Contract Farming in Lao PDR: Cases and Questions - LAD - nafri

companies to sign direct contracts with the farmers. The unit
will then monitor contract implementation,” says Boonpon.
Laotian traders need contracts with deposits from their Thai
customers because they are short of capital. “The problem
is today the Laotian companies do not have enough money
to buy the products from the farmers; they depend on the
financial resources of the Thai companies,” says Boonpon.
Farmers also struggle to find capital. “One constraint is the
limitation of funds. If you want to expand your fields you have
to hire people to work on the fields,” says Samlong, one of
the cabbage farmers.
Reaching out
He is however looking further afield where prices may be
higher. “We want companies to come that have orders from
foreign partners other than Thais, or with Thai supermarkets
which pay higher prices than fresh markets.”
Inpeng is planning to visit trade fairs to find customers in
other countries to break out from dependency on wholesale
distributors in Thailand. “I would like to find new markets
for ginger, banana and beans, like soya and peanut, and
especially for Chinese cabbage and cabbage, which I think
we can get a better price for in Malaysia, Singapore and
Indonesia than in Thailand,” she says.
Even the trade office notes the shortage of capital as a barrier
to expansion. “Recently we have been able to borrow money
from the bank for buying seeds and fertilizer. The bank will
not however grant loans for expanding cultivation land. If
we can get access to more finance we could expand the
production of other crops,” says Boonpon.
Working in the dark
Yet making more money available for loans might bring its
own problems because there is a lack of information about
opportunities and knowledge of trends within agriculture. “I
don’t know what’s happening in Thailand or Vietnam. The
only way I can get information about prices is calling a guy at
the border,” says Samlong.
Prices alone are probably not sufficient to make wise
decisions on what crops to plant and how much. “It’s not
easy for us to access information, here we do not have
internet. Television only gives us information about Thailand,”
says Boonpon.
Her company has recently acquired a 209 hectare concession
which will be used to increase supply by working with
farmers under contract arrangements. “We will assign land
to farmers, for example one family two or three hectares, as if
they own the land. They will plant the crops for the company,
which will provide extension services, fertilizer, seeds.”
In Paksong the experiment with regulated production
arrangements has during its short existence seemingly
proved a hit with farmers, traders and officials, despite the
differing interpretations of the agreements.
The challenge however is to sustain and develop the
emerging regulated production and trading system in the
face of risks posed by Laotian traders with inadequate
financial resources or unsecured orders from processors or
distributors in Thailand or beyond.
Information drought is one of the reasons Inpeng regularly
visits Talaad Thai and Si Moom Muang, the major wholesale
markets in Bangkok. “It’s difficult to access information
about prices and markets, for example we have to find that
information ourselves, sometimes we cannot find it on the
internet because the Thais don’t give the real price, we have
to go to the market to see for ourselves.”
Nevertheless despite the information hurdles, officials
and traders are optimistic about prospects for expanding
production under the evolving regulated contract system. “I
think in the future contract farming can expand and develop
because the Thai government has agreed to reduce the
import tax to zero on 13 products,” says Boonpon.
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