Promoting Cluster and Value Chain Development in Three Agricultural Sectors in Lao PDR


I attended the 5th International Conference on Lao Studies held at the Tha Prachan campus of Thammasat University here in Bangkok. The conference went quite well – I was only able to attend the second day, although of course everybody was being careful about what they were saying. More information on the conference is available here.

I could not present my paper on special economic zones but I was able to present (with co-author Nittana Southiseng, who was not able to attend):

Promoting Cluster and Value Chain Development in Three Agricultural Sectors in Lao PDR


Research was conducted into three agricultural sectors in Lao PDR to determine the extent to which clusters of complementary activities had been forming and how value chains were performing. The sectors were organic rice, organic vegetables and white charcoal (bintochan). Organic agriculture is a potentially important area for Lao PDR, a low income country, since many farmers operate on a de facto organic basis anyway, although certification is not available domestically. In common with white charcoal, organic produce will mainly be intended for export, primarily to or through partners in Thailand since Lao PDR is a landlocked country and one at a disadvantage, therefore, concerning export prices. The three sectors studied are at a comparatively early stage of development and each has some significant production issues yet to overcome. Respondents within production groups continue to focus on personal relationships and group management issues, while also acknowledging lack of access to markets, skills and capital that are common to small businesses around the world. Government agencies lack resources and technical capacity necessary to help link production groups to markets on an advantageous basis and the limited nature of the domestic market means that few well-equipped entrepreneurs have been attracted to take a role. However, some small private networks have been created in the white charcoal sector to move the products to Japan and Korea, where they are greatly valued as fuel for barbecues in the restaurant industry. For vegetables and rice, it will be necessary to establish cross-border relationships with operators in neighbouring Thailand, Vietnam and China, where there are large domestic markets, preferably on an equitable basis. It is not clear how this should best be approached from the perspective of public sector agencies, which tend to feature people who are suspicious of private sector organizations and of the potential for market relations to exert a form of neo-colonialism over what are considered to be national interests. Recommendations are made at various levels as to how networks can be established and existing ones strengthened. Adding new and more profitable stages to value chains, through issues such as packaging and branding, is also discussed.

Keywords: agriculture, clusters, Lao PDR, organic agriculture, value chains

Nittana Southiseng, SME Development Advisor, GIZ-RELATED project, Vientiane Lao PDR

John Walsh, Director, SIU Research Centre, Shinawatra University, Thailand

This research project was supported by a grant from the Economic Research Institute of Trade of the government of the Lao PDR.