The US$14 million of Second Trade Development Facility (TDF-2) project aims to support the implementation of government's trade and integration priorities outlined in the 2012 Diagnostic Trade Integration Study Roadmap, and in particular to contribute to improved competitiveness and diversification, focusing outside the natural resource sectors. The TDF-2 is financed through a multi donor partnership including an International Development Association (IDA) grant of US$4 million, and a Multi Donor Trust Fund grant of US$1 0 million with contributions from the Australian Agency for International Development (AusAID), the European Union, the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) and Irish Aid. A US$ 7.5 million grant has been committed in signing ceremony while the remaining commitments of US$ 6.5 million to be appended as the project progresses. And this TDF-2 will be continued and implemented through the Ministry of Industry and Commerce, Department of Planning and Cooperation together with the related implementing agencies.

TDF-2 will have a deepened focus on ensuring that Lao PDR is able to fully take advantage of the opportunities provided by increased international integration, while also carefully managing the risks. The ultimate beneficiaries of the project are the firms, entrepreneurs, employees and consumers who stand to gain from an enhanced and more competitive business enabling environment, a more predictable and transparent trading regime, lower trade facilitation costs, and improved trade policy and regulations. The proposed project aims to reach beneficiaries at multiple levels and through both direct and indirect means.

Trade-related technical assistance, including that provided under TDF-2, has the potential to achieve significant and broad-based results in terms of improved living standards and poverty reduction. There will be a number of direct beneficiaries from the project – principally enterprises gaining access to consulting services and matching grants from the Business Assistance Unit– as well as firms receiving assistance to improve their labor standards compliance under the skills and productivity component. In both of these areas, firms that become more competitive will be able to grow faster, employ more workers at higher wages and become more integrated into domestic and cross-border supply chains. Similarly, in both areas there is significant potential for the increased economic empowerment of women through improved performance of enterprises owned by women, via greater female employment and through better conditions and working practices in export manufacturing, where a disproportionate share of employees are female. However, the greatest impact of TDF-2 is likely to be through the wider and more indirect impact on firms, entrepreneurs, employees, livelihood opportunities, consumer prices and taxes that is attributable to the motivation of reforms and to improvements to the broader policy environment for trade and competitiveness.

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