Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Lao People’s Democratic Republic (PDR) based on a desk review. The review applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective GPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country Overview" section with executive summary, indicative maturity rating, key achievements, potential pathways forward and timeline of key events related to advancing sustainable public procurement.
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.

The Factsheet is intended to be a living document to promote knowledge sharing and support training activities at ADB. It will be revised and improved as new information is uncovered and advances are made. If you have new information, please contact ychu@adb.org.

While the Lao PDR is rich in natural resources, and has dynamic mining and hydropower industries, economic diversification is needed to expand private sector investment, generate employment in services and industry, and promote regional cooperation and integration. Under its 9th Five-Year National Socioeconomic Development Plan (NSEDP9), 2021–2025, the Lao PDR aims to promote quality, sustainable, inclusive, and green growth in the context of recovery from the COVID-19 pandemic and to graduate from least developed country status in 2026.

The Government first committed to promoting green public procurement in its National Green Growth Strategy of the Lao PDR till 2030, adopted in 2016. In 2022, the Sustainable Consumption and Production (SCP) Roadmap of Lao PDR 2022-2025 reinforced this commitment, and set our priority actions to promote GPP. The Ministry of Natural Resources and Environment adopted a detailed Green Public Procurement Action Plan in December 2022, setting out a goal to achieve 50% GPP by 2025.

The 2020 Nationally Determined Contribution (NDC) sets out the country’s priorities on climate change, focusing on four sectors: forestry, renewables, energy efficiency and transport. The Law on Public Procurement 2017 explicitly calls for public procurement to be carried out in a manner that contributes to national socio-economic development, with further detail provided in the PPL Instructions and Manual.

>> Visual snapshot of Sustainable Procurement Maturity Level

Official Procurement Portal: http://ppmd.mof.gov.la/

Key Achievements

• 2017 Public procurement law allows procuring entities to practice GPP
  
• GPP Action Plan developed in 2022 by the Ministry of Environment and Natural Resources (MONRE)
  
• Ministry of Finance assigned mandate to promote green public procurement
  
• Study exchange tour organized by Government of Japan
  
• Domestic preferences in public procurement encouraged especially as a post-COVID recovery measure
  

Ongoing Activities

• Development of a national ecolabel and green standards system (planned)
  
• Development of a green product directory (planned
  

Potential Pathways Forward

• Promote an all-of-government approach to SPP implementation led by the Ministry of Finance, as MONRE has guided the agenda to date
  
• Create an inter-ministerial body to coordinate GPP implementation
  
• Engage and build capacity of procuring entities across government to adopt GPP, including through peer groups, helpdesks and pilot procurements
  
• Develop practical tools to guide SPP practice, including an SPP manual, sustainability criteria, organization of joint procurements
  
• Support market actors to adopt green practices and technologies
  

>> Timeline of Implementation of Sustainable Procurement Activities

2017

2018

2019

2020

2021

2022

2023

Law on Public Procurement promotes “environment for green sustainability”

National Green Growth Strategy of the Lao PDR calls for green public procurement

Decree on Climate Change adopted

Instruction on the Implementation of the Law on Public Procurement adopted

Nationally Determined Contribution sets out 4 priority areas: forestry, renewables, energy efficiency and transport

National Socio-Economic Development Plan promotes quality, sustainable, inclusive, and green growth

Industrial Development and Manufacturing Plan 2022-2025 prioritizes green industry and manufacturing

Sustainable Consumption and Production Roadmap of Lao PDR 2022-2025 promotes GPP

Forum on “Showcasing Progress and Identifying Solutions for Green Growth” hosted

MONRE develops GPP Action Plan with seven priority areas of action

Knowledge exchange study trip on GPP and ecolabels organized in Japan

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as an adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

Green public procurement

Green public procurement is recognized in several policy documents adopted by the Government of Lao PDR. The National Green Growth Strategy of the Lao PDR till 2030, adopted in 2016, calls for the “provision of preference to green products, green producers of goods and green providers of services in the process of public procurement of goods and services” (p. 54).

The pathway to a greener economy in Lao requires action to promote greener industries and manufacturing while driving more sustainable consumption and production patterns. The Industrial Development and Manufacturing Plan 2022-2025 sets out the plan for more environmentally friendly local industries. Meanwhile, the Sustainable Consumption and Production (SCP) Roadmap of Lao PDR 2022-2025, Vision 2030 sets out a vision that “By 2030, Lao PDR will be a country consuming eco-goods and eco-services, stably economic development by applying clean productivity technology, renewable energy, energy efficiency, promote eco-tourism, good waste management of green and sustainable direction." The SCP Roadmap ‘promotes the implementation of green procurement with state funding” with the following priority actions:

1. Assess the procurement situation in government organizations and state enterprises. Develop green public procurement policies and action plans.
   
2. Establish and improve policies and regulations to promote GPP
   
3. Development and update guidelines for GPP
   
4. Disseminate GPP guidelines and manuals
   
5. Implement pilot activities on GPP including monitoring and evaluation
   

A Green Public Procurement Action Plan (available in Lao only) was developed by the Ministry of Natural Resources and Environment (MoNRE) in December 2022. The Action Plan recognizes the link between SPP and the Sustainable Consumption and Production agenda of SDG 12. It sets out seven priority areas of action including: legal reform, procurement system, environmental labeling, green products and services (including a green product directory, tax incentives, awards), capacity building, monitoring and evaluation, information exchange and partnerships.

SDGs and climate change

Lao PDR is dedicated to achieving the Sustainable Development Goals (SDGs) and has integrated them into the National Socio-Economic Development Plan (NSEDP). Around 60% of NSEDP indicators are linked to SDGs. The country's commitment is reflected in the Prime Minister's role in overseeing SDG implementation.

The NSEDP sets out a strong set of policy reforms to promote cleaner growth based on the National Green Growth Strategy 2030. The country’s commitments include making 30% of all vehicles electric by 2030, reaching 70% forest cover across the country by 2035, and becoming carbon neutral by 2050. This last makes Laos the first ASEAN member to commit to net zero emissions. Priority actions have been established on renewable natural resources, environmental pollution and waste management, along with environmental fiscal instruments and nature-based tourism that can drive economic growth and help create green jobs.

The Prime Minister’s Office issued the Decree on Climate Change in 2019, which states that climate change must be mainstreamed into the national socio-economic development plans, sectoral as well as local strategies and plans. The Government submitted its updated and enhanced Nationally Determined Contribution in 2020 with a target of 60% GHG emission reductions, building on the 34% reduction already achieved in 2020. The NDC sets out four key sectors for the government’s mitigation initiatives with mitigation measures outlined in Table 1.

Awareness raising

A National Strategy on Education and Awareness on the Environment and Climate Change (2018-2005) and Vision to 2030 has been developed. The overarching goal is for “Lao people become more knowledgeable and aware, understand, care, participate and take ownership in natural resources management, environmental protection and adaptation to climate change, ensuring socio-economic development in line with green and sustainable manner.” The Government has prioritized awareness raising on environment,climate change, and the circular economy.

Table 1. NDC Targets in four key sectors for climate mitigation

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

Sustainability concept

Public procurement in Lao PDR is governed by the Law on Public Procurement (PPL) 2017. The Ministry of Finance also issued an Instruction on the Implementation of Law on Public Procurement in 2019. The PPL states, in its first provision, that public procurement should be carried out in a manner that contributes to national socio-economic development - a concept emphasized as a fundamental procurement principle in Article 5. Article 4 sets out the government policy on public procurement, which includes promoting public procurement that preserves “the environment for green sustainability.”

Non-price criteria

The PPL Instructions provide further detail by making clear that procuring entities can include non-price criterias such as quality, usage and “sustainable condition” (Article 13.1.3.3). The 2022 Public Procurement Manual describes sustainable procurement requirements as those that “impact on the environment or promote environmental objectives” (Section 5.4). The Manual notes that the total weight of non-price criteria should not exceed 30%, but can go up to 50% if reasonable to achieve value for money. Technical criteria should include strict mandatory requirements related to quality, safety standards or the environment (Section 5.2.3.1)

Bid evaluation

The PPL sets the basis of bid evaluation as achieving “value for money”, but includes “lowest evaluated bid” as a key factor in this determination (Article 14). The Procurement Manual offers further guidance, noting that “value for money is a difficult concept to use” (Section 5.4). In most cases, it will mean more than just selecting the lowest price as the ideal terms cannot be expressed in price, especially when sustainability is taken into consideration. Other non-price factors can include time schedule for delivery, maintenance and replacement parts. The concept of life cycle costing (LCC) is introduced with examples of LCC for vehicles and manufactured goods provided.

Domestic preference

Article 45 of the PPL allows procuring entities to grant a domestic preference to local suppliers. The conditions for this domestic preference are set out in Article 14 of the PPL Instructions. Procuring entities can grant bids with local contractors a 7.5% price preference and bids with domestically manufactured goods a 15% price preference.

Pillar 3: Institutions & Capacity

Procurement Institutions

Public procurement is centrally managed by the Ministry of Finance (MOF) in coordination with the Ministry of Planning and Investment. The procurement framework applies to provincial/capital governments, cities, towns and districts, as well as ministries, agencies and local administrative authorities. The MOF has the authority to govern public procurement policies and develop related policies. The State Budget Department (SBD) at MOF is responsible for overseeing all public procurement activities.

Inter-ministerial Bodies

No inter-ministerial body has been created to coordinate implementation of GPP in the country. Lao PDR's Green Growth program aims to incorporate green principles into strategic planning and monitoring. The Green Growth National Steering Committee, chaired by the Deputy Prime Minister/MoF, guides this process. The program focuses on awareness-raising, policy coherence, budgeting for the future, and monitoring and reporting for sustainable green growth.

Other relevant institutions

The NDC requires several ministries to mainstream climate change into their activities, including the Ministry of Agriculture and Forestry, Ministry of Industry and Commerce, Ministry of Energy and Mines, Ministry of

,

Public Works and Transport, Ministry of Labor and Social Welfare, Ministry of Science and Technology, Ministry of Information, Culture and Tourism, Ministry of Education and Sports, and Ministry of Public Health. A national standard testing center exists in the country

Training and Capacity Building

A “Knowledge Exchange Study Trip on Green Public Procurement and Ecolabel in Japan” was organized in April 2023. Twelve (12) high-level government officers attended the trip including representatives from the Lao PDR’s Natural Resources and Environment, Finance, Industry and Commerce, and Planning and Investment ministries. The objective was to learn about the implementation of GPP, ecolabels and policies in Japan and the good practices, as well as to gain a practical experience of institutionalization schemes for GPP and ecolabelling.

The National University of Laos teaches climate change courses in the Faculty of Environmental Science and other faculties, and could be a potential partner in training on GPP.

Pillar 4: Market Practices

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

Procurement Framework

The 2022 Procurement Manual explicitly supports the practice of market dialogue to identify fit-for-purpose procurement approaches. One specific goal of market engagement mentioned in the Manual is to “explore the latest trends in sustainability and ethics.”

Industrial policy

The Government passed the Law on the Processing Industry in 2006 to promote added-value economic activities in the industrial and handicraft sectors. The Law encourages these sectors to source raw materials from domestic households and cooperatives , especially forestry and agricultural production. While focused on job creation, the Law requires that factories adhere to environmental protection laws, including proper waste and wastewater disposal and minimization of pollution from toxic chemicals. The Industrial Development and Manufacturing Plan 2022-2025 supports production of environmentally friendly products in the country. It calls for market readiness studies to assess the state of domestic green markets and mechanisms to promote domestic eco-products. The reduction of fossil fuel imports through tax policies that favor eco-friendly vehicles and parts is proposed.

Business Groups

The Lao National Chamber of Commerce and Industry focuses on building the capacity of small and medium enterprises in Lao. It has featured environmentally-friendly private companies in its communications, including Mekong Timber Plantations Co. Ltd which offers Forest Stewardship Council certified forest products from a 24,000 hectare plantation estate.

Forums

A two day forum on “Showcasing Progress and Identifying Solutions for Green Growth” was held in October 2022 by the Ministry of Planning and Investment, with the support of the Global Green Growth Institute and the World Bank. The Forum provided an opportunity for the private sector to showcase solutions for electric mobility, plastics reduction, and the circular economy.

Pilots

Pilots that promote the use of eco-friendly vehicles in public transportation are identified as a priority action in the Sustainable Consumption and Production Roadmap, along with pilots to prompt the import and procurement of eco-friendly products and services in the private sector.

SMEs

The Government established a Department of Small and Medium Enterprises (SME) Promotions that focuses on promoting SMEs and improving their access to loans.

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

Website and Manual

The Lao public procurement website and procurement manual were launched in 2022 with support from the European Union and World Bank.

Ecolabel

The development of a green label for domestic products has been prioritized in the Lao PDR GPP Policy, as priority action area 2.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

The Lao PDR GPP Action Plan sets a target to achieve 50% GPP by 2025. The Action Plan emphasizes the need for robust reporting, monitoring and evaluation of the GPP system. It set several sub-targets to monitor progress across all prioritized actions and calls for the creation of an online registration portal for monitoring green purchasing.

Projects Supported by ADB

ADB remains committed to improving the capacities of executing and implementing agencies and has provided financial management training in 2022. ADB has issued a guidance note on contract management and reminded executing and implementing agencies of the importance of workers’ health and safety in construction sites.

ADB, along with the Ministry of Commerce and Industry and the Lao National Chamber of Commerce and Industry, launched a report that explores ways to improve the local business environment and provides an index to measure support to private sector development from the provinces. Another study commissioned by ADB in collaboration with the Lao Women’s Union provides gender analysis of national laws and policies in the Lao PDR to inform efforts to strengthen women’s resilience to climate change and disasters. ADB prepared a report that provides insights into the support needed to further develop the country’s sustainable finance market. Another report explores how a local currency government bond market can strengthen economic recovery from COVID-19 pandemic. ADB also led the preparation of papers related to macroeconomics and infrastructure development for the government’s 2022 Annual Round Table Implementation Meeting with development partners

ADB, Vientiane Sustainable Urban Transport project (2015-2025, $99.7 million). The project supports the purchase of 55 electric buses and 150 electric bicycles for the urban public transport system

Future Outlook

Several feasibility and research studies have been carried out recently to explore opportunities in Lao PDR for green growth. A 2020 World Bank study stated that “Lao PDR can strategically position itself as a global center of green [forest] production” in response to the growing international market for sustainably forested wood products.

Other Initiatives supported by National/International Agencies

Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), “Proliferation of Sustainable Consumption and Production (SCP) in Asia – the Next 5 (SCP Outreach)” (2019-2023, EUR 5 million) Implemented by GIZ and the World Bank. Supports the preparation of sustainable public procurement strategies and environmental labels (Type I) in Lao PDR, Bhutan, Cambodia, Myanmar, Vietnam.

The Switch-Asia “ Sustainable Production Innovation in Vietnam, Cambodia and Lao PDR “ aimed to reach out to at least 500 companies in Vietnam, Cambodia and Lao PDF to improve environmental and social sustainability. It promoted sustainable public policy and procurement with 30 government organizations.

Swiss Agency for Development and Cooperation (SDC) “Waste to Value Project” within the Swisscontact Development Programme (2022-2024) strengthens the environmental performance in service sector SMEs (hotels, restaurants, cafés and mini-marts) by improving their waste management practices and access to green products.

References

ADB Member Fact Sheet, 2023. Lao PDR.

Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH (2021). Analysis Study: National Green Public Procurement and Environmental Labels in Cambodia, Lao PDR, Myanmar, Vietnam, and Bhutan.

Global Green Growth Institute (GGGI), 2022. Supporting Policy and Technical Standards Development for Electric Vehicles in Lao PDR.

Government of Lao, 2017. Law on Public Procurement No. 30/NA on Public Procurement.

Government of Lao, 2018. National Green Growth Strategy of the Lao PDR till 2030.

Government of Lao, 2019. Instruction No. 0477/MOF on the Implementation of Law on Public Procurement

Government of Lao, 2021. Ninth National Socioeconomic Development Plan 2021-2025.

Government of Lao, 2021. Nationally Determined Contribution.

Government of Lao, 2022. Agreement and promulgation of the Lao PDR's 2022-2025 green public sector procurement-hiring operation plan, vision up to 2030 (Lao only).

Government of Lao, 2022. Industrial Development and Manufacturing Plan 2022-2025, Vision to 2030.

Government of Lao, 2022. Sustainable Consumption and Production Roadmap 2022-2025, Vision to 2030.

Government of Lao, 2022. Revised Public Procurement Manual

UNDP, 2017. Circular economy strategies for Lao PDR: A metabolic approach to redefine resource efficient and low-carbon development.

The World Bank. Global Public Procurement Database “Lao PDR country profile for 2021”.

The World Bank, 2020. Greener Growth through Good Wood: Sustaining Forest Landscapes and Local Livelihoods in Lao PDR.

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