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Towards Responsible Agricultural Investment in Laos 14 Towards responsible agricultural investment in Lao PDR A study of agribusiness experiences As a federally owned enterprise, GIZ supports the German Government in achieving its objectives in the field of international cooperation for sustainable development. Published by: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany Friedrich-Ebert-Allee 36 + 40 53113 Bonn, Germany T +49 228 44 60 - 0 F +49 228 44 60 - 17 66 E [email protected] I www.giz.de Programme/project description: Programme Responsible Land Policy Friedrich-Ebert-Allee 13 53113 Bonn, Germany Author: Justine Sylvester Responsible: Dr. Klaus Ackermann Design/layout: Jeanette Geppert pixelundpunkt kommunikation, Frankfurt Photo credits/sources: Cover, p.31 GIZ/Bart Verweij; p. 7, p.18, p. 22, p. 27, p. 29 GIZ; p. 14 shutterstock/ BePhumirat; p. 25 shutterstock/CHOKCHAI POOMICHAIYA; p. 37 shutterstock/Tanes Ngamsom URL links: This publication contains links to external websites. Responsibility for the content of the listed external sites always lies with their respective publishers. When the links to these sites were first posted, GIZ checked the third-party content to establish whether it could give rise to civil or criminal liability. However, the constant review of the links to external sites cannot reasonably be expected without concrete indication of a violation of rights. If GIZ itself becomes aware or is notified by a third party that an external site it has provided a link to gives rise to civil or criminal liability, it will remove the link to this site immediately. GIZ expressly dissociates itself from such content. Maps: The maps printed here are intended only for information purposes and in no way constitute recognition under international law of boundaries and territories. GIZ accepts no responsibility for these maps being entirely up to date, correct or complete. All liability for any damage, direct or indirect, resulting from their use is excluded. On behalf of German Federal Ministry for Economic Cooperation and Development (BMZ) Bonn, Germany GIZ is responsible for the content of this publication. Eschborn, June 2018 2 Towards responsible agricultural investment in Lao PDR A study of agribusiness experiences 3 TABLE OF CONTENTS Executive Summary 06 1. Introduction 08 1.1 Methodology 09 2. Global trends towards responsible agricultural investment 12 2.1 Multi-Stakeholder Approaches to Responsible Agricultural Investment 12 2.2 Agricultural investment in Laos 13 2.3 Moving towards Responsible Agricultural Investment in Laos 14 3. Domestic legal and regulatory frameworks governing agricultural investment 16 3.1 International standards and guidance in the Lao context 17 3.2 Regional guidance and standards 18 4. Findings from the field: from large-scale concessions to alternative investment models 20 4.1 Local level agreements and the concession obsession 21 5. Success factors for agricultural investment in Laos throughout the project cycle 26 6. Implications for stakeholders working towards RAI 30 Annex 1: Terms of Reference 32 References 34 ACKNOWLEDGEMENTS Research Team: Avakat Phasouysaingam, Juliet Lu, Chansamone Souvanhsai, Sommith Manylert and Hanno Fuehren. The team would like to sincerely thank all of the community members, company representatives, government officials, development partners and civil society organisation staff who kindly gave their time during fieldwork for this study. 4 SELECTED LIST OF ACRONYMS BMZ German Federal Ministry of Economic Cooperation and Development CFS Committee on World Food Security CSO Civil Society Organisation ELTeS Enhanced Land Tenure Security project FAO United Nations Food and Agriculture Organisation FDI Foreign Direct Investment FPIC Free, Prior and Informed Consent GIZ Deutsche Gesellschaft für Internationale Zusammen- arbeit LAK Lao currency (kip) LMDP Land Management and Decentralized Planning project MAF Ministry of Agriculture and Forestry MONRE Ministry of Natural Resources and Environment MPI Ministry of Planning and Investment MRLG Mekong Region Land Governance project OECD Organisation for Economic Cooperation and Development RAI Responsible Agricultural Investment SEL Stora Enso Laos USAID United States Agency for International Development VFI Village Focus International VGGT Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests within the Context of National Food Security 5 EXECUTIVE SUMMARY Executive Summary In 2017, a research team documented diverse experiences To capture a diverse range of experiences, agribusiness of agricultural investments in Lao PDR (Laos), for a study selections were based on geographical factors (southern commissioned by the Global Programme on Responsible and northern Laos), land arrangements (contract farming, Land Policy, implemented by GIZ on behalf of the German non­state land leasing, state land concession1, and mixed Federal Ministry of Economic Cooperation and Devel­ arrangements), amounts of capital invested, and country opment (BMZ). The study sought to identify factors for of origin of the investors. Access to the investment sites making agricultural investments more responsible in the Lao was facilitated by the GIZ Land Program in Laos, and the context, and to examine the extent to which international Ministry of Planning and Investment (MPI). Interviews guidance shapes interactions between the various stake­ were conducted with relevant government representatives holders, especially with local communities. In particular, at national, province and district levels, as well as with the team examined agricultural investment in Laos with communities impacted by the investments, company repre­ regards to the 2012 Voluntary Guidelines on the Responsible sentatives, and civil society organisations in Laos. Governance of Tenure of Land, Fisheries and Forests within the Context of National Food Security (VGGT), and the 2014 Principles for Responsible Investment in Agriculture Key Findings and Food Systems (CFS Principles). This study found a general lack of awareness and under­ The study team selected six agricultural investments across standing of international guidance across stakeholder Laos. Recognising the lack of private sector perspectives groups, with the exception of some multinational agribusi­ in most literature in Laos, this study gathered information nesses, a handful of central government officials, and some directly from six agribusinesses, including: civil society organisations working on land issues in Laos. Yet many stakeholders confirmed a growing interest in ap­ Two Chinese rubber companies, Thaijieng Rubber plying this international guidance – particularly the VGGT Company and Yunnan Natural Rubber Company, in – within the Lao context. The study also found that regional Luang Namtha province; guidance recently developed by neighbouring countries such Mitr Lao Sugar Company, a Thai sugar and energy as Thailand, Vietnam and China has untapped potential to (biofuels) company in Savannakhet province; positively influence the business practices of agribusinesses Yee Nong Banana Company, a Chinese­owned banana operating in Laos. For example, the Chinese government, company, in Sayaboury province; issued Guidelines for Sustainable Development of Natural Thongtai Trade Company, a joint Lao­Chinese mango Rubber (2017) contain clear principles for responsible and pomelo (mak pook) plantation, in Sayaboury outbound investment, as well as advice for conducting due province; and diligence before proceeding with an investment. Regional Stora Enso Laos, a subsidiary of a Swedish­Finnish pulp (“non­Western”) actors need to be brought into the dialogue and packaging company with eucalyptus plantations in and efforts towards responsible investment. Savannakhet and Salavan provinces. 1 A land concession is the process of giving authorization to individuals or legal entities to operate business with the right to use state land, based on terms and time limit specified in the contract (Decree on State Land Lease or Concession, No.135/PM, 25 May 2009). For simplicity, concessions and state land leases are often referred to as ‘land deals’. 6 EXECUTIVE SUMMARY This study also found a trend away from large­scale state Support negotiations that enable third parties (civil land concessions towards contract farming and non­state society organisations, paralegals) to play an advisory land leasing, driven both by government policies and by role throughout the negotiation process. Increased civic investors seeking alternatives to large­scale land concessions. space is also needed to allow civil society organisations to Support for smaller­scale, locally­agreed investment models operate freely in Laos. is also contained in international guidance, such as USAID’s Develop a common language and shared understand- Operational Guidelines on Responsible Land­Based Invest­ ing of what constitutes ‘sustainable’ and ‘responsible’ ment (2015), which advises investors to seek models such investment in Laos, based on internationally recognised as “contract farming or smallholder outgrower schemes”. principles and standards. Chapter 12 of the VGGT also urges governments to consider Government and other stakeholders should capture and promoting a range of production and investment models share aggregated data on the sizes, locations, and im- that do not result in the large­scale transfer of tenure rights pacts of contract farming arrangements. This is a key to investors. step towards greater
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