It is important to note that the recent exchange rate appreciation may have arisen from other factors such as a
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3.2. Poverty
Poverty is one of the most important issues for Laos. In order to eradicate poverty by 2020,
the government has implemented the National Growth and Poverty Eradication Strategy
(NGPES), an overall development and poverty alleviation framework (GoL 2004). Analysis
of four Lao Expenditure and Consumption Surveys (LECS) from WB and DOS (2009)
showed that the incidence of poverty has fallen since LECS 1, though it fell slowly from
1997-98. The incidence of poverty fell from 46% in LECS 1 to 39% in LECS 2, and from
33.5% in LECS 3 to 28% in LECS 4. However, inequality has increased, especially in
Vientiane and other urban areas. The Gini coefficient increased from 30.5 in LECS1
(1992/93) to 35.4 in LECS 4 (2007/08). In Vientiane, the Gini coefficient increased from 29.7
in LECS1 (1992/93) to 38.00 in LECS 4 (2007/08).
From these figures, it is clear that despite reducing poverty in recent years, Laos still faces
high poverty and inequality. The inequality (Gini coefficient) increased from 30.5 in 1992/93
to 35.6 in 2007/08 (table 3-2). Vientiane and northern Laos have experienced greater
increases in inequality as compared with with other regions of the country. In Vientiane, the
Gini coefficient increased from 29.7 in 1992/93 to 38.0 in 2007/8 which increased about 28
percent points, and in northern Laos the Gini coefficient increased from 26.9 in 1992/93 to
35.2 in 2007/08 (table 3-3).
Although the national rate of poverty has decreased, malnutrition and education remain
serious problems in Laos. Cases of underweight and stunted children under the age of 5
reached 37% and 40% respectively in 2006 (DOS et al, 2008). Underweight and stunting
declined by only 15-17% from 1993 to 2006 (table 3-4). This shows that malnutrition is one
of the most serious obstacles to development in Laos. Supporting the poor in order to
improve nutrition for children is therefore one of the most critical tasks facing the country
(Kyophilavong, 2010). In addition, poverty and childhood education are highly correlated and
currently, children in rural areas travel 8 km on average to the nearest secondary school,
whereas this journey in urban areas averages 3 km. Improvements in education are apparent,
for example 81% of 6-10 year olds were enrolled in school in 2007/08 compared with 72% in
2002/3. However, only 78% of rural children were enrolled, as compared with 94% of urban
children. The main reasons for low enrollment in rural areas were: school fees, other
expenses, and the need for their labor in agriculture (WB and DoS, 2009).
Reducing poverty in Laos has been discussed by a number of scholars. According recent
studies using the LECS 4 by Kyphilavong and Yearsourher (2013), an empirical analysis
showed that livestock, education, and access to electricity are the most crucial factors at the
household level to reducing poverty in Laos. Warr (2008; 2010) showed that access to roads
in both dry and rainy season plays a crucial role in reducing poverty in Laos. Kyophilavong
(2010) highlighted the importance of conditional crash transfer for th poor as another crucial
factor to reducing poverty in Laos. Finally, the impacts of agriculture productivity and price
changes related to climate change on poverty and income distribution were discussed by
Kyophilavong and Takamatsu (2011).
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Table 3-2. Poverty trends in Laos
Table 3-3. Inequality trends in Laos
Table 3-4. Poverty and Nutrition (in %)
Source: World Bank and DOS (2009).
Note: Lao Expenditure and Consumption Census (LECS 4) in 2007/08.
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