Study on Sustainable Financing Mechanism for

Integrated Water Resource Management in

Lao PDR

Department of Water Resource, Ministry of Natural Resource and Environment

Lao PDR

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Outlines

1. Introduction

2. Laws and Regulations and Lesson learnt of Fee Collection on IWRM in Lao PDR

3. Financing Source and Current Implementation

4. Future Plan

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1. Introduction • Laos is a natural resource abandon country,

especially a great wealth in water resources. The northern region captures a rainfall of approximately 1,300 mm/yr and the southern region 3,000-3,700 mm/yr.

• 35% of all water in the Mekong River originates from watersheds within Lao PDR.

• The government also emphasizes the important role of water resource on Social-Economic Development, especially revenues generation from sector development project and livelihood improvement of the poor (NGPES, NSEDP 5, 6, 7).

• Therefore, it is required to have fund for financing the recovering cost of IWRM.

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1. Introduction (Cont.)

Water resource Utilization Wastewater

The cycle of water resource utilization

Water resource utilization in Lao PDR:– Agricultural sector– Industrial sector: mining, hydropower, commercial water production,

heavy and light industry – Service sector: tourism, transport, and others.– Household sector

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Costs of water related services provision

Water resource

management

Water distribution

Managing natural and man made environment to deliver

sufficient water quantity, quality, and timing

Abstracting , storing, treating, and distribution

Capturing, retaining, treating, re-releasing

sewage and other liquid wastes

Investment cost, operating and maintenance, debt services, coordination, administration, and labor cost, and researches

Waste water management

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Influential Factors Affecting Availability of Water Resources

The decline in forest cover (70% in 1940 to 40% in 2004 in Laos)

An increase in demand of water utilization: GDP Growth: Hydropower,

mining, industry, service, agriculture, and other economic activities

An increase of population Climate change Other factors

Impacting to environment: Water resources

(surface and underground water) quantity quality

source: draft Water Resource Strategy from present to 2020 and 12 action 2011-2015 (2013)

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fund typesmandates funding sources

public budget

special account/retention

fund

autonomous earmarked fund

govt & donor funds

service charges & user fees

users’ contributions

public donations

coordination & planning

operationof utilities & regulation of

activities

provision of ecosystem services

& public benefits

different mandates, funds & funding sources

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2. Laws and Regulations on WRM & Fee Collection in Lao PDR

a. Review of Laws and Regulations: Existing laws and regulations established the responsibility of water

users and developers to protect water resources and the natural environment, and enable the use of various charges and funds relating to environmental protection.

Apart from the Law on Water and Water Resources (1996), it does not however deal explicitly with funding for WRM. Nevertheless, They provide an enabling legal basis for developing kind of water resource fee.

b. Lesson Learnt of Fee Collection in Laos: Although well-established water supply tariff and wastewater

charge systems exist in Lao PDR for piped water users, they neither factor in the costs of WRM nor generate revenues for IWRM.

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2. Laws and Regulations on WRM & Fee Collection in Lao PDR(cont.)

• Hydropower and mining developments are

already subjected to a variety of fees,

taxes and royalties. These payments are

not however explicitly concerned with, or

allocated to, water resource management

and protection.

– Although developers are additionally required

to provide funding to support environmental

protection and community development

activities, it is not clear to what extent

revenues are used to directly support IWRM.

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Government budget

Service fees and user fees

Royalties

Fines

Payments for watershed services

Payments for other ecosystem services

Carbon finance

Fiscal transfers

Contributions from water developers

Biodiversity offsets

Other corporate sponsorship

International development grants

Interest from investments

?

?

?

?

?

?

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Water Resource Fee Rate (Draft-Possible Options)

No. Sector Fee Rate Remark

I. Natural resource fee for hydropower project

1.1 Hydropower for export

5%- 15% detailed rate of

each project indicated in the

agreement

1.2Hydropower for domestic utilizationMedium and large scale (capacity generation from 15 MW up)

1.3Hydropower for domestic utilizationSmall scale (capacity generation below 15 MW )

II. Water resource fee for each sector (calculated in m3)

2.1 Water use in industry and handicraft

1-100 m3 6 kip101-500 m3 8 kip501-1000 m3 10 kip1001-5000 m3 12 kip5000 up m3 15 kip

Source: Draft Presidential Decree on Natural Resource Fee, MOF (2013)

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2.2 Water use in mining

Fresh water use for production

1-100 m3 20 kip101-500 m3 16 kip501-1000 m3 12 kip1001-5000 m3 10 kip5000 m3 Up 8 kip

2.3Water use in commercialized agricultural production (concessionaire projects)

Detailed collection methodology will be

mentioned in implementation

manual

a.Water use for crash crop and industrial trees 1 m3 /5 kip

b. Water use fishery and livestock Direct Indirect

1 m3 /10 kip1 m3 /5 kip

Source: Draft Presidential Decree on Natural Resource Fee, MOF (2013)

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2.4 Water use in tourism

a.Water use in resort, hotel, guest house, restaurant, entertainment places and others (surface and ground water, not including connected to pipes)

1-100 m3 6 kip101-500 m3 8 kip501-1000 m3 10 kip1001-5000 m3 12 kip>5000 m3 15 kip

2.5 Urban water users (connected to piped water/water supply)

1 m3 /10 kip

Revenue collection from this sources will be centralized through the National Treasury

Source: Draft Presidential Decree on Natural Resource Fee, MOF (2013)

14Source: Public Investment Law (2009)

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Future Plan:– Create or study on water resource fee

calculation method for all sectors: hydropower and others.

– Piloting payment for ecosystem services– Fund mobilization from international

communities for water resource management activities and capacity development

Challenges:– Lack of skilled technical staff at provincial and

district levels.– Lack of fund to implement water resource

management activities at local level.– The detailed method for fund collection and

using (need more details)

6. Future plan and challenges

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References

• Nation Growth and Poverty Eradication Strategy (2003)

• National Social-Economic Development Plan 5th 6th and 7th

• Draft water resource strategy from present to 2020 and 12 action programmes 2011-2015

• State Budget Law (updated version, 2006)

• Public Investment Law (2009)

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Thank you for your kind attention

Email: lan-laos@hotmail.comwww.dwr.monre.gov.la

Tel: +856-21 241 744; Fax: +856-21 218 737