Job creation key for Laos to improve its economic status, says World Bank

VIENTIANE, August 1 (Vientiane Times/ANN): Despite robust economic growth in Laos, job creation has been limited, according to a recent World Bank report.

This is largely because economic growth has been driven by capital-intensive sectors such as mining, energy and construction, which have not created enough jobs to meet existing demand.

The 2021 update of the Lao PDR Systematic Country Diagnostic highlighted how jobless growth prevents households from utilizing human capital and benefiting from economic growth.

“The majority of workers remain trapped in low-paying, low-quality jobs, either as self-employed workers or as unpaid family workers, especially in agriculture. Jobless growth disproportionately affects poor and vulnerable groups, leading to greater inequality that can fuel social instability,” the report says.

“A more inclusive growth model will require improvements in the business climate, socio-economic infrastructure, skills development and a well-functioning labor market.”

Creating more and better jobs requires a competitive private sector. Improved regional and national transport connectivity will improve access to international markets and facilitate integration into global and regional supply chains.

“Laos needs economic growth based on creating jobs, rather than borrowing and selling natural resources,” said Alex Kremer, World Bank Group Country Director for Lao PDR.

“The immediate priority is to increase state revenues. Otherwise, with debt repayments increasing every year, there will be less money available to invest in education, skills, local infrastructure and health – the sources of healthy economic growth.

Prosperous and resource-rich countries have effectively transformed their natural capital into human capital.

In Laos, the agricultural and forestry sector provides more than 60% of total employment. According to the World Bank, about two-thirds of the rural population depend on forests for food, fuel, fiber and medicine, and more than 39% of rural family income comes directly from non-timber forest products.

Although the development of hydroelectricity has stimulated growth in the industrial sector, it has created few jobs, while production in job-creating sectors has increased slowly.

Between 2012 and 2018, the wholesale and retail sector laid off the most almost exclusively self-employed workers, around 76,000 in total.

Although some of these workers may have moved into the hospitality industry where some jobs have been created, many have left the workforce altogether.

Unemployment rose from 4% in 2012 to 16% in 2018. The competitiveness of the manufacturing sector has eroded since the early 2010s, as labor productivity has not kept up with rapidly rising labor costs. labor and the compression of the profitability of manufacturing companies.

The World Bank report recommended that Laos should boost job creation through a more vibrant private sector and better connectivity infrastructure.

It is also essential for Laos to improve the labor market, education and health services help Laotians to access employment opportunities. -Vientiane Times/ANN