Why should agricultural products in Laos be developed as commodities?

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The changing agriculture in Laos has become a hot spot for investment, and opportunities and risks coexist.

Zhang Zhongliang

20 19 12 18 16:25

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Agriculture has always been the pillar industry of Laos' economy, accounting for nearly half of Laos' gross domestic product, and the agricultural population accounts for about 90% of the country's total population.

In recent years, the agricultural development in Laos is quietly changing.

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In the early years, Luang Prabang lacked vegetable varieties and meat supply. Now, celery, big green pepper, big white radish, carrot and lotus root have appeared in the vegetable market one after another. Arched greenhouses have been erected in the farmland of Nanta province, and new varieties of vegetables are being tested; In Pingba paddy field in Shawan Raj province, small agricultural machinery replaced cattle; Around Vientiane, the capital of Laos, a modern agricultural experimental station has been initially built. ...

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Not only does the Lao government actively develop agriculture and increase investment in agriculture, but foreign investors also aim at the development potential of Lao agriculture.

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Laos has many advantages suitable for developing agriculture, and agriculture has become one of the hot spots of foreign investment.

Superior natural conditions

Laos is rich in precipitation and heat, and natural conditions are very favorable for agricultural production. In addition, the central and northern regions are fertile and suitable for farming, while the eastern and southern regions are mainly mountainous and suitable for developing forestry and animal husbandry.

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Rich in agricultural resources

On the one hand, Laos is rich in land resources and biological resources, and the development and utilization rate of agricultural resources is not high, which has great potential for agricultural development; On the other hand, due to the backward economic development in Laos, the ecological environment has not been destroyed and agricultural pollution is less. Therefore, Laos has potential advantages in developing ecological agriculture, popularizing high-quality pollution-free biotechnology and expanding the green agricultural market.

Unique geographical advantages

Laos is located in Indochina Peninsula of Asia, the center of Greater Mekong Subregion, and is a landlocked country bordering five countries. In recent years, Laos has proposed to turn a "landlocked country" into a "land-linked country" and actively responded to the "Belt and Road Initiative" to build China-Laos Railway. At the same time, actively promote the implementation of interconnection plans with ASEAN countries and promote the establishment of regional economic corridors in the Greater Mekong Subregion. With the gradual advancement of these strategic projects, Laos is expected to become the hub of economic relations in the Mekong subregion and the transit center of agricultural products trade.

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Good social environment

The political situation in Laos is relatively stable, the social environment is good, and Laos is adjacent to Yunnan, China, with certain similarities in folk customs and cultural background, little difference in human environment, and more convenient investment exchange. Since the international financial crisis in 2008, Laos' economy has grown at an average annual rate of 8%, making it one of the fastest growing countries in Asia and one of the most favored emerging markets by investors.

Land lease and labor price are low.

Land in Laos can be leased by signing a lease concession agreement, and the price is relatively low. At the same time, the labor price in Laos is also at a low level in Asia.

Machine encounter

The development goal of the Lao Ministry of Agriculture and Forestry is to ensure national food security through clean, safe and sustainable agriculture, and to establish an agricultural production system that has made great contributions to the national economy in accordance with the goals of industrialization and modernization.

At the same time, in recent years, China, Viet Nam, Thailand and other neighboring countries have increased their efforts to encourage domestic enterprises to invest overseas, and have also sought domestic agricultural economic development transformation and overseas economic cooperation, which has provided unprecedented opportunities for agricultural development in Laos.

Experts believe that future investment in agricultural cooperation in Laos can be concentrated in four aspects:

Cooperation in mechanized planting of grain crops

Laos is rich in land resources, with a potential arable land area of more than 700 hectares, and a large amount of agricultural land has not yet been developed. In addition, Laos has preferential land preferential policies and tax policies to attract foreign investment, and the grain produced by enterprises can be exported without export tax, which greatly reduces the cost of grain production and trade and improves the economic benefits of grain planting. Enterprises can also combine the local demonstration base in China to establish the cooperation mode of "enterprise+base+farmer" and "company+base+farmer+scientific research institute".

Source: CCTV

There is great potential for cooperation in green and organic agricultural products projects.

Laos has low development intensity of agricultural resources and good original ecological environment protection. Most farmers in Laos use traditional farming methods. Farmers in most areas have no habit of using chemical fertilizers and pesticides. Agricultural products are less polluted, and they are generally planted all year round. There is great room for cooperation in green and organic agriculture.

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three

Wood processing projects have broad prospects.

Laos has forestland area of 1 188000 hectares, and the timber accumulation is about160 billion cubic meters, ranking first in the world per capita. There are more than 10000 forest species in Laos, with a total timber output of 949.4 million cubic meters. At present, the export of logs in Laos has been restricted, but due to the need of economic development, the government has specially approved the processing and export of some precious timber, and given priority to large-scale and technologically advanced enterprises. The forest resources in Laos are evenly distributed in the three regions, but the timber output is more in the south-central part. In addition, the land and water transportation in Laos is relatively convenient, which is conducive to import and export.

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Cooperative development of renewable biogas energy

The humid and hot climate conditions in Laos are very conducive to the development of biogas energy. At present, it is mainly in the mountainous farmers' settlements in the provinces of Champasak, Savannakhet and Vientiane, where the population density in Laos is relatively high.

The harm of wind

According to the analysis, under the current environment, there are still multiple risks in investing in Laos agriculture.

The government management system is not smooth and the administrative efficiency is low. The cooperation between the functional departments of the Lao government is very low. The government's "window" service for foreign investors has not played a good role, and the complicated project approval procedure is still one of the main reasons for increasing the cost and risk of foreign investment.

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Some existing laws and regulations in Laos are poorly implemented, and there are phenomena of non-compliance with laws and lax enforcement. Foreign companies investing in Laos often encounter a controversial problem, that is, the preferential policies promised by the Lao government in investment agreements are often unable to fulfill their promises in practice. If there is an investment economic dispute in Laos, foreign investors can submit it to the Ministry of Planning and Investment of Laos for settlement. However, in practice, there are many internal procedures and a long time, so it is usually necessary to hire a senior local legal expert as a lawyer or consultant at a high cost, and provide supplementary information and answer related questions in time, which often brings investors a heavy burden of time, manpower, material resources and financial resources.

three

The construction of agricultural infrastructure is not perfect. According to experts' analysis, there is still a big gap between Laos' transportation infrastructure construction and the requirements of foreign investors, and the cost of land transportation is high. It is impossible for the Mekong River to be navigable all the way, and only the section from Vientiane to Binham estuary can be navigable all the year round, so the transportation capacity of the Mekong River is extremely limited. In addition, air transportation in Laos is still in its infancy, which leads to higher transportation costs than production costs, which has a great impact on the material transportation of some products, especially agricultural products. Farmland irrigation facilities are backward, and there are few reservoirs, so irrigation can only take water from the river. However, due to the lack of power grid construction in Laos, the national power grid coverage rate has not reached 100%, and even if many mountain villages are electrified, the cost is high. These two reasons make irrigation a big problem in Laos, which seriously hinders the growth of crops and the economic benefits of investment.

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four

Credit risk of joint venture customers. China's transnational investment in Laos agriculture is mostly private enterprises with limited scale and limited technical and financial strength. Laos has a vast territory, a small population and many ethnic groups. Most of them believe in Buddhism and have their own religious etiquette beliefs. In order to better integrate into the Lao market, joint ventures with local people are often adopted at the initial stage of investment. Therefore, the credit of partners is the key to successful investment. Customers with poor credit cannot perform the contract in time when the contract expires, which will bring great losses to the enterprise. However, many enterprises and even the government in Laos have a weak credit concept and a high rate of contract default. Therefore, before conducting transnational joint ventures, enterprises must fully understand and investigate the cooperative enterprises and choose enterprises with good credit for cooperation.

five

Investing in technology is risky. Green organic agricultural products do not need chemical fertilizers and pesticides, and adopt pure natural planting and stocking methods. However, fruits and vegetables have no chemical fertilizers and pesticides, and they grow slowly and are prone to insects. Therefore, before investing in green organic agricultural products, we must fully understand the local environment and make full and reasonable arrangements for production, processing and logistics, so as to achieve the success of investment. The input of ecological energy biogas also has certain requirements for technology, and the later maintenance is more important. Therefore, we should consider the company's own technology and management capabilities and rationally choose regional investment.

At present, agriculture in Laos has become a hot spot for investment, but in the face of various risks, investors need to fully investigate and understand the actual situation in Laos, give full play to their advantages, and participate in project investment cooperation in a targeted manner.

Source: China News Network, Xinhua News Agency, Rural Land and Rural Revitalization, etc.

Editor: Hennessy

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