Development of Commercial Agriculture in Laos: A case study of Savannakhet Province

MINISTRY OF EDUCATION AND TRAINING THE NATIONAL ECONOMICS UNIVERSITY

 PHOUTHALATH XAYYALATH DEVELOPMENT OF COMMERCIAL AGRICULTURE IN LAO PDR: A CASE STUDY OF SAVANNAKHET PROVINCE PHD DISSERTATION IN AGRICULTURAL ECONOMICS HANOI, 2022 MINISTRY OF EDUCATION AND TRAINING THE NATIONAL ECONOMICS UNIVERSITY

 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 HANOI, 2022 i DECLARATION 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 Phouthalath Xayyalath ii TABLE OF CONTENTS DECLARATION i TABLE OF CONTENTS ii ABBREVIATION vi LIST OF FIGURES viii LIST OF TABLES ix INTRODUCTION 1 Rationale of the dissertation Research objectives 2.1 Overall objective .3 2.2 Specific objectives .3 2.3 Research questions 3 Research scopes 3.1 Scope of contents of the study 3.2 Scope of area and timing of study .4 Key findings of the research Dissertation structure CHAPTER LITERATURE REVIEW AND RESEARCH METHODOLOGY 1.1 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 CHAPTER THEORETICAL FRAMEWORK AND PRACTICAL EXPERIENCES ON DEVELOPMENT OF COMMERCIAL AGRICULTURE 31 2.1 Related definitions and concepts .31 iii 2.1.1 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 Main indicators 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 42 2.6.3 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 CURRENT DEVELOPMENT OF COMMERCIAL AGRICULTURE IN SAVANNAKHET PROVINCE, LAO PDR 73 3.1 Overview of Savannakhet province 73 3.1.1 Natural conditions 73 3.1.2 Social and economic conditions 74 iv 3.1.3 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 20112020 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 120 3.4.1 Achievements and causes 120 3.4.2 Shortages and causes 121 CHAPTER 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 4.2 Recommended solutions to speed up the development of commercial agriculture in Savannakhet province 131 v 4.2.1 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 systems133 4.2.4 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 137 4.2.7 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 APPENDIX 152 vi ABBREVIATION 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 NEM New Economic Mechamism vii NEW 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 WTO World Trade Organization viii LISTOF 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 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 Figure 3.14 Better education results in higher labor productivity 112 ...MINISTRY OF EDUCATION AND TRAINING THE NATIONAL ECONOMICS UNIVERSITY

 PHOUTHALATH XAYYALATH DEVELOPMENT OF COMMERCIAL AGRICULTURE IN LAO PDR: A CASE STUDY OF SAVANNAKHET PROVINCE. .. 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. .. 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,