Economic Outlook for Southeast Asia, China and India 2024

Lao PDR

Introduction

Lao PDR is exposed to multiple natural hazards including floods, droughts, tropical storms, landslides and earthquakes, as are the other countries in peninsular Southeast Asia (GFDRR, 2017[1]). It is classified as facing a low disaster risk by the WorldRiskIndex (ranked 127^th). Historically, Lao PDR has been relatively less exposed to major disasters due to its landlocked location and lower seismicity than other countries in Emerging Asia (UNDRR, 2019[2]). However, the country has experienced some significant disasters in the last two decades. Typhoons Ketsana in 2009 and Haima in 2016 caused estimated losses of USD 58 million and USD 63 million, respectively (GFDRR, n.d.[3]).

Lao PDR: Disaster occurrences (from 1981 to 2023) and WorldRiskIndex

Source: EM-DAT and WorldRiskIndex.

Statlink

The hazardscape

Riverine and flash flooding associated with episodes of heavy monsoon rains are recurring phenomena in Lao PDR, with damaging floods occurring mostly in the central and southern regions in low-lying areas along the Mekong and Nam Ngum rivers. More than 12% of the country is considered to be at medium or high risk for floods (Phakonkham, Kazama and Komori, 2021[4]), and a large number of settlements are located in flood-prone areas such as the Mekong River valley (NDMC and UNDP, 2010[5]). Countrywide, 89% of nighttime lights (a proxy for the concentration of population and economic activity) are located in flood-prone areas (Chantarat and Raschky, 2020[6]). Flooding in densely populated and more economically developed areas along the Nam Ngum River results in significant economic losses (Hansana et al., 2023[7]). Flooding can also occur as a consequence of dam failure, as was the case in 2018 when a dam breach in southern Lao PDR caused severe flooding in both Lao PDR and Cambodia (Latrubesse et al., 2020[8]). Flood impacts are increasing, with the number of people affected annually by riverine flooding projected to increase from 170 000 to 250 000 between 2010 and 2030 (WRI, n.d.[9]). Recent government efforts to mitigate flood risk by implementation of water management systems and flood prevention strategies seem to have reduced flood footprints (Hansana et al., 2023[7]). In the future, the expected annual flood damage is estimated to increase significantly due to urban development (Tierolf, de Moel and van Vliet, 2021[10]).

Lao PDR has experienced at least nine major droughts since the 1960s, and drought losses have been increasing in the last decade (Maniphousay, 2021[11]). Droughts occur as a consequence of low local rainfall, below-average river flows (associated with less rain upstream) or a combination of these two factors. The entire area of Lao PDR is considered to be at risk of drought throughout the year, but the risk of severe drought is estimated mainly for the highland areas of Northeast Lao PDR. In the last decade, hydropower development in both Lao PDR and the People’s Republic of China (hereafter “China”) has been affecting the hydrology of the region and potentially increasing drought risk, as rainfall occurring in the upper parts of the Mekong River may reach downstream communities less reliably (Lu and Chua, 2021[12]). In the future, the northern part of Lao PDR is expected to face extreme drought during severe El Niño conditions (UN.ESCAP, 2021[13]).

Given its mountainous topography, Lao PDR is also exposed to landslides, usually triggered by heavy rainfall and affecting transport infrastructure during the rainy season (Arambepola and Devkota, 2013[14]). Forty-four percent of the country’s area is estimated to be at a medium landslide risk and approximately 5% is at a high risk, mainly in southeastern and central Lao PDR (NDMC and UNDP, 2010[5]). Lao PDR also experiences occasional earthquakes, but the earthquake hazard is higher in the northern parts of the country where population density is much lower. Most recurring earthquakes thus typically do not cause significant damage.

Climate change perspective

Disaster risk in Lao PDR is characterised by high rural vulnerability, as approximately 60% of the population live in rural regions and are largely dependent on subsistence agriculture (GFDRR, 2017[1]). While the country has one of the fastest growing economies in Southeast Asia, it is still among the least developed, with high poverty rates and approximately 80% of the population living on less than USD 2.5 per day (GFDRR, n.d.[3]).

The economy of Lao PDR is highly reliant on agriculture, with 64% of the population working in the agricultural sector. Agriculture represents about 24% of the country’s GDP, exacerbating its exposure to disaster risk (GLPDR, 2018[15]). Extreme weather impacts on agriculture lead to major disruptions to rural household livelihoods and reduce food security (Soulibouth, Hwang and Shin, 2021[16]). Disaster vulnerability is highest among the most remote rural communities, which largely consist of minority ethnic groups which are characterised by the highest poverty rates, higher rates of disability and low access to health services and education, limiting their potential for social development (UNDRR, 2022[17]). Community resilience is further reduced due to the extensive use of monoculture farming, limited infrastructure, and inadequate public social protection systems (GLPDR, 2018[15]; GFDRR, 2017[1]).

Climate change is projected to intensify both flood and drought hazards in Lao PDR through rising temperatures and changes in rainfall patterns (Paltan et al., 2018[18]; Thilakarathne and Sridhar, 2017[19]).

Challenges for disaster risk management policy

Following the devastation brought about by Typhoon Ketsana in 2009, disaster risk management in Lao PDR is in the process of gradually shifting from mostly ad-hoc and reactive approaches towards more proactive and holistic ones (Vivona and Suyavong, 2021[20]). In this vein, improved collection, analysis and management of disaster data on hazards, exposure and vulnerability should be among the main priorities as it would greatly assist the formulation of policy (UNDRR, 2019[2]). In terms of implementation, there is room to improve the capacity of disaster risk management institutions at the provincial and district levels (Soulibouth, Hwang and Shin, 2021[16]). Increasing capacity of civil society organisations would allow them to take on a great share of the burden, which would be beneficial to both the government and the population as a whole (Vivona and Suyavong, 2021[20]).

As regards drought risk management, the priorities include strengthening drought risk assessment and early warning systems, supporting drought risk financing mechanisms, and enhancing adaptive capacity to drought to reduce drought-related conflict (UN.ESCAP, 2021[13]). Disaster resilience among farmers could be increased through encouragement of the use of flood-resistant storage facilities, moving livestock to higher grounds during floods, growing alternative crops which can be harvested early, strengthening social protection systems, and supporting projects that can help farmers restore their farms following a disaster event (Soulibouth, Hwang and Shin, 2021[16]).

Disaster insurance coverage in the country is extremely limited for residential assets and minimal for commercial assets (GFDRR, 2017[1]). Agricultural insurance could potentially enable farmers to transfer some extreme weather financial risk to insurance companies and financial markets. One study found that rice farmers were willing to pay for a premium with an indemnity of 17% (Wongpit and Sisapangthong, 2021[21]). In April 2023, Lao PDR launched a National Financial Protection Strategy Against Disaster Risk, which may address some of these disaster financing concerns.

Lao PDR is facing a funding gap that leaves it unable to sustain disaster risk reduction efforts and provide emergency relief, especially in the case of severe and large-scale events (GFDRR, 2017[1]).

References

[14] Arambepola, N. and K. Devkota (2013), “Developing a framework for assessment of landslide hazard risk associated with critical national and provincial roads in Lao PDR”, https://www.researchgate.net/publication/351515385_Developing_a_framework_for_assessment_of_landslide_hazard_risk_associated_with_critical_national_and_provincial_roads_in_Lao_PDR.

[6] Chantarat, S. and P. Raschky (2020), Natural Disaster Risk Financing and Transfer in ASEAN Countries, Oxford University Press, https://doi.org/10.1093/acrefore/9780199389407.013.198.

[1] GFDRR (2017), Disaster Risk Finance Country Diagnostic Note: Lao PDR, https://www.rcrc-resilience-southeastasia.org/wp-content/uploads/2017/12/world_bank_et_al._2016._lao_pdr_disaster_risk_financing_draft-diagnostc-report.pdf.

[3] GFDRR (n.d.), Lao People’s Democratic Republic, https://www.gfdrr.org/en/lao-peoples-democratic-republic.

[15] GLPDR (2018), Post-Disaster Needs Assessment: 2018 Floods, Lao PDR, https://www.gfdrr.org/en/publication/post-disaster-needs-assessment-2018-floods-lao-pdr.

[7] Hansana, P. et al. (2023), “Flood Analysis Using Multi-Scale Remote Sensing Observations in Laos”, Remote Sensing, Vol. 15/12, pp. 3166, MDPI AG, https://doi.org/10.3390/rs15123166.

[8] Latrubesse, E. et al. (2020), “Dam failure and a catastrophic flood in the Mekong basin (Bolaven Plateau), southern Laos, 2018”, Geomorphology, Vol. 362, pp. 107221, Elsevier BV, https://doi.org/10.1016/j.geomorph.2020.107221.

[12] Lu, X. and S. Chua (2021), “River Discharge and Water Level Changes in the Mekong River: Droughts in an Era of Mega‐Dams”, Hydrological Processes, Vol. 35/7, Wiley, https://doi.org/10.1002/hyp.14265.

[11] Maniphousay, V. (2021), “Climate Change Adaptation in Lao PDR”, in Disaster Risk Reduction, Climate Change Adaptation in Southeast Asia, Springer Singapore, Singapore, https://doi.org/10.1007/978-981-16-6088-7_5.

[5] NDMC and UNDP (2010), Developing a National Risk Profile of Lao PDR, National Disaster Management Committee, https://www.adpc.net/igo/category/ID275/doc/2013-sWNa61-ADPC-Final_Report_Part1.pdf.

[18] Paltan, H. et al. (2018), “Global implications of 1.5 °C and 2 °C warmer worlds on extreme river flows”, Environmental Research Letters, Vol. 13/9, pp. 094003, IOP Publishing, https://doi.org/10.1088/1748-9326/aad985.

[4] Phakonkham, S., S. Kazama and D. Komori (2021), “Integrated mapping of water-related disasters using the analytical hierarchy process under land use change and climate change issues in Laos”, Natural Hazards and Earth System Sciences, Vol. 21/5, pp. 1551-1567, Copernicus GmbH, https://doi.org/10.5194/nhess-21-1551-2021.

[16] Soulibouth, L., H. Hwang and D. Shin (2021), “The Impact of Flood Damage on Farmers, Agricultural Sector and Food”, Journal of International Development Cooperation, Vol. 16/2, pp. 151-170, Korea International Cooperation Agency - KOICA, https://doi.org/10.34225/jidc.2021.16.2.151.

[19] Thilakarathne, M. and V. Sridhar (2017), “Characterization of future drought conditions in the Lower Mekong River Basin”, Weather and Climate Extremes, Vol. 17, pp. 47-58, Elsevier BV, https://doi.org/10.1016/j.wace.2017.07.004.

[10] Tierolf, L., H. de Moel and J. van Vliet (2021), “Modeling urban development and its exposure to river flood risk in Southeast Asia”, Computers, Environment and Urban Systems, Vol. 87, pp. 101620, Elsevier BV, https://doi.org/10.1016/j.compenvurbsys.2021.101620.

[13] UN.ESCAP (2021), Ready for the dry years: building resilience to drought in South-East Asia, https://www.unescap.org/sites/default/files/publications/Ready%20for%20the%20Dry%20Years.pdf.

[17] UNDRR (2022), Global Assessment Report on Disaster Risk Reduction 2022: Our World at Risk: Transforming Governance for a Resilient Future, https://www.undrr.org/gar/gar2022-our-world-risk-gar#container-downloads.

[2] UNDRR (2019), Disaster Risk Reduction in Lao PDR: Status Report 2019, https://reliefweb.int/report/lao-peoples-democratic-republic/disaster-risk-reduction-lao-pdr-status-report-july-2019.

[20] Vivona, D. and M. Suyavong (2021), “Strengthening Disaster Response and Resilience in Lao PDR - A Decade of Learning Since Typhoon Ketsana”, Journal of Disaster Research, Vol. 16/2, pp. 234-240, Fuji Technology Press Ltd., https://doi.org/10.20965/jdr.2021.p0234.

[21] Wongpit, P. and V. Sisapangthong (2021), “Willingness to pay of rice farmers in Lao PDR on agriculture insurance”, Thammasat Review of Economic and Social Policy, Vol. 8/1, pp. 49-66, https://so04.tci-thaijo.org/index.php/TRESP/article/view/258880.

[9] WRI (n.d.), AQUEDUCT Global Flood Analyzer, https://floods.wri.org/.