additional incomes through contact with private construction companies. For the majority of medical personnel, additional incomes appeared to be in the range of 50 to 200 percent on top of their official salary. Teachers reported the lowest rates of additional income, with the highest stated total income double official salary. [See Annex 6 for further detail.] _What are the perceived reasons for not entering or for leaving the civil service?_ On balance, the number of alternatives to the civil service is perceived as relatively limited and other advantages apart from pay and compensation continue to make the public sector very attractive. Older civil servants expected from the outset to work in the public sector; younger civil servants see the picture as more mixed. Top students today, especially those in urban planning, business, and to some extent agriculture and forestry, are perceived to have real options in the private sector—although the number of high paying private jobs with some job security was described as still limited. Newly graduated top students in nursing and teaching, however, are seen to have few alternatives to the public sector.

_What are career advancement prospects in the public sector?_ Implementation of defined criteria for promotion and HRM processes from the Party and from PACSA and personnel departments is seen as uneven at best. Five criteria for promotion were identified: seniority; educational background and performance; following government code of conduct; political performance including memberships; and personal connections or networks. [Perceived criteria for promotion are presented as sample responses in Annex 7.] Overall, political performance—i.e., party membership—appears to be the sole factor without which advancement to senior civil service positions is not possible. There was, however, a general sense that two criteria are gaining in importance for career advancement, namely technical performance and capacity to network through personal connections. Among the younger generation, a sense of frustration appears to be building over perceived unfairness in career progression.

# **_Ways Forward: Core Civil Service Reform Principles for GOL to Consider_**

Turning to a forward looking perspective, although existing compensation and HRM practices in the Lao civil service may be adequate for now—in terms of attracting and motivating civil servants—there are growing signs that the system will come under pressure in the near future. First, the fiscal costs of the civil service are growing and a number of hidden non-wage recurrent costs could prove to be a liability for the government. If wage bill growth continues unchecked, the government will likely be forced to consider painful pay and employment measures to ensure fiscal sustainability. Second, there are signs of emerging dysfunctionalities in civil service management, particularly as parallel systems of non-regular compensation proliferate, which skew the incentives of public employees away from a performance orientation. Third, it appears that expectations and perceptions of fair HRM practice are evolving as a younger generation of more professionally trained and motivated civil servants become more prominent in the public sector.

In light of these growing challenges, we propose the following set of potential reform options. These recommendations tailor good practice in civil service management to the Lao context described in this analysis and the country’s current capacity constraints. In particular, they are elaborated in a manner to align with the GOL’s own incentives as it deals with an evolving civil service. We present the recommendations in increasing order of difficulty—considering both the technical requirements for implementation as well as possible political constraints. Yet they should not necessarily be viewed as a linear sequence; rather they should be seen as a menu of options that each serve as building blocks toward enhanced civil service performance within a fiscal constraint.

_Improving HRM through better data tracking and analysis._ The primary objective of the Lao PDR civil service pay and compensation analysis was to support the GOL’s efforts to enhance the effectiveness of 30