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Lao PDR Country PaperLao PDR Country Paper
Value Chain Training MI Value Chain Training MI September 2010 2010September 2010 2010
National Flower
Geographical Location
Thailand
(1,835 km in the west)
Cambodia
(435 km in the south)
China
(505 km in the north)
Myanmar
(236 km in the north west)
Vietnam
(2,069 km in the east)
04/19/23 DLF profile and Developement 2
Key Demographic Info
• 18 Provinces• 147 districts• Population: 6,6 million • Population growth rate:
2.3%
Lao Dual Rural Economy
• Lowlands - Plateau– Transformation started– Commodity markets
operating– Beginning of farming
systems diversification
• Uplands– Subsistence rural
agriculture;– Limited market
access;– Traditional farming
systems;– Rural poverty
Key Economic Factors
• 80% of the Lao population lives in rural areas/ farming
• In 2009, economic growth was 7.5%: – agriculture = 44.3% of GDP; – industry = 30% of GDP– manufacturing & services =
25.7% of GDP; • Services sector is growing
8-9% annually; • Energy sector is growing
rapidly (hydropower);• Mining sector is fastest growing
industrial sector: expanding 12% annually:
– minerals include: gold, silver, copper, coal, zinc, tin, iron, sapphire, bauxite ore;
Agricultural Production
Trends in area planted and production of major crops
Crop 2005 2006 2007
Planted (ha)
Production(tons)
Planted (ha)
Production(tons)
Planted (ha)
Production(tons)
Paddy rice 793,980 2.57 mil. 808,640 2.66 mil. 812,617 2.71 mil.
Maize 86,000 296,860 113,815 403,585 154,255 620,550
Coffee 55,085 25,000 55,465 25,250 58,385 33,200
Peanut 16,650 26,990 18,385 27,600 15,965 35,070
Job’s tears 11,900 19,720 10,620 25,450 14,845 36,715
Cassava 6,765 51,300 16,880 174,490 11,015 233,420
Soybean 9,535 11,100 8,920 11,955 8,040 10,455
Cardamom 8,220 2,010 6,955 2,010 6,745 1,605
Cabbage for ExportA future for Champassack Province?
Packaging&Loading Operations
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– Long term relationships => trust– Credit in kind <=> commodities for trading– District initiatives:
– organize & register farmer groups – arrange credit– organize primary market
Farmer Group Applications:
Cabbages in Champasak
Agricultural Primary MarketPakxong District
Suppliers:–13 villages: 2 large farmer groups;about 150 families– Products: Cabbage & Chinese Cabbage– Production inputs:Seed, fertilizer
Buyers/Exporters:– Mme Inpeng
– Mr Bountieng
Markets: – Ubon, Thailand
– Vientiane
Service companies:– 2 firms in Paksé– process forms
Key factors:
Vang Tao Market
Mapping Value Chain of Vegetable for Export
Input supply
Production Collection Trading (L) Trading (T) Retailing
Act
ors
Fun
ctio
ns
Thai TraderFarmers collectors Lao Trader
Seed & Fertilizer SuppliersCollectorsLao/Thai Traders
Retailers
Act
iviti
es
Seed supplyFertilizer supply
Veg collectionVeg selling
GrowingHarvesting
SPS documentExport docsExporting
GradingPackagingTransportingImporting
Selling To
consumers
Actors Rules & Regulations
Supplier Farmer Collector Trader (Lao)
Trader (Thai)
Supplier None Agreement None None None
Farmer Agreement Group member- ship
Agreement Agreement Exchange info
Collector None Agreement Exchange info
Agreement Exchange info
Trader (Lao)
None Exchange info
Exchange info
Exchange info
Contract Farming AECMECS(?)
Trader (Thai)
None Set price Set price Contract FarmingAECMECS (?)
Exchange info
Cost & Benefits of Vegetable Value Chain
Supplier Farmer Collector Trader (Lao)
Trader (Thai)
Total Cost
Cost
Revenue
AverageSale/year
Smallholder farmer key marketing constraints
Farmers’ perspective: • Insufficient capacity in production
planning (quality & quantity) to meet market demand;
• Insufficient understanding of markets;• Limited technical knowledge of post-
harvest handling and marketing techniques;
• Difficulty in accessing financing for market-oriented farm-based activities.
• Labor is becoming scare due to industry competition for workers (especially garment industry).
Government’s perspective:• Farmers do not adopt modern production
techniques; • Farmers do not diversify cropping
patterns; • Extension technicians do not meet
technical needs of farmers’ organizations;• Foreign agribusiness investors lack
experience working with Lao farmers; • Public sector lacks a regulatory framework
to administer farmer groups;
Agribusiness perspective: • Farmers provide only poor quality and
insufficient quantities of raw materials;• Farmer production and marketing
groups are disorganized, poorly administered and regulated, and lack the ability to respond to agribusiness needs;
• Farmers refuse to undertake post-harvest handling at the farm level;
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Pakxong Cabbage Farmer Issues
Challenges:• Seasonal price slump• Cooperation of business• Administration of markets• Uncoordinated farmer
groups
Proposals / Solutions:• Crop diversification by farmer
groups to overcome price slumps
• Cropping calendars• Trade concessions =
incentive to deal with farmer groups– Public-private partnership
• Organization of farmer associations
• Post-harvest handling & simple processing at the local level to retain value added
Smallholders in the Agriculture & Forestry Sector Strategy4 Goals & 13 Measures
Goal 2: Commodity Production:
Supply raw materials & agriculture & forestry products to processing industries & the service sector.
Increase export share of agriculture & forestry products to 1/3
(approximately US$1 billion) of the total export value of commercial & services sectors (US$3.48 billion)
by 2010.
The Dual Rural Economy
The LowlandsThe LowlandsTransformation
StartedCommercial factor
and product markets operating
Beginning of farming systems diversification
The UplandsThe UplandsSubsistence rural
economyLimited marketsRural povertyTraditional farming
systems
04/19/23 DLF profile and Developement 16
Minister
Vice-Minister
Permanent Secretariat
Department of Inspection
Department of Planning
Department of Agriculture
Department of Personnel
Department of Livestock and Fisheries
Department of Forestry
Department of Irrigation
National Agriculture & Forestry Research
Institute
National Agriculture & Forestry Extension
Services
Ministry of Agriculture and Forestry
Board of Science and Technology
Vice-Minister
Secretariat of Science and Technology
Cross-cutting Policies and Strategic Issues – Direction - Supervision - Coordination
Technical Issues
Support to Policy Research, Technical Innovations, Implementing
Department of Forestry Inspection
National Agricultural &
Forestry Extension
Service
Administration Division
Shifting Cultivation & Stabilization
Division
Agriculture & Forestry
Training Centre
Provincial Agriculture &
Forestry Office
Extension & Information
Division
Planning & Cooperation
DivisionProjects
Provincial Agricultural &
Forestry Extension
Service
District Agriculture &
Forestry Office
District Agricultural &
Forestry Extension
Service
Structure of the National Agricultural and Forestry Extension Service
Piloting work with smallholders: Smallholder Development Project
SHDP Description
Addresses supply-side and demand-side constraints within the agriculture sector.
Promotes agricultural commercialization through extension and training.
Supports growth of value-added enterprises. By improving access to information and markets.
By creating an enabling environment for investments in agribusiness.
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Project Goal and Objective
Goal : Increase in rural incomes and long-term reduction in rural poverty Economic growth
Objective: Increasing production and marketing of diversified, non rice dry
season cash cops; livestock and fisheries Improving smallholder access to domestic and international
markets and to market information and Increasing investment in value-adding agribusiness.
1. Farmer Support Services
• Formation of Farmers Production and Marketing Groups (FPMGs)
• Farmers’ trainings and study tours• Strengthening of extension staff capacity• Extension and Demonstration• Post-Harvest technology
2. Agribusiness & Marketing• 6 primary markets• Agricultural Market Information System• Agribusiness database (120 businesses)• Trade fairs for agribusiness promotion• Contract farming opportunities and modalities
identification• Development of linkages with agribusiness, farmers
and Lao National Chamber of Commerce• Identification of alternative crops for diversified
production (out of season export crops for neighboring countries, organic high value export,…)
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Scope of project intervention
Input supply
Production Collection Trading (L) Trading (T) Retailing
Act
ors
Fun
ctio
ns
Thai TraderFarmers collectors Lao Trader
Seed & Fertilizer SuppliersCollectorsLao/Thai Traders
Retailers
Act
iviti
es
Seed supplyFertilizer supply
Veg collectionVeg selling
GrowingHarvesting
SPS documentExport docsExporting
GradingPackagingTransportingImporting
Selling To
consumers
Entry point for project intervention
Vangtao Border Market
Conclusion: key challenges when working with smallholders
• Difficulty to organize farmers in groups (legal framework still unclear, powerful private commercial interests, lack of understanding from both farmers and extension staff); lack of understanding of value chain approach.
• Farmers have low access to information, technology (on farm process) and knowledge, finance, labor and land (land titling and mapping is in progress and needs to be continued).
• Linkages between agribusiness and farmers are not easy to establish: – trust does not exist (farmers or companies don’t respect contracts), – paradigm shift for agricultural extension organization (now need to look at the market,
not only at production),– Agreed quality standards are still to be established– Infrastructure needs further improvements
Thank you