1 Energy and Mining Policies in Laos and National Budget Dr. PHANHPAKIT ONPHANHDALA NATIONAL UNIVERSITY OF LAOS Lower Mekong Public Policy Initiative Ho Chi Minh City, 29 th November 2016
Outline 2 Introduction Economic Perspective of Lao PDR The Dynamic Change of Natural Resource Governance Energy and Mining in National Budget Concluding Remarks
Introduction: Fast Facts of Lao PDR 3 Demographic Total Area : 236,800 Km 2 Population : 6.49 million Age : 0-14 = 35.1% : 15-64 = 61.1% : 65+ = 3.8% Pop. Growth : 1.9% Urban Pop. : 37.6% Source: ADB Key Indicators (2015)
Introduction (Cont.) 4 Value Added by Sector 1995-2014 as % of GDP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Agricuture Service Industial Source: World Bank (2016)
Introduction (Cont.) 5 Value Added by Sector 1995-2015 as Annual % Growth 25 20 15 10 5 0 Agriculture Service Industry Source: World Bank (2016)
Introduction (Cont.) 6 The rapid growth of Lao economy is a result from natural resource and energy exporting, mostly in mining and electricity. This growth has occurred in a short period and not lead to sustainability!!! Better natural resource governance is the engine of sustainable development of Laos.
The Dynamic Change of Natural 7 Resource Governance in Lao PDR Early 90s Timber Late 90s Electricity 2000s Mining 2010s Agricultural Product
The Dynamic Change of Natural 8 Resource Governance in Lao PDR (Cont.) Value of Natural Resource Export (in thousand USD) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Timber Electricity Mining Source: Bourdet (2000) and Trade Map (2016)
The Dynamic Change of Natural 9 Resource Governance in Lao PDR (Cont.) % of Natural Resource Export (in thousand USD) 120% 100% 80% 60% 40% 20% 0% Timber Electricity Mining Source: Bourdet (2000) and Trade Map (2016)
The Major Change of Development 10 Strategy 1986 The first appearance of New Economic Mechanism (NEM). The NEM aims to introduced market incentives and began decentralizing government economic enterprise. An increasing of private investment and joint venture. 1991 The new constitution was promulgated. 1997 Laos becomes ASEAN member.
Forestry Policy 11 Late 1990s, wood products account for more than 30% of the total export revenue. Demand for timber is expected to grow both in Laos and neighboring countries. Source: Ministry of Agriculture and Forestry
Timber Exportation during 1991-2015 12 Value of Timber Export (in thousand USD) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Source: Bourdet (2000) and Trade Map (2016)
Timber Exportation in early 1990s 13 Value of Timber Export (in thousand USD) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-1991 1992 1993 1994 1995 1996 1997 Source: Bourdet (2000)
Timber Exportation in early 2000s 14 Value of Timber Export (in thousand USD) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Source: Trade Map (2016)
Hydropower Policy and Regulation 15 The hydropower sector serves two vital national priorities: It promotes economic and social advancement by providing a reliable and affordable domestics power supply. It earns foreign exchange from electricity exports. Source: Ministry of Energy and Mines
Hydropower Policy and Regulation 16 (Cont.) The Law on Electricity, No. 03/NA, officially issued on 20 December 2011 emphasizes that the concession period of Hydropower project is under 30 years after commercial operation date (COD). There are 4 criteria of hydropower dam by installed capacity: Governance of Hydropower Dam Operation Installed Capacity 1 District Governor < 100 KW 2 Provincial Governor/Vientiane Mayor 100 KW 50 MW 3 Government of Lao PDR 51 100 WM 4 National Assembly approval base on the request of the government > 100 MW or 50 ha of water reservation
Hydropower Projects in Laos 17 Projects Location Capacity COD* Market IPP Hydropower Projects Operation Central (4) Vientiane (3) North (3) South (3) 3.2 1080 MW 100-615 MW 3-44 MW 14.8 250 MW EDL Hydropower Projects Operation Vientiane (4) South (3) North (2) 6 155 MW 5 76 MW 1-1.5 MW IPP Hydropower Projects under Construction North (13) South (5) Central (3) Vientiane (1) 8 1285 MW 45 410 MW 64 290 MW 61 MW Source: Ministry of Energy and Mines 1998 2013 2010-2012 2011 2014 1999 2013 2010 2013 1999-2012 1970-2011 2015 2019 2016 2020 2016 2019 2017 Mostly Thailand / Laos Thailand / Laos Laos Vietnam / Laos Thailand / Laos Mostly Thailand /Laos Laos Mostly Laos and some export to Thailand *Commercial Operation Date
Electricity Export during 1990s 18 Value of Electricity Export (in thousand USD) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Source: Bourdet (2000) and Trade Map (2016)
Electricity Export during 1990s 19 Value of Electricity Export (in thousand USD) 25,000 20,000 15,000 10,000 5,000-1991 1992 1993 1994 1995 1996 1997 Source: Bourdet (2000)
Electricity Export during 2005-2015 20 Value of Electricity Export (in thousand USD) 700,000 600,000 500,000 400,000 300,000 200,000 100,000-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Trade Map (2016)
Mining Sector in Lao PDR 21 The Lao government aims to develop the nation to become industrialization and modernization. During 2011-2015, FDI inflows to Laos in mining sector remarkable high (MPI, 2016). GDP growth was at the highest between 2006-2007 regarding to minerals exportation.
Mining Sector in Lao PDR (Cont.) 22 There are 3 majors working mines companies in Laos namely Lanexang Minerals, Phu Bia Mining and Lao-Korean Tin Mines, respectively. Company Name Mine Name Type of Minerals Investors Lanexang Minerals Sepon Gold and Copper Australia Phu Bia Mining Phu Kham Gold Australia Lao-Korean Tin Mines No data Tin Laos-North Korea Source: MINDECO (2006) and Kyophilavong (2008)
Minerals Policies and Regulations 23 Law and Regulation No. Issued Date Remarks Law on Mining 49/NA 12 Apr 1997 Prime Minister Decree on Minerals Export 90/PM 9 Jun 2008 Raw minerals are not allowed to export. Law on Minerals (revised) 02/NA 20 Dec 2011 Emphasizes minerals classification, mineral resource area, activities
Minerals Export during 2001-2015 24 Value of Minerals Export (in thousand USD) 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Source: Bourdet (2000) and Trade Map (2016)
Minerals Export during 2001-2004 25 Value of Minerals Export (in thousand USD) 7,000 6,000 5,000 4,000 3,000 2,000 1,000-2001 2002 2003 2004 Source: Trade Map (2016)
Minerals Export during 2005-2013 26 Value of Minerals Export (in thousand USD) 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000-2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Trade Map (2016)
National Socio-Economic 27 Development Plan VII (2011-2015) Promoting food security, food production for domestic consumption and exportation such as rice, coffee, beans, sugar cane and maize. Enhancing agricultural productivity. Promoting growth and green. An Agreement on Macroeconomic Stability Measurement, No. 14/PM, issued date on 7 Feb 2014 also suggests agricultural products promoting lists as follows: Rubber, Sugar, Coffee, tea, maize and cassava Source: NSEDP (2011 and 2016)
Agricultural Export Products in 2014 28 Top 10 Agricultural Export Products Value (thousand USD) Coffee 97,800 Maize 35,300 Cassava 28,500 Locust Bean/Sugar Cane 18,000 Rice 13,000 Starches 10,500 Cabbages 9,200 Ground Nuts 5,000 Processed Cereal 4,900 Perfume Plants 3,500 Source: OEC (2016)
29 Major Export Country of Laos Agricultural Products 4% 4% Coffee Maize 1% Cassava 3% 7% 36% 23% 34% 22% 92% 75% Vietnam Japan Europe Thailand USA China Vietnam Thailand Thailand Vietnam China Source: OEC (2016)
National Budget 30 Government Revenue during 1990 2014 (in thousand USD) 1990/91 1995/96 2000/01 2005/06 2010/11 2014/15 Revenues and Grants 10,490.0 34,375.0 309,512.5 664,046.3 1,736,258.8 2,839,965.0 Revenues 7,620.0 27,175.0 250,050.0 533,247.5 1,272,658.8 2,271,740.0 Tax Revenues 4,705.5 22,000.0 203,612.5 455,140.0 1,138,580.0 1,959,483.8 Profits Tax 994.5 2,587.5 25,650.0 57,358.8 67,932.5 286,012.5 Income Tax 29.3 1,687.5 19,087.5 29,280.0 67,920.0 137,476.3 Land Tax 190.0 262.5 2,100.0 3,766.3 12,268.8 16,347.5 Business Licenses 145.0 12.5 50.0 762.5 1.3 N/A Minimum Tax N/A N/A N/A 2,771.3 5,201.3 1,691.3 Turnover Tax 893.1 4,237.5 39,750.0 110,891.3 63,755.0 44,708.8 VAT N/A N/A N/A N/A 236,637.5 530,590.0 Natural Resources Taxes N/A 87.5 2,950.0 27,193.8 65,861.3 73,382.5 Timber Royalty Receipts N/A 4,325.0 22,687.5 21,557.5 11,592.5 67,508.8 Hydropower Royalties N/A N/A 6,400.0 7,145.0 24,415.0 44,368.8 Non-Tax Revenues 2,914.5 5,175.0 46,450.0 78,108.8 134,078.8 311,131.3 Source: BOL Annual Report (1991 to 2015)
National Budget (Cont.) 31 Share of direct tax from mining, timber and electricity during 1995-2014 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1995/96 2000/01 2005/06 2010/11 2014/15 Timber Royalty Receipts Hydropower Royalties Natural Resources Taxes Source: BOL Annual Report (1995 to 2015)
32 National Budget (Cont.) Government Revenue as % of Total of Revenue from Natural Resource (direct and indirect tax) during 1995-2013 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1995/96 2000/01 2005/06 2010/11 2012/13 Mining 0% 0% 3% 13% 11% Electricity 0% 4% 3% 1% 1% Timber 13% 7% 3% 1% 1% Source: BOL Annual Report (1991 to 2013)
Concluding Remarks 33 The Lao government has emphasized national development to become industrialization and modernization. The dependency of natural resource can cause the economy slump, due to the short period of growth. In the case of Laos, the economy growth is a result from energy exportation. The better governance of natural resource can ensure the long term development and sustainability of the nation.
34 Thank you very much Questions & Answers Dr. Phanhpakit ONPHANHDALA National University of Laos Email: o.phanhpakit@gmail.com