes a slight change in indicator (11) to

“increased No. of TRTAs that have adopted single project governance structure under the PEC”

and “Government planning documents takes account of trade and integration in the area of

poverty / social and gender impact (list names of documents)”. Lastly, as we take account of

gender seriously in trade and competitiveness issues, we confirmed ES2012 revealed 41.9 %

already achieved for the indicator (13) “Increased share of firms with female management /

ownership participation %”. This indicator is on good track. This gender indicator is rather

overarching indicator for TDF2; however since the TFD2 is not exclusively for female

businesses, we would refrain from putting this indicator at the PDO level. To make sure we

take gender into account, we keep this intermediate indicator under Component C for

monitoring purpose.

90. Other indicators and targets will be unchanged. The observed results at the MTR and

proposed changes are showed in the updated results framework attached in Annex 4 to this aide

memoire

91. The M&E team in the NIU has been working closely with implementation agencies of

each component by consolidating semi-quarterly and quarterly reports from implementation

agencies, and holding meeting with them. Since the latest data source for PDO / intermediate

indicators are not available, the NIU looked into the qualitative description in the submitted

reports to confirm the progress made so far.

FIDUCIARY ISSUES

Procurement

92. The mission reviewed the progress of procurement under the project, the capacity of

the implementing agency and found that the overall procurement performance has been

‘Satisfactory’. All procurement packages in the procurement plan were reviewed and

discussed, the procurement progress for the project has been very good and the procurement

work were completed around 80%. However, there are some pending procurement packages

which are needed to be discussed and finalized concerning Implementing Agencies as well as

WB technical team.

93. Procurement Plan. The mission suggested to the NIU to finalize and update the

Procurement Plan with all implementing agencies concerned before submitting to the WB for

no objection by mid-August 2015.

94. The mission also conducted a procurement ex-post review for the procurement

packages which were procured by NIU during FY 15. There is no major issue found during the

reviewing and the letter of procurement ex-post review finding will be sent to the project.



Financial Management

95. The Mission reviewed some key internal controls over financing reporting and

financial management arrangements under the project. The overall financial management

performance remains ‘Satisfactory’. There are a few areas that may still need strengthening in

the project’s internal control system as discussed below.

Action Responsibility Due Date

(a) Update information in the advance register NIU’s FM July 31 and

ongoing basis

(b) Persons who have outstanding advances should

inform NIU of reasons leading to late advance

clearance.

NIU’s FM and

Implementing

Units

From now on

(c) Ensure all invoices are stamped ‘PAID’ NIU’s FM Ongoing basis.

(d) Submit cash flows projection for expenses to be paid

from the operating account

NIU’s FM July 31 2015

(e) Submit a working on budget availability taking into

account current disbursements in SDR for IDA and

US$ for TF, current commitment and estimated

expenses until the project’s end for IDA Grant and

TF

NIU’s FM July 31 2015

(f) Ensure that each implementing unit will prepare an

annual work plan having a quarterly budget

breakdown

Implementing

units/NIU’s FM

Annual budget

for FY15/16

onwards.

96. Review of selected controls and transactions. The mission reviewed cash count,

bank reconciliations, advance register, fixed asset register and randomly selected a few

transactions from the general ledger from Jan to Apr. 2015. Results of reviews of the controls

and transaction disclose that controls are working as intended. Nonetheless, there are a few

observations for improvement as follows:

(a) Information in an advance register: The advance register has useful information such

advance date, deadline for clearance, actual cleared date, aging, description, debit,

credit, balance and remark. Our review of the advance register for Jan to Apr. 2015

shows that only uncleared transactions were maintained in the register and the

advance’s age were not recorded. NIU should ensure that complete information in an

advance register be maintained and the advance register should also show information

about those already cleared.

(b) Late advance clearance: Late clearance of a few advances was observed in the register

despite many follow-ups from the NIU’s FM team. NIU should require each IA to send

a letter or email to provide reasons of late liquidation before the advance clearance is

due. A phone call to follow up late advance clearance should be recorded in the advance

register for monitoring purpose.

(c) Stamp ‘PAID’ on invoices: In general, invoices from suppliers were stamped ‘PAID’;

while the consultant’s invoices were not. All invoices should be stamped ‘PAID’ as

soon the cheque or transfer document has been approved / signed.



97. Ceiling in an operating account: The Mission was informed that ceiling in the

operating account maintained by NIU may be low given expected increase of the implementing

unit’s activities in the coming years. This will lead to more replenishments of the operating

account. NIU should send the Bank’s projected cash flows for expenses to be paid from the

operating account for at least six months to support a request to increase the ceiling in the

operating account.

98. Budget plan. IAs have not yet prepared their annual work plan and budget with a

break-down of the quarterly budget. Without having a quarterly budget from each IA makes it

difficult for NIU to prepare sound consolidated budgets for each quarter for monitoring purpose

and for reporting in IFR. NIU’s FM team acknowledges an importance of having quarterly

budget plan and will work with each IA to the annual budget broken down into quarter for

FY16 where the budget preparation process will start in Aug/Sept. 2015.

99. Interim unaudited Financial Reports (IFRs) and external audit. IFRs have been

submitted to the Bank on a timely basis. The audit report for FY14 was submitted to the Bank

by the due date of 31 March 2015. The auditor’s opinion is unmodified (clean).

Disbursements

100. As of 18 October 2015, cumulative disbursements, including DA balances, for

TDF-2 are:

No. Currency Allocations Disbursements % of

disbursement

Undisbursed

amounts

IDA H8190 XDR 2,600,000 1,380,771 53% 1,219,229

TF14189 US$ 9,900,000 4,826,720 49% 5,073,280

101. The total financing of the project is XDR2.6 million (US$4 million equivalent) for IDA

Grant and US$9.9 million for TF12. As of 18 October 2015, the disbursements for IDA Grant

are XDR1.4 million or 53% of the total IDA allocations; and the disbursements for TF are

US$4.8 million or 49% of the total TF allocations. The total disbursements as of 18 October

2015 are US$6.8 million, which represent 49% of the total allocation. Compared with the total

disbursements recorded in the previous mission (November 2014) – US$3.9 million, there is

an increase of about 25 percentage points of the total disbursement rate. In comparison with

projected disbursement in PAD, disbursements are now slightly behind estimates (expected

disbursements by end of June 2016 are US$11 million). However, it is expected that the project

will accelerate its disbursements in the next six months due to increased activities planned by

each implementing agency.

102. At appraisal stage, the IDA Financing Agreement was SDR 2.6 million (US$ 4 million

equivalent) and the MDTF Grant Agreement was US$ 10 million13. It is important to note the

risks of a funding shortfall due to the strength of the USD. Indeed, the funding commitments

12 The slight difference between the appraised amount for the MDTF (US$ 10 million) and the amended amount (US$ 9.9

million) is due to exchange risk discounting on the remaining unpaid non-USD donor contributions to the MDTF. The amount

will be amended again at a later stage to reflect the reality, once all donor contributions are fully paid in. 13 The IDA grant is SDR 2.6 million, which at the time of appraisal was equivalent to US$ 4.0 million, but now is nearer to

US$ 3.7 million. The MDTF grant was appraised at US$ 10.0 million. However, since the MDTF donors only pay in gradually,

the final amount of the MDTF will be known once all donor contributions are paid in – and the Grant Agreement will be

revised accordingly.



in non USD currencies, such as IDA in SDR, Australia in AUD, EU and Germany in EUR, are

now worth less than estimated at the time of appraisal. The Mission discussed SDR’s

depreciation with the NIU’s FM team and asked the project to prepare a budget working sheet

for both IDA Grant and TF. Taking into account the current cumulative disbursements and

projection from now until the project’s end, this budget working sheet will tell the project if

there is any remaining funds or a short of funds. The project will send this budget working

sheet the Bank for review by mid November 2015. In addition, NIU should keep updating

information in the budget working sheet more often when the project is near the closing date

in order to avoid any over committed situation.



ANNEX 4: Updated Results Framework and Monitoring (as of June 2015)

LAO PDR: SECOND TRADE DEVELOPMENT FACILITY PROJECT

Project Development Objective: To support the implementation of Government's trade and integration priorities outlined in the 2012 DTIS Roadmap, and in

particular to contribute to improved competitiveness and diversification, focusing outside the natural resource sectors.

PDO Level Results

Indicators Core

Unit

of

Meas

ure

Baseli

ne

Cumulative Target Values

(actual) End

Target

Frequenc

y

Data

Source/

Methodolo

gy

Responsi

ble for

Data

Collectio

n

Description of observed progress YR 1 YR 2 YR 3

(MTR

)

YR 4

1. Reduced mean

number of days to

clear imports

Days 10.6

(2009) 10.1 9.5

8.5

(3.3) 5.3 5.3

Every 2-

3 years

World

Bank

Enterprise

Survey

NIU Score 3.3 from WBES 2012

2. Reduced mean

number of days to

clear exports

Days 7.5

(2009) 7.1 6.8

6.0

(5.6) 3.8 3.8

Every 2-

3 years

World

Bank

Enterprise

Survey

NIU Score 5.6 from WBES 2012

3. Improved logistics

performance score

Num

ber

2.5

(2012) 2.6 2.7

2.9

(2.39) 3.0 3.0

Every 2-

3 years

Logistics

Performanc

e Index

NIU Score 2.39 from LPI 2014 [Customs

score 2.45]

Component A: Trade facilitation, trade policy and regulations

Intermediate Results

Indicators

1. Reduction in

percentage of firms

identifying customs

and trade regulations

as a major constraint

% 6.8

(2009) 5.8 4.8

3.8

(12.4) 2.8 2.8

Every 2-

3 years

World

Bank

Enterprise

Survey

NIU

12.4 % from WBES 2012. WBES

will be available later 2015, the

result will be updated then.



2. Increase in usage

statistics for Lao PDR

Trade Portal

%

incre

ase

in

numb

er of

hits

7,179

(No.of

hit)

5

(167,

378)

10

(190,

456)

30

(49,53

9)

50 50 Annual

Monthly

performanc

e statistics

NIU

Increase in No. of hits substantially,

but need to have the disaggregated

data (by country) & conduct a small

survey on how LTP has been useful

for non-traders or business.

3. Successful

completion rates for

Trade Facilitation

capacity building

program

% of

gradu

ation

s

0 100 100 100

(0) 100 100 Annual

Student

records NIU

Consultant hired, curriculum being

developed for the training.

4. Frequency and

participation of

National Trade

Facilitation Secretariat

meetings to resolve

trade facilitation

issues, with decisions

documented and

follow up actions

prioritized

Num

ber

per

year

4 4 4 4 (2) 4 4 Annual

NTFS

Annual

Reports

DIMEX

Proposed correction:

According to the agreement on the

structure and role of Trade

Facilitation Secretariat No

023/NSCEI dated 20/10/2010

National Trade Facilitation

Secretariat meetings shall be

organized twice per year but to

discuss urgent issues more meetings

can also be organized. To be more

realistic, we would propose to target

2 times per year.

5. Reduction in the

mean number of days

required to obtain

import licenses

Days 20.7

(2009) 18.0 15.0

12.0

(14.2) 9.0 9.0

Every 2-

3 years

World

Bank

Enterprise

Survey

NIU 14.2 % from WBES 2012



6. Reduction in the

mean number of days

required for services

firms to obtain

operating licenses

Days 14.7

(2009) 14.1 13.1

11.8

(12.6) 10.1 10.1

Every 2-

3 days

World

Bank

Enterprise

Survey

NIU

% from WBES 2012 for services

sector

Proposed additional intermediate

indicator:

No. of regulations prepared on

telecom sector / insurance sector /

professional services.

Component B: Diversification and competitiveness

7. Sales growth in

BAF supported firms

compared to non-

supported firms

% 0 +20 +20

(N/A) +20 +20 Annual

Mid-term

and end

term

surveys

NIU

It is too early to measure sales

growth now due to delay in

implementing BAF

8. Cumulative number

of businesses

supported using BAF

advisory services

Num

ber 0 50 100

150

(69)

150

(100)

150

(100) Annual

Progress

reports BAF

Rephrasing for clarification:

Cumulative number of BAF grant

approvals

Proposed change in end target: from

150 to 100

8a. Increase in share

of female

owned/managed

businesses supported

using advisory

services

% 0 +10 +10 +10 +10 +40 Annual Progress

reports BAF

Proposed new indicator:

Average Percentage of female

owned business reached by BAF

outreach activities14 30 %

maintained from now own.

14 Outreach activities are seminars in provinces, call calling, referrals



8b. Within supported

businesses, percentage

of women employed.

Within those

businesses, percentage

of women employed

% 0 30 30 30 (?) 30 30 Annual Progress

reports BAF

Given this is out of control of BAF

program, may not be relevant to the

project activities. The record

anyway proved that about 30 % of

employees are women.

9. Garment factory

labor standards

monitored and

reported to

international standards

Num

ber

of

moni

tored

facto

ries

0 0 0 5 (0) 15 20 Annual Inspection

records MoLSW

Due to delay in contracting with

ILO, it is too early to have results.

10. Cumulative

number of garment

enterprises using GSC

advisory services

Num

ber

of

user

facto

ries

3

(2012) 4 6

8

(N/A) 10 10 Annual

GSC

reports GSC

The data is not available, the

indicator / component in discussion

between WB and GSC on a

strategic plan.

Component C: Mainstreaming aid-for-trade

11. Improved aid for

trade governance

moving towards a

program based

approach operating

under the TPSWG

Desc

riptiv

e

Fragm

ented,

standa

lone

work

progra

ms

Coordinated, joint work planning and

results monitoring supervised by the

TPSWG (8 TRTAs adopted single

project governance structure under the

PEC)

Annual Progress

reports NIU

Proposed modification:

Increased No. of TRTAs that have

adopted single project governance

structure under the PEC.



12.Increased focus in

government planning

documents on the

poverty, social and

gender impact of

increased trade and

integration

Desc

riptiv

e /

Quali

tative

Limite

d

focus

Substantive focus with poverty, social

and gender impact mainstreamed

(gender has been included in the 5 year

Industry and trade Development Plan of

MOIC)

Annual Progress

report NIU

Proposed modification:

Planning documents take account of

trade and integration in the area of

poverty / social and gender impact

(list names of )

13. Increased share of

firms with female

management /

ownership

participation

% 39

(2009) 41 43

45

(41.9) 47 47

Every 2-

3 years

World

Bank

Enterprise

Survey

NIU 41.9 % from WBES 2012



ANNEX 5: Trade in Services component (A3)

Task TORs – Action plan for streamlining business registrations procedures

Background

1. The Regulatory Assessment on Services Trade and Investment conducted by MoIC Foreign

Trade Policy Department (FTPD) identified laws, regulation and administrative practices

that are limiting the potential of the services sector in Lao PDR. The assessment found that

while some important formal restrictions on the services sector remain in place, services in

Lao PDR is mostly hampered by limitations do the weak administrative practices and

unwarranted regulatory requirements that affect the business environment.

2. A number of regulatory and administrative measures pertaining to the implementation of

the Enterprise Law, amongst others, were found to affect services providers, and more

broadly the business environment. These measures fall largely under the jurisdiction of the

MoIC. Examples of these regulatory and administrative restrictions, as set out in the

Horizontal Regulatory Assessment include:

a. Unwarranted consultations by MoIC officials with line ministries during business

registration procedures, in non-controlled sectors;

b. Unnecessary requirements to fill a standardised Articles of Association (AoA)

form, which, in addition to including additional requirements, has the potential to

create unpredictable outcomes as there is no certainty in a legal conflict of which

version of the AoA;

c. Need for approvals for changes related to the legal documentation establishing the

company. Some regulatory authorities such as the BoL require to notify of changes

of directors and business address once they have been made while others regulatory

authorities like MoIC require the business to seek approval for such changes;

d. Procedural requirements do not match the stage of the actual regulatory process

being undertaken. An example of the latter point is where business registration

requires the presentation of documents such as lease agreements and labour

contracts which a company could not reasonably possess before incorporation.

3. The above examples suggest that some implementing aspects of the Enterprise Law, such

as the procedures for company registration, may need to be revised and streamlined in order

to expedite procedures, and reduce costs for business and regulatory authorities alike.

Goals

4. The current task will seeks to improve the business environment for services and non-

services firms by:

a. identifying additional measures under the implementation of the Enterprise Law

that introduce unnecessary barriers and affect the business environment;

b. assessing specific actions of legal, regulatory, and administrative nature that are

needed to remove unnecessary barriers and streamline business registration

procedures;



c. facilitating the means to reduce such barriers, including through promoting high

level consultations, providing technical advice, and suggesting alternative practices.

Deliverables

5. The task will entail three main deliverables

a. Action Plan identifying the measures pertaining to business registration to be

reformed, including but not only those related to the implementation of the

Enterprise Law, and setting steps to achieve. For each specific measured to be

reformed, the action plan will include, amongst other elements,

i. Negative effect produced by the measures (e.g. delay, increase

documentation, inconsistency in the regulation;

ii. agency directly responsible for the reform;

iii. specific actors within each MoIC department who must be directly involved

in the reform;

iv. means (e.g. decree, ministerial guidance, administrative procedure, de facto

practice) necessary for reform;

v. suggested strategy for reform, and steps to implement it;

vi. timeline estimated for the reform;

vii. beneficiaries of the reform.

b. Updated Action Plan, outlining the progress made in the reforms, the obstacles

faced, and updated strategies and next for each of the measures identified for reform

c. Results framework indicating the measures that have been reformed, the reason why

a measure was not reformed –if any.

Timeline

6. From the start of the tasks, the deliverables shall be submitted in the following periods

Action Plan 3 months

Updated Action Plan 8 Months

Results Framework 14 months



ANNEX 6: Non-Tariff Measures (A2)

Lao PDR’s Non-Tariff Measures by UNCTAD NTM Classification Categories

published in LTP

Categories Description Number of Measure

A Sanitary and Phytosanitary measures 47

B Technical Barriers to Trade 44

C Pre-shipment Inspection and Other formalities 20

E Non-Automation licensing, quotas,

prohibitions and quantity-control measures

other than for SPS or TBT reasons

8

F Price-control measures, including additional

taxes and charges

57

N Intellectual property 1

0 Rules of origin 1

P Export related measures 48

Total 226

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