Lao PDR faces a generalized under-investment in production and processing of agricultural products by the private sector due to (i) the poor physical infrastructure which affects transport access and costs, (ii) the weak regulatory frameworks and enforcement of contracts, (iii) limited capacity of extension and technical assistance services, (iv) poor access to and high costs of formal financial services, (v) limited distribution networks for commercial provision of inputs, (vi) low technical levels of farm management, (vii) limited ability to contain risks linked to both floods and drought, and (viii) sometimes disruptive government intervention in market. The resulting unfavourable business environment in rural areas leaves the country with underdeveloped value chains beyond the farm level, leaving Lao farmers with fewer market options, and the Lao economy with limited capacity for domestic transformation and value added of the primary commodities that it produces.
The Government of Laos is aware of above mentioned constraints, and in its National Socio-Economic Development Plan (NSEDP) for 2006-2010 spells out a comprehensive strategy for the transformation of the agriculture sector and better market integration, emphasising the following: improved productivity through better technologies and access to markets, promotion of commodities and commercial farming, enhancement of food production in food-deficient areas, diversification of the rural economy and development of economic opportunities for poor people in remote areas.
During the first phase (2003-2007), the project has adapted successfully the Agro-Enterprise Development Process (AEDP) developed by the International Centre for Tropical Agriculture (CIAT) in Latin America to the context in Laos and Vietnam. The AEDP has been applied across a range of products[1] and has led to considerable improvements in the value chains. It is a robust process with potential to be widely applied in the context of other development initiatives and through mainstream extension in Laos. Moreover, SADU supported the emergence of private service providers, as the successful establishment of “Commercial Animal Health Service Providers”.
Despite above positive results, a one year transition phase is needed for three main reasons: (i) In the first phase, little attention was given to systematically assess and document emerging value chain outcomes. This needs to be done to have a basis for planning a sustained scaling-up. (ii) In view of the expansion of the SDC rural economy and natural resource portfolio in Laos with a major regional initiative (Mekong Market Development Portfolio) and a new programme currently in design phase (preservation of agro-biodiversity), additional assessments (mapping of interventions and approaches in the sector as well as gender analysis) need to be carried out, in order to best link the different initiatives addressing agri-business development in a coherent programmatic framework and (iii) at the launching of SADU in Laos in 2003, there was no identified government partner (“institutional home”) with a mandate to pilot and promote small scale agri-business development. With the formal establishment in October 2007 of the Agriculture and Forestry Policy Research Centre, and their expressed interest to work with SADU on the Agro-Enterprise Development Process, this new institutional partner at national level could lead to formal collaboration.
[1] Passion-fruit, broom grass, maize, peanuts, paper mulberry bark, livestock (cattle and pigs)
