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Policy on Rice Self-Sufficiency in Laos

Department of Agriculture, MAF Mr. Khamtanh Thadavong, DDG of DOA Mr. Somvang Phanthavong, DD of Planning & International Cooperation Division, DOA
Paper Prepared for The 2nd ASEAN Rice Trade Forum Yogyakarta, 4-5 June 2013

Introduction Policy Framework Rice Sector Performance Emerging Challenges Options for Improving Rice Sector Policy

Contents

Introduction
Lao PDR is predominantly a rural agriculture-based country, 85% of its population live in rural areas. Cultivated land covers about 1.2 million ha (5%), rice occupies 60%-70% of the total crop area. Population is about 6.51 million (2012) Agriculture contributes 26.7% to GDP (2011-2012) GDP per capita: US$ 1,349 (2011-2012) Rice production since 2001 reached 2.1 million tons of paddy. Rice is also the staple food crop in Lao PDR, as in most of the region. Other commercial crops: coffee, corn, cassava, rubber, tobacco, jobs tears, vegetables, sugarcane and legume crops Strategic directions of country: Increased productivity, sustainability, modernization, safety and clean products

GDP Share in 2011-2012


39.1% 26.7%

28.2%

Agriculture

Industry

Services
4

Rice Production Areas in Lao PDR


Mostly in 7 big plains=540,540 ha 14 small plains =23,487 ha

Rice Production 2006-2012 and Target for 2013 Year Area Yield Production Comparison (%) Harvested (Ton/ha) (Tons, paddy) (ha) 796,575 3.00 2,663,700 +3.7 781,243 3.47 2,710,050 +1.7 825,349 3.55 2,927,140 +8.0 872,896 3.60 3,144,800 +7.4 855,114 3.59 3,070,640 -2.36 817,250 933,767 960,000 3.75 3.74 3.96 3,065,760 3,489,210 3,800,000 -0.15 +13.8 +8.9

2006 2007 2008 2009 2010


2011
2012

2013 (Target)

Total requirement and estimated net availability of rice for consumption, 2009-2012

Item 2009
3,144,800
6,165,709 3,050,456 2,592,888

2010
3,070,640
6,230,270 2,978,520 2,531,742

2011
3,065,760
6,361,100 2,973,782 2,527,715

2012
3,489,210
6,514,000 3,384,534 2,876,854

Paddy production (t)


Population Paddy output less seeds (about 3%) tons Net Availability: After loss & wastage (about13%)+other uses (2%) Conversion into rice (62%) tons Per capita net availability (kg) Total requirement/year Surplus/Deficit (+or -) (milled rice)

1,607,591 261 1,294,799 +312,792

1,569,680 252 1,308,357 +261,323

1,567,183 246 1,335,831 +231,352

1,783,650 274 1,367,940 +415,710

Harvested Area and Total Production 2006-2010


3,500,000
3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 796,600 781,245 2,928,100 2,663,700 2,710,000 3,144,800 3,070,000

825,350

872,205

865,165

2006 2007 2008 2009 2010

Harvested Area

Total Production

Irrigation program in the whole country


Total Irrigation projects: 1,550

Rice production: 2.1 million tons of paddy since 2000-2001


surplus
400,000

300,000

200,000

100,000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

(100,000)

insufficiency

(200,000)

(300,000) Surplus of raw milled rice (tons)

FAO 2011

10

Exports of Glutinous Rice to Vietnam and Thailand 2005-2010 (1000 tons)


25

20

15

10

0 2005 2006 2007 2008 2009 2010

Government Policies and the Rice Sector


Three main key policy reference documents provide a strategic framework for the rice sector:
1. The political report of the 8th Central Committee to the 9th Party Congress in 2011 recognized the importance of agriculture and forestry as a fundamental sector of the national economy and called for a fundamental transformation of the rice industry in Laos to modernize it, and make it more productive and market-oriented. 2. The 7th national socio-economic development plan (2011-2015) seeks to achieve sustainable economic growth and to reduce poverty. 3. The agricultural development strategy (ADS: 2010-2020) and the associated agricultural master plan (AMP) have as its primary goal the attainment of food security by 2015 in order to meet the necessary calorie intake requirements, especially in remote rice-deficit areas.

Rice Sector Target by 2015


MAF has developed the following targets for the rice sector in 2015: Increase of total paddy rice production to 4.2 million mt from 3.7 million mt in 2010 Increase of planted area to 1.04 million ha from 870,000 ha in 2010 Export of 600,000 mt of good quality, non-glutinous rice mostly to countries in the ASEAN region and also to the international market Increase of non-glutinous rice production to 30% from 10% in 2010 Reduce food insecurity and malnutrition by one-half through increased availability, access to and utilization of rice and other foods

A Map of the Policy Goals, Objectives, Instruments and Responsibilities in the Lao PDR

1/ MoIC Ministry of Industry and Commerce; DTD Domestic Trade Department; IED Import-Export Department; PICD Planning and International Cooperation Department; MLSW Ministry of Labour and Social Welfare; PG Provincial Government 2/ Strategic Rice Reserve has three components with different institutional responsibilities: (i) rice reserve (including subsidized credit to millers in exchange for keeping minimum stocks) under MoIC DTD, (ii) seed reserves under MAF responsibility and (iii) rice distribution as part of safety nets under MLSW.

Trade policy measures and national rice reserves


Bilateral trade agreements and regional trade relations (between Laos Vietnam and neighbouring countries, including formal trade agreements, export quotas, and border trade. Trade bans at the provincial and national levels where rice production is not sufficient for consumption and during periods of natural calamities and economic crisis. Rice reserve policy includes three components: (1) National Rice Reserve under the responsibility of MoIC, (2) Seed Reserves (MAF), and (3) emergency rice distribution programme (MLSW).

Rice Sector Performance


Rice has been a top priority for the Government of the Lao PDR since the First NSEDP (1981-1985). Rice is not only associated with cultural traditions in the Lao PDR, but has also been of prime political importance throughout the countrys history. Lao rice production started to increase significantly in the 1990s, which occurred along with the expansion of irrigated areas and increase in yields mainly due to the scaling up the use of improved varieties. The production increase was driven by both improvement in yields and expansion in rice growing areas, in clearly distinct phases.

Historical evolution of Laos rice production and harvested area, 1961-2011


Cooperative movement Output in thousand tons
3,500 3,000 2,500 800 2,000 600 1,500 400
1,000 500

Expansion of dry season rice through irrigation investment Area in thousand ha mid 90s - release and distribution of improved Lao glutinous varieties
1,200

early 80s - loosening of price controls

1,000

200

1963

1965

1968

1971

1974

1977

1980

1983

1985

1988

1991

1994

1997

2000

2003

2005

2008

1961

1962

1964

1966

1967

1969

1970

1972

1973

1975

1976

1978

1979

1981

1982

1984

1986

1987

1989

1990

1992

1993

1995

1996

1998

1999

2001

2002

2004

2006

2007

2009

Harvested area ('000 ha) - right hand axis

Paddy output ('000 tons)

2010

Laos historical per capita rice consumption according to FAOSTAT(1961-2007), kg/person

Per Capita Rice Consumption (kg raw milled rice), based on Lao Expenditures and Consumption Survey (LECS)
LECS 3 (2002/2003) LECS 4 (2007/2008) % change

Lao PDR Urban Rural

145.2 139.8 147.1

179.1 130.1 199.0

+23 -7 +35

Expected rice consumption per capita by 2015 and 2020 (kg)


2007/2008

2015

2020

Lao PDR (whole country) Urban


Rural

179.1
130.1 199.0

168
125 192

162
122 187

Emerging Challenges
The country does not have a comprehensive rice policy that cuts across different government institutions, which sometimes have conflicting policy/political objectives on taxes, prices, credit, markets, trade, etc. Policies on promoting rice production and rice market and trade seem to be separate. Growing competition between rice and other crops (coffee, rubber, bananas, maize and cassava) has caused the shift of rice growers to other crops, reducing areas planted to rice for household food consumption. The proportion of rice farming to households decreased from 77% (1998/99) to 71% (2010/11) (Agriculture Census, 2010-11). Climate change

Emerging Challenges (contd)


Labor shortages and resulting increase of costs of farm labor due to the ongoing shift of farm labor to non-farm sectors. Current (trade policy) focuses on keeping domestic rice price low (non-incentive), which may not be optimal in a situation of increasing rice surpluses. Increasing job opportunities (non-agriculture sector). Modern processing/milling and postharvest facilities are not developed, with very limited investments, resulting in the low quality of milled rice. Investments on extension service are limited.

Options for Improving Rice Sector Policies


Facilitate Trade in Paddy and Rice:
Create a transparent trade (export) environment for both white rice and paddy, with clear and easily monitored rules at the borders. Substitute all bans at central and provincial levels with an indexed variable export tax. Establish a clear coordination of arrangements between MOIC and MAF to determine particular trade policy decisions. Establish better information base on production, consumption, and trade flows.

Options for Improving Rice Sector Policies (contd)


Allow formal and informal exports of paddy:
Laos borders two large rice exporting countries, Vietnam and Thailand, with highly competitive milling and transport infrastructures. The main constraint for export of Lao milled rice is the high cost of milled rice relative to quality, but cheaper production costs of paddy than its competitors (Vietnam and Thailand). Thai and Vietnamese traders are interested in importing cheap glutinous rice from Laos that they mill in their countries. Overcoming milling constraints would require significant private sector (both domestic and foreign) investments in medium- and large-scale modern mills.

Options for Improving Rice Sector Policies (contd)


Strengthen Emergency Rice Seed and Food Reserves: Emergency rice seed and paddy reserves for populations affected by natural disasters and target food aid groups It is suggested that a reserve of 30,000 to 60,000 tons may be able to meet the food security needs of such groups. Improve the efficiency and effectiveness of public investments (need more balance between extension and irrigation/infrastructure): Improve the efficiency of budgetary allocations to agriculture, need to balance approach between investments in (1) extension, technology development and transfer (good seed), postharvest management, credit, development of national rice standards, and (2) irrigation.

Options for Improving Rice Sector Policies (contd)


Establish the foundation for the development of the rice seed sector key to achieving production targets/productivity growth: Identify options for improved planning and coordination of the work between DOA, NAFRI and NAFES Review and rationalize the seed production stations Identify options for private sector involvement Establish National Seed Board (NSB) Allocate annual funding for core seed production (Basic Seed, R1 and R2) at about 300-350 tons by 2015 Encourage and support the development of the private seed distribution system and piloting of privatization or stateowned enterprise of some seed stations

Rocket festival in Laos

Thank you for your kind attention

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