Lao PDR Country Paper Value Chain Training MI September 2010 2010

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

2. Geographical Location China (505 km in the north) Vietnam (2,069 km in the east) Myanmar (236 km in the north west) Cambodia (435 km in the south) Thailand (1,835 km in the west) DLF profile and Developement

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

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. 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; Key Economic Factors

6. Agricultural Production

7. Cabbage for ExportA future for Champassack Province?

8. Packaging&Loading Operations

9. Farmer Group Applications: Cabbages in Champasak Vang Tao Market • 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 Agricultural Primary Market Pakxong District Key factors: • Long term relationships => trust • Credit in kind <=> commodities for trading • District initiatives: • organize & register farmer groups • arrange credit • organize primary market

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

11. Actors Rules & Regulations

12. Cost & Benefits of Vegetable Value Chain

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. 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 Pakxong Cabbage Farmer Issues

15. 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.

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 DLF profile and Developement

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.

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,…)

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

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