2008～2020 Planning for Industrial Economic Development and Cooperation in Northern Part of Lao People's Democratic Republic (Mid-term Draft for Opinions) Northern Laos Industrial Economic Development and Cooperation Planning Preparation Group May 2008 1 Preface I. “Planning for Industrial Economic Development and Cooperation in Northern Part of Lao People's Democratic Republic” (referred to as “North Plan” hereinafter”) is a technical assistance project that the Chinese government rendered to Laos, including the Comprehensive Plan and four special plans (Construction of Infrastructures, Development of Industries and Handicraft Industries, Industrial Development of Agriculture and Forestry, Trade, Investment and Foreign Cooperation). II. There are nine provinces in North Laos (referred to as “North Laos” hereinafter), i.e., Phongsaly, Luangnamtha, Bokeo, Oudomxay, Huaphanh, Xiengkhuang, Luangprabang, Xayabury and Vientiane. The land area is 135,900 km2, and the total population was 2.4004 million by the end of 2006. North Laos enjoys abundant natural resources, advantageous geographic location, and excellent conditions for developing advantageous industries. However, its industrial economic foundation is still weak, and the means of production is still based on traditional, self-sufficient natural economy and agricultural economy. In 2006, North Laos realized 1.022 billion USD of GDP, or 425 USD per capita. Agricultural output value accounted for as much as 58.25% of GDP, and some farmers in the mountainous areas were still in the state of opening up cultivated land by deforestation, and slash-and-burn natural agriculture. Generally speaking, the development level of North Laos lags behind that of the central and south Laos. The next 10 to 20 years will be an important strategic period for North Laos to speed up industrial development, foster backbone industries, improve economic returns, reduce and eliminate poverty, so as to promote sustainable and fast socioeconomic development. It is to scientifically promulgate industrial development plan that is suited to the actual circumstances of North Laos, select development modes suitable for North Laos, establish scientific industrial train of thoughts, development objectives and key points, promote fast development of advantageous industries, speed up foreign opening and cooperation, which will be critical for promoting prosperity of North Laos, and narrowing the gap with Central and South Laos. III. 2 “North Plan” is prepared on the basis of “Development Blueprint for 2006 - 2010” and “Basic Strategies for Development of Laos from 2010 to 2020” promulgated by Lao People's Revolutionary Party, with reference to “Lao Socioeconomic Development Plan” (2006 – 2010) and industrial development plans and development strategies promulgated by relevant departments for communication, posts and telecommunication, energy, industry and handicraft industry, agriculture, forestry and animal husbandry, as well as trade, etc., “Executive Summary of Development Strategies for North Laos” prepared by Asian Development Bank, as well as relevant plans and all kinds of information from all the northern provinces. The main data for northern economic development of 2001-2006 was the foundation for preparing the “North Plan”. The baseline year is 2006, and the near-term and mid-term is up to 2015, while the long-term is up to 2020. The purpose of preparing the “North Plan” is to study and analyze the new situations, new environments, new opportunities, new problems and new challenges, keep abreast of times, and propose new train of thoughts, new objectives and new measures. It is to focus on laying a solid foundation, fostering backbone industries, sharpening the characteristics and eliminating poverty, enable North Laos to realize sustainable, fast and healthy socioeconomic development, improve the people’s standard of living, and realize the objective of synchronal development with the entire nation. The “North Plan” will not cover all the fields of socioeconomic development. It will mainly focus on development of economic backbone industries in North Laos, also cover some other fields, lay stress on strategy, policy and vision, attach importance to limited objectives and key tasks, try to be highly oriented and workable, so as to guide the economic development of North Laos, and provide the central government and the all the provincial governments of North Laos with references for making decisions. By implementing of the “North Plan”, it is to realize the following objectives: By 2015, the GDP of North Laos will be close to 2.2 billion USD, and the per capita GDP will exceed 800 USD. In the period of 2008-2015, the average annual GDP growth rate will be over 9%. The national economy will achieve sustained, fast and healthy development, the comprehensive economic strength will be enhanced, and the people’s standard of living will improve significantly. The industrial structure will be constantly optimized, agriculture and rural economy will develop in an all-round manner, and the processing and conversion rate of advantageous agricultural products will exceed 30%. Progress will be made in modernization and industrialization, and a mineral resources management system that is suited to development needs of market economy should be preliminarily established. The added value of energy and mining industries should account for more than 15% of GDP, the average annual growth rate of mining output value will be more than 17%, while that of electricity industry shall be over 15%, a hydropower-based electricity supply system shall basically take shape, and the backbone industry of electricity will start to be established. A batch of 3 advantageous enterprise with known brands and competitiveness at home and abroad will come into being. Poverty reduction is progressive, the rate of poor households will drop to 10%, the rate of poor villages will drop to about 20%, and the poor population will decrease, too. By 2020, the GDP of North Laos will reach 3.5 billion USD, and the per capita GDP will exceed 1,200 USD. In the period of 2016-2020, the average annual GDP growth rate of North Laos will be more than 10%. It is to realize sustained, fast, healthy and harmonious socioeconomic development. Construction of infrastructures and ecological environment will be obviously effective, and modern mining economic system will basically take shape and be improved. It is to preliminarily establish an industrial system with characteristics of North Laos, and industrial development will convert to mainly rely on technological progress and management innovation, and gradually march toward a modern and industrialized country. North Laos will become an important production base of iron and steel, non-ferrous metals and gold in Laos, and an important energy base in ASEAN. The output value of energy and mining industries will account for more than 25% of GDP, and mining industry and electricity industry will become important backbone industries of the state. Natural rubber-based agricultural and forestry products processing industry and tourism will become backbone industries of North Laos. The production concentration level, technical equipment levels and product grades of the main industries will be improved significantly and become more competitive, and an industrial system with unique characteristics and sustainable development will basically be established. The rate of poverty-stricken household will drop to below 5%, and the rate of poverty-stricken villages will drop to below 8%. The poverty problem will basically be solved. It is to realize prosperity synchronously with the entire nation, which will walk out of the list of underdeveloped countries and regions as an entirety. IV. The task of preparing “North Plan” is undertaken by Yunnan Provincial Development and Reform Commission, and specifically implemented by Land and Resources Research Office of Yunnan Province, China. In order to properly accomplish this task, the project Contractor of Yunnan, China organized an expert group that comprises almost 100 planning preparation experts and consultants to participate in the preparation of “North Plan”. The preparation of “North Plan” officially started in mid-April 2007, and after almost a year and a half of hard working, it is finished in October 2008, accepted by the Chinese Ministry of Commerce and Lao Ministry of Planning and Investment Development, and officially submitted to the Lao side. In the course of preparing the “North Plan”, the project expert group received active supports from the Chinese Ministry of Commerce, the relevant departments of the Lao central government, the nine provincial governments of North Laos, and the 4 Economic and Commercial Counselor’s Office of the Embassy of the People’s Republic of China in Laos, the National Economic Research Institute (NERI), Lao PDR and relevant research institutes, who make active contributions to the successful preparation of the “North Plan”, and the theme group would like to extend their heartfelt thanks to all of them here. (Note: Unless specially noted, the exchange rate between kip and US dollar is calculated by 10,500:1 in the article). 5 Table of Contents 1. STATUS QUO OF INDUSTRIAL ECONOMIC DEVELOPMENT AND COOPERATION……………………………………..………………..…………1 1.1 STATUS QUO OF SOCIOECONOMIC DEVELOPMENT……….........…….……………..1 1.2 STATUS QUO OF INFRASTRUCTURES CONSTRUCTION AND BASIC INDUSTRY DEVELOPMENT……………………………………………………………………6 1.3 STATUS QUO OF ECONOMIC AND TECHNOLOGICAL