ATM #19: Vientiane: Poor But Different
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Transcript of ATM #19: Vientiane: Poor But Different
Serenity in the Buddha Park.
The Asian Trends Monitoring Bulletin is a project
sponsored by the Rockefeller Foundation, New
York and the Lee Kuan Yew School of Public Policy,
National University of Singapore. The Lee Kuan Yew
School of Public Policy gratefully acknowledges the
financial assistance of the Rockefeller Foundation.
The Asian Trends Monitoring Bulletin focuses on
the analysis of pro-poor projects and innovative
approaches that will contribute to alleviate poverty.
The emphasis is put on identifying major trends
for the poor in rural and urban areas, highlighting
sustainable and scalable concepts, and analysing
how these could impact the future of Asia’s well-
being and future development.
The Asian Trends Monitoring Bulletin are designed
to encourage dialogue and debate about critical
issues that affect Asia’s ability to reduce poverty and
increase awareness of the implications for pro-poor
policy and policy development.
Disclaimer
The opinions expressed in the Asian Trends Monitoring
Bulletin are those of the analysts and do not
necessarily reflect those of the sponsor organisations.
Frequency
The Asian Trends Monitoring Bulletin will be produced
eight times a year and can be downloaded for free at
http://www.asiantrendsmonitoring.com/downloads
Principal Investigators
Darryl S.L Jarvis
Phua Kai Hong
T S Gopi Rethinaraj
Research Associates
Johannes Loh
Taufik Indrakesuma
Nicola Pocock
Production
Chris Koh, Manager, Production & Research
Dissemination
Image credits, with thanks
All the images in this issue were taken by the ATM
team during their Vientiane trip of August 2012,
except for the following images on:
• the cover, copyrighted by Many Moon Honeymon
• page 2, copyrighted by Adamina
Permission is granted to use portions of this work
copyrighted by the Lee Kuan Yew School of Public
Policy. Please follow the suggested citation:
When citing individual articles
Indrakesuma, T., & Loh, J. (2012). Laos in transition:
different from the rest. In Asian Trends Monitoring
(2012), Bulletin 19: Vientiane: poor but different
(pp. 4-11). Lee Kuan Yew School of Public Policy,
Singapore.
When citing the entire bulletin
Asian Trends Monitoring (2012), Bulletin 19: Vientiane:
poor but different. Lee Kuan Yew School of Public
Policy, Singapore.
When citing our survey data
Asian Trends Monitoring (2012). A dataset on urban
poverty and service provision. Lee Kuan Yew School
of Public Policy, National University of Singapore.
Please acknowledge the source and email a copy of
the book, periodical or electronic document in which
the material appears to [email protected] or send to
Chris Koh
Lee Kuan Yew School of Public Policy
469C Bukit Timah Toad
Singapore 259772
Contents
3 • Vientiane: poor, but different
4 • Laos in transition: different from the rest
12 • Providing stepping stones to opportunities
16 • Tourism: a path to equitable growth
3
Among the cities that the ATM team researched this year, Vientiane stood
out for its small population and its close integration to the surround-
ing rural communities. Vientiane, the capital of Lao People’s Democratic
Republic, is the second smallest ASEAN capital after Bandar Seri Begawan
of Brunei Darussalam. It has a population of 700,000 people, which is tiny
compared to 23 million in the Greater Jakarta Area, Manila (16.3 million),
or Hanoi (6.5 million).
Despite being small and relatively underdeveloped, Vientiane has
grown rapidly in the last few years. The economy is booming with a growth
of 8% per year, and the country is set to join the World Trade Organisation
in 2013. However, the growth is not distributed equitably with mining, for-
estry, hydro and tourism as the major drivers of the economy.
The poor are often left on the side lines, suffering from a lack of infra-
structure and inaccessible services. The field interviews and case studies
in this bulletin illustrate the tremendous challenges Vientiane’s adminis-
trators are faced with. In this bulletin we look into the following issues:
• wide service gaps for the poor, specifically in the areas of health
and education;
• low transportation connectivity even within the capital;
• a lack of opportunities for the city’s poor and recent migrants from
rural areas; and
• four alternative futures of how tourism could contribute to poverty
alleviation in Laos.
The ATM team sees Vientiane as a city with much potential for equitable
growth. It is in the unique position of being able to learn from the growth
trajectories of other major cities in the region. The recommendations in this
bulletin are hoped to be able to lead Vientiane in the right direction.
The data and case studies that are used in this bulletin are the result of
primary data collection and field research —we talked to a honey seller in
front of the famous That Luang Stupa, interviewed a farmer who moon-
lights in a garment factory to feed her family and learned from a shop
owner how she grew her business with the help of micro-loans.
This year’s focus on urban poverty entailed travelling to four of
Southeast Asia’s major cities: Jakarta, Manila, Hanoi, and Vientiane. In
the coming months, we will compare the four cities with regards to their
emerging problems in the fields of education, financial access, and health.
We invite you to share the ATM Bulletin with colleagues interested in pro-
poor issues in Southeast Asia. The Bulletin is also available for download
at www.asiantrendsmonitoring.com/download, where you can subscribe
to future issues. We encourage you to regularly visit our website for more
updates and recent video uploads in our blog. Thank you again for support-
ing the ATM Bulletin, and as always, we gladly welcome your feedback.
Tuktuk drivers like Khat Kong, rely on tourists to earn a living.
Suggested citation
When citing individual articles
• Indrakesuma, T., & Loh, J. (2012). Laos in transition: different
from the rest. In Asian Trends Monitoring (2012), Bulletin 19:
Vientiane: poor but different (pp. 4-11). Lee Kuan Yew School
of Public Policy, Singapore.
When citing the entire bulletin
• Asian Trends Monitoring (2012), Bulletin 19: Vientiane: poor but
different. Lee Kuan Yew School of Public Policy, Singapore.
When citing our survey data
• Asian Trends Monitoring (2012). A dataset on urban poverty
and service provision. Lee Kuan Yew School of Public Policy,
National University of Singapore.
Vientiane: poor, but different
by Taufik Indrakesuma & Johannes Loh
4
Laos in transition: different from the rest
With growing exposure to global markets, for-
eign investments in the country’s rich natu-
ral resources, and an upbeat tourism industry
driving economic growth, Laos appears to be a
country on the right path to economic develop-
ment. According to Gross national income (GNI)
per capita levels in 2009, Laos, with US$853, is
slightly richer than Cambodia (US$615), though
it still lags behind its other neighbours Thailand
(US$3,719) and Vietnam (US$1,032).a Compared
to the 2005 figure of US$441, the pace of Laos’
growth seems extraordinary.
However, these numbers are misleading.
It is important to consider the Lao population
of only 6.2 million people and the low popula-
tion density of 27 per square kilometre. More
than a third of the population lives below the
global poverty line of US$1.25 PPP a day in a
society largely dependent on subsistence
agriculture. Farming accounts for a total of
67.6% of total employment, compared to
16.9% self-employed and only 15.5% in wage
employment.b In terms of contribution to GDP
agriculture still accounts for 29%, industry for
19% and services for 51%.c
Transforming this agrarian labour force into
one more focused on manufacturing or services is
difficult due to problems in the education sector.
Compared to the other countries in our urban
poverty series, Laos has a much lower literacy rate
with 73% as of 2008. Indonesia, the Philippines
and Vietnam all have literacy rate in the low nine-
ties. Currently, the average Laotian adult has only
5.1 years of schooling.d Without an education sys-
tem that is able to equip the labour force with new
skill sets, the people will not be able to participate
and benefit from the new economic opportuni-
ties that may arise in the long run.
The problems of these poor, uneducated
farmers are exacerbated by this rapid economic
growth. The “Lao way of life” is undergoing
a rapid shift from an agricultural subsistence
by Taufik Indrakesuma & Johannes Loh
a http://data.un.org/CountryProfile.aspx?crName=Thailand b World Development Report 2013 c World Development Report 2011
d Ibid
Construction companies lie in wait for Vientiane's development to kick off.
5
Interview with Dominique Van der Borght, Country Director Oxfam (Laos Office)
What is your perspective on urban poverty in Vientiane?
Urban poverty is something new—somewhat difficult to define in
Laos’ case. If there is a trend of rural-urban migration from the coun-
tryside to Vientiane, we are only at the very beginning. There is no
big attraction to seek work in the city—there is no industry that
needs workers from the country-side. Currently, demand for low-
skilled workers is much higher in neighbouring Thailand. The capital,
Vientiane, is still at an early stage of growth and has space to accom-
modate new people. But this may change soon.
How would you describe Laos’ economic progress?
The fact that it is a country with lots of natural resources and very low
population density makes it very unique when compared with its
neighbours. Laos has water, soil, forest land, minerals that are in high
demand in their neighbouring countries due to their industrialisation
process. This has allowed Laos to grow at more than 8% GDP annually.
It doesn’t mean that it is automatically generating higher income for
the local people living nearby those resources. For the moment, what
we observe is that they have been excluded from the process, more
than being integrated. People have been losing their access to those
natural resources. Going forward, it is important that smallholder
farmers get better access to markets by shortening the value chain.
One of the major challenges for the rural economy, which is dom-
inated by agricultural, will be the sustainable integration of rural
farmers into the market economy, allowing small scale farmers to
have a decent living from their activities. For the broader population
the country also requires better and affordable access to services
such as education and health facilities in both, rural and urban areas.
Has the increasing exposure to the global economy
impacted the lives of people in Laos?
The cost of living is constantly increasing, especially in the prospering
city centre. It has not yet become a major issue, but incomes are not
rising at the same rate. The life of urban residents is still closely linked
to the country side. This a unique difference as well, since in Vientiane,
the rural and urban linkages are still very interconnected for day to
day existence, whereas in cities such as Jakarta, residents are not so
interlinked to rural Indonesia. Often, households source their rice and
vegetables from family members and relatives practicing subsistence
agriculture within the city’s official borders. They are following the tra-
ditional lifestyle. At the moment, it is probably more sustainable but
we are already seeing a shift and with that more and more people are
losing their old livelihoods. Vientiane is a city at the brink of transition.
You mentioned that international labour migration is an
important trend, why?
Within Laos the opportunities for non-agricultural labour are limited.
If your farm income is not sufficient, the next best option is to work as
a factory worker. Many women and men migrate for a couple of years
to Thailand to work on commercial farms, in construction or in facto-
ries all over Thailand where demand for non-skilled workers is high.
Of course, this type of labour migration has many social implica-
tions back in Laos. Children are brought up by their grandparents
and many spouses live apart for most of the year. Without educa-
tion these workers don’t have any opportunities waiting for them
upon return to Laos.
What are the needs in the medium to long-term?
As I mentioned before, access to education and health, in particular
in the country side are very important. On the next level, the coun-
try also needs improved vocational training programs and technical
schools. Continued economic growth will trigger higher demand for
skilled workers in a range of industries—right now Laos’ workforce
would not be able to meet that demand.
Finally, I hope that the government will be able to provide ser-
vices to all income groups regardless of whether they live in rural
areas or in the city. Access to basic services should not become a
commodity that is reserved for the wealthy.
Dominique Van der Borght, Country Director Oxfam.
6
economy to a cash economy. In order to provide
for their families, farmers increasingly need cash
to buy goods previously obtained from nature
or through barter.
Despite these changes, the capital, Vientiane,
still has a rural feel about it as soon as one leaves
the immediate centre of town. It has not (yet)
witnessed dramatic levels of rural-urban migra-
tion and thus the poor do not suffer from over-
crowding. The real problems are insufficient
infrastructure and low quality or inaccessible
services.
Urban service deficiencies
During the visit to Vientiane, the team observed
a major deficiency in urban service provision.
We noted that for basic services such as water,
sanitation, and education, as well as public infra-
structure such as roads, the pace of progress
made towards universal provision is very slow.
All of these observations were backed up by the
data collected in our survey of poor households
in the city.
In the case of water, survey evidence points
to a lack of a reliable central grid. In the four
areas we surveyed, a whopping 58% of sur-
veyed households resort to bottled drink-
ing water because they do not have access to
a clean piped connection. Worse yet, 17.3% of
respondents still get their water from open,
unfiltered sources such as open wells or rivers.
This data, presented in the charts below, lead us
to two possible conclusions: either piped con-
nections are not available at all for the major-
ity of households, or the water from the piped
connections is not of potable quality. The conse-
quences of this poor water provision are evident
in our respondents’ self-reported health.
In the case of road infrastructure, we
observed that paved roads could only be found
within a certain radius of the city centre, whereas
most of the roads leading to the city’s periphery
were unpaved dirt roads. According to World
Bank data, the percentage of paved roads in
Laos has remained stagnant at around 13-14%
since 1995, despite having almost no growth
in the total length of the road network (only
around 7,000km of new roads). This implies that
no work has been done to improve the roads
in Laos in the last 20 years. As a comparison,
Vietnam’s percentage of paved roads has gone
from 25% in 1995 to 47% in 2007, with the total
road network itself growing from 100,000km to
160,000km.
This poor state of road infrastructure is a
severe impediment to economic growth and
service provision in the urban periphery. In our
interview with Friends International Laos, our
source noted that there are parts of Vientiane
that would benefit greatly from services such as
skills training or health check-ups, but are very
difficult to reach because of the road conditions.
This means that such services cannot be pro-
vided regularly, depriving these people of the
opportunities for life improvement.
Some other issues for Vientiane’s poor resi-
dents include getting access to good quality
health and education services. Costs are often
the largest barrier to this access. While about
half of the respondents rated their difficulty
in paying for both services as neutral, 17% on
health and 40% on education expressed con-
cern over costs, respectively.
On the issue of financial access and savings,
there are some promising signs. About half
Figure 1. Response to the question: Where do you primarily get your drinking water?
Figure 2. Response to the question: How would you rate your personal health?
Source: Asian Trends Monitoring (2012). A dataset on urban poverty and service provision. Lee Kuan Yew School of Public Policy, National University of Singapore.
7
CDEA
The Community Development and Environment Organisation
(CDEA) is one of the non-governmental organisations that have tried
to fill the gap in the central water grid. During the team’s visit to
Vientiane, we were able to speak with Mr. Khampha Keomanichanh,
CDEA’s founder and current head.
When it was founded in 2004, the organisation focused its opera-
tions on providing a clean water supply in Vientiane. The provision
model they have continued to use since the beginning is commu-
nity-based: they build one groundwater pump per village and pro-
vide one pipe for use by the entire community. If households want
a direct household connection, they must pay out of their own
pockets to build the pipes. This helps to ensure “ownership” for
maintenance within the community and makes the solution more
sustainable.
More recently, they have expanded their reach to the outskirts of
the city. They also began improving the condition of sanitation sys-
tems in the poor neighbourhoods around the city by implementing
a Community-Led Total Sanitation (CLTS) model, where they teach
the community to build their own toilets and sanitation networks.
One notable part of CDEA’s provision model is the use of a “com-
munity development fund”. Every water provision project is meant
to be fully funded from within the community. However, since this
capital is usually not available immediately, the initial building phase
is co-funded by CDEA and donors. CDEA then recoups its investment
through water charges of LAK 2000/m3. After CDEA recoups its costs,
all subsequent water charges are pooled into a community fund.
This community development fund can be used for multiple pur-
poses. First, it is sometimes used to cross-subsidise the extremely
poor households so that they can access the water for free. Secondly,
this community development fund also acts as capital for small sav-
ings and loans operations in the community. The organisation loans
out money at 0.5% interest per month for emergencies and educa-
tion loans, and at 2% interest for working capital loans. Finally, the
fund is also used for maintenance and further development of the
community water infrastructure.
CDEA’s adaptation of a community fund model is partly due to
Keomanichanh’s belief that donations and provisions do not work.
He said, “Some of these households are poor because they are lazy.
In these kinds of situations, if you give them handouts, it will not
change their ways and they will not improve their own lives.” This
is why he believes that the community itself needs to have a real
stake in the maintenance of the water pipes.
When asked about future challenges to water provision in
Vientiane and Laos as a whole, Keomanichanh believes there are two
major environmental problems. First, there is the risk of accelerated
deforestation due to the entry of foreign companies looking to build
plantations to replace the traditional Laotian subsistence farming.
This would cause problems with the groundwater levels. Additionally,
the plans to build dams as hydroelectric generators will also jeop-
ardise the quantity and quality of the water supply.
Many micro-entrepreneurs resort to street-side food stalls.
8
of the respondents indicated that they were
able to regularly put some money aside. This
is much higher than the responses in Jakarta
(17.3%) and Manila (24.7%), indicating positive
developments in financial literacy. The most
popular choice for keeping the money save
was cooperatives, followed by the traditional
‘under-the-mattress’ method (home) and com-
mercial banks. It should be noted that banking
services are only easily accessible within the
city and ATMs are not yet found at every corner.
Compared to other ASEAN countries Laos has a
low density of ATM with 4.3 per 100,000 adults
(See Figure 6).
The other side of the financial access coin
is whether the poor are able to take loans
from safe sources. The rapid growth of Laos’
economy drives a trend towards cash trans-
action even among the poor who used to live
from subsistence agriculture and exchange
of goods. However, many urban poor do not
earn enough to pay for their families’ essential
needs and thus, they borrow money (73% of
respondents). Commercial banks and cooper-
atives were the most popular sources of loans,
followed by loans from relatives and friends.
The services of money lenders (popular in
Our survey on urban poverty and service provision in Vientiane, Laos
The Asian Trends Monitoring team conducted a survey among people living in poor
neighbourhoods in Vientiane between September 3 and September 9 2012. We collected
a total of 349 responses from four different districts with the help of 10 field interviewers.
We used the random walk method to sample respondents from every third house/shelter.
Our sample included 211 women and 138 men due to the fact that the survey was
conducted during the day when most of the men are at work. 79.4% of respondents
indicated that they are the head of the household (119 respondents), or the wife (158
respondents) of the head of household. The average age was 43.4 years with an aver-
age household size of 4.98 members. The overall sample consisted of 85.5 % inhabitants
born in Vientiane and 15.5 % rural-urban migrants. The low number of migrants can be
explained by two factors. First, the official capital region Vientiane stretches far beyond
the urbanised part of the aspiring city; and second, Laos has not (yet) witnessed rapid
rural-urban migration such as reported in its neighbouring Vietnam or Thailand.
The survey had a “perception of difficulties” section comprising ten categories, each
to be rated on a 5-point scale (from “easy” to “impossible/unable to do”). The breakdown
(Figure 10, see page 11) shows which categories were perceived as particularly difficult.
For more details on the ATM survey please contact one of the researchers listed at the
end of this bulletin.
The results from our previous surveys conducted in Jakarta, Manila and Hanoi are
available on our website, www.asiantrendsmonitoring.com, in ATM Bulletins #16, #17 and
#18, respectively.
Figure 3. Perception of difficulty with regards to paying for medical or educational services
Source: Asian Trends Monitoring (2012). A dataset on urban poverty and service provision. Lee Kuan Yew School of Public Policy, National University of Singapore.
9
Figure 4. Response to the question: Do you save money regularly?
Figure 8. Response to the question: Do you borrow money regularly?
Figure 6. ATMs per 100,000 adults
Figure 5. Response to the question: What is your main method of saving?
Figure 9. Response to the question: Where do you primarily borrow money from?
Figure 7. Estimated regular savings amount
Source: Asian Trends Monitoring (2012). A dataset on urban poverty and service provision. Lee Kuan Yew School of Public Policy, National University of Singapore.
Source: Global Financial Inclusion (Global Findex) Database (2011)
10
Jakarta and Manila) were only used by about
8% of respondents. This also supports the
hypothesis that the poor of Vientiane are finan-
cially knowledgeable and are a viable market
for services like microfinance.
Requirements set up by banks to ensure they
attract profitable clients raise the expectations
that respondents with bank accounts should
be better off on average, than those without
accounts. Our survey results show that only a
quarter of respondents have an account at a
commercial bank, and less than 12% of respon-
dents have an account and save up regularly.
Respondents without accounts but with the
ability to save regularly represent 39% of our
sample. Interestingly, the differences between
the two groups who have weekly savings are
only US$4.30 per week. Unfortunately, slightly
more than half of respondents are unable to
save up at all.
An easily-satisfied constituency
The final trend we observed in the field is how
content the people of Vientiane were with their
lives. All of the evidence from our survey, inter-
views, and general observations suggest that
people in Vientiane are satisfied with their qual-
ity of life and the level of government services
they receive. With all of these deficiencies in
income opportunities and service provision, this
final trend is perhaps the most worrying.
The survey indicates that people do not find
it difficult to access basic services. For example,
despite the poor conditions described earlier
about drinking water in the city, the vast major-
ity of respondents stated that accessing clean
water in the city is “easy” or “fairly easy”. Also,
transportation is another aspect of life that was
considered relatively easy by Vientiane respon-
dents, although these respondents live in areas
that do not have many paved roads or pub-
lic transport lines running through them. All
in all, the top three difficulties reported by the
respondents were finding work opportunities,
saving money and providing enough food for
the family. None of the ten categories stand out
as a major issue.
When the data from Vientiane is compared
to other cities, it is clear that there is a signifi-
cant difference in perceptions about life diffi-
culty between respondents from Vientiane and
respondents from the other three cities. Figure
11 shows how most other cities have two or
three categories that are almost unanimously
regarded as difficult or impossible to access,
whereas in Vientiane, even the most “diffi-
cult” category is only said to be very difficult or
impossible to access for roughly one-third of our
respondents.
Phonethong Village
Phonethong Village is located in Xaisettha
District, still within the boundaries of
Vientiane Capital. However, it is a small
village of only 150 households, with a
total population of 985 people. Most of
its inhabitants earn a living from farming,
while others work as construction workers
or factory workers.
In Phonethong, we interviewed
Khamphan Daangphachan, one of the
members of the village council. When
asked about whether life in the village
had improved in the past ten years, he
was convinced that it had. He pointed to
the quality of houses and the number of
households with motorcycles as evidence
that people in the village were getting
richer.
Daangphachan also believes that
government services have gotten better.
While taking us on a tour of the village, he
pointed to all twelve roads that the gov-
ernment has built in the past few years.
Most of these roads were unpaved dirt
roads, but they were roads nonetheless.
He also mentioned that there are more
schools now, with one primary school in
each village and two secondary schools
in the sub-district. It has also become
easier to access health care, as one health
care centre was recently set up in the sub-
district. Although there are no trained
doctors in the sub-district health centre,
there is a supply of medicine for everyday
ailments.
Water and sanitation in the village do
not quite meet urban standards of ade-
quacy. The Vientiane tap water grid does
not extend very far, so all households in
Phonethong get their water for daily use
from open wells, and often resort to bot-
tled water for drinking. Also, although
each house in the village has its own toi-
let, the lack of a central sanitation system
forces each household to use septic tanks.
The dangerous interaction between sep-
tic tanks and groundwater use becomes
immediately clear. However, the way in
which the councilman described the situ-
ation suggests that the people are actually
quite satisfied with what they have.
Despite the general level of satisfaction
with the progress of the village, the council-
man still hoped that more improvements
would come. His primary concern was agri-
cultural training. Vientiane’s small farmers
are still working with primitive methods
and equipment, so providing better equip-
ment and training programs could improve
their potential yield and economic compet-
itiveness. Also, he plans to ask the govern-
ment to build some youth activity halls or
sports and leisure facilities for the people of
the village to socialise and engage in
healthier lifestyles. All of these things are
beyond the financial means of the village,
so they must rely on the government’s
good will.
11
One of the sectors that showed a huge dis-
crepancy between perceptions recorded in our
survey and actual conditions in the field was
education. The team observed that schools in the
peri-urban areas were not in the best condition.
Classrooms were dimly lit, chairs and desks were
sometimes not of the appropriate size for the
grade level, and facilities such as sports fields and
libraries were mostly non-existent.
Figure 10. Perception of difficulty among Vientiane's poor
Figure 11. Perceptions of difficulty in ASEAN cities (% of respondents who rated access to services
“very difficult” or “unable to access”)
Source: Asian Trends Monitoring (2012). A dataset on urban poverty and service provision. Lee Kuan Yew School of Public Policy, National University of Singapore.
12
Providing stepping stones to opportunities
The official Vientiane Capital Region extends
over 3,920 km2 of which only 6% were occu-
pied by built-up areas, 68% are forest areas and
16% paddy fields.e With a total population of
just over 800,000 people many settlements in
the capital region are still villages. Even within
Vientiane good roads are a privilege and often
dirt roads represent the only way to access
essential services such as schools or hospitals.
The booming economic development of
the country does not automatically improve
access to services—a major issue for the poor.
Without a system of social protection, the poor
have to rely on relatives and friends in times of
economic hardship. The case of Kaum and her
family (see page 14) illustrates how difficult it is
to make ends meet despite having a number of
income-generating activities. As a farmer with
a small plot without any job training, the pros-
pects of supplementing a family’s income in a
non-farm job are very slim.
Government programmes for skills training
or small business development do not exist and
the few NGOs operating in Vientiane reach only
a small proportion of the people who would ben-
efit from such offers. As Oxfam country director
Dominique van der Borght points out, the coun-
try’s education system falls short of delivering the
services needed in a country that has a rapidly
growing economy. Foreign firms often bring their
own staff and workers into the country because
lack of skills and language barriers make it diffi-
cult to work with local workers. For them only the
lowest categories of jobs remain accessible.
For micro-entrepreneurs who want to take
advantage of new opportunities in the emerg-
ing non-farm economy, another kind of stum-
bling block is awaiting them. Up until 2004, Laos
had no law on microfinance and formal finan-
cial services were inaccessible for the poor. As
of 2012, a number of MFIs are offering savings
and loan products, however mostly for clients
with collateral. Moreover, their branch network
is focused on Vientiane serving small, but estab-
lished entrepreneurs in the city.
e JICA (2011). Vientiane Capital –Urban Development Master
Plan – Proposal -. Retrieved October 29, 2012 from http://
www.jica.go.jp/project/english/laos/009/materials/pdf/
pamphlet_01.pdf
An NGO displays its achievements in aiding the poor.
by Johannes Loh
13
We met with Ali, a friendly entrepreneur,
who has enthusiastically taken up the financial
services by Ekphattana Microfinance Institution
(EMI) and within two years has managed to
build up emergency savings while successfully
repaying several loan cycles (See box above).
In a way, the risk-averse business model of
any financial organisation helps to better serve
those who have already established their busi-
ness models. For those without collateral, the
MFIs do offer group loans, but the reach of those
initiatives is still limited. The MFI capacity to pro-
vide free business training and actively support
aspiring entrepreneurs is very limited, as they
still struggle to build reliable client bases to
Dreaming big, thanks to microfinance
Where did you learn how to run a business?
I learned by myself. First, I sold noodles, one bowl for 3,000 kip
(US$0.37). But it became difficult as more people started to sell noo-
dles, so that’s why I changed to this shop with a wider range of goods
on offer. Our shop is in between two noodle shops, so I switched to
selling different food, but you can still get a warm meal in front of my
shop. I have sold at this location for 30 years now.
Can you describe a typical working day for you?
Every day, I go to the market to buy food to cook and sell. On a typi-
cal day, I can earn US$50–60. However, most of my profits are rein-
vested into the shop. I have to spend on many things: electricity,
water, school fees for my children. At the end of the day my profit is
about US$12.5; I make just enough money to live here with my family.
Do you take loans to grow your business?
Yes, I do. The shop and my product range used to be much smaller
before I found out about EMI’s services for small business owners.
I take loans from EMI because other loan sources have very high
interest rates.
What do you use as collateral for the loan?
I use my motorcycle certificate as the collateral. Before that, I bor-
rowed from money lenders who collect payments daily, but charge
very high interest rates. For a US$125 loan, I had to repay US$190. It
was not good for my business. That’s why I decided to take loans
from EMI instead. The interest is low (2% per month), which allowed
me to save at the same time as repaying the loan. By saving with
them, I have built up US$400 in personal savings.
How long have you been a client for EMI, the microfi-
nance organisation?
I’ve been a client for a little over two years. I have already borrowed
four times, with each loan cycle lasting six months. The first time,
I borrowed US$375; the next time it was US$500, and after that
US$625. I think I have proven that I am a reliable debtor. Now, I
already have plans to take another loan and use it to expand.
What are your business plans for the future?
I have plans to grow my business. For example, I plan to have more
goods to sell, which will allow me to earn more. Maybe I can sell
some more traditional candies and cookies; maybe I can expand the
shop space. With a little bit more capital, I could sell beer or soft
drinks as a wholesaler—that’s something I dream about.
Easy access to capital catalysed her business' success.
14
secure their long-term survival in the competi-
tive market.
Founder and executive director of Laos’ first
MFI EMI, Somphone Sisenglath, adds that “sav-
ings is part of our mission...[...] Access to credit is
one thing, but if there is nothing left [at the end
of repayment], they are still poor.” EMI makes it
a requirement for all their clients to save 10%
of their initial loan in order to teach them the
importance of savings.
Unfortunately, this type of service is not avail-
able to families like Kaum’s, who form the bottom
of the pyramid. They would need it to develop
alternative income streams outside of farming.
Access to microloans coupled with opportuni-
ties for learning about managing a small business
would go a long way in building an additional
stream of income for families relying on subsis-
tence farming and moonlighting on other farms.
Mr. van der Borght describes the situation in Laos
as having a “different face of poverty”, he explains
that importing solutions from places of scarcity
may not work in a country with plenty of natural
assets, but at the same time suffering from a lack
of infrastructure and accessible services for the
poor. Some of the important future enablers to
boost people’s household income from on- and
off-farm economic activities are better access to
knowledge, access to affordable financial ser-
vices (credit-led as well as savings-led) and full
Three jobs, still trapped in poverty
In Phonethong Village, located on the outskirts of Vientiane Capital,
we met a woman named Kaum—a mother, farmer, labourer, and fac-
tory worker—living at the far end of the village. She and her husband
own a small plot of land barely enough for subsistence agriculture. In
order to feed the family, they moonlight as labourers on other villagers’
farms. Kaum also puts in additional shifts at a nearby garment factory.
Working at the factory earns her US$50 per two weeks, or US$3.57 a day.
That is barely sufficient to feed the family of four, let alone the expen-
ditures for school or investments to enhance their agricultural output.
“I would like to open a small shop to earn more money, but
nobody wants to give me a loan,” says Kaum. Since her home does
not qualify as collateral, she can’t get loans to improve or expand her
farm. At the current household income, her children can only hope
to finish primary school before helping at the farm full time. Due to
Laos’ relatively young microfinance sector, her village has yet to be
reached by microfinance organisations that would provide group
loans without collateral. When asked what she expects her childrens’
future to look like, she simply says: “My children don’t have a choice
but to become farmers just like my husband and I. […] there are no
other jobs for them.”
Kaum’s family is constrained by lack of opportunities to lift them-
selves out of poverty—better access to finance, help with income-
generating activities and advanced education for the children
remain out of reach.
Subsistence farmer, Kaum, with her children.
15
integration into the supply chain. All three repre-
sent tremendous barriers which prevent the poor
from becoming empowered market players.
Knowledge solutions will need to reach farm-
ers as well as small business owners like Kood, the
rice trader (see box above), in order to build up
their business acumen, market knowledge and
price awareness. It can also boost their productiv-
ity and increase their household income. The vil-
lage chief we interviewed in Phonethong village
emphasised that better know-how is required to
provide his constituents a way out of poverty. In
the absence of a functioning agricultural exten-
sion network, even villages within Vientiane do
not have access to the advanced knowledge
required to run a profitable farm businesses.
As was mentioned before, the bottom of the
pyramid remains underserved by Laos’ young
microfinance industry. Savings services in partic-
ular would support the process of building
knowledge and awareness about financial man-
agement before granting this bottom of the pyr-
amid market access to credit-led services. Finally,
better connectivity in terms of road infrastruc-
ture as well as digital connectivity is necessary to
allow for effective initiatives to better integrate
poor farmers and non-farm entrepreneurs into
the supply chain. Pushing market integration for
the poor will be an important tool, to enable
them to lift themselves out of poverty.
Roadside rice trader with unknown future
At the outskirts of the city centre, we meet Kood, a rice trader and
entrepreneur. She used to sell small goods and make-up in a shop
outside her house in central Vientiane, but three years ago, she lost
everything when her house burned down in a fire. However, she
immediately found a contingency plan. “I know a lot about rice,” she
said. “My father, a lifelong rice farmer, taught me everything. So, I
thought that the rice business would be something easy to under-
stand and be successful in.”
She was born and raised in the Northern part of Laos before migrat-
ing to Vientiane with her family. Now she rents a roadside stall to sell
a wide variety of rice. “Business closer to the city is better, but rental
prices are too high,” says Kood. At her current location, 5km away from
the centre, the rent is US$37 per month. Her monthly profits fluctuate
between US$60–US$120, just enough to feed the family and keep her
business afloat.
She buys the rice directly from farmers in the region, personally
testing the quality and managing her rice inventory. Given the large
quantities of rice that she has in stock, cash flow regularly becomes
an issue. When business is bad, she has to take loans from a local loan
shark in order to pay the rent and her daily expenditures. The condi-
tions follow the 5/6 principle: for every US$5 borrowed, you need to
repay US$6 after a fixed period (usually 30 to 50 days later). This 20%
monthly interest rate can quickly turn into a debt spiral for small road-
side merchants like Kood, but she has no other options.
Kood is wary of the ongoing development of Vientiane—she
fears that rents will go up as the city centre expands. For her, that
would mean either shrinking profit margins or a decision to relocate
her business farther away from the city. Right now, she can’t think of
a plan B.
Commuters buy directly from their cars and motorbike at Kood’s rice stand.
16
Tourism: a path to equitable growth
Tourism is one of Vientiane’s economic sectors
that have received much attention in recent
years. This is perhaps because tourism currently
represents a large share of Laos’ total export
revenues, with Vientiane as the centre of tourist
activity. Tourist numbers have grown rapidly for
the past decade, going from 700,000 annual vis-
itors in 2000 to over 2,000,000 visitors in 2010.f
The government has recently stepped up its
efforts to attract tourists through tourism cam-
paigns such as the Visit Laos 2012 campaign.
More importantly, it has also begun work on
improving the capital city’s underdeveloped
physical infrastructure through the Vientiane
Vision 2030 project.
These two stable trends of growing tour-
ist numbers and physical infrastructure devel-
opment present an optimistic outlook for
Vientiane’s tourism sector in the next decade or
two. However, the question remains of whether
this growth will be enjoyed by the city’s low
income population.
Tourism is an industry with high impact
potential on the poor, whether positive or neg-
ative. If the city’s tourism strategy is developed
in a way that is favourable to small businesses
and micro-entrepreneurs, these businesses will
be able to reap the benefits of catering to high-
spending tourists and improve their welfare.
However, the development of tourism has not
traditionally followed this kind of trajectory. In
the tourist hubs of many emerging economies,
the aggressive expansion of the tourism indus-
try is one that favours high-end businesses,
such as shopping malls, expensive gift shops,
and five-star hotels, while displacing the small
businesses (often along with the poor people
themselves).
Based on observations in the field, there are
two critical uncertainties that will influence the
trajectory of Vientiane’s tourism sector. The first
is whether the city planners decide to adopt a
tourism strategy that emphasises experiences
Tourist attractions like Buddha Park need to be promoted aggressively to generate revenue.
by Taufik Indrakesuma
f Lao National Tourism Administration. “2009 Statistical
Report on Tourism in Laos”. Retrieved from: http://www.
stdplaos.com/downloads/web-based_knowledge_center/
statistic_report/2009%20Statistical%20Report%20on%20
Tourism%20in%20Laos%20-%20English%20version.pdf
(Accessed 18 September 2012)
17
or expenditures. An emphasis on tourist expe-
rience would favour preservation of traditional
markets, small vendors, and the “Lao way of
life”, and would generally be favourable for
micro-entrepreneurs and the informal econ-
omy in general. In contrast, a tourism strategy
that emphasises expenditures would prioritise
the construction of luxurious tourist attractions
and comforts, favouring big businesses with
high potential tax revenues.
The second uncertainty entails a more social
aspect: the Laotian culture. One of the unique
characteristics of the Lao people is their slow, laid
back pace of life. Some say that this cultural quirk
has led to low rural-urban migration due to “weak
entrepreneurial desires” and “complacency with
agricultural life”. If this culture persists, it is diffi-
cult to imagine Vientiane becoming a traditional
tourist hub full of hustle and bustle anytime
soon. However, changing this culture may have
its own set of difficulties. The plan might be met
with resentment as it forces people to admit that
their current way of life is wrong. Even if the peo-
ple accept the need for change, the change itself
might be difficult to internalise within a short
period of time. Thus, planners should decide
whether a type of “cultural engineering” is appro-
priate in order to strengthen entrepreneurship,
induce the creation of more SMEs, and acceler-
ate economic growth.
The combinations of decisions that planners
make on these two axes lead us to four distinctly
different scenarios. These scenarios are detailed
in Figure 12.
The first scenario, “hypermodernity”, will be
reached if an expenditure-focused tourism strat-
egy is chosen in tandem with strong cultural
engineering. This scenario is characterised by
the adoption of the modern tourist hub trajec-
tory, following the examples of large Southeast
Asian cities such as Jakarta, Singapore, and
Bangkok. It is a scenario with massive shopping
malls, expensive tourist restaurants, and air-
conditioned bus tours. This scenario allows for
the improvement of poor urban livelihoods, but
not in a way that necessarily empowers them.
Rather than enabling low-income households
to start their own businesses and thrive, this
Figure 12. Future scenarios for Vientiane
18
kind of tourist city views the poor as a large sup-
ply of cheap labour that will allow the hospital-
ity sector and large tourist businesses to grow.
It may exacerbate the perceived income dispar-
ity between wealthy tourists and local labour.
In order for this kind of scenario to succeed in
its poverty alleviation element, proper train-
ing must be provided to equip the poor with
the necessary skills to enter this formal employ-
ment, and offer pathways to job advancement.
The second scenario, “displacement”, will
come about if planners decide to pursue an
expenditure-focused strategy without engag-
ing with or engineering the local culture. This
scenario plays out much like the “hypermoder-
nity” scenario with its high-end businesses, but
is hindered by the lack of cheap skilled labour
that comes with it. Without proper engagement
with the local low-income populace, there is
potential for conflict. At best, the poor will con-
sider these new sources of employment to be
unreachable and will prefer to remain in their
current low-income agriculture jobs or their out-
competed small businesses. At worst, people
will see this form of modernisation as an affront
to the local culture, potentially causing political
tensions between planners and public.
The third scenario, “cultural tourism”, comes
as a result of experience-focused tourism and
no cultural engineering. This scenario assumes
that tourist areas keep their traditional look and
feel, with infrastructure being built only to make
these areas more accessible, using off-grid tech-
nologies. In this scenario, the improved access
to Vientiane’s tourist sites would increase the
potential flow of tourists. However, the real
“pull factor” would come from the cultural and
infrastructural preservation. Tourists would
be drawn to the novelty of a small and tradi-
tional capital city, with its small shops and laid
back inhabitants. The end result would be an
increase in income for small businesses with-
out having to disrupt their culture and lifestyle.
However, this approach generates much less
tourist expenditure because the attractions are
cheaper and more modest. It also leads to even
smaller tax revenues because most transactions
take place in informal businesses.
Finally, “hybrid tourism” is the scenario
where an experience-focused tourism strat-
egy is accompanied by a more modern cultural
mindset. This scenario involves a more aggres-
sive and commercial promotion of the “cultural
tourism” and “eco tourism” niches to generate
faster growth of tourist numbers and receipts.
Through cultural engineering, the city will also
have a larger pool of micro-entrepreneurs to
capture this increased tourist expenditure. The
cultural engineering can also include providing
incentives for micro-entrepreneurs to formalise
their businesses, expanding the city’s tax base.
This scenario is an ideal compromise between
empowering small businesses and generating
revenue for the city’s development.
Of these four scenarios, “displacement” can
quickly be discounted from the nexus of viable
alternative futures, due to its low benefits for the
poor and its high potential for conflict. Of the
remaining scenarios, “hypermodernity” shows
the greatest potential for profit-generation while
still involving the poor. On the other hand, “cul-
tural tourism” shows the least amount of disrup-
tion to the lifestyles of the poor, while still improv-
ing their income streams organically through the
increased tourist numbers alone. Finally, “hybrid
tourism” is the compromise between the two
extremes, attempting to empower the poor by
Selling honey to survive
While visiting That Luang Stupa, one of the biggest tourist attractions in Vientiane, the
team spoke to several small vendors that make a living primarily from tourists. These
vendors’ level of income is influenced by the flow of tourists to the cities, and accord-
ing to one honey seller that we spoke to, the current level of income is “barely enough
to survive”.
X is a honey seller who lives about one hour away from That Luang Stupa. Her daily
routine consists of waking up at 3AM to sell wasps and honey at the local market, then
moving to That Luang Stupa at 9AM to sell there for the rest of the day. She does not raise
her own wasps, instead relying on her oldest son to supply the honey from the forests
in the outskirts of Vientiane. She was reluctant to mention how profitable her business
is, but she claims that she makes just enough to feed her family and send her youngest
child to school.
Her story was of particular interest because she was part of a group of vendors. This
group always sold their goods together, moving from location to location before finally
settling in the front area of That Luang Stupa. She became part of the group because the
group had a deal with the government officials that would allow them to sell their goods
in exchange for a monthly fee.
From her stories, we learned one interesting point about government interventions
on street vendors: these street vendors must pay fees to the government. She was not
the only vendor to mention these fees, but we were not able to determine whether these
fees are for official permits or otherwise. Either way, these fees present an additional bar-
rier to entry that cuts into their income. If these fees do not result in any meaningful ben-
efits for the vendors, such as protection of their rights or routine maintenance of the
market areas, they become an inefficiency in the system.
19
building entrepreneurial skills to improve their
businesses and allowing small businesses to drive
the growth of the tourism sector.
This final scenario is perhaps the most ben-
eficial for the two main stakeholders (govern-
ment and the poor), but it is also the most diffi-
cult to execute. It requires that Vientiane’s poor
population find the motivation to start small
businesses rather than be content with their
current levels of income. It requires micro-credit
to be widely accessible in order to enable small
business creation. It also requires the city to be
patient with the initially low levels of growth
and not to succumb to the temptation for rapid
modernisation.
Thus, the key policy recommendations for
the initial stages of achieving the “hybrid tour-
ism” scenario include expanding the reach and
scale of microfinance services in Laos, particu-
larly in Vientiane, and providing training in
financial literacy and business development for
the poor. Furthermore, in order to measure the
progress of this scenario, planners must closely
monitor the growth in numbers of small busi-
nesses that cater to tourists, as well as the aver-
age income of those employed in these busi-
nesses.
The front yard of an NGO-run school.
20
Johannes Loh is working as a Research Associate at the
Lee Kuan Yew School of Public Policy. He holds a Master’s
degree in Public Policy from the Hertie School of Public
Policy in Berlin, and a Bachelor of Arts in Integrated
Social Science from Jacobs University Bremen. His previ-
ous research experience includes aid governance, visual
political communication and public sector reform in
developing countries. Prior to joining the Lee Kuan Yew
School of Public Policy he has also worked for the United
Nations Environment Programme in Geneva, Transparency International Nepal, and
the Centre on Asia and Globalisation in Singapore. His email is johannes.loh@nus.
edu.sg and you can follow his updates on trends in pro-poor policies in the region on
Twitter @AsianTrendsMon.
Nicola Pocock is a research associate at the LKY School of
Public Policy. She is also the research manager at aidha,
a non profit financial education and entrepreneurship
training school for migrant women, especially domes-
tic workers, in Singapore. She holds a BA from Warwick
University and an MSc from Kings College London. Prior
to joining the LKY School of Public Policy, she interned
as a Fast stream trainee in the UK civil service at the
Home Office and as a research volunteer at Amnesty
International. Nicola has also carried out social work in Marseille, France as a European
Union sponsored youth volunteer. Her research interests span health and social policy,
health systems financing, social impact assessment, gender, migration and financial
behaviours. Her email is [email protected] and you can follow his updates on trends
in pro-poor policies in the region on Twitter @AsianTrendsMon #health
Taufik Indrakesuma is a research associate at the Lee
Kuan Yew School of Public Policy. He is a recent gradu-
ate of the Master in Public Policy programme at the
Lee Kuan Yew School of Public Policy. He also holds a
Bachelor in Economics degree from the University of
Indonesia, specialising in environmental economics.
Taufik has previously worked as a Programme Manager
at the Association for Critical Thinking, an NGO dedicated
to proliferating critical thinking and human rights aware-
ness in the Indonesian education system. His research interests include behavioural
economics, energy policy, climate change mitigation and adaptation as well as urban
development policy. His email is [email protected]
Darryl Jarvis is an Associate Professor at the LKY School
of Public Policy. He specialises in risk analysis and the
study of political and economic risk in Asia, including
investment, regulatory and institutional risk analysis. He
is an author and editor of several books and has con-
tributed articles to leading international journals. He has
been a consultant to various government bodies and
business organisations and for two years was a member
of the investigating team and then chief researcher on
the Building Institutional Capacity in Asia project commissioned by the Ministry of
Finance, Japan. His current research is a large cross-national study of risk causality
in four of Asia’s most dynamic industry sectors. He teaches courses on risk analysis,
markets and international governance and international political economy. His email
Phua Kai Hong is a tenured professor at the LKY School
of Public Policy and formerly held a joint appointment as
Associate Professor and Head, Health Services Research
Unit in the Faculty of Medicine. He is frequently con-
sulted by governments within the region and interna-
tional organisations, including the Red Cross, UNESCAP,
WHO and World Bank. He has lectured and published
widely on policy issues of population aging, health-
care management and comparative health systems in
the emerging economies of Asia. He is the current Chair of the Asia-Pacific Health
Economics Network (APHEN), founder member of the Asian Health Systems Reform
Network (DRAGONET), Editorial Advisory Board Member of Research in Healthcare
Financial Management and an Associate Editor of the Singapore Economic Review.
His email address is [email protected]
T S Gopi Rethinaraj joined the Lee Kuan Yew School
of Public Policy as Assistant Professor in July 2005.
He received his PhD in nuclear engineering from the
University of Illinois at Urbana-Champaign. Before
coming to Singapore, he was involved in research and
teaching activities at the Programme in Arms Control,
Disarmament and International Security, a multi-disciplin-
ary teaching and research programme at Illinois devoted
to military and non-military security policy issues. His
doctoral dissertation, “Modeling Global and Regional Energy Futures,” explored the
intersection between energy econometrics, climate policy and nuclear energy futures.
He also worked as a science reporter for the Mumbai edition of The Indian Express
from 1995 to 1999, and has written on science, technology, and security issues for
various Indian and British publications. In 1999, he received a visiting fellowship from
the Bulletin of the Atomic Scientists, Chicago, for the investigative reporting on South
Asian nuclear security. His current teaching and research interests include energy secu-
rity, climate policy, energy technology assessment, nuclear fuel cycle policies and inter-
national security. He is completing a major research monograph "Historical Energy
Statistics: Global, Regional, and National Trends since Industrialisation" to be published
in Summer 2012. His email address is [email protected]
Principal Investigators Research Associates
The Lee Kuan Yew School of Public Policy is an autonomous, professional graduate school of the National University of Singapore.
Its mission is to help educate and train the next generation of Asian policymakers and leaders, with the objective of raising the
standards of governance throughout the region, improving the lives of its people and, in so doing, contribute to the transformation
of Asia. For more details on the LKY School, please visit www.spp.nus.edu.sg