Foreign Direct Investment (FDI) in Land in the Lao PDR Imprint
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Division 45 Agriculture, Fisheries and Food COOPERATIONS DRIVING FACTORS WEAKNESSES IMPACTS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS LAOS KEYFACTS COUNTRY PROFILE CURRENT SITUATION INVESTMENTS OPPORTUNITIES Foreign Direct Investment (FDI) in Land in the Lao PDR Imprint Published by: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH P.O. Box 5180 65726 Eschborn Germany T +49 6196 79 - 0 F +49 6196 79 - 1115 E [email protected] I www.gtz.de Work of Division 45 - Agriculture, fisheries and food, GTZ, Eschborn: Sector Project “Land Management” (Dorith v. Behaim) Sector Project “Agricultural Policy and Food Security“ (Dr. Marlis Lindecke) Future Initiative “AgroInvest” (Dr. Christian Henckes) Responsible, contact: Dorith v. Behaim, Martina Römer, Sector Project “Land Management” Dr. Thomas Breuer, Planning Officer Authors: Oliver Schoenweger, Alfons Üllenberg Source & Copyright of pictures: © GTZ / Oliver Schoenweger Contact to the Federal Ministry for Economic Cooperation and Development Karin Foljanty Design: Jeanette Geppert, www.jeanette-geppert.de Eschborn, December 2009 3 Content Abbreviations 5 1. Summary 6 2. Introduction 7 3. Country Profile 8 4. Land Tenure System and Legal Framework 10 4.1 Legal regulations 10 4.2 Legal Framework for Investors 11 4.3 Problems regarding land acquisition 13 4.4 Land tenure security 14 4.5 National policy 14 5. Investment Forms in Land 15 5.1 Concessions 15 5.2 Contract – Farming (or “Cooperative” private sector agribusiness investments) 15 6. Current Situation 17 7. Investments in Land (Foreign and Domestic) 18 7.1 General Overview 18 7.2 FDI in land in Vientiane Province, Lao PDR 19 7.3 Examples of FDI in Land 22 7.4 Challenges regarding implementation and monitoring of land concessions 24 8. Driving Factors for FDI 26 8.1 From the investors point of view 26 8.2 From the recipients point of view 27 9. Weaknesses 30 10. Opportunities and Risks of FDI in Land in Terms of Sustainable Development in Lao PDR 32 10.1 Opportunities and Risks of Land Concessions for Rural Livelihood 32 10.2 Opportunities and Risks of Contract Farming for Rural Livelihood 33 10.3 Environmental Risks 34 11. How does FDI affect Strategies of Development Cooperation? – Some Recommendations References 36 References 33 4 We would like to express our thanks to Henry Tucker. Some parts of the study, especially chapter 10 Opportunities and Risks of FDI and chapter 11 How does FDI affect Strategies of Development Cooperation are referring to an unpublished study “Foreign Large Scale Investments in Agriculture, Hydropower and Mining: Challenges and Opportunities for Development Cooperation in Lao PDR and Cambodia”, prepared by H. Tucker for GTZ Lao and MRC (Vientiane May 2009). 5 Abbreviations ADB – Asian Development Bank LSC – Land Survey Certificate BOD – Biological Oxygen Demand LTD – Land Tax Declarations BMZ – Federal Ministry for Economic MAF – Ministry of Agriculture and Cooperation and Development Forestry, Lao PDR CIA – Central Intelligence Agency MDG – Millennium Development Goal DAFO – District Agriculture and MEM – Ministry of Energy and Mines, Forestry Office Lao PDR DDFI – Department of Domestic and MIH – Ministry of Industry and foreign Investment, Lao PDR Handicraft DGM – Department of Geology and MoT – Ministry of Trade Mining (Ministry of Industry MoU – Memorandum of and Handicraft) Understanding DLMA – District Land Management MPI – Ministry of Planning and Authority Investment, Lao PDR DSA – Department of State Assets NLMA – National Land Management (Ministry of Finance) Authority FAO – Food and Agriculture NAFRI – National Agriculture and Organization of the United Forestry Research Institute Nations NSEDP – National Socio-Economic FDI – Foreign Direct Investment Development Plan, Lao PDR GDP – Gross Domestic Product NTFP – Non timber forest products GHI – Global Hunger Index ODA – Official Development GMS – Greater Mekong Subregion Assistance GoL – Government of Lao PDR OSA – Office of State Assets GTZ – Deutsche Gesellschaft für PDPI – Provincial Department of Technische Zusammenarbeit Planning and Investment (German Technical Co- PLMA – Provincial Land Management operation) Agency IPMC – Investment Promotion PPP – Purchasing power parity Management Committee SEIA – Social and Environmental LTD – Land Tax Declaration Impact Assessment LFA – Land and Forest Allocation SOE – State-Owned Enterprise LDC – Least Developed Country WFP – United Nations World Food LNCE – Lao National Committee for Programme Energy (Ministry of Industry WREA – Water Resources and and Handicraft) Environment Agency, Lao PDR LPDP – Lao German Land Policy WWF – World Wide Fund for Nature Development Project 6 1. Summary Key facts about the Lao PDR can be summarized as: Official data from 2005 (MAF) reported that • The Lao People’s Democratic Republic is a until 2002 41.5 % of the land area was covered small, landlocked country in Southeast Asia with forest. A more current estimate by the end with a total area of 236,800 km2. Except for the of 2007 from the National Land Management alluvial plains of the Mekong valley below the Authority reported a figure of 35%. Climate con- 200 meter elevation, over 80% of the country is ditions for agricultural production are favourable mountainous, of which a little over half has an for many agricultural products and most parts of elevation between 1,000 and 2,000 meters with Lao PDR do not suffer from water shortages. sub-tropical temperatures. • Nevertheless, pressure on land is increasing, • Though Lao PDR has developed a lot in the last especially in the last decade due to decade with economic growth rates of 7.8% in • resettlement/regrouping programs, especially 2007 and 7.2% in 2008, the country is still one because of the poorest in the region and counts among - ethnic minorities are forced to move from the Least Developed Countries (LDC). The upland areas into the valleys, GDP per capita (at PPP) increased in 2008 to - villages near hydro-power projects and 2,387 USD per year, but 76.8% of the popula- mining areas have to be reallocated, tion live on less than 2 USD per day (2002) and • concessions granted on land which had been 19% suffer from hunger. used by villagers, and • Lao PDR claims to be a food self-sufficient • population growth. country (in terms of rice production), but • Since 2002, many concessions were given to production is not regionally balanced and in national and international companies in order to 47 districts, food aid was given in 2008 to increase agricultural and mining production avoid hunger and famine. which caused an increase in land conflicts. • Lao PDR is divided into 16 provinces and one • Since no official data about the land concessions municipality. Each province is further subdi- is available, GTZ on behalf of BMZ is conduct- vided into districts. 6.7 million people live in the ing an inventory in the two provinces Vientiane country, i.e. on average 27 people live per km2. and Luang Namtha in order to gather informa- • The underdeveloped infrastructure is matched tion about land leasing and land concession by a lack of well educated people - only 61.5% of projects. The results for the Vientiane Province school children reach the last grade of primary are available and show a dramatic increase of school. This creates a bottleneck for further in- FDI in land projects. Just in the Vientiane vestments in the development especially of rural Province, concessions were granted for 293,487 ha areas. (counted are only projects with a size of 100 ha • Nearly 80% (2005) of the population work and more) representing more than 15% of the total in the agricultural sector contributing only surface of Vientiane Province (1,852,500 ha). 42% to the total GDP. Families often practice The largest is the mining sector with 267,381 subsistence farming and do not produce for the ha. Among the agricultural and agro-industry market. In total 1.25 million ha are cultivated sectors land concessions of 12,114 ha were with rice being the main staple food growing granted for the production of agro-fuel on 781,000 ha and representing 68% of the (mostly Jatropha projects), 7,290 ha for rubber cultivated area. production and 5,093 ha for wood production. • It is estimated that on average an agricultural Concession areas for food production counting household has 0.5 – 3 ha for its private use, in for only 1,079 ha. addition to village land and communal forest. • It is estimated that all together concessions for Forests are an important source of income. 2-3 million ha land were granted (including 7 domestic projects), representing up to 13% of sions are not developed yet. In combination with Lao PDR’s total land area. Beside Australia, misuse of power and corruption on all levels, which is engaged in mining activities, the main concessions are sometimes given without investing countries are neighbouring countries respecting the people’s rights to live on these like China, Vietnam, and Thailand, but also lands or are even granted twice, resulting in an South Korea. China and South Korea are mainly increase in land conflicts. involved in food production, probably for export • Forests are often substituted by plantations, reasons. Japanese investors like Oji Paper or meaning that an important source of income (in Indian Birla are also big investors, both focusing terms of NTFPs), especially for the poorest, is on pulp wood production. lost, causing an increase in food insecurity. In • The guidelines for granting land concessions or general, there is no or insufficient compensation leasing contracts are not clearly defined and for loss of access to land/forests. guidelines for the selection of land for conces- 2. Introduction In the last decade the Lao People’s Democratic Land (including forest land) has become an Republic (Lao PDR) has transformed itself into a important resource for industrial use and commer- provider of natural resources (timber, agricultural cial crop production, and demand for land has products, minerals, and energy) for its wealthier been dramatically growing.