TRIGGER

1. The outbreak of the novel coronavirus, COVID-19, has triggered a global crisis of
unprecedented scale,
and risks undoing decades of progress made by developing countries, including Lao PDR,
towards reducing
poverty and the achievement of the Sustainable Development Goals (SDGs) more broadly.
The Lao government was swift in enacting a nationwide lockdown early in the outbreak,
meaning there
have only been 22 recorded cases to date.1 Therefore, the impact of COVID-19 on Lao PDR has
so far been
largely socio-economic as domestic and regional supply chains collapsed, along with economies
and with
them household incomes and consumer demand. With a total population of 7.1 million2
, almost half a
million people are estimated to have lost their jobs, and roughly 383,000 people are expected to
fall back
into poverty, further exacerbating pre-existing inequalities. Food security, already an issue, is
becoming
critical, with people in the northern provinces already lacking rice seven months ahead of the
new harvest.
1.7 million children have had their education disrupted, which could lead to substantial learning
losses in
a country already facing a learning crisis. In short, COVID-19 puts at risk Lao PDR’s hard-won
development
gains of the last decade and hinders its progress towards the SDGs and its ambitions for middle
income
status. In overcoming these challenges, it will be critical to ensure that no one is left behind, and
that
priority is placed in reaching those furthest behind first in our recovery efforts to avoid
disproportionate
humanitarian consequences and intensifying inequalities.
This UN Socio-Economic Response Plan (SERP) has been prepared by the United Nations
Country Team in
Lao PDR using its extensive experience of diverse development challenges globally and of the
country
context, as well as its strong partnership with government, development partners, civil society,
and the
private sector. It is built around four streams of work – based on the global UN Framework for
the
Immediate Socio-Economic Response to COVID-193 – constituting which are considered to
constituting an
essential package of support offered by the UN Development System (UNDS) in Lao PDR over
the next 18
months to contribute to Lao PDR’s recovery effort and to protect the needs and rights of people
living
under the duress of the pandemic, with a particular focus on the most vulnerable people and
groups, who
are at risk of being left behind.
The first chapter is about the macroeconomic response and multilateral collaboration and
highlights the
need for tailored decisions for the short and long term with regards to planning and the creation
of fiscal
space to allow a scaled-up response across all sectors. This SERP lists the following priorities: 1)
planning,
with decisive action tailored for immediate needs and the country’s long-term trajectory; 2)
repositioning
the economy to take advantage of new business opportunities; and 3) creating the fiscal space to
enable
a scaled-up response.
The second chapter builds on the themes and priorities highlighted in the macroeconomic
chapter,
focusing on bolstering the economic response and recovery. It focuses on making improvements
to key
sectors of the Lao economy, setting groundwork for a revitalised and greener return to business,
while
2. exploiting new opportunities for inclusive growth. This chapter specifies the following
priorities: 1) rejuvenating the agricultural sector; 2) greening key employers, including
the return of more sustainable tourism; and 3) seizing and creating new business
opportunities. The third chapter begins to narrow down the focus from the broad-based
economic recovery to the health sectoral interventions, specifically focused on protecting
the health system during the crisis and preparing the health systems and the public for
future COVID-19 outbreaks, in tandem with maintaining essential health services and
delivery. This SERF outlines the following priorities: 1) strengthening coordination and
governance for the COVID-19 response; 2) flattening the epidemiological curve and
improving IPC; 3) establishing safe, clean and green healthcare facilities suitable to treat
COVID-19 cases; 4) WASH in quarantine/isolation centres, communities, schools and
workplaces; 5) Restoring essential health services; 6) Safeguarding continuity of essential
nutrition services; 7) Ensuring implementation of public health and social measures; 8)
Strengthening risk communication and community engagement practices; 9) Building
resilient health systems to respond to COVID-10 and future public health emergencies.
The final chapter aims to extend the UN commitment to work alongside diverse
populations, civil society and local authorities through a people-centred approach by
highlighting the challenges faced by those most vulnerable to the effects of the pandemic,
and proposes intersectional, gender responsive priorities designed for protecting people,
building resilience and fostering social cohesion. The chapter draws out five key areas of
intervention under this heading; education, food security, and social protection,
psychosocial wellbeing and gender-based violence (GBV) prevention; which together
and individually underpin the fulfilment of individuals’ potential in the long term and
Lao PDR’s continued progress towards the 2030 Agenda. It is essential that all basic
services and support mechanisms are designed, implemented, and reviewed in partnership
with communities and local authorities, building on the diversity and intersectionality that
is reflected across the Lao society. Inclusive and flexible service delivery models are an
essential design component in building community and household level resilience and
establishing an enabling environment that advances social cohesion, providing often
marginalised, discriminated, and vulnerable groups opportunities to fully participate in
their own recovery. In addition, the economy is an important component of any recovery.
The COVID-19 pandemic poses a raft of new challenges to Lao PDR’s development
path, both immediately and in the longer-term. It also presents a prime opportunity for the
government and society to advance structural change to transform the country
economically, socially, and environmentally. Lao PDR sits in a unique geographical
position, one that it can use to become vital to the region’s trade, which in turn could help
it exploit the vast potential of e-commerce to boost its micro and small businesses that
characterise its economy. By addressing the needs of the most vulnerable portions of the
population, empowering their recovery, giving all persons a greater stake in society, and
reducing inequality. Moreover, in drawing the links between the economic and the social,
support to the greening of key sectors can allow further steps to be taken towards
addressing one of other biggest challenges to the country’s successful development: its
 vulnerability to climate change. The UNDS in Lao PDR stands ready to support the
government, through this SERP and the National SocioEconomic Development Plan
(NSEDP) which it complements, in taking the necessary steps and actions towards
building back better and stronger, for a more equal, prosperous and green future.

IMPACT TO LAO
The impact of COVID-19 in Lao PDR
1. Healthcare. During the lockdown and in the time since, demand for regular healthcare
and essential health services has dropped. For example, a declining trend in antenatal care
visits, births at health facilities, and assisted births has been identified compared to the
previous three years. Despite the success in controlling the spread of the virus thus far,
the pandemic has created both temporary and potentially long-term setbacks to key
healthcare indicators. The negative impact on nutritious food consumption by pregnant
and lactating women with children under two years of age, could have a longterm
permanent effect on children’s mental and physical development, as well as the mother’s
overall health. The loss of other forms of support, such as school feeding programmes
and a drop in immunizations could also have a lasting impact on health outcomes.

2. More people will fall into poverty and inequality will rise. The COVID-19 pandemic will
worsen poverty and inequalities. It has cut economic opportunities that help people out of
poverty. Overall, 383,000 more people could fall back into poverty, translating into a
five-percentage point increase in the national poverty rate. 4 Given the increased poverty
rate, the COVID-19 pandemic may exacerbate inequality because many unemployed
individuals are daily workers living in rural areas or migrant workers domestically and
from abroad. In addition, the lack of jobs will increase poverty rates and will widen the
poverty gap between urban and rural areas. The pandemic is likely to cause more
hardship for women than men in Lao PDR as its impact is concentrated in industries
where women form most of the workforce, such as tourism and related services, retail
trade, and manufacturing. The COVID-19 pandemic has also led to manifestations of
structural inequalities and vulnerabilities in society. There is a risk of increased tension
within society, including gender-based violence, threatening to reinforce the social
exclusion of disadvantaged groups. Some of the specific challenges include the increased
vulnerability of migrants working in urban informal conditions, with limited access to
basic services and discrimination.
3. Loss of livelihoods leading to food insecurity. Food insecurity is a direct consequence of
unemployment and reduced income. The increase in both has put many young children
and adolescents in low-income and poor households at risk of food insecurity and
malnutrition as families are pushed to the edge of poverty. In a survey of 1,200
 households, 48.9% of the families have reduced spending on food or simply reduced food
consumption; 15.2% are unable to pay for basic food. Among a sample of 232 who took
out loans during the period March-May, 78% stated the main purpose of their new debts
was for buying food.5 The impact on food security is likely to be more severe in remote
and isolated areas commonly inhabited by ethnic minorities. Food insecurity goes beyond
the impact of COVID-19; food production is vulnerable to extreme weather conditions
and hydrological hazards, with droughts and floods in 2019 already putting roughly
76,000, mostly rural poor people, at high risk of food shortages by March 2020.6

4. Education. As part of the measures to prevent the spread of the virus, all schools and
educational institutions were closed from 19th March 2020. This disrupted the learning of
over 1.7 million children and young people who were entering the last two-and-a-half
months of the school year.7 86% of parents from the 1,200 households surveyed believed
the disruption had a major impact.8 The World Bank, in its analysis of the impact of
COVID-19 on learning and schooling outcomes, estimated that five months of school
closures due to the virus will result in an immediate loss of 0.6 years of schooling
adjusted for the quality of learning. The Ministry of Education and Sport (MoES) has
responded to this gap by providing a new TV and radio teaching and learning programme
to reach out to children. However, the reach between urban and rural areas is unequal; the
proportion of households owning a TV in urban areas is 94% while in rural areas it can
be as low as 49%. 9 If further temporary school closures are enforced due to COVID19,
the learning loss gap will only widen with access to TV, radio and the internet as it is
unequal across the country. The loss of household income caused by COVID-19 could
also have knock-on effects for children and their education. For instance, more children
and young people could be pulled out of school, leading to increased dropouts, increased
child labour, and child marriage. Further budget cuts due to the economic fallout could
impact the delivery of education and worsen an already deepening learning crisis.

5. Sharp rise in unemployment. By mid-August Lao PDR will have an expected

unemployment rate of around 25% based on Ministry of Labour and Social Welfare
(MoLSW) data. Given that in 2017 the labour force comprised an estimated 1.9 million
people, the total number of unemployed will be roughly 475,000, including those who
were looking for jobs, those who lost their jobs due to COVID-19, and over 100,000
migrant workers who returned from abroad. The impact of over 100,000 returned migrant
workers will result in an estimated loss of around $125 million in remittances in 2020 or
0.7% of GDP.

6. Supply chain disruption in the agriculture sector. The sector, which accounts for 62.4% of
total employment and 15.3% of GDP11 , also faced supply chain disruptions, affecting
both exports and production inputs, especially during the lockdown. Luang Namtha
province, which has an international
 border crossing with China, is reported to have been the most severely affected. 12
Immediate negative impacts have centred on cash crops linked to the exports and tourism
industries. Micro-and small enterprises and the informal economy.
7. Micro and small enterprises (MSEs), including those in the informal sector, are an
important part of the economy. MSEs make up more than 80% of enterprises in Lao PDR
and rely on daily sales to survive and support the household of the owner. Workers,
typically engaged in MSEs informally, are the most exposed in the current crisis, often
lacking basic social protections while facing accelerated downward adjustments in
enterprise operations and therefore owner and worker incomes. MSMEs have, during the
COVID-19 crisis, faced both direct demand shocks from reductions in direct business
purchases of goods and services from larger firms as well as drops in domestic demand
more generally. The results of the MSEs survey13 of six provinces conducted in June
2020 shows that out of the 350 surveyed, 95% were adversely affected. The imposed
lockdown caused sales to drop for 81% of enterprises; other main impacts were a lack of
customers (66%) and a lack of supply of raw materials (41%). At the same time, with
formal sector businesses closing or reducing operations, there could be a substantial
uptick in unemployed or underemployed workers attempting to either earn more or
transition to earning a living through informal micro-business ownership.

8. The travel and tourism industry most visibly and severely affected. During the
lockdown, most hotels and restaurants were completely or partially closed. Those that
have reopened still suffer income losses, and all must still bear varying levels of
maintenance costs, including COVID-19-related costs. Hotels, resorts, tour agencies, and
operators are attempting to pivot towards domestic tourists, even weekenders, after the
halt of international tourism. On average, tour operators and hotels have laid off around
42% of workers, with some up to 80%. Special economic sectors and zones that are
tourismoriented have been affected more severely. During January-June 2020, Lao
Airlines suffered a 66.5% decline in passenger number and 66.3% in revenue, compared
to same months in 2019.

9. Lowest growth in decades. The COVID-19 pandemic is expected to cause the biggest
economic slowdown in Lao PDR in nearly three decades. The World Bank estimatesthat
the country’s economic growth in 2020 is likely to be negative, unless an adequate
intervention takes place early in the second half of the year. 15 The IMF has projected
economic growth of 0.7% for 202016, while the ADB forecasts a contraction of 0.5%.
The Lao National Institute for Economic Research (NIER) is more optimistic, projecting
growth of 3.3% this year, although this is still a marked slowdown compared to recent
years. As a result of COVID19, up to 65% of formal businesses have reported a high risk
of needing to terminate at least part of their operations.

Chamber of Commerce and Industry (LNCCI) has estimated that a budget allocation equivalent
to 2% of GDP ($380 million) would be required to support the recovery, including $152 million
in support to businesses.20 UNCDF meanwhile, has estimated that investments of $528 million
would be required to achieve GDP growth of 1% in 2020, or $3.7 billion to return to growth rates
seen over the course of the 8 th NSEDP (2016-2020). 21 Lao PDR has extremely limited fiscal
space to respond on a large scale. Thus far, the response has been concentrated on deferrals and
postponements of tax obligations, which themselves further limit the fiscal space. Income tax
exemptions were put in place for three months (April-June) for some public and private sector
workers, some microenterprises were exempted from income taxes, tax collection for businesses
in the tourism sector have been deferred, and mandatory contributions to social security have
been postponed. As of July, only around 3,000 affected workers have received the
unemployment benefits, with more than 9,000 applications still pending. Eligibility criteria
suggests that up to 86,000 people could be entitled to receive benefits, and the UN stands ready
to assist the Government in raising awareness to citizens and delivering the support to those who
need it most

Social protection
The most socially and economically vulnerable have the most limited means of coping at their
disposal, thus social protection is essential in responding to COVID-19 and is increasingly
recognised as a critical strategy for poverty reduction and inclusive growth. This can take the
form of two tracks: 1) Large-scale temporary emergency cash transfer programmes of the type
deployed by governments across the globe, can help mitigate the most immediate and acute
deprivations caused by COVID-19 and the ensuing drop in economic activity, and 2) Longer-
term sustainable allocations of domestic resources to the establishment and expansion of social
protection programmes, such as non-contributory cash transfers, can ensure that such
programmes are sustainable and help people in need. Moreover, social protection can
significantly help to stabilise the wider economy and instil social stability. This calls for swift
action and strong economic and social policies, which can have a considerable positive effect on
the economy, acting as a powerful economic and social stabiliser. Social protection systems,
designed with a gender perspective, address three main dimensions of the COVID-19 pandemic
and its economic and social implications: income security and poverty prevention; stabilising the
wider economy and social stability; and containing the pandemic and reducing mortality. A
system-strengthening approach to social protection during and after the COVID-19 crisis can
have two dimensions. The first is to focus on the development of the social protection system
itself to ensure the effective and efficient delivery of the first and second streams of work. The
second dimension is on the relationship of social protection with the larger spectrum of policy
measures

Priorities
The crisis calls for an immediate, large-scale, and coordinated social protection response. This is
essential
to protect households from income loss due to unemployment and under-employment caused by
the
pandemic as well as to limit the spread of the virus. It is key to address the needs of those hardest
affected,
in particular, the large share of the population that is not covered by social welfare or social
insurance left
highly vulnerable in the absence of income-generating activities. The following priority
recommendations
focus mainly on establishing the national social protection system which is ready to deal with the
current
and future crises, as well as undertaking a temporary emergency cash transfer programme to help
those
hit hardest. The measures proposed below also take into consideration that sufficient institutional
and
administrative capacities should be in place to deliver assistance, especially in light of the news
that less
than half of the 9,000 applicants for unemployment benefits have received their money.

Social welfare:
• Launch a large-scale, temporary, emergency cash transfer programme to support as many of
those most in need as possible to alleviate the most acute deprivations brought on by COVID-19.
• Provide a cash transfer to expectant mothers and children aged 0-2 years, as well as the elderly,
starting in select poor or most-affected districts.
• Extend the National School Meal Programme to guarantee adequate nutrition for children and
households, gradually expanding to more districts.
• Conduct a needs assessment of migrant workers. Provide a cash transfer to returning migrant
workers linked with re-skilling and job search measures.
• Engage with private sector and recruitment agencies on advocacy for migrant rights protection
and ethical recruitment, particularly in the recovery stage. Support the formalisation of
recruitment processes for employment in sectors that have relied primarily on informal
migration as a source of labour.
• Following the assessment, plan and prepare for large-scale policy efforts to provide income
support to prevent demand shock (suppressing consumption among local and migrant workers
and their families in the informal sector) due to reduced economic activity or complete stop of
economic activity because of the COVID-19 response (quarantine).
Social insurance:
• Extend unemployment benefitsto active LSSO contributors who have been affected by
increasing
the amount and duration of benefits and consider eliminating the waiting time of 30 days.
• Provide partial unemployment benefits or wage subsidies to active LSSO contributors (workers
on
leave-without-pay in temporarily closed companies), particularly in the tourism and garment
sectors and create linkages with cash for work in facility upgrades, re-skilling and job search.
• Provide an allowance to inactive LSSO contributors and non-LSSO-members in occupations
affected (the allowance should be lower than any benefits for active LSSO members).
Access to healthcare:
• Enable access to essential health care for all including migrants by temporarily granting
universal
access to essential health care, regardless of health insurance membership status. Also, extend a
waiver on co-payments to all for whom co-payments apply.
• Intensify prevention messages against COVID-19, including in rural and remote areas.
• Continue to invest in and improve preventive health care services, to deal with normal
healthcare
challenges (besides COVID-19).