An Interview with Patchamuthu Illangovan

Patchamuthu Illangovan is the World Bank's Country Manager for Lao PDR since November 2005. He shared in an interview his impressions of changes in the country.

 How has Lao PDR changed in the past 10 years?

Lao PDR’s transition over the past 10 years has been very dramatic. Poverty has dropped from the high 40s (in percentage terms) to the low 30s and continues to decline. Growth has picked up tremendously, averaging around 5 percent over the past 10 years.

In human development, Lao PDR is still behind on the Millennium Development Goals for education and health but is beginning to make good progress. Capacity – though still weak – has come a long way from where it was. The Nam Theun 2 hydroelectricity project (which IDA is contributing to through a Partial Risk Guarantee of US$42 million and an IDA grant of US$20 million) has made an important contribution to the country’s overall capacity. At the same time, investor confidence has also improved – especially in hydroelectricity and mining projects. It’s also picking up in the agriculture and manufacturing sectors. Investors are looking at Lao PDR in a very different way now.
Government is much more reform-minded now compared to 10 years ago. The country is gradually opening up with its institutions becoming more accountable and reform-oriented.

What contribution did IDA make to that change?

IDA has played a major part in deepening confidence in the reform agenda of the country. Along with our development partners – especially the ADB and bilaterals like Japan and France - we are providing the much needed finance and technical advice that Lao PDR needs to make the transition from a low-income country. The NT2 hydro project is helping show that this is a country now geared up to manage its natural resources and handle foreign investment.

You only need to look at one IDA project in Lao PDR – the Poverty Reduction Fund - to see the impact IDA is having. Through that project (worth US$19 million), another 1.5 kilometers of rural road is built every day; a new school opens every third day; a water supply scheme is upgraded or built every fourth day and a new medical facility opens every month. And that’s just one IDA project’s impact. We are also helping build vital infrastructure, improve teacher training and develop school curricula as well as help develop the country’s banking and financial sectors. We are also working with government to develop community forestry programs and policies aimed at curtailing and controlling illegal logging.

The government of Lao PDR recognizes the value that IDA brings through its global experience and knowledge as well as the understanding of our local staff. We have 40 staff now in Vientiane and 30 of them are local. This means a lot to our clients because they know we are investing in the capacity of the country through our own staff.

 What are the challenges ahead for Lao PDR?

For a true private sector to emerge, Lao PDR will have to continue to improve its investment climate. It will also have to put the institutions and policies in place that will help it get ahead of the growing problem of corruption before it gets out of hand. The country’s natural resources will need to be sustainably and equitably managed for future generations. And with the expansion of the economy, comes the need for greater capacity within the labor market. To meet the demand for skills in the years to come, Lao PDR will have to address its low literacy levels and low school enrolment rates and find ways to improve general health indicators. Of course, none of this can happen overnight. The government recognizes the challenges it is facing and is seeking the support of its development partners as it builds the foundations for a poverty-free future.