AFD's involvement in Laos

Agence Française de Développement

LAOS

Early morning collection of the monks at Vat Phou © World Heritage Office Vatphou Champasak

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

Laos Laos is a mountainous landlocked country in South East Asia. Rich in natural resources and less densely populated that neighbouring countries, the country is facing many challenges on the path to development. Like its neighbours, Laos has been a victim of the upheavals of history and has been a Popular Democratic Republic since 1975. It has opened up to the world by degrees, through a series of economic reforms which began in the 1980s, and more recently through its membership of the Association of South East Asian Nations (ASEAN) in 1997, and the World Trade Organisation (WTO) in 2012.

The country’s economy is mainly agricultural. More than 70% of the Lao population depend on agriculture and natural resources, which account for 25% of GDP. The second most important sector is energy and mining (30% of GDP). In addition, Laos has a significant potential to generate hydro-electricity (23,000 MW) which attracts considerable investment. The tertiary sector, which includes tourism, is also booming (44% of GDP). Laos is still among the 48 least developed countries (LDCs) in the world, with a low level of income per head, and has many challenges to overcome. However its natural resources, its cultural and architectural heritage and its location at a crossroads between several regional powers are all assets.

It is against this backdrop that AFD is working to support the country’s sustainable and equitable development.

AFD’s involvement in Laos AFD was mandated to begin work in Laos in 1993 and opened its local office in 1994. In accordance with the country’s own priorities, the Agency’s mandate was originally limited to agricultural and rural development. AFD has become a respected operator in this sector through a range of programmes, which have linked activities in the field with support for public policy.

This sector currently remains a priority for AFD group. However the Agency has since diversified its portfolio particularly through projects to enhance urban heritage.

Breakdown of AFD’s portfolio of activities in Laos Total funding of 133 million euros over 20 years (excluding regional projects) Agriculture and rural development

€60M

Other

€6M

Infrastructure and urban development

45 %

45 % 5 %5 %

€60M Health and social protection

€7M

Fishermen on Nam Ngun Lake © AFD, Thierry Duplan

Since 1998, AFD has been assisting the town of Luang Prabang, and more recently the site of Wat Phu, Champassak (listed as a World Heritage Site by UNESCO). The aim is to improve the living conditions of residents, while also promoting tourism and supporting local authorities in their efforts to preserve the exceptional heritage of these two sites. In the urban infrastructure sector, the Agency has also supported the authority responsible for Vientiane’s water supply in its efforts to improve access to drinking water for the capital’s population.

AFD seeks to support such projects by expanding its range of financial instruments available. Non-sovereign loans could therefore be made available to various stakeholders in both rural and urban areas, either directly in the case of public companies, or to private companies in the context of public-private partnerships.

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

Urban development and heritage conservation in Luang Prabang

H ow we work In Laos, AFD provides a wide range of financial arrangements which are available to investors in many sectors: Grants for development and technical assistance programmes, including grants from the FFEM (French Global Environment Facility) and the TCBP (Trade Capacity Building Programme) as well as grants to NGOs Training programmes and capacity strengthening provision through the AFD enterprise university, the Centre for Financial, Economic and Banking Studies (CEFEB): this includes certified training, short training courses and customised training courses Grants for preliminary studies at the outset of projects, and for strategic sectoral studies Non-sovereign loans to public and private enterprises, which do not require a state guarantee; these may or may not be at concessionary rates Loan guarantees (particularly through the ARIZ individual guarantee mechanism or portfolio mechanism, in partnership with local commercial banks) Funding through equity, or quasi-equity, via PROPARCO Non-sovereign loans as well as bank guarantees can be made available to certain investment projects. The Agency is willing to support projects seeking such facilities.

AFD also finances programmes of a regional nature which help to integrate Laos into its immediate geographical neighbourhood, such as: Financial support for the Mekong River Commission (MRC); Projects designed to combat emerging diseases though the Pasteur Institute network; Establishment of a regional mechanism of support for the recognition of Protected Geographical Indications (PGI) through the Food and Agriculture Organisation (FAO); Multi-stakeholder partnerships for the sustainable management of protected areas such as the Wildlife Conservation Society efforts in the Indo-Burman region; Support for the Conservation Agriculture Network for South East Asia (CANSEA).

Renovated school in Luang Prabang © AFD, Clémence Vidal de la Blache

Luang Prabang, the former capital of Laos, sits at the confluence of the Nam Khan and Mekong rivers.

The town is a cultural and historic gem, the fusion of traditional Lao architecture and the architectural legacy of the French colonial period. Apart from its remarkably well preserved urban landscape, Luang Prabang is also an important religious centre.

The site, which was added to the UNESCO World Heritage List on the 2nd of December 1995, attracts a growing number of visitors. This increase in tourism is both an opportunity and a threat to local development.

Since 1998, AFD’s programmes have been designed to promote the city’s urban development, while improving and preserving its built, cultural and natural heritage. The Agency has adopted a three part approach:

Enhancing urban heritage by modernising public spaces, improving services and refurbishing significant buildings

Strengthening urban planning and site management arrangements

Supporting the various stakeholders involved in the town’s modernisation The goal is to limit the risks inherent in this kind of development, particularly the departure of local residents or the commodification of the local heritage of the peninsula.

During the 2000s, funding from the FFEM (French Global Environment Facility) supported protection work on ponds and marshes to strengthen their tourism potential. These natural wetlands are an integral part of the town’s heritage and play an important role in both flood prevention and natural water treatment.

These projects are the responsibility of the Urban Development Authority and the Luang Prabang Department of World Heritage.

From the outset these activities have been undertaken alongside others involved in French overseas cooperation, particularly the town of Chinon in the Loire valley. AFD also works with the Lao authorities to strengthen local methods of financing heritage works, as well as on the relevant national legislation.

Rooftops of Luang Prabang © AFD, Olivier Gilard

Ho Prabang, the ex-Royal Palace Pagoda, Luang Prabang © AFD, Thierry Duplan

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

Developing the northern mountainous regions The NUDP (Northern Uplands Development Programme), which aims to reduce poverty in the country’s northern provinces, operates under the auspices of the Ministry for Agriculture and Forestry. The project is co-financed by the European Union and the Swiss Agency for Development and Cooperation, who have both delegated their funds to AFD and by the German Agency for International Cooperation (GIZ). This is the first time a financing agreement directly managed by the local administration within a “programme approach” has been put in place. This is in line with recent moves to improve aid effectiveness, as outlined in the Paris Declaration of 2005 and that of Vientiane in 2006.

Financing has been made available at a number of different levels, such as investment support for local populations and producers’ organisations, development of agricultural supply chains and markets through the provision of support for services and advice. Funds have also focussed on infrastructure development, support to decentralised state services at district and provincial levels, research and development in the field of conservation agriculture and assistance to the Ministry to develop policies and sectoral promotional activities.

The programme, which began in 2010, is due to continue until 2016, and involves three districts in each of the provinces of Luang Prabang, Houaphanh and Phongsaly, a total of nine districts.

Arabica coffee harvest © AGPC, Micka Perier

Traditional slash and burn agriculture © CCL, Olivier Ducourtieux

The coffee sector on the Bolaven plateau The cultivation of coffee is a symbolic element of the culture of the Bolaven plateau in southern Laos and a sector which is expanding rapidly. AFD has been supporting this development for around ten years, at the request of the Ministry of Agriculture and Forestry. The aim is to promote and encourage small coffee producers alongside those private investors who have concessions in the area.

Phounoy woman winnowing rice © CCL, Olivier Ducourtieux

Funding provided by AFD has helped to create and strengthen the Bolaven plateau Coffee Producer Groups Association (AGPC). The association now manages the entire supply chain from production to roasting and marketing of an organic coffee product which has received fair trade certification, and which now accounts for 5% of regional production and 15% of coffee producers.

AGPC is recognised at a national level as a model for agricultural producers’ organisations and contributes to the quality image of Lao coffee which may soon achieve a Protected Geographical Indication (PGI).

Running alongside this project, funding has also supported the Ministry in the creation of the Lao Coffee Board. This body is responsible for regulating the entire supply chain and those involved in it.

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

Water management in Vientiane

The Mekong River Commission

Vientiane’s rapid growth poses a very practical problem.

The public authorities must cope with a rising demand for water from the city’s population, while still maintaining, and indeed improving, productivity.

The Mekong, also called the “Mother of rivers”, is of particular importance to Laos and the other countries through which it flows. AFD has taken over responsibility for French cooperation, which has supported the Mekong River commission since its establishment through the 1995 Mekong Agreement. The Mekong Hycos project has funded a uniform hydrometrical observation network to collect water level and rainfall data along the river. These observing stations are then operated by each national service. They share their information with the Mekong River Commission and in exchange receive technical and other support which allows them to make better use of the information gathered.

Support for Vientiane’s water management system has facilitated the upgrading of both the technical and financial skills of its staff, through a special training centre for those working in the water sector. It has also involved improving the city’s water distribution network, by renovating pipes and the supply network to harmonise water pressure and reduce leaks. In addition, AFD has supported the authority at both financial and institutional levels to become a more efficient, autonomous and modern public company.

The same information can be used to conduct objective studies on how any given development may impact the river. They may also be used to estimate dimensions for hydraulic works and to predict flooding and low-water levels. In short they help to manage the water resource provided by the river.

The supply of safe drinking water is an essential service in any modern urban environment.

The “Nam Papa Nakhone Luang” should soon be eligible for subsidised loans without requiring a Lao government guarantee. This will allow it to continue to develop while responding to the challenges posed by the growth and modernisation of the capital, Vientiane.

Hydro-electric power station at Nam Theun II Dam © AFD, Thierry Duplan

Installation of drinking water supply © Nam Papa Nakhone Luang

Site of the Nam Theun II Dam, 2007 © NTPC, Bruno Gondouin

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

Young Ho women, Phongsaly © CCL, Olivier Ducourtieux

PROPARCO PROPARCO is a subsidiary of AFD which specialises in private ­sector funding. It is a financial development institution whose aim is to finance business activities which are socially equitable, environmentally sustainable and financially profitable.

Its involvement may be through medium to long-term loans at market rates, in euros, dollars or local currency, or through equity participation or guarantees.

In terms of portfolio size, Laos is one of the most significant countries in Asia for PROPARCO. PROPARCO has been authorised to operate in Laos since 1996. It has a wide mandate for its activities, which allows it to finance projects which have significant prospects for sustainable growth and which also combat poverty.

As such, PROPARCO has invested in two important projects in the hydroelectricity sector: the financing of the Nam Theun II dam alongside AFD and other international institutional partners, and the financing of an extension to the Theun Hinboun dam, with AFD as a sub-participant.

Partnerships with NGOs Since 2009 AFD has been tasked with financing projects undertaken by civil society organisations. Over the past number of years AFD has supported projects through grant aid which are specifically focused on Laos, as well as those which operate at a regional level.

Projects have been undertaken by NGOs in various sectors: Agriculture and Rural Development AVSF – Agronomes et vétérinaires sans frontières, GRET – Groupe d’échanges et de recherche technologique, SFE – Service Fraternité Entraide, Agrisud International Health MdM – Médecins du Monde, AOI – Aide Odontologique Internationale Protection of individuals HI – Handicap International, ASF – Avocats sans Frontières These programmes have involved a total of €4.2M in funding for Laos through both national and multi-country projects.

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

20 YEARS ON THE GROUND IN LAOS Field experience based on long-term cooperation with local and international organisations, supporting the sustainable development of Laos.

133 million

euros supporting 40 projects at national level

60 million euros invested in agriculture, rural development, infrastructure and urban development

7 million euros for health and social protection

75 million euros lent by PROPARCO for private investment projects; €4M provided by the FFEM (French Global Environment Facility) Over a 20-year period, more than

500,000 families

have benefited directly or indirectly, from projects financed by AFD, almost half the population of Laos.

Transplanting rice © CCL, Olivier Ducourtieux

The future AFD intends to continue its involvement in the agricultural and rural development sectors through targeted programmes which make use of the experience it has gained over twenty years in the country.

In line with AFD’s overall strategy these programmes will aim to promote diversified family farming which is in harmony with its natural environment and is economically viable.

With this in mind, AFD will support the restructuring of agricultural supply chains so that there is a fairer distribution of the value created between the different stakeholders. Technical innovations which permit more intensive but ecologically sound production systems will be encouraged and supported financially.

AFD will also support other sectors in their search for funding through loans or bank guarantees.

Investigations are already underway at both national and regional level, particularly in the infrastructure sector (telecommunications, drinking water) finance, energy (hydroelectricity) and tourism development.

Jeunes femmesResidents de l’ethnie Phongsaly © CCL, Olivier Micka Ducourtieux of Ho theàBolaven Plateau © AGPC, Perier

AGENCE FRANÇAISE DE DÉVELOPPEMENT

LAOS

Agence Française de Développement (AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Provinces for seventy years. It executes the policy defined by the French Government.

Offerings at Wat Simuang © AFD, Olivier Gilard

FFEM PROPARCO, AFD’s subsidiar y dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote su stainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

The French Global Environment Facility / Fonds Français pour l’Environnement Mondial (FFEM) is a bilateral public fund initiated by the French Government in 1994. The FFEM secretariat and its financial management are entrusted to the Agence Française de Développement (AFD). The FFEM co-finances projects that encourage the protection of the global environment in developing countries. Its co-financing is exclusively done as grants and is used for the implementation of pilot projects that combine environmental protection and economic development in the recipient countries. The FFEM is an influential strategic instrument for the French policy on Official Development Assistance regarding global environmental protection. Its activities focus on the topics of biodiversity, international waters, the climate change, land degradation and desertification, persistent organic pollutants and the stratospheric ozone layer. By the end of 2013, the FFEM has co-financed 258 projects with €299m. Two thirds were spent on sub-Saharan Africa and the Mediterranean.

www.proparco.fr

www.ffem.fr

AGENCE FRANÇAISE DE DÉVELOPPEMENT

AFD LAOS

5 rue Roland Barthes 75598 Paris Cedex 12 – France Tél. +33 1 53 44 31 31 Fax +33 1 44 87 99 39 www.afd.fr

Avenue Lane Xang BP 5923 Vientiane – LAOS Tél (856 21)24 32 95/96/97 Fax (856 21)24 32 98 afdvientiane@afd.fr laos.afd.fr

Creation: Planet 7 – May 2014

In 2012, AFD approved EUR 7 billion to finance activities in developing countries and the French Overseas Provinces.

Main outcomes of AFD’s funding are monitored every year. For instance, money delivered will help get 10 million children into primary school and 3 million into secondary school; they will also improve drinking water supply for 1.79 million people.

Energy efficiency projects financed by AFD in 2012 will save nearly 3.6 million tons of carbon dioxide emissions annually.

This publication was printed in an environmentally responsible manner using vegetable-based ink and PEFC™ paper, (sustainable forest management).

AFD is present on four continents where it has an international network of seventy agencies and representation offices, including nine in the French Overseas Provinces and one in Brussels. It finances and supports projects that improve people’s living conditions, promote economic growth and protect Earth, such as schooling for children, maternal health, support for farmers and small businesses, water supply, tropical forest preservation, and the fight against climate change.