International Conference Small and Medium Forest Enterprise Development for Poverty Reduction:

1. Session 1: Enabling frameworks for poverty reduction through small and medium forest enterprise development Non-Wood Forest Products Marketing and Small Enterprise Development for Poverty Alleviation in Lao PDR Vongvilai Vongkhamsao Khamphay Manivong Joost Foppes Thibault Ledecq International Conference Small and Medium Forest Enterprise Development for Poverty Reduction: Opportunities and Challenges in Globalizing Markets CATIE, Turrialba, Costa Rica, May 23-25, 2006

2. 80% of Lao people live in countryside They all collect Non-Wood Forest Products (NWFP) regularly Poorest families and women are most dependent on NWFP All NWFP consumed per household is $400 – 500 per year, or 30 - 40% of GDP Private Sector under-developed, few NWFP companies Mainly raw materials, low prices Theme 1: Lao PDR: NWFP based economy

3. Theme 1 (2): Descriptions of Small and Medium Forest-Based Enterprises (Forest SME) cases in Lao PDR • Case 1: Fresh mushrooms • Savannakhet, Central Laos • SME: 45 families collect wild mushrooms, now they want to cultivate mushrooms to add volume • Main income is from upland farming, mushrooms are a side-income so far • Income from selling wild mushrooms is about $30 per family per year, cultivating mushrooms is expected to add $150 per family • Case 2: Paper mulberry, “posa” • (Broussonetia • papyrifera) • Luang Prabang, • North Laos • SME: 69 families • are engaged in • selling bark • Market chain analysis showed little benefit in paper making at village level. • Main strategy is now to increase outputs by planting 15 ha of “posa” and focus on better quality by special harvesting and processing. • “Posa” provides 28% of family cash income per year, or 42$ per family.

4. Theme 1 (3): More Forest SME cases from Lao PDR • Case 3: Rattan furniture (Calamus) • Champasak, • South Laos • SME: a group of 36 • families make rattan • furniture all year • round as their main • income source • Low-cost furniture for national market, • demand is increasing • Annual income is $400 per family from rattan furniture selling, or 30% of total family cash income • Biggest problem is to find raw material, all rattan is collected from the wild, sourced up to 100 km • Efforts are made • to grow rattan, but • canes will need at • least 7 years to grow • Case 4: Bitter bamboo shoots (Indosasa sinica) • Oudomxay, • North Laos • Fresh vegetable, • this variety • sprouts in the dry season, high • demand for off-season product • Exported to nearby Yunan Province of China, big demand • SME: Harvesting organized by a village selling group of 50 families (December-April), can collect 50 tons each year. They keep 10% of proceeds in village fund. • Average income per family $100 or 40% of total family income. • Bamboo forest of 550 ha, • managed by villagers

5. National Social Economic Development Plan (2005- 2010) Forestry Strategy 2020 Forestry Law and various decrees Decentralization decree Asean Free Trade Area (AFTA) Export promotion policies Land law Some Strong and Weak Points: + Customary rights of villagers to collect NWFP for household use recognized + Good initiatives to promote exports (AFTA, product promotion strategies etc.) – Access rights for commercial use are still confusing – NWFP Trade and small enterprises suffer from over-regulation (quota, taxes etc) – Few mechanisms or services to promote SME Theme 2: Political-legal framework for forest SME development (1): Key elements and issues Basic policies and legislation is in place…

6. Village rights to forests still unclear: land allocation? Concessions? No documented systems for sustainable harvesting of NWFP NWFP management is not based on resource assessments Weak mechanisms for mediating conflicts between villages on sharing benefits from forests Resource management should be an integral part of village socio-economic development plans Clarify forest access rights for village producer groups, e.g. through detailed land use zoning, publicized maps Integrate NWFP in forest management plans of (timber) production forests Resource assessment should become a requirement for any forest-based enterprise Themes 2,3: Political-legal framework for forest SME development (2): Forest Access and Resource Issues Some issues: Some ways to improve:

7. Some ways to improve: NWFP produced in sustainable way do not need to be under forestry quota Abolish quota, reduce agriculture and forestry tax Increase tax from mining, industries Promote SME support services, training and extension support Develop national NWFP policy Themes 2,3: Political-legal framework for forest SME development (3): Over-regulation affecting markets “Chain of fees”: case of broom grass • 400 ton/yr exported from Oudomxay Province to Thailand • Farm price 2,000 kip/kg • Transport 200 kip/kg (10%) • Taxes (10 types, over-regulation) 400 kip/kg (20%) • Government takes $24,000 or $40/ton from poor farmers • Less tax would give better farm price

8. NWFP situation in 1996: Villagers are poor, sell NTFP to buy food Villagers competed with each other selling shoots by bundles, not per kg Poor prices from traders NWFP situation in 2006: Food security achieved Income increased 5 fold Diversified livelihoods Village generates its own funds for development Theme 4 Commercial forest management and rural livelihoods: (1) bamboo-shoots in Nam Pheng village

9. Theme 4 Commercial forest management and rural livelihoods: (2) interventions and impacts in Nam Pheng IUCN Project Interventions Village rice banks: food security, less need to sell NWFP cheaply Forest land allocation: secure access, better harvesting rules and control Marketing groups: selling in group, by weight, not by bundle Drinking water supplies: Reduced workload, better health, more time to collect NWFP Women’s savings group: Providing credit for new enterprises, more collaboration within village • Impacts: • big increase in cash income (income multiplied by 5, 10% put aside for village development) • food security reduced need to over-sell NWFP or sell cheaply • Sustainable Forest Management • Various wealth indicators: clean water, school, electricity supply

10. Theme 4 Commercial forest management and rural livelihoods: (3)Potentials and limits for scaling-up 1. NWFP not a poverty “trap” but an “escape ladder”! • Increased cash income from NWFP sales holds over time • Number of poor households was reduced over years • Food security achieved, health and education improved • NWFP funds are used to fund new small enterprises 2. Side-ways and up-ways spread from pilot sites • Ban Nam Pheng is very well known, institutional impacts: • NWFP have become prominent in Government Policy • NWFP network of 50 organizations replicate the model 3. How to scale up from here? Limits remaining: • Poor leadership and organization skills at village level • Lack of providers of training and other services needed for successful group building • It is not always easy to identify the “golden” NWFP marketing solution… • NWFP-based SME has to compete with “Big business” (rubber, eucalyptus plantations)

11. Theme 4 (4): Commercial forest management and rural livelihoods:Changing Context • NTFP-based SME have good potential for poverty alleviation • but they will get competition from large-scale small-holder schemes for planting rubber, eucalyptus etc. Case of Rubber: • 200,000 ha target, driven by Chinese and Vietnamese investors • Promising income around $600-$1200 per family • Plantations will replace forests, reduce income from NWFP • What will be the long term effect on land tenure, on labor migrations (in- and –out) and on NWFP based SME?

12. Phase 1: Assess the Existing Situation. List existing resources and products and identify local people interested in developing enterprises Phase 2: Identify Products, Markets and Means of Marketing. Identify potential markets and resources by local people. Organise stakeholder meetings. Identify opportunities and constraints to select promising NWFP products. Phase 3: Plan Enterprises for Sustainable Development. Prepare enterprise strategy and business plans. Entrepreneurs are guided through a pilot phase and training, learn to monitor progress and to adapt when change is needed. Theme 5: Forest SME and poverty reduction: (1) Understanding the value chain FAO&RECOFTC Market Analysis and Development (MA&D) approach:

13. Theme 5: Forest SME and poverty reduction(2) Impact of MA&D on relations along the chain • 1. Between Village Producers and Traders • Market demand and quality requirements clarified • Stakeholder meeting generate solutions and agreements • Village groups want technical training, who can provide? • Village groups need better access to credit • 2. Between Village Producers and Government • Village groups want to be registered as SME, have quota • Village groups need clearer rules and recognition of their • rights to access/use forests • Villagers need extension support from Government to • scale-up the facilitation of MA&D processes country-wide • 3. Between Traders and Government • Traders and Government want to build Market Information • Systems (MIS) at province and national level • Traders need more efficient trade permits and tax systems • Government needs a more equitable tax system village trader Gov.

14. Theme 5: Forest SME and poverty reduction(3) How are benefits shared?

15. Theme 5 (4): Missing technical, business and financial services • B: Missing Services: • Training service providers, increase number and skills of (district) extension officers • Finance service providers for NWFP producer groups, how to promote saving groups • Storage capacity to benefit from seasonal price changes • Support for institutional change in Government services in NWFP sector: tax, quota, forest tenure • Challenge: how to develop such services and their suppliers? A: Services provided by NAFRI/FAO/SNV: 1 Training services: • Building producer groups and leadership skills • Facilitating MA&D processes at village (cluster) level • Processing technology skills • NWFP resource assessment and plantation skills 2: Market Information Service • Awareness raised • National taskforce set up, provincial initiatives • Key elements and approaches defined

16. Theme 5 (4): Role of technical, business and financial services: support concept Enabling policy environment Research and information-MIS Enterprises/marketing groups Business development services and service providers Sustainable management/production system Financial services Collaboration, linkages, and learning mechanism - Marketing groups - Micro and small enterprises - Private sector investment - Integration into value chains Participatory (village based) - Government institutions (NAFES,, NAFRI, TPC, PAFO, provinces - I/NGOs/projects -Associations/BMOs - Private enterprises/trainers - Village funds - Saving and credit groups - Financial institutions (Agriculture development bank, commercial banks, other banks/FIs)

17. Conclusions • NWFP are vital for rural livelihoods, they are not a poverty trap but an escape ladder out of poverty • There is convincing evidence of the potential of NWFP-based SME for poverty alleviation and biodiversity conservation • Institutional challenges remain: • To build organizations and leadership, especially at village level • To build up service providers delivering a range of support services, especially at district level • To create supportive policies based on stakeholder consultation • A national NWFP strategy is needed to link national policy goals to building of province and district level institutions and more efficient and equitable regulations

18. References: • Binayee, Surya (ANSAB), Nepal, 2005. Marketing Information System: an overview of agriculture marketing systems in South Asia. Technical report prepared for the FAO-TCP 3002 on Marketing System Development for NWFP in Lao PDR. February 2005. • Chandrasekharan, Dr. C. (FAO) 2006. Effective Policy, Law and Regulations for Sustainable Development and Marketing of Non-wood Forest Products. Technical report prepared for the FAO-TCP 3002 on Marketing System Development for NWFP in Lao PDR. February 2005. • Connel, John (CIAT) 2005. Alternative Approaches to Agro-enterprise development. Presentation for the Steering Committee of the CIAT-SDC Project on Small Enterprise Development in the Uplands (SADU), November 2005. • EDC, 2006. Participatory training and multi-stakeholder workshops on Village Level Capacity Building on Market Analyses and Development (MA&D) and Business Planning in 6 Villages (TCP/LAO/3002) in Lao PDR. Technical report prepared for the FAO-TCP 3002 on Marketing System Development for NWFP in Lao PDR. January 2006. • Fisher, R.J, Stewart Maginnis, W.J. Jackson, Edmund Barrow and Sally Jeanrenaud, 2005. Poverty and Conservation: Landscapes, People and Power. IUCN, Gland, Switzerland, Cambridge, UK. • Ingles, Andrew W. (IUCN Asia) 2006. Non-timber forest products (NTFP) and rural livelihoods in Lao PDR: reducing poverty through forest development and conservation interventions. Presentation on behalf of IUCN-Asia for the GMS BCI symposium, April 2006. • Lecup, Isabel and Ken Nicholson (FAO) 2000. Community-based tree and forest product enterprises: Market Analysis and Development. A manual. FAO, Rome. • McLennan, Karen (WFP) 2004. VAM – VULNERABILITY ANALYSIS & MAPPING in Lao PDR: Analysis of Forest Dwelling Populations and Vulnerability to Food Insecurity at the Village Level. World Food Program, Lao PDR. • Rosales, Rina Mara, Mikkel F. Kallesoe, Pauline Gerrard, Phokhin Muangchanh, Sombounmy Phomtavong and Somphao Khamsomphou (IUCN & WWF) 2003. The Economic Returns From Conserving Natural Forests In Sekong, Lao PDR. IUCN Asia Regional Environmental Program, WWF Indochina Program, Ministry of Agriculture and Forestry, Lao PDR. • Vernon, Eddie, 2006. Marketing Analysis Report. Oudomxay Community Initiatives Support Project, Department of Planning, Oudomxay Province, Lao PDR, IFAD Loan No. 586-LA, UNOPS No. LAO/02/F01, LD No. LAO/412. THANK YOU ! Vongvilai Vongkhamsao, NAFRI, vongvilay_v@nafri.org.la P.O. Box 7174, Vientiane, Lao PDR Khampay Manivong, NAFRI, khamphay.m@nafri.org.la P.O. Box 7174, Vientiane, Lao PDR Thibault Ledecq, FAO, victib@laotel.com P.O. Box 1640, Vientiane, Lao PDR Joost Foppes, SNV, jfoppes@snvworld.org P.O. Box 9781, Vientiane, Lao PDR