1. 1 Lao PDR Country Paper Value Chain Training MI September 2010 2010 National Flower

2. 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) 10/2/2015DLF profile and Developement2

3. Key Demographic Info 18 Provinces 147 districts Population: 6,6 million Population growth rate: 2.3%

4. 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

5. 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;

6. Agricultural Production Trends in area planted and production of major crops Crop200520062007 Planted (ha) Production (tons) Planted (ha) Production (tons) Planted (ha) Production (tons) Paddy rice793,9802.57 mil.808,6402.66 mil.812,6172.71 mil. Maize86,000296,860113,815403,585154,255620,550 Coffee55,08525,00055,46525,25058,38533,200 Peanut16,65026,99018,38527,60015,96535,070 Job’s tears11,90019,72010,62025,45014,84536,715 Cassava6,76551,30016,880174,49011,015233,420 Soybean9,53511,1008,92011,9558,04010,455 Cardamom8,2202,0106,9552,0106,7451,605

7. Cabbage for Export A future for Champassack Province?

8. Packaging&Loading Operations

9. 9 – 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 Market Pakxong 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

10. Mapping Value Chain of Vegetable for Export Input supply Production Collection Trading (L)Trading (T) Retailing Actors Functions Thai TraderFarmers collectorsLao Trader Seed & Fertilizer Suppliers Collectors Lao/Thai Traders Retailers Activities Seed supply Fertilizer supply Veg collection Veg selling Growing Harvesting SPS document Export docs Exporting Grading Packaging Transporting Importing Selling To consumers

11. Actors Rules & Regulations SupplierFarmerCollectorTrader (Lao) Trader (Thai) SupplierNoneAgreementNone FarmerAgreementGroup member- ship Agreement Exchange info CollectorNoneAgreementExchange info AgreementExchange info Trader (Lao) NoneExchange info Contract Farming AECMECS (?) Trader (Thai) NoneSet price Contract Farming AECMECS (?) Exchange info

12. Cost & Benefits of Vegetable Value Chain SupplierFarmerCollectorTrader (Lao) Trader (Thai) Total Cost Cost Revenue Average Sale/year

13. 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;

14. 14 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

15. Smallholders in the Agriculture & Forestry Sector Strategy 4 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.

16. The Dual Rural Economy The Lowlands Transformation Started Commercial factor and product markets operating Beginning of farming systems diversification The Uplands Subsistence rural economy Limited markets Rural poverty Traditional farming systems 10/2/2015DLF profile and Developement16

17. Structure of the National Agricultural and Forestry Extension Service

18. Piloting work with smallholders: Smallholder Development Project

19. 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. 19

20. 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.

21. 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

22. 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,…) 22

23. Scope of project intervention Input supply Production Collection Trading (L)Trading (T) Retailing Actors Functions Thai TraderFarmers collectorsLao Trader Seed & Fertilizer Suppliers Collectors Lao/Thai Traders Retailers Activities Seed supply Fertilizer supply Veg collection Veg selling Growing Harvesting SPS document Export docs Exporting Grading Packaging Transporting Importing Selling To consumers Entry point for project intervention

24. Vangtao Border Market

25. 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

26. Thank you