Lao PDR’s public road system, which totals 13,100 kilometres, is mostly in a deteriorated condition. The Mekong River, which flows through Lao PDR for some 2,030 kilometres, provides a natural means of transporation. However, its navigability is limited to 1,330 kilometres, mainly because of rapids between Savannakhet and Pakse, the Khong Falls ,and low water levels during the dry season. Domestic air transport, though small in volume, plays a significant role by providing passenger services between important urban areas and to areas otherwise inaccessible. There are no railways in the country, but this mode of transportation may be required in the future in line with development of the country’s mineral resources.

Motor vehicles are the dominant mode of transport, carrying 91 per cent of total freight ton-kilometres and 95 per cent of total passenger-kilometres. River transport constitutes nine per cent of freight ton-kilometre and three per cent of passenger-kilometres. Domestic airfreight is negligible while air transport constitutes two per cent of passenger-kilometres. During the period 1985-90, freight and passenger transport increased at an annual rates of 14 and eight per cent. The relatively high growth rate for freight transport is partly due to the abolition in 1986 of control of goods crossing provincial boundaries. It is anticipated that road transport will continue to dominate both freight and passenger traffic in the foreseable future.

Government responsibility for overall transport planning and coordination and for detailed investment planning and administration of national and provincial roads is vested in Lao PDR in the Ministry of Communication, Transport, Posts and Construction (MCTPC).

In Lao PDR, during the Public Investment Programme period (PIP, 1991-1995), US$257 million is envisaged to be invested in the road network, and US$23.2 million to be set aside for road maintenance. The investment allocation to the transport sector under the PIP is estimated at 38 per cent of the total PIP budget, constituting the highest allocation among all sectors. Within the transport sector, road investments account for 92 per cent of the total planned outlays, with civil aviation and airports constituting the balance. Public investments in river ports and barges are considered to be of minor importance. The majority of the investment costs will be spent on rehabilitation/reconstruction efforts on national roads. The total road investment and maintenance costs constitute US$67 per capita.

Lao PDR’s 13,100 kilometre road network, excluding forest and mining roads, consists of national, provincial and local roads. At present, only 19 per cent of this total network is paved. The national roads, linking major towns and provincial capitals and providing connections to neighbouring countries, total 3,390 kilometres, of which 1,620 kilometres are paved. The rest have gravel or earth surfaces. The provincial road network, 5,440 kilometres in length, of which 485 kilometres are paved with the remainder mostly earth-surfaced, comprises roads connecting towns and larger villages within provinces. Although the national and provincial road network is considered generally adequate, in the sense that it provides connections to all important towns, provincial capitals and border crossings, the condition of most roads is poor and in urgent need of improvement. The local roads, totalling 4,270 kilometres, are mostly earth-surfaced and in very poor condition. The deteriorated state of the road network is partly due to the neglect of maintenance prior to 1985, mainly because of the protracted war and the succeeding period of government reorganisation, limited financial resources and lack of road maintenance equipment. More significantly, many of the national and provincial roads were constructed in the 1930s and 1940s and were not designed for heavy commerical vehicles of the type now in use, which results in high maintenance costs.

The spine of the road system consists of National Road No 13 (1,370 kilomtres) which links Pak Mong in the north with Khong in the south, passing through the major urbanised areas of Luang Prabang, Vientiane, Savannakhet and Pakse. This important link serves as an all-weather road between Phone Hong in the north and Seno in the south, and between Pakse and the Lao/ Cambodian border at Khong, a total distance of 690 kilometres. The other sections of this link, Phone HongPakMong (430 kilometres) and SenoPakse (240 Kilometres), have badly deteriorated gravel or bituminous pavements which occasionally become impassable for motor vehicles during rainy periods. National Road No 9, leading to the Vietnamese border, has recently been upgraded to all-weather standard. Some sections of National Road No 7 are programmed for further improvement to bituminous pavement. Work on National Road No 8 is progressing but many river crossings still lack bridges.

Under the PIP, the government is expected to give continued high priority to the improvement of the road transport system. This is essential in order to support its national development objectives. The government’s policy concerning roads is essentially to develop a road network that can be maintained economically, and at the same time, to improve its maintenance operations.

In Lao PDR, current revenues from road users exceed road expenditures. However, the present expenditures are not at an optimum level, particularly for road maintenance, where only about 60 per cent of the estimated requirements, amounting to US$7 million, is being spent. If adjustments to cover full required expenditures were made, revenues would then suffice to cover maintenance expenditures but not all capital costs.

Road feasibility studies and design works in Lao PDR are mostly carried out by foreign consultants, in association with MCTPC Design Institute which has evolved into a professional institution. Hitherto, all road construction and maintenance works have been implemented through force account (i.e. using the government’s own units). Recently, Asian Development Bank and World Bank-financed road projects are being processed through international competitive bidding (ICB), following prequalification of contractors, with contract packages ranging in value from US$15-25 million.

Technical assistance funded by UNDP to provide institutional support to MCTPC is currently assessing the future role of the private sector in Lao road transport, construction and maintenance. At present, the road transport industry is organised into government-operated state and provincial transport enterprises and privately-owned transport associations for carrying passengers and cargo within the country. The state enterprises have a monopoly on transport between Lao PDR and Vietnamese seaports.

Technical assistance is aimed at investigating deficiencies and proposing appropriate measures to promote private-sector participation in the road transport, construction and maintenance industries, within a new regulatory framework. Under that framework, the government will assume the role of supervisor and regulator -- rather than operator -- of these industries. For certain purposes, particularly international trade, carrying cargo and passengers to remote areas of the country, urban transport, and in security-sensitive zones, there would be expected to remain a continuing operational role for the public sector. The technical assistance will also establish guidelines for future private- and public-sector roles in terms of economic efficiency, and will develop proposals for the required legal framework.

It is estimated that the annual turnover in the Lao road freight haulage industry is about US$11.5 million equivalent, of which US$10 million accrues to the public sector. This estimate is based upon annual ton-kilometre transport work of 230 million, executed by a present civil trucking fleet of 8,000 units and an average freight rate of US$0.05 per ton-kilometre. Similarly, in the passenger transport sector, the government bus fleet of 2,500 buses earns about US$2 million a year, based on 200 million passenger-kilometres and an average bus fare of US$0.01 per seat-kilometre. These figures strongly suggest that ample opportunities exist for profitable private-sector investments in the road transport sector. It is anticipated that the government will offer the sale of government assets to the private sector as part of its accelerating privatisation campaign.