Bamboo Value Chain Assessment in Khammouan Province October 05 ‐ 15, 2008

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Prepare d by: Enterprise & Development Consultants Co., Ltd

Buakhai Phimmavong, Vila Chanthavong and SNV NTFP Team

Submit to: Netherlands Development Organization (SNV)

Date: 25 March, 2009

Abstracts

This Bamboo Value Chain Assessment conducted in Khammouan province aims at assessing the current situation of the bamboo handicraft production and sales in the province, including the major opportunities and constraints faced by the actors in the chain, services and key policy issues to be developed and addressed, respectively, assessing the roles of actors and its linkages in the chain and identifying approaches and potential intervention activities for SNV to help promoting the sector in the province. The field work was conducted in October 2008 in 5 districts in the province and also in the neighboring provinces – Quang Binh (Vietnam) and Nakhonephranom (Thailand).

Out of 5 districts, it is found that bamboo handicraft products are made most in Thakhek, Mahaxay and Hinboun districts. They are sold in the provincial and district markets and also transported to other provinces such as Savannakhet, Champasak and Vientiane Capital. The business network from producers to the market has been well established for many years. On another hand, in other districts such as Boualapha and Yommalad, the production mainly serves the household consumption. Among few other bamboo stuff, the main bamboo products that are found in this study are sticky rice boxes, rice trays, fish baskets

(¢Éº¤) and other household appliances such as ¹¸©-, ´¸¨, -À¢ñ-¤. So far, the bamboo products from Khammouane are being exported in the form of semi-woven products only to Nakhonephranom - Thailand, but not to Quangbinh - Vietnam.

The main actors in the bamboo chain include the raw bamboo suppliers, group and individual handicraft producers, wholesalers and retailers/vendors in the provincial and district markets, a Thai importer and end-users. The existing supporting agencies in the province are DoIC, PAFO and the LWU. The relationship among the key actors within the bamboo handicraft value chain in Khammouan province is more or less a market-based type, for instance, the price of the 2 main products - rice basket and rice tray, is normally decided by the buyers and producers and fluctuates seasonally. The bamboo handicraft sector plays an important role in terms of income generation and jobs for the local people.

The constraints of each actor have been identified, based on which four resulting main strategies to address the constraints are formed, which are (1) Raising awareness on bamboo resource management among the relevant Government policies and regulations, (2)

Improving production and design skills for village producers, (3) Dissemination of information on technology, market, production capacity to local producers, traders and all interested buyers, and (4) Building business attitude of villager producers.

Following the SNV’s overall strategy in creating impacts on Productivity–Income– Employment (PIE), all 4 strategies should be considered to be implemented parallel. In terms of location and products to be promoted in Khammouane province, it is recommended that for the domestic market, the production of the rice box and rice tray in Thakhek (Ban Phositha, Nayawai) and Mahaxay (Ban Sangphok) districts has the highest potentials in terms of the number of people involved, the significance of the income generated from the products, the skill level of the producers and the business operation, which has been rather well established.

At the same time, the business cooperation with the Thai trader from Khamtao Handicraft – Nakhonephanom can be further explored for exporting the similar products. Working with Nakhonephanom’s Chamber of Commerce or Trade Promotion Agency is also useful to identify more Thai traders, who are interested to work with Lao producers.

In terms of exploring new products for the new market, the nice souvenir stuff that the producers have started to produce under the LWU-UNIFEM project can be introduced to hotels, handicraft souvenir shops in Thakhek town, in the tourism sites within province and Thai market through Thai traders.

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Table of Contents

Abstracts ...... ii

Table of Contents...... iv

Acronyms ...... vi

Part I: Introduction...... 1

Background to the study...... 1

Study Objectives ...... 2

Study Scope ...... 2

Study Methodologies...... 3

Expected Outputs of the Study...... 3 Part II: Khammouan province bamboo sector ...... 4

Overview of the Study Site ...... 4

Bamboo Handicraft Sector in Khammouan Province ...... 4

Bamboo Value Chain Map...... 5

Bamboo Suppliers ...... 7

Bamboo handicraft producers...... 7

Local traders ...... 7

Wholesalers ...... 7

Retailers /Mobile Vendors...... 8

Foreign Traders ...... 8

Stakeholders Relationship...... 10

Cost and profit ...... 10

Employment ...... 11

Business Environment...... 15

Provincial Department of Industry of Commerce (PDIC) ...... 15

Provincial Agriculture and Forest Office (PAFO) ...... 15

Lao Women’ Union (LWU)...... 16

Provincial Tourism Department (PTD)...... 16

Bamboo Shoot...... 16

Bamboo Woven Mats (Katae) ...... 17 Part III: Market Opportunities, Key Constraints and Market - Based Solutions ...... 17

Market Opportunities ...... 17

Key Constraints ...... 18

Raw bamboo suppliers ...... 18

Producers ...... 19

Wholesalers / retailers / vendors ...... 19

Foreign Traders ...... 23

Market - based solutions ...... 23 Part IV: Recommended Strategies...... 29

Strategy 1: Raising awareness on bamboo resource management in the relevant Government policies and regulations ...... 23

Strategy 2: Improvement of production and design skills of producers...... 25

Strategy 3: Dissemination of information on technology, market, production capacity to local producers, traders and all interested buyers...... 26

Strategy 4: Building the business attitude of village producers ...... 28 References...... Error! Bookmark not defined.

Annex 1: Research Team...... a

Annex 2: List of Interviewed Authorities ...... b

Annex 3: List of interviewed producers and traders ...... c

Acronyms

DAFO District Agriculture and Forest Office

DIC Department of Industry and Commerce

DICO District Industry of Commerce Office

DPI Department of Planning and Investment

EDC Enterprise & Development Consultants Co., Ltd

LHA Lao Handicraft Association

LWU Lao Women' Union

MBS Market-Based Solution

PAFO Provincial Agriculture and Forest Office

PTD Provincial Tourism Department

PTPD Production and Trade Promotion Division

SMEPDO Small and Medium Enterprise Promotion and Development Office

SNV Netherlands Development Organization

UNIFEM United Nation Development Fund for Women

Part I: Introduction

Background to the study

The Netherlands Development Organization (hereafter called SNV) is a development organization providing advisory services to the client organizations in several sectors, which include non–timber forest products. Its interventions in the sector contribute towards the alleviation of poverty and help ensure environmental sustainability. SNV focuses its work on the organizations at the provincial and district level. SNV supports clients working with carefully selected non–timber forest products to strengthen different aspects of the sector, including the marketing of products, and the empowerment of local gatherers and their communities.

SNV’s mission: ‘SNV is dedicated to a society where all people enjoy the freedom to pursue their own development. We contribute to this by strengthening the capacity of local organizations’.

SNV’s overall strategic goal for the coming subsidy period (2007–2015) is to: ‘Support local actors to strengthen their performance to effectively realize poverty reduction and good governance.’

This goal reflects SNV’s conviction that the need for capacity development services to local actors is important. For poverty reduction to be successful in the medium and long term, such services need to be locally owned, sustainable, and increased in both range and depth.

At the national level the organization aims to build capacity to support the creation of an effective enabling environment for the sector.

SNV delivers advisory services to the non – timber forest product sector in Lao PDR to achieve the following:

Sustainable non – timber forest product resource management including domestication of wild products where appropriate,

An enabling environment for non – timber forest product cultivation, harvesting, processing and marketing,

Develop of non – timber forest product enterprise and business services.

Until 2010, SNV’s activities in non – timber forest products will focus on:

Building the capacity of local organizations to deliver sustainable support services to a wide range of actors across the sector, including those involved in gathering and marketing non – timber forest products,

Strengthening the value chain of specific products, by enhancing collection methods, introducing product processing and developing markets to increase income generation potential,

Promoting sustainable forest management and community empowerment,

Providing knowledge development, brokering and networking services to the sector,

Building capacity to ensure that governance, gender and social inclusion practices are integrated within the sector,

Providing access to finance services and business development expertise.

To identify possible interventions in the sector, SNV decides to carry out this study on Bamboo Value Chain in Khammouane province.

Study Objectives

The Bamboo Value Chain Study aims to:

Assess the current situation of bamboo value chains, the major opportunities and constraints for its development, needed services to be developed and main policy issues in need to be addressed for the identified value chain. Assess the roles of actors and its linkages in the value chain of bamboo. Identify potential intervention activities for SNV in Khammouan and its approaches.

Study Scope

Five districts were selected as the study areas, namely Thakhek, Bualapha, Mahaxay, Yommalath and Hinboun. Those are known as the existing bamboo handicraft production and bamboo resource availability. Moreover, Nakhonphanom – Thailand and Quang Binh province - Vietnam were visited in order to find out the existing and potential business relation between Lao and neighboring markets. The study covered key informants in the value chain, such as raw material suppliers, producers, traders, wholesalers, retailers.

Government authorities were also covered such as PAFO, DAFO, DoIC, DICO, PTD and LWU.

Study Methodologies

The study was conducted based on the secondary and primary data. The primary data was collected through semi-structured interviews using guiding questions for different informants. The field trip to 5 districts in Khammouane province, Quang Binh province – Vietnam and Nakhonphanom province - Thailand was conducted from Oct 4 to 14, 2008 by a joint team between the Enterprise & Development Consultants Co., Ltd (EDC), 2 SNV advisors and a coordinator from PAFO. The Deputy Director of PTD also accompanied the team to Nakhonephanom - Thailand in order to interview a Thai handicraft trader.

Expected Outputs of the Study

Overview of bamboo value chains, analyzing its position in social and economic terms, growth, employment, major constraints, linkages among players in the sector. Resources status and potential development: species, amount and resource locations, market opportunity assessment (demand, supply and competitiveness). Description of players with their roles and responsiveness to backward and forward actors in the chosen value chains. Local sector enabling environment o Assessment and issues analysis of investment, trade, land rights, forestry policies etc. o Evaluation of role of bamboo in Provincial Economic Development Plans. Proposed activities for SNV intervention for the development of the chosen value chains.

Part II: Khammouan province bamboo sector

Overview of the Study Site VIETNAM Khammouan ( is a province of Laos, located in ຄາໍ ມວນ່ ) the center of the country and covering 16,315 km2 (See the map). To the north it is bounded by Bolikhamxay; to the south, by Savannakhet, to the west is the Mekong THAILAND and Nakhonphanom Province, Thailand and the Annamite Mountain Range separates Khammouan from Vietnam. There are approximately 358,800 inhabitants (2004 estimation). The province is made up of the following districts: 1) Bualapha, 2) Hinboun, 3) Mahaxay, 4) Nakai, 5) Yommalath, 6) Nongbok, 7) Thakhek, 8) Xaybuathong and 9) Xebangfay.

The vast forests of the Nakai - Nam Theun Biodiversity Conservation Area are an important watershed that feed many Mekong tributaries as well as form the catchment area for Nam Theun 2, the largest hydropower project in Laos. Xebangfay, Hinboun and Nam Theun are the main rivers of the province.

Source: http://en.wikipedia.org/wiki/Khammouan

Bamboo Handicraft Sector in Khammouan Province

In Khammouane province, bamboo handicraft products are produced most in Thakhek, Mahaxay and Hinboun districts. They are sold in district markets and transported to other provinces such as Savannakhet, Champasak and Vientiane Capital. The business network from producers to the market has been well established for many years. In another hand, in other places such as Boualapha and Yommalad districts, the production mainly serves the household consumption. Among few other bamboo stuff, the main bamboo products that are found in this study are sticky rice boxes, rice trays, fish baskets (¢Éº¤) and other household appliances such as ¹¸©-, ´¸¨, -À¢ñ-¤. A brief description about bamboo shoot and woven bamboo mats is also found in this part.

Bamboo Value Chain Map

The Bamboo Value Chain Actors in Khammouan are divided into the key actors and the supporting organizations. The key actors are people, who play a direct role in the flow of the products and the transactions from raw material to the customers. The supporting organizations are those providing technical and regulatory facilitation to the flows of the products in the chain (See Diagram 2.1). This part also includes the description about each actor in the chain.

Diagram 2.1: Bamboo Handicraft Value Chain Map in Khammouan province

Bamboo Handicraft Value Chain Map in Khammouan

End Users Utilization

Traders Assembling Villagers

Importing / Thai Traders Drying (Nakhonphanom)

Utilization End User

Retailers / Vendor

DTP - DIC / UNIFEM Trading - LWU / PTD Wholesalers

Local Traders

Production Individual farmers / Producer groups

Input Supply Farmers within villages and Extension center - other villages DAFO

Function Value Chain Key Actor Supporting Actor

Foreign Actors Export flow

Domestic Actors Domestic flow

Bamboo Suppliers

Bamboo suppliers are the ones, who cut bamboo in the forest in order to sell to the producers. In fact, they have a relatively small role in this value chain because bamboo resources are still available in most villages. In addition, the current bamboo production scale is relatively small at the household level, therefore, the producers mainly harvest the raw bamboo by themselves in their own yard or in the nearby forests. Only in some villages such as Phonsitha , Sangphok , Nayawai , where the (ໂພນສທາີ ່ ) (ສາງ້ ພອກ) (ນາຍາ່ ຫວາຍ) specific bamboo species is not available, the producers have to buy from other villages such as wild rattan and the bottom parts of rice basket.

Bamboo handicraft producers

The bamboo handicraft producers account for the largest proportion in the chain. They consist of many individuals and few groups of producers. The individual producers are the local villagers, who are not involved in a group. They normally produce and sell directly to traders, who come to buy at their place or through other villagers, who go to the district market.

Producer groups are those, who gather to produce a certain kind of products and sell them in a bigger volume such as the group producing rice trays at Nayawai village. The raw material is both bought from the input suppliers and/or harvested by the group members. The products are collected by wholesalers and/or local traders, who sell to the Km 3 market in Thakhek towns or to Thailand.

Local traders

This is an important actor in the bamboo value chain since they manage the distribution of the different types of products in the market. This actor plays a crucial role in collecting products from different villages and transfer to the local market. More importantly, they are the only actor, who brings the Lao products to Nakhonphanom province in Thailand, which seems to be a promising market for bamboo handicraft products in Khammouan at present, thanks to the big demand for bamboo products in Issan provinces, according to the Thai handicraft buyer.

Wholesalers

Souksomboun or Km 3 market is the major hub for bamboo products in Khammouane province. In the market, there are mainly 5 handicraft shops selling numerous types of

products, which are mainly bought through local traders or producers directly. The major source of products in Km 3 market are from Phonsitha , Kengyang , (ໂພນສທາີ ່ ) (ແກງຍາງ້ )

Nayawai , Sangphok and Vientiane Capital. Selling prices are (ນາຍາ່ ຫວາຍ) (ສາງ້ ພອກ) normally marked up between 2,000 - 3,000 Kip from the buying price.

Retailers /Mobile Vendors

Another important actor in the bamboo value chain is retailers or vendors in Km 2 market, district markets and along the streets in Thakhek town. The products are usually received from the wholesalers and/or bought directly from producers. Another way of selling is used by the mobile vendors, who receive the products from the retailers in Km 3 market and go around the town to sell. This selling approach is relatively effective since most of the products are at a big size, therefore, it is more convenient for the users to buy them near their home.

Foreign Traders

The only link between Lao bamboo products and foreign market is a handicraft business in

Khamtao village called Khamtao Handicraft (ຈກສານັ ຂາມເຕາ່ ົ ) in Nakhonphanom province, which seems a promising market for the bamboo products in Khammouan province. The

Thai trader bought semi-finished bamboo mats from Dong Village in 3 sizes. The (ບານ້ ດງົ ) mats were further assembled into food coverings. “Khamtao Handicraft has been established for 10 years, and our business is doing quite well”, said the owner of Khamtao

Handicraft Mrs. Latsamee (ລດສະໝັ ີ). She gave the semi-finished products to the nearby local villagers for assembling and took back for drying. After that, those products were sent to the same villagers for the final finishing. She received the Lao products through Lao traders, who collected many different places such as Tha Ngam , Dong Tai from (ທາ່ ງາມ)

, and Sangphok Village. See details in Diagram 2.2: Bamboo Handicraft (ດງໃຕົ )້ (ສາງພອກ້ ) Value Chain Map in Nakhonphanom.

According to Mrs. Latsamee, there were currently 40 - 50 vendors, who bought from her and sold in different villages in Issan areas. A vendor could generate an average revenue from 20,000 - 30,000 Thai baht per month. In her opinions, the quality of the Lao products that she got was not consistent and relatively poor. Even though she has given feedback to the producers through the traders, a very little improvement was made so far. Therefore, she applied a strict quality control and immediately rejected the products that did not meet her standards. The reason she still bought from Laos was because of the availability of May

Thea (-Ä´É-ÁêÉ), which was no longer available in Thailand. So far, she could get only 60 to

70% of the volume she would need, which was about 1,000 mats per week. She solely relied on her Lao regular traders since she had no information where else in Khammouane makes bamboo products and was able to supply to her.

Diagram 2.2: Bamboo Handicraft Value Chain Map in Nakhonphanom

Bamboo Handicraft Value Chain in Nakhonphanom

Utilization End user

Trading Local trader

Assemblage / Local Villagers Sewing

Import / Drying Khamtao Handicraft

Function Actor

The study team also visited Quang Binh - a province in Vietnam that had border to Khammouane to find out existing and potential business links. The bamboo production in the province had been advanced to the scale of a medium-sized processing factory with machinery and almost 100 full-time workers. The factory received the bamboo mats from

thousands of smaller processors in other provinces like Thanh Hoa, Nghe An, Quang Nam and Quang Binh and then further processed them and wood into wooden boards for construction of high buildings. At the moment, its main source of bamboo supply came from Vietnam but in the near future, when the expansion of 1 more production plant is materialized, the company planned to explore possible supply of bamboo from Laos.

Stakeholders Relationship

The relationship among the key actors within the bamboo handicraft value chain in Khammouan is more or less a market-based type. The price of the rice basket and rice tray, which are two main products in the chain, is normally decided by the buyers and producers and fluctuates seasonally. The period when the price normally drops is from October to December. To cope with this, the producers have the tendency to stock the products and wait until the price goes up again. In terms of influencing the product quality, the Lao wholesalers and retailers did give feedback to the producers but looking at the products, it seemed the feedback was not much taken into consideration.

For export to Thai market, the importer in Nakhonephanom has a higher power over the Lao products than the Lao buyers. The purchasing price, product qualification and quantity are set by the importer, for instance, it must be 3 sizes with the buying price for a 48-inch mat of 50 Baht, the weaving must be fine and the total volume per week is 1,000 mats. The products, which do not meet the standards, are immediately returned. However, so far, the importer still has to rely on the products from Laos because of a specific raw material called may thea, which is no longer available in Thailand. Further more, despite the Lao producers are not able to perfectly meet the importer’s requirement in terms of quantity and quality, the price of Lao products are considered low.

Cost and profit

Bamboo handicraft production requires different types of materials. Some of them are available nearby in the village but some are bought (See Table 2.1). There are mainly 5 elements in a sticky rice box production. The volume used for labor cost calculation is 4 units per day with the assumption of 25,000 Kip for labor fee per day. The total cost for one box is 9,000 Kip and the profit is 3,000 Kip. Surprisingly, a medium-sized rice tray costs 33,000 Kip but is sold at only 20,000 Kip, which means the producers make a loss of 13,000

Kip. The volume used for labor cost calculation is 1 unit per day with the assumption of 25,000 Kip for labor fee per day.

Table 2.1: Cost and profit of Sticky rice box and rice tray

No. Sticky rice box Lao Cost No. Rice tray Lao Cost

1 Labor cost ແຮງງານ 6,000 1 Labor cost ແຮງງານ 25,000 2 Box leg ຕນີ 1,500 2 Tin pea ຕນແປີ 3,000

3 Douk khong ໄມດູ້ກໂຄງ ່ 1,000 3 Yong ຍອງ່ 5,000 4 Bamboo ໄມໄຜ້ ່ 300 4 Por than ປທານໍ - 5 Rattan ຫວາຍ 200 5 Khong ໂຄງ້ - 6 Kong ກງົ - Total Unit cost: 9,000 Total Unit cost: 33,000 Unit price: 12,000 Unit price: 20,000 Profit margin: 3,000 Profit margin: - 13,000

Rice trays and rice boxes become the major source of income in some villages, such as Phonsitha village in Thakhek and Sangphok village in Mahaxay district, respectively. The average household monthly income is 1,440,000 kip (See Table 2.2). On the other hand, rice tray producers in Nayawai village take this activity as the additional source of income. The reason is that for the immediate benefit, the profit margin from bamboo weaving is far lower in comparison to other activities, for instance selling red ant eggs 100,000 Kip per day, bamboo shoot 30,000 Kip per day. However, the bamboo weaving bring regular income and therefore, the villagers maintain it but are not much interested in expanding the business.

Table 2.2: Average household monthly income from bamboo weaving

No. Description Unit price Unit / month Revenue 1 Sticky rice box 12,000 120 1,440,000 2 Rice tray 20,000 30 600,000

Employment

The bamboo handicraft production in the visited districts creates jobs for a substantial number of people, who are mainly women (See Table 2.3). More than 30% of 3,366 households are producing bamboo handicraft (1,158 households or 34.40 %). Sticky rice boxes and rice trays are the two major products. It is also found that more households producing sticky rice boxes than rice trays (604 HH or 52.16 % vs. 162 HH or 13.99 %,

respectively). The reason can be that rice boxes are easier to weave and also the demand is higher due to its shorter durability than the rice tray. Also a family buys many new rice boxes but can have only 1 rice tray. Those figures do not include the traders in villages and district markets.

Table 2.3: Number of households involves

No. of No. of household No. of household No. of Producer household Village produce produce sticky rice household group produce bamboo boxes rice trays handicrafts Bualapha district Nasomboun 87 7 Non 7 Nakajanh 59 4 Non Nathoung 170 8 Non 8 Sompeng 89 10 Non 10 Thahea 99 7 Non 7 Hinboun district Dongkang 61 61 Non Houaibone 61 58 Non Houaikaominh 160 6 Non Nonghouang 71 59 Non Vangmon 67 58 Non 58 Mahaxay district Haitay 17 17 Non 17 Phonxay 55 55 Non 55 Sangphok 106 100 Non 100 Xong 106 106 Non 106 Thakhek district Dongthong 144 45 Non Dongtay 308 48 Non Kengyang 65 63 Non Nadinjee 345 38 Non 38 Nayawai 133 133 Non 133 Papeng 241 68 Non 68 Phonsitha 135 103 2 groups 103 Thangam 316 48 2 groups Yommalath district Nadane 97 5 Non 5 Nongping 177 22 Non 22 Kouanphanh 197 29 Non 29

Total: 3,366 1,158 4 groups 604 162 Percentage: 100.00 34.40 52.16 13.99

Two diagrams below map the value chain of 2 main products by geographical locations and the number of households involved in production and selling activities in the chains.

Diagram 2.3: Sticky rice boxes value chain map by geographical location (Source: Bamboo Scanning – Prosperity Initiatives – Oct 2008)

Sticky rice boxes value chain map by geographical location

District Raw Material Production Trade Trade Utilization

Hinboun (61) Vangmon (58) District market (3) End users

Bualapha (27) Nathoung (8), Thahae (7), Sompeng (10) District market (2) End users

Thakhek (261) Nasa ad, na meo Phonsitha (103), Km 3 and Km 2 End users Papeng (68), markets (7) Donthong (45), End users Nadinjy (38) VTE

Mahaxay (281) Misay, Song, Sangphok (100), Old District market, End users Haitay, Phonsay Phonsay (55), Xong Panam market (3) (106), Haitay (17)

Yommalath (29) Naden (5), Nongping (22) District market (2) End users

Diagram 2.4: Rice tray value chain map by geographical location (Source: Bamboo Scanning – Prosperity Initiatives – Oct 2008)

(Source: Bamboo Scanning – Prosperity Initiatives – Oct 2008) Rice tray value chain map by geographical location

District Raw Material Production Trade Trade Utilization

Mahaxay Old district market (3) End users

Yommalath Vieng, Louang, Phonsy, Phonmak, Thamphouai, District market (2) End users (31) Kouanphanh (29)

VTE End users

Thakhek Kengyang, Yang, Nayavai (133), Km 3 and Km 2 (203) Sangphayang Kengyang (63) markets (7) SVK End users

Vendors End users

Bualapha District market (2)

Business Environment

There are several provincial Government agencies currently and potentially promoting bamboo this sector under their own resources and with the support from projects. The details on their activities related to the bamboo sector are presented below:

Provincial Department of Industry of Commerce (PDIC)

The Division of Trade and Product Promotion (DTPP) under PDIC has a mandate to promote the local products in the domestic, national and regional markets and to help the producers in improving their products to meet requirements of those markets. Specifically, the Division encourages the handicraft producers to attend trade fairs that are organized by PDIC twice per year. Regarding the bamboo sector, so far, the organization does not have any specific policies and measures to promote this sector yet. It is found that the DTP has been collaborating with the Provincial Lao Women Union in supporting the producers’ groups under an UNIFEM funded handicraft promotion project.

The District Industry of Commerce Office (DICO) mainly supports the activities of PDIC. No specific measures to promote the sector within the visited districts were found.

Provincial Agriculture and Forest Office (PAFO)

According to PAFO and DAFOs, the bamboo sector has a relatively big potential because of the abundant source of raw material, however, it is found that it is in a lower priority compared to cultivation, livestock and big plantation of rubber, teak and eucalyptus. The total income generated from bamboo, including bamboo shoot is quite minimal compared to the ones from wood products, agricultural produce, and hydro power, therefore, considered not a strategic sector. No official statistics on bamboo areas, species and trading volume exist.

The District Agriculture and Forest Offices (DAFO) in the visited districts have the role in managing the natural resource of bamboo. However, no statistics or specific policies for the sector exist as well. Except Mahaxay district, no districts have specific projects on bamboo conservation or production. In Mahaxay district, DAFO joins a 1-year project on bamboo conservation under the Environmental Protection Fund of STEA. An incident happened last year in Mahaxay was that some traders from Thakhek cut bamboo and produced woven wall

(Ka tae) for sales in the district. However, due to the complaint from the village authority that the traders did not pay any fee to the villages, from where they got the bamboo, the district ordered them to close down the business without any further attempt to investigate the issue. OJI Company also comes to the district with a big investment plan on plantation. However, in opinions of DAFO, the company made a very slow progress in their project.

Lao Women’ Union (LWU)

The provincial LWU carries out a 6-month project funded by UNIFEM in 3 villages. The project aims to improve product designs in bamboo and cotton handicraft items and to promote producer’s groups. So far, under the project, training on weaving skills and product design was conducted. The products of the project target villages were also displayed and sold in the recent Boat Racing festival. Another activity that the LWU is carrying out at the moment is to look for market for the improved products in the Thai market. However, the project is going to finish soon in Oct 2008.

Provincial Tourism Department (PTD)

In terms of eco-tourism, Khammouane province has great advantages because of the well- known caves, water falls and beautiful landscape. In addition, the PTD considers handicraft production itself one of the tourist attractions of the province. The tourists will be visiting the villages to see the actual production. The upcoming project of PTD is under the NZAID fund in cooperation with SNV, which will start in July 2009

Bamboo Shoot

In Khammouane, bamboo shoots are being collected seasonal and mainly sold fresh. Other simple forms of processing are boiling or grilling. In the visited villages in this study, the shoot volume has been quite small (few bunches or kg), which is considered merely an additional source of income among various income sources of the rural people. According to a villager in Khimin Yai village, the price for fresh shoot could be between 10 to 20,000 Kip per kg.

In many visited villages like in Nasomboun in Boualapha district or Sangphok in Mahaxay district or Dongkang in Hinboun district, most of people also collected the shoot for their own consumption. There has been no established trading relation found for the bamboo shoot, including collectors and traders, who might do some further processing such as slicing, pickling and then transport the products to other provinces or to the neighboring countries.

Bamboo Woven Mats (Katae)

Even though the study team could not visit the producers of the bamboo woven mats in Hinboun district, it is found out from the PDIC that the products are being made mainly in 2 vilalges called Laukha and Phangdeng villages (®É¾−Àì‰¾¢È¾ Áì½ ®É¾− °¾¤Á©¤). The main customers are the construction companies in Savannakhet, Champasak and even Thailand. These products made of Mayhia are used for fencing. The price ranges from 15,000 Kip to 27,000 Kip per piece depending on the size. According to the PDIC, the demand for the products seems quite high.

Part III: Market Opportunities, Key Constraints and Market -

Based Solutions

Market Opportunities

The findings in the survey show that in Khammouane province, the Government agencies recognize the role of the bamboo production as an important alternative source of income for the rural population and are willing to give a full support to the sector development. Even though no specific policies related to the sector exist yet, the agencies welcome and express their willingness to cooperate with any development or investment initiatives in the sector. So far, no custom fee or charge are applied for the bamboo production and trading at all provincial, district and village levels.

Another opportunity for Khammouane’s bamboo sector is the abundance of the raw material and labor. Given the overall current concern of the villagers over the bamboo source, which is the concession for industrial plantation, the province still has a large forest coverage, where different species of bamboo are growing naturally. The main labor force in bamboo

production is married women, who do not have the tendency to seek for job in other places. Therefore, the labor is not an issue in this sector.

Regarding technology, bamboo production does not require sophisticated machinery. The simple hand tools like knives or smoking oven and splitting machines can be easily found in China, Vietnam and Thailand. In terms of demand, the domestic market will be at least stable because rice boxes and trays are the “must have” stuff for Lao families. So far, there is no significant substitute products found. For the market in Thailand, according to the Thai buyer, the demand for bamboo products is still huge because the Issan people have a similar preference to the bamboo handicraft stuffs like Lao people yet bamboo is no longer available in the areas.

The handicraft production center from Khamtao (Nakhonephanom province–Thailand) supplies to the whole Thailand, especially the southern part of the country, where the fishery work exists. In Laos, the fast growing tourism sector can be a good opportunity for souvenir items from bamboo and rattan.

Key Constraints

Besides the opportunities, the study also finds a number of following constraints that disturb the smooth and efficient flow of products and transactions.

Raw bamboo suppliers

This category includes both producers, who harvest the bamboo themselves and those who only cut and sell to other producers. The major problem they are facing is the decline of the bamboo resource that leads to more difficult harvesting. The bamboo resource in the natural forest has been destroyed mainly due to the big industrial tree plantation projects, particularly in Mahaxay and Thakhek districts. The local people gradually have to buy bamboo or rattan from other villages or to go further to the forest, which increases the costs of production. Despite the support of the provincial, district and village authority for bamboo production, there is no specific consideration for bamboo resource preservation in the Government concession or forest management policies. According to the producers in Ban Phonsitha, due to the scarcity of a bamboo species called May Hear, some villagers started

to plant it but still face difficulty with young seedlings; therefore, they could not expand the plantation areas. May Hear seems to be a good species after May Thae for craft making.

Producers

The local producers are either individuals or groups. It is observed that the common problem they face is low production skills, limited access to market information and lack of network. The low production skill results into the low product quality, design and limited production volume. The production skills are merely being transferred from generation to generation without improving or adapting to the evolving needs of the consumers; therefore, there are not much diversified products available in the market. Another reason for the low skills is lack of technology utilization. Only in 1 or 2 villages, specific tools are used in the production process. The rest uses ordinary knives. To make the products more durable, they simply hang them above the fireplace. There is no bamboo drying facility available in the whole province. The producers also do not know where to get the information about tools or smoking oven. The products are exported to Thailand only in the form of semi- products; therefore, currently, a very small value addition happens in the province.

Another problem that the local producers face is the limited access to market information. The natural resources and labor skills are available in most visited places, but where to sell their products is the most common question they mentioned to the study team.

Not being in network or in groups is one of the causes to the above constraints. So far, only two producers’ groups have been formulated recently at Nayawai and Phonsitha villages at Thakhek district, thanks to the UNIFEM-funded LWU project. Individual production and selling results into the poor bargaining power and low competitiveness of the producers. Difficulties in terms of transportation and communication during rainy season are also other additional constraints found in some visited villages.

Wholesalers / retailers / vendors

Two major constraints that this group is facing are supply of low quality products and poor protection methods from damages and fungi. The products that they receive from the producers and local traders are normally mixed between good and bad quality depending on the skills of the individual producers, which makes it difficult to sell and hence, cause a high level of inventory. Using low quality material such as too young bamboo poles and lack of fines in production also affect the overall quality of the products.

Constraints Market-based Solutions

1. Cultivator/input suppliers

1.1 Increasing raw material shortage (Na Ya Wai 1.1 Provision of adequate raw material village) for the producers at the village due to for the village producers land concession, industry tree plantation and lack of forestry management regulation and good practice resulting into difficulties in expanding the production volume, higher production costs and resource depletion.

2. Producers

2.1 Primitive production skills of the village 2.1 Improvement of production and producers result into poor design and limited designing skills for the village range of product types producers

2.2 Poor selection of raw materials for some 2.2 Improvement of raw material parts of the products (e.g.: covering part of the selection for the village producers rice basket and the bottom part are not durable) from the village producers results into poor quality and hence

2.3 Village producers do not know processing 2.3 Access to more effective technology such as smoking oven, which results processing technology for village into poor quality products producers

2.4 Village producers considered bamboo 2.4 Raising awareness of the village weaving a mere alternative income, which results producers about potentials of bamboo into their hesitance to produce and invest more in weaving business the business

2.5 Village producers lack of information on 2.5 Provision of information on technology and marketing (price, competitors, technology and marketing for village buyers’ needs…), resulting into low producers competitiveness and hesitance to invest

2.6 Majority of producers operate individually, 2.6 Organization of the producers’ which results to low access to business groups opportunities like access to information, to bigger buyers and to external technical assistance

2.7 Village producers are not well aware of the 2.7 Raising awareness of village importance of fulfilling buyer’s requirements (e.g. producers on the importance of they use raw material May Hia different from Thai fulfilling buyers’ requirements importer’s need for May Thea), which limits their access to business opportunities

3. Wholesalers/retailers

3.1 They face a relatively high amount of broken 3.1 Access to better quality products and molded products due to low quality, which results into high waste costs and leads to high selling price for them

3.2 They face low sales during the rainy season, 3.2 Improvement of sales during the which results into their hesitance to expand the rainy season for wholesalers and business retailers

4. Thai importer:

4.1 She lacks of information on production 4.1 Provision of information on Lao sources in the Lao side, resulting into the low production sources for Thai importer(s) trust on the existing Lao products and hesitance to order more from Laos. This leads to the lost business opportunities for Lao producers

4.2 She has low trust on the skills and 4.2 Improvement of trust of the commitment on quality and quantity improvement importers on Lao producers of Lao producers, resulting into the lost opportunities of the Lao producers

5. Lao traders/collector for Thai importer:

5.1 They have low responsibility in quality control 5.1 Improvement of quality control before exporting, which results into the hesitance awareness and practice of the Lao of the importers to expand the order for Lao traders for products for export producers

5. Government regulation:

6.1 The weak land and forest management 6.1 Lobbying for Government’s regulation and practices, limited involvement of consideration for bamboo and rattan local people in decision making on land use at preservation in relevant policies the village level and big plantation reduce bamboo and rattan stock, which results into the gradual shift of the producers from handicraft production to other income generating activities such as working in the plantation, in the cities or in Thailand

6.2 The lack of consideration on the importance 6.2 Lobbying for Government to take of NTFP especially bamboo in the socio- bamboo and rattan preservation issue economic development plan and no concrete into consideration when formulating actions results into the unorganized and legal documents unsustainable extraction of the raw material

Once the products are bought, they can not be returned even if they become broken or have fungi due to the long storage. Getting feedback from customers and informing the producers is the approach of the wholesalers and retailers do at the moment, unfortunately, there is very little or no improvement made accordingly.

Once the rice baskets get fungi due to the high moisture or long storage, they can hardly be sold. To protect the products, so far, the producers simply put the rice baskets and trays above their ovens so that the products are smoked but this practice is not consistently done. Another technique is rubbing the rice baskets with a kind of insecticide chemical sticks. Even though the customers are advised to wash the basket before use, this practice is highly dangerous for health.

Foreign Traders

The constraints that the Thai business faces at the moment with the Lao products are two major types (1) Unmet quality and quantity and (2) Lack of information about the Lao producers. The different appearances and quality of the Lao and Thai products can easily be recognized. “They put the good mats on the top of the bulk and the rest is defected. I just reject the bad ones straight away” said the business owner. As mentioned earlier, the supply from Laos is also insufficient in terms of volume. Finally, the Thai traders lack of information about source of the production. The products are brought to her by Lao traders. There is no any communication between her and the producers.

Market - based solutions

The table below summarizes the strategies and suggests the providers of solution and the interventions to eliminate the constraints face by the providers and users of the solutions.

Strategy 1: Raising awareness on bamboo resource management in the relevant Government policies and regulations

1. Value Chain Constraint (addressed by the solution): Low awareness of the Government on the importance of bamboo resource management

2. Strategy: Raising awareness of bamboo resource management on the relevant Government policies an regulations

3. Proposed Provider of Solution (Including their incentives to provide the solution): 9 Provincial Chamber of Commerce and Industry 9 Producers groups These groups represent the private sector and therefore, have a mandate to raise issues that negatively affect the business operation to the Government.

1. Constraints to the provision and use of the solution (only for targeted providers and users): Solution providers: 9 Newly formed and therefore, are still weak in terms of strategic management and operation 9 Do not know how to do lobbying with the Government Government agencies: Might not pay attention to bamboo issues since the sector is not as important as other economic sectors in the province such as hydropower, big factories and agriculture projects

5. Project Facilitation Activities (for responding to constraints in Point 4 above) 9 Experiment the Public-Private Dialogue mechanism of the Lao-German HRD-ME program with the bamboo issues under the involvement of the Provincial Chamber of Commerce and Industry and producers groups 9 Assist the provincial relevant agencies such as PAFO, DoIC to raise the private sector’s concerns on the bamboo resource management to the high level. At both provincial and central levels, this strategy will take a long time before it can show visible results. However, the long-term impact of this intervention is to introduce the provincial organizations, both private and public, to a new tool that they can use to improve the local business environment in a constructive and formal manner.

Strategy 2: Improvement of production and design skills of producers

1. Value Chain Constraint (addressed by the solution): Primitive production and design skills of village producers

2. Strategy: Improvement of production and design skills of producers

3. Proposed Provider of Solution (Including their incentives to provide the solution): 9 Lao Handicraft Association in Vientiane Capital since a provincial LHA does not exist yet 9 Individual bamboo handicraft producers (Lao and Thai) (See Annex 3 for details) Through training, the association fulfills their mandate in helping local products while the producers with improved production and design skills can be a new supply source to the individual producers.

2. Constraints to the provision and use of the solution (only for targeted providers and users): Solution providers: 9 Do not have their own resources for providing training to village producers 9 Might not be interested in working with producers in Khammouane as suppliers due to the far distance from Vientiane Capital Village producers: 9 Do not have resources to pay for training or may not be interested in paying until they see and experience the financial benefits first

5. Project Facilitation Activities (for responding to constraints in Point 4 above) 9 Raise awareness and interest of the village producers in working in groups 9 Identify the village producers’ needs for production and design training 9 Assist in forming producers’ groups 9 Explore possible funding sources 9 Discuss with the Lao Handicraft Association and other interested producers about training provision 9 Explore the possible financial contribution of producers to training

Strategy 3: Dissemination of information on technology, market, production capacity to local producers, traders and all interested buyers

1. Value Chain Constraint (addressed by the solution): Village producers lack of access to information on production, technology and business opportunities; local and foreign buyers lack of information on the local supply (where the local producers are, what is their capacity, etc…

2. Strategy: Dissemination of useful information to producers and buyers

3. Proposed Provider of Solution (Including their incentives to provide the solution): 9 Local and foreign buyers 9 Private companies providing this specific service 9 Producers’ groups and provincial chamber of commerce and industry (PCCI) Buyers can be a good informal source of information on technology, market requirements, etc…Once the producers’ groups are established and operational, the buyers can contact them more easily. Then they can consider it as an embedded service to the producers.

Another source of information, which is more formal, is private companies. To be financially sustainable, they must be able to make profit. However, currently, no private companies provide this type of services on the commercial basis.

The producers’ groups and PCCI can consider as a service to the members.

4.Constraints to the provision and use of the solution (only for targeted providers and users): Local and foreign buyers: 9 Do not provide information on a regular basis 9 Do not pay attention 9 May not be able to provide broad and reliable info. Private companies: 9 Are not interested to start this service due to the low purchasing capacity of village producers Users:

9 Are not willing to pay for the service

5. Project Facilitation Activities (for responding to constraints in Point 4 above) 9 Assist in designing and implementing an information collection and dissemination mechanism that allows regular exchange of information between producers’ groups and buyers. The mechanism should be tested out within few producers’ groups first, then the process is to be documented, adjusted and expanded. Even though this experience-based approach is time consuming, it will be a show case for the producers and buyers to see how the information exchange can be beneficial for both. 9 Experiment the formal channel through the Market Information System (MIS) under the FAO Forest Connect project since the project also selects bamboo sector nationwide for piloting. The implementing agency in Laos is the Enterprise & Development Consultants Co., Ltd. The company is expected to provide this service on the commercial basis. It is envisaged that the major income for this service would come from buyers and therefore, in the short and medium run, the village producers are not yet expected to pay.

Strategy 4: Building the business attitude of village producers

1. Value Chain Constraint (addressed by the solution): Village producers and collectors lack of business attitude

2. Strategy: Building business attitude of village producers

3. Proposed Provider of Solution (Including their incentives to provide the solution): 9 Private business training and consulting companies 9 Business colleges 9 Concerned Government agencies that are active in promoting local economic activities such as SMEPDO, DoIC, Lao Women Union, PAFO These organizations are expected to be financially sustainable while the Government agencies fulfill their mandates in promoting the local economy

3. Constraints to the provision and use of the solution (only for targeted providers and users): Private Providers: 9 Are not interested to start this service due to the low purchasing capacity of the village producers unless they get paid from other source of fund Government Agencies: 9 May not consider the issue an emphasis during different relevant events Users: 9 Are not willing or do not have resource to pay for the full fee of the service

5. Project Facilitation Activities (for responding to constraints in Point 4 above) 9 Assess producers’ needs for business management skills 9 Assist the producers’ groups and the training providers in tapping sources of funds for training based on the need assessment 9 Assist the Government agencies to organize campaigns on promoting entrepreneurs among Government officials and private sector

Part IV: Recommended Strategies

The identified constraints have been put together in the form of a problem tree and then turned into an objective tree. Four resulting main strategies to address the constraints are formed, which are (1) Raising awareness on bamboo resource management among the relevant Government policies and regulations, (2) Improving production and design skills for village producers, (3) Dissemination of information on technology, market, production capacity to local producers, traders and all interested buyers, and (4) Building business attitude of villager producers.

Following the SNV’s overall strategy in creating impacts on Productivity–Income– Employment (PIE), all 4 strategies should be considered to be implemented parallel. Based on the “Market-based Solution” principle of Value Chain Program Design, the tables below provide more details about the potential/existing service providers, which are expected to commercially carry out the activities under each respective strategy, their constraints in providing the intended services as well as the intervention that should be taken to limit those constraints and to allow the market work. Together with the relevant provincial agencies, SNV can finally make the decision whether the organization will intervene in the bamboo handicraft sector in Khammouane or not and if it will, the most suitable interventions can be selected from the suggested strategies from this study.

In terms of location and products to be promoted in Khammouane province, it is recommended that for the domestic market, the production of the rice box and rice tray in Thakhek (Ban Phositha, Nayawai) and Mahaxay (Ban Sangphok) districts has the highest potentials in terms of the number of people involved, the significance of the income generated from the products, the skill level of the producers and the business operation, which has been rather well established.

After the validation of the study’s results and prior to any interventions, since the private sector plays the key roles in all interventions as the service providers and users, consultation with the LHA, PCCI, Lao, Thai traders and the representatives of the local producers shall be conducted in order to (1) identify their detailed opinions on the strategies, their constraints and possible interventions to minimize the constraints, (2) examine the feasibility of each intervention, (3) get their commitment and identify the roles of each party in each intervention.

Annex 1: Research Team

No. Name Organization Position Mobile E-mail 1 Buakhai Phimmavong, Mrs. EDC Senior Consultant 5 503893 [email protected] 2 Banethom Thepsombath, Mr. SNV NTFP Advisor 5 696986 [email protected] 3 Siri Sisomphou, Mr. SNV SHCC Advisor 5 667857 4 Vila Chanthavong, Mr. EDC Consultant 2 547200 [email protected]

Annex 2: List of Interviewed Authorities

No. Name Lao Organization Position Mobile Office

Provincial Level 1 Keo, Dr. Mr. MAF / PPS N / A ທານ່ . ດຣ. ແກວ້ 2 Khampheuang, Mr. PAFO Deputy Director ທານ່ . ຄາເຟອງໍ ື 3 Phetsamai Phaboliboun, Mr. PAFO, Cultivation Sector Head of Sector ທານ່ . ເພດສະໄໝັ ພະບລໍ ິບູນ 4 Bounchanh, Mr. PAFO, Forestry Sector Deputy Director 5 551005 051 212042 ທານ່ . ບຸນຈນັ 5 Soukkan, Mr. PAFO, Forest Sector Deputy Director 5 550228 ທານ່ . ສຸກກນັ 6 Soutchai PAFO, Forest Sector Technical Staff 5 950513 ທານ່ . ສຸດໃຈ 7 Viseth, Mr. DIC, DPTP Director 5 450992 051 212075 ທານ່ . ວເສດິ 8 Khuanchai, Mr. DIC, DPTP Technical Staff 051 212075 ທານ່ . ຂວນໃຈັ 9 Panya, Mr. PTD Director ທານ່ . ປນຍາັ Mahasay District 10 Bounyeun Sayyalad, Mr. DAFO Director 2 328369 051 251064 ທານ່ . ບຸນຍນື ໄຊຍາລາດ 11 Khampheuang Silaphet, Mr. DAFO Deputy Director 6 821623 ທານ່ . ຄາເຟອງໍ ື ສລາເພດ ີ ັ Buarapha District 12 Khamphai Saylavanh, Mr. DAFO / Forest Sector Head of technical staff 2 192225 ທານ່ . ຄາໄຜໍ ່ ໄຊລາວນັ 13 Khamphout, Mr. DICO Director 5 056342 ທານ່ . ຄາພໍ ຸດ 14 Bounnom Nolamoun, Mr. DICO Deputy Director ທານ່ . ບຸນໜອມ ນລະມໍ ູນ 15 Somdeth DICO Technical Staff 2 705476 6 635221 ທານ່ . ສມເດດົ ັ Yommalad District 16 Konekeo Khanthanom, Mr. DAFO / Forest Sector Deputy Director 2 328257 051 214391 ທານ່ . ກອນແກວ້ ຂນທະໜອມັ 17 Theosavanh, Mr. DICO Director 2 164943 ທານ່ . ແຖວສະຫວນັ 18 Khamva Keomala, Mr. DICO Technical Staff 2 182395 ທານ່ . ຄາຫວາໍ ແກວມາລາ້ Hinboun District 19 Bounthieng Manikeo, Mr. DAFO Deputy Director 2 329902 051 214464 ທານ່ . ບຸນທຽງ່ ມານແກວີ ້ 20 Somkhouan Sayyaseng, Mr. DICO Director 5 650376 ທານ່ . ສມຄວນົ ໄຊຍະແສງ 21 Khamphouvieng, Mr. DICO Technical Staff 5 754771 ທານ່ . ຄາໍ ພູວຽງ

Annex 3: List of interviewed producers and traders

No. Market / Village Name (Eng) Type of actor Contact No. Thakhek district 1 Chansamone, Mrs. Wholesaler / Retailer 020 5757948 Km 3 Market 2 Tiu, Ms. Wholesaler / Retailer 3 Davinh Deputy Head of Village 4 Khamsavang, Mrs. Producer Group Leader 5 Bane, Mrs. Producer Group Member Nayavai Village 6 Vannakhone, Mrs. Producer Group Member 7 Na, Mrs. Producer Group Member 8 Khoun, Mrs. Producer Group Member 9 Phonsitha Village Keomany, Ms. Producer Boualapha district 10 Nouai, Mrs. Retailer 020 6435041 11 Amphone, Ms. Retailer Bualapha Market 12 Veuai, Mrs. Retailer 13 Khoun, Mr. Retailer 020 5222156 14 Norlaphom, Mr. Producer 15 Nasomboun Village Khamphanh, Mr. Head of Village 16 Thainoy, Mr. Producer Mahaxay district 17 Panam Market Bounlom, Mr. Retailer 18 Mahaxay Kao Market Yonma, Mrs. Retailer 19 Ammala, Mrs. Producer Sangphok Village 20 Chanhthi, Ms. Producer Yommalath district 21 Yommalath Market Douang, Mrs. Retailer 22 Vanna Yodpanya, Mr. Head of Village Kouanphanh 23 Noy, Mr. Producer Hinboun district 24 Sack, Mr. Head of Area Houaikiminh 25 Phetthavong, Mrs. Producer 26 Kingkeo, Mr. Head of Village Dongkang 27 Souta, Mrs. Producer Nakhon Phanom Province, Thailand 28 Mrs. Lathsamy Thai Trader / Owner 081 7392857, 087 2237049 Kham Tao District (Thai mobile) 29 Mr. Outhay Thai Trader