Enhancing Lao PDR’s Business Climate through Public-Private Dialogues and Institutional Reforms

1. Country Context: Lao PDR • Transition from a planned economy to a market-based economy with gradual reforms starting in 1986 (“New Economic Mechanism”) • Business and investment climate still poor (‘Doing Business’ 2009: #165/181) • Integration into regional (AFTA) and global economy (WTO), plus rapid rise in FDI exposes Laos to strong competitive pressures: need to reform faster • State is slowly reducing its influence over the economy, while private sector representative bodies take an increasingly stronger role • However, the private sector is still relatively weak and concept of government as service provider to its people still not well developed • Significant differences between provinces: geography/physical endowments, but also level of good economic governance and reform-mindedness matter • Relatively sound economic laws and regulations, but implementation, especially at provincial level, still relatively poor Objective:Public and private sector jointly improve the provincial business and investment climate through an institutionalised, transparent Provincial Public Private Dialogue (PPPD) process: (i) better implementation of laws & regulations at provincial level; and (ii) feedback mechanism for drafting laws & regulations at national level.

2. Particularities of Lao PDR’s PPPD • Provincial-level PPPD and national level PPD (Lao Business Forum – LBF, supported by IFC/MPDF) coexist, roughly started at the same time • PPPD initiative forms part of wider GTZ Human Resource Development for a Market Economy Programme (HRDME), which seeks to tackle the key bottlenecks for sustainable private sector development in a concerted effort of public and private sector: • LNCCI: strategy development, incl. expansion of network and membership • MPI / DPI: investment promotion, streamlining, market economy principles • SMEPDO: SME strategy, action plan implementation and monitoring • Ministry of Education: integrated vocational education (public-private) • Strong, participatory, public-private co-leadership approach: • Central Taskforce on PPPD (LNCCI, MPI, SMEPDO, MoE) as key steering and support institution for the provincial dialogue • Additional support to private sector working groups via LNCCI • Drafting of guidelines, structures through consultative processes • Institutionalisation of PPPD • Blue-print for structure & processes, PPPD Guideline • Governor’s nomination of secretariat, approval of roles & responsibilities private public

3. GTZ-HRDME support terminates Roadshows to 2 additional provinces PPPD introduced to pilot provinces Central Taskforce on PPPD set up Roadshowsto 4 pilotprovinces Governor approval (CPS province) Central level secretariat full Lao ownership Link with LBF formalised PPPD guideline complete Fact-finding & consultation for structures & guideline Various PPPD meetings held in pilot provinces Reporting of PPPD generated issues at LBF Additional provinces join (?) Various PPPD Trainings & Coaching Mid 2007 Late 2005 Late 2008 Early 2009 2010(?) End 2010 Mid 2011 The PPPD Timeline & Key Milestones • Introducing PPPD idea  • Familiarisation with dialogue concept  • Testing capacity & ownership  • Building trust  • Ensuring top-levelsupport  Now Introduction Indicator: solve min. 10 issues Institutionalisation • Developing PPPD blue print: structures & processes  • Approval by governors /  • PPPD brand-building  • Quick wins  • Establish secretariats /  • Strengthen working groups  • Link with LBF  Full Ownership & Roll-out • Lao ownership of central-level secretariat & support structures  • Further strengthening of ‘model’ provinces  • Expansion to other provinces /  Legend: () completed, () ongoing, () not yet started

4. national level as facilitator (support via stakeholders) provincial level PPPD Structure, Processes, and Support

5. Major Results & Lessons Learned Major Results: • Strong central-level support for PPPD initiative, both by public and private, based on increased mutual trust and understanding of benefits of PPPD • Request for expansion to two additional provinces by themselves and demand for nationwide expansion by MPI: evidence of ownership • PPPD guideline disseminated: strong ownership of drafting process • Development of blue-print for structure & processes: highly participatory • Trust-building between public and private sector through joint-activities, incl. planning, budgeting, implementation • Comprehensive PPPD branding/marketing strategy: high name recognition and support for PPPD initiative • Request by MPI permanent secretary for set-up of private sector consultation website in connection with economic crisis Lessons Learned: • Despite importance of an overall blue print for PPPD, flexibility for different preferences proved important to get initial support • Political support by provincial authorities (governor) crucial • Sound problem analysis and action planning of private sector crucial • Locally recruited external support important, especially at provincial level • Pushy approach not fruitful in Lao context, a gradual approach with strong emphasis on mutual trust and cooperation yielded better results

6. Challenges & Next Steps Challenges: • Lao ownership of central level secretariat • Linkage of national-level PPD (LBF) and provincial level PPPD • Degree of self-organisation of private sector working groups and capacity of support structure of chamber of commerce (albeit improving) • Quality of issue papers by private sector • Sustainable financial support • Differing levels of reform-mindedness of public sector by province Next Steps: • Linkage with LBF • Presentation of national level issues at LBF through formalised link • 10 issues solved by year end • Newsletter & website • Interprovincial forum on PPPD, possibly with participants from other countries • Increased support for PPPD ‘model’ provinces • Continued expansion to other provinces, depending on demand • Set up M&E system in line with Donor Committee for Enterprise Development (DCED) impact standards • Exit strategy (2011)