Laos seeking comparative advantages – The Edge Review

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Landlocked country turns to organic farming, seeks other ways to stand out

www.theedgereview.com – digital/app download available here (subscription). Published Jan 10 214

Bounloum Phonimavong speaks to TER at her organic farm (Photo: Simon Roughneen)

Bounloum Phonimavong speaks to TER at her organic farm (Simon Roughneen)

BOUNG PHAO — The muck-covered water pump chugging away on the bank of the nearby Mekong River means that Bounloum Phonimavong’s two acres of garden have plenty of water all year round.

Coriander, chinese cabbage and spring onion are among the cash crops grown here for sale in the capital Vientiane, around a 90 minute drive away.

“We have to work hard here as this is all organic, which means we cannot use the pesticides, so we have to keep a close watch on the crops for bugs,” the 51-year-old mother of three says.

Getting that organic produce to market means, for now, selling mostly at home to consumers in Vientiane, many of whom are skeptical about the value of buying organic produce.

“Sometimes the vegetables don’t always look as shiny or as nice as the normal (pesticide-treated) crop,” says Bounloum Phonimavong. “We have to explain to the customer that it is fine, and that it is good for their health.”

Some of Boung Phao farmers sell corn to a vegetable factory a four-mile drive along the Mekong River. There the corn is processed and tinned before export to Europe, where what started as Boung Phao organic corn appears on supermarket shelves in the UK and Germany.

But that would never have happened without the leg-up given by the inclusion of Laos in the European Union’s duty-free access scheme for Laos exports, says Loumkham Vongsay, owner of the processing factory.

“Otherwise, it is too expensive to export compared with other countries, such as Thailand,” says Mr Loumkham, outlining that it costs him almost 50 per cent more than a Thai competitor – even one just across the border in northern Thailand – to send a container of corn to Laem Chabang east of Bangkok, the nearest sea port outlet to get the produce shipped to Europe.

In his The Bottom Billion, economist Paul Collier says that being landlocked means an extra challenge for poor countries to overcome if they are to escape poverty through export-driven growth.

The Laos economy is growing – at 7 per cent per year the last five years on average, and the International Monetary Fund predicts over 8 per cent growth for 2013 – but a lot of that is down to mining and dams. The country’s infrastructure, its roads in particular, lags behind the standards of neighbouring countries.

All that adds to costs, says, Oudet Souvanavong, Vice President of the Lao National Chamber of Commerce and Industry. “Because we are landlocked between bigger countries, a lot of our trade is transit, from Thailand to China or Vietnam, for example,” he said.

Oudet Souvanavong soon switched from using “landlocked” to “land-linked” – the Laos government’s latest buzzword to counter those who wonder whether being landlocked will stall the country’s economic development.

Making the most of Laos’ location at the centre of a region taking in Myanmar to the west, China’s Yunnan and Guangxi provinces to the north, Vietnam to the east and Cambodian and Thailand to the south, is key, according to the government’s economic plans for the future.

A map showing Laos at the center of this region hangs in the office at Somphone Phasanvath’s Lao Freight Forwarder (LFF), which, as the company name suggests, makes a living by helping companies forward goods from, say, Bangkok to Hanoi, a road trip that involves crossing the Laos border twice.

“We see Laos at the heart of the Greater Mekong subregion countries,” says Somphone, explaining LFF’s business.

But 70 per cent of LFF’s work, he says, is based on local copper mining or hydropower – helping 30 truckloads of copper a day pass through customs or ferrying machinery to work on Laos’ hydropower projects – some of which have caused controversy in neighbouring Cambodia and Vietnam. They say dams such as the Xayaburi and Don Sahong will upset the ecology of the Mekong River.

Those big-ticket infrastructure projects are, however, likely key to future growth in Laos, with the country seeing itself as the possible “Battery of Southeast Asia,” selling hydropower and mined metals to wealthier neighbours.

“Investments in mining and hydropower in recent years have driven much of the growth of the economy,” says the Asian Development Bank (ADB), the Manila-based lender which also supports organic farmers such as Bounloum Phonimavong and which says such investments have helped halve poverty in Laos.

The hope is that revenue from the dams and mines can be used to improve infrastructure and help Lao farmers compete with foreign rivals, so Laos can be more than just a power source or transit point for trade between bigger and wealthier neighbours.

Farmers make up 75 per cent of the workforce in tiny Laos, with a population around 6.5 million. They are trying to make inroads into the regional organic vegetable market, because they cannot match the economies of scale in modern farms in neighbours such as Thailand, Vietnam and China, which are the country’s main trade partners. Laos’ US$19.5 billion GDP is about half the size of Cambodia’s, but much smaller than Thailand’s US$662 billion, or Vietnam’s US$325 billion. A quarter of the Lao economy is based on farming.

“We cannot hope to rival Thailand’s agriculture due to economies of scale,” says Dr Phouangparisak Pravongvienkham, Deputy Minister for Agriculture and Foresty. “We need to develop our comparative advantage in organic farming, and, in particular, products such as sticky rice.”

Oudet Souvanong, Vice President of the Lao National Chamber of Commerce and Industry (Photo: Simon Roughneen)

Oudet Souvanavong, Vice President of the Lao National Chamber of Commerce and Industry (Simon Roughneen)

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