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Bamboo Handicrafts / Viengxai Farmer Organizations: Opportunities, Constraints and Pathways for Development Report for the Sub Working Group on Farmers and Agribusiness (SWGAB) By Adam Folkard Bountheing Virvong John G Connell Viengxai Photakhoun November, 2011 Imprint Title: Farmers Organisations: Opportunities, Challenges and Pathways for Development Year: 2011 Authors: Adam Folkard, Bountheing Virvong, John G Connell & Viengxai Photakhoun Disclaimer The views, opinions and interpretations expressed in this report are those of the authors at the time of research and writing. They should not be interpreted as representing official or unofficial views or positions of the Swiss Agency for Development and Cooperation and its officers and representatives, or any other government or non-government organizations. Report jointly produced by: Laos Extension for Agriculture Project (LEAP) and Small-scale Agro-enterprise Development in the Uplands of the Lao PDR (SADU) For Sub Working Group on Farmers and Agribusiness (SWGAB) National Agriculture and Forestry Extension Services (NAFES) Laos Extension for Agriculture Project (LEAP) P.O. Box 9159 Vientiane Lao People’s Democratic Republic Tel: +856 21 740 253 email: [email protected] www.helvetas-laos.org www.laoex.org This study was funded by Swiss Agency for Development and Cooperation (SDC) Executive Summary The role of Farmer Organisations (FOs) is emphasised in the new Agriculture Development Strategy (ADS) of Ministry of Agriculture and Forestry and GoL has recently promulgated decrees that provide a formal basis for farmer cooperatives and associations. This study was initiated by the Sub Working Group on Farmers and Agribusiness (SWGAB) with the objective to better understand existing typology of farmer organisations and possible trajectories for their role in developing the agriculture sector. The study focused on FOs currently in operation in Lao PDR, selecting cases to represent diverse products, broad geographical areas, and forms of organization. The study team visited nineteen sites in north, central and southern Laos, with FOs engaged in production and marketing of field crops, livestock, NTFPs, horticulture and handicrafts. FO are characterised according to their ‘functions’ and the ‘added value’ that these functions generated rather than focusing on ‘structure’ that can disguise a lack of activity of groups. This led to the following classification: A. Informal farmer production groups Farmer Production Groups for receiving (FPG/R) Farmer Production Groups for trading (FPG/T) B. Formal farmer organisations Farmer Cooperatives (FC) Farmer Associations (FA) C. Value chain / private sector driven groups Farmer Group Enterprise (FGE) Constructive Contract Farming (C-CF) Farmer organisations did provide direct benefits to their members: access to resources resulting in increased production; higher prices through collective trading; and access to services and thus improved value-added being captured by farmers. The cases also showed that FOs can play an important role in rationalising agriculture production in Lao PDR; increasing smallholder productivity, achieving consistent, marketable quantities and qualities, and enabling constructive engagement between producers and (private-sector) buyers. But benefits were by no means general, and the opportunity for the various types of FO to contribute to farmers’ livelihoods and agriculture development at this point variedy. The FO’s long favoured by projects (FPG/R) generally did not persist once projects ended. Where they did continue with their production function (e.g. WUGs), they showed no indication to expand membership or evolve. FO's which were linked to markets were dynamic. The Farmer Production Group/Trading enabled farmers to bulk their product and to trade collectively, resulting in significant price increases (10-30%). This was gained not from stronger bargaining power, but due to the added value the bulking function provided to traders. Such FOs tended to seek additional members and encourage members to use improved practices, to increase both volume and improve quality. Thus they contribute to an improved sector. Such groups can be formed relatively easily without formal procedures and without much investment by the farmers. As such they represent an opportunity that could be supported in many areas. The FPG/Trading could provide a useful stepping stone towards development of Farmer Cooperatives and Associations. However, this transition should not be seen as an automatic - nor even a universally desirable one. These higher level FOs do allow farmers to capture greater benefits, but they require farmers to invest in equipment and market their product themselves. Thus they are exposed to quite some risk. However, there are some doubts whether they have the robustness and flexibility to survive the rough and tumble of the market place. These FOs do have a particular role to enable registration for Fair Trade and Organic certification to its member farmers to access value markets. However procedures to establish new farmer cooperatives and associations are not easy and time consuming. It is ii also difficult to see that these will become widespread in the near future, except where committed assistance from an external organisation is available. The value-chain and private-sector-driven groups provide worthwhile alternatives to farmers' cooperatives and associations. These provide services, inputs at reasonable rates and markets access to the farmers. They can be mobilised quickly and are flexible without farmers having to invest funds or be exposed to market fluctuations. These have resulted in significant production increases, particularly in the rice sector. There were indications that as the groups initially formed by the private sector, became confident in their commercial levels of production, they begin to consider moving towards forming cooperatives or associations. Thus these ‘private sector driven groups’ may well be an indirect path towards emergence of farmer cooperative and associations. A numbers of confounding issues were also identified. All sites studied which had effective FOs, were areas with “open markets”. Market distortions (including concessions, monopsonies, exclusive trading rights and closed markets) severely limit FO to improve the market position of their members. Indeed, such market distortions hold back development of the agriculture sector overall, by supporting inefficient private sector operators. These are often entrenched and difficult to dislodge. Support for dynamic Farmers Associations could well be one of the strategy to expos and deal with market distortions at the local level. FO plays important roles both in enabling smallholders and developing the agriculture sector. Many challenges exist to the realisation of this potential. The study recommends proceeding within those areas where greatest potential currently exists. Two steps are ready for action and a third requires active development. Support for establishment of ‘FPG for trading’. These have a wide applicability and are within existing capacity of many project and extension staff to facilitate. They require limited funds mainly to mobilise staff. They generate valuable experience for their members, and may be a stepping stone towards more formal structured FOs later. Support for value-chain, private-sector-driven initiatives. Linkages between farmers and the private may need to be facilitated. As they become established the FOs can be strengthen to be independent of the private sector, and networked into Farmer Associations to provide a framework for farmers to dialogue with both the private sector and local authorities. Continued exploration of the more complex FO types (especially farmer cooperatives) - support pilots when adequate facilitation is available, and then exchange to allow improved understanding of the processes needed for establishment of such FOs. Aside from activities aimed specifically at FO development, efforts need to be made to ensure the conditions that favour market distortions are eliminated. Persistence of such distortions will confound any attempt to develop FO in those areas, but is also necessary as a step towards development of mature and efficient agriculture and trading sectors. iii Contents EXECUTIVE SUMMARY .......................................................................................... II CONTENTS .......................................................................................................... IV ABBREVIATIONS ................................................................................................... V 1. BACKGROUND ................................................................................................... 1 2. STUDY METHODOLOGY ...................................................................................... 2 3. FARMER ORGANIZATIONS – TYPES, FUNCTIONS, AND BENEFITS ............................ 5 3.1 INFORMAL FARMER PRODUCTION GROUPS ............................................................ 5 3.1.1 Farmer Production Groups – Receiving (FPG/R) ........................................ 5 3.2.2 Farmer Production Groups / Trading (FPG / T) .......................................... 7 3.1.3 Lessons for Informal Farmer Groups ....................................................... 9 3.2 FARMER COOPERATIVES (FC) AND FARMER ASSOCIATIONS (FA) ............................... 10 3.2.1 Farmer Cooperatives ..........................................................................
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