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The e-Newsletter of the Gender Network

April 2013 | Vol. 7, No.1

Private Sector Development will Boost Women Entrepreneurs in Lao PDR

by Mohd Sani Mohd Ismail1 An ADB gender inclusive program will help women entrepreneurs achieve their goals Macroeconomic background It is widely recognized that Lao PDR has made considerable progress in its economic development. The GDP increased to 7.8% in 2011, from 7.5% in 2010, and is expected to hold steady in 2012, reflecting stable growth. In addition, based on the national poverty line, the poverty incidence has dropped to an estimated 25% from 2003 to 2009, with accelerated reduction post-2004, when per capita income surpassed $400.2 In 2011, when its GNI per capita exceeded $1,006, Lao PDR was categorized as a lower middle-income economy, as opposed to a low income economy.3 However, the resource boom, whilst providing the Government with a tremendous opportunity to finance its development goals, increase per capita income and reduce poverty, can also lead to a decline in the competitiveness of the nonresource sector.4 The implications for the private sector and small medium enterprises (SME) sector is clear, as an appreciated kip real exchange rate would raise unit labor costs and make them less competitive. The challenges for Lao PDR are to manage the resource boom in a way that sustains growth in the nonresource sector, create productive jobs, and continue with poverty reduction. Given that SMEs represent more than 95% of registered enterprises in Lao PDR, and that more than half of newly registered enterprises are owned by women5, it is not difficult to estimate that women may be disproportionately and negatively affected by a resource boom that is not complemented with appropriate policy reform. ADB has supported the private sector and SME development in Lao PDR since 2006, through program loans and technical assistance. With the resource boom and its

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Financial Sector Specialist, Public Management, Financial Sector, and Trade Division (SEPF), Southeast Asia Regional Department (SERD). K. Bird and S. Ismail. 2010. Lao PDR ASR Trade and Industry Sector. Manila: ADB. World Bank. Lao PDR Now a Lower-Middle Income Economy, World Bank website, accessed 15 April 2013. ADB. 2011. Report and Recommendation of the President to the Board of Directors: Second Private Sector and SME Development Program. Manila. SMEs are enterprises with an annual average number of employees not exceeding 99 persons or total assets not exceeding KN 1,200,000,000 or an annual turnover not exceeding KN 1,000,000,000.

implications for the private sector providing the context for the Second Private Sector and SME Development (PSME2) Program, the latter was designed to focus on diversifying the sources of non-resource growth, undertake reforms to improve competitiveness at all levels of the supply chain, and harness trade policies that promote SME access to international trade.6 There was also a realization that ADB had to look at ways to mainstream and empower women entrepreneurs. Achieving this through a program loan modality is challenging, because, unlike sector specific projects, direct intervention is limited. However, through careful planning and appropriate sequencing of reforms, the PSME2 Program has been effective in achieving this objective. Below are several key considerations and characteristics of the program, including gender design measures. Gender Designs of the Program The first characteristic of the program is ADBs dialogue with relevant Government counterparts on including promoting women entrepreneurs into the regulatory framework, national strategies and action plans. Without such an anchor, reform measures would always be implemented on an ad hoc basis, with results which may not be sustainable. Through ADBs discussion with Government and support during the design and processing of the PSME2, important reforms were completed. The SME law mandates the Department of SME Promotion (DOSMEP) to support and facilitate the development of women entrepreneurs, and the SME Development Plan of 2011-2015 includes activities to promote the empowerment of female entrepreneurs. The former is fundamental as it requires Government to proactively consider challenges faced by women entrepreneurs in rolling out SME activities. The second feature of the design of the program is having an effective enterprise registration system which can monitor the number of new enterprise registrations, and disaggregate the data based on sex. As part of reforms supported by ADB and completed in 2011, the Enterprise Registry Office (ERO) improved the registration system by increasing transparency and reporting disaggregated data by sex, region and size. This allows both the Government and ADB to track the numbers of women entrepreneurs. Finally, gender inclusive indicators were included in the Design and Monitoring Framework (DMF). Through discussion and agreement with Government, the DMF in the PSME2 included gender inclusive indicators at the outcome level and in all three outputs. For example, at the outcome level, the improved business environment for SMEs will be partially measured by the increase in the percentage of registered SMEs owned by women. The output of improving regulatory efficiency and strengthening of trade policies that supported SME development, will also be measured by effective consultation with womens stakeholder groups and SMEs owned by women. This means in effect, to a large extent, that the performance of Government reforms, and the program itself, will be measured based on gender inclusive indicators.

Ibid 3.

Gender Results of Government Reforms and ADB Support It is often difficult to draw a direct causal relationship between ADBs support, government reforms and statistical figures. However, the reforms supported by ADB in the PSME2 program have played a meaningful role in encouraging and empowering women entrepreneurs. The positive impact of the PSME2 program works through two channels. First, the reform in the business licensing system has a distributive effect in favor of women entrepreneurs. Lowering business compliance costs helps remove gender bias in the regulatory environment.7 This will have substantial benefits for women entrepreneurs as they are concentrated in the micro and small enterprise sector, and the burden of high-cost regulations fall the most on micro and small firms.8 Lowering business compliance cost also encourages more women entrepreneurs to register formally. Registration is the starting point to better access to finance and business development services. Banks, for example, will not provide loans to unregistered SMEs. Therefore, making registration simpler and more cost efficient has a knock-on effect that goes beyond the initial reform. The second channel is through the consultation process for regulatory reform and trade policies, which allows women stakeholders to help shape and formulate activities to develop the SME sector. For instance, good practices require the Government to consult the private sector for trade negotiations so that priority sectors can be identified. The program encourages the Government to consult 500 SMEs on an annual basis, 50% of which should be SMEs owned by women. Numbers dont lie; evidence of the impact of the program is reflected in the share of newly registered enterprises owned by women in the first year of the program period of 2010 over 2009 and 2008. This has increased from about 40% of new registration in 2008, to 43.9% of new registrations in 2009, and 54.8% of new registrations in 2010. This will be continuously monitored during the implementation of the program. Whilst there is no assurance that the numbers will continue to increase as percentages in a particular year depends on a variety of factors, having disaggregated data at hand alerts the Government and ADB that women entrepreneurs may be facing additional challenges. Government can then initiate the process of identifying those challenges and take remedial action if necessary.

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Ibid 3. ADB. 2009. Options for a Regulatory Review Program and Office of Best Regulatory Practice. Manila.

PMSE2: Empowerment of women entrepreneurs

Importance of measuring indicators: enterprise registry offices (EROs)
RESULTS 2010: May 2011: 70, 000 enterprises registered 54.8% of newly registered enterprises owned by women 2009: 43.9% of newly registered enterprises owned by women Increased transparency through first ever published book on enterprise regulation (includes disaggregate d data by gender, region and size)

late 2008: 35, 000 enterprises registered

Diagram based on presentation of Mohd Sani Ismail at Gender Equity CoP, 24 January 2013

The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. The countries listed in this paper do not imply any view on ADB's part as to sovereignty or independent status or necessarily conform to ADB's terminology.