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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: PAD1998
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT PAPER
ON A
PROPOSED ADDITIONAL GRANT
FROM THE SECOND TRADE DEVELOPMENT FACILITY MULTI-DONOR TRUST FUND
IN THE AMOUNT OF USD2.5 MILLION
AND A PROPOSED RESTRUCTURING
TO THE
LAO PEOPLE’S DEMOCRATIC REPUBLIC
FOR THE SECOND TRADE DEVELOPMENT FACILITY PROJECT
December 7, 2016
Trade and Competitiveness Global Practice
East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without
World Bank authorization [will be disclosed after approval].
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i
CURRENCY EQUIVALENTS
(Exchange Rate Effective November 16, 2016)
Currency Unit = LAK (Lao Kip)
LAK 8,150 = US$1
US$ = SDR 1
FISCAL YEAR
October 1, 2015 – December 31, 2016
then
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AEC ASEAN Economic Community
AF Additional Financing
ASEAN Association of South East Asian Nations
CPS
DIMEX
DTIS
Country Partnership Strategy
Department of Imports and Exports
Diagnostic Trade Integration Study
FM Financial Management
FTPD
GDP
Foreign Trade and Policy Department
Gross Domestic Product
GRS Grievance Redress Service
IDA International Development Association
IFC International Finance Corporation
IP Implementation Progress
LBF Lao Business Forum
LNCCI Lao National Chamber of Commerce and Industry
LTP
MDTF
Lao Trade Portal
Multi-Donor Trust Fund
MOIC Ministry of Industry and Commerce
MPI Ministry of Planning and Investment
MTR Mid-Term Review
NIU National Implementation Unit
NSEDP National Socio-Economic Development Plan
NTM Non-Tariff Measures
PDO Project Development Objective
SCD Systematic Country Diagnostic
SME Small and Medium-Sized Enterprise
STIP Services Trade and Investment Portal
TDF-2 Trade Development Facility 2
TFA
TFS
WTO
Trade Facilitation Agreements
Trade Facilitation Secretariat
World Trade Organization
ii
Vice President: Victoria Kwakwa
Country Director: Ulrich Zachau
Country Manager: Sally Burningham
Senior Global Practice Director:
Practice Manager/Manager:
Anabel Gonzalez
Mona Haddad
Task Team Leader: Mombert Hoppe
iii
LAO PDR
ADDITIONAL FINANCING TO THE SECOND TRADE DEVELOPMENT FACILITY PROJECT
CONTENTS
Additional Financing Data Sheet ............................................................................................................... iv
I. Introduction ............................................................................................................................................ 1
II. Background and Rationale for Additional Financing and Restructuring ............................................... 2
Country Context ...................................................................................................................................... 2
Project Background ................................................................................................................................. 4
III. Proposed Changes ................................................................................................................................. 6
Summary of Proposed Changes .............................................................................................................. 8
IV. Appraisal Summary ............................................................................................................................ 10
V. World Bank Grievance Redress .......................................................................................................... 12
ANNEXES 1: Revised Results Framework and Monitoring Indicators .................................................. 13
ANNEX 2: Detailed Description of Modified or New Project Activities .............................................. 20
ANNEX 3: Revised Estimate of Project Costs ....................................................................................... 26
ANNEX 4: Division of Labor: TDF-2 Additional Financing & IFC Investment Climate Project ......... 27
ANNEX 5: Procurement Arrangement ................................................................................................... 28
iv
Additional Financing Data Sheet
Lao People's Democratic Republic
AF - SECOND TRADE DEVELOPMENT FACILITY PROJECT ( P159060 )
EAST ASIA AND PACIFIC
GTC02
Basic Information – Parent
Parent Project ID: P130512 Original EA Category: C - Not Required
Current Closing Date: 31-Mar-2017
Basic Information – Additional Financing (AF)
Project ID: P159060 Additional Financing
Type (from AUS): Scale Up
Regional Vice President: Victoria Kwakwa Proposed EA Category: C
Country Director: Ulrich Zachau Expected Effectiveness
Date: December 20, 2016
Senior Global Practice
Director: Anabel Gonzalez Expected Closing Date: 30-Sep-2018
Practice
Manager/Manager: Mona E. Haddad Report No: PAD1998
Team Leader(s): Mombert Hoppe
Borrower
Organization Name Contact Title Telephone Email
Ministry of Finance
H.E. Mme.
Thipphakone
Chanthavongsa
Vice
Minister
(MoF)
856-21-412142 [email protected]
Project Financing Data - Parent ( Lao PDR Second Trade Development Facility Project-
P130512 ) (in USD Million)
Key Dates
Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness
Date
Original
Closing Date
Revised
Closing Date
P130512 IDA-H8190 Effective 04-Dec-2012 28-Mar-2013 08-May-2013 31-Mar-2017 31-Mar-2017
P130512 TF-14189 Effective 28-Mar-2013 28-Mar-2013 08-May-2013 31-Mar-2017 31-Mar-2017
Disbursements
Project Ln/Cr/TF Status Currency Original Revised Cancelled Disbursed Un-
disbursed
%
Disbursed
P130512 IDA-H8190 Effective USD 4.00 4.00 0.00 2.87 0.83 72
P130512 TF-14189 Effective USD 9.90 9.90 0.00 6.80 3.10 69
Project Financing Data - Additional Financing AF - SECOND TRADE DEVELOPMENT
v
FACILITY PROJECT ( P159060 )(in USD Million)
[ ] Loan [X] Grant [ ] IDA Grant
[ ] Credit [ ] Guarantee [ ] Other
Total Project Cost: 2.50 Total Bank Financing: 0.00
Financing Gap: 0.00
Financing Source – Additional Financing (AF) Amount
Borrower 0.00
Multi-Donor Trust Fund for the Second Trade Development Facility 2.50
Total 2.50
Policy Waivers
Does the project depart from the CAS in content or in other significant
respects? No
Does the project require any policy waiver(s)? No
Bank Staff
Name Role Title Specialization Unit
Mombert Hoppe Team Leader
(ADM
Responsible)
Senior Economist Task Team Leader -
Trade and
Competitiveness
GTC02
Latharo Lor Procurement
Specialist (ADM
Responsible)
Procurement
Specialist
Procurement GGO08
Reaksmey Keo Sok Financial
Management
Specialist
Consultant Financial
Management
GGODR
Asya Akhlaque Team Member Lead Economist Trade and
Competitiveness
GTC02
Gerard McLinden Team Member Lead Private Sector
Specialist
Private Sector
Development
GTC09
Khampao Nanthavong Team Member Private Sector
Specialist
Private Sector
Development
GTCEA
Konesawang
Nghardsaysone
Team Member Economist Trade and
Competitiveness
GTC02
Manush A. Hristov Team Member Senior Counsel Legal LEGES
Phet Udom Mainolath Team Member Program Assistant Administration and
client services
EACLF
Locations
Country First Administrative
Division
Location Planned Actual Comments
Lao People's
Democratic
Republic
Khoueng Viangchan Khoueng Viangchan X
vi
Institutional Data
Parent ( Lao PDR Second Trade Development Facility Project-P130512 )
Practice Area (Lead)
Trade & Competitiveness
Additional Financing AF - SECOND TRADE DEVELOPMENT FACILITY PROJECT ( P159060 )
Practice Area (Lead)
Trade & Competitiveness
1
I. Introduction
1. This Project Paper seeks the approval of the Regional Vice President for an Additional Financing
(AF) grant in the amount of USD 2.5 million to the Lao People’s Democratic Republic’s Second
Trade Development Facility Project (P130512, IDA grant No. H8190 and MDTF grant No.
TF014189).1 The AF involves restructuring as the revision of the results framework is being
proposed, and the closing date of the project will be extended for a period of 18 months to September
30, 2018. The Project performance is progressing well, with the Project Development Objective
(PDO), and Implementation Progress (IP) rated consistently as “Satisfactory” over the last 12 months.
Disbursements under the current project (P130512) stood at 70 per cent on December 7, 2016. There
is compliance with key legal covenants, including audit and financial management reporting
requirements.
2. The proposed AF grant and restructuring builds on the significant progress made so far
under the project and would primarily finance costs associated with scaling up of components
aimed at improving trade facilitation and business environment. The support in the additional
areas will critically complement support provided thus far to ensure that private enterprises will
benefit more effectively from improvements made in the areas of trade facilitation, trade policy and
regulations, and efforts made to support diversification and competitiveness. It will support increased
transparency of the business enabling environment, streamlining of procedures, and an increase in
predictability in the application of existing rules, regulations, and procedures. In addition, the
proposed AF will support improving, and making more inclusive, the dialogue and coordination
between the Government and the private sector to increase demand for reforms and its follow-
through.
3. The PDO remains to support the implementation of Government's trade and integration
priorities outlined in the 2012 DTIS Roadmap, and in particular to contribute to improved
competitiveness and diversification, focusing outside the natural resource sectors. There is no
change in the PDO. The AF will not change the fiduciary, safeguards or implementation
arrangements that are currently in place for the original project. Government staff, however, would be
increasingly involved with Financial Management to ensure sustainability beyond the project end-
date. No additional safeguard policies will be triggered, and there will be no change in the safeguards
category.
4. The additional funding will be funded from an additional contribution of Australia to the
Second Trade Development Facility Multi-Donor Trust Fund. Around half of Australia’s
contribution has already been received, and an amount exceeding the full appraised amount has been
legally committed by Australia through an MDTF Administration Arrangement. The initial
amendment to the recipient-executed grant agreement of US$1.3 million will reflect contributions
already received by the MDTF, while the remaining US$1.2 million of the appraised US$2.5 million
will be added to the recipient-executed grant through subsequent amendment(s) to the GA without the
need to process another AF package, as and when we receive the additional contributions. None of
1 While the total amount of the additional grant is US$2.5 million, the initial amendment to the grant agreement of US$1.3
million reflects the contribution already received by the MDTF. The remaining amount will be added to the grant through
subsequent amendment(s) to the GA without the need to process another AF package.
2
the other partners is currently planning to contribute additional funding to the MDTF, and no
additional IDA resources will contribute to the Additional Financing.
II. Background and Rationale for Additional Financing and Restructuring
Country Context
5. The economy of Lao PDR has been expanding at an average of 7.5 percent per annum for
the past 15 years, enabling the country to reduce poverty rates significantly and multiply per
capita incomes. Growth has been boosted by the resource sector and by accommodative
macroeconomic policies on both the fiscal and monetary fronts, Lao PDR attained lower middle-
income country status in 2012 and real GDP is expected to grow at average annual rate of 7 percent
from 2016-2020. However, while high economic growth increased per capita GNI to US$ 1,730 in
2015,2 it has been accompanied by a less than proportionate decline in poverty and rising inequality.
While poverty declined from 33.5 percent in 2002/03 to 23.2 percent in 2012/13, the elasticity of
poverty reduction to economy growth is less than unity. For every 1 percent increase in GDP, poverty
has fallen by approximately 0.47 percent. This uneven trend suggests that the benefits of economic
growth are not translating into shared benefits for all and in some cases may have widened inequality.
6. As part of this strong growth, the Lao economy has gone through a rapid structural shift
from agriculture to natural-resource based economy. The share of natural resource-based sectors
to GDP almost tripled between 1998 and 2010, increasing from 5.9 percent in 1998 to 16.1 percent in
2010. The share of non-tradables (services) to GDP grew more moderately, driven by increases in
tourism and trade in recent years as well as an expansion in infrastructure construction. Similarly,
manufacturing (garments, wood and wood products, construction materials, light manufacturing,
handicrafts, and, increasingly, food, beverages and related processing) as a share of GDP has also
expanded, but at a relatively slower rate. These non-resource sectors remain critical to creating more
job opportunities and moving people out of poverty. However, growth in these sectors has been
modest relative to potential largely due to a complex business environment that hampers private
sector operations. According to the Investment Climate Assessment from 2014, deeper investment
climate reforms will be necessary to unlock the full potential of the Lao economy, to attract higher
quality private sector investment in a wider range of diversified sectors, and to benefit more fully
from natural resource development spillovers.
7. The country is located within a region that includes some of the most dynamic and fastest
growing economies in the world, and it has benefited significantly from growing external demand
for goods and services as well as increased inflows of foreign direct investment. However, to more
strongly benefit from these regional market opportunities, a number of challenges in the business
environment will still have to be addressed. Given its small size, investments into Lao PDR (outside
the natural resource sector) will be largely efficiency seeking. For this type of investment investors
are particularly looking for a transparent, dynamic and streamlined business environment (and trade
environment) as they compare alternative investment locations. It will therefore be particularly
important for Lao PDR to improve the business environment to compensate for the natural
disadvantages the country faces as a land-locked economy.
2 Lao PDR Economic Monitor 2016, The World Bank.
3
8. In fact, Lao PDR’s growing dependence on the natural resource sector has tended to erode
national competitiveness in sectors that have the potential to create jobs and reduce poverty in
the long term. While the natural resource sector has been the key driver of economic growth in
recent years and has led to high rates of foreign investment, the positive spillovers from this growth
have largely been limited to an expansion in the services and constructions sectors. While important,
these sectors will not generate the kind of employment growth needed to absorb the estimated
900,000 new job seekers joining the workforce in the next decade3. This suggests that urgent attention
needs to be directed toward reforms that have the potential to support growth in the non-natural
resources sector, particularly in agriculture and manufacturing but also the services sectors. It is in
these sectors where most employment is likely to be generated over the short to medium term that
could contribute to broad-based income growth and contribute to achieving the twin goals.
Agriculture alone currently accounts for 75 percent of Lao PDR’s entire workforce.
9. Importantly, strong economic growth has tended to mask the costs and constraints imposed
on business of a still largely unreformed business and investment environment. The difficult
business environment in Lao PDR (ranked 134th
out of 189 economies on the 2016 Ease of Doing
Business ranking) generates significant costs for new investments as well as the expansion of existing
ones. The overall ranking, and a particularly low ranking for ‘starting a business’ (153) and ‘paying
taxes’ (127) directly affecting business operations, further suggests that the few improvements made
have resulted in an overall pace of reform far too slow to make a meaningful difference. The 2016
Enterprise Survey data further points to the challenges in the business environment. While trade
indicators continue to improve the time to obtain operating licenses in the manufacturing sector has
been increasing since 2009 and now takes longest for small enterprises. External reform
commitments (under the WTO and ASEAN) have driven reforms in some areas, such as tariff and
service trade liberalization, rationalization of non-tariff measures (NTMs), as well as improvements
in trade facilitation and border management systems. As a result, constraints in the business
environment have become relatively more important for the private sector.
10. Available analytical work, consultations with the private sector, and data indicate that the
business environment remains complex and risky, negatively affecting investment flows into the
non-resource sectors. Laws and secondary legislation on regulatory requirements is frequently
unavailable despite recent modernization in many areas (notably as part of the WTO accession), and
clear procedures on how to meet such requirements are absent. Business licensing is still largely
manual and paper-based, transactions are not standardized and require face-to-face interactions.
Coordination among Ministries is not fully formalized, generating high transaction costs and drawn-
out processes. Together with a broadening gap between the “law in the books” and the “law in
practice” (de jure/de facto gap) as well as a lack of predictability (resulting from significant
divergence in the interpretation and enforcement of the same rules by different line ministries and by
provincial authorities), this regulatory uncertainty function as barriers to business entry and
operation—and undermine the confidence of the private sector. Anecdotal evidence indicates that
compliance with regulations can be avoided, or processes be accelerated, by informal means. While
large companies might be able to navigate such an environment (characterized by negotiation and
discretionary decisions), it particularly places burden on smaller, including women-owned,
companies and new entrants that might not have established relationships, complicating new entry
3 Lao PDR Systematic Country Diagnostic, The World Bank, forthcoming 2016.
4
and reducing competition in the market.4 Business registration as well as complex and opaque sector-
specific business licensing requirements are frequently reported as key constraints facing SMEs.
11. Improving the business and investment regime will require consistent and comprehensive
reforms and will be critical to diversifying sources of growth and facilitating investment,
especially in the context of the ASEAN Economic Community (AEC). Improving the environment
for starting and operating businesses would have to consist of increasing transparency (including
regarding taxation), simplification of regulatory requirements, reducing policy restrictions on market
entry, and increasing consistency and predictability of how existing rules and procedures are applied
in practice. It would remove restrictions on market entry and levelling the playing field between new,
existing, formal, and (often large) informal businesses, encouraging competition through new
business entry and the formalization of existing economic activity. Addressing the business
environment will be critical if Lao PDR wants to use the private sector as an engine for poverty
reduction and job creation. The fact that a number of new investments focusing on the assembly of
parts have recently come in, concentrated in Special Economic Zones, indicates that simplifying the
business environment and putting the right conditions in place can lead to increased investment in
labor-intensive sectors.
Rationale for Bank Involvement
12. The proposed AF and restructuring supports the Government’s priorities outlined under
the eighth National Socio-Economic Development Plan (8th
NSEDP), aiming at continued strong
growth, increased productivity and widened regional and international integration, and graduation
from LDC status. To that end, the Plan stresses the need to enhance productivity and to diversify the
economy beyond the extractive, natural resource-based industries. To achieve this, Lao PDR will
need to focus on creating a positive enabling business and investment environment that supports the
development of the non-resource sectors by attracting and retaining quality investment and lowering
the cost of doing business. The proposed AF also forms a major part of efforts to achieve the World
Bank Group’s Country Partnership Strategy (CPS – Report No. 66692, March 8, 2012) Strategic
Objective 1: "Improving competitiveness and connectivity", and in particular the CPS Outcome 1.1:
"Strengthening government capacity to support growth diversification and competitiveness",
providing important complements to the activities already funded under the TDF-2. The objectives of
TDF-2 and proposed AF to support the Government’s trade and integration priorities aim at improved
competitiveness and diversification, especially outside the natural resource sectors, and are therefore
still highly relevant to the current CPS. As these efforts are expected to contribute to increased job
creation and productivity growth, the objectives of the TDF-2 and proposed AF are also aligned with
the World Bank Group’s twin goals.
Project Background
13. The proposed AF and proposed restructuring for the TDF-2 will complement the
components already funded, ensuring that benefits to the private sector and the economy can be
maximized through the TDF-2. The original TDF-2, in the amount of US$14m, was approved in
November 2012, became effective in May 2013, and is scheduled to close in March 2017. The total
amount is funded through IDA grant No. H8190 and MDTF grant No. TF014189. It is being
4 The increased use of concession agreements (case by case negotiation of discretionary package of incentives) in multiple
sectors and by multiple agencies also raises concerns regarding transparency and competition.
5
implemented by the Ministry of Industry and Commerce (MOIC). The AF is designed to deepen and
broaden the reform agenda led by MOIC under TDF-2, to further strengthen the coordinating role of
the Ministry and build additional capacity for the implementation of trade and business-environment
related reforms.
Summary of Project’s Results
14. The Mid-Term Review (MTR) of the current TDF-2 in June 2015 considered progress
towards the achievement of the Project Development Objective and Implementation Progress to
be ‘Satisfactory’ and this was confirmed during the last Implementation Support Mission in
May 2016. Overall, the MTR found that project implementation is proceeding at an encouraging
pace, with significant progress being made right across TDF-2 components and sub-components. The
latest implementation support mission particularly highlighted progress regarding regulatory reform
in services sectors and implementation of the Business Assistance Facility. Lessons learned from
TDF-1 have been incorporated into TDF-2 and have resulted in attention to the early launch of
procurement for major consultancy packages and the establishment of key frameworks to support
implementation, which have led to effective implementation progress during the early stages of the
project.
15. Complementing these positive findings, the MTR found that some activities that would
benefit from some additional time to fully complete and to maximize impact and results. In
addition, the MTR found that including complementary activities and scaling up of some existing
components would further support key elements of the Government’s priorities. It particularly
identified improving the complex business environment and supporting MOIC’s new high-profile
coordination responsibilities for the Lao Business Forum.
16. The proposed AF will focus on improving the existing regulatory environment, an actual
improvement in the implementation of existing laws and regulations, and improving the
coordination between Government and the private sector to increase demand for reforms. It
will first support increasing the transparency regarding procedures and processes relating to
registering businesses as well as obtaining operating licenses, and increase regulatory predictability
by reducing the scope for discretionary decisions. Second, the proposed AF will support the review
and streamlining of particularly burdensome regulations. To identify the most pressing challenges the
private sector is facing, the proposed AF will also support the MOIC’s leadership of the Lao Business
Forum to make it an inclusive and effective body for discussing challenges and follow-up actions by
Government. Effective follow-up by Government is expected to generate increased private sector
participation in the forum and increased demand for further reforms. To ensure an inclusive impact of
the reforms supported under this AF, a particular focus will be put on the participation of emerging,
rural, and women-led enterprises and SMEs in consultations and (where possible) focusing on
addressing barriers that particularly affect such businesses. In addition, the AF will scale up support
under some of the existing components. Annex 2 describes proposed activities under this additional
financing in more detail, while Annex 4 presents a short overview regarding the division of labor in
this area between the proposed AF and the IFC-Investment Climate project that is in pre-
implementation.
17. To reflect the proposed changes and in line with recommendations from the MTR to update
the results framework, the AF also proposes a restructuring and updated results framework. It
reflects the additional areas of support and proposes to adjust some of the indicators for more accurate
measurement towards the PDO.
6
18. Implementation modalities will not be changed, building on the strong implementation
capacity already built under the TDF-1 and the current TDF-2 projects.
III. Proposed Changes
19. The proposed AF and proposed restructuring will not alter the overall project design nor its
Development Objective, but it will introduce additional sub-components under the existing
three components. As a result of these modifications, and in response to the recommendations made
during the MTR, the results framework will also be updated (see Annex 1).
20. Component A: Trade Facilitation, Trade Policy, and Regulations (US$5,800,000 including
additional financing of US$200,000): As a result of the small market size of Lao PDR, continued
economic integration with neighbors will be important to allow future investments to benefit from
economies of scale and reduce the current dis-incentives for investment (domestic and foreign) in Lao
PDR. Trade facilitation support under the Second Trade Development Facility has supported Lao
PDR in reducing the cost related to accessing imported inputs (goods and services) and bringing
goods to markets (including capacity building) and the Additional Financing aims to continue that
support, particularly regarding the implementation of the Trade Facilitation Agreement (which Lao
PDR ratified as 18th
WTO member) under the existing sub-component. As Lao PDR has already
ratified Category A commitments, focus would be on Category C. Likewise, support to reviewing and
streamlining non-tariff measures and procedures will be strengthened while support to FTPD in
developing their capacity for trade negotiations and domestic policy coordination around trade in
services will be continued. Support to establishing and maintaining the Services Trade and
Investment Portal (STIP), and maintaining the Lao Trade Portal, will continue.
21. Component B: Diversification and Competitiveness (US$5,200,000 including additional
financing of US$1,100,000). Improving the overall business environment remains critical to increase
competitiveness of the private sector and support diversification. To allow the private sector to
benefit from improvements in the trade policy environment, component B will be broadened to
include one additional sub-component (B3 - Business regulations review and rationalization) to
support rationalization of business regulations related to entry and operations of enterprises,
particularly in non-resource sector. The new sub-component will aim to 1) increase transparency and
predictability of obtaining business registration certificates and key operating licenses by mapping
out related regulations, procedures, and processes, making such information publicly available; and
supporting capacity building of relevant government officials. It will further assist the Government to
2) review and streamline selected regulations affecting the setting up and operating environment for
private businesses, based on the process mapping. Other sub-component under this component
(Business Assistance Facility and Labour Standards and manufacturing productivity) will be
concluded as planned.
22. Component C: Mainstreaming Aid-for-Trade (US$5,500,000 including additional financing
of US$1,200,000): The degree of mainstreaming trade into policy making in Lao PDR has been
significantly supported by this component of the TDF-2. However, discussions among the private and
public sector remain limited and need to be further strengthened if demand for policy reforms by
national stakeholders is to translate into real impact on the ground, particularly now that MOIC is
taking over the leadership of the Lao Business Forum (LBF) from the Ministry of Planning and
Investment (MPI) amid renewed Government interest. While the LBF had been a forum for
7
consultation between Government and the private sector in the past (led by the Lao National Chamber
of Commerce and Industry (LNCCI)), the forum had been effectively discontinued over the last
years. Aiming to strengthen the natural coordinating role of the MOIC for trade and private sector-
related questions, a sub-component C4 (Public-private dialogue) will be added. It will support 1)
MOIC in improving and making more inclusive the design of the LBF, improving coordination and
feed-back between the public and private sector, and leading the LBF politically to ensure decisions
are followed-up by relevant Ministries. The component will also 2) support LNCCI technically to
implement the LBF and making it more inclusive by supporting small and women-led enterprises in
formulating their concerns in an actionable manner. This sub-component will also benefit from the
reforms being proposed under Sub-Component B3. The Government’s capacity to flexibly respond to
emerging priority areas will also further strengthened by allocating additional funds to the DTIS
challenge facility and continuing support to the NIU and its ability to coordinate implementation of
the TDF-2. Additional focus would be put on fiduciary capacity building and Financial Management
(FM) system strengthening of implementing agencies, and Government staff at the NIU would be
involved increasingly with FM to ensure sustainability.
23. To reflect the change in relative financing of the overall project from IDA and MDTF
resources, the current 70-30% MDTF-IDA disbursement percentages will be adjusted. As a
result, the project expenditures will shared among three sources of funds, namely, IDA, the original
TF and the new (parallel) TF. Once IDA funds are fully utilized, expenditures will be shared among
the two TFs until one TF is fully utilized.
24. In order to allow for the implementation of these activities, the project will be extended for a
period of 18 months. The closing date for the AF will be September 30, 2018 and the closing date
for the original financing agreement and grant agreement will also be extended to September 30,
2018.
8
Summary of Proposed Changes
The proposed Additional Financing operation will extend support to existing sub-components and add two
additional sub-components. In addition to scaling up some of the existing components, it will focus on
improving the existing business environment and improving the coordination between Government and the
private sector to increase demand for reforms.
Change in Implementing Agency Yes [ ] No [ X ]
Change in Project's Development Objectives Yes [ ] No [ X ]
Change in Results Framework Yes [ X ] No [ ]
Change in Safeguard Policies Triggered Yes [ ] No [ X ]
Change of EA category Yes [ ] No [ X ]
Other Changes to Safeguards Yes [ ] No [ X ]
Change in Legal Covenants Yes [ ] No [ X ]
Change in Loan Closing Date(s) Yes [ X ] No [ ]
Cancellations Proposed Yes [ ] No [ X ]
Change in Disbursement Arrangements Yes [ X ] No [ ]
Reallocation between Disbursement Categories Yes [ ] No [ X ]
Change in Disbursement Estimates Yes [ X ] No [ ]
Change to Components and Cost Yes [ X ] No [ ]
Change in Institutional Arrangements Yes [ ] No [ X ]
Change in Financial Management Yes [ ] No [ X ]
Change in Procurement Yes [ ] No [ X ]
Change in Implementation Schedule Yes [ X ] No [ ]
Other Change(s) Yes [ ] No [ X ]
Development Objective/Results PHHHDO
Project’s Development Objectives
Original PDO
The project development objective is to support the implementation of government's trade and integration
priorities outlined in the2012 DTIS Roadmap, and in particular to contribute to improved competitiveness
and diversification, focusing outside the natural resource sectors.
Change in Results Framework PHHCRF
Explanation:
In line with discussions during the MTR, some indicators will be reformulated and some indicators will be
added to reflect new sub-activities.
9
Risk PHHHRISKS
Risk Category Rating (H, S, M, L)
1. Political and Governance Moderate
2. Macroeconomic Moderate
3. Sector Strategies and Policies Moderate
4. Technical Design of Project or Program Moderate
5. Institutional Capacity for Implementation and Sustainability Moderate
6. Fiduciary Moderate
7. Environment and Social Low
8. Stakeholders Low
9. Other Moderate
OVERALL Moderate
Finance
Loan Closing Date - Additional Financing ( AF - SECOND TRADE DEVELOPMENT
FACILITY PROJECT - P159060 )
Source of Funds Proposed Additional Financing Loan Closing Date
Trade Development Facility in Lao 30-Sep-2018
Loan Closing Date(s) - Parent ( Lao PDR Second Trade Development Facility Project
- P130512 )
PHHCLCD
Explanation:
The closing date of the overall project will be extended by 18 months to allow the completion of original
and additional activities under the Additional Financing.
Ln/Cr/TF Status Original Closing
Date
Current Closing
Date
Proposed Closing
Date
Previous Closing
Date(s)
IDA-
H8190 Effective 31-Mar-2017 31-Mar-2017 30-Sep-2018 31-Mar-2017
TF-14189 Effective 31-Mar-2017 31-Mar-2017 30-Sep-2018
TF-0A3946 Pending 30-Sep-2018
Change in Disbursement Estimates (including all sources of Financing)PHHCDE
Explanation:
Changes made to reflect the Additional Financing
Expected Disbursements (in USD Million)(including all Sources of Financing)
Fiscal Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual 0.50 1.30 0.70 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Cumulative 0.50 1.80 2.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Allocations - Additional Financing ( AF - SECOND TRADE DEVELOPMENT
FACILITY PROJECT - P159060 )
10
Source of
Fund Currency
Category of
Expenditure
Allocation Disbursement %(Type
Total)
Proposed Proposed
LAPR
Goods, non-consulting
services, consultant
services, Incremental Op
Costs, and Training for
the Project except under
Part B1.b
2.50 100.00
Total: 2.50
Components
Change to Components and Cost PHHCCC
Explanation:
The AF is designed to deepen and broaden the reform agenda led by MOIC under TDF-2, to further
strengthen the coordinating role of the Ministry and build additional capacity for the implementation of
trade and business-environment related reforms. The Additional Financing is therefore scaling up the three
components.
Current Component
Name
Proposed Component
Name
Current Cost
(US$M)
Proposed
Cost (US$M) Action
Trade facilitation, trade
policy and regulations Trade facilitation, trade
policy and regulations 5.60 5.80 Revised
Diversification and
competitiveness Diversification and
competitiveness 4.10 5.20 Revised
Mainstreaming aid for
trade Mainstreaming aid for
trade 4.30 5.50 Revised
Total: 14.00 16.50
IV. Appraisal Summary
Economic and Financial Analysis PHHASEFA
Explanation:
As outlined above the economic benefits of increased transparency in the area of business entry and
operating licenses are likely to attract additional investment and increase competition, leading to lower
consumer prices and increased competitiveness. However, the size of the benefits are difficult to quantify
ex-ante as they will play out through various channels in the economy.
The project has no outstanding audit report or IFR and the FM performance rating of the current project
is satisfactory. The FM risk is rated as moderate. This rating will be updated during the implementation.
The financial management arrangements under the current project will continue to be used for the AF. The
service of the International FM consultant is currently focused on day-to-day operations of FM functions
and some capacity building in the form of daily coaching to the national FM consultants. Under AF, the
main role of the International FM consultant will be to provide advisory services with regard to policies,
analysis of financial information, budgeting and planning, and to continue providing capacity building to
11
enhance capacity of NIU staff and other implementing units in all areas of project financial management.
Moreover, NIU or MoIC staff will be assigned to work on financial management and disbursement of the
AF to enable FM knowledge to transfer from the International and national FM consultants to the
institution. This is an important aspect of sustainability and for filing the gap in FM resources during the
project's grace period when services of all FM consultants finish by the closing date of AF.
The project expenditure will be 100% financed and shared by the three sources of funds, namely, IDA, the
original TF and the new TF. Once IDA funds are fully utilized, expenditures will be shared 100% by the
two TFs and then 100% by either TF when one TF is fully utilized. The combined ceiling for the three
sources of funds is increased to US$800,000 and the minimum application value for the combined sources
of funds is US$100,000.
Procurement Analysis
The procurement arrangements under the current project will continue to be used for the AF. The NIU
within the Department of Planning and Cooperation at the Ministry of Industry and Commerce is in-charge
of day-to-day project management. An assessment of the NIU procurement capacity was carried out and it
concluded that the overall procurement risk remains moderate. The detail procurement arrangement for the
AF will be in Annex 5.
Technical Analysis PHHASTA
Explanation:
The World Bank completed a preparation mission between June 27, 2016 and July 15, 2016, discussing
and agreeing on the proposed additional financing operation. The government is strongly committed to the
proposed additional financing grant and has the necessary capacity to implement the additional activities to
be covered by the project. In technical terms, the additional financing to new subcomponents will
complement reforms already undertaken, linking an increased and more inclusive public-private dialogue
with support to implement identified reforms regarding business registration and business licensing.
Social Analysis PHHASSA
Explanation:
The TDF-2 does not trigger any safeguards and is category C. The AF to the project will not trigger any
additional safeguard issues and policies and therefore there will not affect the safeguards category of the
project
Environmental Analysis PHHASEnvA
Explanation:
The TDF-2 does not trigger any safeguards and is category C. The AF to the project will not trigger any
additional safeguard issues and policies and therefore there will not affect the safeguards category of the
project
Risk PHHASRisk
Explanation:
Overall moderate implementation risks for the Second Trade Development Facility (including the AF)
primarily result from the complexity of the reforms supported. Implementation of the project so far has
mitigated these risks, on the whole, successfully despite a few challenges. Overall, Political and
Governance risks result from the fact that increasing the transparency of the trade and business
environment will affect rents of those benefitting from the current environment through direct payments or
through increased protection of existing business activities. Strong support for the reforms at the MOIC,
where priority reforms will be implemented, and the planned inclusive consultations with a broader private
12
sector are expected to mitigate this risk. Second, the Technical Design and Institutional Capacity for
Implementation and Sustainability generate some risks as the program covers complex issues relating to
improved regulation of economic sectors as well as consumer goods. To mitigate related risks and to
ensure that proposed changes will be in line with international good practices, the project will continue to
draw on support from sector experts, while continuing to build national capacity through training. To
mitigate risks specifically relating to the complex coordination issues around Non-Tariff Measures
(NTMs), the government is working on operationalizing a technical working group to discuss and review
NTMs. In addition, while most implementing agencies have been part of TDF-2 for some time, two new
implementing agencies might require some time to fully familiarize themselves with processes to be
followed under a World Bank funded project. This risk is being mitigated by having continuity in the NIU
who will be working closely with these new agencies, which are also part of the main implementing
ministry (MoIC). Keeping in mind the broader fiduciary risks present in Lao PDR, including a weak
country procurement environment, the overall project procurement risk is currently Substantial. The risk
will be managed and mitigated through the action plan that will be incorporated in the project design.
V. World Bank Grievance Redress
25. Communities and individuals who believe that they are adversely affected by a World Bank (WB)
supported project may submit complaints to existing project-level grievance redress mechanisms or
the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly
reviewed in order to address project-related concerns. Project affected communities and individuals
may submit their complaint to the WB’s independent Inspection Panel which determines whether
harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures.
Complaints may be submitted at any time after concerns have been brought directly to the World
Bank's attention, and Bank Management has been given an opportunity to respond. For information
on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS),
please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the
World Bank Inspection Panel, please visit www.inspectionpanel.org.
13
ANNEXES 1: Revised Results Framework and Monitoring Indicators
Project Name: Second Trade Development Facility Project Project Stage: Additional Financing Status :Final
Team Lead: Mombert Hoppe Requesting Unit: EACTF Created by: Mombert Hoppe
Product Line: Recipient Executed Activities Responsible Unit: GTC02 Modified by: Mombert Hoppe
Country: Lao PDR Approval FY:
Region: EAP Lending Instrument: Investment Project Financing
Parent Project
ID: P130512 Parent Project Name: Second Trade Development Facility Project
Project Development Objectives
Original Project Development Objective – Parent: To support the implementation of Government's trade and integration priorities outlined in the 2012
DTIS Roadmap, and in particular to contribute to improved competitiveness and diversification, focusing outside the natural resource sectors.
Current Project Development Objective – Parent: To support the implementation of Government's trade and integration priorities outlined in the 2012
DTIS Roadmap, and in particular to contribute to improved competitiveness and diversification, focusing outside the natural resource sectors.
Proposed Project Development Objective – Additional Financing (AF): NO CHANGE – To support the implementation of Government's trade and
integration priorities outlined in the 2012 DTIS Roadmap, and in particular to contribute to improved competitiveness and diversification, focusing
outside the natural resource sectors.
Results
.Core sector indicators are considered: No Results reporting level: Project Level
Project Development Objective Indicators
Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target
No change
1. Reduced mean
number of days to
clear imports
Days Value 10.6 3.3 5.3
Date 2009 2012 9/30/2018
Comments
No change 2. Reduced mean
number of days to
clear exports
Days Value 7.5 5.6 3.8
Date 2009 2012 9/30/2018
Comments
14
Marked for
deletion 3. Improved
logistics
performance score
Number Value 2.5 2.39 3.0
Date 2012 2014 9/30/2018
Comments The indicator is
perception based and its
scope is considerably
larger than what can be
impacted by the project
New 3. Number of
products at 6-digit
level of the
Harmonized System
with exports
exceeding USD
100,000 in a year
Number per year
Value 282 290 300
Date 2012 2014 9/30/2018
Comments Data source
COMTRADE mirror
data (import data
from all countries)
Not all countries
have reported data
for 2015 yet
Intermediate Results Indicators
Component A: Trade Facilitation, trade policy and regulations
Status Indicator Name Core Unit of Measure Baseline Actual(Current) End Target
No change
1. Reduction in
percentage of firms
identifying customs
and trade
regulations as a
major constraint
Value 6.8 12.4 2.8
% Date 2009 2012 9/30/2018
Comments
Revised
Current: 2. Increase
in usage statistics
for Lao PDR Trade
Portal
% increase in
number of hits
Value 7,179 4,319 percent 50 percent
Date 2012 2015 9/30/2018
Comments Number of hits Increase in % Increase in %
Proposed: 2.
Number per year Value 7,179 310,072 200,000
15
Increase in number
of hits for Lao PDR
Trade Portal
Date 2012 2015 9/30/2018
Comments Adjusted target: Initial
target was 10,769 per
year
Revised
Current: 3.
Successful
completion rates for
Trade Facilitation
capacity building
program
% of graduations Value 0 90 100
Date 2012 2015 9/30/2018
Comments
Proposed: 3.
Successful
completion rates for
Trade Facilitation
capacity building
program
% of graduations Value 0 90 90
Date 2012 2015 9/30/2018
Comments No capacity building
program has a 100%
success rate. We are
aiming to maintain what
has been achieved to
date.
Revised
Current: 4.
Frequency and
participation of
National Trade
Facilitation
Secretariat meetings
to resolve trade
facilitation issues,
with decisions
documented and
follow up actions
prioritized
Number per year Value 4 2 4
Date 2012 2015 9/30/2018
Comments
Proposed: 4.
Frequency and
participation of
National Trade
Number per year Value 4 2 2
Date 2012 2015 9/30/2018
Comments According to official
16
Facilitation
Secretariat meetings
to resolve trade
facilitation issues,
with decisions
documented and
follow up actions
prioritized
agreement, the TFS
should meet twice per
year, but could meet
more frequently
No change
5. Reduction in the
mean number of
days required to
obtain import
licenses
Days Value 20.7 14.2 9
Date 2009 2012 9/30/2018
Comments
No change
6. Reduction in the
mean number of
days required for
services firms to
obtain operating
licenses
Days Value 14.7 12.6 10.1
Date 2009 2012 9/30/2018
Comments
New
6a. Cumulative
number of new
regulations adopted
affecting the telecom
sector / insurance
sector / professional
services
Number Value 0 6 8
Date 2012 2016 9/30/2018
Comments Five regulations in
the telecoms sector
and one affecting
insurance
Component B: Diversification and Competitiveness
No change
7. Sales growth in
BAF supported
firms compared to
non-supported firm
% Value 0 0 20
Date 2012 2015 9/30/2018
Comments No survey done yet
to measure sales
growth. Will be
available early 2017
Revised Current: 8.
Number Value 0 168 150
17
Cumulative number
of businesses
supported using
BAF advisory
services
Date 2012 2016 9/30/2018
Comments
Proposed: 8.
Cumulative number
of BAF grant
approvals
Number Value 0 168 150
Date 2012 2016 9/30/2018
Comments
Revised
Current: 8a. Increase
in share of female
owned/managed
businesses
supported using
advisory services
% Value 0 30 40
Date 2012 2015 9/30/2018
Comments
Proposed: 8a.
Average percentage
of female owned
businesses among
approved
applications by
BAF.
Number Value 0 30 30
Date 2012 2015 9/30/2018
Comments Revised indicator can
more accurately be
measured,
corresponding change
in target
No change
Current: 8b. Within
those businesses,
percentage of
women employed.
% Value 0 51 30
Date 2012 2015 9/30/2018
Comments
Revised
Current: 9.
Garment factory
labor standards
monitored and
reported to
international
standards
Number of
monitored factories
Value 0 0 20
Date 2012 2015 9/30/2018
Comments Due to delay in
contracting ILO, too
early for results
Proposed: 9.
Number Value 0 0 5
18
Cumulative number
of garment factory
labor standards
assessed
Date 2012 2015 9/30/2018
Comments To clarify the indicator
and adjust target to
limited participation of
private companies
Marked for
deletion
Current: 10.
Cumulative number
of garment
enterprises using
GSC advisory
services
Number of user
factories
Value 3 N/A 10
Date 2012 2015 9/30/2018
Comments No further support in
this area
New
10. Number of new
company
registrations per year
in non-resource
sectors
Number Value 4,353 4,353 7% increase
Date 2015 2015 9/30/2018
Comments Increased transparency
leading to more
registrations
Component C: Mainstreaming aid-for-trade
No change
Current: 11.
Improved aid for
trade governance
moving towards a
program based
approach operating
under the TPSWG
Descriptive Value Fragmented
standalone work
programs
Coordinated, joint
work planning and
results monitoring
supervised by the
TPSWG
Coordinated joint work
planning and results
monitoring supervised
by TPSWG
Date 2012 2016 9/30/2018
Comments 8 TRTA projects
currently under the
single project
governance structure
Marked for
deletion
Current:
12.Increased focus
in government
Descriptive Value Limited focus Substantive focus
with poverty, social
and gender impact
Substantive focus with
poverty, social and
gender impact
19
planning documents
on the poverty,
social and gender
impact of increased
trade and
integration
mainstreamed. mainstreamed
Date 2012 2015 9/30/2018
Comments Gender has been
included in 5 year
Industry and Trade
Development Plan of
MoIC
New
12. Perception of
Lao Business
Forum’s
effectiveness
increased
Qualitative Value Somewhat effective
40% and very
effective 10%
0 60% perceive LBF as at
least somewhat
effective
Date 2014 2015 9/30/2018
Comments This data would be
obtained by adding a
relevant question to the
existing Lao economic
“sentiment survey”
New
12a. Cumulative
number of issues
and concerns raised
by small and
women-led
enterprises captured
and actioned
through the Lao
Business Forum
Number Value 0 0 10
Date 2015 2015 9/30/2018
Comments This data would be
collected by the LBF
No change
13. Increased share
of firms with female
management /
ownership
participation
% Value 39 41.9 47
Date 2009 2012 9/30/2018
Comments
20
ANNEX 2: Detailed Description of Modified or New Project Activities
Lao PDR: Trade Development Facility Project – Additional Financing
1. The support in the additional areas will critically complement support provided thus far to ensure
that private enterprises will benefit more strongly from improvements made in the areas of trade
facilitation, trade policy and regulations, and efforts made to support diversification and
competitiveness. It will support increased transparency of the business enabling environment,
streamlining of procedures, and an increase in predictability in the application of existing rules,
regulations, and procedures.
2. The proposed additional financing and proposed restructuring will not alter the overall
project design nor its Development Objective, but it will introduce additional sub-components
under the existing three components. As a result of these modifications, and in response to the
recommendations made during the MTR, the results framework will also be updated.
COMPONENT A: TRADE FACILITATION, TRADE POLICY AND REGULATIONS
3. Work under component A has advanced well, but additional work remains to be done. The
Additional Financing under this component will therefore continue work already undertaken and
deepen the work, including making use of remaining funds as costs for some activities had been
overestimated.
Subcomponent A1: Trade facilitation support (US$ 100,000 to existing subcomponent)
4. Provision of support to, inter alia: (a) the Trade Facilitation Secretariat in the
implementation of the secretariat’s action plan; (b) enhance the capacity of management
starting at the middle level of the Recipient’s civil servants in trade related agencies; and (c)
enhance and operate the Recipient’s trade portal. The Additional Financing will support
DIMEX/Trade Facilitation Secretariat (TFS) to coordinate and address trade facilitation issues facing
the trading community. While trade facilitation agencies have made good efforts under the TFS since
establishment in 2010 for inter-agency cooperation, there is a capacity gap in collating, analyzing and
articulating trade facilitation issues and providing timely resolution to address the reported problems.
This subcomponent will finance a technical support of a part-time trade facilitation advisor (12 man
months over the period of additional financing) to help prioritize and implement the commitments
made by Lao PDR as part of the WTO’s Trade Facilitation Agreement (TFA). This sub-component
will also provide additional support to DIMEX to evaluate and expand the training on trade
facilitation issues based on the curricula developed under TDF-2. This will permit the trainers who
were trained to deliver additional workshops and reach a broader audience in the trade facilitation
agencies. It will continue support public dissemination around TF issues and continue support to the
Lao Trade Portal (LTP) through a full-time Content Coordinator, trade portal maintenance, and
updating of the portal to include tariffs that Lao PDR is granting imports from preferential trading
partners.
Subcomponent A2: Non-tariff measures review and rationalization (US$ 0 to existing
subcomponent)
21
5. Streamline, simplify and harmonize non-customs border agency measures through, inter
alia: (a) the classification, review and streamlining of domestic non tariff measures; and (b) the
conduct of a survey and related activities to identify and assess non tariff measures faced by
Lao exporters. This AF component will continue to support DIMEX, focus on rationalizing,
streamlining and where possible removing the most burdensome measures. All non-tariff measures
(NTMs) in Lao PDR were collected, classified and published in the Lao Trade Portal with the
implementation of the original financing –TDF-2. Efforts to rationalize, streamline and remove
burdensome NTMs have started under the original financing, but political and coordination
constraints within the NTMs working group have limited progress made to date. Establishing at least
a functioning technical NTM Review Working Group remains a high priority and precondition for
effective implementation of this component across Ministries as DIMEX would otherwise have to
focus on NTMs within MOIC with strong Ministerial support. As part of the increased support to
improving the business environment, the additional financing will continue to fund a part-time
international NTM advisor to strengthen consultations with the private sector around NTMs, to
support and build capacity within DIMEX to undertake impact assessments, and to review and
streamline NTMs. A national NTM specialist could further support NTM with implementing these
activities. Consultation with private sector should be inclusive (in terms of size, location, and
ownership characteristics), allowing issues for a variety of stakeholders to inform the reform process.
This would allow the Government to ensure regulatory measure meet sound policy objectives without
generating unnecessary costs to businesses. Due to the challenges of inter-agency coordination, this
additional support could also focus on assisting MOIC in revising two or three NTMs relating to
processes fully under MOIC control. If progress with the institutional coordination allows, the project
will also review measures under the control of other agencies and ministries.
Subcomponent A3: Trade in services (US$ 100,000 to existing subcomponent)
6. Strengthen the governance of the regulatory environment affecting trade in services
through, inter alia: (a) the conduct of regulatory assessments to, inter alia, compile the existing
measures affecting trade in services, review the performance in their implementation, and
identify gaps in the existing trade in services regulatory framework; and, (b) the improvement
of access to the regulatory framework affecting trade in services. The Additional Financing to this
subcomponent will continue support to the trade in services agenda by supporting FTPD in
developing their capacity for trade negotiations and funding a term part-time International Trade in
Services Policy Advisor as well as a part time National Consultant for Trade in services under
subcomponent A3-1. Both consultants will support FTPD in their efforts further assist other
departments and Ministries to effectively implement key recommendations made in the analytical
studies funded by the original project which covered horizontal barriers as well as the telecoms and
insurance sectors. Support from the consultants could also assist FTPD to engage in additional
priority sectors such as transport/logistics and to continue support implementation of ASEAN MRAs
that started under the original project. Similar to the support provided to the LTP, the project will
support, under sub-component A3-2, a full-time Content Coordinator and trade portal maintenance
for the Trade in Services Portal (STIP) who will closely coordinate with the Content Coordinator for
the LTP. Resources will also be provided to publish (and maintain) information made public under
subcomponent B3.
Subcomponent A4: Trade in goods
22
7. Support to activities associated with the implementation of the Recipient’s trade obligations
to, inter alia, WTO and ASEAN, through, inter alia: (a) strengthening trade policy coordination
mechanisms to ensure trade policy coherence; (b) disseminating the Recipient’s trade
commitments and strengthening capacity on trade remedies; and (c) strengthening the legal
framework for sanitary and phytosanitary measures. No additional financing.
COMPONENT B: DIVERSIFICATION AND COMPETITIVENESS
8. Component B of the additional financing to the TDF-2 aims to complement the work undertaken
in the area of trade policy, trade facilitation, and regulations with efforts to improve the business
environment to foster diversification and strengthen competitiveness of companies. This
complementary work will allow companies to more easily benefit from an improved trading
environment by reducing other constraints to business growth. This will be critical if Lao PDR wants
to use the private sector as an engine for poverty reduction and job creation.
9. The difficult business environment in Lao PDR (ranked 134th
out of 189 economies on the 2016
Ease of Doing Business ranking – against an ASEAN average of 88) continues to generate significant
costs for new investments (and the expansion of existing investments), and key challenges are
confirmed in the 2014 Investment Climate Assessment. Available data and opinions among the
private sector support the view that the business remains complex and risky, and investors tend to
seek quick return, low quality investments while forgoing investment in skills and productivity.
Challenges in the business environment result partially from a lack of transparency and complex
regulations, but also from a consistent discrepancy between de-jure laws and guidelines on the one
hand and their de-facto application on the other. The additional financing will support the
Government’s efforts to improve the business environment by increasing transparency of existing
regulations, reviewing regulatory objectives and efficiency (including streamlining), and more
consistent and predictable implementation of laws and regulations in place that undermine the
confidence of the private sector and are not conducive to greater investment flows.
Component B1: Business assistance facility
10. Establish a Business Assistance Facility to inter alia: (a) advise firms on business growth
plans; (b) provide Matching Grants to assist firms in purchasing specialized business
development services in support of growth plans; and (c) conduct impact evaluation of services
provided. No additional financing.
Component B2: Labor standards and manufacturing productivity
11. Improve productivity, competitiveness and labor standards of the garments manufacturing
sector, by, inter alia: (a) strengthening the supervision of the Recipient’s labor standards and
developing a scheme to improve said standards; and (b) supporting the transition of the
Garment Skills Development Centre towards financial and operational independence. No
additional financing.
Component B3: Business regulations review and rationalization (US$ 750,000 to new
subcomponent)
12. Support transparency and rationalization of business regulations related to entry and
operations of enterprises, by, inter alia: (a) mapping out related regulations, procedures, and
23
processes, making such information publicly available; and (b) reviewing and streamlining
selected regulations affecting the setting up and operating environment for private businesses.
As part of the horizontal regulatory assessment of laws, regulation and administrative practices
affecting services that has been undertaken through TDF-2, a number of regulatory and administrative
measures pertaining to the Enterprise Law, among others, were found to affect service providers, and
more broadly the business environment. The horizontal assessment also recommended a further
regulatory impact assessment be conducted to identify additional measures that would have to be
addressed to improve the business environment. The additional financing under this new
subcomponent will support the Enterprise Registration and Management Department (ERMD) at
MOIC to take a leadership role in improving the business environment for general business activities
in Lao PDR. To strengthen the diversification and competitiveness agenda, the support will focus on
increasing transparency regarding laws and regulations, the rationalization of business regulations
related to entry and operations of enterprises, and dissemination as well as capacity building activities
to increase the predictability of application.
13. The additional financing will support the ERMD in increasing transparency regarding business
registration and obtaining operating licenses, to review existing legal provisions, regulations, and
procedures, increase predictability in application and streamline the most burdensome processes.
With the resources provided, ERMD would be able to hire a full-time Business Process Specialist to
work with the department, as well as a domestic consultant counterpart to support the Specialist and
ERMD. Under guidance of ERMD, the Specialist would first work with all departments within the
mandate of the MOIC (ERMD, DoIH, DIMEX, and Domestic Trade) to collect all laws, regulations,
procedures, forms, process maps, and fees related to obtaining the Business Registration Certificate
(particularly relating to the ‘negative list’) and operating licenses operations (for example for setting
up a production facility, hiring workers, importing or buying intermediate inputs, or relating to the
sale of raw materials and final products). Once completed for all MOIC agencies and piloting the
methodology, the Specialist would then replicate the work across all relevant departments in other
line Ministries. Subject to need, the project could fund sectoral short-term experts to contribute to
that exercise at more technical line Ministries. The experts will present the stocktaking of processes
and list of all operating licenses to government stakeholders for verification. The detailed information
will be prepared and uploaded in an accessible and searchable database linked to the Services Trade
and Investment Portal.
14. Based on this stocktaking, the Additional Financing would allow the Specialists to review
collected documents for internal consistency and to identify inconsistencies among them and Lao
PDR’s international commitments, and would permit ERMD to organize inclusive consultations with
the private sector to identify those measures that most negatively affect private sector operators (in
terms of time, discretion and costs involved) for obtaining the Business Registration Certificate and
operating licenses, identifying those that disproportionally affect women entrepreneurs. To ensure
inclusiveness, an international Communication and Engagement Specialist would support ERDM in
organizing these consultations. Following these consultations, the Specialist would undertake a
detailed business process mapping for around 40 of the identified priority licenses. The detailed
process maps as well as documents, procedures, and downloadable forms would also be made
publicly available in the public domain. To improve the predictability of application, the Additional
Financing would fund selective capacity building activities such as training and dissemination
workshops for ERMD and line ministries, as well as information dissemination of existing laws and
regulations.
24
15. Following the detailed business process mapping, the Specialists would propose priority
regulations for reform to address the inconsistencies that have been identified. With support from a
lawyer funded under the Additional Funding, ERMD and the Specialist would work with relevant
departments/agencies to change relevant regulations to make them consistent in line with existing
laws where possible. Revisions would start with those processes under control of MOIC before
expanding to processes in line Ministries. As part of this review, the Specialist would also assist
ERMD in reviewing the negative list in an effort to simplify and streamline it. Support under the
additional financing will be closely coordinated with other projects to ensure that initiatives build on
each other and avoid duplication. In particular, work will be closely coordinated with the IFC/WB-led
Investment Climate Project (see Annex 4 for more information), support provided by other
development partners (such as the Mekong Business Initiative and ADB’s support to ERMD focusing
on processes within ERMD only as well as data connection between central and provincial offices),
and support by various partners to MPI in revising the Investment Promotion Law.
COMPONENT C: MAINSTREAMING AID-FOR-TRADE
Component C1: National Implementation Unit, and Trade and Private Sector Development
Working Group (US$ 300,000 to existing subcomponent)
16. Support the Recipient’s aid-for-trade governance framework through, inter alia, the
strengthening of the capacity of the National Implementation Unit and the Trade and Private
Sector Development Working Group. The additional financing will support maintenance of a
satisfactory project management arrangement of the project. It will permit to keep the current team in
place, allowing the additional financing to build on well-established and efficient management
experience and processes. The additional financing to this subcomponent will support further capacity
building and transfer of responsibilities to Government staff within the NIU and permitting the NIU
to increase their coordination role. The additional financing will also assist NIU to continue
administering the DTIS roadmap challenge facility, further strengthening of policy dialogue on trade
and private sector development and AfT governance framework in the country, and provide practical
policy advice on trade and private sector development issues.
Component C2: DTIS action matrix/roadmap challenge facility (US$ 500,000 to existing
subcomponent)
17. Establish a challenge facility to support implementation of smaller priority activities
identified within the DTIS Roadmap on a demand-driven basis. Progress of implementing
projects under the DTIS challenge facility has been strong and as of July 18, 2016, 81% of the
originally allocated funds have been committed to eight proposals and 70% of the commitments have
been disbursed. The additional financing will allocate additional resources to the DTIS challenge
facility to continue support implementation of smaller priority activities identified within the DTIS
Action Matrix/Roadmap on a demand-driven basis. As part of this additional allocation, stronger
focus will be put on working with non-MOIC agencies to access the funds of the challenge facility.
At the same time, the maximum size for proposals will be increased to US$ 150,000.
Component C3: Research and policy analysis
25
18. Support to the Recipient’s trade policy research capacity by, inter alia: (a) research
methodology and capacity building; and (b) development of policy relevant research on issues
related to trade and private sector development. No additional financing.
Component C4: Public-Private Dialogue (US$ 400,000 to new subcomponent)
19. Strengthen the Recipient’s mechanisms for discussions among the private and public sector
by, inter alia: enhancing the capacity, inclusivity and effectiveness of the Lao Business Forum. Complementary to the activities to improving the business environment supported under component
B3, the additional financing will support the public-private dialogue with a view to making it more
effective and inclusive. This component will support the MOIC in its newly transferred high-profile
coordination responsibilities for the Lao PDR Business Forum (LBF), allowing MOIC to strengthen
LBF operations and the Lao private sector to raise their concerns with high-level Government
officials. This sub-component will support 1) MOIC in improving and making more inclusive the
design of the LBF, improving coordination and feed-back between the public and private sector, and
leading the LBF politically to ensure decisions are followed-up by relevant Ministries. The
component will also 2) support LNCCI technically to implement the LBF and making it more
inclusive by supporting small and women-led enterprises in formulating their concerns in an
actionable manner.
20. To support MOIC, the component would fund the appointment of a part-time senior international
Strategy and Priority Advisor at MOIC to assist MOIC in ensuring that the LBF will be inclusive and
effective. Together with a national consultant/staff, his/her role would be to design a mechanism
allowing MOIC to effectively follow up with line Ministries on decisions taken at the LBF, to design
a M&E framework, and to design and implement a mechanism to obtain frequent feedback from the
private sector on the functioning of the LBF, allowing such feedback to improve the design of the
LBF making the LBF an effective ‘sounding board’ generating reform success. To support LNCCI,
the additional financing would continue to fund the full-time local PSD consultant and an
administrative assistant that have been funded under the challenge facility proposal under TDF-2 to
support the LBF and to feed information generated and challenges identified under component B3
into discussions at the LBF. The Additional Financing would further fund a full-time national
Inclusiveness Advisor who would work with smaller companies, women-led enterprises, new start-
ups and companies in the regions (using the regional offices of the LNCCI) to work with such
companies to help them formulate their concerns in a manner that would allow that input to feed into
the LBF process. This would ensure increased inclusiveness of the Public-Private dialogue.
26
ANNEX 3: Revised Estimate of Project Costs
Project component Original
Costs
(USD$)
Additional
Financing Revised Total
Component A: Trade Facilitation, Trade Policy and Regulations 5,600,000 200,000 5,800,000
A1 Trade Facilitation Support 1,300,000 100,000 1,400,000
A2 Non Tariff Measures review and rationalization 1,300,000 0 1,300,000
A3 Trade in services 1,700,000 100,000 1,800,000
A4 Trade in goods 1,300,000
1,300,000
Component B: Diversification and Competitiveness 4,100,000 1,100,000 5,200,000
B1. Business Assistance Unit (BAU) 2,500,000 0 2,500,000
B2. Labour standards and manufacturing productivity 1,600,000 0 1,600,000
B3. Business Regulations Review and Rationalization
750,000 750,000
contingency
350,000 350,000
Component C: Mainstreaming Aid-for-Trade 4,300,000 1,200,000 5,500,000
C1.
National Implementation Unit, and Trade and Private Sector Development
Working Group 2,500,000 300,000 2,800,000
C2. DTIS action matrix/roadmap challenge facility 1,000,000 500,000 1,500,000
C3. Research and policy analysis 800,000 0 800,000
C4. Public-Private Dialogue
400,000 400,000
Total investment costs 14,000,000 2,500,000 16,500,000
27
ANNEX 4: Division of Labor: TDF-2 Additional Financing & IFC Investment Climate Project
Area TDF-2 Additional Financing Investment Climate Project
Mapping of
licenses/
permits
Process mapping for obtaining Enterprise
Registration Certificates, covering
processes at all involved agencies
Stocktaking of existing operating licenses in
all sectors of the economy to create a
licensing inventory
Clarification of sectors included on the
negative list of businesses requiring line
Ministry approval for registration
Detailed process mapping of around 30
processes to obtain operating licenses,
focusing on those within MOIC
Testing of methodology for taking
stock of operating licenses in key
sectors (tourism, logistics, agriculture)
Assessing overall burden, costs and
time involved in complying with
selected priority procedures
Streamline/
revise legal
documents
Identify inconsistencies between laws and
regulations, conflicting regulations, or de
jure vs de facto implementation
Consultant team to proposed regulatory
changes to address existing inconsistencies
Identify unnecessary steps in procedures (or
procedures themselves)
Review/streamline negative list of
businesses requiring line Ministry approval
for registration
Continued support to the Doing
Business Task Force to complement
licensing reforms at MPI. Support will
be under leadership of the MPI and
focus on other Ministries than MOIC
Testing of methodology for detailed
process mapping of six procedures
(outside MOIC)
Access to
Information
Include collected information on new
website developed by ADB in close
collaboration.
Publication of findings and process
maps developed will be undertaken
through the AF
Private
Sector
engagement
Strong linkages with the LBF to identify
priority constraints, agree on solutions, and
ensure follow up
Follow-up primarily through the Task
Force at MPI to build support for
reforms and use the LBF as discussion
forum for prioritizing and agreeing on
reforms
Gender Particular focus on gender impact of
existing regulations processes and approach
to streamlining
No specific focus on gender impact
Enforcement Capacity building for ERD at central and
provincial level to ensure consistent
application of rules/regulations
Establish an appeals mechanism
Note: work in this area will also be closely coordinated with ADB’s support to ERMD, focusing on processes
within ERMD only as well as data connection between central and provincial offices
28
ANNEX 5: Procurement Arrangement
Procurement
1. Procurement for the proposed Additional Financing project will be carried out in accordance with the World
Bank’s Procurement and Consultant Guidelines, dated January 2011 and revised July, 2014, and the provisions
stipulated in the Grant/Financing Agreement and in agreed Procurement Plans.
2. It is expected that there will not be any procurement of works under this proposed AF.
Procurement of goods
3. Goods to be procured under this AF will be less primarily include, office equipment. Value of procurement of
goods is generally less than USD 600,000 per contract ant it will be procured through National Competitive
Bidding (NCB) and shopping methods.
Selection of consultants
4. It is expected that some new individual consultants will be hired under this proposed AF and some consultants
under the on-going TDF2- project will be continued under the AF. A few consulting firms will be also
employed.
Assessment of the agency’s capacity to carry out procurement
5. Procurement activities will be carried out by the NIU established in the Department of Planning and
Cooperation at the Ministry of Industry and Commerce. An updated assessment of the capacity of the NIU to
implement procurement under the AF was carried out and the NIU, the designated implementing agency, has
adequate and qualified officers and staff and also has experiences in handling the Bank-financed projects.
However, there are risks of conflict of interest and corrupt practices and the NIU will continue to implement
the measures to mitigate against risks of conflict of interest and corrupt practices and strengthen integrity and
transparency in the procurement process which is applying under on going project.
6. The overall project risk for procurement is Moderate.
Procurement plan
Period covered by this procurement plan: 24 months (Oct 2016 to Sep 2018)
I. Procurement of Goods
1. Prior Review Threshold: Procurement Decisions subject to Prior Review by the Bank as stated
in Appendix 1 to the Guidelines for Procurement:
Procurement Method Procurement Method
Threshold
Prior Review
Threshold
Comments
1. ICB (Goods) >=US$ 600,000 All
2. NCB (Goods) <US$ 600,000 First contract
3. Shopping (Goods) <US$ 100,000
4. Direct Contracting (Goods) - All Where justified and
subject to IDA’s prior
agreement
29
2. Procurement of all contracts for Goods financed wholly or partially by IDA, including through
the Multi-Trust Fund, will be carried out through the applicable procurement methods in
accordance with the thresholds in the above table and as defined against each contract package in
the procurement plan. Procurement using NCB or shopping procedures will use procedures, set
forth in the Decree 03/PM dated January 9, 2004, and the Implementing Rules and Regulations
(IRR) dated March 12, 2004, including national standard bidding document with IDA’s prior
concurrence, will be followed subject to the improvements listed in the NCB-Annex to the Legal
Agreement.
3. Procurement Packages with Methods and Time Schedule
1 2 3 4 5 6 7 8 9 10 11 12
Ref.
No.
Contract
(De-
scription)
Estimated
Cost
(US$)
Procure
ment
Method
Pre-
qualifi-
cation
(yes/no)
Domestic
Preference
(yes/no)
Review
by Bank
(Prior /
Post)
Start
Bidding /
Selection
Process
Expected
Bid-
Opening
Date
Contract
signed
Contract
Finished
Com
ments
GS.1
Office
equipme
nt for
B3.
40,000 Shoppin
g
No No Post Jan
2017
Jan
2017
Feb
2017
Mar
2017
II. Selection of Consultants
1. Prior Review Threshold: Selection decisions subject to Prior Review by Bank as stated in Appendix 1 to
the Guidelines Selection and Employment of Consultants:
Selection Method Procurement
Method Threshold
Prior Review
Threshold
Comment
1. QCBS, QBS (Firms) >US$ 300,000 >US$ 100,000
2 CQS (Firms) <US$ 300,000 First Contract
3. Single Source (Firms) - All Where justified and
subject to IDA’s prior
agreement
4 Least Cost Selection - >= US$ 100,000 For Auditors
5 Individual Consultants - Fiduciary
Consultants and
>US$ 10,000 for
SSS
Comparison of
qualifications of at least
three candidates. SSS
may be used where
justified and subject to
IDA’s prior agreement
2. Short list comprising entirely of national consultants: Short list of consultants for services, estimated to
cost less than US$ 200,000 equivalent per contract, may comprise entirely of national consultants in
accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
30
3. Consultancy Assignments with Selection Methods and Time Schedule
1 2 3 4 5 6 7 8 9 10
Ref. No. Contract
(Description)
Estimate
d
Cost
(US$)
Selectio
n
Method
Review
by Bank
(Prior /
Post )
Start
Bidding /
Selection
Process
Expected
Proposal
Submission
Date
Contract
signed
Contract
Finished
Comment
Component A1 & A2 – Trade Facilitation Support and NTMs
A1.1 International Trade Facilitation
Specialist
100,000 IC Prior Mar 2017 Contin-n Mar 2017 Mar 2018 Input is 12 months
over 18 months
A1.2 National Trade facilitation
Specialist
50,000 IC Prior Mar 2017 Contin-n Mar 2017 Mar 2018 Contract extension
A1.3 International NTM Specialist 120,000 IC Post Mar 2017 Contin-n Mar 2017 June 2018 Input is 12 months
over 18 months
A1.4 National NTM Specialist 30,000 IC Post Mar 2017 Contin-n Mar 2017 June 2018 Contract extension
A1.5 National PSD Coordinator 32,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A1.6 Lao Trade Portal Content
Coordinator
31,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A1.7 Administrative Officer 13,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A1.8 Maintenance contract with IT firm 30,000 Firm Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
Component A3 – Trade in Services
A3.1 International Trade Policy
Advisor
120,000 IC Prior Mar 2017 Contin-n Mar 2017 Sep 2018 Input is 12 months
over 18 months
A3.2 STIP Content coordinator 30,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A3.3 Maintenance contract with IT firm 30,000 Firm Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A3.4 Trade Analyst 30,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A3.5 National Project Coordinator 30,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A3.6 Public Relations Officer 30,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
A3.7 Administrative Officer 12,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
Component B3 - Business Regulations Review and Rationalization
31
1 2 3 4 5 6 7 8 9 10
Ref. No. Contract
(Description)
Estimate
d
Cost
(US$)
Selectio
n
Method
Review
by Bank
(Prior /
Post )
Start
Bidding /
Selection
Process
Expected
Proposal
Submission
Date
Contract
signed
Contract
Finished
Comment
B3.1 Business Regulation Review and
Rationalization –Firm (Business
Regulation Expert, National
Regulatory Expert, Sectoral
regulatory experts, International
& National Legal expert)
500,000 QCBS Prior Sep,2016 Nov,2017 March ,
2017
March ,
2018
The input is 12
months
B3.2 National Coordinator 30,000 IC Post Oct 2016 Nov 2016 Dec 2016 Sep. 2018 The input is 18
months
B3.3 Data preparation and uploading –
Firm
40,000 CQS Post Feb 2017 Mar 2017 May
2017
May 2018 The input is 12
months
Component C1. National Implementation Unit, and Trade and Private Sector Development Working Group
C1.1 National Procurement Officer 45,000 IC Prior Mar 2017 Contin-n Mar 2017 May 2018 Contract extension
C1.2
Inter Procurement Advisor
38,000 IC Prior Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension (3
months over 18
months period)
C1.3 Procurement assistant 18,000 IC Prior Oct 2017 Contin-n Oct 2017 Mar 2017 Contract extension
C1.4 National Finance Officer 36,000 IC Prior Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C1.5
International Financial
Management Specialist
75,000 IC Prior Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension (6
months over 18
months period)
C1.6 Finance assistant 13,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C1.7 Audit firm 10,000 SSS Prior Mar 2017 Contin-n Mar 2017 Sep 2018 Contract amendment
C1.8 M&E Officer 60,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C1.9 National Trade Analyst 35,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C1.10 National Trade and Private Sector
Development Advisor
120,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C1.11 Public Relation Assistant 15,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C1.12 Administrative Officer 10,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
32
1 2 3 4 5 6 7 8 9 10
Ref. No. Contract
(Description)
Estimate
d
Cost
(US$)
Selectio
n
Method
Review
by Bank
(Prior /
Post )
Start
Bidding /
Selection
Process
Expected
Proposal
Submission
Date
Contract
signed
Contract
Finished
Comment
Component C4. Public - Private Dialogue
C4.1 Part time International technical
assistance for Strategy and
Inclusiveness
240,000 IC Prior Oct 2016 Nov 2016 Jan 2017 Jan 2018 Initial contract for 6
months
C4.2 National Senior PSD consultant to
support MOIC
72,000 IC Post Oct 2016 Nov 2016 Jan 2017 Sep 2018 The input is 18
months
C4.3 National consultant for inclusive
engagement
54,000 IC Post Oct 2016 Nov 2016 Jan 2017 Sep 2018 The input is 18
months
C4.4 National PSD consultant to
LNCCI
30,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
C4.5 Administrative assistance to
LNCCI
12,000 IC Post Mar 2017 Contin-n Mar 2017 Sep 2018 Contract extension
Frequency of Procurement Supervision
In addition to any prior reviews to be carried out by the World Bank, the procurement capacity assessment of the project’s implementing agency
has recommended one implementation support mission every six months during the implementation period of the project. The procurement ex-
post review will be conducted at least one per year and the percentage of the post review is 20%.