ADB Approves $10 Million for Laos Forest Restoration and Rural Economic Diversification

ADB Funds Critical Forestry and Rural Development in Laos

MANILA, PHILIPPINES – The Asian Development Bank (ADB) announced on Thursday, December 18, 2025, the approval of a $10 million financing package for the Lao People's Democratic Republic (Lao PDR). This significant investment, designated for the Responsible Forestry Project Phase I, aims to address widespread forest degradation and foster economic diversification in rural areas. It represents the ADB's first foray into Laos' forestry sector in a decade.

The financing is structured as a $5 million concessional loan from ADB's ordinary capital resources and a $5 million grant through the Asian Development Fund (ADF), which supports the region's most vulnerable countries.

Project Objectives and Scope

The primary goals of the Responsible Forestry Project Phase I are multifaceted:

• To halt ongoing forest degradation
• To strengthen climate resilience within the country
• To improve the livelihoods of communities that rely on forest resources
• To diversify rural economies

The project will focus on forest-dependent communities in key provinces, including Bolikhamxay, Khammouan, and Vientiane Capital. Phase I will involve assessing current challenges and designing effective solutions, including feasibility studies for a subsequent Phase II. It will also facilitate crucial partnerships among the government, private investors, and local communities to establish commercial plantations and conservation initiatives.

Addressing Decades of Degradation

Forests currently cover approximately 62% of Lao PDR's land area, supporting vital economic sectors and employing over 65% of the national workforce. However, decades of unsustainable practices have led to significant forest degradation, with estimated annual costs reaching nearly 19% of the country's gross domestic product. The ADB emphasizes that public funding alone is insufficient to reverse these trends, highlighting the critical need for private investment to restore forests, expand tree planting, and develop conservation-linked ecotourism.

Official Statements and Future Outlook

Shanny Campbell, ADB Country Director for Lao PDR, underscored the project's importance, stating, 'By promoting responsible forestry and empowering communities, we can drive sustainable growth, protect ecosystems, and create opportunities for women and rural families.' The project is also designed to strengthen institutions and ensure active community participation and benefit from forestry activities. This initial phase is expected to lay a strong foundation for future investments, aiming to revive Laos' forests and build a greener, more sustainable rural economy.