The report examines the commercialization of rice and vegetables in Lao PDR, and the challenges and opportunities to the development of their value chains, drawing upon newly collected data that has not been available before.
- Rice is a key agricultural commodity in Lao PDR: it is the biggest in terms of farmers involved in production, cropland area allocated, and food consumption, and also supports related jobs in milling, trading, and food services.
- Vegetables are emerging as a new source of growth, driven by a more affluent class and growing demand for more nutritious foods.
- Consumers in Vientiane pay high retail prices for these commodities, despite the fact that farmers are not making large profits.
The report presents findings of a study of the rice value chain from Khammouane Province to Vientiane capital, and the vegetable value chain from Vientiane Province to the capital. The study reveals that high consumer costs are mainly caused by a high cost of production and inefficiency along the value chain. Several constraints are identified:
- While farm-gate prices are relatively high, high production costs diminish farmers’ profits below those in neighboring countries
- Farm productivity is low, compared to neighboring countries, and quality is not managed at the farm or post-farm levels
- The milling sector is fragmented, with small operators that often use old technology
- The overall market system lacks incentives for product quality
- Lao PDR lacks a significant consumer class with high purchasing power to foster consolidation of wholesale and retail sectors and reduce costs, such as through supermarkets
- While administrative and regulatory barriers were not found to be a major constraint, issues of cumbersome regulations continue to affect entry and competition in the market.
The report recommends addressing these constraints by:
- Facilitating closer linkages between farmers and millers – stronger coordination along the value chain could help reduce cost and inefficiency and open new markets
- Strengthening enforcement of contracts to reduce the risk of doing business in the country
- Improving public services delivery, focusing on areas critical to reduce production costs and increase commercialization – making public sector services more transparent can promote a more business friendly environment
- Continuing current regulatory improvements undertaken by Lao authorities while adopting a more balanced agriculture budget to increase public expenditure on quality of research and extension services
- Strengthening enforcement of price labelling and display regulations, and phasing out price controls, removing potential entry barriers
Download the full report for further detailed analysis of the value chains and conclusions as to what types of policy actions could reduce costs and increase private sector investment.