Vulnerability and Safety Nets in Lao PDR

Lao PDR has experienced high levels of
economic growth in recent years and the incidence of poverty
has fallen dramatically since the 1990s. Yet, this report
shows that Lao households continue to be highly vulnerable
to regular seasonal fluctuations, as well as agricultural
shocks and natural disasters. The report also highlights the
importance of health shocks, injury and death for household
welfare. Households adopt a variety of strategies to cope
with these shocks, but in many cases are unable to fully
smooth consumption, with negative short and long term
consequences. Overall, the report points to a number of
important vulnerable groups. The chronic poor in remote
rural areas, including ethnic minority groups, remain highly
vulnerable to seasonal fluctuations and natural disasters.
However, households in urban areas, particularly the poor
and near-poor, are vulnerable to future increases in food
prices if they are not accompanied by increases in real
wages. Moreover, as the Lao economy develops, more
households will rely on off-farm work or migrant
remittances, making them increasingly vulnerable to domestic
and global macro-shocks. Finally, particular groups,
including children, women, the disabled and the elderly are
likely to be particularly badly affected by these shocks.
The report goes on to discuss the potential value of social
safety nets. Safety nets can reduce poverty and alleviate
suffering for households who are unable to fully smooth
their consumption after a shock. But effective safety nets
don't just contribute to reducing poverty in the short
term; they can also prevent long term poverty traps from
arising (e.g. due to households being forced to sell
productive assets, withdraw children from school, or reduce
consumption below nutritionally adequate levels), and enable
households to pursue riskier but more productive livelihood
strategies. The report reveals important gaps in current
policies and programs and suggests some potential directions
towards implementing a comprehensive and institutionalized
safety net program in Lao PDR. This will require substantial
investments, not only to finance the actual programs, but
also to develop the required capacity and knowledge at both
local and central levels. While there are no easy solutions,
reaching consensus on priorities and policy options for
addressing vulnerability in Laos is essential if recent
progress in poverty reduction and economic growth is to be
sustained and deepened.