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The government of Lao PDR has recently promulgated a series of laws and policies governing the allocation and use of natural resources. These reforms have positive long-term implications for rural development and environmental protection. They also mark a clear break with a highly centralized and top-down tradition of government decision-making.

But the country faces formidable challenges when it comes to policy implementation. Lao PDR, one of the world’s poorest countries, has a very weak human resource base. It is ranked 136 out of 174 countries by the UNDP’s Human Development Index (14 places behind Vietnam and 77 behind Thailand), which combines income, life expectancy, and quality of education. Many parts of the country suffer chronic food insecurity because of the lack of flat, arable land, which covers only 5 percent of the country.

This paper assesses watershed management and upland development policy in Lao PDR in relation to government objectives and implementation capacity. It is based on a reading of official government documents and unofficial literature, and a series of not-for-attribution interviews with government staff during a 2-month visit to Lao PDR in the summer of 1998. The purpose of the paper is to shed light on implementation problems facing these policies, and to propose ways to increase the effectiveness of foreign assistance.