HE Mr Cheick Sidi Diarra, Under-Secretary-General and High Representative of UN-OHRLLS,
Dr Esperanza Duran, Executive Director of AITIC,
Excellencies,
Ladies and Gentlemen,

It is a great honor and pleasure for me to be invited to this high-level meeting on Trade Facilitation and Aid for Trade: Keys for Unlocking the Landlocked as a pre-conference event to UNCTAD XII. I sincerely appreciate the initiatives of both organizers of this meeting for choosing the right theme of common concern as it will enable us to discuss and share experiences of the current status and the way forward on Trade Facilitation and Aid for Trade.

Let me start with a very brief introduction of my country. Lao People’s Democratic Republic or Laos is one of the landlocked least developed countries located in the Southeast Asia with an area of 236,800 square kilometers and a population of slightly less than 6 million inhabitants, sharing a common border with five countries namely China, Vietnam, Cambodia, Thailand and Myanmar.

Lao PDR has shifted from a centrally planned economy to a market-oriented economy since 1986. Since then, GDP has been growing steadily at a higher average annual rate of over 6% from 1990 to 2006. This rapid growth during the 1990s was driven by a strong export expansion, which reached an annual rate of 15% on average between 1991 and 2003, though starting from a relatively low basis. Nevertheless, export to GDP ratio remains as low as 24% in 2005 - up from 9% in 1990. Compared to neighboring countries this ratio is rather low. Given the size of its market, merchandise export is one of the main powerful stimuli of future growth. In the past, our foreign trade is not only handicapped by the geographical location, but faced a number of tariff and non-tariff barriers. To cope with this situation, Lao PDR has joined the Association of Southeast Asian Nations (ASEAN) in 1997 and is to implement its commitments of the ASEAN Free Trade Area (AFTA), as a new member from 2008 onward. Presently, it is also under the accession process to the WTO. The fourth working party of its accession will take place this year.

The government’s strategic goal is for the country to graduate from the status of least developed countries by 2020 and to eradicate poverty by 2010. This will not be an easy task for a small economy like ours. In the National Socio-economic Development Five Year Plan (NSEDP), GDP is expected to grow at an average annual rate of over 7.5% with export to grow at an average rate of 18% per year. Investment is expected to grow and reach 32% as a share of GDP on five years average. While, public investment will cover to the extent of 10% of GDP, the remaining part will have to come from private sector investment. Hence, private sector development especially SMEs, trade facilitation, trade promotion and foreign direct investment promotion have been set as priority tasks in the coming years. To date, the country has been a net recipient of official development assistance. Four main sectors namely the public works and transport, agriculture and forestry, education and public health have been allocated the largest part of public investment program. In the National Growth and Poverty Eradication Strategy (NGPES), these sectors are also the core agencies to tackle poverty with trade and other sectors playing supporting role.

Although the country is rich in natural resources endowments, it has limited capacity to exploit this advantage. Nowadays, under the GSP scheme, market access is one main opportunity for LDCs to expand its export. To reap such benefit, supply-side constraints must be properly addressed at home. With this aim, our ministry of industry and commerce has been recently set up as a result of the merging of industry and commerce.

On the international front, the problem of land-lockness has been undoubtedly one of the crucial issues in our international trade development. In this connection, I would like to point out that in spite of the fact that a number of international organizations especially in the UN systems and some regional organizations have been actively supported us in dealing with the problem of transit and land-lockness, we still have a long way to go. As presented by the distinguished speakers in this meeting, the issue of facilitating the trade of LLDCs by improving their physical and customs infrastructure has not been specifically addressed under the Doha Work Programme.

Trade facilitation, in its broader sense, covers a wide range of issues. Certainly it is not the mandate of a particular and single line ministry, but encompasses both the infrastructure and policy/regulatory part of a national and international agenda.

In the context of Lao PDR, trade facilitation touches upon at least the works of three main ministries such as the Ministry of Industry and Commerce (MOIC), which I am personally in charge of, the Ministry of Finance with all related matters of customs clearance of goods and the Ministry of Public Works and Transport on the physical infrastructure and logistics. In this regard, Lao PDR has been actively involved in a number of bilateral, sub-regional and regional agreements and projects related to trade facilitation.

Excellencies,

Ladies and Gentlemen,

The moment has come for us to rethink how best to assist LLDCs. Given the ceiling of ODA granted by development partners to LDCs, if a more substantial part of such assistance is turned to trade, the situation might have changed. There is no doubt that trade facilitation is the key to develop trade and aid for trade means aid for development.

To share with you the national experiences and perspectives on trade facilitation and aid for trade in this country, let me give you the following basic information:

With a view to unlock the land-lockedness once and for all, our government plans to transform the country to a land-linked or a kind of sub-regional transportation hub. Thanks to the assistance from our development partners, three bridges have been constructed on the Mekong River to facilitate trade with mainly Thailand and Vietnam. The Mekong River is one of the principal rivers of the region. You may be aware of the so-called the Greater Mekong Sub-region composing of six riparian countries. Two Economic Corridors have been established. The North-South Economic Corridor will link Kunming, Yunnan Province of China to Bangkok of Thailand. This road cuts across Laos with a distance of nearly 260 km. The second is the East-West Economic Corridor. This links the seaport of Danang in central part of Vietnam (South China Sea on the Pacific) to Thailand and up to Mawlamyine, a seaport of Myanmar in the Andaman Sea ( Indian Ocean). This Corridor passes through the central part of Laos, covering nearly the same distance as the first one. Many alternative transit routes within the sub-regional are being planned or upgraded for future utilization.

From 1976 to 1986, our main access to the sea was made through the port of Danang, but from 1986 to date most of our transit cargo is shipped through the port of Bangkok. It took so many years and a great effort to negotiate less disadvantageous transit terms with neighboring countries. Nevertheless, all the problems are not solved. Transit costs are still high and delivery time still long. These factors have to a great extent affected export competitiveness of our country.

On the regulatory side within the country, we have considerably streamlined trade regulations particularly those pertaining to the business start-up, enterprise registration, inland flow of goods and cross-border movement of goods and people. A pilot project towards the implementation of the single stop inspection is being tested at the border checkpoint between Laos and Vietnam on the East-West Economic Corridor. If successful, this will be also implemented on the western border checkpoint with Thailand on the same road. In order to do so, the Thai government shall have to amend its customs law so as to allow foreign customs officers to operate on its customs territory, especially the border checkpoint. In addition, in the framework of AFTA, tariff has been reduced and non-tariff barriers are systematically and gradually dealt with.

Although, much works have been carried out in terms of trade facilitation. In the perspectives of the business community, much works remain to be undertaken.

Main transit transport constraints can be summarized as folIows :

• Customs procedures and border crossing regulations in both Laos and its transit countries are still major obstacles and remain unchanged;
• Some imported cargoes to Laos are still checked by customs of transit countries;
• No computerized system such as EDI, ASYCUDA, ACSIS to help simplify and harmonize customs procedures and shorten the process;
• Lack of simplification and harmonization of rules, laws, regulations, procedures and transport related documents;
• Lack of qualified staff on trade and transport facilitation issues;
• The amendments of the provisions of existing laws, rules, and regulations to conform with international conventions and agreements is retarded;
• Lao PDR and most of its neighboring countries are not party to international agreements and conventions on transit transport issues; and
• Lao transport fleets are not competitive in transit transport due to outdated and substandard vehicles and unskilled truck drivers;

Current Status of TRA in Laos, which include IF, EIF, etc

Let me now brief the meeting of the current work under the Integrated Framework for trade related technical assistance (IF). This dated back from 2004, when our government decided to be part of this IF process. As a result, the so-called Diagnostic Trade Integration Study (DTIS) was first undertaken and finally validated at the national meeting in 2006. An action matrix was also developed and focused on the five main priorities as follows:

• Export Competitiveness,
• Trade Facilitation including customs modernization…,
• Business Environment,
• Trade Policy, Trade Agreements and Global Opportunities,
• Trade Opportunities for the Poor.

Under IF Window II, 4 projects were implemented namely the capacity building of IF Implementation Unit, the capacity building for WTO Accession of the Lao PDR, the support to the Garment Sector, and the capacity building for the Import and Export Department.

The latest development is the preparation to establish a Multi-Donor Trust Fund for Trade Development Facility (TDF). The TDF represents coordinated donor efforts towards supporting IF Action Matrix validated by the government of Laos (GOL) and will have the following components:

1. Trade Facilitation;
2. Sanitary and Phyto-sanitary Standards Framework and Technical Barriers to Trade;
3. Export Competitiveness and Business Environment;
4. Capacity Building, Trade Policy, Trade Agreements and Global opportunities;
5. Strengthening of the National Implementation Unit.

I, hereby, wish to draw your attention especially the donor community and

development partners in order to assist us in these efforts.

In the next 5 years, we can estimate that through the TDF (10 US million) and the Enhanced IF (4-8 US million) that the amount of ODA flowing to the area of Trade Related Assistance (TRA) and Private sector development will increase substantially (not including other bilateral and regional funding).

This is indeed a substantial scaling up of aid in Laos and with such a surge in aid for trade (AfT), donor coordination and absorption capacity becomes an important issue, which the GOL and the Developing Partner (DP) need to address as a matter of priority.

The absorption capacity for aid in developing and least developed countries tends to be directly correlated with;

• Effectiveness of the aid delivery mechanism in place,
• Technical and project management skills of government officials
• Country‘s institutional capacity and infrastructure.

The reality in the field is that there are many donors providing ODA in the area of Trade. As we move towards a full market economy and WTO accession, AfT in the future is likely to become even more important part of our ODA receipts. However, there is a risk of ODA in the area of trade to become fragmented and causing a strain on the limited capacity of LDC government.   There is an urgent need for LDCs like Laos to have effective aid coordination mechanism in place which brings multilateral, bilateral and regional funding into sync. This will help reduce transaction costs, improve our absorption capacity, improve coherence in our strategic vision and implementation of TRA and ensure that all priority areas of funding are being covered through timely tracking of TRA.

Our objective is to move towards a harmonized aid delivery mechanism, which will allow for funds to be channeled from various sources i.e. multilateral, bilateral and regional.

Let me now conclude by expecting a fruitful discussion and by hoping for a tangible result following this meeting. Last but not least, may I wish you all happiness and prosperity.

Thank you for your attention.