To sustain or exceed the 1990s annualaverage growth rate of 6.3 percent, Lao will need to promoteagricultural and manufactured exports, and increase thecontribution of natural resources to development. This willrequire another round of reforms, and supportive publicspending. These reforms should seek to create a moreenabling environment for the private sector, and forexports, to raise revenue and maintain macroeconomicstability, as well as to improve the transparency,accountability and efficiency of public expendituremanagement, and public service delivery. To develop naturalresources and mineral reserves, Lao will need to attractsubstantial international and domestic capital to meet theheavy front-end capital costs required to exploit mineraldeposits. To bring in that investment, however, requiresimprovement in governance of the mining sector, particularlyin regard to partnerships with the private sector. Lookingspecifically at growth and poverty reduction, threescenarios for growth - base, base plus and high - showaggregate GDP growth up to 2015, rising roughly by an annualaverage of 4-5 percent, 5-6 percent, and 6-8 percentrespectively. These indicate that this long-term growth willbe driven largely by manufacturing (industry) and services,with growth from agriculture though important in the initialyears, its contribution declining in the long-term. Thesegrowth scenarios depend very much on the pace and depth ofreforms the country implements. Additionally, risinggovernment revenues from natural resources alone will notsuffice to meet social needs. On current trends, forexample, per capita recurrent expenditures in health hardlyincrease until 2015. The country will need to takeadditional revenue measures and reallocate expenditures toincrease recurrent expenditures on social sectors. To beeffective, such revenue and expenditure measures must alsobe accompanied by efficient improvements in the servicedelivery mechanisms, i.e., increasing the participation ofthe poor.
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