Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.Development of Commercial Agriculture in Laos A case study of Savannakhet Province.
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PHOUTHALATH XAYYALATH
DEVELOPMENT OF COMMERCIAL
AGRICULTURE IN LAO PDR: A CASE STUDY OF SAVANNAKHET PROVINCE
PHD DISSERTATION
IN AGRICULTURAL ECONOMICS
Trang 2
PHOUTHALATH XAYYALATH
DEVELOPMENT OF COMMERCIAL
AGRICULTURE IN LAO PDR: A CASE STUDY OF SAVANNAKHET PROVINCE
Specialization: AGRICULTURAL ECONOMICS Specialization Code: 9620115
PHD DISSERTATION
Supervisor: Assoc Prof Dr VU THI MINH
Trang 3DECLARATION
I have read and understood the University’ policy on plagiarism I hereby declare on my honor that this PhD dissertation is my own work and does not violate the guidelines on good academic practices
PhD Student
Trang 4TABLE OF CONTENTS
DECLARATION i
TABLE OF CONTENTS ii
ABBREVIATION vi
LIST OF FIGURES viii
LIST OF TABLES ix
INTRODUCTION 1
1 Rationale of the dissertation 1
2 Research objectives 3
2.1 Overall objective 3
2.2 Specific objectives 3
2.3 Research questions 3
3 Research scopes 4
3.1 Scope of contents of the study 4
3.2 Scope of area and timing of study 4
4 Key findings of the research 4
5 Dissertation structure 6
CHAPTER 1 LITERATURE REVIEW AND RESEARCH METHODOLOGY 71.1 Literature Review 7
1.1.1 Research results of commercial agriculture in the world 7
1.1.2 Research results on commercial agriculture in Laos 18
1.1.3 The gaps for this research 20
1.2 Research methodology 21
1.2.1 Research approaches 21
1.2.2 Data collection methods 27
1.2.3 Data analysis methods 30
Trang 52.1.1 Definition of agriculture 31
2.1.2 Definition of commercial agriculture 31
2.1.3 Definition of development of commercial agriculture 33
2.2 Characteristics of commercial agriculture 34
2.3 Role of development of commercial agriculture 35
2.4 Contents of development of commercial agriculture 37
2.4.1 The formation of areas of specialization agriculture and the development of cash crops and livestock production 37
2.4.2 Development of different types of agricultural production organizations 38
2.4.3 Development of linkage & cooperation in supply chains of agricultural products 39
2.4.4 Increase in eficiency of commercial agriculture 41
2.5 Mainindicators of development of commercial agriculture 41
2.6 Main factors influencing development of commercial agriculture 42
2.6.1 Legal policy system for commercial agriculture 42
2.6.2 Demand of agro-products and competitive advantages in agricultural markets 422.6.3 Human resources in agricultural sector and related sectors 43
2.6.4 Sources of investment capital and credit 44
2.6.5 Development of agricultural extension network 44
2.6.6 The coordinaiton among concerned stakeholders in agricultural value chains 44
2.6.7 Natural conditions and natural resources 44
2.7 International and domestic experiences in developing commercial agriculture 45
2.7.1 Several international experiences 45
2.7.2 Experiences of several provinces in developing commercial agriculture 61
2.7.3 Lessons for Savanakhet province in development of commercial agriculture 71
CHAPTER 3 CURRENT DEVELOPMENT OF COMMERCIAL AGRICULTURE IN SAVANNAKHET PROVINCE, LAO PDR 73
3.1 Overview of Savannakhet province 73
3.1.1 Natural conditions 73
Trang 63.1.3 Advantages and disadvantages of Savanakhet province in development of
commercial agriculture 75
3.2 Curent development of commercial agriculture in Savanakhet province 76
3.2.1 Development of specialized cultuvating areas and cash crops in the 2011-2020 period 76
3.2.2 Development of production organization models in the last 10 years 87
3.2.3 Development of linkage and cooperation within agricultural suppy chains in the last 10 years 91
3.2.4 Efficiency of commercial agriculture development in Savanakhet province 100
3.3 Factors influencing development of commercial agriculture in Savanakhet 108
3.3.1 Improvement of state and provincial policies of encouraging development of cash crops to increase farmers’ income 108
3.3.2 Increase in market demand for agricultural products 110
3.3.3.Qualifications of human resource in agricultural sector 111
3.3.4 Increase of investment and credits in the agricultural sector and rural development 112
3.3.5 Development of agricultural extension network and services 115
3.3.6 Cooperation among partners in agricultural value chains 117
3.3.7 Change of natural conditions and diseases 119
3.4 General evaluation on developemt of commercial agriculture in the province 1203.4.1.Achievements and causes 120
3.4.2 Shortages and causes 121
CHAPTER 4 SUGESSTED SOLUTIONS TO SPEED UP DEVELOPMENT OF COMMERCIAL AGRICULTURE IN SAVANNAKHET PROVINCE 124
4.1 Forecasted contexts for commercial agriculture development in the province 124
4.1.1 Opportunities for development of commercial agriculture in the province 124
4.1.2 Challenges to develop commercial agriculture in comming years 126
4.1.3 Orientation for agricultural development in Savannakhet to the year 2025 and vission to 2030 128
Trang 74.2.1 Concretize and effectively implement policies for agricultural and economic
development especially investment attraction policy 131
4.2.2 Promote development and widen application of science and technology advances and standards to agricultral production 133
4.2.3 Improve skills of farmers through education and agricultural extention systems 1334.2.4 Encourage cooperation to develop the linkages within agricultural value chains 134
4.2.5 Promote stakeholder participation in various forums to improve models of contract agriculture system 135
4.2.6 Continue to improve agricultural and rural infrastructure in the province 1374.2.7 Expand markets for local agricultural products 137
4.2.8 Strengthening local capacity to prevent natural harzads and adapt to climate change 138
CONCLUSION AND RECOMMENDATION 139
LIST OF WORKS THAT THE PHD CANDIDATE HAS PUBLISHED 141
REFERENCE 142
Trang 8ABBREVIATION
7th NEADEP 7th National Economic and Social Development Plan 8th NEADEP 8th National Economic and Social Development Plan
ACMECS Ayeyawady Chao Phraya Mekong Economics Cooperation Strategy
ADB ASEAN Development Bank
AFTR Asean Free Trade Areas
APB Agriculture Development Bank
ASEAN Association of Southeast Asian Nations ATIGA ASEAN Trades in Goods Agreement
CARD Commercial Agriculture and Rural Development
CF Contract Farming
DCAP Development of Commercial Agricultural Production DOAF District Office of Agriculture and Forestry
FDI Foreign Direct Investments GDP Gross domestic product
GOL Government of Lao
Lao PDR Lao People’s Democratic Republic
LDB Lao Development Bank
LDD Land Developmetn Department LPRP Lao People’s Revolutionary Party MAF Ministry of Agriculture and Forestry
MARD Ministry of Agriculture and Rural Department MDGs Millennium Development Goals
MOA Ministry Of Agriculture
NAFRI National Agriculture and Forestry Research Institute
Trang 9NEW National Econimics University ODA Official Development Assistance
PCPP Promotion of Commodity Production Program PDAF Provice Department of Agriculture anfd Forestry
REDD Reduced Emission from Deforestation an Forest Degradation SAFD Savannakhet Agriculture and Forestry Department
SPS Sanitary and Phyto Sanitary TBT Technical Barriers to Trade
UNDB United Nations Development Business
UNDP United Nationals Statistical Development Program
USD US Dollar
USDA United States Department of Agriculture
VND Vietnamese Dong
WB World Bank
Trang 10LISTOF FIGURES
Figure 1.1 Logical framework for the research on Development of commercial
agriculture in Savannakhet province 26
Figure 1.2 Map of study areas of three Districts in Savannakhet Province 28
Figure 2.1 Production cost of cane sugar in 2015 46
Figure 2.2 Yield of processed sugar calculated per 1 hectare of harvested sugarcane 47
Figure 2.3 Production cost of sugar and purchase price of sugarcane 49
Figure 2.4 Structure of world sugarcane production costs 49
Figure 2.5 Sugar cane procurement into the production process of sugar mill operator 56
Figure 2.6 The Role of the Chief Quota sugarcane 57
Figure 2.7 Benefit allocation pattern of Thai cane and sugar industry 58
Figure 2.8 Share of sugar imports by China, Indonesia and Malaysia 60
Figure 2.9 Allocation and cultivating areas of main crops in Lao PDR 64
Figure 2.10 Laos’ agricultural export in total export during 2012-2018 68
Figure 3.1 Wet Season paddy production in Savannakhet 79
Figure 3.2 Dry paddy production in Savannakhet 79
Figure 3.3 Wet and Dry Season Paddy production in Savannakhet 80
Figure 3.4 Cash crops production in Savannakhet 82
Figure 3.5 Sugarcane production in Savannakhet 83
Figure 3.6 Cassava production in Savannakhet 84
Figure 3.7 Watermelon production in Savannakhet 85
Figure 3.8 Banana production in Savannakhet 85
Figure 3.9 Structure of main cash crops in terms of prodution value in 2020 86
Figure 3.10 Percentage of types of agriculture products exported in 2011-2020 104
Figure 3.11 Growth rate of Savannakhet’s Gross.Domestic Product (%) 106
Figure 3.12 GDP per Capita in the period of 2011-2020 (USD/Capita/Year) 107
Figure 3.13 Economic structure of Savannakhet in 2016, 2020 and Plan 2020 108
Trang 11LIST OF TABLES
Table 2.1 Average yield of sugarcane in some countries in the World 50
Table 2.2 Area harvested of main crops in Laos in the last decade 61
Table 2.3 Yield of main crops in Laos in the last decade 62
Table 2.4 Production of main crops in Laos in the last decade 63
Table 2.5 Growth in population of major livestocks in the last decade 65
Table 2.6 Growth in production of major livestocks in the last decade 65
Table 2.7 Laos’ export quantity of main cash-products in the last decade 66
Table 2.8 Laos’ export value of main agro-products in the last decade 67
Table 2.9 Major markets for Lao agricultural export by share during 2014-2018 69
Table 3.1 Structure of crops in terms of cultivating area in Savannakhet 77
Table 3.2 Structure of cash crops in terms of production value in Savannakhet 78
Table 3.3 Annual average growth rates of cash crops in 2011-2020 (%) 82
Table 3.4 Commercial crop production in the year 2020 86
Table 3.5 Number of agricutural households by year in Savannakhet 87
Table 3.6 Number of agricutural commanies by year in Savannakhet 88
Table 3.7 Number of respondents classified by districts 96
Table 3.8 Number of respondents classified by gender 96
Table 3.9 Number of respondents classified by age group 97
Table 3.10 Number and percentage of respondents classified by education level 97
Table 3.11 Households classified by main activities for income 97
Table 3.12 Farmers’ oppions on advantages of contract farming for sugar factories 98Table 3.13 Farmers’ oppions on disadvantages of contract farming for sugar factories 99
Table 3.14 Efficiency of production of cash crops in the year 2020 101
Table 3.15 Export of agricultural products of Savannakhet in years 2011-2020 103
Table 3.16 Detail export of agricultural products of Savannakhet in 2011-2020 104
Trang 12INTRODUCTION
1 Rationale of the dissertation
The Lao PDR is primarily an agricultural economy, with this sector contributing 51 percent of the GDP Approximately 1,880,000 individuals are involved in agricultural work The Lao PDR’s recent major agricultural census provides an excellent overview of the basic nature of Laos' agricultural system The results of this survey indicate that 79.7 percent of the total population is engaged in farming The average land holding is 1.62 hectares with 27 percent of households having 2 hectares or more and 36 percent having less than 1 hectare An impressive 97 percent of farmers own their own land About 93 percent of the area devoted to rice production is for the production of sticky rice, a subsistence crop used primarily for home consumption However, in terms of commercialization of agricultural products, the quantity and quality of agricultural products have not yet been standardized
By comparing neighboring countries, especially Vietnam and Thailand, it can be said that these nations have been able to produce agricultural products for export to generate large amounts of income each year and make their economy much better than Laos In contrast, Laos has a large land area and a landscape suitable for agricultural production and farmers account for about 80%, but Laos’ agriculture has not developed to produce as much as posible products for export in terms of both quantity and quality
Especially, growth of Laos’ agriculture have reduced in the last five years of 2016-2020, with only 2.1% annually, much lower than the target of 3.4% per year set up in the 8th National Economic and Social Development Plan (2016-2020) Therefore, the development of commodity agriculture or commercial agriculture to speed up growth of agriculture and to exploit Lao’s advantage of cultivating land have been increasingly encouraged in the country economic development strategy
Savannakhet is the largest province among the 17 provinces of Lao PDR The name derives from Savanh Nakhone (heavenly district or land of fertility suitable for agriculture') the province's original name It bears the same meaning as Nakhon Sawan, a city in Thailand
Trang 13Vietnam to the east, Salavan Province to the south, and Nakhon Phanom and Mukdahan Provinces of Thailand to the west The Second Thai–Lao Friendship Bridge over the Mekong River connects Mukdahan Province in Thailand with Savannakhet in Laos Its capital, Savannakhet, also known as Kaysone Phomvihane or Muang Khanthabouly is Laos' second most largest city after Vientiane It forms an important trading post between Thailand and Vietnam
Savannakhet province has an area of 21,774 square kilometres Notable settlements in the province include Savannakhet, Muong Song Khone, Ban Nhiang, Seno, Dong-Hen, Muang Phalan, Ban Sanoun, Muang Phin, Ban Dong, Ban Nammi, Ban Nao Tai With fertile land and a location adjacent to Vietnam and Thailand, Savannakhet is one of the provinces with advantages in developing commodity agriculture, including supplying raw materials for the processing industry In particular, the Government of the Lao PDR has set a strategy to make Savannakhet a province for large-scale agricultural production, which is suitable for turning agricultural products into commodities and industrial crops to supply raw materials for factories
In the province, commercial production by smallholder farmers working with foreign investors has expanded considerably over the last decade, with support from the government which expects such arrangements to reduce poverty by improving household income The results have been mixed Discourse frequently focuses on disappointments, inequity, and failure There are, however, cases of success that are creating the experience and knowledge which can improve policy and shape practices
by farmers, investors, and agricultural officers
According to the Savannakhet Province’s Department of Agriculture and Forestry, economic crops are increasing year by year Sugarcane cultivation is an economic crop that is in high demand of sugar factories Sugarcane cultivation of farmers in Savannakhet province under contracts with sugar factories has been implemented with differrent models of contract farming However, to the year 2020 only about 6% of total farmer households have had farming contracts and the provincial average sugarcane yield was only about 60 tons/ha, much lower than the world average of 72 tons/ha The production of other cash crops in recent years in the province is also facing the same challenges, even for contract farming models These challenges need to be addressed through careful and scientifically sound research
Trang 14very little research related to the development of commodity agriculture (i.e commercial agriculture) in Lao PDR gennerally and in this province particularly
Therefore, the topic "Development of commercial agriculture in Lao PDR: A case
study of Savannakhet province" was chosen for this study
2 Research objectives
2.1 Overall objective
The overall objective of this research is to provide recommendations for developing commercial agriculture, which can exploit the advantages of the locality to produce commodity products that satisfy the needs of the market and at the same time bring better income to the farmer households in Savannakhet province
2.2 Specific objectives
The specific objectives of this research are below:
To clarify theoretical framework on the development of commercial agriculture;
To evaluate the current status of development of commercial agriculture in Savannakhet province particularly;
To analyze factors influencing the development of commercial agriculture in Savannakhet province;
To recommend solutions to speed up development of commercial agriculture in Savannakhet province
2.3 Research questions
This study focuses on answering several key questions as follows:
• What is the content of development of commercial agriculture? How to measure development of commercial agriculture?
• How is the development of commercial agriculture in recent years in Savannakhet province?
• What factors are hindering the development of commercial agriculture in Savannakhet province?
Trang 153 Research scopes
3.1 Scope of contents of the study
The study concentrates on the development of commercial crops in Savannakhet province, which includes cash crops of sugarcane, cassava, banana and watermelon These are important sources of cash income for agricultural households in the province Paddy/rice prodution and livestock prodution which are mainly for self comsumption, are also mentioned in the study
The crop sector plays an important role in agriculture due to its contribution to food production, source of raw materials for agro-food processing and animal feed industries, and source of commodities for international and local market demands Crop sector is primarily recognized as a primary factor that contributes to improved livelihood of the Lao people and 78% of the population is basically dependent on crop production It is noted that the agriculture and forestry sector contributes to 30.4% of the gross national products (GNP) in which 25% of those come from crop production in Lao PDR in the year 2011 Development of crop sector takes place gradually by transforming from being semi-subsistencebased and subsistence-based to being more modernized and market-oriented
The study focuses on consideration of cash crop production of farmer households which are main agricultural units that constribute to development of commercial
agriculture in Savannakhet province particularly and in Lao PDR generally
3.2 Scope of area and timing of study
The research location of the study is Savannakhet province
The period of analysing development of commercial agriculture in the study is about ten years of 2011-2020, exprecially the last five years of 2016-2020 and suggestion is for the period of the next 10 years of 2021-2030
4 Key findings of the research
New theoretical contributions
Trang 16production organizations; linkage and cooperation in agricultural supply chains and eficiency of commercial agriculture A definition on development of commercial agriculture has been suggested and main indicators for this process consist of increase in production value of cash crops/animals, changes in agricultural production structure, increase in farm hoseholds and conpanies under contract farming, and enhancement in efficiency of agricultural production Seven main factors influencing development of commercial agriculture have been generalized in this research
New findings and proposals drawn from the research
In the past ten years, commercial agricultural development in Savannakhet province has gained remarkable results Crop structure has transitioned towards higher valuable crops Specialised crop subregions have been set up more clearly All cash crops increased in terms of area, yield and production There was a clear transition by households from traditionally self-sufficient to market-oriented cultivation Production organisation have been improved with increasing percentage of households and companies under contract faming Number of agricultual companies has increased 3 times within 2011-2020 period Linkage within agricultural suppy chains have been improved
Main limitations of commercial agricultural development in Savannakhet pointed out consist of lower crop yields and quality of products compared to Thailand and Vietnam; fluctuated demand for export; untight relationship between farmers and other partners in supply chains and low efficiency of crop production These shortcomings were due to small scale of farm production; farmers’ lack of experiences in farm management and technical skills; limited capacity of local extention systems; inconsistent policies; and low fertility of soil, climate instability and natural disasters
Trang 17The above results of the thesis are valuable resources for policy makers and state managers on agriculture in Savannakhet province in particular and in Laos in general for reference and application The thesis is also a reference for teaching and scientific research.
5 Dissertation structure
In addition to the introduction and conclusion, the structure of this dissertation consists 4 following chapters:
Chapter 1: Literature review and research methodology
Chapter 2: Theoretical framework and practical experiences on development of commercial agriculture
Chapter 3: Current development of commercial agriculture in Savannakhet province, Lao PDR
Trang 18CHAPTER 1
LITERATURE REVIEW AND RESEARCH METHODOLOGY 1.1 Literature Review
1.1.1 Research results of commercial agriculture in the world
1.1.1.1 Overview of research works related to agricultural development
Regarding to development of agriculture, Todaro and Michael (1998) also based on the theory of Weitz (1971) divided development of agriculture into three stages with very different characteristics, namely: (1) self-sufficiency with risks and instability, in which people live only subsistence, (2) mixed and diversified agriculture, and (3) specialized agriculture or modern commercial agriculture In which, in phase 1, households mainly produce in small pieces, are self-sufficient; in the second stage, they already know how to accumulate capital and invest in joint ventures; By the third stage, farmers almost become enterprises with large land area, larger investment and higher investment efficiency, etc It can be seen that agriculture is divided into two distinct categories: high-yield agriculture in developed countries and low-productivity, inefficient agriculture in developing countries on the one hand (Todaro and Michael, 1998)
There are many studies related to the role and trend of agricultural development The introduction of private standards in agriculture has helped retailers to create strong competitiveness in the global agricultural system (Busch and Bain, 2004; Denise et al., 2005; Fulponi, 2007); Hatanaka et al., 2005; Henson and Reardon, 2005) On the supply side, through economic liberalization, retailers began to dominate the food industry market in the global value chain since 1990 by introducing private standards for agricultural commodities industry (Singh, 2001; Temu and Marwa, 2007) Increasing competitiveness based on quality and group cohesion, retailers have overtaken food processing giants such as Nestle' and Heinz (Busch and Bain, 2004) Through suppliers in various regions and countries, retailers have created a system of product supply chains Standardizing product requirements is essential to effectively maintaining the alignment of supply chains (Henson and Reardon, 2005)
Trang 19increasingly improved, the issue of health protection is increasingly focused, forming a trend to shift from a preference for packaged foods to fresh foods (Busch and Bain, 2004) At the same time, consumers have also increased concerns about pesticide residues and microbial contamination (Unnevehr, 2000) With the increasing pressure of society, the northern public authorities have strengthened the law to hold retailers accountable for the products they supply To protect themselves, retailers have developed various voluntary food safety standards that are often superior to publicly available standards (Fulponi, 2007) This has made it difficult to adapt agro-food practices in different countries (Hatanaka et al., 2005; Henson and Reardon, 2005)
Thus, from the perspective of supply and demand, the GAP standard was born to meet the development requirements of modern agriculture, GAP emerged in the global value chain as a food quality assurance system, best known in the field of agriculture It can be said that GAP is a way for stakeholders in the food production chain to demonstrate their commitment to: (1) maintain consumer confidence in food quality and safety; (2) carry out the production process to ensure safety; (3) minimizing negative impacts on the environment (Wannamolee, 2008)
Specifically, according to FAO (2003), the state, food processing and retail industries, farmers-agricultural producers and consumers are GAP stakeholders From the point of view of demand, consumers are concerned with food quality and safety and good agricultural practices for food production From a production point of view, farmers have applied GAP for the purpose of achieving economic benefits, conserving natural resources and maintaining cultural and social values According to Henson and Caswell (1999), potential consumers' responses to food safety risks and, subsequently, consequential costs incurred by companies are incentives for processors to foods take precautions to reduce hazards through changing their production processes The state prescribes quality standards and controls implementation, and supports implementation to meet quality requirements As GAP is being driven by demand-side factors, the key challenge is to ensure that the expanded use of GAP benefits small-scale producers in developing countries both in terms of safety and security safety, economy and sustainability of domestic production
Trang 20the more important industrial sector The conventional approach to the roles of agriculture in development concentrated on agriculture’s important market-mediated linkages: (i) providing labor for an urbanized industrial work force; (ii) producing food for expanding populations with higher incomes; (iii) supplying savings for investment in industry; (iv) enlarging markets for industrial output; (v) providing export earnings to pay for imported capital goods; and (vi) producing primary materials for agro-processing industries (Johnston and Mellor, 1961; Ranis et al, 1990; Delgado et al, 1994; Timmer, 2002) There are good reasons for why these early approaches focused on agriculture’s economic roles as a one-way path involving the flow of resources towards the industrial sector and urban centers In agrarian societies with few trading opportunities, most resources are devoted to the provision of food As national incomes rise, the demand for food increases much more slowly than other goods and services As a result, value added from the farm household’s own labour, land and capital, as a share of the gross value of agricultural output falls over time Farmers’ increasing use of purchased intermediate inputs and off-farm services adds to the relative decline of the producing agriculture sector, per se, in terms of overall GDP and employment (Timmer, 1988, 1997; Pingali, 1997)
Less well understood is agriculture’s multiple contributions to pro-poor economic development (Byerlee, et al, Valdes, et al., etc) These include the contributions of a vibrant agricultural sector to: income growth, food security and poverty alleviation; gender empowerment; and the supply of environmental services (FAO, 2004a) While agriculture’s direct, private contributions to farm households (such as farm incomes) are tangible, easy to understand and simple to quantify, t’s numerous in-direct benefits(such as, contributions to improved child nutrition and education) tend to be overlooked in assessing rates of returns Ignoring the whole range of economic and social contributions of agriculture underestimates the returns to investment in the sector (Valdes and Foster, 2005)
Trang 21agriculture for many parts of the world (Ekasingh, Sungkapitux et al 2007) Production will have to have increased massively, but also labor productivity, requiring a vast reduction in the proportion of the population engaged in agriculture and a large move out of rural areas (Collier and Dercon 2014) Efficient pre- and post-harvest services are essential if small farms in high potential areas are to intensify production, contribute to economic growth, and reduce poverty (Poulton, Dorward et al 2010) Commercial agricultural production is likely to result in welfare gains through the realization of comparative advantages, economies of scale, and from dynamic technological (Gebremedhin and Jaleta 2010) Policies for the commercial transformation of smallholder agriculture are often aimed at promoting household market participation (Gebremedhin and Jaleta 2013)
1.1.1.2 Overview of research works related to trading of agricultural products
Today's trade in agricultural goods is inevitable throughout the world There are many factors that affect the trade process in the agricultural sector Some countries may see rapid economic growth in both developing and developed countries, the introduction of new technologies, market expansion, market liberalization, urbanization, fast food demand, agricultural population, free policies and economic liberalization, bilateral and multilateral (Mahaliyanaarachchi and Bandara 2010) Comparative study is describing and analyzing agricultural participation in East Asian economies Until now, the agriculture section is a little attention, which is the foundation of industrial and commercial development Recently, this sector has become the focus of increasingly bitter economic disputes, especially over protection and the use of import tariffs (Boestel, Francks et al 2013) This article provides a brief overview of the major switches in rural development that took place in the last half century Including the existence is different narratives The continued success of the
performance of small farms has come a long way (Ellis and Biggs 2001) It is seen that
Trang 22and resource flexibility There are links to changes in market conditions (Chavas 2001) However, this pattern has changed dramatically in the past few decades due to
the significant use of formal intellectual property protection of agricultural progress
Trang 23and proper policy support improves the productivity of this land (Pingali and Heisey 2001)
What considerations lead policymakers to invest in agricultural extension as a key public responsibility, What should be considered leads policy makers to invest in expanding agricultural production as a commodity is the responsibility of the key community, and what is an incentive and what is the facilitator's organization to explain the differences, in the implementation of the promotion system? To help explain the answers to these questions, in researching this document to provide a framework for the needs of farmers for information on promoting production, the characteristics of agricultural products, the public of promotion services, and the political features that affect the implementation of the system of farmers' production promotion This conceptual framework was used in several analytical frameworks (Anderson and Feder 2004)
1.1.1.3 Overview of research works related to role of farmer households in development of commercial agriculture
A number of studies have also confirmed the great role of farm households in the development of agricultural production Researchers believe that household farming is the basic form of economy, an excellent economic unit for agricultural growth and development (Traianov, quoted in Tran Duc Vien, 1995; Le Dinh Thang, 1993) It can be seen that farm households are the main production units that create products in agriculture, and households also account for a large number of the population, so they also play the role of a market for agricultural products and other industries However, the role of the farm household is very limited by the individual characteristics of the household and the agricultural sector, which are very different depending on the conditions of the agricultural production of each country
In developing countries, the following restrictions have affected household commercial agricultural production according to market GAP standards Specifically:
Trang 24to apply advanced technology Ministry of science and technology into production if it does not receive outside support from businesses or the government
- Limitations on input and output markets: high transaction costs, absence of some important markets such as credit and insurance, difficulties in accessing input and output markets because they are mainly developing markets, fragmented, small and discontinuous in both space and time, asymmetric information, lack of bargaining and negotiation power, etc (Braverman and Guasch, 1986; Hunt, 1991 ; Ellis, 1992; Griffon et al., 2001- cited in Nguyen Duc Thanh, 2008; WB, 2007; Bienabe et al., 2004) In general, this area still faces many difficulties in market access for both inputs and outputs, creating a huge barrier to the development of agricultural investment, especially investment in the direction of applying scientific advances techniques as per GAP
- Depends on production conditions: Production and business of households are still heavily dependent on natural exploitation, thus affecting the environment and depleting resources, underdeveloped infrastructure in developing countries development inhibits agricultural investment greatly, farming is highly dependent on weather and natural conditions, but agricultural land is increasingly shrinking, etc (Pinstrup-Andersen and Shimokawa, 2006; WB, 2007) ; Mai Thi Thanh Xuan and Dang Thi Thu Hien, 2013) Agricultural investment depends greatly on production conditions, however, in developing countries, these conditions are not really good, which has caused great difficulties for expanding investment in agricultural production and application using advanced technology due to its small and fragmented area
- Government failure: large inequalities between rural and urban areas in terms of economic and educational conditions have made rural areas really poor when there is overall economic growth and vice versa The government tried to intervene to regulate but to no avail, partly due to the lack of public goods such as weak infrastructure Government failure is also reflected in the regulation of problems related to overcoming market failures such as asymmetric information, lack of credit and insurance markets (Janvry and Sadoulet, 2000; World Bank, 2007)
- Restrictions on corporate investment: the profitability of the agricultural sector is generally low, thus discouraging private investment from outside (Stevens and Jabasa, 1988)
Trang 25Studies on production conditions of farmers
The small area of production land makes it difficult to apply modern farming techniques, leading to no improvement in household income (Manjunatha et al., 2013) Infrastructure problem: Underdeveloped infrastructure in rural areas of developing countries is also a particular problem, and this limits the efficiency and productivity of agricultural production Efficiency and low productivity, as discussed above, is another factor that holds back investment Thus, it can be said that underdeveloped infrastructure is a factor holding back investment in the agricultural sector Pinstrup-Andersen & Shimokawa (2006) discusses this issue in detail and provides many valuable references Figure 1.1 illustrates the views of the two authors on the impact of infrastructure on agricultural production in general and investment in this region in particular, in a broad context interwoven with other factors
Studies on household characteristics in commercial agriculture
Education plays a key role in the development of an individual, an organization as well as a country; Education determines each person's advantage in generating income (Foster & Rosenzweig, 1996; Pitt & Sumodningrat, 1991; Yang, 2004)
Janvry & Sadoulet (2000) argue that at the rural community level, public goods are difficult to access and in some cases unsuitable for demand Meanwhile, at the household level, asset fragmentation and disparity is a serious problem
In conditions of less mechanized production, the number of workers will be the basic factor that helps increase household income (Abdulai & CroleRees, 2001; Yang, 2004)
Long-term farmers in the locality often get help from relatives as well as social organizations (capital and production experience) when needed through kinship and community relationships In addition, these households also have better living, production and accumulation conditions because "settlement makes a career" (Phan Dinh Nghia, 2010)
Nguyen Van Hung (2015) proved that the gender of the household head, participation in mass organizations, the number of laborers in the household participating in dragon fruit farming have an impact on the ability to participate in dragon fruit production according to GAP in Vietnam Binh Thuan
Trang 26Besley summarizes the theoretical groups in the field, and divides them into four groups: (i) theory of safety; (ii) theory of collateral; (iii) the theory of profit from trade; (iv) hypothesis about the endogenous relationship between property rights and investment
There have been many empirical studies to test hypotheses about the importance of property rights for investment, including the studies of Feder & Onchan (1987) on Thailand, Barrows & Roth (1990) for the mixed ownership case in Africa, Feder et al (1992) and Li, Rozelle & Brandt (1998) for the post-reform China case, Do & Iyer (2003) for Vietnam, Laiglesia (2004) on Nicaragua, Besley (1995) and more recently Goldstein & Udry (2008) for Ghana, Deininger & Jin (2006) for Ethiopia, etc In general, the studies show importance of identifying and improving property rights in Asia in encouraging household investment, especially long-term investment Meanwhile, this trend in Africa is not clear
Some studies on agricultural market characteristics
Because of these characteristics, it is difficult for the market in the agricultural sector to develop on its own, and it is therefore more difficult for farmers to access markets and a market-friendly institutional environment As a result, farmers both lack resources for production (lack of capital, land, human capital, social capital, lack of conditions for returns to scale), and have to face other conditions difficulties in circulation (high barriers to entry, high risks, high transaction costs, asymmetric information, lack of bargaining and negotiation power) (Bienabe et al, 2004)
Studies on the role of state management in commercial agricultural development
Poonam Singh (2014) in a study on public investment in Indian Agriculture concluded that there is a decreasing trend in public investment in agriculture and private investment in agriculture will increase At the same time, he also made distinctions about the impacts of direct public investment in agriculture such as investment in infrastructure, irrigation system, etc., with indirect investment in agriculture such as input price support
Trang 27educational programs to improve knowledge Consumer awareness of the risks of exposure to foodborne pathogens
Most governments regulate the food industry by establishing minimum safety standards that companies that produce food must meet before they can market their products (Henson and Caswell, 1999)
Food safety standards allow suppliers to bring products to market without prior control However, suppliers must meet certain minimum standards (Henson and Caswell, 1999; Ogus, 1994)
Deng et al (2010) analyzed the role of state policies in promoting the establishment of agricultural cooperatives The results of the study show that the coefficients of the variables measuring support policy measures are positive and significant when using all the estimates in turn These findings confirm the hypothesis that state support is important in the strategy to promote the development of
cooperatives
Studies on the role of enterprises and credit institutions in commercial agricultural development
One of the most important but also the most imperfect and incomplete markets is the rural credit and financial market There have been many theoretical and experimental studies on this topic Conning & Udry (2007) performed a very detailed and up-to-date review of such studies The two authors argue that the rural financial market has two important characteristics: (i) sporadic or often completely empty nature, and (ii) very deep government intervention
Underdeveloped financial markets in rural areas have hindered the process of stabilizing people's incomes as in standard theoretical models with complete and perfect financial markets As a result, farmers often choose the decision to diversify to reduce risk over specialization, even though the former offers lower expected returns For example, Rosenzweig & Stark (1998) show that people may choose urban migration as a way of dispersing risk away from purely agricultural activity The same goes for investing is understandable
According to Egger (2005), while farmers' demand for financial insurance tools is very high, the supply is very limited due to the characteristics of rural areas, making information and monitoring costs often high
Trang 28characteristics of each stage of the value chain in the agricultural sector is very necessary In addition, IFAD (2003) also suggested that commercial companies in rural areas should be considered as credit sources worthy of exploitation
The importance of smallholder aggregation, by which farmers collectively access inputs for production and sell their produce in formal markets, comes from the fact that a majority of the world’s farms are small and marginal in size Approximately 475 million, or 84%, of the 570 million estimated global farms are smaller than two hectares (FAO,2014; Gomez et al., 2020) Despite predictions that small farms will consolidate as the agricultural sector’s relevance relative to the industrial and service sectors diminish in developing countries, they have persisted and, in many cases, have increased in number (Hazell, 2020; Hazell et al., 2010) Given the current situation of smallholder farmers in developing countries, they are generally faced with the following two options: to “move up” or “move out,” where either smallholder farmers commercialize and increase their market orientation to emerge as a profitable commercial activity, or be supported to exit agriculture towards non-farm employment (Fan & Rue, 2020)
Studies on the role of agricultural extention in commercial agricultural development
According to the study of DansoAbbeam et al (2018), in agriculturaldependent economies, extension programmes have been the main conduit for disseminating information on farm technologies, support rural adult learning and assist farmers in developing their farm technical and managerial skills The study has reaffirmed the critical role of extension programmes in enhancing farm productivity and household income It is, therefore, recommended that agricultural extension service delivery should be boosted through timely recruitment, periodic training of agents and provision of adequate logistics
Trang 29improved livelihoods for rural households to increasing the overall production and contributing to foreign exchange earnings from exports
1.1.2 Research results on commercial agriculture in Laos
The agricultural production is a significant sector in Lao PDR It is an important part of the total GDP of the Lao population of more than 70-80% is involved in agriculture Nevertheless, poverty is mainly in the agricultural sector because of the inefficient agricultural system, because most Lao farmers are knowledgeable about subsistence farming only because it is unsupported agricultural environments composite inadequate infrastructures (facilities, irrigation, road, etc.)
However, the level of commercial production is still very limited in the agricultural sector, which is the main reason for lower income for farming families and poverty incidence Therefore, the Party and the Government have adopted agriculture as the first priority for development and poverty reduction A importance program of Promotion of Commodity Production Program (PCPP) was introduced by the government, after the enactment of New Economic Mechanism (NEM) in 1986 The main focus of PCPP is to support the transition from a livable economy to a market economy by promoting trade in agricultural production Therefore, in the past, the direction of agricultural development policy is still quite common and it does not have policy advocacy as with any other sector On the other hand, many farmer's family members are unknowingly aware of agricultural production as a source of commodity and cash income that enables them to engage in agricultural activities, especially in application of the modern technology in to the production There are sveral issues related to agricultural production systems in Lao PDR Policies that contribute to development of commodity agriculture have aimed to ensure that it enables increasing household income and reducing poverty across the country
Trang 30domestic product (GDP) and 77% of the national labor force according to the United Nations Development Program National Statistical in the Lao People's Democratic Republic (UNDP/NSC, 2006) In the agricultural sector, the rice production is one of the most important economic activities of all agricultural products and one-fifth of GDP It can be said that almost all of the country's agricultural outputs are produced in the agricultural sector in small families Despite the importance of agriculture to the national economy, poverty in Lao PDR is very vulnerable in small farm families Approximately 87 percent of the country is the poorest in the household is led by farmers (NSC, 1999)
Although the enactment of the New Economic Mechanism (NEM) in opening the country for marketing, market integration is still low, there are not exact marketing conditions in 1986 The majority of farmers practice specific rice cultivation and lack access to the support they need to improve their production and income Access to the market of farmers is still limited, because of poor infrastructure, inadequate market knowledge and traditional limited marketing systems that are controlled by a limited number of traders (MPDF, 2004) Overall, in Lao PDR, most are an agricultural economy, which contributes 51% of GDP It covers 1,880,000 people involved in agricultural production In recent years, in Laos, there has been a major agricultural survey that shows the basic features of Lao agriculture system During the survey, it is possible to indicate that 79.7 percent of the populations are involved in farming The
average land holdings are 1.62 ha, with 27% of households having 2 ha or more and
36% less than 1 ha With the survey, about 97 percent of farmers own their own land Approximately 93% of the area of rice production is for the production of glutinous rice, which is a living plant for domestic consumption Planting trees is another important part of Lao agricultural life About 23 percent of these farms have mango trees, 17 percent have coconut trees, 17 percent have banana trees, 11 percent have jackfruit trees and 11 percent have tamarind trees 71 percent of farmers participate in aquaculture and other fishing activities 31 percent of farmers have cattle, 49% have pork (73 percent in the case of Hmong people) Only 6% of farmers sell their livestock products and 35% sell crop products This means that most farmers (59%) are involved in self subsistence agriculture and the production of glutinous rice is for local consumption
Trang 31Among agricultural products there are cash crops sush as sugarcane, mung-beans, peanuts, tobacco, soybeans, tea, coffee and cotton Because most of the agricultural production is also based on nature, exported agricultural products of Lao are not high quality, as a result, the country's foreign trade market is still limited The main export products of Lao agriculture are plywood, timber, lumber, wood, and coffee Major agricultural imports are sugar, condensed milk, and long grain rice.
Contract farming is an alternative income scheme for rural farm households in Lao PDR Sugarcane contract farming offers new hope instead of conventional income from rice and brings higher returns for households In practice, the raising of income from sugarcane contract farming in rural farm households has been faced with a number of challenges (Saichay Phoumanivong & Dusadee Ayuwa, 2013) Sugarcane contract farming is new to rural farm households requiring farm management with regard to production, profit, skills and knowledge Moreover, the households are facing a dominant buyer of factory owners who provide inputs to households to grow ugarcane and as the same time they may be competitors of the farm households in the
planting of sugarcane Xaiburi, Savannakhet Province, is one of three districts in the
province promoting sugarcane for raising the income of rural farm households The sugarcane areas cover a total of 10,077 hectares, the majority of the areas are owned
by the Mitr Lao Factory (7,517 hectare), while the rest are owned by rural farm
households (2,560 hectare) There are a total of 628 households involved in sugarcane contract farming, Contract farming is diversified and unpredictable as some households stopped growing the sugarcane, while some expanded their farms and others want to become sugarcane farmers Therefore, the farm households may have
some impacts from contract farming in both positive and negative aspects
1.1.3 The gaps for this research
Trang 32There are also very few in-depth studies on recent development of commercial agriculture in Laos in general and in Savannakhet province in particular Given that the province is the largest province of Laos and has advantages of being located nearly Vietnam to the east and Thailand to the west, what are the advantages and limitations of its development of commercial agriculture? How curent development of commercial agriculture in Savannakhet province are? What factors are hindering development of commercial agriculture in the province? What solutions are neccesary to promote the development of commodity agriculture in Savannakhet province and in Laos generally?
The above questions have not been answered in previous studies and thus they would be considered and partially filled in this study
1.2 Research methodology
1.2.1 Research approaches
The study used the following main approaches:
(1) Territorial approach toresearch
Agricultural economic activities in a territory are aimed at exploiting synthetically the natural conditions, natural resources, socio-economic characteristics The territorial structure of Savannakhet province is considered as a relatively complete synthesis, in which natural, socio-economic factors have a close relationship, influencing each other and affecting development commodity agriculture
In the process of understanding the current situation of commercial agricultural development, this study applies this approach to see the division in terms of production territory as well as the specific strengths of each district-level administrative unit in development From there, provide integrated development orientations to best exploit the potentials of the province to accelerate the growth of commodity agriculture
(2) Systematic approach to research
Trang 33commercial agriculture development from a systematic point of view requires considering and analyzing the influencing factors, pointing out the factors that are facilitating and hindering that development, in order to have suitable solutions can be found
Research on the development of commercial agriculture in Savannakhet province, from a systematic point of view, the territory of Savannakhet province is considered a part of the whole country of Laos At a lower level, the territory of Savannakhet is a collection of subsystems (districts, cities) that are closely related to each other Commercial agriculture is also a system consisting of sub-sectors (cultivation, animal husbandry, etc.), each of which produces a variety of products (e.g, crop production including rice, sugar cane, etc.), Crop production is affected by internal and external factors Systematic approach makes the research process logical and smooth Therefore, this research has studied and explored the interrelationships and influences between elements in a system and between systems to accurately assess the problem to be studied To understand the development of commercial agriculture in the overall relationship with the local economic restructuring, associated with rural economic development and farmers in the context of international economic integration
(3) Approach by commodity crop type to research
Crop production in the province is a combination of many crops The factors, natural, socio-economic, and comparative advantages of each district or commune allow the development of a structure of sub-sectors of cultivation, with specific characteristics of production technology Each sub-sector exploits the unique advantages of each locality to develop the production of the most dominant agricultural products and apply appropriate technology to sustainable production
(4) Approach from the perspective of development economics
Commercial agriculture development, from the perspective of development economics, is to effectively use all resources for agricultural development, especially land resources, plant genetic resources and agricultural labor resources
Trang 34Figure 1.1 Logical framework for the research on Development of commercial agriculture in Savannakhet province
Current status of development of commercial agriculture in Savannakhet province
Solutions for development of commercial agriculture in Savannakhet province
- Improve agricultural & rural infrastructure - Apply new technology & GAP, organic standards - … -… Theoretial framework Definition Roles Main Indicators:
- Increase in production value of cash crops,
- Changes in agricultural production structure,
- Increase in farm hoseholds and conpanies under contract farming, - Enhancement in efficiencyof agricultural production
Factors influencing to development of commercial agriculture
- Legal policy system , - Demand of markets, - Human resources,
- Sources of investment capital and credit
- Development of agricultural extension network
-The coordinaiton within value chains
- Natural conditions and natural resources
International & domestic practical experiences The formation of specialized agricultural regions & commodity crops The development of different types of agricultural production organizations The linkage & cooperation in supply chains of agricultural products The Eficiency of commercial agriculture - Improve skills of farmers through training & extention systems - Develop linkages within agricultural value.chains…
Context, orientation and goals of development of commercial agriculture in Savannakhet province
Trang 351.2.2 Data collection methods
1.2.2.1 Secondary data collection
In this research second data was collected from websites of Laos’ Government on agriculture such as website of Ministry of Agriculture and Forestry, General Statistical Office, the Land Development Department (LDD) of the Ministry of Natural Resources and Environment, and related ones from international organizations Second data was gatherd directly from Department of Agriculture and Forestry, the Department of Industry and Commerce in Savannakhet province
In addition, the results of other people's research and other national experiences related to agricultural production were collected through electronic search and through personal contact with researchers Data from studies related to the development of commercial as such agriculture in the world was collected from the internet and some books in libraries of WB, ADB, UNDP, NEU, etc Data was also be collected from the library in Laos and Savannakhet Province The author has also searched documents from the internet and books in the library that related to the development of commercial agriculture worldwide
1.2.2.2 Primary data collection
Primary data was collected by survey of farmer households who do agricultural production for commerce The questionaires and result of the survey can be seen in the Appendix
• Selection of districts for the survey
This study selected 3 districts from total 15 districts of Savannakhet province to do the survey These are Xaybouly, Outhumphone, and Atsaphone districts These districts are located in the North-West part of the province where have favourably natural conditions for cash crops expecially sugarcane (see figure 1.2) Sugarcane crop have been developed in these districts since 2006 Expecially at Xayabouly district, there are more contract farming by sugarcane farmers in comparison to Outhumphone and Atsaphone districts
Trang 36These three districts are located on the same traffic route, which is convenient for the disertation author to access to survey in the context of limited travel due to concerns about the spread of the Covid-19 epidemic
Figure1.2.Map of study areas of three Districts in Savannakhet Province
• Sample of the survey
The sample size for survey in this study has been culculated by using the formula that was developed by Taro Yamane (1970)
The formula to calculate sample size if population size is finite and known as
(Taro Yamane, 1970) In which: n sample size
N population size
e Margin of error 0.05 (5%)
In the three districts of Xaybouly, Atsaphone and Outhomphone selected for the survey, there are 1,195 households that have planted sugarcane Substituting the value of N (N =1,195) and with margin of error of 5% (e = 0.05), that is
we have the sample size is about 300 households
1,195
1 1,195 0.05 1,195
Trang 37In the three districts, 300 households choosen who are living in 78 villages.The convenient sampling method was applied to choose households with sugarcane cultivation These households are doing contract farming to supply sugarcane for the Mitr Lao Sugar Factory Therefore, the data collected for research is of sugarcane farmers under contract farming with the sugar factory, in order to find out their advantages and disadvantages in the production under the contract farming By surveying one season of sugarcane production of 2019-2020 to get primary data, the study can summarize the advantages and disadvantages of sugarcane farmers up-to-date to be able to give relevant suggestions for the coming years
• Methods to collect data
In-depth interviews combined with semi-structured interviews (Creswell, 2012) were applied for data collection based on 2 different semi-structured interviews One set of guidelines is for the organization level and another is for the household level At the household level, the head, or a member of the household who is working or used to work closely with sugarcane contract farming was interviewed At village level, group interviews and observation techniques was added in this study
Patton (1990) also emphasizes that In-depth interviews are particularly used when the presence of an observer is precluded by the situation As the study is attempting to understand subjective experiences from the development of plantation, in-depth interviews allow a glimpse into the perception of the stakeholders who are involving in this type of investment Also given both resource and time constraints at the present study, the choice of in-depth interviews was an appropriate method to comprehend the actual effect of agricultural products for commercial on land use system and their livelihood As further described by Minichiello et al (1995), in-depth interviews are haracterized by a conversation-style discussion with a specific purpose They also further emphasize that this particular form of interview is distinguished in that the conversion focuses on the participant’s ‘perspective of self, life, and experience and is expressed in his or her own words Patton (1990) spells out that, unlike the structured interview where participants must fit their experiences and feeling into the researcher’s categories even if perceived as irrelevant, the in-depth interview allows for great flexibility to capture the experience of each participant and on their term
Trang 38selected agricultural products in Savannakhet province The in-depth interview will also be done with managers and policymakers who are responsible for Laos’s agriculture as well as for agriculture in Savannakhet province
1.2.3 Data analysis methods
Descriptive Statistics method was used for calculating indicators of commercial agriculture development (such as growth rates in the area, yield, production of cash crops; for comparing increase between cash crops such as sugarcane, cassava, banana, and watermelon in Savannakhet province, etc.)
Trang 39CHAPTER 2
THEORETICAL FRAMEWORK AND PRACTICAL EXPERIENCES ON DEVELOPMENT OF COMMERCIAL AGRICULTURE
2.1 Related definitions and concepts
2.1.1 Definition of agriculture
Agriculture is the most comprehensive word used to denote the many ways in which crop plants and domestic animals sustain the global human population by providing food and other products The English word agriculture derives from the Latin ager (field) and colo (cultivate) signifying, when combined, the Latin agricultura: field or land tillage But the word has come to subsume a very wide spectrum of activities that are integral to agriculture and have their own descriptive terms, such as cultivation, domestication, horticulture, arboriculture, and vegeculture, as well as forms of livestock management such as mixed crop-livestock farming, pastoralism, and transhumance Also agriculture is frequently qualified by words such as incipient, proto, shifting, extensive, and intensive, the precise meaning of which is not selfevident Many different attributes are used too to define particular forms of agriculture, such as soil type, frequency of cultivation, and principal crops or animals The term agriculture is occasionally restricted to crop cultivation excluding the raising of domestic animals, although it usually implies both activities The Oxford English
Dictionary (1971) defines agriculture very broadly as “The science and art of
cultivating the soil, including the allied pursuits of gathering in the crops and rearing live stock (sic); tillage, husbandry, farming (in the widest sense)” In this entry, we too
use the term in its broadest, inclusive sense
2.1.2 Definition of commercial agriculture
Trang 40in advanced industrialized nations The harvested crop may be processed on-site and then sold to a wholesaler as a complete product, or it may be sold as-is for further processing elsewhere Commercial agriculture differs significantly from subsistence agriculture, as the main objective of commercial agriculture is achieving higher profits through economies of scale, specialization, introduction of capital-intensive farming techniques, labour-saving technologies, and maximization of crop yields per hectare through synthetic and natural resources Whereas subsistence agriculture is an economic model in which most members of a population work in agriculture to feed themselves, with limited need for trade, commercial agriculture is a type of agriculture suited to industrial or postindustrial economic models, in which most members of a population do not work in agriculture, are fed by others, and purchase their food and fiber as consumers, with currency
Commercial agriculture will also necessitate the link between the input and the output side of markets Increased use of purchased modern production inputs is assumed to lead to increasedproduction beyond subsistence needs thus creating surpluses for the markets Govereh et al., (1999) argue that benefits arising from agricultural commercialization can happen both at household level and regional level through spill-over effects At household level, they argued that commercialized production can ease the credit constraint that smallholder farmers usually face This is because withcontinued contacts with buyers, trust can be developed and credit advances can be made They alsoargued that commercialization especially through cash cropping under contracts can enhance