Comparative Assessment of Resource and Market Access of the Poor in Upland Zones of the Greater Mekong Region

Comparative assessment of resource and market access of the poor in upland zones of the Greater Mekong Region

Yangtze

Irrawaddy Pearl

Red Salween

Chao Mekong Phraya

David E. Thomas Benchaphun Ekasingh Methi Ekasingh Louis Lebel Hoang Minh Ha Laura Ediger Sithong Thongmanivong Xu Jianchu Chanchai Sangchyoswat Ylva Nyberg

Rockefeller Foundation Grant No. 2004 SE 024 2008 Citation: Title: Comparative assessment of resource and market access of the poor in upland zones of the Greater Mekong Region

Authors: David E. Thomas, Ph.D. World Agroforestry Centre, Chiang Mai. Benchaphun Ekasingh, Ph.D. Chiang Mai University Methi Ekasingh, Ph.D. Chiang Mai University Louis Lebel, Ph.D. Chiang Mai University Hoang Minh Ha, Ph.D. World Agroforestry Centre, Hanoi & Swedish Agric. University, Uppsala Laura Ediger, Ph.D. World Agroforestry Centre, Kunming (consultant) Sithong Thongmanivong, Ph.D. National University of Laos Xu Jianchu, Ph.D. World Agroforestry Centre, China Chanchai Sangchyoswat, Ph.D. Chiang Mai University Ylva Nyberg, M.Sc. World Agroforestry Center, Hanoi

Submitted to the Rockefeller Foundation as the final product under Grant No. 2004 SE 024 Acknowledgements

This volume reports on research conducted during 2004 to 2007 under a research project entitled Comparative assessment of resource and market access of the poor in upland zones of the Greater Mekong Region, organized by the World Agroforestry Centre and Chiang Mai University. The project was made possible by financial support provided under a grant from the Rockefeller Foundation, through its office in Bangkok, Thailand. We thank Dr. Rosalia Sciortino and Dr. John O’Toole for their role in this process, as well as Busaba Tejagupta for her kindness and tolerance throughout the project. This report is being submitted as the final product under that grant. Since it took considerably longer than anticipated to complete our final synthesis of work under this complex undertaking, we also need to thank Dr. Alan Feinstein and Busuba for their kind indulgence.

Principle researchers and authors of this report acknowledge the many contributions from additional colleagues without whose contributions and assistance this work would not have been possible. They include: x Vietnam. Additional colleagues who made significant contributions as members of the research team include Pham Thu Thuy (ICRAF Vietnam), Nguyen Le Hoa (RDViet), Mai Hoang Yen (ICRAF Vietnam), and Dr. Be Quynh Nga (Social Science Institute of Vietnam). Case studies were conducted in close collaboration with the Rural Development and Environment of Vietnam Project (RDViet), which is funded by the Swedish Agency in Research and Education Cooperation (SAREC) and the Swedish International Development Agency (Sida), and coordinated by Hue University of Agriculture and Forestry (HUAF) and the Swedish University of Agricultural Sciences (SLU) in Uppsala, Sweden. x Lao PDR. Additional contributions to our work in Laos were made by Houngpheth Chanthavong at the National University of Laos. And we especially want to acknowledge the many contributions of Dr. Yayoi (Fujita) Lagerqvist. Although she was unable to join us as a principle researcher and author, she has made many contributions by sharing her research findings from other work, and indirectly through her collaboration with our sister project coordinated by Dr. Jeff Fox at the East-West Center and supported by the U.S. National Science Foundation, as well as from studies in which she collaborated while working with the National Agriculture and Forestry Research Institute (NAFRI). x Yunnan, China. Colleagues who made significant contributions to our research in Yunnan include He Jun and Chen Huafang from the ICRAF office in Kunming. And we especially acknowledge the assistance of Dr. Horst Weyerhaeuser, the former head of the ICRAF Kunming office, who helped us establish our research linkages with Baoshan and contracted the services of Dr. Laura Ediger to work as our colleague. x Thailand. Here we need to acknowledge important contributions from colleagues from several organizations: o At Chiang Mai University’s Faculty of Agriculture and Multiple Cropping Center, we acknowledge the kind contributions of our colleague Dr. Pornsiri Suebpongsang, as well as many contributions made by research staff including Sorak Dispayoon, Supakit Sinchaikul, Naruemon Thinaraj, Chalermpol Samranpong, and Prapatsorn Pantsompong. o At the CMU Faculty of Social Science Unit for Social and Environmental Research (USER), we acknowledge the substantial contributions made by Po Garden and Sakkarin Na Nan. o At ICRAF Chiang Mai, we acknowledge important support for field research provided by Sonat Natee and Sunthorn Sepan, and the very substantial contributions made by Anantika Ratnamhin and Saipim Channuan to various research components, including preparation of this report. Also, Pornwilai Saipothong led our earlier mapping work in Mae Chaem. o We also acknowledge the many contributions to management and financial operations under this project made by Pramualpis Kanthatham, Arerut Yarnvudhi, and Somjit Tararak, as well as support from Dr. Meine van Noordwijk and many other colleagues at our ICRAF regional office in Bogor.

And at sites in all of these countries, we gratefully acknowledge the critical contributions that have been made by the many people living in communities where studies were conducted, who willingly sacrificed their time to provide detailed information on their lives, livelihoods, problems and aspirations. Without them all the rest of our efforts would have been meaningless.

We also acknowledge collaboration with other projects that have provided two-way linkages that we hope have benefited both sides of these partnerships. Of particular importance in this regard has been collaborative links with the project entitled Understanding dynamic resource management systems and land cover transitions in montane mainland Southeast Asia, which is led by Dr. Jeff Fox at the East- West Center, and supported by funding from the U.S. National Science Foundation. Links between these two projects have been especially strong in Thailand and the Lao PDR. In Vietnam, links have been strong with SAREC/Sida and the RDViet project coordinated by Hue University and SLU. These types of links provide synergies that can benefit all.

Finally, at another level we want to acknowledge and salute the growing number of international organizations, universities, government agencies and non-governmental organizations who are providing open access to information, statistics and spatial datasets available on the World Wide Web for use by researchers around the world. Examples include data that have greatly enriched our work and are available from sources such as NASA, USGS, GLCF, EC-JRC, NOAA, CIESIN-SEDAC, WWF, WRI, WCPA-WCMC, World Bank, and ADB; the UNEP GEO Data portal, UNSD common database, and various other UN sources; IFPRI, Cifor, IWMI, CIAT, ICRAF and other centers and institutes under the CGIAR; and a considerable range of others. We have also benefited from data and information from various agencies and organizations in the region that are beginning to take a similar approach, and we hope the number of providers and the quantity, quality and compatibility of their data will continue to improve. Moreover, we hope this is only the beginning of true global connectivity for the growth of human knowledge.

Table of Contents 1 (Brief)

1. Introduction and Overview Page 1.1 Uplands, markets and poverty in the Greater Mekong Region 1 1.2 Study research strategy 14 1.3 Overview of study areas 16 1.4 Structure of this report 29

2. Who and where are the poor? 2.1 How is poverty defined and why does in matter? 31 2.2 Distributions of poverty in the Greater Mekong Region 41 2.3 Dimensions of poverty in case study areas 63 2.4 Identifying and locating the poor 78

3. How have market opportunities changed? 3.1 What do we mean by market opportunities? 83 3.2 Changing context of opportunities for production 96 3.3 Case studies of production change and development 124 3.4 Changing market opportunities and constraints 160

5. How might larger transitions in society affect opportunities and responses? 5.1 Future transitions 227 5.2 Scenarios: an overview 228 5.3 Illustrations and applications in case study sites 241 5.4 Responding to larger transitions and uncertainties 263

6. What are the implications of state policies for market opportunities & access for the poor? 6.1 Policies and their impacts in upland areas 267 6.2 Major areas of policy concern in the region 268 6.3 Policy issues and impacts at case study sites 283 6.4 Implications for upland policies 307

7. Summary and Conclusions 7.1 The Uplands 315 7.2 Multiple Poverties 316 7.3 Changing opportunities, responses and constraints 319 7.4 Potential future pathways 329 7.5 Policy issues, processes and tools 331

References 335

Table of Contents 2 (Extended)

Page 1. Introduction and Overview 1.1 Uplands, markets and poverty in the Greater Mekong Region 1 1.1.1 General characteristics of upland mountain regions 2 1.1.2 Where are the upland zones of the Greater Mekong Region? 3 1.1.3 Change in the Valley World and implications for the uplands 9 1.1.4 Importance of market integration and poverty issues 12 1.2 Study research strategy 14 1.2.1 Research objectives 14 1.2.2 Major research questions 15 1.2.3 Case studies in a regional context 16 1.3 Overview of study areas 16 1.3.1 Study sites in their regional context 16 1.3.2 Thailand study sites: the Upper Ping Basin 17 1.3.3 Vietnam study site: Tea farmers in Thai Nguyen 25 1.3.4 Yunnan study site: Vegetable farmers in Baoshan 26 1.3.5 Lao PDR study sites: Emerging markets in Northern Laos 28 1.4 Structure of this report 29

2. Who and where are the poor? 2.1 How is poverty defined and why does in matter? 31 2.1.1 Definitions and measures of poverty 31 2.1.2. Why poverty definitions and measures matter 39 2.2 Distributions of poverty in the Greater Mekong Region 41 2.2.1 Locations of poor areas 41 2.2.2 Numbers of poor in different types of areas 49 2.2.3 Where and who are the poor in Vietnam? 55 2.2.4 Where are the poor in Laos? 57 2.2.5 Changes in poverty over time in Northern Thailand 58 2.2.6 Ethnicity and poverty 60 2.3 Dimensions of poverty in case study areas 63 2.3.1 Distribution of poverty in the Upper Ping Basin, Northern Thailand 63 2.3.2 Local heterogeneity in poverty status 65 2.3.3 Self-defined and alternative poverty lines 68 2.3.4 Notions of well-being 73 2.3.5 Changes in household poverty over time 74 2.3.6 Ethnicity factors 76 2.4 Identifying and locating the poor 78 2.4.1 Poor areas versus numbers of poor 78 2.4.2 Multiple dimensions and causes of poverty 79 2.4.3 Perceptions of poverty 81

3. How have market opportunities changed? 3.1 What do we mean by market opportunities? 83 3.1.1 The “opening” of economies in the Greater Mekong Region 83 3.1.2 Conceptual framework for assessing farmer response to opportunities 93 3.1.3 Blurred lines between state and private sectors 94 3.2 Changing context of opportunities for production 96 3.2.1 Natural resources and changing opportunities 96 3.2.2 Meso-level manifestations of economic development and change 102 3.2.3 Regional growth and change in international trade 111 3.2.4 Growing regional role of tourism 117 3.2.5 Physical infrastructure and the GMS 119 3.3 Case studies of production change and development 124 3.3.1 Commercialization of land use in the Upper Ping Basin 124 3.3.2 Commercialization and diversification of local economies 143 3.3.3 State and private sector roles in commercial production 147 3.3.4 Linkages between lowland and upland economies in the UPB 158 3.4 Changing market opportunities and constraints 160 3.4.1 Expansion of market opportunities for mountain areas 161 3.4.2 Role of technical innovation 162 3.4.3 Role of the state in expansion of opportunities 163 3.4.4 Constraints on opportunities 165

4. What strategies have been used to respond and adapt to changes in opportunities? 4.1 Access of the poor to market opportunities 167 4.2 Access constraints and efforts to reduce them 170 4.2.1 Physical access to resources and markets in the UPB 171 4.2.2 Programs to improve access and livelihoods in the uplands of Vietnam 177 4.2.3 An upland asset-entitlement ladder 180 4.3 Case studies of strategies for adapting to opportunities & constraints 182 4.3.1 Types of household and their basic strategies 182 4.3.2 Characteristics of different household types 187 4.3.3 How strategies have fared and changed over time 199 4.4 Diverse strategies and response capacities 209 4.4.1 How do household strategies vary regarding engagement in commercial markets? 209 4.4.2 How do asset capacities affect response to market opportunities? 213 4.4.3 How do wider institutions affect response to opportunities? 219 4.4.4 Is inequality growing? 223

5. How might larger transitions in society affect opportunities and responses? 5.1 Future transitions 227 5.2 Scenarios: an overview 228 5.2.1 Key uncertainties and contrasting scenarios 228 5.2.2 Scenario story lines 235 5.2.3 Implications for livelihoods and landscapes 240 5.3 Illustrations and applications in case study sites 241 5.3.1 Signs of potential transitions in agriculture 241 5.3.2 Future of conservation: land constraints in the uplands 244 5.3.3 Scenario applications at case study sites 248 5.4 Responding to larger transitions and uncertainties 263 5.4.1 The past may not be a good guide for the future 263 5.4.2 Market opportunities depend on both local & wider scales 264 5.4.3 Political roles and resource access and stewardship may co-evolve 264

6. What are the implications of state policies for market opportunities & access for the poor 6.1 Policies and their impacts in upland areas 267 6.2 Major areas of policy concern in the region 268 6.2.1 Mountain land use: protection versus development 268 6.2.2 Competitiveness and comparative advantage 274 6.2.3 Infrastructure and services 276 6.2.4 Identity and citizenship 277 6.2.4 Governance and subsidiarity 280 6.3 Policy issues and impacts at case study sites 283 6.3.1 Land use policies 283 6.3.2 Trade policies: uncertainties and new opportunities 284 6.3.3 Emergence of private extension services and business strategies 285 6.3.4 Access to financial capital 287 6.3.5 Education and access to opportunities 291 6.3.6 Experiments with local resource governance 293 6.3.7 Improving access to information in Thailand 299 6.4 Implications for upland policies 307 6.4.1 Conservation-based constraints on upland land use and development 307 6.4.2 Basic infrastructure and physical connectivity 308 6.4.3 Improving access to financial capital in upland areas 308 6.4.4 Emerging private alternatives for production support services 309 6.4.5 Roles for education and information technology policies 311 6.4.6 Policies on decentralization, localization and subsidiarity 312

7 Summary and Conclusions 7.1 The Uplands 315 7.2 Multiple Poverties 316 7.2.1 Poor areas, poor populations, and inequality 316 7.2.2 Perceptions of poverty 318 7.3 Changing opportunities, responses and constraints 319 7.3.1 Market opportunities 319 7.3.2 Response strategies 323 7.3.3 Response capacities 326 7.3.4 Key constraints 328 7.4 Potential future pathways 329 7.5 Policy issues, processes and tools 331 7.5.1 Improving market access 331 7.5.2 Access to natural resources 333

References 335

Figures

Page 1-1 Generalized relationships among elevation zones 5 1-2 Key altitude zones of MSEA 6 1-3 Major river basins of MSEA 6 1-4 GMS states and nearby countries and Chinese provinces 8 1-5 GMS grouping and the Mekong Basin 8 1-6 Population Growth in the GMS 1970 – 2005 9 1-7 Population Densities in the GMS, 1970-2005 9 1-8 Economic Growth in the GMS, 1970 – 2005 10 1-9 Urbanization in the GMS, 1970 – 2005 10 1-10 Distribution of population density & urban areas 12 1-11 Locations of study areas in regional context 17 1-12 Upper Ping river basin & its sub-watersheds using Pfafstetter coding system 18 1-13 Nested Upper Ping Basin and watersheds at level 2, level 3 and level 4 19 1-14 Characteristics of a sub-watershed stored in a geodatabase 19 1-15 Locations of Mae Wang, Mae Chaem, and Omkoi in the UPB 20 1-16 Elevation zones and major slope classes of the Upper Ping Basin 22 1-17 Spatial distribution of mean monthly and annual rainfall 22 1-18 Spatial distribution of mean monthly temperature 23 1-19 A schema of soil database 23 1-20 Distribution of soil groups 24 1-21 Location of Vietnam study area 25 1-22 Location of Baoshan study areas 26 1-23 Locations of study areas in Laos 28 2-1 Poverty lines in Northern Thailand and the whole country, 1988–2006 36 2-2 Poverty incidence in Thailand at province, district and tambon levels, 2002 42 2-3 Poverty incidence in GMS states, circa 2000 43 2-4 Poverty gaps and severity in GMS, circa 2000 47 2-5 Distribution of inequality in GMS, circa 2000 47 2-6 Poverty density in GMS states, circa 2000 49 2-7 Density of non-poor people in GMS, circa 2000 52 2-8 Estimates of poverty rates and NGPES district classes, Lao PDR 58 2-9 Poverty Incidence in urban & rural areas of North Thailand, 1988-2006 59 2-10 Ethno-linguistic distributions in river basins 60 2-11 Relationships of ethnicity with poverty incidence & severity in Vietnam 61 2-12 Relationships of ethnicity with poverty incidence & severity in Yunnan 61 2-13 Distribution of UPB village settlements by ethnic groups 63 2-14 Distribution of population & population density in the UPB 64 2-15 Distribution of indicators of household wealth status in UPB 64 2-16 Levels of education of people in UPB 65 3-1 Growth of the Three Largest GMS Economies, 1975–2005 86 3-2 Growth of the Three Smallest GMS Economies, 1975-2005 87 3-3 GMS growth by major sectors, 1985 – 2005 89 3-4 Change in Openness Ratios, 1985-2005 90 3-5 GDP per capita in GMS states, 1975-2005 90 3-6 Conceptual framework for assessing response to market opportunities 93 3-7 Biomes & original forest cover 96 3-8 Mainland Southeast Asia land cover, circa 2000 97 3-9 Mainland SE Asia forest cover, FRA 2000 101 3-10 Tree cover in mainland SE Asia 101 3-11 Gross provincial product in Chiang Mai, Chiang Rai & Lamphun, 1981-2006 102 3-12 Gross provincial product of agriculture in Chiang Mai, Chiang Rai & Lamphun, 1981-2006 104 3-13 Population in Chiang Mai, Chiang Rai and Lamphun, 1981-2006 105 3-14 Vietnam tea export price and world price for tea, 1990-2005 110 3-15 Vietnam tea production, export and domestic supply, 1995-2003 110 3-16 China’s import and export value of top five products by value, 1986-2003 113 3-17 Vietnam’s import & export value of top five products by value, 1986-2005 113 3-18 Thailand’s import & export value of top five products by value, 1986-2006 114 3-19 Myanmar’s import & export value of top five products by value, 1985-2004 114 3-20 Export value by GMS country and destination, 1985-2005 115 3-21 Import value by GMS country and source, 1985-2005 116 3-22 Tourist arrivals in GMS states, 1995-2005 117 3-23 GMS road net, cities & settlements 120 3-24 GMS Strategic Framework 2002 – 2012 121 3-25 Distribution of protected areas and UPB land in different watershed classes 125 3-26 Main cropping patterns in irrigated lowlands, and rainfed lowlands and uplands of the UPB 126 3-27 Main highland cropping patterns 126 3-28 Change in irrigated lowland cultivated areas, 1991-2002 main season rice & dry season crops 127 3-29 Change in cultivated fruit tree area 1991-2002 127 3-30 Spatial distribution of crop production systems 127 3-31 Expansion of longan and urban area into paddy fields, 1988-2000 128 3-32 Crop suitability index for rainy season paddy rice 128 3-33 Crop suitability for corn and soybean in rainy season 130 3-34 Crop suitability index of dry season paddy rice 131 3-35 Crop suitability for corn and soybean in dry season 131 3-36 Crop suitability for potato and tobacco in dry season 131 3-37 Crop suitability index for garlic, onion, and shallot in dry season 132 3-38 Crop suitability index for longan 132 3-39 Crop suitability index for litchi and tangerine 133 3-40 Crop suitability index for mango and rubber 133 3-41 Comparing crop suitability assessment with existing land use, rainy season paddy and longan 134 3-42 Crop relative suitability for rainy season and dry season 135 3-43 Generated crop production zone in main season and dry season 136 3-44 Crop expansion strategy for longan and rubber with the resulting production zone 137 3-45 Crop reduction strategy for garlic and the resulting production zone 137 3-46 Sites of village land use mapping in Mae Chaem 139 3-47 Land cover under forest fallow systems 140 3-48 Land cover under permanent field systems 140 3-49 Land cover under multiple systems 140 3-50 Tea chain in Dai Tu district, Thai Nguyen province, Vietnam 151 3-51 Conceptual framework for assessing response to market opportunities 160 4-1 Irrigated areas classified by type of source and type of structure 173 4-2 Access to irrigation expressed as percent of irrigated area in level 4 sub-watersheds 174 4-3 Transportation network and road density in UPB 175 4-4 Travel time (hours) from local sub watersheds and from villages to district town 175 4-5 Travel time (hours) from local sub watersheds and from villages to City of Chiang Mai 176 4-6 Distribution of agri-chemical stores and local markets 176 4-7 Assets-entitlement ladder for household livelihood strategies in upland northern Thailand 180 4-8 Farmers’ typology in Hoang Nong & Phu Xuyen communes of Dai Tu district 186 4-9 Order of processing stages before tea is sold 196 4-10 Evolution of different types of farmers in Mae Salaeb, North Thailand 199 4-11 Trends of different farmer types, Mae Salaep, North Thailand 200 4-12 Seasonal patterns of variation in tea prices, weather and tea production activities 206 5-1 Upland watershed scenarios 230 5-2 Regional scenarios 231 5-3 Regional scenario developed by participants in the NSEC workshop 233 5-4 Set of global scenarios developed by working group at dialogue event on water & trade futures 233 5-5 Time lines with key events & issues for 4 regional scenarios to make storylines more coherent 236 5-6 Past trajectories of change in the Mae Chaem sub-basin, North Thailand 248 5-7 Upstream – downstream linkages: central plains and Bangkok factor 250 5-8 Urban scenarios embedded in regional socio-economic scenarios for how landscapes may evolve 258 5-9 Opportunities for different household classes for growing tea in Dai Tu district 262 6-1 Internationally registered protected forest areas (all IUCN types) 269 6-2 Watershed classification in Thailand and the Lower Mekong Basin 270 6-3 Administrative units in GMS states at three levels 280 6-4 River basin & administration hierarchies 282 6-5 Location & administration context of Ping River Basin 294 6-6 Spatial scales of Ping Basin hierarchies 294 6-7 Official sub-basins of the Ping River Basin 295 6-8 Comparison chart of characteristics of alternative forms of organization for Ping RSBOs 297 6-9 Integrating different data types and searching village data in the UPB 303 6-10 Examples of spatial query and data displays in DSSARMS 304 6-11 Two perspectives on remote sensing contributions to land planning & management 305 6-12 Prototype information support system for participatory watershed management 306

Tables

Page 1-1 Percentage distribution of altitude zones in GMS country domains 9 1-2 Population Growth Rates, 1955 – 2005 9 2-1 Poverty Incidence and Magnitude in GMS countries, 1990-2003 34 2-2 Change in Inequality Indicators for GMS countries, 1992-2004 35 2-3 Urban and Rural Poverty Lines in Northern Thailand, 1988–2006 36 2-4 Access to small area estimates of poverty data 38 2-5 SAE data used in analysis for this report 42 2-6 Poor area shares of poor, people & land 44 2-7 Areas classified by poverty incidence levels 45 2-8 Characteristics of areas classified by density of poor people 50 2-9 Areas classified by density of non-poor people 53 2-10 Poverty Incidence and Magnitude in Northern Thailand, 1988–2006 59 2-11 Average household income by income groups, Chiang Mai, Lamphun & Chiang Rai, 2002 66 2-12 Income of farmers in Chiang Mai, Lamphun and Chiang Rai, 2002-2003 67 2-13 Distribution of households using farmer self-defined poverty lines in four Royal Project sites 68 2-14 Stages of progress with self-defined poverty and well-being lines from case study site in Vietnam 70 2-15 Change in household stages of progress & poverty status over time at case study site in Vietnam 71 2-16 Self-defined poverty levels in the Lao PDR 72 2-17 Self assessment of poor, medium & well-off households at case study sites in North Thailand 73 2-18 Comparison of Gini coefficients for land per household at case study site in Yunnan, China 74 2-19 Household income by ethnic group in 20 upland & highland villages in four Royal Project sites 76 3-1 Sector shares of GDP and employment 91 3-2 Value added per worker by sector in GMS countries 92 3-3 GMS land use by type and altitude zone, 2000 98 3-4 Farm & non-farm sector as percent of GPP, Chiang Mai, Chiang Rai & Lamphun, 1981-2006 103 3-5 Per capita GPP in Chiang Mai, Chiang Rai & Lamphun & per capita North GRP , 1981-2006 104 3-6 Development of Vietnam's export volumes of major agricultural products, 1986-2002 108 3-7 Export values of major agricultural products of Vietnam in 2005 109 3-8 GDP at constant US$ market prices in GMS countries, 1976-2005 111 3-9 Import and export value in GMS countries, 1986-2006 112 3-10 Financial resources allocated to GMS projects, 1992-2006 121 3-11 Overall land use strategies from village land use zoning maps in Mae Chaem, 2002 142 3-12 Net farm household income by cropping pattern, Chiang Mai, Lamphun, Chiang Rai, 2002-03 143 3-13 Changes in cropping over time in Mae Chaem and Mae Wang sites, Chiang Mai 144 3-14 The relation between wealth groups and farming system groups at Vietnam tea site 145 3-15 Role of government at vegetable production case study sites in Yunnan, China 149 3-16 Places for selling tea of households in different groups by type of tea 152 4-1 Irrigation projects and service areas in Chiang Mai and Lamphun provinces 172 4-2 Irrigable and cultivated areas in large-scale irrigation projects, 2001 172 4-3 Importance of organizations in Hoang Nong commune, Dai Tu district, Vietnam 179 4-4 Land allocation situation in Hoang Nong commune, Dai Tu district, Thai Nguyen province 179 4-5 Comparison of livelihood strategy components of poor household in Mae Hae, Mae Chaem 185 4-6 Education level of head of household by farming system groups 186 4-7 Expenditures of different groups by quartile 187 4-8 Land, labor & capital assets of household types in four Royal Projects, 2001 189 4-9 Distribution of farmer types by site, Royal Project, Chiang Mai & Lamphun, 2001 189 4-10 Income, family size & education of semi-commercial farmers in Mae Wang & Mae Chaem 191 4-11 Land ownership of semi-commercial households by income class, Mae Wang & Mae Chaem 191 4-12 Assets in semi-commercial households by income class, Mae Wang and Mae Chaem, 2006 192 4-13 Average crop diversity & tea production of households in five wealth groups 193 4-14 Main occupations of household heads by farming system groups (%) 194 4-15 Expenditure items of different groups of farmers 194 4-16 Assets owned by different wealth groups for different uses 195 4-17 Credit for tea by purpose, 2004 195 4-18 Average cost of stages of tea processing for different wealth groups, 2004 196 4-19 Numbers of households and household members by wealth groups 197 4-20 Labor distribution of different wealth groups of households by activities 197 4-21 Poverty incidence among members & non-members of four Royal project sites, 2000 202 4-22 Income of each type of farmers in the four sites of Royal Project 202 4-23 Demographic characteristics of sampled households in three villages in Om Koi district 203 4-24 Income of different crops grown by households in 4 Royal Project Development Centers, 2000 204 4-25 Change in household stages of progress & poverty status over time, Vietnam study site 205 4-26 SWOT analysis of the market situation of Doan Thang and Dinh Cuong villages 207 5-1 Rationales of conveners for participation in building scenarios 234 5-2 Cross-level interactions in scenarios 238 5-3 General implications for landscapes & livelihoods of four local scenarios where they are 240 plausible under a corresponding regional scenario 5-4 Four key transitions in how water has been managed in the Upper Ping River Basin 253 5-5 Institutionalizing practices in 4 key transitions in how water has been managed in the UPB 253 6-1 Adaptive financial strategies of households in Mae Wang & Mae Chaem 288 6-2 Capital availability problems, borrowing & loan sources, Mae Wang & Mae Chaem 288 6-3 Credit amounts and interest rates for purposes other than tea production by source 291 Boxes Page 2-1 Foster, Greer, Thorbecke poverty measures 33 2-2 Main messages on Where and Who are the poor in Vietnam? 56 2-3 The Stages of Progress (SOP) Method 69 3-1 Multicriteria Land Evaluation in GIS 129 5-1 Building scenarios together 232 5-2 Conceptualizing transitions 252 6-1 Organizational Models for Ping River Sub-Basins 296 6-2 DSSARM (A GIS Tool for Integrating Spatial Data) 303 Acronyms ADB Asian Development Bank ASEAN Association of Southeast Asian Nations BAAC Bank for Agriculture and Agricultural Cooperatives, Thailand BMN Basic minimum needs indicators, Thailand CDD Community Development Department, Thailand CED Communes in extreme difficulties, Vietnam CEO Chief executive officer CGIAR Consultative Group for International Agricultural Research CIESIN Center for International Earth Science Information Network (Columbia University) CIFOR Center for International Forestry Research CMU Chiang Mai University CSI Crop suitability index DEM Digital elevation model DLD Department of Land Development (same as LDD), Thailand DNP Department of National Parks, Wildlife & Plant Conservation, Thailand DOAE Department of Agricultural Extension, Thailand DSSARMS Decision support system for agricultural resource management and services EC-JRC European Commission Joint Research Centre EPS Electrical pumping station ESRI Environmental Systems Research Institute FAO Food and Agriculture Organization of the United Nations FGT Foster, Greer, Thorbecke family of poverty measures FRA Forest Resource Assessment (FAO) GATT Global Agreement on Tariffs and Trade GDP Gross domestic product GIS Geographic information system GISTDA Geo-Informatics and Space Technology Development Agency, Thailand GLCF Global Land Cover Facility GMO Genetically modified organism GMR Greater Mekong Region GMS Greater Mekong Subregion GPP Gross provincial product GRP Gross regional product GRUMP Global rural-urban migration project GTZ German technical cooperation agency HEPR Hunger eradication and poverty reduction program, Vietnam HH Household HUAF Hue Univeristy of Agriculture and Forestry, Vietnam ICRAF World Agroforestry Centre (formerly International Centre for Research in Agororestry) IFPRI International Food Policy Research Institute IIED International Institute for Environment and Development, London IUCN International Union for the Conservation of Nature IWMI International Water Management Institute Lao PDR Lao People's Democratic Republic LAOPA Lao PDR poverty assessment LDD Land Development Department, Thailand LECS Lao expenditure and consumption survey LMU Land mapping units LNTA Lao National Tourism Authority MAF Ministry of Agriculture and Forestry, Lao PDR MARD Ministry of Agriculture and Rural Development, Vietnam masl meters above sea level MCDM Multi-criteria decision making approach MMSEA Montane mainland Southeast Asia MOLISA Ministry of Labor, Invalid & Social Affairs, Vietnam MONRE Ministry of Natural Resources and Environment MOP Ministry of Planning, Cambodia MSEA Mainland Southeast Asia NAFRI National Agriculture and Forestry Research Institute, Lao PDR NASA United States National Aeronautics and Space Administration NECTEC National Electronics and Computer Technology Center, Thailand NESDB National Economic and Social Development Board, Thailand NGO Non-government organization NGPES National growth & poverty eradication strategy, Lao PDR NOAA National Oceanic and Atmospheric Administration NOMAFSI Northern mountain agriculture and forestry science institute, Vietnam NPA National protected area NRD2C National rural development committee village-level database, Thailand NSC National statistics center, Lao PDR NSEC North-South economic corridor (GMS project) NTFP non-timber forest product OAE Office of Agricultural Economics, Thailand ONEP Office of Natural Resources Policy and Planning, Thailand PCED Poor communes with extreme difficulties in mountainous and remote areas, Vietnam PPP Purchasing power parity PRA Participatory rural appraisal PVC Poly-vinyl chloride (type of plastic) RBO River basin organization RDViet Rural development and environment of Vietnam project RFD Royal Forest Department, Thailand RID Royal Irrigation Department, Thailand RPF Royal Project Foundation, Thailand RRIT Rubber Research Institute of Thailand RSBO River sub-basin organization RTSD Royal Thai Survey Department SAE Small area estimates SAREC Swedish Agency in Research and Education Cooperation SDI Spatial Data Initiative of the CGIAR SEDAC Socioeconomic Data and Applications Center (Columbia University) Sida Swedish International Development Agency SLU Swedish University of Agricultural Sciences, Uppsala SOP Stages of Progress method SRTM Space shuttle reconnaisance terrain mission SWOT Strengths, weaknesses, opportunities, threats analysis method TAO Tambon Administration Organization, Thailand TAT Tourism Authority of Thailand THB Thai baht TRF Thailand Research Fund UMIACS University of Maryland Institute for Advanced Computer Studies UN United Nations UNEP United Nations Environment Programme UNESCO United Nations Economic, Social and Cultural Organization UNSD United Nations Statistical Division UPB Upper Ping Basin USD United States dollars USDA United States Department of Agriculture USER Unit for Social and Environmental Research, CMU Faculty of Social Sciences USGS United States Geological Survey VBARD Vietnam Bank for Agriculture and Rural Development VBSP Vietnam Bank for Social Policy VCCI Vietnam Chamber of Commerce and Industry VCF Vegetation continuous fields datasets VND Vietnamese dong WCMC World Conservation Monitoring Center WCPA World Commission on Protected Areas WFP World Food Programme WRI World Resources Institute WTO World Trade Organization WWF World Wildlife Fund

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1. Introduction & Overview

Efforts to reduce rural poverty in disadvantaged upland zones of the Greater Mekong Region (GMR) are taking place in the context of evolving regional trends toward greater restrictions on upland land use induced by environmental concerns, generally more pluralistic and participatory multi-level governance (despite periodic setbacks), and an increasingly globalized economy. Indeed, national and regional development policies emphasize investments in infrastructure that are expected to bring upland rural communities into the growing market economy. Many skeptics, however, are concerned that poor minority communities cannot effectively engage in production for globalizing markets, that national and local institutions will not be able to provide appropriate governance and information, and that market economics will only bring additional hardship and deterioration of environmental services. How to address these concerns is one of the greatest development challenges in the region today.

The World Agroforestry Centre (ICRAF) and colleagues at Chiang Mai University have joined with researchers working in upland areas of Thailand, Lao PDR, Vietnam and Yun- nan, China in formulating and implementing a project that has sought to advance how we try to understand and address these issues. The Rockefeller Foundation has kindly provided funding support for these efforts.

As described in this report, the project has sought to build on promising innovative efforts in the region to combine livelihood approaches with modern information systems technologies, in order to improve understanding of how upland households and communities have responded to and been affected by market opportunities. In the process, we have sought to provide examples of how emerging spatial information systems can be extended and adapted to help address particular conditions and problems faced by small upland farmers and enterprises. We have also explored alternative future scenarios related to current debate about directions development should take in the region, in order to more dispassionately assess likely impacts on patterns of livelihood opportunities and landscape transformation.

Major methods and information systems include a regional-level spatial and statistical database constructed from a variety of global and national sources, and a regional-level collection of secondary materials. At more specific local levels, we have built on previous and current work in the Upper Ping river basin of northern Thailand, as well as coordinated complementary case studies at sites in Vietnam, Laos and Yunnan, China, and secondary materials on each country. These components have provided the basis for the preliminary comparative assessment of livelihood and landscape transformation processes, conditions and patterns presented in this report. We hope our preliminary work will contribute to strengthening studies of local change and interpretations of region-wide analyses, with the goal of further improving both livelihoods and landscapes in upland zones for the benefit of all in the region.

1.1 Uplands, markets and poverty in the GMR

One of the basic underlying hypotheses of this project has been that there are significant differences between upland and lowland zones of the area known as the Greater Mekong Re- gion that relate to market and resource access of the poor. Thus, our initial framework re- Page 2 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region quired that we clearly identify the region and its upland zones, as well as key dimensions of regional economic change that have made market integration an issue.

1.1.1 General characteristics of upland mountain regions

We began at the broadest level with global definitions of upland mountain areas and widely recognized dimensions of their biophysical and socio-cultural characteristics that distinguish them from other parts of the world.

Biophysical dimensions of upland mountain regions From a global biophysical point of view, mountains are seen as areas with steep slopes and high elevations in relation to their surroundings. They include all areas with elevations greater than 2,500 m.a.s.l., areas higher than 1,500 meters with slopes steeper than 2 degrees, and areas of any elevation with slopes of >5 degrees or >300 meters above their surroundings, including plateaus and valleys within mountainous terrain. Mountain habitats support living organisms, animals (including humans) and plants, and they cover about 24% of the earth’s surface. Chapter 13 of Agenda 21(1992) established mountains as a significant habitat.1

Since slope, aspect, and altitude determine fundamental biophysical characteristics of upland habitats, topographic diversity results in small-scale variations in physical environment. And at broader scales, latitude (distance from the equator), continentality (distance from oceans), and topographic features (direction and altitude) affect climate and local weather patterns, rendering some mountains almost permanently wet, others dry, and yet others highly seasonal. Complex geological conditions add more diversity and influence soil development, soil type, erosion processes, and vegetative cover. With climates varying according to altitude and exposure, mountain uplands have greater species richness than the lowlands when comparing similar areas. This richness decreases with increasing altitude, but isolation and environmental extremes restrict species’ habitats. Globally, there are 10,000 species of flowering plants in the alpine belt alone, representing 4 percent of all higher plant species, even though the alpine belt covers only 3 percent of the earth’s land area [Körner 1995].

Socio-cultural dimensions of upland mountain regions in Asia The complex physical geography of upland mountain regions also promotes cultural diversity in languages, belief systems, architecture, settlement patterns, land use and livelihood practices. People have adapted in ways that demonstrate their intimate relationship with the environment and knowledge about plants, wildlife, vegetation, and ecosystems. The mountains provide them with environmental services (water, biodiversity, climate modulation, and carbon storage) and useful products (food, medicine, other non-timber forest products, rock building materials, etc.). Twelve percent (or about 720 million) of the global human population lives in mountain regions, and half of them are in the Asia-Pacific region. Of the 10 percent living above 2,500m, almost all – over 70 million – live in poverty and are vulnerable to food insecurity and mountain hazards, vulnerabilities, and risks [Jodha 2005].

1 http://www.un.org/esa/sustdev/agenda21chapter13.htm Chapter 1. Introduction & Overview Page 3

Different people interpret upland or mountain regions in different ways. Some see them as shrouded in mystery, a kind of frightening dungeon, with primitive people living in a wilderness. Others, such as the British author James Hilton [1933], describe a fictional Himalayan paradise, Shangri-la, which has become a myth and a synonym for Utopia in many languages and cultures. In reality, however, our knowledge of mountains is still far from complete and our understanding of relationships between human beings and the uplands, as well as between upland and lowland regions remains rife with misconceptions.

Landscapes in upland and mountain regions are generally mosaics of forests, home gardens, wetlands, crop lands, and alpine pastures: a range of habitats for many life forms and a diversity of livelihoods, from shifting cultivation to agropasture in high elevations, from rice ter- races to tea gardens, from orchards to rubber plantations. Ecological complexity within and among different elevation zones leads to diverse survival systems and earning patterns as upland people rely on the overall landscape and its products for their livelihoods.

Over the centuries, people have used barter systems to exchange goods and services, maintaining genetic diversity and food security within the parameters of their traditional cultures. Merchants from Yunnan traveled the Tibetan plateau, Southeast Asia and South Asia for a thousand years. Caravans served as market structures and formed a socio-cultural network among upland and lowland communities. Mountains were as much pathways of migration and trade as barriers between uplands and lowlands.

Nevertheless, historical upland-lowland linkages have been shaped by political ideologies about land use and property rights developed in lowland areas. In the past, uplands were perceived by lowland people as sources of strategic resources for lowland development such as hydropower, timber, non-timber forest products, and minerals. Logging, mining, and power generation have been developed and operated by state-owned enterprises. Construction of large reservoirs has directly caused loss of biodiversity and resulted in many negative social impacts. Millions have been resettled or displaced from their original homes, and it may take generations for resettled people to adapt to their new environment. Thus, upland people are further marginalized and impoverished, while large state and private enterprises receive government resource concessions for real estate, resorts, and plantations.

1.1.2 Where are the upland zones of the Greater Mekong Region?

Upland zones of what is being called the Greater Mekong Region have also become collec- tively known as Montane Mainland Southeast Asia (MMSEA). Efforts to characterize MMSEA usually focus on its diversity, both in terms of the ecological patterns in its mountainous terrain, and the ethno linguistic composition of its inhabitants. MMSEA has also been witness to a long and complex history of geo-political dynamics dominated by waxing and waning empires centered primarily on lowland areas where irrigated paddy rice production could flourish. Often serving as a buffer zone between lowland empires, as a safe haven for those with different cultures or ideas, or as a refuge for those out of favor with or displaced by growing empires [Thongchai 1994; Wyatt 2003], MMSEA and its mountain forests have long provided livelihoods for its inhabitants through a considerable range of agroforestry techniques that evolved through centuries of local experience enriched by informa- Page 4 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region tion that flowed along trade routes, through kinship networks, or with evolving settlement patterns. In many parts of the MMSEA domain, ethnic groups settled into different altitude zones where their agroecosystems became adapted to local ecological characteristics and patterns of biodiversity distribution. While their livelihoods usually centered on self-reliance, diverse characteristics among their local domains also allowed them to identify products with value for trade or tribute through networks of social interaction that spanned the region. Thus, efforts to understand processes in MMSEA must of necessity explore relationships that span all relevant zones in the region.

Our explorations of the recent and current outcomes of these complex processes in the region have employed a regional database of mainland Southeast Asia developed under this project and a companion project conducted in collaboration with the East-West Center with funding support from the U.S. National Science Foundation. Particular focus in this database is on information that can help us understand important characteristics and major driving forces associated with change over space and time. This has helped us clarify and refine key terms used in our analytical framework:

While the terms “uplands” and “lowlands” are very commonly used in discussions and debate about a wide range of issues in this region, specific definition of these areas is often elusive. Our assessments under this project suggest that considerable clarification can be achieved through definitions based on a quite simple set of altitude zones. Since our approach seeks to move beyond the simple binary “upland-lowland” dichotomy, we have articulated the following zones. General relationships among them are depicted diagrammatically in Figure 1-1. Lowland Zone. We define the lowland zone to include all areas with elevation below 300 m.a.s.l. And in order to capture some of the important variation within this zone, we go on to define two major subunits: Coastal lowland zone. This zone is comprised of all areas below 100 m.a.s.l., which includes all major river delta areas, as well as adjacent low-lying areas that extend inland for considerable distances in major river valleys – to the tip of southern Laos in the Mekong, and to the border of Yunnan in the Red River Valley. These areas include the central base for many of the dominant empires in regional history, as well as the most widely-known “rice bowl” production areas for irrigated paddy rice. They are also susceptible to major flooding events, and especially areas nearest the coast are now of major concern regarding impacts of rises in sea level expected to be associated with global climate change. Upper lowland zone. Areas between 100 to 300 m.a.s.l. are classified into this zone. While widespread production of paddy rice has also become a prominent feature of this zone, there are often more constraints associated with insufficient availability of irrigation water or more difficult soil conditions. At the same time, however, various naturally highly productive valley bottom lands also fall into this zone in more inland areas of the region; Montane Zone. This zone includes all areas with elevations falling between 300 and 3,000 m.a.s.l. Our assessments confirm the relevance of this altitude range for defining the domain of “Montane Mainland Southeast Asia (MMSEA)” [Thomas 2002], which Chapter 1. Introduction & Overview Page 5

also includes areas most commonly referenced as “uplands”. However, we also believe it is important to further articulate this broad zone into three major sub-units: Lower montane zone. Areas in this zone fall between 300 to 500 m.a.s.l. This includes most areas commonly referred to as “uplands” in reference to “foothill” lands situated immediately above those developed into irrigated paddy. In some cases, various types of irrigation systems have sought to bring parts of these areas under paddy production, but constraints and costs are often high. More commonly, such areas are considered more appropriate for rainfed production of field or orchard crops, or for irrigated crops using systems other than bunded flooding. Middle montane zone. This zone includes areas located between 500 to 1,000 m.a.s.l. These are usually in areas of more steeply sloping terrain, often with only small areas of valley bottom land where establishment of paddy rice is feasible. Many of the region’s “composite swidden” agroecosystems evolved in this zone, often within minority cultures. Dominant lowland societies frequently view such types of systems as primitive and “inappropriate” forms of land use. Upper montane zone. This zone includes areas between 1,000 to 3,000 m.a.s.l. Sig- nificant change in natural ecological conditions is found in this zone relative to lower altitude zones, which is associated with temperature and rainfall patterns. Land is often steeply sloping, and variations are frequently found in ethnic composition and the types of agroecosystems that were developed in these areas. Domi- nant lowland societies tend to believe that forest cover should be maximized in these areas in order to maintain regular stream flow patterns upon which lowland systems depend. Alpine zone. This zone includes all areas above 3,000 m.a.s.l. Another ecological shift occurs in this zone, with coniferous forest becoming more prominent initially, above which large areas are located above the timberline for natural forest. Open shrublands, peat swamps and snowpack are major features of landscapes in this zone.

Figure 1-1. Generalized relationships among elevation zones m.a.s.l. (approx) Higher Alpine Mountain 3,000 Valleys

Upper Lower Mountain 1,000 Valleys

Middle Montane 500 Lower 300 upper 100 Lowland 0 coastal

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In order to help visualize the overall Figure 1-2. Key altitude zones of MSEA spatial patterns of these altitude zones, Figure 1-2 maps the zones across an area of 40 degrees longitude (85 to 125 degrees east) by 40 degrees latitude (0 to 40 degrees north), which is the maximum domain of our regional spatial database. As indicated in the map, the amount of spatial variation across this large region that is captured by this simple set of altitude zones is quite striking.

The term “Greater Mekong Region” implies that river basins are important for the region, and that there is some central role played by Figure 1-3. Major river basins of MSEA the Mekong River. Thus, having identified the altitude and spatial domains of montane and neighboring zones, we then turned Yangtze to the role of major river basins in the region. The boundaries of the Irrawaddy Pearl seven largest river basins contained Red in the window of our regional spatial Salween database are displayed in Figure 1-3. Chao Mekong These major basins can be grouped Phraya into two basic categories:

The “Big 3” river basins include the Yangtze, the Mekong and the Salween (Figure 1-3). These are by far the longest rivers in the region, Data: NASA SRTM, Processing: CGIAR-SDI and all have their upper origins in Interpretation: D. Thomas – Xu Jianchu adjacent areas of the Tibetan Plateau. The basic consequence of this characteristic is that river flows are influenced by the slow release of water stored in the ice, snow and peat swamps of Tibet. Although the proportion of the total stream flow contributed by this source may be quite small for the Yangtze and especially for the Mekong, it can be of strategic importance for downstream ecosystems and populations, and especially for the period of low flows that occurs during the dry season of their strongly monsoonal climate.

These three river basins are also quite different. Since the Yangtze is a huge basin that covers about 2 million square kilometers, although source areas in the alpine altitude zone are large, Chapter 1. Introduction & Overview Page 7

they contribute only about 25 percent of total catchment area. Another 30 percent of the area is located in large lowland zone areas, while the rest is fairly evenly distributed among the three levels of montane altitude zones.

The Mekong is more skewed toward the lowlands, with only about 10 percent of its catchment area in the alpine zone, and about half located in lowland zones. Land area of the Sal- ween river basin is skewed in the opposite direction, with about two-thirds located in the alpine zone, and only about 2 percent in lowland zones.

While the Yangtze is a huge and hugely complex basin, its entire area is located within the borders of China. And while the Salween river spans parts of three countries, its share of populations is quite small.

The “Middle 4” river basins also cover very significant and strategically important parts of the terrain and human populations of the region (Figure 1-3). While the Irrawaddy and Pearl basins cover almost as much area as the Salween, only a tiny proportion of the Ir- rawaddy extends into the alpine zone. The Pearl, Red and Chao Phraya basins do not extend beyond the upper montane zone. In terms of distribution of land among altitude zones, the Chao Phraya represents one end of the spectrum, with only about 6 percent of its area in the upper montane zone, and about 58 percent in lowland zones. While all have large and important lowland areas, more than 20 percent of the Pearl and Irrawaddy basins, and more than half of the Red River basin, are in the upper montane zone.

Since their source areas are limited to montane zones, seasonal river flows in these basins are more strongly influenced by seasonal variations in the monsoon climate. The same is true for remaining areas of the region, which are located in various small basins and coastal drainage areas that are even more vulnerable to local variations in climatic conditions. One consequence is that large downstream areas have become increasingly concerned about land use in montane zones, which they believe can have serious impacts on water resources that feed their large irrigated paddy-centered agricultural production systems.

But boundaries of the Greater Mekong Region are not defined by river basins. Rather, it is the reality of human social organization based on nation states and their administrative sub- units that matter in this regard. Figure 1-4 overlays boundaries of nation states and nearby provinces of China onto altitude zones.

The Greater Mekong Region – or the Greater Mekong Sub-region (GMS) as it is known under programs supported by the Asian Development Bank (ADB) – is widely recognized as the grouping of Vietnam, Lao PDR, Cambodia, Thailand and Myanmar together with the Yun- nan Province of China. Boundaries of this grouping are shown in Figure 1-5 along with the boundaries of the Mekong Basin. Although the Chinese province of Guangxi has recently joined various ADB infrastructure programs for the GMS, its land area does not intersect with the Mekong Basin and it is not included in our analysis.

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The GMS label for this grouping Figure 1-4. GMS states and nearby countries and Chi- is somewhat of a misnomer. The nese provinces GMS does not include the entire area of the Mekong River Basin, Qinghai Gansu and yet it does include extensive areas located in other river basins. Sichuan Hubei Xizang (Tibet) Chongqing But the GMS name is accepted Jiangxi Hunan Guizhou Fujian because of its symbolic nature. India Yunnan Bangla- This symbolism follows from the Guangxi Guangdong desh fact that the Mekong Basin is the Myanmar one biophysical feature that all six Lao Vietnam of the member units have in Thailand common, as well as from the fact Cambodia that its effective management Philippines requires cooperation and collaboration among all the members. Since cooperative and Malaysia collaborative programs are the Indonesia central focus of activities Figure 1-5. GMS grouping & the Mekong Basin conducted under the GMS banner, the symbolism is appropriate and the name has stuck.

GMS member states provide the political context for decisions about resource and economic policies, and their perspectives on montane regions are reflected in the outcome. In order to help provide some insight into their respective points of view, the distribution of land area among altitude zones in each of the GMS country domains is displayed in Table 1-1. With nearly 90 percent of its land area in the lowland zone, it is not surprising that Cambodia has been considered a quite minor player in issues related to the MMSEA domain. At the other extreme is Yunnan which, with more than 90 percent of its area in montane zones (and almost all the rest in the alpine zone) is the area where MMSEA issues could be expected to play a very important role. Indeed, the relative “lowlands” of Yunnan are in the middle montane zone, while its “highlands” are in the alpine zone. Remaining countries provide a gradient of relative proportions in montane zones in the order of Thailand (31%), Vietnam (46%), Myanmar (54%), and the Lao PDR (75%). For all of these countries, MMSEA-related issues could be expected to be important, but heavy weight is likely to be placed on interactions between Chapter 1. Introduction & Overview Page 9

lowland and montane zones – and all have political and economic systems dominated by lowland-centered societies. And even in the case of Yunnan, many political and economic issues are decided in larger national contexts where, again, lowland society is dominant.

Table 1-1. Percentage distribution of altitude zones in GMS country domains Cambodia Thailand Vietnam Myanmar Lao PDR Yunnan GMS Alpine - - 0 1 - 8 2 upper 1 4 10 21 22 83 24 Montane middle 5 15 23 21 40 8 18 lower 5 13 14 12 14 0 10 upper 26 41 17 26 24 0 23 Lowland coastal 64 28 36 20 1 0 22 TOTAL 100 100 100 100 100 100 100

1.1.3 Change in the Valley World and implications for the uplands

After identifying montane zones and their relative importance on an area basis within regional and national contexts, we then turned to key underlying Figure 1-6. Population Growth in the GMS 1970 - 2005 forces of demographic and eco- Total Population, 1970 - 2005 nomic change that have made 300 250 market integration an issue in 200 the GMS. 150 100 One important dimension of millions of persons 50 0 demographic change has been 1970 1975 1980 1985 1990 1995 2000 2005 population growth. Change in Thailand Myanmar Lao PDR Cambodia Viet Nam Yunnan the total number of people Figure 1-7. Population Densities in the GMS, 1970-2005 living in the GMS during 1970 Overall Population Density, 1970 - 2005 to 2005 is charted in Figure 1-6, 300 250 with contributions by each state. 200

The regional population grew by 150 more than 100 million people 100 during this 35 year period, 50 Persons per square kilometer 0 driving a huge increase in 1970 1975 1980 1985 1990 1995 2000 2005 demand for resources to support Cambodia Lao PDR Myanmar Thailand Viet Nam Yunnan China livelihoods of people living in Table 1-2. Population Growth Rates, 1955 – 2005 the GMS. While national percent per year population growth rates in each 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Cambodia 2.2 2.3 2.5 2.4 0.5 -1.0 3.7 3.6 3.2 2.3 1.8 country are now low or rapidly Lao PDR 2.7 2.6 2.5 2.5 2.6 1.3 2.5 3.0 2.8 2.1 1.6 Myanmar 2.0 2.1 2.2 2.3 2.5 2.2 2.0 1.7 1.4 1.2 0.9 decreasing (Table 1-2), Viet- Thailand 2.8 3.0 3.1 2.9 2.5 2.1 1.6 1.3 1.2 1.1 0.8 nam, Cambodia and the Lao Viet Nam 1.9 2.3 2.5 2.4 2.2 2.0 2.2 2.3 2.1 1.5 1.4 China 1.9 1.5 2.1 2.6 2.2 1.5 1.3 1.5 1.1 0.9 0.7 PDR will have significantly source: UN Population Division's quinquennial estimates and projections higher population levels over the next few decades.

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Overall population density is one indicator of increased pressure on resources in the region. Change in population densities at the national level during 1970 to 2005 are charted for each GMS member state in Figure 1-7. While increases in density have occurred everywhere, the groupings of density patterns are instructive. The Lao PDR is by itself at the lowest level of population density. While Cambodia passed through an era of unusual demographics during its period of political turmoil, it has now become quite closely paired with Myanmar in terms of overall density levels, which are still quite modest by regional standards, but Cambodia’s current growth rate is much higher. Similarly, Yunnan and Thailand are quite closely paired at middle levels of population density, not too far below the density level of China at the overall national level. While there has been substantial increase in density levels during this 35-year period, population growth rates in China and Thailand have dropped to very low levels (Table 1-2), as reflected in the decreasing slope of their population density curves.

The clear exception to this story is Vietnam, which is in its own class of overall population density that far exceeds levels elsewhere in the GMS. Although growth rates have dropped dramatically since 1990, the many implications of the Figure 1-8. Economic Growth in the GMS, 1970 - 2005 large population and very GMS GDP by country, 1970 - 2005 high population density 250 levels in Vietnam will be seen 200 in various components of the 150 analysis presented in this 100 50

report. billion 1990 US dollars 0 1970 1975 1980 1985 1990 1995 2000 2005 Demographic change during Thailand Myanm ar Cambodia Lao PDR Viet Nam Yunnan this period, however, cannot Figure 1-9. Urbanization in the GMS, 1970 - 2005 be understood apart from Proportion of Urban Population, 1970 - 2005 drives in GMS states toward 45 40 economic restructuring and 35 30 urbanization. Thus, GDP 25 levels of GMS states during 20 15 1970-2005 are charted in 10 5 Figure 1-8, based on Percent of total population 0 constant 1990 US dollars 1970 1975 1980 1985 1990 1995 2000 2005 that reflects change in real Cambodia Lao PDR Myanmar Thailand Viet Nam Yunnan China value.

Since Thailand began serious economic development plans and programs in 1960, its economy has been dominant at the GMS level throughout this period. It is also clear, however, that rapid economic growth became a much more widespread process in the region during the 1980’s, and that growth in Yunnan and Vietnam is now faster than in Thailand. Overall effects of the 1997 “Asian Economic Crisis” can also be seen in this chart, with the greatest impact occurring in Thailand.

Chapter 1. Introduction & Overview Page 11

This type of rapid economic growth has only been possible as countries restructured their economies away from a primary focus on agriculture into greater emphasis on industrial and service sectors, along with increased economic integration with international and global levels. As economic change has penetrated rural areas, it has brought increasing commercialization of agriculture and emphasis on production of export crops. In order to facilitate this type of production, there has also been rapid expansion and upgrading of transportation and communications infrastructure, along with rapid growth in additional private and public sector investments and production arrangements.

Economic growth has been most rapid, however, in industrial and service sector activities that are largely focused in or near urban centers. This has stimulated a second level of demographic change that is concentrating greater proportions of GMS populations in urban areas. Official levels of urbanization for each GMS state are charted in Figure 1-9. Again, Thailand was the first to experience a period of very rapid urbanization during the 1970’s. Rapid urban growth at the overall national level in China began during the 1980’s and continues un- abated. While urbanization in montane Yunnan probably began somewhat later, data are incomplete due to changes in the way statistics are compiled. Recent data indicates, however, that current rates of urban growth parallel the rapid rates in China overall. While urbanization in Vietnam, Myanmar and Cambodia was more modest during most of this period, they all appear to be experiencing more rapid rates during the last 15 years. Change in the Lao PDR appears to have been fairly constant throughout this period. All these data are probably fairly conservative, since all GMS states have registration issues that tend to underestimate urban populations. Indeed one recent study suggests Thailand’s urban population may actually already exceed 50 percent of the total [Pramote Prasartkul 2007].

Economic change and urbanization are also associated with changing lifestyles that affect consumption patterns, as well as demographic patterns related to household size and composition. And in GMS states like Yunnan and Thailand, low population growth is bringing still another wave of demographic change as populations undergo aging transitions.

These processes suggest spatial distributions of populations in GMS states are uneven and changing. Spatial distribution of population density and major urban areas are displayed in Figure 1-10 for GMS states in the context of the entire window of our regional spatial database. Overall densities in the GMS – except for Vietnam – appear relatively modest in comparison with the huge densely populated areas of northeast China and South Asia, but relatively high compared to the very sparsely populated Tibetan Plateau. Within GMS states, as across the broader region, highest population densities are concentrated in large lowland zones, and in valley floors in areas dominated by montane zones. Distributions in Vietnam are again most dramatic since its high overall density is largely concentrated in very densely settled lowland zones in the Red and Mekong river deltas and the narrow band of lowlands along its coast. It is also important to note that distributions everywhere in this map reflect the distribution of intensity of demands for natural resources, as well as distributions of relative political and economic power. Comparison with Figure 1-4 makes the overall dominance of lowland zones very clear.

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As a result of these processes of Figure 1-10. Distribution of population density & urban change, people in montane zones areas have been affected in many ways, resulting in transformations of both livelihoods and landscapes. Popula- tion growth increases the number of people seeking livelihoods from their local natural resource base. The pool of opportunities from which local people construct their livelihoods changes with commercialization and linkages with production input, output and wage labor markets. Population Density persons per sq km Urban areas in Transportation and communications 0 yellow 1-4 infrastructure increases interaction 5-24 with lowland society. Merchants 25-99 100 - 249 introduce many new consumption 250 - 999 1,000 - 1,999 opportunities. Various public and 2,000 or more Data: CIESIN: GRUMP ver 1.1 private organizations bring new forms of social and economic arrangements, as well as new types of services that require cash payment. Mass media and education bring in new ideas and information, attracting many to try to emulate lowland and urban lifestyles or actually migrate, either temporarily or permanently, to those areas. Government land use policies are bringing new opportunities for land security or ownership in some areas. But policies are also bringing widespread restrictions on how land can be used in montane zones, and establishing protected forest areas where local people are excluded from access to resources. New opportunities are also beginning to emerge in the services sector, such as tourism, but participation requires radical change in livelihoods, new forms of knowledge and information, and new types of social and economic linkages with people and organizations outside the montane zone.

Many of these changes in constraints and access to opportunities tend to pull or push people in different – and often conflicting – directions. Many new opportunities also require access to investment capital, and many may involve substantial risk. And in some areas that the lowland-centered urbanizing world finds particularly attractive, there may be strong competition from knowledgeable, well-endowed, and well-connected outsiders seeking control over or ownership of local natural resources. Other barriers to access and effective participation can relate to monopoly control or high “transaction costs”.

1.1.4 Importance of market integration and poverty issues

Access to these new opportunities, as well as impacts of new constraints, are not evenly distributed across all areas of GMS states. And where new opportunities emerge, some are willing and able to develop new livelihood activities and thrive, whereas some will try and fail; others may hesitate, and still others may not be able to participate because they lack basic resources or skills. Some may also face ethnic prejudice or other constraints.

Chapter 1. Introduction & Overview Page 13

Thus, while governments are increasingly recognizing the futility of trying to “micro- manage” these complex processes of change, they are also recognizing the need to understand the overall impacts of change. Clearly, they place high priority on stimulating economic growth through increased market integration. And more recently they have begun placing more emphasis on needs to manage natural resources in ways that can help maintain the longer-term sustainability of their economic systems.

Poverty. But to various degrees, GMS governments also recognize the importance of eliminating, or at least minimizing poverty and perceived inequities in their societies. Such recognition tends to be based on some combination of three lines of reasoning: x Moral. Poverty can be a moral or ideological issue, and most governments engage in extensive rhetoric about how their programs will help everyone in society to meet their basic needs and pursue prosperity. x Economic. Reducing or eliminating poverty can be an economic issue because of the cost of government programs to help poor people, at least in times of crisis. And, because as people move above poverty levels they will produce and consume more, reducing poverty can also help stimulate the domestic economy. x Security. Poverty can also be a national security issue because of the potential threat to political stability that can arise when significant components of the population are not able to meet their basic needs, or feel they are being excluded from access to prosperity. One element of current political problems in Thailand, for example, relates to perceptions of a political division between urban elites in upper and middle classes, and people in relatively poor rural areas.

Market integration. All governments in the GMS region have proclaimed that increased market integration is a central component of their approach to poverty alleviation. There are many different views and variations on how this can or should be achieved, and many additional factors seen as important for promoting broader notions of improved well-being and quality of life. And while more immediate improvements in livelihoods and reduction of poverty are important, sustainability of change needs to be understood in the context of generational change. Nevertheless, promotion of broad effective participation in globalizing market economies is a key element of their approach, and action programs are being designed and implemented.

In this study, the term ‘market integration’ is given a broad definition to encompass a range of inter-related processes occurring at multiple levels. In previous sections we have already seen that the recent period of rapid economic change has been set in motion largely through change in economic policy at national levels. x One key dimension of this change has been outward integration of national economies and markets with those of other nations through international trade and investment, which we will explore in more detail in a subsequent chapter. x A closely related and equally important dimension has been inward integration of economic activity at more local levels into national economies and markets, as well as related Page 14 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

national administrative, political and social systems. A range of investment policy tools have been used to help induce this change, including expansion of infrastructure and support services aimed at building capacity for market-oriented economic activity. While initial efforts focused largely on major lowland agricultural and urban centers, many efforts have expanded over time to increase penetration into upland zones. x Thus, another important dimension of this change has been integration of households and communities in formerly remote rural upland areas into participation in economic markets that link local upland areas through this hierarchy to markets at international levels. These linkages introduce new options and opportunities for changes in production, consumption, and other livelihood alternatives such as non-farm or off-farm employment, as well as changes in lifestyles and aspirations. But whether and how local households and communities choose to participate in these market integration processes is closely related to their capacities to participate and to constraints they face. Constraints can be those placed on previous livelihood activities that ‘push’ them toward market integration, or constraints serving as barriers that prevent them from being ‘pulled’ into participation in market activities. In any event, livelihood strategies are likely to change. x And yet another relatively more recent dimension of this change is impacts of processes of globalization and the multi-dimensional types of connectivity with which it is associated, on market integration processes at all of the above levels. This newest wave of change underscores the uncertainties, risks and potential rewards associated with integration into today’s increasingly complex and dynamic market systems, as well as the types of new approaches and skills that are likely to become even more important in the future.

1.2 Study research strategy

Our overall research strategy is best explained in terms of our research objectives, the five major questions our research has sought to address, and the multi-level structure of our investigations in the region.

1.2.1 Research objectives

The broad goals of this research project have been: (a) To increase knowledge of how production for commercial markets does and can affect poverty and natural resource management in uplands of the region. (b) To develop spatial information systems and alternative future scenarios to help identify types of products, technologies, and policies that respond to markets, reduce poverty, and assure agroforestry landscape sustainability.

Specific objectives of this exploratory project have been: (1) To assess how upland households, livelihoods and land use patterns in north Thailand are being affected by commercial production, by access to information on technologies, products and markets, and by public development and land use policies. (2) To extend capacity of a pilot spatial information system developing in north Thailand to identify current and potential distributions of conditions where market opportunities and Chapter 1. Introduction & Overview Page 15

technologies are most likely to be profitable and policy-consistent, and to learn from key actors at different levels how to improve access to such knowledge and information. (3) To explore and compare assessments piloted in north Thailand with complementary analyses of conditions and experience in Vietnam, Lao PDR, and Yunnan, China, in order to identify key elements of variation in commercialization processes and impacts, and help inform and facilitate further analyses of Mekong Region uplands.

1.2.2 Major research questions

In order to achieve these objectives, our research project formulated five major research questions, and identified key components of investigation that would be required to address each question. This provides a framework for integrating our complex set of research activities. x Where and who are the poor? Response to this question requires exploration of various ways in which poverty is conceived, identified and measured by different people and for different purposes. It further requires regional and more local level spatial assessments to help determine where different types of poverty are located and the manner in which they are linked to issues associated with market integration in upland zones. x How have market opportunities changed? Response to this question requires exploration of regional patterns of economic change and their links with meso-level conditions associated with sites of more local level studies. It further requires more specific examination of local examples of change in market opportunities, including key actors, technologies, institutional arrangements, production chains, or other relevant factors. x What strategies have been used to respond and adapt to changes in opportunities? This question requires explorations to identify and classify upland household livelihood response strategies in relation to their engagement with market opportunities that have emerged. It also requires further examination of household livelihood asset and response capacities associated with different strategies, as well as information on household perceptions regarding intentions, intended trajectories and constraints they face in responding to alternative opportunities. x How might larger transitions in society affect opportunities and responses? Response to this question requires explorations of trends and uncertainties regarding future trajectories of change at multiple levels within which local upland areas are nested. Assess- ments of plausible alternative future scenarios at multiple nested scales could suggest how characteristics and patterns would vary according to different trajectories of change. x What are the implications of state policies for market opportunities and access for the poor? Response to this question requires exploration of major areas of policy concern in the region, including the nature of policy impacts at more local levels in relation to factors found to be important in influencing local response to new market opportunities. Particular em- Page 16 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

phasis should be on policy impacts that have helped strengthen or weaken local response capacities, and on those that have increased or reduced constraints on response. Special attention needs to be given to impacts on the poor

An overall synthesis of responses to these five research questions is our primary means for achieving project objectives and goals. Our synthesis is presented in this report.

1.2.3 Case studies in a regional context

Investigations under the project to explore and address these five research questions were conducted at two levels. At a broader level, investigations were based on regional overviews from previous research studies, and secondary sources that in various cases included spatially explicit data that could be used in quantitative and qualitative assessments of regional distributions of characteristics and their relationships with upland mountain zones.

The second level of investigation consisted of local case studies conducted at a set of sites across the region by colleagues collaborating under this project in Thailand, Vietnam, Yun- nan and the Lao PDR. Studies are from a mix of activities conducted under support from this project and from a closely linked project managed by the East-West Center and supported by the U.S. National Science Foundation. Parts of our analysis also draw on information and data gathered through surveys and studies by project researchers under previous or parallel studies they have conducted. In aggregate, these more detailed investigations conducted under specific local conditions provided our research with much more depth by giving us windows into real-world behavior and perceptions that are often masked in broad regional analysis. They also provide us with at least some evidence about how local conditions and processes may be similar or may vary across different parts of the region.

By combining these two levels of investigation, we were able to develop a synthesis that responds to each of our five research questions. These are presented in this report in the context of our overall synthesis under this research project.

1.3 Overview of study sites

This section provides a brief introduction to the locations of the local case studies conducted in countries of the region that have contributed to analyses conducted under this project.

1.3.1 Study sites in their regional context

We must first locate our study sites in the context of the Greater Mekong Region. The regional spatial database developed in association with this project has already been introduced in section 1.1.2. It is constructed from data from a considerable range of sources at national, regional and global levels, most of which are already in the public domain or available upon request for non-profit research.

Employing our study’s operational definitions of uplands in terms of montane zones, Figure 1-11 locates the meso-level outlines of our study areas in the Greater Mekong Region. In Chapter 1. Introduction & Overview Page 17

Thailand, the Ping River Figure 1-11. Locations of study areas in regional context Basin is shown in its context as a major tributary in the larger Chao Phraya River

System, which includes both Baoshan China Bangkok and the lowland Prefecture

‘rice bowl’ agricultural Kunming production area of the Yunnan Thai Nguyen Central Plains. The location Province of the Bhumiphol reservoir Viet is also indicated, in order to Myanmar Nam demarcate the boundary of Hanoi Ping River the Upper Ping Basin which Luang Namtha, Basin Oudomxay, & is the main focus of our Lao PDR Luang Prabang studies. These boundaries Vientiane Provinces Chao Phraya also reflect the river basin River and watershed context that System Bhumiphol characterizes much of our Reservoir Thailand work in this area. Bangkok In the Yunnan province of Cambodia China, our case studies have largely focused at sites in Baoshan Prefecture, located in West Yunnan near the border with Mynmar. In Vietnam, our case studies have focused on the northern province of Thai Nguyen, which is seen in relation to the lowlands of the Red River Valley and Hanoi. Case studies in the Lao PDR have been at several locations nested within the three adjacent northern provinces of Luang Namtha, Oudomxay and Luang Prabang. Together, these sites span a quite large range of locations and conditions in the uplands of the Greater Mekong Region.

1.3.2 Thailand study sites: the Upper Ping Basin

Since our sites in Thailand have been the basis for a major part of studies under this project, our introduction is considerably more detailed than for our sites in neighboring countries. Thus, we introduce here the river basin and watershed framework used in many of our studies in the Upper Ping Basin, as well as areas where more local studies were conducted, and some characteristics of the physical environmental setting, most of which are fairly similar in neighboring upland areas in the region. River basin and watershed context Our primary set of case study sites is located in the upper portion of the Ping River Basin above the Bhumiphol Reservoir. This area is commonly known as the Upper Ping Basin (UPB), which is the name used in this report. The UPB includes the Chiang Mai Valley and Page 18 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region its highly commercialized agricultural areas and urbanizing centers, as well as various more remote upper tributary watershed areas with characteristics more similar to what can be found in many parts of montane mainland Southeast Asia (MMSEA).

Analyses at this type of level, which is intermediate between our broad regional spatial database and very local village-oriented data, are usually very difficult to conduct. Fortunately, however, this project was developed in partnership with colleagues at CMU who have been working for several years on building pilot provincial-level spatial information and decision support systems in this area. Thus, we have been able to draw heavily on their analytical tools and databases in conducting the UPB analyses in this report. By using these tools, we have also been able to transcend various constraints imposed by often arbitrary boundaries of government administrative units. At the same time, this allows much of our spatial analysis to remain more consistent with our overall river basin and watershed approach in the UPB.

The Upper Ping Basin (UPB) covers an area of about 25,203 sq.km and includes most of the land in Chiang Mai and Lumphun provinces. For spatial analysis, the overall extent of the UPB is too large to capture significant variations among key biophysical and socioeconomic variables that underlie the opportunity and constraints of people’s livelihood systems. But within the UPB, sub-watersheds may be nested into various levels. Characteristics such as terrain, transportation networks, and resources availability for major production systems vary with space and time among sub-watersheds of the UPB. These spatial variables also play important roles in determining the effectiveness of agricultural resource utilization and services such as access to resources (land, water and bio-resources), and access to market and agricultural services. Drought, flood, debt, landlessness, markets, resource policy, trade agreement, and local administration are among the many dynamic factors which contribute to productivity, food security, and poverty of the population in this area.

Thus, to facilitate analysis Figure 1-12. Upper Ping river basin & its sub-watersheds using and discussion of these types Pfafstetter coding system of factors, we have delineated the UPB into hierarchical levels using Pfafstetter’s method and assigning appropriate codes to each watershed [Verdin & Virdin 1999]. This was accomplished by a tool developed to work with ArcGIS [ESRI 2002] and described by Pin- petch and Methi [2005]. A feature dataset was designed to store polygon feature class data representing boundaries of sub-watersheds as generated from Pfafstetter’s method. The Pfafstetter’s codification system and hierarchical level of watersheds is illustrated in Figure 1-12. This coding system is useful in tracking the hierarchical level as well as the position of any particular watershed in the network. Chapter 1. Introduction & Overview Page 19

The UPB is considered to be a group of Level 3 watersheds (the Ping itself is Level 2, and the Chao Phraya is Level 1). Within the UPB, sub-watersheds may be delineated and codified to the smallest area. For our purposes, delineation of sub-watersheds was done down to level 4. At this level sub-watersheds can be matched and named after streams labeled on topographic maps and size is small enough for local watershed management purposes. The full extent of the UPB as expressed in sub-watershed levels 2, 3 and 4 is shown in Figure 1-13.

Figure 1-13. Nested Upper Ping Basin and watersheds at level 2, level 3 and level 4

(a) Level 2 watersheds (b) Level 3 watersheds (c) Level 4 watersheds

In this project, level 4 sub- Figure 1-14. Characteristics of a sub-watershed watersheds have been used to sum- stored in a geodatabase marize biophysical and socioeconomic data in order to capture spatial variation of key variables. Once data are summarized they can be linked to each polygon that represents the level 4 sub-watershed with which it is associated, and may be displayed in GIS as a map of the attributes. Figure 1-14 illustrates a map that displays level 4 sub- watersheds and their biophysical and socioeconomic attributes. Such maps can be intersected with other spatially explicit data in conducting further quantitative and qualitative analyses.

Page 20 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Chiang Mai Valley, Mae Wang, Mae Chaem, and Omkoi

Major locations of the various more local case studies that have contributed are shown in Figure 1-15 in the context of the Upper Ping Basin.

Chiang Mai Valley. It is particularly important to note the location of Chiang Mai City and adjacent areas of the Chiang Mai Valley that are located in the upper lowland zone. The important role of the valley and its urbanizing areas will be explored in considerable detail in subsequent chapters, as well as the influences these areas have on more remote upland areas in upper tributary watersheds. Figure 1-15. Locations of Mae Wang, Mae Chaem, Mae Wang. The name of Mae Wang and Omkoi in the UPB is used for both a watershed and a dis- Myanmar trict near the western border of the Chiang Mai Valley. Mae Wang watershed is a tributary of the larger Mae Khan sub-basin, and the Mae Wang Chiang area obtained full district status in Upper Mai City 1995. This area represents a gradient Ping from the upper lowland zone of the Basin Chiang Mai Valley floor with convenient connections to Chiang Mai City, Chiang to upper montane zones in the ridge Mai Valley of mountains that contains the highest peak in Thailand. Not surprisingly, lowland areas are mainly ethnic Northern Thai, with increasing numbers of ethnic minorities found at higher elevations. Since its location and this combination of biophysical and cultural characteristics provide a Bhumiphol basis for a new line of non-farm local Reservoir enterprise associated with day-trips from Chiang Mai for ecotourism, in addition to farming livelihoods. Myanmar

Mae Chaem. The name Mae Chaem also applies to both a district (the boundary shown in Figure 1-15) and a watershed, which in this case is a sub-basin that is so large (about 4,000 sq. km.) that government officials have arbitrarily divided it into ‘upper’ and ‘lower’ Mae Chaem sub-basins. Mae Chaem district includes 10 sub-districts (tambon). Mae Chaem lies to the west of Mae Wang and the Chiang Mai Valley, separated by an important mountain ridge that includes Inthanon, the tallest mountain in Thailand. Thus Mae Chaem has long been considered a remote upper tributary area, with very small flat valley floor areas, and extensive sloping areas in middle and upper montane zones. Ethnic minorities, and especially ethnic Karen, make up a substantial majority of the population. Traditional agroecosystems were based small pockets of paddy land where terrain allows, and much larger areas of rota- Chapter 1. Introduction & Overview Page 21

tional forest fallow shifting cultivation systems. Forest cover is extensive, and protected forest areas have expanded greatly. Its upper montane zones areas have been a major site for opium crop substitution programs. All these issues and their relationship with market integration and livelihood change will be explored much further in subsequent chapters.

Omkoi. Located to the south of Mae Chaem, Omkoi is one of the most remote and sparsely populated districts in Chiang Mai province. Its population of about 48,000, 80 percent of whom are ethnic Karen, is scattered over 2,094 km2 most of which, like Mae Chaem, is national reserve forests and wildlife sanctuaries. Omkoi district town lies 180 km southwest of Chiangmai city. Its only main road was paved in 1986 and followed by introduction of cash crops. There are six tambons (sub-districts), 95 administrative villages and 232 hamlet settlements in the district, and while most can be reached by 4-wheel-drive vehicles, about 50 villages can only be reached by foot. Omkoi remains one of the poorest districts in Thailand.

The majority of Karen villagers still adhere to traditional family and kin-based economic organization, although some household activities have been modernized as a result of new knowledge associated with cash cropping. A comfortably well-off household utilizes tacit based knowledge to produce rice in upland swidden fields and learns through the suppliers’ network about how to produce cabbages and tomatoes. The two knowledge systems are overlain with little conflict or hybridization. Savings from any successful cash cropping are invested in free range cattle or a vehicle. More influential members of a village with enough cash and available labour may experiment with crops suggested through their network of private or government contacts. Physical environmental setting In order to complete our introduction to the Upper Ping Basin, this section provides very brief descriptions of the spatial variation of differences in terrain, climate and soils. x Terrain. The landscape of the UPB is characterized by mountainous area and valleys of different sizes. The elevation ranges from 191 masl in Chiang Mai valley to 2,569 masl on Inthanon, the highest peak in Thailand. Using categories commonly used by agencies in Thailand, the lowlands (< 600 masl) and midlands (600-1,000 masl) equally occupy about 38 percent of the total area while the highlands (> 1,000 masl) form the rest of the area (Figure 1-16a). Part of the lowlands is nearly flat with land slope of < 2% (Figure 1- 16b), which allows surface irrigation to be conveniently implemented. Large portions of the highlands are associated with steep land with an average slope of more than 35%. The steep land is much more difficult for cultivation and its soil surface is vulnerable to soil erosion and degradation. x Climate. Spatial distributions of climatic data were achieved by spatial interpolation using daily rainfall and temperature records of about 250 weather stations in and around UPB and the digital elevation model (DEM). Rainfall starts in April in the highlands and upper parts of UPB (Figure 1-17). The amount of rain is adequate for upland crops cultivation in the early part of May on the highlands and late May in the midlands and lowlands. Farmers have to wait until late July or early August for rainfall amounts to accumulate enough for paddy cultivation. Page 22 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 1-16. Elevation zones and major slope classes of the Upper Ping Basin

(a) Elevation zones (b) Major slope classes

In some highland Figure 1-17. Spatial distribution of mean monthly and annual rainfall areas, second cropping without irrigation may be possible where rainfall is prolonged until early November and soil is deep enough to store good amounts of residual soil moisture. Distribution of annual rainfall indicates that higher amounts of rainfall are generally found in the highlands and midlands, and ranging from 800 to 1,200 mm in the lowlands. Spatial distribution of mean monthly temperature reveals rather stable tem- peratures around 25 to 35 C, an optimum temperature for most tropical crops including rice, during March Chapter 1. Introduction & Overview Page 23

to October in the Figure 1-18. Spatial distribution of mean monthly temperature lowlands (Figure 1- 18). However, during November to February, mean monthly temperature is lower, in the range of 10 to 25 C; this permits some temperate cash crops such as onion, garlic, potato, tobacco and soybean to be grown after rice, providing there is enough water for irrigation in the lowlands. The mean monthly tempera- tures in the highlands and midlands are much lower than in the lowlands throughout the year. Mean monthly temperature during No- vember to February in the highlands is less than 20 C and drops to less than 10 C in January to February, which is suitable for many temperate fruits and vegetables. Highland farmers take this opportunity to capital- ize on cool climate Figure 1-19. A schema of soil database during this time to produce commercial crops that have good demand in markets. As a result of climate vari- ability in the UPB, agroecosystems are diverse both in space and time. Soils. Spatial distribution of soil resources has been captured as soil maps in the past, and soil characteristics have been detailed separately in soil survey reports. The system is Page 24 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

difficult to use in responding to specific que- Figure 1-20. Distribution of soil groups ries on soils in an area of interest, not to mention the very limited accessibility data required for land suitability assessment. In this project, a geodatabase [MacDonald, 2001] of soils was constructed to store spatial information and related attributes of soil groups. The soils geodatabase is based on data surveyed and published by Land Development Department (LDD). This geodatabase includes features which are used to represent soil group boundaries. Related tables (Figure 1-19) store different properties of soil groups, representative pedons and soil layers necessary for land suitability evaluation of major crops. Spatial distribution of soil groups in UPB is shown in Figure 1-20. It is important to note, as this figure indicates, that soil maps are available only in areas outside reserved forests and in the areas where slope of land does not exceed 35 percent. Most areas in middle and upper montane zones are designated only as ‘slope complex’, and no data on them are available.

Variation of soil groups across UPB results in variations in land quality in terms of supply of water and nutrients, which are necessary to effectively support production of major cash crops. In chapter 3, the spatial features of this map will be overlaid with other variables to generate Land Mapping Units (LMU), a minimum mapping unit from which land characteristics required for land evaluation processes have been linked. This information has been used in physical land evaluation to assess land suitability for major crops and will be discussed later in chapter three.

Chapter 1. Introduction & Overview Page 25

1.3.3 Vietnam study sites: Tea farmers in Thai Nguyen

Case studies in Vietnam focused on two communes (sub-districts) in Dai Tu District of Thai Nguyen Provence in North Vietnam, as shown in Figure 1-21. Thai Nguyen is located about 80 kilometers north of Hanoi, at the northern edge of the lowland zone of the Red River (Song Hong) Valley Figure 1-21. Location of Vietnam study area (Figure 1-11).

Hoang Nong Commune and Phu Xuyen Commune are located at the western side of Dai Tu District along a small ridge of mountains that extends Hoang Nong Commune into the Red River Valley Phu Xuyen Commune lowlands. Both communes have Dai Tu District Thai gradients of elevation zones that Nguyen extend from upper lowlands to City upper montane zones. More- over, commune lands that are Thai located in montane zones are Nguyen also located within the boundary Province of the Tam Dao National Park, Tam Dao National which was established in 1997. Park Thus, these communes are considered to be located in the park’s ‘buffer zone’.

More intensive study was in Hoang Nong commune, which consists of 18 villages, 1,145 house-holds and a population of 4,968. The population is composed of members of six ethnic groups including ethnic Kinh, Vietnam’s dominant ethnic group. Ethnic Kinh migrated into the area during the 1960’s in response to national ‘new economic zone’ policies.

As described in some detail in subsequent chapters, most households living in these communes currently get the majority of their incomes from agricultural activities, such as paddy farming, rearing cattle and tea cultivation. Many local farmers, especially poor households, also earn part of their living through forestry-related activities, such as hunting, trafficking in wild animals, exploiting medicinal trees, growing orchids, breeding cattle and especially acquiring firewood. Thus, park managers are also interested in ways in which households can both improve their livelihoods and decrease pressure on wildlife and plants in the park. The production of ‘safe tea’ is considered an important promising approach.

These studies were conducted in close collaboration with the Rural Development and Envi- ronment of Vietnam (RDViet) project funded by SAREC/Sida and coordinated at Hue Uni- versity of Agriculture and Forestry (HUAF) and the Swedish University of Agricultural Sci- ences (SLU) in Uppsala, Sweden. Page 26 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

1.3.4 Yunnan study sites: Vegetable farmers in Baoshan

Our study site in Baoshan prefecture (Figure 1-22) represents conditions in higher mountain valleys as found in many parts of the Yunnan province of China, where valley floors are often located in lower to middle montane zone. Baoshan prefecture is located in western Yunnan, within the watersheds of the Lancang (Mekong) and Nu (Salween) Rivers (Figure 1-11). The total area covers 19,636 km2, with a population of 2.5 million, of which around one-third live in the city proper. Around 10 percent of the population consists of ethnic minorities from thirteen of China’s officially recognized minority groups.

The topography is highly variable, with elevation ranging from 645 to 3,655 masl. More than 90 percent of the landscape is classified as mountainous, which places constraints on land use options. As of 2005, official statistics identified nearly five times more forested land (often in the form of state-managed reserves) than farmland, and there continue to be projects encouraging farmers to convert farmland and grazing land to tree plantations. Most arable land has been terraced, using either packed dirt or stones.

Agricultural practices vary based Figure 1-22. Location of Baoshan study areas on elevation and terrain. People resident in lower-lying Middle montane zones are able to Myanmar cultivate multiple crops of rice in one year, and to diversify into sugar cane or the commercial production of crops like mulberry or vegetables. Households located in Upper montane zones typically plant one crop of corn Baoshan City and a winter crop of wheat or vegetables, but may also have plots of tea or eucalyptus. As the landscape is highly variable, most households have access to several plots with different production capacities, and therefore cultivate a variety of differ- Myanmar ent crops on a small scale.

Most residents also have access to either collective or individually-managed forest land, from which they are allowed limited use of timber. Households in upland areas typically derive additional income from the sale of non-timber forest products (NTFPs) such as mushrooms and pine nuts. Supplemental income and livelihood support comes from raising livestock: a few chickens, pigs, goats, and a cow or water buffalo for use in plowing.

Chapter 1. Introduction & Overview Page 27

Rural residents are clustered in ‘natural villages,’ which are then grouped into ‘administrative villages,’ which is the lowest level of public administration. Townships and then counties are the higher levels of government; Baoshan administers four additional counties, as outlined in Figure 1-22.

Transportation infrastructure is limited by the landscape. Although smaller roads consist of packed dirt, many villages are not far from an asphalt or cobblestone road. However, the routes are often tortuous, and frequent repairs are necessary due to the prevalence of landslides and cave-ins, particularly during the rainy season. Overall road density is around 50 km per 100 km2.

Basic services such as access to electricity and running water are often unreliable. Education and health services are relatively poor, and most rural students do not attend high school. Access to markets and technical expertise is also limited. Some areas are able to utilize irrigation, if they are located near small reservoirs. Terracing is the main mechanism to cope with steeply sloping land in upland zones, but many areas are highly eroded and heavily grazed.

Case studies on household economy and migration were conducted in the villages of Baicai and Yangliu (Figure 1-22), around 15 km from the city of Baoshan. The elevation at these two sites in the upper montane zone ranges from 1,500-2,600 masl, and household economies are still largely dependent on the production of grain for subsistence purposes. Land at the lower elevations is used for paddy rice, but middle and upland zones are used to cultivate corn and other dryland crops. Households in this area rely on management of multiple different production systems at different elevations, and usually raise livestock and use forest resources.

Other case study sites (Figure 1-22) focus on issues related to commercial vegetable production, which is increasing rapidly in villages at lower elevations, particularly along the Nujiang river valley. At these lower lying middle to upper montane zone locations, elevation (700- 1,500 masl) and warmer climate makes it possible to cultivate sugarcane and other high-value crops. Wandian, located along a tributary of the Nujiang, has a similar climatic and agricultural environment. Oranges, coffee, tobacco and mulberry (for silkworms) are all state- supported alternative crops in these villages. Households typically have lowland plots that can be used for sugarcane or seasonal paddy rice and vegetable production, as well as plots at higher elevation that are used to cultivate corn or tobacco. Forest resources and livestock grazing are more limited, except for on the steepest slopes.

Page 28 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

1.3.5 Lao PDR study sites: Emerging markets in Northern Laos

Case study sites in the Lao PDR were located at various locations within the three northern provinces of Luang Namtha, Oudomxay, and Luang Prabang (Figure 1-23). These sites represent relatively remote, predominantly middle and upper montane zone locations that have relatively recently been exposed to emerging opportunities for market production. At the same time, they have been subjected to government policies and programs seeking to stop shifting cultivation practices that were a key component of traditional livelihoods, and to relocate and consolidate small remote ethnic minority villages into larger multi-ethnic settlements with intensive commercial agriculture and village forest lands located in lower-lying areas where the government is seeking to establish transportation and development corridors in the region.

Of particular importance Figure 1-23. Locations of study areas in Laos in this area is a major road link with China, which Yunnan enters Laos at the border in Luang Namtha, and branches into a major connection with Thailand Myanmar Viet and a major road to Luang Nam Prabang and destinations further south. The latter also includes important branches to the east that connect with Vietnam. These roads are part of the regional road network being developed in association with the GMS Luang grouping of states, and Prabang supported by the Asian City Development Bank and other sources (see section Thailand 3.2.5).

Road development is also accompanied by changing policies and international trade relationships with neighboring countries. Commercial production of crops such as sugarcane, maize, watermelon, Job’s tears, paper mulberry and others, as well as various non- timber forest products, for sale to markets in neighboring countries has already been increasing for a number of years. But the magnitude of the recent ‘boom’ in planting of rubber trees threatens to dwarf, and perhaps displace many of these other components. Related issues are discussed in the context several sections of this report. Chapter 1. Introduction & Overview Page 29

More detailed analysis of land use change in this area, as well as adjacent Bokeo province, conducted by project researchers has already been reported elsewhere [Thongmanivong & Fujita 2006]. This, and other data and information used in this report related to these areas in northern Lao PDR have primarily come from studies conducted by project researchers in association with other research projects and partners. Several additional secondary sources of data and information have also been cited, most of which are based on research conducted by people, organizations and projects with whom project research staff are very familiar, and have often had various previous working relationships.

1.4 Structure of this report

The overall structure of this report is very closely aligned with the structure of our research strategy as already presented in section 1.2. Major points include:

x This first chapter has provided an introduction and overview of biophysical and human dimensions of the Greater Mekong Region, of where the uplands are located in the region, of the role and importance of issues related to poverty and market integration, of the research objectives and strategy of this project, and of the locations where studies used in this project were conducted.

x Our core research analyses and findings are presented in Chapters 2 through 6, with each of these chapters addressing one of our five major research questions (section 1.2.2):

q Who and where are the poor? (Chapter 2)

q How have market opportunities changed? (Chapter 3)

q What strategies have been used to respond and adapt to changes in opportunities? (Chapter 4)

q How might larger transitions in society affect opportunities and responses? (Chapter 5)

q What are the implications of state policies for market opportunities and access for the poor? (Chapter 6)

x The structure of each of these chapters is roughly parallel and divided into four parts. The first part introduces major issues and concepts used to orient our work directed toward the question that is the subject of that chapter. The second part seeks to provide an overview and review of findings at the regional level, whereas the third part presents examples of related more local level findings at our case study sites. The fourth part then builds and draws on the previous sections to provide a more specific response to the question addressed in that chapter.

x The final chapter (Chapter 7) then presents a synthesis of findings in previous chapters in the format of an overall summary that includes our major policy-related conclusions.

Page 30 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

We realize that this report is a rather long narrative, and that it covers a fairly broad range of topics and areas. Thus, readers with very limited time or more narrow interests might consider one of two options:

x For a rapid overview of our work and findings, Chapter 7 has been structured in a way that it could stand on its own as a summary. Some cross-references have been cited, and the list of figures and tables can help readers find illustrations related to particular issues of interest.

x For those with more narrow interests, we have also tried to structure chapters 2 through 6 in a manner that they could stand alone in reporting our findings related to a particular set of issues. Again, some important cross-references have been cited, and the table of contents and lists of figures and tables may help locate particular topics or illustrations.

We also hope, however, that at least some readers will be willing and able to read through the entire report. For these readers, we hope we have been able to communicate our approach and our findings in a manner that demonstrates our efforts to build arguments and extract conclusions based on evidence we have found. We welcome comments, criticism, and alternative interpretations and points of view.

Page 31

2. Who and where are the poor?

This chapter presents how we have sought to address this question by clarifying the definitions and measures of poverty used in our analysis, by providing a broad spatial assessment of distributions of poverty in the major altitude zones of the region introduced in the previous chapter, and by providing a range of findings and insights from case studies conducted in specific local areas in the region under this and previous studies. It then concludes with a brief synthesis of our overall assessment of findings related to distribution of the poor in mainland Southeast Asia.

2.1 How is poverty defined, and why does it matter?

In order to assess issues related to market and resource access of the poor in upland zones of the Greater Mekong Region, we first need to clarify our understanding of who the poor are, how poverty is measured, and why poverty is an issue in the region.

2.1.1 Definitions and measurement of poverty

There are various approaches to defining and assessing poverty. Most analysts now recognize that poverty is multi-dimensional in nature. Thus, not surprisingly, there is also an increasingly diverse range of ways in which poverty is conceptualized. While conventional conceptualizations tend to focus on poverty in terms of material deprivation that can be assessed by monetized income or consumption levels, it has become increasingly clear that this conceptualization fails to include various other important dimensions of poverty. As pointed out in recent reviews for the Asian Development Bank [ADB 2004, Osmani 2003], newer strands of evolving conceptualizations of poverty can be grouped into those associated with the capabilities approach, the livelihoods (or vulnerability) approach, and the social exclusion approach. While these three approaches are interrelated, each contributes an additional set of insights into the nature and causes of poverty, with implications for policy analysis and formulation. Measurement and assessment of poverty using these newer approaches, however, is more complicated and often requires less conventional types of data that may not be available for populations across broader regions.

Thus, given the scope, information needs, and resource limitations of this research project, discussions of poverty in this report focus draw heavily on data that is available for material forms of poverty based on monetized income and consumption levels. But we also try to bring in additional factors in discussions of particular countries where information is available. Moreover, some of the case studies have included information on additional perspectives and local perceptions of poverty as they try to untangle some of the relationships between poverty and access to markets and resources in this globalizing era.

Page 32 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Income and Consumption Based Definitions of Poverty and Inequality The most widely used definitions of poverty are based on levels of income or consumption expenditures [UNSD 2005]. The focus is on monetary or material poverty, and identification of material deprivation in terms of income or consumption levels that are inadequate to attain a basic minimum acceptable standard of living in a society. Clearly, standards for defining minimally acceptable income or consumption levels will vary across societies and over time.

Measurements of this type of poverty require a “poverty line” benchmark level of income or consumption that enables a person to attain the minimum acceptable standard of living, as well as a means for collecting data on income and/or consumption from at least a representative sample of a given population. One advantage of this more conventional conceptualization of poverty is that it can be assessed across large populations using established national census or survey data on household income and expenditures.

Once the benchmark poverty line and data from a sample or census of the population are obtained, various measures have been developed for analyzing and assessing the data. Some of the most commonly applied measures (which are also components of the Foster, Greer, Thorbecke (FGT) family of poverty measures summarized in Box 2-1) include: x Poverty incidence is the proportion of individuals whose income or expenditure falls below the poverty line. The measure may be based on either national or international poverty lines. Poverty incidence is also referred to as the headcount ratio, or even the poverty ratio or poverty rate. x The poverty gap index gives a sense of how poor the poor are and reflects the depth of poverty. It is equivalent to the shortfall of consumption below the poverty line per head of the total population, and is expressed as a percentage of the poverty line. x The poverty severity index (or squared poverty gap index) adds the dimension of inequality among the poor to the poverty gap index, and is said to reflect the severity of poverty. For a given value of the poverty gap index, populations with greater disper- sion of incomes or expenditures among the poor will show up with a higher value for the squared poverty gap index. While the above measures are effective for identifying three aspects of the poverty level of a given area or domain, they do not address the question of how many poor people are present within the domain. Thus, a second associated set of measures are also commonly used to examine absolute numbers of poor within an area. x Poverty magnitude is simply the total number of persons in the domain being assessed whose income or expenditure falls below the poverty line. It is also referred to as the total poverty headcount or the total number of poor. Chapter 2. Who and where are the poor? Page 33

Box 2-1. Foster, Greer, Thorbecke poverty measures

The FGT (Foster, Greer, Thorbecke) measures are a family of poverty measures where Į is a measure of the sensitivity of the index to poverty, the poverty line is (z), and (Gn) is equal to the poverty line (z) less actual income (Yi) for poor individuals. When Į is set equal to 0, P(0) is simply the headcount index. When Į is set equal to 1, P(1) is the poverty gap index, and when Į is set equal to 2, P(2) is the severity of poverty or squared poverty gap index.

FGT 0: Poverty Headcount Index. the proportion of the population that is counted as poor. It is often denoted by P(0), where N is the total population, and I (.) is an indicator function that takes on a value of 1 if the bracketed expression is true, and 0 otherwise. So if expenditure (Yi) is less than the poverty line (z) then I(.) equals to 1 and the individual would be counted as poor. Np is the total number of poor. The formula for the headcount index is as follows

FGT 1: Poverty Gap Index. This index measures the mean proportionate poverty gap in the population, where the poverty gap (Gn) is the poverty line (z) less actual income (Yi) for poor individuals (the non poor have a zero poverty gap). Some think of this measure as the per capita cost of eliminating poverty (relative to the poverty line), through perfectly targeted transfers to the poor, in the absence of transactions costs and disincentive effects. The formula for the poverty gap index is as follows

FGT 2: Poverty Severity Index (or squared poverty gap index). This is a measure of the severity of poverty in an area. By squaring the poverty gap for each individual/household, this measure gives greater weight to those observations that fall far below the poverty line than those that are closer to it. The formula for severity of poverty, or squared poverty gap index, is

Source: CIESIN. 2006. Catalog of small area estimates of poverty and inequality

x Poverty density is the overall average density of poor persons per unit area of the domain being assessed. It is calculated by dividing the poverty magnitude of a domain by its area, resulting in a value that is usually expressed in persons per square kilometer. Both of the above sets of measures seek to measure poverty against an independently established outside standard, in order to provide estimates of absolute poverty within the domain for which the poverty line is established. A third set of commonly applied measures address issues associated with relative poverty by assessing inequality among the population in levels of income or consumption expenditures. In order to avoid confusion, these are best referred to as measures of inequality. x The Lorenz curve is a curve that represents the relationship between the cumulative proportion of income and the cumulative proportion of the population in income distribution, beginning with the lowest income group. If there were perfect income equality, the Lorenz curve would be a 45-degree line. Page 34 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x The Gini coefficient is a commonly used measure of inequality that represents the area between the Lorenz curve and the 45-degree line. Mathematically, it is expressed as:

Where G = Gini coefficient, X = cumulated proportion of the population variable, and Y = cumulated proportion of the asset variable. The asset variable can be a measure of any type of asset under study, such as income, consumption expense, land, labor, etc. In the case of income poverty, the asset variable would be actual income. Thus, with perfect income equality the Gini coefficient would be equal to zero; with perfect inequality it would be equal to one. Internationally, Gini coefficients of income tend to range from a low of 0.3 to a high of 0.7.

Not surprisingly, there are also several other sets of measures that are used to analyze poverty data. For example, the SEN Index is an example of another type of poverty measure, while inequality can be measured using the Generalized Entropy approach or the Atkinson Index.

In an effort to provide a meaningful way to compare poverty across countries, efforts associated with establishment of the Millenium Development Goals articulated a two-level set of global poverty lines. They were chosen through assessments of the lowest ten poverty lines among a set of low-income countries. x $1-a-Day Poverty identifies members of the population Table 2-1. Poverty Incidence and Magnitude in GMS with average consumption countries, 1990 - 2003

expenditures less than $1.08 a Headcount Ratio Magnitude day measured in 1993 prices Country (percent) (thousand persons) converted using purchasing 1990 2003 1990 2003 $1-a-Day Poverty Index and Magnitude of Poor power parity (PPP) rates. This China 33 13 377,055 173,072 is considered a severe poverty Cambodia 46 34 3,953 4,526 condition. Lao PDR 53 29 2,183 1,630 Myanmar na na na na x $2-a-Day Poverty identifies Thailand 10 1 5,651 415 Viet Nam 51 10 33,446 7,861 members of the population $2-a-Day Poverty Index and Magnitude of Poor with average consumption ex- China 72 42 825,043 536,554 penditures less than $2.15 a Cambodia 84 77 7,248 10,361 day measured in 1993 prices Lao PDR 91 74 3,773 4,210 Myanmar na na na na converted using purchasing Thailand 43 28 24,168 17,217 power parity (PPP) rates. This Viet Nam 87 54 57,675 44,063 is considered an important, Source: Asian Development Bank (ADB) - Key Indicators 2005 but less severe poverty condition.

Using these external global standards, progress of countries toward meeting the Millennium Development Goals for reducing poverty is being assessed by the World Bank based on pri- Chapter 2. Who and where are the poor? Page 35 mary sample surveys. Progress of GMS nations between 1990 – 2003 is summarized in Table 2-1.

It is instructive to note that while all GMS countries (except Myanmar where data is not available) appear to have made significant progress in reducing the incidence (headcount ratio) of poverty, in Cambodia and the Lao PDR this has not always translated into reduced magnitude in the number of poor people.

There are also efforts at the global level to track changes in inequality. Data on the overall Gini coefficients at national levels is one of the most common measures. Another common indicator is the ratio between the income or wealth of the richest quintile (20 percent) of a population to the income or wealth of the poorest quintile. Efforts are being made to establish databases containing time series data on such indicators. As an example, Table 2-2 displays national-level data for GMS countries from the Asian Development Bank that measures annualized change from the early 1990’s to 2002/4.

These data indicate that inequality has been increasing in all countries except Thailand, and

Table 2-2. Change in Inequality Indicators for GMS countries, 1992 - 2004 Gini Coefficients Top 20 Bottom 20 Country Period initial final Annualized initial final Annualized year year change ( ) year year change ( ) China 1993–2004 40.7 47.3 1.35 7.6 11.4 3.70 Cambodia 1993–2004 31.8 38.1 1.63 5.2 7.0 2.68 Lao PDR 1992–2002 30.4 34.7 1.32 4.3 5.4 2.35 Myanmar na na na na na na Thailand 1992–2002 46.2 42.0 -0.97 9.4 7.7 -1.98 Viet Nam 1993–2004 34.9 37.1 0.55 5.4 6.2 1.31 Source: ADB Key Indicators 2007 is especially rapid in China. While inequality in Thailand appears to be decreasing, these decreases began from the highest levels of inequality in the region. This presumably reflects recent growth in the primarily urban middle classes in Thailand.

While data at this level are useful at the global level for the types of assessments for which they were developed, this level of aggregation is not very useful for improving understanding of poverty at levels that are useful for analyses under this project. At the extreme, for example, national level poverty or inequality data for China tells us very little about conditions in the montane province of Yunnan, and the same is true regarding distributions of poverty and inequality within all of the GMS countries.

Thus, further assessments of poverty clearly required access to data at sub-national levels, which also means that the poverty lines used for assessing poverty must be based on criteria established within the context of each GMS society. Examples of the types of approaches encountered in each country include:

Page 36 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Poverty lines in Thailand In Thailand, the Office of the National Economic and Social Development Board (NESDB) constructs poverty lines and provides definitions of poverty in the country. Poverty conditions are defined those where people do not have adequate expenditure to meet basic necessities in life including food, housing, clothing, transportation and medical expenses. This level of minimum expenditure to sustain a basic livelihood varies according to region and depending on whether people live in urban or rural areas. The poor are defined as those falling below this regional area-specific poverty line.

Case studies under this project, for Figure 2-1. Poverty lines in Northern Thailand and the example, use the 2006 Northern whole country, 1988 – 2006 regional poverty lines of 1,227 baht $1.50 (US$ 1.08) per person per month for rural areas, and 1,425 baht (US$ 1.25) $1.00 per person per month for urban areas. Figure 2-1 charts change in the US $0.50 dollar value of the poverty line for day per person per $US Northern Thailand and the whole $0.00 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 country during 1988-2006, and Table Urban North Rural North Whole country 2-3 provides the actual values in both Thai Baht and US$ currency. Source: NESDB

Table 2-3. Urban and Rural Poverty Lines in Northern Thailand, 1988 – 2006

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Poverty line (baht/person/month) North(urban) 708 762 860 913 1,023 1,178 1,199 1,252 1,294 1,425 North (rural) 578 623 705 729 835 984 974 1,032 1,089 1,227 Exchange rate 26.29 25.59 25.4 25.15 25.34 41.37 40.16 43.00 40.27 37.93 (baht/$US) Poverty line ($US/person/day) North(urban) 0.90 0.99 1.13 1.21 1.35 0.95 1.00 0.97 1.07 1.25 North (rural) 0.73 0.81 0.93 0.97 1.10 0.79 0.81 0.80 0.90 1.08 Source: NESDB for poverty line in baht, Bank of Thailand for foreign exchange rate

There are also many other views on how to conceptualize, define and measure poverty in Thailand, including rather longstanding interest in “quality of life” indicators, as well as the views underlying the focus of the Ninth 5-year National Economic and Social Development Plan on “sufficiency economy” principles and dimensions of well-being such as empowerment and happiness. Efforts to broaden information associated with these needs include village-based national data collection systems on basic minimum needs (BMN) and the Na- tional Rural Development Committee (NRD2C) database.

Chapter 2. Who and where are the poor? Page 37

Poverty lines in Vietnam In Vietnam, the multi-dimensional nature of poverty is recognized, and poverty is being a ssessed on the basis of the sustainable livelihood framework. Various World Bank activities are attempting to integrate broader notions of risk, vulnerability, social inclusion and opportunities [World Bank 2006a]. Activities supported by the Australian Agency for International Development define poverty in terms of meeting basic necessities, as well as accountability from state institutions and civil society, and freedom from excessive vulnerability to adverse shocks [AusAID 2001].

The operational definition of the poor used in case studies under this project is based on the current system used by the Ministry of Labor, Invalid and Social Affairs (MOLISA), which is based on a poverty line of 200,000 VND per person per month. Further investigations within local case study areas also include poverty criteria based on who local authorities and local people perceive to be the poor. Additional factors related to poverty in Vietnam are also discussed in a subsequent section, and in the context of our case study.

Poverty lines in the Lao PDR Especially during the last decade, the Lao PDR has been exploring various approaches for assessing poverty. Using more conventional expenditure and income approaches, it has been developing and refining the Lao Expenditure and Consumption Survey (LECS), as well as the population censuses conducted every 10 years since 1985. Both are managed by the Na- tional Statistics Center (NSC). Previous poverty assessments using this data employed poverty lines developed by Kakwani et al. [2002] which have now been updated to provide time series compatibility for the recent Lao PDR Poverty Assessment (LAOPA) [World Bank 2006b].

But leadership in the Lao PDR is also keenly interested in multi-dimensional characteristics of poverty. Thus, for example, it has also conducted a major Participatory Poverty Assess- ment [ADB 2001], as well as a broad analysis of poor districts that was used in developing its national Poverty Reduction Strategy Paper [World Bank 2004]. The recent LAOPA effort seeks to incorporate and build on as much of this information as possible.

Poverty lines in China China has an elaborate national statistical system operating under the National Bureau of Statistics, which includes a national population census, a national agricultural census, and both rural and urban household surveys that can provide data for poverty assessments.

China also has additional poverty assessment efforts associated with various major previous and current poverty reduction programs. The most recent is the poor household register established by the Poverty Alleviation and Development Office of the State Council. Some of the issues associated with this data have been discussed by Ahmad [2007].

Page 38 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Small-Area Estimates of Poverty In terms of the basic poverty line standards used to assess poverty using income or consumption expenditure approaches, there are clearly issues within each country regarding the adequacy of current methodologies. Yet these approaches still provide the most consistent and broad-based approach for assessing poverty that is currently available. But for efforts to better understand how poverty is distributed across societies and landscapes, there is a clear need to have far more disaggregated databases. By disaggregating poverty data into small units, it can then be linked with spatial database systems that contain many additional types of spatially explicit and similarly disaggregated data. This can then provide a powerful tool for exploring additional types of relationships between poverty and a wide range of additional factors with which it is believed to be linked. And once relationships are further clarified, this can also provide valuable information for efforts to improve poverty alleviation policies and how their programs are targeted.

These needs have been recognized at various levels, resulting in efforts by a growing community of analysts to develop approaches under the banner of poverty mapping. Perhaps the most prominent has been activities conducted in association with the Development Research Group of the World Bank, using techniques they have developed to estimate poverty at a local level by combining census and household survey information. These methods have now been tested through applications in various countries, including all of the GMS states except Myanmar. The basic approach has been summarized in a recent book [Bedi 2007], along with case studies that include Cambodia, Yunnan, Vietnam and Thailand.

This data has already begun to be applied in assessing various wider dimensions of poverty and its relationships with other issues. Noteworthy as initial examples of some of the types of potential applications where this data can be used include work on the poverty-environment nexus in Cambodia, Lao PDR and Vietnam [World Bank 2006a], and on relationships between poverty and forests in Vietnam [Sunderlin 2005, Muller 2006]. A wide variety of additional types of applications are clearly possible, including some of the types of analysis to which our project has sought to contribute.

But gaining access to this data for further work by researchers who are outsiders to this group has often been somewhat problematic, and increasingly difficult with higher levels of data disaggregation. The Socioeconomic Data and Applications Center (SEDAC) and the Pov- erty Mapping Project of the Center for International Earth Science Information Network (CIESIN) at Columbia University are seeking to help address this issue by providing open access to as much of this data as possible through their website on small area estimates (SAE) of poverty and inequality1. For GMS states, however, data at the most disaggregated level is only available for Cambodia, there are no associated boundary files for Cambodia or Yunnan, and no data at all for Thailand or the Lao PDR. After a great deal of effort, however, we have been able to access SAE data and reconstruct spatial datasets for the countries and levels indicated in Table 2-4.

1 http://sedac.ciesin.org/povmap/datasets/ds_nat_all.jsp Chapter 2. Who and where are the poor? Page 39

Within the SAE datasets we Table 2-4. Access to small area estimates of poverty data obtained for use in this Cambodia Lao PDR Myanmar Thailand Vietnam Yunnan study, there are also some Level 1 province province n.a. province province prefecture*** Level 2 district district n.a. district district county additional limitations. Level 3 commune* n.a. n.a. tambon commune** township** * poverty data available, but no access to appropriate boundary file x The dataset for the Lao ** access to boundary files, but no access to poverty data PDR was constructed *** access to boundary files, but no known poverty data at this level from published data from 1998 [Kakwani 2001] that only allows us to calculate total poverty incidence, there is no data on how much of the populations are urban, and data is missing for several districts. We know from other sources [van der Weide 2004; World Bank 2006b] that other more complete and updated versions exist, but we were not able to gain access to them for this study. x For Cambodia, there is no calculation of Gini coefficients, and data is either missing for a few districts, or our boundary file is not fully time-matched with the data. This dataset is discussed by Tomoki Fujii [2003, 2007] and elsewhere [MOP-WFP 2002]. More recent data also exists [World Bank 2006c]. x The Vietnam data is complete for measures at the total population level, but only poverty incidence can be calculated on a rural versus urban basis. Detailed information on development and application of this dataset are available [Minot et al. 2003, 2005; Swinkels 2007]. x For Thailand, data is complete for measures on rural and urban populations, but only poverty incidence can be calculated for overall population levels, and there is no data for the Bangkok Metropolitan Area. The basic data we acquired (without unit codes, population data or boundary files) is one product of published work [Somchai et al. 2007; Healy 2003]. x For Yunnan, measures are complete, but as for Thailand, overall population data was missing. In both cases, however, we were able to obtain population data for the right year and make the calculations. Work in Yunnan is described by Ahmad [2007].

2.1.2 Why poverty definitions and measures matter

As already mentioned in the previous chapter of this report, governments in GMS states are recognizing the importance of eliminating, or at least minimizing poverty in their societies, and this recognition tends to be based on some combination of three lines of reasoning: x Moral. Poverty can be a moral or ideological issue, and most governments engage in extensive rhetoric about how their programs will help everyone in society to meet their basic needs and pursue prosperity. x Economic. Reducing or eliminating poverty can be an economic issue because of the cost of government programs to help poor people, at least in times of crisis. And because as people move above poverty levels they will produce and consume more, reducing poverty can also help stimulate the domestic economy. Page 40 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Security. Poverty can be a national security issue because of potential threats to political stability that can arise when significant components of the population are not able to meet their basic needs, or feel they are excluded from access to prosperity.

Moreover, all governments in the GMS region have proclaimed that increased market integration is a central component of their approach to poverty alleviation. There are many different views and variations on how this can or should be achieved, and many additional factors seen as important for promoting broader notions of improved well-being and quality of life. Nevertheless, promotion of broad effective participation in globalizing market economies is a key element of their approach, and action programs are at various stages of design and implementation.

But how polices and programs are formulated, how their objectives and targets are established, and whether they achieve their intended objectives will all relate to how poverty is defined and measured. Moreover, selection of definitions and measures that are most appropriate will likely vary according to the importance placed on moral, economic or security lines of reasoning. And in any event, definitions and measures are likely to be influenced by different interest groups through these inherently political decision-making processes.

In order to help clarify some of the implications of variations in definitions and measures of poverty, our regional assessment of distributions of poverty employs several different measures of poverty in GMS states for which data is available.

Chapter 2. Who and where are the poor? Page 41

2.2 Distributions of poverty in the Greater Mekong Region

This section employs small area estimates of poverty in all GMS states except Myanmar as the basis for providing an overview of the distribution of poverty in the region. In doing so, it is important to keep in mind that definitions of the poverty line standard for assessing poverty are different between countries. Thus, the picture we seek to paint in this chapter is one that merges spatial distributions of relative levels of poverty and numbers of poor people within countries, with how poverty is perceived and is being measured among countries.

In conceptualizing distributions of poverty, one of the first basic questions that need to be asked is whether we are seeking to identify areas according to the incidence or depth of poverty within them, or whether we are seeking to identify where the greatest number of poor people are located. The first two sections below will address these two issues, both of which are quite relevant for formulations of poverty alleviation policies. They also raise rather different questions related to access to markets and resources.

2.2.1 Locations of poor areas

Many efforts to try to improve understanding of poverty or to target programs that seek to help alleviate poverty begin with an assessment of areas within a country or other relevant domain in terms of poverty incidence (or headcount ratio). Many now also extend the approach to include assessment of poverty gaps or poverty severity.

But in taking this poor area-based approach, one of the most basic initial issues is the resolution of the assessment, which is a function of the degree of disaggregation that is possible in the data that is available. In order to provide an example of how resolution can affect to the outcome and utility of poor area assessments, Figure 2-2 shows poverty incidence data for Thailand at provincial, district, and sub-district (tambon) levels.

Close examination of the maps in this figure demonstrates many of the implications of increased resolution through disaggregation of poverty data into smaller spatial units. In the province-level (also known as level 1) map there appear to be no provinces where the incidence of poverty exceeds 50 percent of the population, and the lowest levels only occur in a few areas around Bangkok. But at district level (level 2), the full range of poverty incidence categories can be observed, while at tambon level (level 3) extremes at both ends occur at more locations in the country. This, of course, is not surprising since aggregation is essentially an averaging process. But visualization of the increased variation that is masked by aggregation helps underscore the need for assessment of disaggregated data, and clarify some of the implications for poverty analysis and targeting of poverty alleviation programs.

One of the implications here is that district level (level 2) data represent what is really about the minimum level of disaggregation that can be very useful for analysis of relationships between poverty and other types of spatial or spatially disaggregated data. For most who are Page 42 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 2-2. Poverty incidence in Thailand at province, district and tambon levels, 2002

TH_L3_pov TFGT_0%Poor 75 + 50 - 75 45 - 50 40 - 45 35 - 40 30 - 35 25 - 30 20 - 25 15 - 20 10 - 15 Provinces Districts Tambons 5-10 2.5 - 5 1-2.5 <1 familiar with life in rural areas this is no surprise at least because of the obviously different characteristics of conditions in the central districts (amphoe muang in Thailand) of each province.

It is also worth noting the degree to which provincial boundaries disappear or endure with increasing levels of resolution. In cases where they endure, it raises various questions about whether there are issues associated with particular provincial administration and programs – which are extensions of a centralized government system that is supposed to provide an equitable distribution of investments, programs and services among provinces – or whether there may some issues related to data collection and analysis. This is also an example of how disclosure of disaggregated data can help improve transparency and accountability, as well as an indicator of why many factions within the system oppose such disclosure.

The next step is to expand our classification of areas by the incidence of nationally-defined poverty to all portions of the GMS for which we have data. The results are displayed in Fig- ure 2-3. As indicated in this figure, our analysis has used the greatest level of disaggregation that we were able to achieve for each country, as shown in Table 2-5. Thus, level 2 data (district level, or county level in Yunnan) has been used for all Table 2-5. SAE data used in analysis for this report countries except Thailand, Cambodia Thailand Vietnam Yunnan Lao PDR year: 1999 2002 1999 2000 1998 where we used the available level adm level: level 2 level 3 level 2 level 2 level 2 3 data. By using a common set unit: district tambon district county district N: 180 7,254 613 128 127 of poverty incidence categories for all countries, we are able to gain some insight into relative distributions of poor areas and the way they are viewed across countries. Chapter 2. Who and where are the poor? Page 43

While various interesting Figure 2-3. Poverty incidence in GMS states, circa 2000 patterns appear in this map, the most obvious is the relatively low levels of poverty incidence in Yunnan. Although we were not able to gain access to the township level poverty data for Yunnan, we know from maps included in analyses conducted under the study that township level data did Legend not have such great intra- TH_L3_pov county variation that it TFGT_0%Poor radically altered the overall 75 + 50 - 75 picture from county-level 45 - 50 data [Ahmad 2007]. Thus, 40 - 45 either there is a very sig- 35 - 40 30 - 35 nificant difference in how 25 - 30 poverty is being defined in 20 - 25 15 - 20 Yunnan, or else there really 10 - 15 are much lower levels of 5-10 poverty incidence in 2.5 - 5 1-2.5 Yunnan. <1

The second obvious pattern in this data is the very high levels of poverty incidence in montane areas of northern and central Vietnam and Laos, and agreement in areas along their common montane border. Highest levels in Yunnan are also near the border with Vietnam in the Red River valley, as well as in the northeast near the border with the densely populated Sichuan area.

In Thailand, highest levels of poverty incidence are also found in mountain areas of the north and along the western border with Myanmar, as well as in the Northeastern region.

Yet another pattern that is apparent is the lower levels of poverty incidence in areas around capital cities, and especially around Bangkok, Kunming and Ho Chi Minh City. The delta areas of the Red River and the Mekong River have intermediate, but somewhat high poverty incidence levels, whereas the Chao Phraya delta shows very low levels.

In order to clarify overall patterns of the distribution of poverty incidence levels within countries, this data is aggregated at national levels in Table 2-6. The three sub-tables show how land area, total population and numbers of poor are distributed among areas classified according to their level of poverty incidence. In the Lao PDR, more than half of the poor live in areas with greater than 50 percent poverty incidence; these areas account for a similar proportion of the total land area, but contain only about one-third of the total population. In Page 44 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Cambodia and Vietnam, areas Table 2-6. Poor area shares of poor, people & land with poverty incidence at 75 area % poor Poor Area Share (%) of the Total Land Area percent or more contain rela- Lao PDR Cambodia Thailand Vietnam Yunnan tively small percentages of poor 75+ 20 5 2 18 - 50-75 32 14 9 38 - people and total population, but 45-50 6 8 5 11 - 40-45 5 11 6 12 - in Vietnam they account for 18 35-40 6 6 7 8 1 30-35 9 5 9 3 9 percent of national land area. In 25-30 5 14 9 2 4 both countries, most of the poor 20-25 8 9 11 1 2 15-20 4 9 12 4 13 live in areas having poverty 10-15 3 4 12 2 19 5-10 1 14 12 1 26 incidence levels of between 35 2.5-5 0.3 0.1 4 0.1 20 1-2.5 0.5 - 2 - 6 and 75 percent. In Thailand half <1 - - 1 - 0.3 of the rural poor live in areas 100 100 100 100 100 with poverty incidence above 30 area % poor Poor Area Share (%) of the Total Population Lao PDR Cambodia Thailand Vietnam Yunnan percent, but these areas have 75+ 11 3 0.3 3 - considerably smaller shares of 50-75 21 18 5 14 - 45-50 4 13 3 10 - land area, and especially 40-45 5 16 4 18 - 35-40 3 12 5 18 2 population. Data from Yunnan 30-35 15 7 6 8 6 25-30 6 14 7 4 6 indicate the highest poverty 20-25 12 5 9 4 2 incidence levels are just over 35 15-20 9 4 12 6 12 10-15 10 3 14 4 20 percent. There appears to be a 5-10 1 6 15 6 22 2.5-5 3 0.3 8 6 17 tendency for more poor people 1-2.5 1 - 6 - 13 <1 - - 5 - 1 to live in areas with relatively 100 100 100 100 100 high poverty incidence levels, area % poor Poor Area Share (%) of the Total Number of Poor but trends are not as clear as they Lao PDR Cambodia Thailand Vietnam Yunnan 75+ 23 6 1 7 - are in other GMS states where 50-75 32 27 16 23 - data is available. 45-50 5 16 8 13 - 40-45 6 18 9 21 - 35-40 3 11 9 18 5 30-35 12 6 10 7 16 While visual inspection of the 25-30 4 10 10 3 12 20-25 7 3 10 2 4 distribution of poor areas is 15-20 4 2 10 3 17 useful in gleaning insights such 10-15 3 1 9 1 19 5-10 0.2 1 6 1 14 as these, our next step was to 2.5-5 0.3 0.0 2 1 6 1-2.5 0.0 - 0.5 - 5 conduct a more systematic <1 - 0.1 - 0.1 examination of interactions 100 100 100 100 100 between poor areas classified by their poverty incidence levels and the altitude zones articulated in the first chapter that define the domain of upland areas in the region.

Poor areas & altitude zones Combining data layers for poor areas and our six altitude zones enabled us to construct the tables displayed in Table 2.7. Aggregates of areas by their poverty level class are characterized by the overall distribution of their land area among altitude zones, along with data on their population density, urbanization, and relative shares of national populations and land area. Poverty and altitude zone classes are also color coded to facilitate comparison with their respective distribution maps. Chapter 2. Who and where are the poor? Page 45

These data allow us to refine Table 2-7. Areas classified by poverty incidence levels our assessment of basic Cambodia People % People Land Lowland Montane Share People Density Share Coastal Upper Lower Middle Upper Alpine area oor terrain and demographic % Urban per/km 2 % 75+ 3 3 32 5 71 24 4 2 0 - 100 characteristics of poor areas 50-75 18 1 82 14 89 5 1 5 0 - 100 45-50 13 8 107 8 91 9 0 0 - - 100 40-45 16 11 93 11 81 18 1 0 - - 100 in each country: 35-40 12 6 119 6 91 7 1 1 - - 100 30-35 7 12 93 5 83 14 2 1 - - 100 25-30 14 13 63 14 53 26 13 7 1 - 100 x Cambodia. As expected 20-25 5 46 35 9 46 30 8 12 4 - 100 15-20 4 81 29 9 56 37 4 2 - - 100 10-15 3 76 46 4 64 28 2 5 0 - 100 from its small 5-10 6 82 26 14 22 66 7 5 0 - 100 2.5-5 0 100 275 0 73 25 2 - - - 100 proportion of land in 1-2.5 ------<1 ------the montane zone, 100 19 65 100 65 26 5 4 0 - 100 there appears to be Lao PDR People % People Land Lowland Montane Share People Density Share Alpine area oor Coastal Upper Lower Middle Upper % Urban per/km 2 % little association 75+ 11 na 13 20 0 6 7 53 34 - 100 50-75 21 na 15 32 1 18 13 42 26 - 100 between poverty 45-50 4 na 16 6 - 1 18 61 20 - 100 40-45 5 na 25 5 0 38 23 24 15 - 100 35-40 3 na 14 6 0 7 12 46 35 - 100 incidence zones and 30-35 15 na 37 9 4 33 21 30 12 - 100 25-30 6 na 28 5 5 57 8 15 15 - 100 altitude levels. Indeed, 20-25 12 na 34 8 1 42 10 30 18 - 100 15-20 9 na 52 4 - 46 17 29 7 - 100 10-15 10 na 72 3 0 40 27 30 3 - 100 most of the poorest 5-10 1 na 21 1 - 29 16 48 7 - 100 2.5-5 3 na 221 0 - 100 0 - - - 100 areas have most all of 1-2.5 1 na 27 0 - 51 10 23 16 - 100 <1 ------their land area in the 100 na 23 100 1 23 13 40 23 - 100

coastal lowland zone. Thailand People % People Land Lowland Montane Share People Density Share Coastal Upper Lower Middle Upper Alpine area oor % Urban per/km 2 % The main association 75+ 0.3 6 17 2 4 12 16 52 15 - 100 50-75 5 4 67 9 11 42 14 25 8 - 100 in this data is that 45-50 3 6 72 5 9 49 13 21 8 - 100 40-45 4 6 80 6 11 50 14 20 5 - 100 lower poverty 35-40 5 8 73 7 12 47 16 20 5 - 100 30-35 6 10 80 9 15 48 15 18 4 - 100 25-30 7 11 88 9 20 45 15 17 4 - 100 incidence levels are 20-25 9 13 90 11 22 43 16 15 3 - 100 15-20 12 16 106 12 34 41 13 10 2 - 100 generally associated 10-15 14 18 127 12 37 41 12 8 1 - 100 5-10 15 26 145 12 47 36 9 6 1 - 100 2.5-5 8 40 227 4 63 30 5 2 0 - 100 with higher levels of 1-2.5 6 54 387 2 81 14 4 2 0 - 100 <1 5 61 468 1 64 20 9 7 0 - 100 urbanization. 100 21 110 100 27 41 13 15 4 - 100

Vietnam People % People Land Lowland Montane Share People Density Share Alpine x Lao PDR. Areas with area oor Coastal Upper Lower Middle Upper % Urban per/km 2 % poverty incidence 75+ 3 6 43 18 1 9 17 42 31 0100 50-75 14 9 84 38 16 27 19 28 9 - 100 45-50 10 8 207 11 53 15 11 20 1 - 100 levels above 50 percent 40-45 18 8 357 12 61 10 11 14 3 - 100 35-40 18 8 525 8 89 5 1 3 2 - 100 cover more than half of 30-35 8 12 554 3 73 6 4 14 3 - 100 25-30 4 24 514 2 65 21 13 1 0 - 100 20-25 4 52 848 1 74 7 3 16 0 - 100 the land area of Laos 15-20 6 53 351 4 58 35 5 2 0 - 100 10-15 4 44 481 2 89 10 1 0 - - 100 and contain about one- 5-10 6 67 1,045 1 80 11 0 0 9 - 100 2.5-5 6 99 9,137 0.1 99 1 - - - - 100 1-2.5 ------third of the entire <1 ------population. A very 100 24 232 100 36 18 14 23 10 0 100 Yunnan People % People Land Lowland Montane large proportion of Share People Density Share Coastal Upper Lower Middle Upper Alpine area oor % Urban per/km 2 % their land is located in 75+ ------50-75 ------45-50 ------the montane zone, and 40-45 ------35-40 2 5 192 1 - - 1.3 27 71 0.3 100 most of it is in middle 30-35 6 10 79 9 0.0 0.3 1.0 11 80 7 100 25-30 6 9 164 4 - - 0.0 8 90 2 100 20-25 2 7 95 2 - 0.0 1.0 13 75 11 100 and upper portions of 15-20 12 12 99 13 - 0.2 1.4 10 80 8 100 10-15 20 17 114 19 - 0.1 0.2 5 91 4 100 the montane zone. For 5-10 22 19 93 26 0.0 0.3 0.6 6 85 8 100 2.5-5 17 34 97 20 - - 0.0 11 75 14 100 remaining parts of the 1-2.5 13 53 236 6 - - - 0.1 88 12 100 <1 1 25 253 0.3 - - - - 100 - 100 country, however, 100 23 111 100 0.0 0.1 0.5 8 83 8 100 trends are mixed. While there is a general tendency for higher proportions of upper montane land to be associated with higher poverty levels, the trend is not very strong, especially in areas with middle to upper-middle levels of poverty incidence. Page 46 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Thailand. Relationships are considerably more clear in Thailand. Areas with poverty incidence of 75 percent or more have more than 80 percent of their land in the montane zone and have very low population densities, but they include only 2 percent of the land area and only 0.3 percent of the people. Beyond that, however, the proportion of an area that is located in middle and upper montane zones is clearly associated with higher poverty incidence levels. Increasing population density and urbanization are associated with lower poverty levels, and with increasing proportions of land in the coastal lowland zone. Trends for the upper lowlands and lower montane zones are less clear, at least partially because of the large share the Northeast region has in both upper lowland zone land area and moderately high poverty incidence levels. x Vietnam. In Vietnam, as in Laos, areas with poverty incidence above 50 percent occupy more than half of the land area of the country, and most of their land area is in montane zones. Here, however, they account for only 17 percent of the total population. Yet two-thirds of the people and 80 percent of the land area are within districts with poverty incidence levels above 35 percent. Within this band higher poverty levels are associated with greater proportions of land in montane zones, and lower overall population densities; urbanization rates are all quite low. Higher levels of urbanization are generally associated with decreasing poverty incidence at lower levels of the scale. x Yunnan. More than 80 percent of both the people and the land area of Yunnan are located within counties with poverty incidence levels between 1 to 20 percent. Moreover, there are no clear relationships between relatively higher or lower levels of poverty and altitude zones or overall population density. The only identifiable relationship is the lowest levels of poverty incidence are associated very mildly with higher urbanization and population density.

This assessment of relationships between poverty incidence levels and altitude zones has demonstrated that in Cambodia, which is 90 percent of it land area in lowland zones, and in Yunnan, where more than 80 percent of its land is in the upper montane zone, there appears to be little relationship between levels of poverty incidence and altitude zones. In Vietnam, Laos and Thailand, however, the very poorest areas are associated with high proportions of land area located in middle to upper montane zones. These areas also have relatively lower population densities, low levels of urbanization, and are considered relatively remote.

Poverty gaps and severity While poverty incidence levels allow us to classify areas according to the proportion of people below the nationally-defined poverty line, it does not provide information on how far below the poverty line are the levels of income or consumption of the poor. Thus, although our datasets for poverty gaps and severity are less complete, we also mapped available data using a similar approach. Data for Viet-nam are for the overall population, but for the other countries they are for rural populations only. By constructing a common set of classes that spanned the range of levels found in countries for which we have data, we are able to show variation within each country, while also capturing a picture of how levels compare across countries. But of course, we need to again caution the reader that these calculations are all Chapter 2. Who and where are the poor? Page 47 relative to poverty Figure 2-4. Poverty gaps and severity in GMS, circa 2000 lines defined in somewhat different ways in each country. Results are displayed in Figure 2.4.

As this figure illustrates, the spatial distribution of poverty gaps and poverty severity are very similar in the case of these four countries. Indeed, the largest poverty Figure 2-5. Distribution of Inequality in GMS, circa 2000 gaps and highest levels of severity are found in the same types of areas where we found the highest poverty incidence levels – relatively remote mountain areas in northern and central Vietnam and northern and western Thailand, along with parts of Northeast Thailand and areas north of Tonle Sap in Cambodia. Although relatively lower overall, highest levels in Yunnan are adjacent to Vietnam in the upper Red River valley, near Sichuan in the northeast, and in some areas near to Myanmar.

Page 48 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Since these patterns add little information to the analysis above, we will not present any further assessments of poor areas based on these measures of poverty depth.

Inequality One approach that seeks to transcend issues associated with national poverty lines is to look at relative poverty by examining inequality in income or consumption levels. Thus, we also used data from small area estimates to map Gini coefficients in countries where such data is available.

In this case, the data available to us was limited to only three of the GMS countries, Viet- nam, Yunnan and Thailand. Again, data from Vietnam is from the overall population, while data from Yunnan and Thailand are for rural populations only. Results are displayed in Fig- ure 2-5.

Despite the fact that data from Vietnam are for the total population, the lower levels of inequality are quite striking. It is also instructive to note that the relatively higher levels of inequality in Vietnam are associated with the same primarily montane areas in northern and central parts of the country that stood out in terms of their high poverty incidence levels.

Of course the other striking feature of this map is the high levels of inequality in Thailand. When we compare this distribution to the distributions assessed earlier in this chapter, it is clear that much of this inequality in Thailand is occurring in areas with relatively low poverty incidence levels, and that inequality is only associated with measures of poverty gaps or poverty severity in some areas. This presumably implies that some components of the population have very high incomes, while substantial numbers of people must be just above the poverty line in some areas, and possible well below it in areas with high poverty severity.

This raises questions about relationships between economic development, at least as it has been occurring in Thailand, and levels of inequality. Indeed, it is interesting that Yunnan shows overall levels of inequality that are intermediate between Vietnam and Thailand, which is where it would also be located in terms of its per capita level of overall economic development (see next chapter). Thus, although Yunnan has a far narrower bandwidth of inequality than what is found in Thailand, given the trends at the national level in China shown in Ta- ble 2.2, it will be interesting to see what the future has in store.

Clearly, identification of poor areas, whether based on poverty incidence, gaps or severity, is useful, both from an analytical point of view and from a policy formulation perspective. But as we have already seen in our assessments of poor areas, at least in this region many of the poorest areas also have relatively low levels of population density and small shares of the overall poor population. Thus, the next section seeks to add some balance to the assessment of this section by examining areas according to the number of poor people residing within them.

Chapter 2. Who and where are the poor? Page 49

2.2.2 Numbers of poor in different types of areas

While it is important for Figure 2-6. Poverty density in GMS states, circa 2000 both analysts and policy makers to know locations of areas where the proportion and depth of poverty are most severe, it is also important for them to know where the greatest numbers of poor people are located. Thus, the next stage of our assessment of poverty in the GMS region turned to this perspective.

One of the most straightforward ways to assess the spatial distribution of numbers of poor people is simply to calculate their density, or the number of poor people per unit area in small disaggregated areas. Thus, we made these calculations based on data in the small area estimates of poverty datasets for all countries except Myanmar. Results are mapped in Figure 2.6. The same approach as in previous sections was employed by identifying a suitable range of classes that could capture variation within and among all five countries.

There are two initially striking features of the distribution of data in this map. The first is the relative lack of differences among countries relative to the distributions in most of the previous maps in this chapter. Of course, Vietnam has the highest density levels, but the manner in which data blends at its borders with data from neighboring countries is reassuring.

The second striking feature is the nearly inverse relationship for many – but certainly not all – areas between relative poverty incidence levels and poverty density levels. This pattern is especially clear in northern and central Vietnam and the neighboring mountains of Laos, where what were the areas of highest poverty incidence are now seen as the areas of low poverty density. It is not the case, however, in Northeast Thailand or northeastern Yunnan where areas of high poverty incidence are also areas of relatively high poverty density.

In order to further explore the implications of issues such as these, we crossed data layers on poverty density with our altitude zones, and calculated a few additional demographic vari- Page 50 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region ables for each area in our dataset. The results are tabulated in Table 2-8. This set of sub- tables for each GMS country for which we have data provides another perspective on poverty in the region: x Cambodia. In this case, even Cambodia shows a quite clear relationship between poverty density and altitude zones. Areas with highest poverty density are located in the coastal lowland zone, and greater proportions of area in increasingly higher altitude zones are associated with lower poverty density levels. This is parallel to the same trend in overall population density. Most people are distributed among intermediate levels of Table 2-8. Characteristics of areas classified by density of poor people Cambodia People People % Poverty Density Poor Land Lowland Montane overty den ity Share Density People 2 Share Share Alpine level er m per/km Coastal Upper Lower Middle Upper % per/km2 Urban Rural Urban % % 500+ 5 19,425 100 - 1,605 1 0.0 100 - - - - - 100 250-500 5 1,474 78 134 196 3 0.2 100 - - - - - 100 100-250 23 259 12 114 9 28 6 99 1 0.1 0.0 - - 100 75-100 17 198 11 79 7 18 5 99 1 0.1 - - - 100 50-75 13 170 7 59 3 13 5 98 2 0.0 - - - 100 25-50 21 81 6 34 1 23 17 95 4 0.4 0.0 - - 100 10-25 10 48 29 14 4 10 14 75 18 3 4 0.2 - 100 <10 781020.24534243870.9-100 100 65 19 23 3 100 100 65 26 5 4 0 - 100 Lao PDR People People % Poverty Density Poor Land Lowland Montane overty den ity 2 level er m Share Density People per/km Share Share Coastal Upper Lower Middle Upper Alpine % per/km2 Urban Total % % 500+ ------250-500 1 1,524 na 253 1 0.0 - 100 - - - - 100 100-250 3 779 na 205 2 0.1 12 77 6 5 - - 100 75-100 ------50-75 6356na60 20.4- 991-- -100 25-50 851na32144 16013207-100 10-25 39 37 na 16 43 25 2 29 11 39 19 - 100 <10 43 14 na 5 39 71 1 18 15 42 25 - 100 100 22 na 9 100 100 1 23 13 40 23 - 100 Thailand People People % Poverty Density Poor Land Lowland Montane overty den ity Share Density People 2 Share Share Alpine level er m per/km Coastal Upper Lower Middle Upper % per/km2 Urban Rural Urban % % 500+ 0 4,415 97 27 586 0.2 0.0 86 10 4 - - - 100 250-500 1 2,424 85 126 194 1 0.1 80 15 6 - - - 100 100-250 7 496 47 107 21 9 1 42 55 2 1 0.0 - 100 75-100 6 280 34 72 12 10 2 22 73 3 2 0.0 - 100 50-75 13 216 27 55 6 18 6 19 75 4 2 0.3 - 100 25-50 25 148 17 32 3 30 19 25 60 9 5 1 - 100 10-25 30 103 15 15 1 24 32 32 37 15 13 3 - 100 <10 18 52 16 5 0.2 9 39 25 27 17 25 6 - 100 100 110 21 20 2 100 100 27 41 13 15 4 - 100 Vietnam People People % Poverty Density Poor Land Lowland Montane overty den ity Share Density People 2 Share Share Alpine level er m per/km Coastal Upper Lower Middle Upper % per/km2 Urban Rural Urban % % 500+ 12 3,932 69 458 171 5 1 100 0.2 - - - - 100 250-500 27 991 17 334 22 27 6 96 2 1 0.4 0.1 - 100 100-250 31 429 19 149 12 31 17 79 11 5 4 1 - 100 75-100 8 217 20 79 7 9 9 50 23 10 14 3 - 100 50-75 8 124 16 58 3 11 15 25 21 21 25 8 - 100 25-50 10 80 14 34 2 13 31 17 19 17 32 15 0 100 10-25 344111814171521173115-100 <10 0 17 23 7 1 1 5 5 17 10 44 24 0 100 100 232 24 79 6 100 100 36 18 14 23 10 0 100 Yunnan People People % Poverty Density Poor Land Lowland Montane overty den ity Share Density People 2 Share Share Alpine level er m per/km Coastal Upper Lower Middle Upper % per/km2 Urban Rural Urban % % 500+ 2 23,854 100 - 900 1 0.0 - - - - 100 - 100 250-500 ------100-250 ------75-100 7 457 50 64 21 11 2 - - - 2 98 0.2 100 50-75 5 210 13 50 5 12 3 - 0.4 1.3 18 79 1.0 100 25-50 11 144 24 26 3 19 9 0.0 0.3 1.3 11 86 1.3 100 10-25 36 135 20 13 2 35 29 - 0.1 0.7 9.0 89 0.8 100 <10 40 76 19 4 1 22 58 0.0 0.1 0.2 7 79 14 100 100 111 23 11 2 100 100 0.0 0.1 0.5 8 83 8 100 Chapter 2. Who and where are the poor? Page 51

poverty density, while the greatest proportion of land area in the country is in areas with the lowest levels of poverty density. x Lao PDR. In Laos, more than 80 percent of the people and 95 percent of the land area is in areas with a poverty density of less than 25 poor persons per square kilometer. The vast majority of these areas are located in montane zones, and especially in the middle and upper montane zones. Remaining areas of the country show a strong trend toward increasing poverty density and population density as altitude zones become lower. x Thailand. Nearly half of the people and 70 percent of the land area are in tambons that average less than 25 poor persons per square kilometer. While these areas include most of the nation’s land located within montane zones, they also include substantial areas located in lowland zones. This obviously reflects a merging in these categories of relatively remote montane areas where poverty incidence is high but population density is low, with lowland areas where population densities are higher but poverty incidence is low. Overall, trends toward higher poverty density are associated with higher population density and greater urbanization; where poverty density exceeds 500 persons per square kilometer, it is fundamentally an urban poverty issue. Intermediate levels of poverty density show large proportions of land area in the upper lowlands largely due to the contribution from the Northeastern region of the country. x Vietnam. Areas in Vietnam with less than 50 poor persons per square kilometer account for just over half of the total land area, with the vast majority located in montane zones, but only about 13 percent of the population and 18 percent of the poor. About 70 percent of the poor people are located in districts with poverty densities greater than 100 persons per square kilometer, more than 95 percent of which are located in lowland altitude zones; the vast majority are in rural areas. x Yunnan. Three-quarters of the people and 87 percent of the land area of Yunnan are located in counties with poverty density levels of less than 25 persons per square kilometer. These areas account for about 57 percent of poor people, and while the vast majority of land area is in the upper montane zone, most land areas in alpine and lower- to-middle montane zones are also included. Areas with higher levels of poverty density are small in terms of their share of both land area and total population; areas with poverty density above 100 persons per square kilometer are a purely urban phenomenon. It is the intermediate areas of 25-100 poor persons per square kilometer where the share of poor people is proportionally larger than the share of land or total population, but there is no clear difference in their distribution among altitude zones.

Clearly, this assessment presents a quite different picture of poverty. Yet it also responds to the question of “where are the poor?” Moreover, it also shows another dimension of similar- ity and differences in the distribution of poverty within and among GMS states.

The other side of the coin: People above the poverty line This project seeks to explore issues associated with access to markets and resources by the upland poor. Thus, we have invested significant effort in identifying where poor areas and poor people are located in relation to upland zones. But in order to be able to assess past or poten- Page 52 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region tial future impacts of access on well-being, we also need to know something about where are the people who are able to achieve livelihoods that allow them to have levels of income or consumption that exceed national poverty lines. In other words, we need to know something about the distribution of the non-poor population of the region.

Perhaps the most straight-forward way to examine locations of non-poor people is simply to calculate their density in a manner similar to how we have assessed density of poor people. Again, the small area estimates datasets provide the basis for these calculations, which are mapped in spatial form in Figure 2-7.

In order to further explore implications of this map of the distribution of people who have managed to achieve a socially Figure 2-7. Density of non-poor people in GMS, circa 2000 acceptable minimum level of income or better, we have again crossed this data with our altitude zone data layer, and present the results in a set of national sub-tables in Table 2-9.

One aspect of the spatial distribution of non-poor people that is visually apparent is the relatively high level of agreement on each side of the border of GMS states. Again, the higher montane zones in northern Vietnam and Laos have large areas of low density. These areas also extend along the mountain range to the south that separates the two countries, and join the lower altitude, but relatively remote areas of northern Cambodia. A similar pattern also extends across northern Thailand, and along its western border with Myanmar. Relatively lower densities are also apparent in areas of Yunnan with extensive areas in the alpine zone, as well as in the southwestern part of the province. Chapter 2. Who and where are the poor? Page 53

At the same time, we Table 2-9. Areas classified by density of non-poor people see relatively high Cambodia densities of non-poor non oor People % category share (%) of Poverty Land Lowland Montane den ity level Density People total total non- total Incidence Share Coastal Upper Lower Middle Upper Alpine 2 in the delta areas of the er m per/km Urban people poor poor % % 500+ 2,849 89 10 14 1 14 0.2 100 - - - - - 100 250-500 464 100 2 3 3 20 0.3 95 4 0.4 0.0 - - 100 Chao Phraya, the 100-250 237 11 37 38 28 38 10 98 2 0.2 0.0 - - 100 75-100 159 2 10 9 18 47 4 99 1 0.1 0.0 - - 100 Mekong and especially 50-75 116 13 11 10 13 42 6 85 11 2 2 0 - 100 25-50 67 10 17 15 23 46 17 87 9 2 2 0 - 100 the Red river basins, as 10-25 27 7 7 5 10 49 16 72 18 5 5 0.5 - 100 <10 8 1 5 5 4 45 46 41 45 7 6 1 - 100 well as in major 65 19 100 100 100 39 100 65 26 5 4 0 - 100 Lao PDR mountain valleys, in non oor People % category share (%) of Poverty Land Lowland Montane den ity level Density People total total non- total Incidence Share Coastal Upper Lower Middle Upper Alpine 2 the Mun and Chi sub- er m per/km Urban people poor poor % % 500+ 828 6 8 2 13 0 - 98 2 - - - 100 basins of the Mekong 250-500 400 3 3 2 26 0 6 88 3 3 - - 100 100-250 206 4 5 1 13 0 - 100 0.3 - - - 100 in Northeast Thailand, 75-100 101 8 11 4 19 2 0.0 96 1 3 0.2 - 100 50-75 76 8 10 4 21 2 2 74 13 10 2 - 100 25-50 52 12 13 10 34 5 6 51 14 15 13 - 100 along the narrow 10-25 25 32 34 30 36 30 1 33 17 32 18 - 100 <10 11 28 16 46 65 60 1 9 13 49 28 - 100 coastal lowland zone of 22 100 100 100 39 100 1 23 13 40 23 - 100 Vietnam, and in areas Thailand non oor People % category share (%) of Poverty Land Lowland Montane around Kunming in den ity level Density People total total non- total Incidence Share Coastal Upper Lower Middle Upper Alpine 2 er m per/km Urban people poor poor % % Yunnan, from which 500+ 1,386 68 17 20 4 5 1 70 22 7 1 0.4 - 100 250-500 372 30 11 12 6 10 3 67 26 6 1 0.0 - 100 100-250 178 14 33 33 30 18 20 41 52 5 1 0.2 - 100 relatively high densities 75-100 116 7 13 12 16 25 12 31 59 7 3 0.5 - 100 50-75 87 6 12 11 18 29 16 33 50 10 6 1 - 100 radiate out toward 25-50 55 4 10 9 17 32 20 26 41 16 14 3 - 100 10-25 26 5 4 3 7 35 15 9 30 24 30 7 - 100 Sichuan, toward <10 11 2 1 1 3 52 12 3 15 20 48 14 - 100 110 21 100 100 100 20 100 27 41 13 15 4 - 100 Myanmar to the west, Vietnam non oor People % category share (%) of Poverty Land Lowland Montane and toward Vietnam to den ity level Density People total total non- total Incidence Share Coastal Upper Lower Middle Upper Alpine 2 er m per/km Urban people poor poor % % the southeast. While 500+ 1,413 41 41 49 27 24 7 95 2 1 2 0.0 - 100 250-500 564 13 20 20 21 37 8 88 8 1 2 1.5 - 100 the largest urban areas 100-250 268 10 18 17 19 40 15 73 14 5 6 0.6 - 100 75-100 155 15 4 4 5 45 6 55 19 9 12 4.0 - 100 of each country are 50-75 127 10 5 4 7 50 9 48 30 15 7 1 - 100 25-50 81 12 5 3 8 56 14 16 30 21 28 5 - 100 10-25 53 10 5 2 9 68 20 5 20 23 38 14 - 100 associated with high <10 30 8 3 1 6 81 20 1 12 15 42 29 0 100 density of non-poor, 232 24 100 100 100 37 100 36 18 14 23 10 0 100 Yunnan the high density areas non oor People % category share (%) of Poverty Land Lowland Montane den ity level Density People total total non- total Incidence Share Coastal Upper Lower Middle Upper Alpine 2 appear much larger er m per/km Urban people poor poor % % 500+ 1,297 92 7 7 3 6 1 - - - - 100 - 100 than the cities them- 250-500 346 39 10 10 6 7 3 - 0.3 0.4 1 96 2 100 100-250 157 18 48 47 50 12 34 - 0.1 0.3 5 93 1 100 75-100 101 11 13 13 14 12 14 - 0.0 0.1 5 94 1 100 selves. National 50-75 73 16 14 13 16 13 21 0.0 0.6 1.6 16 80 2 100 25-50 46 14 9 9 11 14 21 - - 0.1 10 78 11 100 breakdowns of non- 10-25 17 20 1 1 1 12 4 - - - - 26 74 100 <10 8 12 0.2 0 0.3 14 3 - - - - 29 71 100 poor density confirm 111 23 100 100 100 12 100 0.0 0.1 0.5 8 83 8 100 these types of relationships within each GMS country: x Cambodia. Three-quarters of the overall population and 80 percent of the poor in Cambodia live in districts with non-poor density levels between 25 to 250 persons per square kilometer, and more than 95 percent of their area is in lowland zones. Districts with lower non-poor density levels occupy more than 60 percent of the total land area, and have more than 10 percent of their land in montane zones. But districts with non- poor densities higher than 250 persons per square kilometer are primarily urban areas located in the lowland zone; they account for 12 percent of the total population, but only 4 percent of the poor and 0.5 percent of total land area. x Lao PDR. In Laos, 60 percent of the people and three-quarters of the poor live in districts that occupy 90 percent of total land area, but have less than 25 non-poor persons Page 54 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

per square kilometer. The vast majority of their land area is located in montane zones, with more than half located in middle or upper montane zones. Districts with higher non-poor densities are associated with increasingly higher overall population densities and increasing proportions of their small land areas located in lowland zones. x Thailand. About 70 percent of the population and 80 percent of the poor live in tambons with between 25 – 250 non-poor persons per square kilometer, which occupy about two-thirds of the land area of the country. Areas with lower non-poor densities occupy about 27 percent of the country and have low population density, but relatively high poverty incidence levels. Higher non-poor density levels are associated with increasing urbanization and low poverty incidence in small areas with more than 90 percent of their land in lowland zones. Overall, for non-poor densities of less than 100 persons per square kilometer, there is a quite strong association between increasing non-poor density and decreasing proportions of land in montane zones. x Vietnam. Nearly 90 percent of the people and about two-thirds of the poor live in areas where non-poor densities are more than 100 persons per square kilometer. These areas occupy only about 30 percent of total land area, and about 90 percent of their land is in lowland zones. In the rest of the country, increasing non-poor density shows a strong relationship with increasing population density, decreasing poverty incidence levels, and decreasing proportions of land in montane zones, and especially middle and upper montane zones. Districts with non-poor densities of less than 25 persons per square kilometer occupy 40 percent of the total land area, and most of it is located in middle and upper montane zones. While these areas contain only 8 percent of the population, they account for 15 percent of the poor, and there are more poor than non-poor people.. x Yunnan. Three quarters of the people and 80 percent of the poor live in counties with between 50 – 250 non-poor persons per square kilometer. These areas occupy about 70 percent of the total land area. While almost all of this area is located in the upper montane zone, these counties also include most of the land in the province located in lower elevation zones, but only a small amount of land in the alpine zone. Alpine zone land is primarily located in counties with lower levels of non-poor density and overall population density, but their poverty incidence levels are not significantly different from the majority area. Counties with non-poor densities above 250 persons per square kilometer are more urban and account for 17 percent of the population, but only 9 percent of the poor and 4 percent of the total land area.

Overall, then, it appears that urban areas across the region are associated with high population densities that have a relatively lower proportion of poor than the general populations. With the exception of Yunnan, these urban areas are primarily located in lowland zones associated with river deltas, major river valleys, and coastal areas. Montane Yunnan still shows relatively lower poverty incidence and magnitude in urban areas, but elsewhere in the province both appear to be relatively evenly distributed In primarily lowland Cambodia, there also appears to be little relationship between poverty incidence levels and altitude zones, but the greatest magnitude of poor people is associated with the coastal lowland zone.

Chapter 2. Who and where are the poor? Page 55

Elsewhere in the region, however, there is considerable variation. In the Lao PDR, both poverty incidence and poverty magnitude are strongly associated with proportion of land area in middle and upper montane zones, where the population of non-poor people is very sparse. In Vietnam, where poverty is overwhelmingly a rural issue, there is a stark separation between poverty incidence, which is most severe in middle to upper montane zones, and poverty magnitude, which is far greater in lowland zones. In Thailand, poverty incidence is also most severe in more sparsely settled areas with larger proportions in middle and upper montane zones, but poverty magnitude is greatest in areas of intermediate density and mixed altitude zone composition, although the upper lowland zone is strongly represented due to the role of the Northeastern region.

In order to help round out our regional overview of the distribution of poverty in the GMS, we now turn to more specific discussions regarding poverty in Vietnam and Laos, and how poverty has been changing over time in Thailand.

2.2.3. Where and Who are the poor in Vietnam?

Using the national total poverty line as a standard, 23 million Vietnamese are identified as poor, while only 9 million are classified as poor according to the food poverty line [Sunderlin & Huynh 2005]. Moreover, farmers with better access to markets were found by Pandey and Khiem [2002] to have lower incidence of food shortages than farmers with limited market access. Highest poverty rates (incidence) in Vietnam are concentrated in the Northern Up- lands, the Central Highlands and the Central Coast [Minot & Baulch 2002; IFPRI, 2003].

Throughout the country, rural areas of provinces are significantly poorer than their urban counterparts [Minot & Baulch 2002]. Since rapid modernization in Vietnam occurs last and is slowest in the most remote areas, some believe it makes sense that most poor people in Vietnam are found in rural areas [Sunderlin & Huynh 2005]. Other variables found to be positively linked to rural poverty include bare and rocky land cover, steep slopes, acid sulphate soils, sandy soils, saline soils, and distance to a town of at least 10,000 inhabitants. An- nual rainfall, annual hours of sunshine, and elevation have not been found to have statisti- cally significant effects. As much as three quarters of the variation in district level poverty can be explained by agro-climatic factors and market access [IFPRI 2003].

In Vietnam there are 11 million households trying to earn their living from 7.7 million ha of agricultural land, which means very small farm sizes, especially in densely populated lowland areas [ADB 2000]. Poverty is also more common among farming households than others, with 48 percent of farming households found to be poor, compared to less than a quarter of households with their main income source from off-farm activities. Poor families are highly correlated with low education of the household head, as well as with large family size with a large proportion of children. Most ethnic minorities also have higher poverty rates than other people, probably because of language barriers, less favorable land, and less education. [ADB 2000].

Page 56 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Box 2-2. Main messages on Where and Who are the poor in Vietnam? x The highest poverty rates in Vietnam are concentrated in the Northern Uplands (highest), the Central Highlands and the Central Coast. x The most severe poverty and highest poverty incidence rates are in remote, upland regions, which are sparsely populated. This poverty may due to the mountainous landscape, distance to major markets, limited infrastructure and high shares of the population belonging to ethnic minorities x Densely populated cities and delta areas account for a greater absolute number of poor people despite relatively low poverty rates in the big cities. x 90 percent of poor people in Vietnam are found in rural areas. x Physical and socio-economic variables positively linked to rural poverty are bare and rocky land cover, steep slopes, acid sulphate soils, sandy soils, saline soils and distance to a town of at least 10,000 inhabitants. Three quarters of the variation in district level poverty can be explained by agro-climatic factors and market access. Low education of the household head and ethnic minority status are other important social variables. x Ethnic minority people are often among the poorest in remote areas, probably due to unfavorable infrastructure, lack of access to markets, poor soils and discrimination.

Other studies have also found the density of poverty to be greatest where its incidence is lowest [IFPRI 2003]. Thus, densely populated cities and delta areas account for a greater absolute number of poor people, despite relatively low poverty incidence in big cities. For example, provinces near the Red river delta and Hanoi (Thai Nguyen, Bac Giang and Phu Tho) are less poor than provinces near the country borders and they have better infrastructure and higher population density as well.

The most severe poverty and the highest poverty rates (% of all people) are, however, found in remote, upland regions, which are sparsely populated [IFPRI 2003]. The World Bank [1999] found that 90 percent of poor people in Vietnam are found in rural areas, and the situation is predicted to look similar in the future. This is seen to imply that poverty alleviation programs for the rural sector should focus on agriculture and off-farm enterprise and services. However, because of unfavorable infrastructure, lack of access to markets, poor soils, and discrimination, ethnic minority people are often among the poorest in remote areas. And, given the context within which programs must operate, much of this poverty is seen as likely to be very expensive to alleviate [Sunderlin & Huynh 2005].

The most effective poverty targeting variables/criteria have been found to be those relating to house quality and ownership of durable assets. Television or radio ownership is surprisingly better as a targeting indicator than all other assets, demographic or educational variables. But the use of an index of television and radio ownership for targeting would be problematic, as it would be easy for households to conceal ownership if it became known that ownership would exclude them from being selected as program beneficiaries [Minot & Baulch 2002]. There- fore, it is important to have many indicators for the same purpose, so that crosschecks and triangulation can help improve findings.

Chapter 2. Who and where are the poor? Page 57

Another more diffuse poverty indicator may be forestry. Most of the poor in Vietnam (90%) live in rural areas and their main income is from agriculture and forestry, especially in the uplands [World Bank 1999]. Thus, forestry may have a close linkage to poverty alleviation. Sunderlin and Huynh [2005] suggest three key linkages between the forest sector and poverty alleviation: 1. There is an important cause and effect relationship between transformation of rural livelihoods and dramatic changes in forest cover as they occurred during the same time periods and in the same places. Poor, remote areas are often also where the last pockets of natural forests survive longest. 2. Poor people in remote areas often depend at a relatively high level on goods/services from natural forests. 3. But at the same time, many rural people get benefits from eliminating forests through selling timber and other products, and to obtain new arable land.

Sunderlin and Huynh [2005] also explain two strategies for potential forest-based poverty alleviation. The first seeks to avoid or mitigate poverty. Forests resources can prevent people from slipping into poverty or from becoming poorer, if they serve as a safety net, “gap filler”, or additional source of petty cash for its owners. The second strategy seeks to eliminate poverty. Here forest will help to lift a household out of poverty through being a source for savings, investments, and livelihood diversification, thus permanently increasing income and welfare [Sunderlin & Huynh 2005]. Usually, either of these strategies are combined with others to alleviate poverty. In their report, Sunderlin and Huynh suggest some different ways of forest resource use that potentially could assist poverty alleviation processes. These include conversion of forestry to agriculture, timber production, non-timber forest products, environmental services (including compensation for downstream benefits), employment and indirect benefits, such as creation of jobs for others than just forest producers.

2.2.4. Where are the poor in Laos?

Although a series of studies on income and consumption-based poverty have been conducted in the Lao PDR, government programs target poor areas that were identified with a somewhat different approach. The ADB-supported participatory poverty assessment conducted in Laos [ADB 2001] was particularly effective in raising a number of questions about poverty and poor populations in Laos, which helped influence thinking and activities during development of the landmark National Growth and Poverty Eradication Strategy (NGPES) [World Bank 2004]. Recently, a second round of participatory assessments has also been launched [Chamberlain 2007].

During formulation of the NGPES, various assessments of poverty in Laos were conducted and reviewed, and analyses were conducted at various levels on characteristics of districts and their poor populations. As a result, 72 districts were classified as ‘poor’, and 47 of these classified as ‘very poor’. Although the resulting categories are quite simple, the process through Page 58 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region which they were identified was quite complex and included a range of perspectives from different sectors and levels [see World Bank 2004 for the complete NGPES and its annexes]

In order to compare the outcome of this approach, Figure 2.8 compares the maps of poverty incidence using the small areas estimate data [Kakwani 2001] with a map of the NGPES classification. Although there are numerous differences, there are few major discrepancies. Moreover, poverty data has been improved and updated since the initial work upon which our small area estimate data is based, and World Bank analysts claim there are no major conflicts between the results of these two approaches [World Bank 2006b].

Figure 2-8. Estimates of poverty rates and NGPES district classes, Lao PDR

Data sources: Kakwani 2001; World Bank 2004

2.2.5 Changes in poverty over time in Northern Thailand

Our assessment of the spatial distribution of poverty in Thailand used disaggregated data that was available for 2002. While this assessment has helped us clarify questions of spatial distribution, since it represents a single point in time it has not captured the dynamics of change in poverty over time that is occurring in all countries of the region. As an example of the change that has already taken place, this section presents data on changes in poverty incidence and magnitude that have been occurring during the last 20 years in Thailand and its northern region where our case study is located.

The proportion of people and the number of people in Northern Thailand who were under the poverty line during 1988-2006 are displayed in Figure 2-9 and Table 2-10. It is clear that the proportion of poor people in Northern Thailand has decreased significantly through time. In 1988, the proportion of poor people in urban areas of Northern Thailand was 39 per cent of total urban population, decreasing to 16 per cent in 2000 and only 6.5 per cent in Chapter 2. Who and where are the poor? Page 59

Figure 2-9. Poverty Incidence in urban & rural areas of North Thailand, 1988-2006

60 50 40

20 10 0 per cent of total population 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Urban Rural

Source: NESDB 2006. Similarly, the proportion of poor people in rural areas of the region was as high as 50 per cent in 1988, decreasing to 36 per cent in 1994 and 17 per cent in 1998. While levels then increased after the 1997 economic crisis to 25 per cent in 2000, since then they have been decreasing with economic recovery to 13 per cent in 2006. Although impacts of the economic crisis appear to have begun more quickly in urban areas, subsequent impact in rural areas appears to have been even greater.

Table 2-10. Poverty Incidence and Magnitude in Northern Thailand, 1988 – 2006

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Proportion of poor ( ) North urban 39.19 27.82 19.12 19.06 13.41 14.1 16.11 13.54 9.28 6.50 rural 50.12 37.11 36.25 21.18 18.96 17.08 24.87 22.06 17.36 13.31 Whole country 42.21 33.69 28.43 18.98 14.75 17.46 20.98 14.93 11.16 9.55 Number of poor (1,000 persons) North: urban male 201 145 155 174 156 110 73 female 222 155 163 192 161 116 74 North: rural male 895 817 761 1,128 1,020 800 633 female 928 834 746 1,096 953 816 630 Total North 2,246 1,951 1,825 2,590 2,290 1,842 1,410 Total poor in Thailand (million persons) 22.1 18.4 15.8 10.7 8.5 10.2 12.6 9.1 7.0 6.1 Total population in Thailand (million persons) 52.4 54.5 55.6 56.6 57.6 58.7 59.9 61.2 62.9 63.4

The proportion of poor people in rural areas of Northern Thailand has generally been higher than the average for the entire country, as seen in Table 2-10. The number of people in the region below the poverty line was 1.4 million persons in 2006. Most of the poor reside in Page 60 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region rural areas, with an equal proportion among men and women. This compares with a total of 6.1 million poor persons nationwide, and a national poverty incidence level of 9.6 per cent.

2.2.6 Ethnicity and poverty -

Ethnic diversity is considered a characteristic of mainland Southeast Asia in general, and especially of its montane zones. Relationships between percentages of ethnic minorities and poverty incidence and depth have already been mentioned in the context of Vietnam, but they are also a common feature of discussions about poverty across the region.

In order to help bring more clarity to discussions about ethnicity, Figure 2-10 maps data on zones in major river basins of the region that are dominated by different ethno-linguistic groups. It is important to note that colors in this map have been assigned randomly, so that there has been no effort Figure 2-10. Ethno-linguistic distributions in river basins to use color codes to indicate in this map which groups are most closely related to each other. Rather, the intent is simply to portray the distribution of overall diversity and complexity of the groups in various parts of the region. Thus, the increased complexity of patterns in montane areas is visually obvious.

Moreover, the complexity of ethic distributions is really considerably more complicated than this map indicates. Zones in this map only attempt to chart the dominant group of a particular area. But within each zone - and especially in montane zones - there are usually minorities of other groups, usually in separate settlement areas, and often differentiated by altitude zones. Examples of ethnicity at village level in the Upper Ping River Basin will be shown in the section below on the case study area in Northern Thailand. In addition, these zones have been dynamic over time as various ethnic groups moved in response to conditions in various parts of the region. Even today, hun- dreds of thousands of ethnic Shan people have fled to Thailand from their homeland in Myanmar, due to a combination of their fear of perceived persecution and lack of livelihood opportunities in Myanmar. Chapter 2. Who and where are the poor? Page 61

For reasons that vary across space and over time, ethnic minorities are also marginalized by societies dominated by particular ethnic groups that are usually most prominent in areas where major agricultural zones and urban centers are located. There are also often considerable differences among ethnic groups in terms of their relationships with dominant ethnic groups, and how they are generally perceived by power elites and mainstream societies.

Figure 2-11. Relationships of ethnicity with poverty incidence & severity in Vietnam

100% 30%

90% 25% 80%

70% y 20% 60% y 0.0012x 0.0211 R2 0.6877 50% 15% y 0.0048x 0.3095 40% R2 0.565 10% 30% total poverty severit total poverty poverty incidence incidence 20% 5% 10%

0% 0% 0 102030405060708090100 0 102030405060708090100 Percentofethnicminorities Percent of ethnic minorities

Figure 2-12. Relationships of ethnicity with poverty incidence & severity in Yunnan

40% 4.0%

35% 3.5%

e y 0.0007x 0.0819 30% 3.0% R2 0.0499 y5E-05x0.0059 25% 2.5% R2 0.0383 20% 2.0%

15% 1.5%

10%

total poverty severity 1.0% total poverty incidenc

5% 0.5%

0% 0.0% 0 102030405060708090100 0 102030405060708090100 Percent of ethnic minorities Percent of ethnic minorities

Small area estimates datasets for Vietnam and Yunnan include information in the form of the percentage of people in the reporting unit that belong to ethnic minority groups. Although this is a very coarse measure of this issue, it is instructive to examine relationships of this variable with measures of poverty. Results of data scatter plots and regression lines displayed in Figure 2-11 for Vietnam and in Figure 2-12 for Yunnan show two quite different patterns.

In the case of Vietnam, there is a fairly clear general relationship between increasing proportions of ethnic minorities and poverty incidence levels, and the relationship is even stronger Page 62 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region with the index of poverty severity. In Yunnan, however, there are virtually no relationships among these variables. It is tempting to see this as possibly associated with a higher degree of integration of minorities into society in Yunnan, where cultural diversity is perceived as one of the province’s major characteristics in the context of larger Chinese society. One would anticipate various relationships that would be likely to emerge in data from Thailand and the Lao PDR if such data were available, and one might also anticipate differentiation of relationships with different ethnic groupings. Many in Vietnam and Laos are now recognizing and trying to address these issues in various ways. But in Thailand, the lack of ethnicity data associated with poverty assessments is a reflection of official pretensions that ethnicity is not an issue in their society. One only has to look at the ethnic composition of areas with highest poverty incidence and severity, however, to see reality.

Chapter 2. Who and where are the poor? Page 63

2.3 Dimensions of poverty in case study areas

This section turns from regional overview to explorations of poverty in the context of our specific case study areas in the region. In the process, we also provide some examples of diversity in the region in how people are viewing and assessing poverty and issues with which it is associated.

2.3.1 Distribution of poverty in the Upper Ping Basin, Northern Thailand

The Upper Ping Basin (UPB) is populated with diverse ethnic groups. The majority ethnic group is the Northern Thai, whose settlements occupy most of the lowlands (Figure 2-13). The second largest ethnic group and the largest ethnic minority is the Karen who live in highland areas (mostly in middle to upper montane zones) in the Upper Mae Chaem, Lower Mae Chaem, Mae Khan, Mae Klang, and Mae Tuen sub-basins. Hmong, Lisu, and Lahu minority groups occupy highland areas in Mae Taeng and Ping 1 sub-basins in the north. Other ethnic minorities are dispersed in some midlands and highland areas of UPB.

Figure 2-13. Distribution of UPB village settlements by ethnic groups

The abundance of land and water resources makes the Chiang Mai- Lamphun valley the main “food basket” for the upper North. With installation of three large-scale irrigation projects, multiple cropping has been practiced since the early 1970s. This has encouraged expansion of trade, as well as city and suburban areas. Populations are concentrated in lowland areas, and especially those in the periphery of Chiang Mai city (Figure 2-14). Thus, population density is highest in irrigated lowlands, while most of midland and highland areas have population densities of less than 50 persons per square kilometer. Page 64 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

In order to assess income-based poverty using village-level data, household income data from the 2003 NRD-2 survey conducted by the Community Development Department were zon- ally summarized as a property of small local level 4 sub-watersheds (see details on sub- watershed levels in the UPB site description section of chapter 1).

Figure 2-14. Distribution of population & population density in the UPB

(a) Population levels & sub-watersheds (b) Population density in sub-watersheds

Figure 2-15. Distribution of indicators of household wealth status in UPB

(a) average household income (b) households above poverty line

Chapter 2. Who and where are the poor? Page 65

Spatial distribution of wealth expressed Figure 2-16. Levels of education of people in UPB as a thematic map (Figure 2-15(a)) indicates that communities where average household income is less than 60,000 Baht/year are mostly located in midland and highland sub-watersheds. This is confirmed by data in Figure 2-15(b) which displays the percentage of households above the poverty line within sub- watersheds. These communities are mainly ethnic Karen (Figure 2-13) and have lower levels of education in terms of the percent of total population with at least 9 years education (Figure 2-16).

Other factors that contribute to poverty in these areas are access to land, water and time of travel to district towns and provincial cities where major sources of information and markets for inputs and people with at least 9 years education outputs are located. These will be discussed in later sections of this report.

2.3.2 Local heterogeneity in poverty status

In considering the poverty status of the population, a case study in Northern provinces of Thailand found that the poor were scattered in different districts of areas often considered to be relatively well-endowed areas.

A study by Benchaphun et al. [2005] surveyed 910 farm households in Chiang Mai, Chiang Rai and Lamphun provinces of North Thailand. The survey covered 490 farm households in the Chiang Mai Valley (Chiang Mai and Lamphun) and 420 farm households in Chiang Rai, located within an overall total of 115 villages. These areas are considered prime agricultural areas of the North. Yet even here, the research team found very diversified farming systems and considerable heterogeneity in study area populations.

In the lowlands of Chiang Mai, Lamphun and Chiang Rai in, the average annual household income in 2002 was around 60,000-70,000 baht, which was only slightly higher than poverty line2 (Table 2-11 and Table 2-12). Well-off, medium and poor farm households were found to live side by side each other in the same areas, sub-districts and districts. Net cash

2 The national poverty line was 1,032 baht per person per day in 2002. This is equivalent to $USD 0.80 a day per person or 50,000 baht per household. Alternatively, if $USD 1 a day per person is used to define the poverty line, this is equivalent to around 60,000 baht per household per year. Page 66 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region income of farmers ranged from 0 baht per household to 1.2 million baht per household, depending on crops and resources such as land and capital. x Poor farm households defined as less than 60,000 baht per household had incomes that averaged around 35,000 baht per household. x Medium farm households defined as those having income between 60,000-120,000 baht per household had on average income of 85,000-88,000 baht per household. x Well-off farm households with more than 120,000 baht per household had average incomes of 180,000-260,000 baht per household.

Table 2-11. Average household income by income groups, from surveys of farmers in Chiang Mai, Lamphun and Chiang Rai provinces, 2002

Total household income Very poor Poor Medium ell off Total <30,000 baht 30,001-60,000 baht 60001-120,000 baht >120,000 baht Chiang Mai Average HH income 18,707 47,804 85,602 259,789 70,690 Sample size 101 138 82 38 359 percent 28.1 38.4 22.8 10.6 100.0 Lamphun Average HH income 19,493 44,334 87,650 176,678 73,191 Sample size 28 49 30 24 131 percent 21.4 37.4 22.9 18.3 100.0 Chiang Rai Average HH income 21,149 44,134 84,345 179,049 60,985 Sample size 121 151 103 42 417 percent 29.0 36.2 24.7 10.1 100.0

Total sample size 250 338 215 104 907 percent 27.6 37.3 23.7 11.5 100.0 Source: Benchaphun et al 2005

About 65 percent of total income came from their farm, and about 35 percent from off-farm and non-farm sources. Medium income households in Chiang Mai and Chiang Rai had a higher proportion of their income from farm sources (75 percent). Well-off households in Chiang Rai had the lowest proportion of their income from farm sources (53 percent), with non-farm sources constituting nearly half of their income. Chiang Mai well-off farm households were relatively wealthier than those in Lamphun and Chiang Rai, with higher levels of both farm and non-farm income. Well-off farm households had about 5 times the income of poor farm households.

The study also found that 27.6 percent of the households surveyed had annual household incomes that placed them in the lower range of very poor (less than 30,000 baht), whereas 37.3 percent were classified as poor (30,000-60,000), 23.7 percent had medium incomes (60,000-120,000 baht)), and 11.5 percent were well-of with incomes of more than 120,000 Chapter 2. Who and where are the poor? Page 67 baht per household per year. In Lamphun, 18 percent of the farmers surveyed enjoyed more than 120,000 baht of annual household income, compared to 10 percent at this income level in Chiang Mai and Chiang Rai areas. This is due to the fact that Lamphun farmers grew higher-value fruit trees like longan, and that many of them had non-farm income sources. In this survey, the proportion of poor households was as high as 65 per cent because it was a survey among rural farm households where there was a high concentration of poor households. Among very poor households, their average household income ranged around 20,000 baht per household or $USD 0.40 per person per day.

Table 2-12. Income of farmers in Chiang Mai, Lamphun and Chiang Rai, 2002-2003

Number of Farm Non-farm Total Province households income income income ------baht per household------Chiang Mai 239 23,048 12,488 35,508 Poor Lamphun 77 26,603 8,805 35,301 Chiang Rai 272 21,675 11,552 33,909 Chiang Mai 82 64,749 20,173 85,602 Medium Lamphun 30 64,400 23,250 87,650 Chiang Rai 103 53,380 29,289 84,346 Chiang Mai 38 178,871 84,205 259,789 Well-off Lamphun 24 118,051 58,627 176,678 Chiang Rai 42 94,910 86,490 179,048 Total 907 43,793 22,554 66,589 -----percent of households----- Chiang Mai 239 64.9 35.2 100 Poor Lamphun 77 75.4 24.9 100 Chiang Rai 272 63.9 34.1 100 Chiang Mai 82 75.6 23.6 100 Medium Lamphun 30 73.5 26.5 100 Chiang Rai 103 63.3 34.7 100 Chiang Mai 38 68.9 32.4 100 Well-off Lamphun 24 66.8 33.2 100 Chiang Rai 42 53.0 48.3 100 Total 907 65.8 33.9 100 Source: Benchaphun et al 200 Page 68 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

2.3.3 Self-defined and alternative poverty lines

Self-defined poverty lines in North Thailand A survey conducted by Benchaphun et al. [2001] during 2000-2001 in 20 villages of four Royal Project sites (Angkang, Nong Hoi, Mae Hae and Prabat Huay Tom) in Chiang Mai and Lamphun provinces of Northern Thailand included interviews among farmers and farmers leaders about criteria of poverty.

During discussions about how they defined poverty, they included income, housing, assets and land ownership as key criteria for definition of poverty. They used a household income of 40,000 baht3 per household as the “cut-off point” between poor and non-poor, irrespec- tive of household size. Households with incomes of more than 100,000 baht per household were considered well-off.

Using their “definitions” of poverty, Table 2-13 categorizes poor, medium and well-off households. Poor households predominated in the Prabat Huay Tom site (63 per cent of the surveyed households). The Angkang site had 34 per cent of the surveyed households being poor, but in the Nong Hoi site only 14 per cent were poor and in Mae Hae only 4 per cent of the interviewed households were viewed by the people as being poor — the rest were considered to be “medium” and “well-off”. One can see how perceived poverty varies across local contexts.

Table 2-13. Distribution of households using farmer’s self-defined poverty lines in four Royal Project sites in Chiang Mai and Lamphun Poor Medium ell-off Royal Project up- (<40,000 baht per (40,000-100,000 baht per (> 100,000 baht per land highland Site household) household) household) % of surveyed households Angkang 33.9 54.2 11.9 Nong Hoi 14.1 70.3 15.6 Mae Hae 4.5 80.3 15.2 Prabat Huay Tom 62.7 34.3 3 All four sites 28.9 59.8 11.3

Self-defined poverty lines in Vietnam case study Self-defined poverty lines were determined by tea growers in Hoang Nong commune of Dai Tu District in Thai Nguyen Province using both wealth ranking and the Stages of Progress Method (see Box 2-3). Their self-defined poverty lines compared quite well with official poverty lines defined by the MOLISA ‘poverty reduction 135 program’.

3 If the national standard is used, 11,688 baht per person per year is the poverty line. A household with 5.6 members should have more than 65,452 baht per household, while a household with 9.6 members should have more than 112,204 baht per household to be above poverty line. Chapter 2. Who and where are the poor? Page 69

Box 2-3. The Stages of Progress (SOP) Method

Village representative groups in two villages (about 30% of the total households in each village) (1) define local notions of poverty, (2) identify “stages of progress” that households in the villages might go through as they obtain more and more investment funds, and (3) characterize each household in the village according to its current and past stage.

Focus groups also characterize livelihood strategies. Two representative focus groups of tea growers in each village were selected using the following criteria: x Wealth: rich, average and poor (following criteria of ‘poverty reduction program 135 and wealth ranking) x Age: including the most common age of the HH head (over 40 years old) and the old group. x Gender: 2 groups, male and female.

One-day group meetings were conducted using a semi-structured checklist and PRA tools as described below. Research questions, tools and expected outputs: Research questions Tools Expected outputs 1 Poverty causes and Wealth rank- Self-defined poverty and well-being lines are poverty line according, identified. Livelihood strategies of households ing to local percep- SOP in getting out from poverty are mapped tion 2 market information – Interview + Information access( social & human resource poor (what, where, brainstorming of the poor) why, how, who) + ranking 3 Gender along value time line Gender role among the poor- target groups for chains seasonal cal- improving production process (social re- endar sources) day clock 4 Institutional assess- Institutional Opportunities & Constraints the poor have ment ranking

Source: http://www.pubpol.duke.edu/krishna/index.html

Hoang Nong commune consists of 18 villages that include 1,145 households and a total population of 4,968 people. Their population growth rate is low, and the dominant age group belongs to the labor force. According to criteria from MOLISA, about 55 percent of the commune population belongs to the average wealth group, while 20 percent are the well- off and 25.6 percent (332 households) are poor. Income of poor households is less than 200,000 VND/month/person, while rich can earn 6 million VND/year/person (after deduct- ing all production costs).

Indicators for poverty as measured by participating villagers are based on the following parameters: House, land areas, labor, income, but also measured price received when selling tea, loans, and furniture. The poor, as defined by the ‘stages of progress’, usually lack labor, have bad health, and do not have enough money for purchasing fertilizers for tea (Tables 2-14 and 2-15). Page 70

Table 2-14. Stages of progress with self-defined poverty and well-being lines from case study site in Vietnam Doan Thang Village Dinh Cuong village Stage (Kinh ethnic group) (Dao ethnic group) Expand business, having brand 10 name of Hoang Nong Applying technology, investment, Savings and loan 9 marketing, learning about product market Owning advanced multi media (ra- Expand production activities, Large farm, purchase car, selling tea dio, television) extent breeding facilities, build up to traders,producing ‘clean tea’ using 8 biogas system well-established irrigation system for intensifying tea plantation From average to wealthy From average to wealthy Sending children to learn at high school Savings, take care of health Furniture and television Doing business, change crop to more 7 or vocational school to get a working skill From average to wealthy economic species, large livestock Building many store house, saving Buying motorbike Motorbike Saving money for pay back debt, for 6 money in a bank children wedding Improve housing, cleaner Building houses, improve and up- Buffalo for cultivation Better food, have meat for each meal, grade kitchen and house furniture, nice clothes 5 bathroom From average to wealthy Poverty line Poverty line Purchase motorcycle, more furniture, Buying cows and buffalo Building breeding facilities Purchase motorcycle for transport 4 better food (2 meals/day with meat, fish) materials, TV Poverty line Shelter with toilet and bath room Buying fertilizers and basic ma- Buying fertilizers for improving tea Building house ‘cap 4’, purchase buf- 3 Poverty line chines quality falo, pay back debts Purchase fertilizers to replant old tea, Buying additional land Building temporary houses Purchase fertilizers, piglets, sharing 2 improve health tea processing equipment Not hardworking, sick, bad economy Little and poor land, many depend- Small children, do not have ca- Not yet hard working enough, lack of management, in debt, toilet made by ent people, do not have basic pacity to work for other people, equipments, no buffalo, not enough 1 bamboo houses, sick living in cottage rice and tea, due to less land, in debt, simple house, sick, not good economy management Source: PRA survey, 2007 Chapter 2. Who and where are the poor? Page 71

Table 2-15. Change in household stages of progress and poverty status over time at a case study site in Vietnam Note: stages 1, 2 are under poverty line, 3, 4 are average, 5,6 are good sense of well-being Important Periods & Major Events Sample 82- 86 1991 -92 1997 2001 2005 2007 House- Sell young GTZ project started; Reasons for changes Team observation Land allocation; Electricity holds labor to the Establishment of a Red book issued available south ‘safe tea’ cooperative HH has high risk to fall back to Children grow up, health poverty. They need help to The 1 3 improved, hard working (14 borrow money with low interest hours/day) to strengthen tea production Old parents, pay for small Nhi 4 3 children go to school Purchase more land for tea, Hai 2 3 children get bigger Hang 2 3 Children get bigger Thanh 2 3 Parents are less sick Business service, selling Hong 1 2 4 equipment for tea and drying processing, selling pesticles working with tea, children Lan 2 3 4 grow up, more labor More labor, creativity, pen- Lang 3 4 4 sion good management, diversify Thom 3 4 agricultural activities Lam 3 4 More labor No children at the beginning, have invalid subsidy and Hanh 2 4 6 5 reduced school fee due to working in the army healthy, no children from Loc 1 3 4 5 beginning, safe minded and hard working Source: PRA Survey, 2007 Location: Doan Thang village, Hoang Nong commune, Thai Nguyen district, Vietnam Page 72

Self-defined poverty lines in the Lao PDR According to the Prime Minister Instruction No. 1010 in June 2001, the Government of Laos defines poverty based on four main factors. These include availability of food, (2,100 kcl per person per day) and clothing, housing condition (permanent, temporary, etc.), access to health services and access to education. The government aims to reduce the percentage of population under poverty line to 24 percent by 2015.

One of the key challenges for poverty alleviation in Laos is its geographic (i.e. mountainous- lowland, urban-rural) and ethnic discrepancies (Chamberlain 2007). With particular regard to rural poverty, Raintree states that the "…problem of rural poverty is ultimately rooted in the failure or weariness of rural livelihood systems. Any serious effort in poverty alleviation must eventually focus on finding ways to improve and sustain rural livelihoods (Raintree 2001, p72)." He particularly stresses examining poverty in Laos not merely in terms of a household's level of consumption, but instead from the perspective of capabilities: Do households have ability to save and accumulate wealth? Can they adapt to changes and cope with adversities? Are they able to adopt technologies that enhance long-term productivity?

A team of researchers from the Faculty of Forestry of the National University of Laos conducted a case study in Sing district (Luang Namtha province) supported by the U.S. Na- tional Science Foundation. Focus group interviews were held with village elders and leaders to discuss different economic classes within seven villages. Rice sufficiency, access to land (size and numbers of plots), agricultural production, and assets (i.e. livestock) emerged as key factors that distinguished households' economic status across villages. Based on these characteristics, researchers distinguished three general economic classes of households as described in Table 2-16. This approach also parallels the NGPES approach.

Table 2-16. Self-defined poverty levels in the Lao PDR Classes Description These are families that have land to meet their food needs and may have surplus production that can be sold. These families also have means to invest and Better off diversify into commercial cash crops such as sugarcane, maize, Para-rubber, or are able to engage in small-scale agricultural trade. These are families that have land to meet their basic food needs and may have some surplus production that can be sold. These families may also have some Middle limited means to invest and diversify into commercial cash crops such as sugarcane, maize, Para-rubber, or to engage in small-scale agricultural trade. These include families that do not have sufficient access to agricultural land to meet their subsistence food needs throughout the year. Families also tend to Poor have limited household labour (i.e. young family, illness, death, etc.) and assets.

In addition to basic factors of poverty defined by the Lao government, we found that access to basic agricultural production inputs including land and labor were important conditions for households' survival and accumulation of wealth.

Chapter 2. Who and where are the poor? Page 73

2.3.4 Notions of well-being

At our case study site in Vietnam, well-being is noticed by villagers as soon as one owns motorcycles or a television, has better food for better health, has savings or expands her/his agricultural activities such as using more fertilizers and more land (see Table 2-14).

In Northern Thailand, our studies have found that the poor as defined by others may not view themselves in the same light. A survey by Benchaphun during 2006 in Mae Wang and Mae Chaem of Northern Thailand asked farmers to do a self-assessment. They were asked to identify whether they considered their households’ living as “experiencing hardships” (lum- bak) or “not sufficient” (kud-son); “moderate level of comfort” (pan-klang); or “having good level of comfort” (sabai). Using the poverty line definition at 60,000 baht per household, it turned out that only 42 per cent of them who had income less than 60,000 baht per household per year or in the “poor” category considered themselves lum-bak or experienced hardships, quite a proportion (56 per cent) considered their household as or pan-klang or moderately comfortable and even 2 per cent considered themselves sabai or a good level of comfortable.

For the medium income group, while 18 percent of households considered their household as lum-bak or kud-son or experienced hardships , the majority (82 per cent) considered their households as pan-klang or moderately comfortable. But 33 per cent of them reported that their income was not sufficient for living.

Among those with incomes greater than 120,000 baht per year 91 percent of these households considered themselves as pan-klang or moderately comfortable, while 9 per cent even reported their living experienced hardships (lam-bak or kud-son), and 18 per cent of the well- off said their living was insufficient. None of the medium or well-off households considered themselves sabai. This case study shows the fact that poverty is a relative concept which is not captured well by income levels per se, as many of those in “poverty” would consider themselves reasonably comfortable, while many of those not in “poverty” considered themselves insufficient in income and experienced hardships (Table 2-17).

Table 2-17. Self assessment of poor, medium and well-off households at study sites in North Thai- land

Type of households Households reporting that: Poor Medium Well-off %oftheincomegroup Income is sufficient for living 40.4 66.7 81.8 Income not sufficient for living 59.6 33.3 18.1

Experienced hardships, not sufficient 42.3 17.8 9.1 (lam-bak or kud-son) Moderate level of comfort (pan-klang) 55.8 82.2 90.9 Good level of comfort (sabai) 1.9 0 0 Source: field survey, 2006 Page 74 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

2.3.5 Changes in household poverty over time

Land assets and household cycles in Yunnan Access to land resources is often an important indicator of relative wealth for rural populations. In China, arable rural land is periodically redistributed based on changes in household size. During the period between allocations, the amount of land per-capita for each household gradually becomes more unequal as household size changes according to stages in household life cycles.

This process of change was assessed for natural village hamlets within two administrative villages in western Yunnan, based on data from official household land use contracts. Gini coef- ficients4 were calculated for household land assets in order to quantify the inequality of land distribution in villages. As when used with income or any other asset, a value of 0 indicates perfect equality whereas a value of 1 indicates perfect inequality. Results confirm that agricultural land in these villages was more evenly allocated in 1985 (Table 2-18).

Table 2-18. Comparison of Gini coefficients for contracted land per household in each natural village at a case study site in Yunnan, China

Baicai 1985 2002 Pingzhang 1985 2004 Baicai 0.053 0.158 Baishuihe 0.000 0.204 Baojiacun 0.014 0.164 Dazhai 0.019 0.205 Dashuigou 0.070 0.185 Lujiadi 0.018 0.285 Lipo 0.024 0.157 Shangpingzhang 0.031 0.217 Qingcai 0.048 0.192 Xiapingzhang 0.065 0.275 Xiaohezhai 0.034 0.126 Xinzhai 0.016 0.197 TOTAL 0.071 0.188 TOTAL 0.046 0.239 Average 0.042 0.171 Average 0.029 0.219

Every natural village had an increase in the inequality of land distribution between 1985 and 2002/2004, as depicted by the increase in the Gini coefficient over the same period. This pattern of increasing inequality in access to land is due to gradual changes in household composition as each separate household grows, divides and decays through the various stages of a household life-cycle. Households which are currently in the growth stage (marriage, repro- duction) will have lower per-capita land resources than households which have lost members since the time of land allocation (due to out-migration or death). Thus, the life-cycle stage of a household functions as an important determinant of relative access to land resources due to the current system of land distribution. This is particularly relevant to poverty in a context where there are few resources other than land, and few economic options other than agriculture.

4 Use of the Gini Coefficient as a measure of inequality is further discussed in section 2.1.1. Chapter 2. Who and where are the poor? Page 75

Land, electricity and change in Vietnam Since the land allocation program in 1991-1992, life of villagers has improved at our case study site in Vietnam. Since the village began receiving electricity from national grid in 2005, new opportunities for hard-working families with cash savings allowed them to “take off” and achieve the “well-being” level described earlier.

On the other hand, there is significant risk that families of tea growers may fall back into poverty, as they are only just above the poverty line today. Their farming depends much on their own labor, and if any family member gets sick they can fall back into debt. They need help with access to low interest loans in order to strengthen their tea production (see Table 2- 15).

Age and gender in North Thailand In Northern Thailand, Charal et al [1997] studied an Akha village called Mae Salaep in the highland areas of Mae Chan district in Chiang Rai province. They found that poor households were newly settled and young families, while old settlers and old families were more well-off with paddy land and more farm land. Early settlers had more access to land while young families found it difficult to have farm land of their own. If they had some land from their parents, it was usually small in size.

On the other hand, interviews with villagers in the Mae Wang watershed of Chiang Mai Province during 2006 found that many poor households were aged and landless. These old people did not have many of the wage employment opportunities which are often available to the young and strong. When they were young, they could earn income by wage employment. As they got older, they were not strong enough to do many farm jobs. Many of them had some health problems. Moreover, many of the poor were old people who had weak kinship networks, and many of them were single parents. Old men and women were equally vulnerable to poverty. As extended families are disappearing, poverty among the aged has been more apparent in rural areas of Northern Thailand.

A study by Nutcha [2003] in the Mae Hae Royal Project site in Chiang Mai province found that many poor households had aging household heads, a woman as head, insufficient labor or had more dependent members of their family. Household heads typically had low education and many did not speak good Thai language. These households had insufficient rice for consumption. They also had less access to loans, and would borrow only to a small extent for consumption purposes.

Page 76 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

2.3.6 Ethnicity factors

Ethnicity at case study sites in North Thailand In Northern Thailand, the poor are sometimes members of ethnic minority groups, but there is also considerable variation among ethnic groups. Benchaphun et al. [2001] found in their survey in Chiang Mai and Lamphun in 2000-2001 that household incomes of the Karen, Lahu, Palong tribal groups were low compared to those for Hmong and Chinese Yunnanese (Haw). The Hmong and Chinese Haw are often recognized to be quite entrepreneurial and commercially-oriented while the Karen, Lahu and Palong ethnic minority groups are often recognized as being self-sufficient and subsistence oriented. As for lowland Thai, they are the majority in Northern Thailand and their wealth status is mixed—some poor and some well- off.

In order to help clarify some of the patterns among ethnic groups, Table 2-19 shows income data by ethnic groups in villages surveyed during 2001. As indicated in this table, the Thai and Karen relied more on non-farm activities than the Hmong, Lahu and Palong. Although initial examination of this data suggests that the Hmong are more well-off, analysis of per capita income reveals that because of their large household size, they too are in poverty — in addition to the Karen, Lahu and Palong ethnic groups. Only the Thai and Chinese Yun- nanese (Haw) were slightly above the poverty line due to their smaller household size.

Table 2-19. Household income by ethnic groups in 20 upland and highland villages in four Royal Project sites in Chiang Mai and Lamphun areas

Cash Cash Total In-kind Total HH Total in- Number HH size income income cash come per Ethnic group income income farm HH (persons) farming non-farm income person per ---baht/household/year year1/ Hmong 64 9.7 65,631 11,164 76,795 17,227 94,023 9,693 Yunnanese (Haw) 21 6.6 66,207 20,211 86,418 7,319 93,737 14,202 Thai 16 4.2 19,033 25,471 44,504 9,663 54,166 12,896 Karen 112 5.4 18,539 21,520 40,059 10,796 50,855 9,417 Lahu 17 9.6 29,143 8,509 37,652 11,033 48,685 5,071 Palong 19 5.6 22,656 4,879 27,536 5,823 33,359 5,956 1/ Poverty line for 2000 was 974 baht per person per month or 11,688 baht per person per year Source: Benchaphun et.al. 2001

In a study of ethnic hill tribe and lowland Thai villages in Mae Hae, Nutcha (2003) found that commercialization and development did not reach people equally. Although agriculture remained dominant in all income classes, off-farm wage employment was the main source of supplementary cash income for the poor farmers in such areas, and it was especially more prevalent among the Karen. Trading was more common among well-off households, but poor Karen and Hmong households were less able to cope with the new market-oriented economy. Wage employment, seeking more farm land, borrowing, more trading, growing more fruit trees, or changing crops were some of the measures they employed in trying to cope with poverty. Poor households were often found to be those with land, labor and information constraints. They had about 0.3-2 hectares of upland fields per household, often Chapter 2. Who and where are the poor? Page 77 with poor soil and sloping land, and this is usually insufficient to meet household needs. Most poor ethnic groups did not have irrigated land. The lowland Thai had more irrigated paddy due to their earlier arrival in this area. Kinship networks of the poor were also weak. Households had some livestock, but mostly pigs and chickens. Moreover, the health of household members was usually not very good.

The study found that incomes of poorer farmers were below the poverty line. Hmong income was lower than that for the Karen because of their larger family size. The main cause of poverty was lack of inputs, and especially land and capital. In addition, there was also some disparity among the poor farmer group. The Hmong were found to have more tendency to switch to commercial agricultural systems, and annual income from sale of products of the Hmong was 1.2 times higher than that of the Karen. However, income from the agricultural sector was not sufficient to meet livelihood needs in both of the poor ethnic groups. They were still dependent on off-farm occupations, both for consumption and investment, but the Karen earned 1.4 times more off-farm income than the Hmong.

Ethnicity at case study sites in Vietnam At the case study site in Vietnam, the population of Hoang Nong commune belongs to six ethnic groups, including the Dao, Kinh, Tay, Muong, Hoa, and San Diu. The Dao and Kinh are the largest ethnic groups.

The Kinh group migrated to this commune around the 1960’s from the Hong (Red) river delta (Thai Binh and Ha Nam provinces), as well as from neighboring upland provinces in the north (Tuyen Quang and Lang Son provinces). This was in response to a national program named ‘Development of New Economic Zones’.

Each ethnic group keeps their culture and ritual. When a mixed couple, one from an ethnic minority and one from the Kinh group, gets married, their children are usually registered as belonging to the ethnic minority group. This is in order to get benefits that specifically target ethnic minority groups, such as for education or for support for improving livelihoods, including better housing, clean water and sanitation as provided under the 134 program. There is no tension between different ethic groups, and 30 percent of the commune leaders belong to Dao and Nung ethic minority groups, while the remaining 70 percent are Kinh.

There did not seem to be any differences between Kinh and Dao groups in defining their wealth or the “stages of progress” that households in their villages might go through as they obtain more and more investment funds (Table 2-14). This may imply some positive impacts of livelihood support to ethnic minority groups under the national ‘134 program’. Page 78 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

2.4. Identifying and locating the poor

Previous sections of this chapter have provided a brief survey of definitions and distributions of poverty at regional, national and selected local levels. Case studies have also provided insights into various factors that appear to relate to how we indentify and interpret poverty and its implications. Based on this survey, we offer the following responses to the question with which this chapter began: Who and where are the poor in the Greater Mekong Region?

2.4.1 Poor areas versus numbers of poor

An initial set of issues relates to how one conceives of, defines, and measures poverty itself. If more conventional conceptualizations of material deprivation are used, based on monetized levels of income or consumption expenditures, then there are still basic issues regarding its assessment that relate to how best to establish a poverty line and whether it should focus on the proportion of a population in an area that falls below the line, or perhaps on the absolute number of people who are classified as poor, or whether it should bypass the poverty line and focus on inequality and relative poverty among the population. Each approach focuses on a legitimate set of issues, and there are no right or wrong answers.

Our regional assessment using data derived from small area estimate techniques suggests that significant questions and issues related to choice of approaches emerge where discrepancies occur between the outcome of approaches based on poor areas or numbers of poor. x The Lao PDR is the most obvious case where poor areas also contain greatest numbers of poor people. But since this includes extensive sparsely settled areas in montane zones, and the government must allocate its very scarce resources among efforts to achieve its poverty elimination strategy (NGPES), there may still be need to consider differences between poverty rates (or depth) and poverty density in setting program priorities. x Vietnam is the case with the largest discrepancy between assessments based on poor areas (poverty incidence, gaps or severity) and numbers of poor people (poverty density). The poorest areas are in montane, and especially remote middle to upper montane zones, whereas the greatest numbers of poor people are in far more densely settled rural areas in lowland zones. This underscores the fact that there are different types of poverty in the country, which may well have different underlying causes, and that different approaches and priorities are required to address poverty issues. x In Thailand these types of discrepancies are mixed. In the northern region, highest poverty incidence and severity is associated with more remote, sparsely settled areas in montane zones that are largely inhabited by ethnic minority groups, resulting in discrepancies that are similar to those in Vietnam, but with lower magnitudes. In its Northeastern region, however, distributions of poverty incidence, severity, and density show similar patterns. x Many remaining parts of Thailand and areas in Yunnan show more modest levels of both poverty incidence and poverty density, suggesting persistent poverty among certain com- Chapter 2. Who and where are the poor? Page 79

ponents of the population. We have seen evidence of heterogeneous combinations of poor and non-poor households and/or communities from the Upper Ping Basin. x We have also seen an example of discrepancies between a measure of inequality using the Gini coefficient, and distributions of poverty incidence or density based on national poverty line standards. Vietnam has the highest levels of poverty incidence and density. Yet it also has the lowest levels of inequality, and its highest inequality levels appear to be in areas where poverty incidence is high and poverty density is low. Yunnan and Thailand both have much lower overall levels of poverty incidence and density, but inequality in Thailand is by far the highest in the region, whereas Yunnan has relatively low levels of inequality that appear to be relatively evenly distributed.

These results again underscore the diversity and complexity of poverty distributions, and provide further evidence that over-simplistic approaches to poverty alleviation are likely to be only partially effective at best. And since access to markets and resources are important factors related to poverty programs, there is a need to understand more clearly the nature and roles of constraints and impacts that occur in different contexts.

A second set of issues arises when other alternative approaches to conceptualizing and defining poverty are used. While these approaches have great promise, and are clearly capable of providing important insights into the nature and dynamics of poverty, as well as into potential impacts of different approaches to poverty alleviation, they usually require data and/or other types of information that are not currently available across large areas. Thus, it is usually difficult to apply these approaches in efforts to assess distributions of poor areas or numbers of poor people across spatial or social landscapes at national or regional levels.

Efforts to reach some middle ground include those that focus on developing indicators based on variables present in census or large sample surveys regularly conducted across broad areas. One major example includes studies of determinants of poverty that employ regression analysis to reveal relationships between poverty incidence or density with other variables in large databases. Such studies include recent work in Vietnam [Minot 2003, 2005], Laos [Anders- son 2006; Engvall 2006; World Bank 2006b], Thailand [Warr 2004] and Cambodia [World Bank 2006c]. Another recent study by the World Bank [2006a] explores linkages between poverty and a range of environment-related variables. And several of these studies are also beginning to include dynamic elements to help assess change over time.

2.4.2 Multiple dimensions and causes of poverty

There is now widespread recognition that poverty has multiple dimensions and causes. More- over, while conceptualizations of poverty based on material deprivation continue to play an important role in analyses and formulation of various policies, analytical approaches based on capabilities, livelihoods, vulnerability, and/or social exclusion are rapidly becoming more visible and influential. We can see the relevance and importance of these concepts and approaches in many of the examples from individual countries and case study sites.

Page 80 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

The five types of capital used by the sustainable livelihoods approach [Carney 1998] can be used to help us begin organizing elements of information presented in this chapter. These notions are useful for helping classify dimensions of poverty and suggesting causal links. x Natural capital includes the quantities and qualities of natural resources to which people have access, including land, water, forest and biodiversity. There are basic ecological characteristics associated with our definitions of altitude zones that set broad limitations on possibilities for natural capital within them, and some of these issues will be explored further in subsequent chapters. Within zones, we have seen frequent reference to limitations the poor face in terms of insufficient quantity or quality of land and water resources relative to their better-off counterparts, as well as how needs for natural capital can change with household life cycles or livelihood strategies as they respond to changing conditions. Roles for forest assets in rural Vietnam have also been discussed. x Human capital includes the people themselves, their vision, and their ability to labor and pursue their livelihood strategies, including characteristics such as their skills, knowledge, health, and so on. Case study examples have shown how perceptions and abilities can vary, and have indicated relationships between poverty and education, skills, health, aging, etc. Work with the ‘stages of progress’ approach underscored additional aspects of livelihood strategies, and the importance of social and community context. x Financial capital includes savings, credit supplies, remittances, etc. These play a role not only in assessing the poverty or wealth status of individuals, households or communities, but also in limiting or facilitating their access to new opportunities, both in terms of the cost of entry, and in terms of their ability to accept and manage risk, as well as their vulnerability to impacts of environmental or economic fluctuations. x Physical capital includes basic infrastructure such as irrigation facilities, equipment, transport, energy, communications, and physical access to markets for inputs, outputs, wage labor, consumer good and services markets. It also includes livestock, which have multi-purpose roles including a means for accumulating wealth. Physical assets of households are frequently used as indicators of wealth and poverty status, both by outside analysts and by local people themselves. Shortage of larger-scale physical infrastructure is seen as a major factor associated with poor areas, and has been the main focus of many development programs that target poor areas. Case studies have already shown how electricity, irrigation, roads and other types of physical infrastructure are associated with change in local areas. x Social capital includes relationships and membership and participation in various groups or networks, as well as access to wider institutions of society. At one level, this includes all the social groupings to which people may or may not belong at relatively local levels, including those based on kinship, production activities, political affiliations, ethnicity, culture, religion, or other types of interests. At another level it also includes relationships between people and the groups with which they are affiliated with larger society and the social, economic, political and other types of institutions at that level. Thus, for example, characteristics such as kinship, ethnicity, or political affiliation can either limit or ex- Chapter 2. Who and where are the poor? Page 81

pand access to support services, social safety nets, development assistance, etc. Moreover, group membership may facilitate access at one level, but exclude access at other levels.

Poverty, then, can result from deprivations associated with various combinations of these forms of capital that limit the capabilities of people to pursue with dignity the livelihoods and goals to which they aspire.

2.4.3 Perceptions of poverty

Perceptions of poverty are associated with both the ways in which poverty is conceptualized, and the level at which it as assessed.

Levels of material income and consumption, together with perceptions of poverty lines that reflect minimum levels that are socially acceptable in a society, are still the most widely used indicators and measures of poverty across broad populations. Additional attributes of poor populations are identified through regressions with variables found in census or broad surveys, or through more casual generalizations and popularized stereotyping.

We also see frequent use of material income as an indicator of wealth at more local levels, but it appears to be more commonly used in the context of articulating relative wealth categories or rankings. It is also more common at local levels for the placement of people, households or groups into wealth categories to be subject to modification by additional information about their characteristics.

But it is also more common at very local levels to find perceptions of poverty status to be based on some mixture of asset indicators and information about the intentions, capacities and/or trajectories of people or households. Thus, for example, poor people may be seen as either “hard working” or “lazy”, based on their individual characteristics, their family history, their ethnicity, or other factors. They may also be seen as unfortunate, such as households headed by elderly women whose children have died or moved away and are not willing or able to help to “properly” care for their parents during old age. Or they may be seen as being “temporarily” poor, as in the case of young couples with several young children who thus have high dependency levels and small labor force assets.

These types of more complex, and sometimes more intuitive perceptions of poverty reduce the relevance of efforts to define a single acceptable “standard” for defining and assessing poverty. Thus, indicators and measures of inequality may be more relevant for characterizing areas and populations, as well as for understanding local self-perceptions of relative poverty. Indeed, local self-perceptions often appear to also include factors related to levels of inequality that are seen as equitable, or at least acceptable, as indicated in areas of heterogeneous wealth status in North Thailand, Thus, they are also often more complex and may reflect values and aspirations by integrating abstract notions of satisfaction or happiness associated with quality of life. Accordingly, some people classified as poor may not perceive themselves as experiencing hardship, whereas some people classified as quite wealthy may perceive of Page 82 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region themselves as living with only a moderate level of comfort – presumably either because there are people who have more than them, or because it is not culturally acceptable to flaunt your wealth or status. On the other hand, some well-off elites view themselves as having superior fates or attributes that are responsible for their better fortune, so that the poor (and often other ethnic groups) can only hope to aspire to a much more meager status and position in life.

Page 83

3. How have market opportunities changed?

The previous chapter explored the nature and distribution of poverty in the Greater Mekong Region. It ended with discussion of five forms of capital, and how different dimensions of poverty can be associated with deprivation related to various combinations of these forms. We now turn our focus to dynamics of change in the region and how they have affected the pool of opportunities from which people can construct and develop their livelihood strategies, depending on the mix, quantity and quality of capital assets to which they have access. The next chapter will then examine how people have responded and adapted to these changes in opportunities.

3.1 What do we mean by market opportunities?

Evolution of livelihood change and its interactions with trade and larger economies is inextri- cably linked with the political economy of the societies within which it occurs. Thus, this section begins with a brief review of change in the political and economic context of the region, and how it has affected the overall framework within which livelihood opportunities develop. We then present the conceptual framework that our study used to explore how people respond and adapt to livelihood opportunities, followed by a brief discussion of the often blurred distinctions between state and private sectors in the region. Following sections will focus on particular dimensions of change in factors related to market opportunities in the region, and then on case studies of change in specific local areas.

3.1.1 The “opening’ of economies in the Greater Mekong Region

Mainland Southeast Asia has been witness to a long and complex history of geo-political dynamics dominated by waxing and waning empires centered primarily on lowland areas where irrigated paddy rice production could flourish. Forested montane zones often served as a buffer between lowland empires, as safe haven for those with different cultures or ideas, or as refuge for those out of favor with or displaced by growing empires.

Montane mainland Southeast Asia (MMSEA) and its mountain forests have long provided livelihoods for its inhabitants through a considerable range of agroforestry techniques that evolved through centuries of local experience enriched by information that flowed along trade routes, through kinship networks, or with evolving settlement patterns. In many parts of the MMSEA domain, ethnic groups settled into different altitude zones where their agroecosystems became adapted to local ecological characteristics and patterns of biodiversity distribution. While their livelihoods usually centered on self-reliance, diverse characteristics among their local domains also allowed them to identify products with value for trade or tribute through networks of social interaction that spanned the region. Although MMSEA began to be carved into pieces belonging to one or another lowland-dominated geographic nation state during the colonial era, the reality of such boundaries on the ground occurred more slowly.

Page 84 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

But in association with the increasingly globalized geo-political dynamics of the 20th Cen- tury, nation states began increasing their presence in and control over portions of MMSEA within their domain. Thus, livelihoods in different parts of the region began taking on more of the flavor of the administrative, political, cultural and economic characteristics of each country as they pursued divergent paths of socio-political change.

While various forms of interaction, trade and migration had been taking place in the region for centuries, the Cold War era that began in the wake of the Second World War brought a period of dramatic change. In 1948 Myanmar gained independence from the British Com- monwealth, and by 1949 political struggle in China resulted in a new communist government. The First Indochina War in Vietnam resulted in the end of French colonial control in Vietnam, Cambodia and Laos in 1953-54. Vietnam was subsequently partitioned into two zones, and the Second Indochina War that followed grew to include massive conflict in Viet- nam, and civil wars erupted in Cambodia and Laos. Opposing sides were backed by the U.S., China, the Soviet Union and various allies of both sides. After the end of the Second Indo- china War in 1975, the Cambodian-Vietnamese War was an effort by Vietnam to end the brutal reign of the Khmer Rouge, and this was followed by a short Third Indochina War fought between Vietnam and China in 1979. While the wars did not directly include Thai- land, it felt threatened and became an ally in the U.S.-backed anti-communist coalition, providing military bases and launching intensive national security-oriented development programs.

During this period, parts of MMSEA were targets of unprecedented levels of aerial bom- bardment by the U.S., and assistance from mountain ethnic minority groups was sought by competing sides in the conflicts. Moreover, the importance of montane zones as buffers between lowland-based societies in conflict with each other increased as countries erected barriers to “close” trade and exchange across the region, and sought to increase their control over mountain areas. As mountain peoples became more integrated into national systems, populations grew in some areas, perhaps due to reduced endemic diseases such as malaria, but also through migration associated with political turmoil, armed conflict, and directed or enticed relocation, or with perceived opportunities first in the opium economy, and more recently in commercial production or wage labor.

Barriers to movement and exchange, together with roads, policies and projects aimed largely at increasing national security and stopping opium production, facilitated emergence of agricultural production based on MMSEA locations that were either the most ‘tropical-like’ portion of a temperate zone country (China), or the most ‘temperate-like’ portion of tropical countries (especially in Thailand and Vietnam). Programs for self-sufficiency in China included efforts to convert forested montane areas of Yunnan into grain production, while state farms were established in southern Yunnan to produce rubber. Temperate crops were promoted in upper montane zones of North Thailand as an alternative to opium production, despite the state’s refusal to officially recognize land holdings in these zones. Forests in many areas were cleared to deny cover to the enemy.

Chapter 3. How have market opportunities changed? Page 85

After many years and countless casualties, re-ordering of the political landscape of GMS states was basically completed in 1975, although turmoil associated with Cambodia continued for several more years. Newly reunified Vietnam and the new government in the Lao PDR turned most of their focus inward for several years as they built their new political, economic and social structures and launched efforts to begin recovering from the enormous damage inflicted by war.

Then during the final decades of the 20th Century, political tensions among the countries began receding, and a new era of regional identity began to emerge, linked to common interests in economic development in the face of growing forces toward globalization. Beginning in the mid-1980’s a wave of change in economic orientation swept through the region, and by the 1990’s all countries were joining regional organizations and entering into economic agreements at regional and global levels.

Economic growth and structural change in GMS states Examination of economic growth and change in the region since 1975 results in a quite clear grouping of GMS states into two categories according to the size and structure of their economies. Growth and basic structure of the three largest economies in the GMS, Thai- land, Yunnan and Vietnam, are charted in Figure 3-1 for a 30 year period since 1975. These data from the UN Statistical Division’s common database are expressed in constant 1990 US dollars, and thus reflect change in real value without distortion by inflation. x Thailand. Thailand began its strong push for economic development with its first national economic development plan in 1960, while inward policies were pursuing self- sufficiency in China, and most of the region was involved with armed conflict. Perhaps largely as a result of this “head start”, the size of its economy has been by far the largest among GMS states throughout this period. By 1975 the overall size of the Thai economy was already approaching the current size of the second largest economy in the region. Thailand’s economic development strategy has been strongly export oriented, and at the global level Thailand was a founding member of ASEAN, and became a member of GATT in 1982, prior to establishment of the WTO. It has also emphasized diversification of the economy from a central focus on agriculture into industrial and service sectors, which has been linked with high levels of foreign investment. Thus, despite strong emphasis on commercialization of agriculture and production of export crops, the share of agriculture in the overall economy has dropped to very low levels. We can also see Thailand’s 10-year period of very rapid economic growth that began during the late 1980’s – as then Prime Minister Chatichai announced a policy to ‘turn battlefields into marketplaces’ – and ended with the Asian Economic Crisis. Despite this quite significant setback, by 2002 it managed to begin a new period of reasonably rapid growth. Most of the economy is based on a fairly even balance of contributions from increasingly complex industrial and service sectors. x Yunnan. Growth in the Yunnan economy was constant, but fairly modest until it began to accelerate during the late 1980’s. This corresponded to policy changes in China from 1985 that included reduced tariffs and an “open door” trade policy. The late 1990’s brought a surge in growth related largely to industry. China became a key dialogue part- Page 86 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 3-1. Growth of the Three Largest GMS Economies, 1975 – 2005

Vietnam GDP, 1975 - 2005 20

billion 1990 US dollars 0 1975 1980 1985 1990 1995 2000 2005 Agriculture Industry Services unclassified

Yunnan, China GDP, 1975 - 2005 40

billion 1990 US dollars 0 1975 1980 1985 1990 1995 2000 2005 Agriculture Industry Services unclassified

Thailand GDP, 1975 - 2005 200

150

100

0 billion 1990 US dollars 1975 1980 1985 1990 1995 2000 2005 Agriculture Industry Services unclassified

ner with ASEAN, joined the WTO in 2001 and began entering into trade agreements with other countries, including Thailand. Now Yunnan appears to be in period of very rapid growth related to both industry and services sectors, with tourism its proclaimed “backbone”. And while agriculture’s share in the Yunnan economy has been decreasing over time, it has also been making steady growth that appears to be continuing. x Vietnam. Overall economic growth in Vietnam appears to have been steady but fairly modest during the first 10 years after reunification. Major economic policy changes were introduced in 1986, however, under the banner of Doi Moi. Dramatic economic growth and restructuring has followed, in parallel with a very outward-looking economic policy. By 1995, Vietnam had become a full member of ASEAN, and was accepted as a member of WTO in January 2007. Although its early achievements included massive increases in production of rice, which brought it from a rice deficit to being the second largest ex- porter in the world, as well as in various other agricultural commodities where it has become a player at the global level, growth in agriculture is now dwarfed by growth in services, and especially industrial sectors, which are linked with high rates of foreign investment. Vietnam’s economic growth rates are now among the highest in the world.

Chapter 3. How have market opportunities changed? Page 87

Figure 3-2. Growth of the Three Smallest GMS Economies, 1975 - 2005

Lao PDR GDP, 1975 - 2005 2.5 2.0 1.5 1.0 0.5

billion 1990 US dollars 0.0 1975 1980 1985 1990 1995 2000 2005 AgricultureCambodiaIndustry GDP,Services 1975 -unclassified 2005 5.0 4.0 3.0 2.0 1.0

billion 1990 US dollars 0.0 1975 1980 1985 1990 1995 2000 2005 AgricultureMyanmarIndustry GDP,Services 1975unclassified - 2005 20

billion 1990 US dollars 0 1975 1980 1985 1990 1995 2000 2005 Agriculture Industry Services unclassified

We now turn to how the smallest three economies of the region have fared in comparison with performance and change in the largest three. Thus, similar data on economic growth and general structure are presented for the Lao PDR, Cambodia, and Myanmar in Figure 3- 2. Our interpretations of this data include: x Myanmar. Like Thailand and Yunnan, Myanmar was not directly affected by the Indo- china Wars, but in comparison to Thailand its economic policy has been less open to foreign investment. Yet it still experienced steady economic growth through the first decade of this period, until the economy began to contract and then stagnate during the late 1980’s as political turmoil emerged. After declaration of an ‘open door’ policy in 1989 and strong reassertion of military control, the economy began growing during the 1990’s, and growth became more rapid at the turn of the century. Myanmar joined the WTO in 1995, and became a member of ASEAN in 2001. Most of its economic growth has been in agriculture and service sectors, although there has been modest growth in industry during recent years. One should also note, however, that the agriculture sector includes forestry, and that timber exports to Thailand accelerated during the 1990’s. Moreover, political turmoil continues in Myanmar and is resulting in increasing levels of international economic sanctions against the military regime. Perhaps as part of their response, data on the economy and conditions in Myanmar are becoming more sparse, inconsis- tent and difficult to obtain. Page 88 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Cambodia. Cambodia went through a very dark period during the 1970’s, during which much of its economic and administrative infrastructure was devastated. Many people were killed and many more became refugees in Thailand and other countries. Some of the economic dimension of the difficulties it has endured is reflected in the economic contraction during the first decade of this period. By 1985, however, a reasonable level of order and functionality was restored, and Cambodia announced its market economy policy. And by the early 1990’s parliamentary democracy was restored and economic growth began to increase. Cambodia joined ASEAN and became a member of the WTO in 2004. While much of its economic growth has been in the services sector, the industrial sector is now also receiving substantial foreign investment and is growing rapidly. Its overall economic growth rate is now very high. x Lao PDR. The smallest economy in the region is that of the Lao PDR. As we saw in the previous chapter of this report, Laos is a mountainous country with a very dispersed population. Moreover, a large portion of the population has been composed of a diverse range of ethnic groups who have lived relatively aloof from central authorities, even under colonial rule. Thus, in many ways the new government that took power in 1975 was faced with building much of the infrastructure of a modern nation state under difficult conditions and with very scarce human and financial resources. Thus, it should not be too surprising that the overall economy was basically stagnate during the late 1970’s, and made only very modest growth during the 1980’s. But after adoption of their New Eco- nomic Mechanism in 1986 the situation gradually began to change, and by 1989 Laos began to experience a fairly steady rate of economic growth. In line with this policy, the Lao PDR joined ASEAN in 1997, and hopes to join the WTO during 2008. The pattern of Lao economic growth appears fairly balanced among sectors of the economy, including a large contribution from agriculture. It needs to keep in mind, however, that the industrial sector includes their sale of electricity to Thailand, while the agricultural sector includes sale of timber and forest products, and that until only recently these have been the two largest sources of foreign exchange for the country.

While countries of the region share some elements in their patterns of economic change, as well as the regional consensus on more open market-oriented economic development that emerged during the 1980’s, there are still very significant differences in the size and structure of economies in the region. In order to help visualize overall patterns of economic activity and change in the GMS since the mid-1980’s, Figure 3-3 aggregates GDP from member states into charts of economic change according to agricultural and non-agricultural sectors during 1985-2004.

In terms of regional agricultural GDP, we can see that while agriculture contributes only a very small percent of the total GDP in Thailand, it is still the largest agricultural economy in the region. But at the same time, distribution of contributions from agriculture to GMS regional GDP is far more balanced than for the non-agriculture sector. Yunnan and Myanmar have played particularly important roles in the growth of regional agricultural GDP, but especially in the case of Myanmar, the forestry component is likely to be quite strong, although more conclusive data are also quite difficult to obtain. Despite significant impacts that in- Chapter 3. How have market opportunities changed? Page 89 creased agricultural Figure 3-3. GMS growth by major sectors, 1985 - 2005 production in Vietnam has had at the GMS Agriculture GDP by country, 1985 - 2004 40 international level, its contribution to the 30 growth in overall value 20 1990 US dollars of agriculture in the 10

region has been fairly billion 0 modest. 1985 1990 1995 2000 Thailand Myanmar Cambodia Lao PDR Viet Nam Yunnan In terms of GDP from GMS Non-Agriculture GDP by country, 1985 - 2004 200 non-agriculture sources, dominance of the Thai 150 economy is very clear 100 throughout this period, 50

and disaggregation into billion 1990 US dollars 0 industrial and services 1985 1990 1995 2000 sectors shows similar dis- Thailand Myanm ar Cambodia Lao PDR Viet Nam Yunnan tributions for each. But it is also important to note that growth rates in non-agricultural sectors are now higher in Vietnam, Yunnan, and recently even Cambodia, than they are in Thailand. Whether they can sustain such growth rates to the point that the size of their economies can challenge that of Thailand, however, remains to be seen.

Patterns of economic growth in all countries are related to growth in exports and international trade, and growth rates are clearly highest in industrial and service sectors where imports and foreign investment are also major factors. Thus, the “opening” of regional economies in the economic sense relates to the relative degree to which their economies are engaged with and are dependent on international trade and investment. One common measure of this type of economic openness is the ratio between the total value of international trade (imports + exports) relative to the size of the economy (GDP). Values of this ratio or “index of openness” are charted in Figure 3-4 for GMS countries during 1985 – 2005.

The convergence of trajectories of Thailand, Vietnam and Cambodia toward very high degrees of economic openness is clear, while Laos is still seeking its own path after instability during the Asian Economic Crisis. Yunnan, like China at the national level, has lower levels of openness using this measure because the huge size of the domestic economy in China di- lutes the relative impact of imports and exports. The demise of openness in Myanmar is linked with the state of affairs within that country.

Impacts of economic growth and change While most economies of GMS states have been growing quite rapidly, and most are undergoing quite significant structural change, the benefits and impacts of these changes are not distributed evenly. This can be further explored by addressing two questions. Page 90 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

The first question is how is the overall Figure 3-4. Change in Openness Ratios, 1985 - 2005 value of economic Ratio of Total Trade to GDP activity in the region 140 distributed relative to 120 distribution of the 100 population? In order 80 to explore this issue, 60

Figure 3-5 charts Total Trade / GDP 40 change in GDP per 20 capita in GMS states 0 during 1975 – 2005. 1985 1990 1995 2000 2005 Cambodia Lao PDR Myanmar Thailand Vietnam China As this chart indicates, Sources: ADB Key Indicators, various years; ICRAF-China economic value per capita has been substantially higher in Thailand than in other GMS states throughout this period. But we also see in a rather dramatic fashion how GDP per capita grew very rapidly from the mid-1980’s to the mid-1990’s during what has become known as Thailand’s “bubble economy” period. This ended during the Asian Economic Crisis as per capita GDP lost about one-third of its value before beginning renewed growth after 2002. Although less dramatic, impacts associated with the Asian Economic Crisis are also seen in data for Laos, and to a lesser extent Myanmar and Cambodia, which were probably at least partially linked to the severe downturn in Thailand.

But beyond that, we can Figure 3-5. GDP per capita in GMS states, 1975 - 2005 also see that per capita GDP per capita, 1975 - 2005 GDP began growing in 3,500 the 1990’s in all GMS 3,000 states except Myanmar. 2,500 2,000 The rates of growth, 1,500 however, have been 1,000 US Dollars (current) somewhat different, and 500 appear to be resulting in 0 increasing disparities 1975 1980 1985 1990 1995 2000 2005 Cambodia Lao PDR Myanmar Thailand among countries. Of Viet Nam Yunnan China particular note is the Source: UNSD common database, IFPRI, ICRAF-China dramatic increase in per capita GDP of China at the national level, and given its size this is already an achievement of monumental proportions. While the trajectory of Yunnan is climbing more rapidly than GMS states other than Thailand, the gap between Yunnan and China at the national level reflects its classification as a relatively poor province of China, and the gap appears to be growing. The third largest economy in the region, Vietnam, also has the third highest level of per capita GDP. And while it appears to now be growing rapidly, its level and rate is more modest because of its relatively large and still more rapidly growing population. The three smallest economies have the lowest levels of per capita GDP, as well as the lowest rates of increase, although the Lao PDR appears to have recently improved. Chapter 3. How have market opportunities changed? Page 91

The second question is how does distribution of economic value among sectors compare to distribution of actual employment among sectors in economies of the region? Agriculture was the primary focus of both production and employment in the past, and it is still the main source of employment in rural areas. We have already seen how shares of agriculture in the total GDP of GMS states are declining, but it is not yet clear what this means regarding the distribution of benefits from economic growth. Thus, Table 3-1 displays available data on sector shares of both GDP and employment in GMS countries during 1990 to 2005. Since employment data for Yunnan is not available, national data for China are used instead. Sev- eral patterns in this data are apparent: x For larger economies in China, Thailand, Table 3-1. Sector shares of GDP and employment and Vietnam, agri- % GDP Share % Employment Share culture makes a year agric industry services agric industry services relatively small and Thailand 1990 12.5 37.2 50.3 63.3 9.9 26.7 1995 9.5 40.7 49.7 46.4 14.3 39.3 declining contribution 2000 9.0 42.0 49.0 44.2 15.0 40.8 to GDP. And, while 2005 10.2 44.1 45.7 38.6 16.0 45.4 the employment share China 1990 26.9 41.3 31.8 60.1 13.3 26.6 of agriculture is much 1995 19.8 47.2 33.1 52.2 14.4 33.4 higher, employment is 2000 14.8 45.9 39.3 50.0 11.2 38.8 2003 12.5 47.5 39.9 49.1 12.0 38.9 shifting out of agriculture at a fairly rapid Vietnam 1990 38.7 22.7 38.6 72.1 8.8 19.0 1995 27.2 28.8 44.1 71.3 8.6 20.1 rate. 2000 24.5 36.7 38.7 64.4 10.1 25.5 2005 21.0 41.0 38.0 53.9 12.9 33.2 x Among the smaller economies, the same Myanmar 1990 57.3 10.5 32.2 66.2 8.0 25.8 1995 60.0 9.9 30.1 64.1 9.1 26.8 pattern is now 1997 58.9 10.2 30.9 62.7 9.7 27.6 becoming evident in Cambodia 1995 49.6 14.8 35.5 81.4 2.3 16.3 Cambodia. Change in 2000 37.9 23.0 39.1 73.7 7.0 19.3 Myanmar was in the 2005 32.5 26.4 41.1 60.3 9.7 30.0 same direction but at a Lao PDR 2001 51.2 23.7 25.1 82.7 8.7 8.6 slow pace during the 2003 48.6 25.9 25.5 82.2 9.3 8.6 1990’s, but employ- Data sources: ADB Key Indicators 2007 and UNSD common database ment data since then is unavailable. Data for the Lao PDR are insufficient to say much about trends, but about 80 percent of employment is still in agriculture. x While industry contributes more than 40 percent of GDP in larger economies, its share of employment is much smaller. x Although there have been periods of rapid growth in industrial employment (Thailand during the early 1990’s, Vietnam since 2000) growth in employment in the services sector was much more rapid during those periods. x Overall, most decreases in agricultural employment are associated with shifts to the services sector, where the contribution to GDP is much greater than agriculture, but (except Page 92 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

for China) is growing more slowly than industry (Cambodia), relatively stagnate (Viet- nam), or slowly declining (Thailand).

These distributions begin to demonstrate how the “opening” of economies in the region is bringing new livelihood opportunities, but the nature and location of these opportunities are not evenly distributed or equally accessible for everyone.

Another way to examine this type of data is presented in Table 3-2, which displays the value added per worker in major sectors of the region’s largest and most rapidly growing economies. This type of data allows us to see Table 3-2. Value added per worker by sector in GMS countries differences across ShareofAgricultural Value Added Per Worker sectors and among Country Year Employment (constant 2000 US$) countries in value (%) Agriculture Industry Services Thailand 2004 42.6 1,028 9,163 5,407 added per worker, China 2002 50.0 600 4,961 5,080 (or worker economic Vietnam 2004 53.9 367 2,251 1,509 productivity). If we Myanmar 1997 62.7 n.a. n.a. n.a. assume that workers Cambodia 2004 60.3 412 1,685 1,116 Lao PDR 2003 82.2 n.a. n.a. n.a. receive a propor- Sources: ADB Key Indicators 2007, Special chapter on inequality & country tables tionate share of this value added (which can be a rather heroic assumption), then at least these relative relationships should carry through to wage rates they receive.

Thus, this table can be seen as a map of: x the distribution of emerging opportunities; x incentives for changes in livelihoods; x incentives for movement to locations where opportunities are greater; or x for entrepreneurs or employers, the labor costs for you and your competition. Chapter 3. How have market opportunities changed? Page 93

3.1.2 Conceptual framework for assessing farmer response to opportunities

In the first chapter of this report, we articulated the physical boundaries of montane zones of mainland Southeast Asia. The second chapter explored distributions of poor populations in the region according to different definitions and measures. And the previous section of this chapter has outlined the broad context of political and economic change that has been occurring in the region. We now turn to the basic conceptual approach this study has taken in its explorations of market and resource access of the poor in upland zones of the Greater Mekong Region.

The conceptual framework of our study is summarized diagrammatically in Figure 3-6. This figure maps relationships among components of the two main researchable propositions upon which this study was developed and conducted: x First, how local households respond to opportunities for commercial production depends on their access to markets, technologies, natural resources, and appropriate knowledge. It also depends on the capacities, skills and rights of households themselves. Private and public sector initiatives also have an important influence. All can be influenced by public policies, investments and programs directed toward both development and land use, with tension between these two policy realms often resulting in increased uncertainty. x Second, that provision of spatially-explicit information about current and future market opportunities in forms relevant to small-scale upland farming enterprises could make a substantial contribution to alleviating poverty in these upland areas (dotted boxes and lines, Figure 3-6).

Figure 3-6. Conceptual framework for assessing response to market opportunities

Development Policies, Land Use Investment & Programs Policies

Technology Market Structure Natural Resource Land use Access and Access Access patterns

Commercial Alternative Knowledge & Opportunities Responses of production Development information for commercial different (productivity, Scenarios access production household types profitability)

Local domain

Spatial Public sector Private sector Livelihood information Livelihoods of initiatives and initiatives and Capacities and management rural poor incentives incentives Entitlements systems

This figure also maps several domains within which particular components are located, and among which important relationships occur. x The local domain (green color) within which a pool of production opportunities (commercial or not) arise, households respond, and production outcomes occur. A particular Page 94 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

local domain may also have its own characteristic (such as those associated with various types of communities) that help shape or filter (and thus enable or constrain) how outside components enter into the local domain and influence the local opportunity pool. x The wider resource domain (purple color) upon which households depend regardless of their degree of integration into wider market systems. This domain includes the natural resources to which they have access, but also their own other attributes and capital assets, including their perceived needs, aspirations and visions of the future. x The wider outcome domain (orange color) wherein cumulative responses of households result in wider patterns of livelihoods and land use. x The additional market factor domain (blue color) includes additional components upon which successful responses to market opportunities depend. We should note that knowledge, and especially local or indigenous knowledge, is part of livelihood capacities in the resource domain. The knowledge and information in this domain relates to new additional forms. x The remaining wider policy domain remains outside the previous four, and includes overall development policies, investments and programs, which are determined at distant locations, but which influence components in other domains. We have also placed our exploratory information system approaches in this domain.

3.1.3 Blurred lines between state and private sectors

Although our conceptual framework employs two separate boxes to depict initiatives and incentives from the public and private sectors, realities we have found across the domains of GMS states compel us to qualify this distinction.

There is a great deal of rhetoric from national governments, international development banks, development agencies, and others, that employs this same public-private distinction and touts efforts for dialogue, interaction and collaboration among the two sides. The role of the state is seen to be that of providing infrastructure, the basic institutional framework, support services, and policies that facilitate entrepreneurial initiatives in the private sector. The private sector is seen as the main engine for economic growth, and is increasingly seen as a partner in infrastructure development through mechanisms such as build-operate-transfer arrangements. But in fact, lines between public and private sectors are often quite blurred, and there are important ways in which they overlap at various levels.

Perhaps the most obvious aspect of this issue is in the “transitional” economies that are approaching development of a private sector from a past that centered on socialist ideology. Yunnan, Vietnam and Laos are all clearly in this group, as well as various major players in Cambodia. Since their independence from the British Commonwealth, Myanmar has also had its own peculiar take on socialism, which seems to now be mixed with totalitarian military control. And while Thailand is the only country among the GMS states that has consis- tently disavowed socialism, it also has a history associated with numerous state enterprises Chapter 3. How have market opportunities changed? Page 95 that are defended with nationalistic rhetoric, as well as some rather thick relationships between private and public sectors.

Some of these issues relate to overlapping membership, where private businesses may either be state enterprises that are being “spun off” to the private sphere, or new entities led and/or staffed by people still in or very recently from the state sector, where they still maintain close relationships. In short, they may be the same players acting in a format that provides them with more flexibility, and sometimes less accountability. At the same time, of course, there is also a growing list of independent entrepreneurs with amazing “success stories” (especially in hi-tech fields), who are becoming media favorites and pop heroes of the young.

Moreover, the issue is not confined to large, high profile companies, and may be even more widespread among the small and much more local enterprises and companies that emerging across especially “transitional” states of the region. Various types of cooperatives, growers associations, or other similar forms of organization, especially when their initiation has been induced by government agencies or agents, may also fall into this grey area in between state and private sectors.

Another aspect of these issues relates to the influence that one side of this equation has on the other, which is an issue that arises to varying degrees in countries throughout the world. While virtually everywhere people are familiar with stories about business interests trying to “buy” the outcome of state decisions that affect their business interests, in this region there is also considerable initiative from the opposite direction in the form of extorted payments or favors of various sorts to avoid harassment or worse. These have come to be considered one of several types of transaction costs that are seen simply as part of the cost of doing business.

Yet another dimension of state-private sector relationships has emerged as provincial, district or local government authorities enter into contracts with large, often foreign companies, which may be either private or state enterprises. Such contracts may or may not have the en- dorsement of local communities, but they can have strong impacts on local communities, their natural resource base and livelihoods, and their local institutional arrangements.

At the broader policy level, where it is generally recognized that the state has an important role to play, there are also sometimes questions about impacts of state policies on private sector development. One important example has been the general area of state promotion of production of particular crops. At various times, states in the region have implemented national programs to boost production of various crops, initially for national food security or self-sufficiency, and subsequently to increase foreign exchange through exports. While such programs have been common around the world, some of these programs in the region have been fairly heavy-handed at times. Impacts of such efforts have included distortions of opportunities and incentives that have hampered diversification, as well as development of markets and private sector enterprise. They have also sometimes brought large benefits to a relatively small component of society. While membership in international trade agreements may result in pressure to reduce such programs, the terms of various trade agreements can also bring differential impacts on private sector development in various sectors and locations. Page 96 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

3.2 Changing context of opportunities for production

Given the “opening” of economies in the region and our conceptual framework for assessing response to market opportunities, this section provides a brief survey of the state of land resources in the region, followed by a meso-level overview of economic development and change in areas where our case study sites are located, and brief discussions of three factors that play important roles in changing opportunities: international trade, tourism, and physical infrastructure.

3.2.1 Natural resources and changing opportunities

For the vast majority of people in montane zones of mainland Southeast Asia, most major components in their local pool of livelihood opportunities have long related to land-based production options. Thus, the quantity Figure 3-7. Biomes & original forest cover and quality of land and water resources within the wider resource domains to which they have access is a major factor in shaping their perceptions of opportunities, as well as the viability of their responses to new market production opportunities that may arise.

At the broadest level, mainland Southeast Asia can be divided into several biomes that integrate broad variation in climate, water and soil characteristics that have shaped the distribution of basic types of natural vegetation occurring in the region. Within these biomes, which are mapped in Figure 3-7, various more Data sources: WWF 2006; Bryant 1997 localized eco-regions have also been identified [WWF 2006]. This figure also overlays forest tree texture that indicates the estimated extent of natural forest across the region about 8,000 years ago, assuming current climatic conditions [Bryant 1997].

We can see the dominance of tropical and sub-tropical moist broadleaf forest across the GMS region, except in the alpine zone of Yunnan where temperate coniferous forest occurs, and in the belt of dominantly dry broadleaf forest that stretches from southern Vietnam northwest to parts of northern Thailand and central Myanmar. The dry forest is mostly deciduous, reflecting dry season moisture limitations associated with soil and rain shadow conditions related to the strongly monsoonal climate. Together with figures in Chapter 1 that identified altitude zones and major river basins of the region, this gives a picture of broad variation in the natural resource base for human activities in the region. This variation affects the overall potential of natural resources in within specific local resource domains

Chapter 3. How have market opportunities changed? Page 97

After millennia of human interaction with this regional landscape, however, its current condition looks rather different. In order to help visualize how the broad landscape of the region has changed under human management, and thus provide a clearer picture of the current state of resources potentially available in different types of localities, Figure 3-8 presents a simplified classification of land use based on interpretation of remote sensing from various sources conducted under the Global Land Cover 2000 project [EC-JRC 2003]. This figure also overlays boundaries of GMS states.

Figure 3-8. Mainland Southeast Asia land cover, circa 2000

Source: reclassification of Global Land Cover 2000 [EC-JRC 2003] based on global legend

Two features in this figure are particularly striking. The first is the large portions of the region that have been converted into cultivated lands, and how these areas primarily correspond to the lowland zones identified in chapter 1 of this report. The second feature is that a very large proportion of the remaining area is classified as mosaics of shrubs/trees and natural herbaceous vegetation, or one of the two other mosaic categories. Although evergreen and Page 98 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region deciduous forests are still Table 3-3. GMS land use by type and altitude zone, 2000 evident, they appear to cover Lowland Montane Alpine Total Cambodia Coastal Upper Lower Middle Upper a rather small proportion of Area percent of total land area the overall landscape. evergreen 5.8 8.0 3.2 4.1 0.6 - 22 Forest deciduous 10.2 6.3 0.1 0.0 - - 17 flooded 1.1 - - - - - 1 Judging from how areas w/trees 2.4 1.5 0.2 0.2 0.0 - 4 Mosaic w/shrubs 14.6 6.6 1.0 0.4 0.0 - 23 with which we are very w/crops 3.0 2.1 0.4 0.1 - - 6 Agricultural land 24.2 1.2 0.1 0.0 0.0 - 26 familiar are classified in this water, urban, bare, etc 2.7 0.0 0.0 - - - 3 dataset (such as the Mae 64 26 5 5 1 - 100 Lowland Montane Alpine Total Chaem sub-basin in North Lao PDR Coastal Upper Lower Middle Upper Area Thailand where we have percent of total land area evergreen 0.0 2.9 2.9 7.8 4.6 - 18 time series Landsat and Forest deciduous 0.2 1.7 0.3 0.2 0.0 - 3 flooded ------aerial photo data as well as w/trees 0.0 0.6 1.1 6.8 4.5 - 13 Mosaic w/shrubs 0.4 11.4 6.1 17.2 10.2 - 45 considerable ground w/crops 0.0 2.0 2.3 6.6 2.3 - 13 observations), it appears that Agricultural land 0.3 4.6 0.7 0.6 0.2 - 6 water, urban, bare, etc 0.0 0.3 0.2 0.3 0.0 - 1 the category of shrubs/trees 124144022- 100 Lowland Montane and natural herbaceous Alpine Total Myanmar Coastal Upper Lower Middle Upper Area mosaic includes a very percent of total land area evergreen 1.4 4.2 3.1 4.4 6.3 0.4 20 substantial amount of area Forest deciduous 0.9 4.1 2.7 4.7 2.0 - 14 that most people would flooded 0.3 0.0 0.0 - - - 0 w/trees 0.1 1.4 0.6 1.6 2.2 0.0 6 consider forest. Although Mosaic w/shrubs 5.0 5.4 3.1 7.9 8.2 0.1 30 w/crops 1.2 1.8 0.9 2.0 1.5 0.1 8 many of these areas have Agricultural land 10.8 8.4 1.1 0.8 0.6 0.1 22 water, urban, bare, etc 0.4 0.1 0.0 0.0 0.0 0.0 1 been affected by human 20 26 12 21 21 1 100 activities, and one would Lowland Montane Alpine Total Thailand Coastal Upper Lower Middle Upper Area certainly not think of them percent of total land area as pristine wilderness, the evergreen 1.0 1.5 1.7 3.2 1.2 - 9 Forest deciduous 0.5 3.1 3.5 2.7 0.1 - 10 tree cover component of this flooded ------w/trees 0.2 0.2 0.2 0.6 0.4 - 2 mosaic is often very Mosaic w/shrubs 2.7 7.0 3.7 5.8 1.4 - 21 substantial. The extent of w/crops 4.0 1.7 0.8 1.7 0.4 - 9 Agricultural land 18.5 27.0 3.2 0.7 0.0 - 49 agriculture and both water, urban, bare, etc 0.5 0.5 0.0 0.0 0.0 - 1 27 41 13 15 4 - 100 evergreen and deciduous Lowland Montane Alpine Total Vietnam Coastal Upper Lower Middle Upper (which includes mixed Area percent of total land area deciduous) forest for these evergreen 0.7 2.2 2.7 6.5 3.7 0.0 16 areas, however, appears fairly Forest deciduous 0.3 1.0 0.2 0.2 0.0 - 2 flooded 0.3 - - - - - 0 reasonable. w/trees 0.6 1.2 1.0 2.1 1.1 0.0 6 Mosaic w/shrubs 3.8 5.8 4.9 8.7 3.5 - 27 w/crops 2.3 3.8 3.3 3.6 1.2 - 14 Agricultural land 26.7 3.4 1.6 1.7 0.3 - 34 Thus, with this caveat in water, urban, bare, etc 1.1 0.1 0.0 0.0 0.0 - 1 mind, the national sub- 36 18 14 23 10 0 100 Lowland Montane Alpine Total tables in Table 3-3 were Yunnan Coastal Upper Lower Middle Upper Area developed by overlaying percent of total land area evergreen 0.0 0.0 0.1 0.5 28.2 5.2 34 land cover in Figure 3-8 Forest deciduous --- 0.00.00.00 flooded ------onto our set of six regional w/trees 0.0 0.0 0.1 2.8 9.0 0.0 12 altitude zones. Numbers in Mosaic w/shrubs 0.0 0.0 0.1 1.6 26.7 2.5 31 w/crops 0.0 0.0 0.1 1.9 9.0 0.1 11 each table show the Agricultural land 0.0 0.0 0.1 1.1 9.7 0.1 11 water, urban, bare, etc -0.00.00.00.50.41 percentage distribution of 0.0 0.1 0.5 8 83 8 100 Chapter 3. How have market opportunities changed? Page 99 total national land area according to both of these dimensions for each of the GMS states.

This data helps us further assess the land cover dimension of the regional natural resource base. Basic patterns in each country include: x Cambodia. Large areas of relatively intensive agriculture are located almost exclusively in the lowlands, along with the vast majority of deciduous forest and mosaic vegetation. The small proportion of land in montane zones is largely covered by evergreen forest. x Lao PDR. More than three-quarters of the major cultivated areas are located in the lowlands, but they account for only 6 percent of national land area. Mosaic vegetation that includes mixture of agricultural crops is primarily distributed among montane zones, and especially the middle montane zone. But three-quarters of the total land area is covered by primarily evergreen forest, or by mosaics of basically natural vegetation that includes trees and shrubs of various size (keeping in mind our above note on the “shrubs/trees” category), and the overwhelming majority of these types of land cover are located in montane zones. This reflects the extensive areas of mountain forest lands in Laos, as well as land cover patterns associated with local agroecosystems that occur there. x Myanmar. About 22 percent of total land area has been converted to major areas of agricultural cropland, the vast majority of which is located in lowland zones. More than one- third of the country is classified as intact evergreen or deciduous forest, and more than 40 percent is associated with mosaic patterns. The majority of both intact forest and mosaic land covers are found in montane zones. x Thailand. The most extensive conversion to agricultural cropland has occurred in Thai- land, where about half of the total land area is in major cultivation areas. About 90 percent of this area is located in lowland zones, and almost all the rest is in the lower montane zone. Another 9 percent of land area has mosaic patterns that include crops, and two-thirds of this is in lowland areas associated with orchards, rubber or other plantation tree crops. Remaining areas in montane zones are associated with tree cover in the form of evergreen or deciduous forest, or with mosaic patterns, some of which include mixtures with agricultural crops. x Vietnam. Conversion of forest to agricultural cropland has also been extensive in Viet- nam, where major cultivated areas occupy about one-third of the total land area, with 90 percent located in lowland zones. Intact forest is primarily evergreen and primarily located in montane zones. Land under mosaic patterns is extensive, accounting for just under half of the total land area. There is a larger proportion of mosaic areas associated with mixtures of agricultural cropping than in other GMS countries, and more than half is located in montane zones. x Yunnan. More than three-quarters of the total land area of Yunnan remains under various forms of tree cover, with large areas classified as evergreen forest, and only 11 percent classified as agricultural cropland. Another 11 percent has mosaic patterns that include agricultural crops, most of which runs in an east-to-west belt across the southern half of the province, and as in parts of Thailand, this may also include areas with plantation tree crops. In areas below the upper montane zone, more than 78 percent is in mosaic pat- Page 100 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

terns, with 15 percent in cropland, and the remainder under evergreen forest. Most alpine zone areas are under evergreen forest, with the remainder primarily in mosaics with shrub/tree cover.

From this brief overview of the distribution of natural resource characteristics in the region, we can see that extensive areas of agricultural cropland are, indeed, primarily a phenomenon of the lowlands, where they already occupy very large areas. Montane zones, on the other hand, have substantial areas of intact forest cover, and extensive areas with mosaic patterns of cover that include varying proportions of trees, shrubs, natural herbaceous vegetation, and crops. These are the heartlands of the agroforestry mosaic landscapes which provide the natural resource base for production activities in montane zones of mainland Southeast Asia.

Major areas of agricultural cropland are generally associated with fairly clear and well recognized land use claims that usually have some form of official recognition. The same is usually true for areas classified as mosaics with crop components that are associated with orchards or plantation tree crops. These areas are also where most of the major investments have been made for developing irrigation systems and other forms of supporting infrastructure for agricultural production. For dominant lowland societies, these are the areas most suitable for agricultural production, and are the major centers of commercial agricultural production that have contributed most to agricultural GDP.

But for other areas classified as having mosaic patterns of land cover, the story is often quite different. Many of the agroecosystems that evolved in these areas have included components that maintained their agricultural productivity through management of natural vegetative regeneration processes. In other words, they used various types of shifting cultivation techniques that restored the productivity of agricultural fields during fallow periods when natural vegetation was allowed to regenerate. Thus, areas with a mixture of agricultural fields and others that are at various stages of natural regeneration are one source of the mosaic patterns found in many mountain landscapes. But their often complex patterns and lack of clear fixed field boundaries make them less “legible” and have thus not allowed them to be easily incorporated into systems for documenting and recognizing land use tenurial rights.

Moreover, expanding state forest land claims by governments and their forestry agencies often proclaim mosaic landscapes dominated by natural vegetation, and especially “unused” fallow areas to be state forest land. Thus, people who opened agricultural fields within these areas became seen as “encroachers”. To help provide a picture of how these landscapes are viewed from a forestry perspective, Figure 3-9 displays interpretations of “forest cover” from the 2000 forest resource assessment (FRA 2000) conducted under the FAO. Under this type of interpretation, mosaic landscapes become “open or fragmented” forest or “other wooded land”. While some GMS states are experimenting with approaches to recognize at least some forms of local land use rights in these areas, others have taken little substantive action.

Furthermore, for lowland societies, agroecosystem management practices that include shifting cultivation components are usually considered primitive, and inappropriate forms of land use for the sloping lands found in montane zones. Such views have been exacerbated by the Chapter 3. How have market opportunities changed? Page 101 fact that many of those Figure 3-9. Mainland SE Asia forest cover, FRA 2000 practicing these techniques have been members of ethnic minority groups who are marginalized by mainstream societies. And as we saw in chapter 2 of this report, despite their relatively low population densities, these areas are also where the highest rates of poverty incidence are found. And during recent years, montane zones with agroforestry mosaic patterns of land cover have also become a major target of concern by environmental interests. Many interpret these land use patterns as forms of “forest degradation” that threaten biodiversity, downstream water resources, and overall environmental sustainability.

In this regard, it is also useful to consider overall tree cover in the region, without attempting to interpret whether trees are part of forest or agricultural landscapes. Thus, Figure 3-10 displays tree cover levels for the region, based on interpretations of Figure 3-10. Tree cover in mainland SE Asia data from the Terra Modis satellite platform available from the Global Land Cover Facility. As this figure suggests quite clearly, there are significant to quite substantial amounts of tree cover in most agricultural areas. The current and potential roles of agroforestry landscapes are clearly important questions that need to be addressed in a more systematic Tree Cover <5% and transparent manner. Modis VCF 2005 5-9% Collection 4, Ver 3 10 - 19 % GLCF - UMIACS Subsequent parts of this report 20 - 39 % 40 - 59 % will revisit aspects of these issues 60+ % and how they relate to livelihood opportunities for commercial production in montane zones of the Greater Mekong Region. Page 102 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

3.2.2 Meso-level manifestations of economic development and change

In the introduction to this chapter, we have already seen at the macro-level how economic policies, investments and programs have been bringing dramatic change to the region. And the previous section of this regional overview has painted a picture of how current land use patterns reflect the general condition of natural resources potentially available in different areas. This section continues our regional overview by looking more closely at how economic development and change has affected the meso-level context of case study areas in Northern Thailand and Northern Vietnam. Following sections complete the regional overview by looking at three dimensions of regional change that are particularly important for our study - international trade, tourism and physical infrastructure.

Changing economic context in the Upper Ping Basin of Northern Thailand In the vicinity of our case study sites in Northern Thailand, the income of the population has generally increased continuously Figure 3-11. Gross Provincial Product in Chiang Mai, over the last three or four decades, Chiang Rai & Lamphun provinces, 1981-2006 as reflected in per capita gross Chiang Mai Gross Provincial Product in 1988 Prices provincial product (GPP) or gross regional product (GRP). 60,000 However, as in Thailand and the 50,000 40,000 region more generally, this growth Non-farm 30,000 Farm

in income has come mainly from m. baht 20,000 the non-farm sector. As a result of 10,000 two decades of implementation 0 under four National Social and 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006 Economic Plans (1961-1981), the Thai economy had grown rapidly, Chiang Rai Gross Provincial Product in 1988 prices but there was a widening gap 60,000 50,000 between the rich and the poor. Non-farm 40,000 Farm Thus, the Fifth National Social 30,000 and Economic Plan (1982-1986) m. baht 20,000 turned attention to regional 10,000 growth and income distribution. 0 According to this plan, Chiang 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006

Mai was to be the Northern Lamphun Gross Provincial Product in 1988 prices growth pole for economics, educa- 60,000 tion and culture. However, 50,000 Manat et al. [1991] found that 40,000 Non-farm focus in the plan was subsequently 30,000 Farm shifted from the agricultural sector m. baht 20,000 to industrial and service sectors. 10,000 Thus, the proportion of gross do- 0

mestic product from agriculture 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006 continued its decline during im- Source: NESDB Chapter 3. How have market opportunities changed? Page 103 plementation of this plan. Subsequent National plans followed the same approach, and by 1997 the non-farm sector increased in relative importance to the point that it accounted for 81 percent of regional GDP, compared to 19 percent from agriculture. At the same time, natural resource quality in the North had become a major concern, whether being forest, soil or water resources.

Structural shifts from farm to non-farm production are most pronounced in Lamphun province, and to a lesser extent Chiang Mai province. Figure 3-11 shows gross provincial product in constant 1988 prices from farm and non-farm sectors during 1981-2006 in Chiang Mai, Chiang Rai and Lamphun provinces. GPP for the farm sector stayed at an approximately constant level during this period, while GPP for the non-farm sector increased continuously, but with a dip in 1998-99 due to the 1997 macro-economic crisis. As a result, the share of the farm sector in total GPP declined continuously. Specifically, Table 3-4 shows that the share of the agricultural sector in Chiang Mai decreased from 24 per cent in 1981 to 15 per cent in 1990, and remained around 12-13 per cent during 1997-2006, while the share of agriculture in Chiang Rai began at 39 percent in 1981, fell to 27 percent in 1990 and then to 18 percent in 1997, but then increased after the economic crisis 26 percent in 2003, before dropping again to 22 per cent in 2006. Lamphun is the province that has undergone the most substantial structural change during this period, with the share of the agricultural sector decreasing from 40 percent to merely 9 percent in 1997 and holding at around 5-6 percent during 2000-2006. In general, growth in agriculture has been good in Chiang Rai and Chiang Mai where there has been much agricultural development and diversification—but not in Lamphun.

Table 3-4. Farm and non-farm sector as a percentage of gross provincial product in Chiang Mai, Chiang Rai and Lamphun, 1981-2006

Share of total GPP Year Sector Chiang Mai Chiang Rai Lamphun ------% of GPP------Farm 24 39 40 1981 Non-farm 76 61 60 All 100 100 100 Farm 15 27 24 1990 Non-farm 85 73 76 All 100 100 100 Farm 12 18 9 1997 Non-farm 88 82 91 All 100 100 100 Farm 13 23 5 2000 Non-farm 87 77 95 All 100 100 100 Farm 13 26 6 2003 Non-farm 87 74 94 All 100 100 100 Farm 12 22 6 2006 Non-farm 88 78 94 All 100 100 100 Source: NESDB Page 104 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 3-12 shows gross provincial product for the agricultural sector measured in 1988 prices for Chiang Mai, Chiang Rai and Lamphun during 1981-2006. GPP for the agricultural sector in Chiang Mai showed reasonable improvement over time, while that for Chiang Rai declined in relative terms until 1995-1997, and then increased rapidly until 2003 and stabilizing until 2006. For Lamphun, agricultural GPP was stable throughout this period.

Figure 3-12. Gross provincial product for the agricultural sector in Chiang Mai, Chiang Rai and Lamphun, 1981-2006

Gross Provincial Product from Agriculture in 1988 prices

7,000 6,000 5,000 Chiang Mai 4,000 Chiang Rai 3,000

m. baht Lamphun 2,000 1,000 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006

Source: NESDB

Economic value has also increased on a per capita basis, as reflected in Table 3-5, which reports per capita GPP measured in constant 1988 prices for Chiang Mai, Chiang Rai and Lamphun provinces during 1981 to 2000. During this 25 year period, per capita incomes doubled in Chiang Mai, grew by 55 per cent in Chiang Rai, and multiplied eight-fold in Lamphun. This compares with a doubling of per capita incomes in the North generally. These data help demonstrate how economic growth in Northern Thailand has been more rapid in certain provinces. Average growth for the North as a whole was slower than in Chiang Mai and Lamphun. The fastest growth has been in the non-farm sector, and especially in Lamphun where the Northern Industrial Park is located. Income disparities begin to show more clearly when comparing data for Lamphun and Chiang Rai in Table 3-5, where we can see that GPP per capita in Chiang Rai has been relatively stagnant over the last 10 years compared, compared to dramatic growth in Lamphun.

Table 3-5. Per capita gross provincial product (GPP) in Chiang Mai, Chiang Rai and Lamphun and per capital GRP for all provinces of the North, 1981-2006

Per capital GPP/GRP (constant 1988 Baht) Chiang Mai Chiang Rai Lamphun North Region ------baht per person------1981 16,414 11,207 11,364 12,402 1985 18,328 12,100 11,518 14,323 1990 25,877 14,919 16,732 18,039 1995 33,776 18,538 40,282 23,627 1997 35,839 17,830 42,692 24,304 2000 26,658 16,115 76,826 22,869 2003 29,250 16,537 73,324 26,342 2006 31,621 17,344 90,907 28,484 Source: NESDB Chapter 3. How have market opportunities changed? Page 105

Figure 3-13 shows that population growth has basically stabilized since around 1990 in Chiang Mai and Lamphun provinces, whereas population growth remains somewhat higher in Chiang Rai province.

Figure 3-13. Population in Chiang Mai, Chiang Rai and Lamphun, 1981-2006

Population

3,500 3,000 2,500 Lamphun 2,000 Chiang Rai 1,500 Chiang Mai 1,000 1,000 persons 500 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006

Source: NESDB

In the past four decades of development in Northern Thailand, there has been substantial development in the infrastructure supporting the Northern Thai economy. Road improvement, electricity, and irrigation facilities were expanded, and now provinces, districts and villages are well connected to each other. Telephone connections and household water supplies were also developed. Access has been improved for remote villages in the highlands and the uplands, and merchants can now get into these villages to buy and sell products. Communi- cation and information exchange has also been much improved. An investigation of effects of highland roads in Chiang Mai, Mae Hong Son, Lampang and Phayao provinces by Som- pong [1988] found that improved road access in the highlands of these provinces during the 1980s facilitated market access, job opportunities, better access to education and health facilities, better access to information and extension on new technology, and access by state services, including law and order and opium poppy enforcement measures. Highland communities on the whole appear to have better standards of living through better road access. Some of the negative effects associated with improved road access included undesired cultural changes and loss of traditional values, as well as some possible negative environmental effects, such as soil erosion and forest loss. Sompong asserts, however, that better roads have also facilitated better enforcement against forest destruction.

Since 1981, the Thai government has promoted Chiang Mai as the Northern center of economic, social and cultural activities, featuring its “Lanna” identity. Tourism boomed in Chiang Mai and many hotels, resorts, restaurants, golf courses, and handicraft producing villages have been developed and successfully operated. Agro- and ecotourism are also becoming popular, and have emerged in neighboring provinces like Chiang Rai and Mae Hong Son. Tourist enterprises employ quite a number of people and many rural people have moved to towns to find jobs in such enterprises [Attachak 1991]. Page 106 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Especially during 1987-1992, growth in industrial and tourist sectors in the North was high, and began having impacts on the agricultural sector as substantial areas of agricultural land— both with and without land titles -- was sold to land developers for tourist resorts, hotels, housing and commercial projects.

In addition to growth in tourism in the North, there has also been good growth in both large and small industries. Kanok and Luechai [2001] reported that during 1992-1996, growth in industry in the North was the highest among all sectors. Industrial investment was concentrated in Chiang Mai and Lamphun, especially after the Northern Region Industrial Estate Authority of Thailand was established as part of national policies to decentralize industrial development into regional centers. Many government offices were set up to support this development, including offices of the Board of Investment, Northern Region Industrial Promo- tion, Northern Human Skill Development, Export Promotion, and the Industrial Board [Rattanaporn 2003].

Together with growth in commercialization, contract farming has been increasingly common in the North since 1987. Both foreign and domestic companies have invested in contract farming in order to assure their supply of necessary agricultural products. Commodities under contract farming in the North have included grapes, soybeans, barley, potatoes, ginger and cucumber. Processing factories run by foreign companies were also established in many areas of the North.

Typical characteristics of contract farming commodities are their need for more management and care than other crops. They often have high risks of pests and diseases. Companies which introduced the crops would normally supply materials to farmers, such as seeds, fertilizers and chemical inputs, and would guarantee a price for output at certain specified quality and time periods. Thus, quality control is usually a key aspect of such contract farming. Ac- cordingly, although farmers do not have price and market risks, they are still subject to production risks. When there are pests, diseases, quality or management problems, farmers will need to bear such risks.

In 1994, the Northern Industrial Economics Center [1994] reported some 100 fruit and vegetable processing firms in North Thailand: 36 in Chiang Mai, 14 in Chiang Rai, 10 in Lampang, 9 in Lamphun and the rest in other Northern provinces. Products from these factories are sold both domestically and for exports. Often the products are canned, but some are frozen.

More high-value crops have also been introduced in the North since 1981. Rattanaporn [2003] and Benchaphun et al. [2005] reported that in the 2000’s, agriculture in the North has become very diversified, and in addition to traditional cash crops like shallots, garlic and onion, there are now many fruits and vegetables grown in the North, including cabbages, broccoli, cauliflower, cucumber, tomato, potato, chilli, legumes and tuber crops, many of which are supported by government extension services. More fruit tree farms have been planted in the uplands to replace upland field crops, especially longan, lychee, mango and Chapter 3. How have market opportunities changed? Page 107 orange. Fruit tree orchards need high investment and are usually established by farmers who have sufficient capital. Farmers also need to have some annual income from other sources in order to engage in fruit tree farming. Fruit tree farms are seen as being suitable for the land, water and climatic resources available in the North, and good progress has been made in their expansion during recent decades. Good profitability has been reported for some of these crops [Benchaphun et al. 2004].

Changing economic and international trade context of tea production in Vietnam Before the Doi Moi policy began in 1986, the main agricultural objective in Vietnam was to produce enough rice. As a result, the government invested heavily in expansion of rice production area. This was accomplished either by providing more irrigation or drainage facilities, or by opening up new land for agriculture through efforts such as dike construction. The increase in area planted to rice was about 0.6 million ha during the span of 18 years from 1976 to 1994. During the first decade after the end of the war in1975, the government’s food policy was halfway in that direction, i.e. clearing forests for rice fields with little consideration for soil conservation aspects [Nguyen van Sanh 2005].

Since Doi Moi was introduced in 1986, Vietnam has made significant achievements in socio- economic development, foreign affairs and national security. GDP has more than doubled, while inflation has dropped to low single digit figures. Vietnam’s poverty rate has declined from 70 percent of the population in the mid-1980s to 58 percent in 1993, 37 percent in 1998, and to 29 percent in 2002. Much of this reduction can be attributed to economic growth during the early 1990’s (8-9 percent per year), and to Vietnam’s strong agricultural performance since the late 1980’s.

While Vietnam has placed strong emphasis on eradication of poverty, positive effects of the country’s remarkable economic growth have not yet reached the entire population. A series of challenges remain to be addressed, and especially the growing levels of regional disparity. According to Vietnam’s latest (2006-2010) poverty line definitions (based on per capita income) there are still 4.6 million poor households in the country (26.3 percent of the total). The percentage of the total population classified as poor reaches 10 percent in urban areas, 42 percent in rural delta areas, and 48 percent in rural mountainous areas.

After nearly 20 years of the Doi Moi reform process, Vietnam’s agriculture and forestry sector has achieved stable development, with an average grow rate of 4.3 percent per year, and it is strongly and rapidly changing from autarkic production to a diversified commodity export- oriented form of agriculture.

The nine main exportable agricultural products of Vietnam are rice, coffee, tea, rubber, pepper, sugar, groundnut, cashew nut and pig meat (Table 3-6). Most agricultural products were taxed from the mid 1980’s to the mid 1990’s, but in 2001 export quotas were eliminated. Since then private companies have been able to export without any restrictions [Nguyen & Grote 2004], and now most exportable agricultural products are free of tax. Jensen and Tarp [2003] found that reduced trade taxes (especially import tariffs) affect rural areas more negatively than urban areas, and that farming households are more affected than wage-earning Page 108 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region and self-employed households. Moreover, export subsidies may support farmers in different ways depending on where they are located. For instance, farmers near the port may be affected positively, while farmers in regions far from the port may not benefit if domestic trade limitations hinder their products from reaching ports for export [Nguyen & Grote 2004].

Trade between the northern uplands region and both the rest of Vietnam and the rest of the world is well below national standards. Farmers in upland areas are benefiting from low production costs, but margins for marketing their products are relatively high because of inadequate transport, communication and other commercial infrastructure [Minot 2003].

Table 3-6. Development of Vietnam’s export volumes of major agricultural products, 1986-2002 Product 1986 1994 2002 ------(thousand tons) ------Rice -500 (import) 2,000 3,250 Coffee 40 180 720 Tea 12 24 75 Cashew nut 6 82 63 Groundnut 44 120 108 Rubber 40 130 450 Pepper 4 16 76 Sugar -40 (import) -125 (import) 10 Pig meat 7 13 15 Source: Nguyen & Grote, 2004

Vietnam has now entered a new phase of reform and integration into the world economy, with aims of raising the country’s economic development and reducing poverty, enhancing the life quality of the people, and laying a foundation to achieve the target of industrialization by 2020. With this vision, Vietnam started to apply for WTO accession in early 1995 and became an official member of WTO in January 2007. As a result of becoming a WTO member, there are likely to be widespread effects on the overall national economy in general, and on the agricultural sector in particular. According to Kwa [1999], MARD [2001], Nguyen Thang [2004], and Oxfam [2004, 2005], predictions are that by joining the WTO, Vietnam’s agriculture will be able to expand agricultural product markets, achieve foreign investment, and create pressures to develop and enhance the competitiveness of domestic enterprises. Moreover, Vietnam’s agriculture will have more opportunities to access new sources of technology, which in turn will contribute to improving productivity, quality and competitiveness of Vietnam’s agricultural products including rice, coffee, tea and cashew.

WTO accession also poses certain challenges for Vietnam, however, and especially in the early years after becoming a member. By liberalizing its market, Vietnam has to eliminate trade barriers and lower tariffs. Thus, Vietnamese firms and households will face fiercer competition from foreign competitors. And in its export markets, Vietnam’s agricultural products may also face strict regulations imposed by importing countries on standards for quality, hygiene, food safety, etc. Many households who depend on agricultural production, including tea producers, are likely to be negatively affected. Vietnam may thus face shocks in product and labor markets during the transition period [Do Hoai Nam 2001].

Chapter 3. How have market opportunities changed? Page 109

Opportunities as well as challenges that WTO accession may bring to Vietnam’s agriculture are highlighted in our case study in terms of potential impacts of accession on tea farmers. Tea is a commodity that contributes considerably to agricultural product export value of Vietnam (Table 3-7).

Table 3-7. Export values of major agricultural products of Vietnam in 2005 Export value Share of value Relative Agricultural product (million USD) (% of total) Position Rice 1,407.2 4.3 1 Rubber 804.1 2.5 2 Coffee 735.5 2.3 3 Cashew nut 501.5 1.5 4 Vegetable 235.5 0.7 5 Pepper 150.5 0.5 6 Tea 96.9 0.3 7 Ground nut 32.9 0.1 8 Total export value 32,441.9 100.0 Source: Vietnam Customs Department, 2006

With production of 577,000 tons of fresh tea in 2005, tea is one of eight major export agricultural products of Vietnam. Most tea in Vietnam is produced by smallholders. There are currently 34 districts in Vietnam that grow tea, and more than 600 enterprises are involved in tea production and business. Tea has been exported to 59 countries, with 80 percent going to Iraq, Taiwan, India, Pakistan and Russia. Moreover, the Vietnamese people have a long traditional custom of drinking tea in both fresh and processed forms. The market for Vietnamese tea is one of the markets that will be affected by WTO accession. At present, on average, tea for domestic demand accounts for about 30 percent of available annual output [MARD 2005]. Vietnamese tea products that have been exported to many countries for several years include much more pre-processed tea. After processing, mixing and packaging at factories, importers have sold their products in their markets under the name of Indian or Taiwanese tea, and not Vietnamese tea. Thus, while customers have been sipping Vietnamese tea and have known its taste for a long time, the trademark of Vietnamese tea is hardly known in international tea markets.

On the export side, because of poor cultivation methods and processing technology, Viet- nam’s tea productivity is still low, at only about 1,060 kg/ha, compared to 1,460 kg/ha for Sri Lanka, 1,700kg/ha for India and 2,100 kg/ha for Kenya [FAO 2005]. Moreover, tea varieties are mostly low-value, resulting in low quality tea (Figure 3-14) [MARD 2005]. During 2002- 2003, tea production increased, but tea exports fell (Figure 3-15).

All types of tea in Vietnam have low competitiveness and may face several difficulties in world tea markets after the country joins WTO. As a result, poor households who are depending on tea as their main source of income may be negatively affected.

Page 110 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 3-14. Vietnam tea export price and world price1for tea, 1990-2005

Unit: ton 2500 Vietnam export price World price

2000

1500

1000

500

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Vietnam General Statistical Office, Vietnam Custom Department, FAO

Figure 3-15. Vietnam tea production, export and domestic supply, 1995-2003

Unit: Ton 100,000

90,000 Production Exports 80,000 Domestic Supply

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: FAOSTAT, 2005

At a seminar recently organized by VCCI (Vietnam Chamber of Commerce and Industry) in Hanoi, the Ministry of Trade pointed out that quality is the weakest aspect of Vietnamese tea products being exported to global markets. Moreover, product hygiene and safety at all stages of tea production, ranging from cultivation to treatment and processing, are two important indicators to which Vietnam should pay the most attention. But since the production cost of Vietnamese tea is still lower than its export price by 14 percent, tea still has a certain competitive advantage in price, and thus potential for participation in international trade.

1 World tea price is Mombasa auction price Chapter 3. How have market opportunities changed? Page 111

3.2.3 Regional growth and change in international trade

Processes underlying the dramatic expansion of Southeast Asian economies during the last three decades, as we have seen both at macro and more meso-levels, have been closely linked with international trade and investment. GDP of countries in the Greater Mekong Subregion (GMS) measured in constant 1990 prices were on average 3-6 times larger in 2005 than in 1976 (except 14 times for China), as indicated in Table 3-8. This growth has occurred in both agricultural and non-agricultural sectors. Changes leading these patterns of growth involve a number of features which are common, to a greater or lesser extent, to all these economies [Flatters & Santikarn Kaosa-ard 1994]: x major shifts in economic structure—in most cases from agriculture to industry, and a continuing change in the structure of industry itself; x high rates of technical change, based largely on importing and adapting foreign technologies; x high levels of foreign and domestic investment; and x rapidly growing international trade, led by increasingly competitive exports of manufactured goods and imports of necessary capital and intermediate inputs.

Table 3-8. GDP at constant US$ market prices in GMS countries, 1976-2005 (Unit: billion 1990 USD) Country/ year 1976 1980 1985 1990 1995 2000 2005 Cambodia 1.5 1.0 1.1 1.7 2.3 3.3 4.5 Lao PDR 0.5 0.5 0.7 0.9 1.2 1.6 2.2 Myanmar 3.6 4.6 5.8 5.2 6.9 10.3 16.1 Thailand 29.9 40.1 52.3 85.4 129.1 132.0 168.6 Viet Nam 3.2 3.8 5.3 6.5 9.6 13.4 19.3 China 113.0 157.6 262.3 383.0 682.9 1,032.4 1,623.6 Sources: UN Statistical Division (UNSD) Common Database, Asian Development Bank (ADB) Key Indicators, Interna- tional Food Policy Research Institute (IFPRI) China Provincial Dataset (Yunnan)

Effects associated with trade liberalization in the form of the multilateral GATT trading Sys- tem, emergence of new Asian regionalisms such as ASEAN+1 (China) and ASEAN+3 (China, Korea and Japan), as well as other bilateral and multilateral FTA’s world-wide during recent years, pose challenges, and also offer trade opportunities for member countries.

Most GMS countries have gradually liberalized their economies, and have reaped substantial benefits from opening up to the outside world. The region has actually made great achievements in international trade and investment with other countries, and especially China. Among GMS countries, China has had the highest international trade values for two decades, followed by Thailand, Vietnam, Myanmar, Cambodia and Laos. China’s import value was around 18 times larger in 2006 than in 1986, while export value was around 31 times larger in 2006 than in 1986 (Table 3-9). Among other GMS countries, Thailand has been one of the leaders in international trade for many decades, and export growth has risen since 1986. Other GMS countries have also accelerated their export growth since 1996 (Table 3-9).

Page 112 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Table 3-9. Import and export value in GMS countries, 1986-2006 (Unit: million USD) Country/ year 1986 1991 1996 2001 2006 Export 3 57 293 1,296 3,345 Cambodia Import 11 62 1,632 1,456 4,235 Export 14 82 321 376 1,055 Lao PDR Import 60 154 690 719 1,633 Export 288 527 1,183 2,625 4,361 Myanmar Import 304 1,068 2,678 2,663 3,910 Export 8,864 28,875 56,478 65,113 130,783 Thailand Import 9,165 37,957 74,939 62,057 128,634 Export 789 2,189 7,463 15,020 40,203 Vietnam Import 2,155 2,483 11,285 16,217 47,162 Export 31,367 71,967 151,168 266,709 969,284 China Import 43,247 63,877 138,949 243,567 791,793 Source: Asian Development Bank (ADB) Key Indicators 2003, 2007

Major export markets for GMS countries are the countries within the GMS (especially Thai- land, China, and Viet Nam), other countries in Asia (especially Hong Kong, India, Indone- sia, Japan, Republic of Korea, Malaysia, Philippines, Russian Federation, and Singapore), as well as Australia, Europe (especially Belgium, France, Germany, Italy, Netherlands, and United Kingdom), and North America (Canada and United States). According to Asian De- velopment Bank statistics, since 1985 the United States and Japan have remained the biggest export market for GMS countries, except Lao. Accelerating export growth in China and Viet- nam suggests that competition for international market share among GMS exporters may also be intensifying. For example, China’s and Vietnam’s exports to the US market in dollar terms were still growing at average rate of 30 and 56 percent respectively during 2001 to 2006, a time when Thailand’s exports to this market had slowed to around 8 percent.

The major markets from which GMS countries import products are the countries within the GMS (especially Thailand, China, and Viet Nam), other countries in Asia (Hong Kong, In- dia, Indonesia, Japan, Republic of Korea, North Korea, Malaysia, Russian Federation, Saudi Arabia, Singapore, and United Arab Emirates), as well as Australia, Europe (France and Ger- many), and the United States. Since 1985 Thailand, China, and Viet Nam have had highest import values in dollar terms from Japan and United States.

With exports outpacing imports, China’s net trade has become positive for two decades. In 2006, the trade surplus was US$ 177 billion (Table 3-9). China’s first five export groups have been machines and transport equipment, miscellaneous manufactured goods, basic manufactures, chemicals, and food and live animals, while the first five import groups have been machines and transport equipment, basic manufactures, chemicals, crude materials excluding fuels, and miscellaneous manufactured goods (Figure 3-16). In recent years China has been by far the most dynamic and fastest growing market for exporters in the rest of East Asia. Producers in the rest of East Asia have rapidly expanded exports of parts, components and capital equipment to China, in particular for use in China’s export industries (World Bank 2007). Exports of machines and transport equipment measured in US$ were 5 times larger in 2003 than in 1996. At the same time, reflecting stronger domestic demand, machines and transport equipment import growth rose 4 times during 1996 to 2003.

Chapter 3. How have market opportunities changed? Page 113

Figure 3-16. China’s import and export value of top five products by value, 1986-2003

200,000 200,000

150,000 150,000

100,000 100,000

50,000 50,000 Export Value (Million USD) (Million Value Export Import Value (Million USD) 0 0 1986 1991 1996 2001 2003 1986 1991 1996 2001 2003 Machines, transport equipmt Misc manufactured goods Machines, transport equipmt Basic manufactures Basic manufactures Chemicals Chemicals Crude materials excl. fuels Food and live animals Misc manufactured goods

Figure 3-17. Vietnam’s import & export value of top five products by value, 1986-2005

12,000 12,000 10,000 10,000 8,000 8,000 6,000 6,000 4,000 4,000 2,000 2,000 Export Value (Million USD) Import Value (Million USD) (Million Value Import 0 0 1986 1991 1996 2001 2005 1986 1991 1996 2001 2005 Misc manufactured goods Mineral fuels, etc. Basic manufactures Machines, transport equipmt Food and live animals Machines, transport equipmt Mineral fuels, etc. Chemicals Basic manufactures Food and live animals

In Viet Nam, by the mid-1980s, the war-ravaged country faced famine and a failing command economy. But after the launch of its renovation process (Doi Moi) in 1986, it experi- mented with market mechanisms while trying to preserve social inclusion. An egalitarian redistribution of farmland, coupled with free trade in agricultural products and better agricultural support services at the local level, led to a boom in farm exports and a dramatic reduction in rural poverty. Accession to the World Trade Organization (WTO) in January 2007 may lead its farms and firms to open to competition and its legal system modernized [International Development Association 2007]. Vietnam exports in 2006 were 5 times larger than in 1996 while import growth was 4 times during the same period (Table 3-9). However Vietnam has run a trade deficit for two decades. Import growth picked up in 2006 largely due to capital goods, in particular machinery and equipment for the Dung Quat oil refinery and industrial zone [International Develop- ment Association 2007]. Exports of miscellaneous manufactured goods (garments and foot- wear), mineral fuels and food and live animals (especially seafood) were particularly strong (Figure 3-17). Imports and exports classified by product rank for Thailand and Myanmar are displayed in Figure 3-18 and Figure 3-19. Myanmar import value increased substantially after 1995 while export value increased only after 2000. Thailand export and import value increased substantially after 1996 and especially so in 2006. Page 114 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 3-18. Thailand’s import & export value of top five products by value, 1986-2006

2,500 1,800 1,600 2,000 1,400 1,200 1,500 1,000 800 1,000 600 400 500 Import value (Billion Baht)

Export Value (Billion Baht) 200 0 0 1986 1991 1996 2001 2006 1986 1991 1996 2001 2006 Machines, transport equipmt Basic manufactures Machines, transport equipmt Mineral fuels, etc. Misc manufactured goods Food and live animals Basic manufactures Chemicals Chemicals Misc manufactured goods

Figure 3-19. Myanmar’s import & export value of top five products by value, 1985-2004

6,000 4,500 5,000 4,000 3,500 4,000 3,000 3,000 2,500 2,000 2,000 1,500 1,000 1,000 Export value (million Kyat)

Import Value(Million Kyat) 500 0 0 1985 1990 1995 2000 2004 1985 1990 1995 2000 2004 Mineral fuels, etc. Food and live animals Machines, transport equipmt Basic manufactures Crude materials excluding fuels Unclassified goods Unclassified goods Mineral fuels, etc. Basic manufactures Chemicals

In terms of the destinations of exports from GMS countries, larger GMS economies tend to send more exports to multiple large industrialized countries, whereas smaller economies are still disproportionately dependent on a single foreign market. To help clarify these patterns, Figures 3-20 and 3-21 display exports and imports of the six GMS countries according to importing and exporting countries.

The Lao PDR and Myanmar export mainly to Thailand, and their second largest export markets are also neighboring countries – Vietnam and India, respectively. Cambodia exports predominantly to the United States. In the larger economies, Vietnam, Thailand and China all export substantially both to the United States and to Japan, in addition to various other markets. Vietnam exports more to Australia, Singapore and Europe, while China has more exports to Hong Kong than other countries. In a change from the past, Thailand now finds its exports going more to China than to Singapore, while exports to Malaysia have also grown substantially.

Chapter 3. How have market opportunities changed? Page 115

Figure 3-20. Export value by GMS country and destination, 1985-2005

A. China export value (million USD) D. Cambodia export value (million USD)

250,000 2,500 Germany Canada 200,000 Hong Kong 2,000 France Italy Germany 150,000 Japan 1,500 Hong Kong Korea (South) Japan 100,000 1,000 Netherlands Malaysia 50,000 Russian Fed 500 Singapore Singapore United Kingdom 0 United Kingdom 0 United States 1985 1990 1995 2000 2005 United States 1985 1990 1995 2000 2005 Viet Nam

B. Thailand export value (million USD) E. Lao PDR export value (million USD)

Australia 25,000 500 Belgium China China 20,000 Hong Kong 400 France Indonesia 15,000 300 Germany Japan Italy 10,000 Malaysia 200 Malaysia Netherlands Netherlands 5,000 100 Singapore Thailand 0 United Kingdom 0 United Kingdom 1985 1990 1995 2000 2005 United States 1985 1990 1995 2000 2005 Viet Nam

C. Vietnam export value (million USD) F. Myanmar export value (million USD)

10,000 Australia 2,500 China China France 8,000 2,000 France Germany 6,000 Germany 1,500 India Japan Japan 4,000 Malaysia 1,000 Malaysia 2,000 Philippines 500 Singapore Singapore Thailand 0 United Kingdom 0 United Kingdom 1985 1990 1995 2000 2005 United States 1985 1990 1995 2000 2005 United States

Source: Asian Development Bank

Sources of imports show both similarities and differences among GMS countries. China’s imports have been heavily weighted toward machines and transport equipment, (Figure 3- 16) and its imports have been largely from Japan, Korea, the United States and Germany. Vietnam’s imports include large shares of both basic manufactures and machines and transport equipment (Figure 3-17), and its major sources have been Singapore, Japan and Korea, but China now has the largest share and Thailand has been increasing its share in recent years. Imports into Thailand are led by machines and transport equipment, followed by fuels, basic manufactures and chemicals (Figure 3-18). The largest source of imports is from Japan, now followed by China, the United States, Malaysia and the United Arab Emirates. Myanmar’s decreasing levels of imports are led by machinery and basic manufactures, and its main sources are China, Thailand, and Japan. Cambodia’s recent surge in imports comes largely from Hong Kong, Thailand, China and Vietnam, whereas imports into the Lao PDR are largely from Thailand. Page 116 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 3-21. Import value by GMS country and source, 1985-2005

E. China import value (million USD) B. Cambodia import value (million USD)

140,000 1,500 China Australia 120,000 France Germany 100,000 Hong Kong Hong Kong 1,000 Indonesia 80,000 Japan Japan 60,000 Korea, South 500 Korea, South Malaysia 40,000 Malaysia Russian Fed 20,000 Singapore Singapore 0 0 Thailand Thailand 1985 1990 1995 2000 2005 Viet Nam 1985 1990 1995 2000 2005 United States

E. Thailand import value (million USD) B. Lao PDR import value (million USD)

30,000 China 1,200 Australia 25,000 Germany 1,000 China Indonesia France 20,000 800 Japan Germany 15,000 Korea, South 600 Hong Kong 10,000 Malaysia 400 Japan 5,000 Saudi Arabia 200 Korea, South Singapore Singapore 0 0 United Arab Em Thailand 1985 1990 1995 2000 2005 United States 1985 1990 1995 2000 2005 Viet Nam

E. Vietnam import value (million USD) B. Myanmar import value (million USD)

10,000 China 1,400 China Hong Kong 8,000 Germany 1,200 Hong Kong 1,000 India 6,000 Indonesia 800 Indonesia Japan Japan 4,000 600 Korea, South Korea, North 400 2,000 Malaysia Korea, South Singapore 200 Malaysia 0 Thailand 0 Singapore United States 1985 1990 1995 2000 2005 1985 1990 1995 2000 2005 Thailand

Source: Asian Development Bank

Most GMS countries have found that international trade has become an increasingly important element in their countries, and especially since 2000. Moreover, while trade among GMS countries is important, interregional trade is also flourishing and is closely tied both to major export markets and to sources of imports, especially for investment in further building economies of the region. Indeed, international trade and investment has become a major, if not the most central focus of strategies for economic development within and among GMS countries.

Chapter 3. How have market opportunities changed? Page 117

3.2.4 Growing regional role of tourism

In addition to international trade, tourism has become an important part of the services sectors of economies in most GMS states. From just over 9 million foreign tourist arrivals in 1995, by 2005 numbers had more than doubled. As in many other parts of the non- agricultural sectors of the regional GMS economy, Thailand’s “early start” in tourism helped give it a 75 percent share of tourist arrivals in the mid-1990s. But tourism also began to boom in other states of the Figure 3-22. Tourist arrivals in GMS states, 1995-2005 region at the turn of the century, and by 2005 20,000 Thailand’s share had dropped to 60 percent. 15,000 Recent growth is most rapid in Vietnam, Cambo- 10,000 dia and the Lao PDR, and foreign tourist arrivals are 5,000

now more than a million tourist arrivals (thousand persons) 0 persons per year in all 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 GMS states except Thailand Myanmar Yunnan Vietnam Cambodia Lao PDR Myanmar. In addition to the data in Figure 3-22, Sources: UNWTO, Qiu Xueqin 2005, China Tourism Statistics 2006 numbers of domestic tourists within GMS states are also growing, and in Yunnan where domestic tourists come from throughout China, they outnumber foreign tourists by a factor of more than ten to one [Qiu Xueqin 2005].

Especially during earlier years of tourism growth in the region, however, various shady elements with connections to tourism, and especially drugs, prostitution and human trafficking, affected its international reputation. Growing concern among many was further heightened as HIV-AIDS problems began emerging in the region.

But subsequently, very successful programs were launched in Thailand to promote other types of tourism and to expand and upgrade a wide range of tourist facilities and services. This diverted attention away from the darker side of tourism, resulted in massive growth in the tourism sector, and helped put Thailand on the global tourism map. We have already seen reference to the role of tourism in economic diversification of the Upper Ping Basin in North Thailand. And in Yunnan, tourism is seen as the “backbone industry” of the province, and major development and promotion programs have helped it become one of the top 10 destinations for Chinese domestic tourists [Qiu Xueqin 2005]. Other countries have now developed their own similar types of approaches, resulting in a large and growing array of tourist and convention options around the region, from urban centers, to scenic beach areas, hot spring spas, centers of ancient culture, and mountain areas with diverse ethnic traditions. New growth areas include homestays in town and rural areas, eco-tourism linked with protected forest areas, and even agro-ecotourism in scenic agroforestry landscapes of the region.

While the types of tourist industry development and promotion pioneered in Thailand and Yunnan have demonstrated the important economic potential of this sector, there are still a Page 118 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region range of concerns that are often expressed. One particular focus of these concerns centers on the distribution of benefits from expansion of tourism. While large profits have been made by large-scale investors, many are questioning how many benefits have filtered down to poorer segments of society. Moreover, poor rural communities in many areas have complained about being displaced from their already meager natural resources due to expansion of protected forest areas and development of tourist facilities backed by wealthy and well- connected interests. And while employment of local people has increased wage labor opportunities in various tourism areas, many of the jobs available to locals center on low-paying menial work with few prospects for future development. Although various interesting exceptions have emerged in the region, they do not yet play a prominent role in the overall tourism industry of the region.

It is in this context that ambitious new regional initiatives in the tourism sector are being announced by GMS states, along with pledges of major financial support from the Asian De- velopment Bank (ADB). A glossy GMS Tourism Sector Strategy has now been published [ADB 2005], based on a consultancy report that proclaims, “the tourism sector has been recognized as a major growth engine for socio-economic development and poverty alleviation, as a promoter of the conservation of natural and cultural heritage, and as a harbinger of peace” [APPI 2005]. But the consultancy report also goes on to recognize that realization of such potential will require reinvestment of much more of the revenue generated by tourism in: x protecting and enhancing the value of the subregion’s outstanding cultural and natural resources; x diversifying product and promoting the subregion as a single destination; x promoting the development of competent tourism human resources; x raising quality standards of tourist facilities, services and tour products; x providing tourism-related infrastructure that spreads benefits of tourism more widely and is more pro-poor; x controlling the adverse social impacts of tourism on women, children and ethnic communities (HIV-AIDS, commercial sex work, child prostitution, and trafficking) and its potential impact on the image of the subregion; x encouraging more active participation of the private sector in tourism, investment, marketing and human resource development; and x increasing efforts to reduce barriers that restrict the movement of tourists between and within the subregion giving special attention to cross-border facilitation.

This program seeks to increase annual foreign tourist arrivals in the region to between 46 to 52 million by 2015, through a strategy focused on promotion of “competitive, cross-border culture, nature and adventure-based tour programs” [ADB 2005]. The growing network of World Heritage Sites (both cultural and natural) and expanding protected forest areas are seen as growth points for marketing and strategy implementation. Especially for a country like the Lao PDR, where market-based opportunities for rural communities have been very scarce, promotion of these types of tourism are being taken very seriously.

Tourism in the Lao PDR Political stability in the region and improved transportation networks have facilitated increased importance of tourism in Laos. The number of tourists entering Laos has increased very dramatically, from 14,400 in 1990 to 737,000 in 2000 and 1,095,315 in 2005. Earn- ings from tourism have also been increasing steadily, from just over 70 million USD in 1997 to more than 110 million USD in 2004. Due to interest in the country’s diverse natural and Chapter 3. How have market opportunities changed? Page 119 cultural attractions, culture and nature based tourism are estimated to account for more than half the total value of the Lao tourism industry [Bouttavong et al 2002].

Under its National Tourism Authority, the Lao government is supporting development of eco-tourism and cultural tourism as a strategy to reduce rural poverty [LNTA 2005]. As an important example, the Nam Ha National Protected Area (NPA) in Luang Namtha province is seen as a successful case and potential model for eco-tourism that has been supported by UNESCO since 1999 [Lyttleton & Allcock 2002]. According to Schipani [2007], more than 70 percent of tourists arriving to Luang Namtha participate in eco-tourism activities, the most popular of which include multi-day forest trekking, locally guided visits to ethnic minority villages, and guided river and cave tours. Numbers of tourists to Luang Namtha increased from 18,600 to more than 49,000 between 1994 and 2005, and the tourism industry in Luang Namtha alone generated 3.15 million USD during 2005.

One of the notable successes of Nam Ha NPA is the employment opportunities and streams of revenue generated by eco-tourism for local authorities and local people. This is particularly important to help counter various negative trends that are also linked with changes occurring in association with newly expanding roads through the area [Lyttleton et al. 2004].

3.2.5 Physical infrastructure and the GMS

We have already seen references to important roles physical infrastructure has played in economic and social transformations occurring in the GMS region, including those associated with economic growth and restructuring, international trade and tourism, and more details will emerge in subsequent sections of this report. Since expansion of roads and transportation, irrigation systems, electricity grids, and telecommunications networks has been a major factor facilitating economic and social change, it should not be too surprising that such items are very high on priority lists of both governments and international development banks.

While local communities also usually want very much to have access to these types of facilities, they are often at least initially unaware of the range of impacts that may emerge at larger scales and over longer periods of time. Moreover, their interest usually places strong emphasis on associated systems related to health care, education, markets, information and extension services that are suppose to follow in areas where basic physical infrastructure is developed, and in the past – especially in lowland areas – often have done so. And, it is a core premise of poverty alleviation programs across the region that such processes will indeed occur.

Given this recent historical context, perhaps it should also not be too surprising that there is a strong focus on basic physical infrastructure in regional strategies and programs for development under the GMS banner, which has especially strong support from the Asian Develop- ment Bank (ADB).

One of the main central themes of GMS programs is to spur development by increasing “connectivity” across the region. This is to be brought about through five “strategic devel- Page 120 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region opment thrusts” consisting of activities conducted under 11 “flagship” programs. The five development thrusts include: x Strengthen infrastructure linkages through a multisectoral approach x Facilitate cross-border trade and investment x Enhance private sector participation in development and improve its competitiveness x Develop human resources and skill competencies, and x Protect the environment and promote sustainable use of shared natural resources.

Of the 11 flagship programs, the first three consist of “economic corridors” that have been the focus of most attention, and continue to expand or shift as new reports emerge: x The North-South Economic Corridor initially had two branches. The first stretches from Kunming to Bangkok via two alternative routes through either Laos or Myanmar, and the second runs from Kunming through Hanoi to Haiphong. With extension of the GMS to Guangxi in 2004, a third looping branch has been added to which joins Kun- ming with Nanning, and then turns southwest through Lang Son to Hanoi. x The East-West Economic Corridor stretches from Da Nang and Hue in Vietnam, through Thailand and Laos, to Myanmar (initially Yangon, but now stops in Myawaddy). x The Southern Economic Corridor stretches from Bangkok through Cambodia to Ho Chi Minh City in Vietnam. A second branch has also been added from Cambodia to Quy Nhon, Vietnam. A map in the draft version of the ADB mid-term review report Figure 3-23. GMS road net, cities & settlements indicated five additional corridors (Northern, Eastern, Western, Southern Coastal, Central and Northeastern), as well as an extension through southern Thailand to Malaysia, but they were not included in the final version of the report [ADB 2007b]. The roads in these additional corridors are, however, included in the map indicating the vision of the overall regional road network in 2015. The general overall pattern of transport corridors in place, under construction and envisioned in the region is indicated in Figure 3-23, along with associated urban areas, towns and underlying existing major roads. The most recent Chapter 3. How have market opportunities changed? Page 121 version of the ADB vision for 2015 includes a few additional corridors that are not yet on this map, but the overall pattern is indicative.

Remaining flagship programs were established to provide focus on telecommunications, energy, trade, investment, tourism, environment, water resource management, and human resources development. All of the documentation associated with GMS programs has gone to great lengths to explain that these economic corridors are seen as much more that just transportation corridors, and that together the flagship programs are pursuing the overall goals of GMS cooperation, which is “…to fulfill its vast potential, lift people from poverty and promote sustainable development for all” [ADB 207c].

Over time, however, articulation of the GMS program has changed, and the 2004 “plan of action” specified priority program implementation Figure 3-24. GMS Strategic Framework 2002 - 2012 targets more clearly. The Strategic Thrusts Action Plan Goals Vision mid-term review by ADB Strengthen infrastructure linkages notes that the focus of Plan of Action x Accelerated and Facilitate cross-border x Transport sustained trade, investment, and GMS implementation and Telecommunications economic growth tourism x x Energy x Reduced poverty More monitoring has shifted and income integrated, Enhance private sector x Environment disparities prosperous, participation and x Tourism harmonious from “flagship programs” competitiveness x Improved quality x Trade facilitation of life sub regi on Investment x Sustainable to the sectors and areas of Develop human x x Human resource management of resources and skills development environment and competencies subregional cooperation, x Agriculture natural resources which are articulated with Protect the environment and promote sustainable use of shared natural the diagram reproduced in resources Figure 3-24. The tourism Source: ADB 2997b program was added in 2004, the core environment program was adopted in 2005, and a core agricultural support program has just been adopted.

While marketing of GMS programs places heavy emphasis on “software” components and “soft” sectors, with frequent references to poverty alleviation, how project resources under these programs have been allocated thus far paints a somewhat different picture, as indicated in Table 3-10.

Table 3-10. Financial resources allocated to GMS projects, 1992-2006 first phase second phase overall Funding source (%) 1992–1999 2000–2006 1992–2006 Govt Co- ADB M US$ % M US$ % M US$ % only finance only Transportation 2,233 85.4 2,493 60.0 4,726 69.8 44 23 33 100 Energy 383 14.6 1,578 38.0 1,961 29.0 5 81 14 100 Tourism - - 47 1.1 47 0.7 26 - 74 100 Health - - 39 0.9 39 0.6 20 2 78 100 Total 2,616 100 4,156 100 6,772 100 32 39 28 100 Source: ADB 2007b, Mid-term Review of the GMS Strategic Framework

Indeed, in projects funded during 1992-2006, which total to an impressive US$ 6.8 billion, 70 percent of all financial resources have been allocated to transportation infrastructure, and Page 122 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region another 29 percent to energy infrastructure. A total of 1.3 percent of financial resources have been allocated to tourism and health, and apparently only technical assistance funds (not included in the table) have been allocated to other sectors. There are also additional components of these overall systems not included in these figures, that are being built apparently from national budgets and through bilateral collaborations within the region, such as fiber optic networks, etc.

The overall pattern of resource allocation under the GMS and its focus on facilitating trans- border flows of goods, people and resources has not gone unnoticed, however, and skeptics are raising a range of questions related to possible discrepancies between rhetoric and actions. As Oehlers [2006] notes, a number of shortcomings in the developmental vision underpin- ning the GMS programs have been raised by various studies, to which he adds his own cau- tions about the potential of the “regional market economy” as articulated under the GMS program to deliver on its goal of poverty reduction. Oehlers particularly questions whether increases in economic flows within the region based on cost differentials associated with current patterns of production structures and specialization will be sufficient to bring about change that is either enduring or deep enough to improve production and productivity, and thus address fundamental issues associated with poverty. He especially points to needs to address a range of issues in the institutional environment within which all this is taking place.

Recent reviews of impacts of regional integration on various forms of migration in the GMS raise another range of issues associated with increased “connectivity” in a region where there are large degrees of disparity among localities and states [Sciortino et al. 2007; World Bank 2006d]. The review by Sciortino et al. [2007] especially underscores the many dimensions and implications of migration in response to incentives and disincentives associated with disparities at multiple levels, which are illustrated by recent and current movements of people within the GMS itself, including several closely related with GMS regional projects. Rapid urbanization, feminization of poverty, and official and unofficial movement of young un- skilled labor among countries, are increasing numbers of often stateless people seeking work and a better life. Under current conditions many are vulnerable to exploitation and trafficking, have little or no access to education, health or other social services, and are frequently subjected to threats, violence, extortion, fraud or deception [Sciortino 2007, World Bank 2006d]. Various of these conditions, including health threats such as HIV-AIDS can affect people within their own country where related changes are occurring, as illustrated by a study in Laos [Lyttleton et al. 2004]. Unless the related institutional environment in the region can be improved, increased “connectivity” brought about by easier travel is likely to exacer- bate these problems.

The mid-term review of the GMS program by the ADB acknowledges that there are legitimate issues being raised regarding issues such as these [ADB 2007b]. But it yet again denies any singularity of focus on physical infrastructure. Rather, it argues that emphasis on removing physical barriers to connectivity among GMS countries has been a necessary initial priority, and that progress on the “hardware” components involved has been good. It also claims that reasonable progress has been made in negotiating and initiating additional programs related to “soft” aspects of regional cooperation, most of which have only begun to become op- Chapter 3. How have market opportunities changed? Page 123 erational during recent years. It then goes on to identify a substantial number of “opportunities” for further emphasis that will be critical for achieving the goals and objectives of the GMS Strategic Framework. Many of these areas include those identified by outside analysts and skeptics, and are grouped into areas related to increasing competitiveness of production systems (including agriculture), to helping translate advances in physical connectivity into accelerated improvements in livelihoods and poverty reduction, and to “containing and miti- gating” undesirable consequences such as transmission of communicable diseases, illegal migration of workers, and environmental degradation. Time will tell how many of these “opportunities” will be acted upon, and what will be the impact.

In any event, it is undeniable that changes in physical infrastructure have been, and will continue to be a very important factor in changing the framework within which local livelihoods throughout the region are conceived and continue to evolve.

Page 124 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

3.3. Case studies of production change and development

Given the continuing major changes in the context in which opportunities for market production are emerging, we now turn to some specific examples of change and development in local sites in the Greater Mekong Region. We begin with a section on how changing patterns of commercial production are reflected in land use patterns in the Upper Ping Basin, where the extent and degree of commercial production is greatest among our case study sites, but where there are also areas with characteristics and some types of conditions that still resemble remote areas in other parts of the region. We then turn to brief examinations of patterns of commercialization and change in selected aspects of local economies in the UPB, as well as in case study in sites in Vietnam, Yunnan and the Lao PDR. This is followed by brief discussions of roles played by state and private sectors in examples of commercial production arrangements from our various sites in the region. The section concludes with a note on linkages between lowland and upland economies in the context of the Upper Ping Basin.

3.3.1 Commercialization of land use in the Upper Ping Basin

Land and water resources are key basic elements in resource domains of local households and communities in mountain areas of the region, including the Upper Ping Basin (UPB). And since characteristics of these basic natural resources are not distributed uniformly, local configurations of natural resources have a strong influence on how various market production opportunities are perceived, as well as on the viability of commercial production in the context of globalizing economies. Moreover, patterns of land use for commercial production will also reflect competition from other sectors of the economy and society for land, labor and capital resources that are in demand for alternative uses. Resulting tensions among competing demands can result in policies that seek to pull or push change in different directions.

This section focuses on assessments of land use in the UPB that employ the quite high resolution spatially explicit database developed by Methi Ekasingh and his colleagues at Chiang Mai University under support from the Thailand Research Fund, and its associated modules to support provincial decision-making related to agricultural policy and management issues. These assessments provide us with an overview of how changing market opportunities have interacted with distributions of natural resource characteristics, human settlement and investment patterns to shape agricultural production systems in the UPB. At the same time, the assessments demonstrate some important emerging analytical tools that can help guide future decisions about how best to respond to continually changing market conditions as re- gionalization and globalization bring new levels of complexity that market-based production decisions must consider.

Since most of the more extensive and complex commercial agricultural production systems in the UPB have a central focus in and around the Chiang Mai-Lamphun Valley area, we con- clude this section with a brief look at land use patterns in some local sub-watersheds of the Mae Chaem sub-basin. This provides an example of how forces shaping production patterns in the Chiang Mai-Lamphun Valley are also interacting with more remote areas in montane Chapter 3. How have market opportunities changed? Page 125 zones of the UPB, and inducing responses that are conditioned on contexts that are more strongly affected by policy-induced constraints that have a bit different set of similarities with contexts in other montane zones in the region.

Land Use and Production Systems Access to land resources is constrained in the Upper Ping Basin (UPB) by protected areas (national parks and wildlife sanctuary) and conservation forest (Figure 3-25a). In addition, agriculture is forbidden or highly restricted within watershed class 1 and 2 zones, but limited agricultural activities are allowed on the land that belongs to watershed class 3 and 4, and are unrestricted in watershed class 5 zone, which are mainly lowland area (Figure 3-25b). Other aspects of physical access in the UPB are further discussed in the next chapter.

Figure 3-25. Distribution of protected areas and UPB land in different watershed classes

(a) protected areas (b) watershed classification

But despite these restrictions, the UPB supports one of the most diversified and productive agricultural systems in northern Thailand, including agroecosystems that range from lowland paddy to temperate fruits and vegetables in the highlands.

The most productive agriculture areas are irrigated lowlands, and rice still dominates this agricultural landscape during the rainy season (Figure 3-26a). Rice is usually grown during July to August and harvest time is between November to early December, and both glutinous and non-glutinous varieties are cultivated. In the dry season commercial crops such as garlic, shallot, onion, potato, soybean, and corn are grown, while dry season rice is preferred in areas where irrigation water is available from any of the three large scale irrigation systems. In lowland rainfed areas, rice is also the main choice of farmers, due to good surface water storage capacity of the poorly drained soils. Page 126 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

In the uplands, corn and soybean are preferred by farmers [Benchaphun et al. 2004]. As illustrated in Figure 3-26b, shallot and baby corn are short duration crops that are grown commercially in UPB uplands. Fruit trees such as longan and mango are also widely grown in upland areas, and to a lesser extent citrus and litchi. Figure 3-26. Main cropping patterns in irrigated lowlands, and rainfed lowlands and uplands of the Upper Ping Basin

(a) irrigated lowlands (b) rainfed lowlands & uplands

Upland rice is grown as a staple food Figure 3-27. Main highland cropping patterns on sloping land, while paddy rice is cultivated in flat land of small valleys of the highlands (Figure 3-27). Maize is cultivated for commercial purposes during mid May to mid September on sloping land. Climate conditions in the highlands are favorable for vegetables and sub-tropical fruit crops. Short duration cash crops such as cabbage, carrots, and other vegetables were introduced by the Royal Project Foun- dation, and have been well accepted in local and Bangkok markets for decades. Two to four crops of vegetables per year are possible in some areas on the highlands where water is available for low-cost sprinkler irrigation system. Peach, pear, persimmon, and Japanese apricot are examples of sub-tropical fruit trees that are currently grown. However, their products have been severely threatened by higher quality products now imported from China.

During the last decade, there has been significant change in agricultural land use in UPB. In general, the planted area of the main rice crop declined by 26,875 ha (Figure 3-28a), while production areas of soybean, garlic, and dry season rice decreased by 14,106, 4,218, and 3,778 ha respectively, and growing areas of shallot increased by 2,066 ha (Figure 3-28b). Two factors are responsible for the decline in cultivated area of main season rice and soybean: (1) the expansion of city of Chiang Mai and its suburbs into irrigated areas, and (2) an increase in longan production area by 51,109 ha (Figure 3-29) in response to demand for dried longan in China together with more efficient longan dryers and marketing facilities. The growing areas of litchi, tangerine and mango were found to have increased by only 8,568, 6,444, and 1,100 ha, respectively, during this period. Chapter 3. How have market opportunities changed? Page 127

Figure 3-28. Changes in cultivated areas of irrigated lowlands during 1991-2002 for main season rice and dry season crops

(a) main season rice (b) dry season crops

Figure 3-30 displays distri- Figure 3-29. Change in cultivated fruit tree area 1991-2002 bution of major cropping systems as interpreted from Landsat TM and field survey in 2000. The changes in selected land use where expansion of urban and longan production area took place during 1988-2000 are illustrated in Figure 3-31.

Figure 3-30. Spatial distribution of crop production systems

Source: Benchaphun, et al. 2004 Page 128 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Assessing potential production area Figure 3-31. Expansion of longan and urban area into paddy fields, 1988-2000 The dynamics and competitive nature of agricultural production require information on potential land use options to cope with changes in demand for food and environmental quality. Land evaluation is the process of predicting the potential use of land regarding the purpose of its use and land attributes. Modern land evaluation is based on the FAO Framework for Land Evalua- tion [FAO 1976]. A variety of analytical models can be used in these predictions, ranging from qualitative to quantitative, functional to mecha- nistic, and specific to general approaches. Fuzzy set is one technique that has been used to standardize land attributes prior to applying specific decision rules for evaluating land for its physical suitability [Ahamed et al. 2000; Baja et al. 2002; Braimoh et al. 2004; Sicat et al. 2005]. Land evaluation at the regional scale requires a geographic information system (GIS) to effectively build and store land mapping units and their attributes. A customized interface is required for interacting with a user in these processes. In this study, Multi-criteria Decision Making (MCDM) approach [Malczewski 2004] was used to evaluate LMU for specific and relative suitability (see Box 3-1). Figure 3-32. Crop suitability index for Since available land resources can support multiple rainy season paddy rice cropping in some areas, land suitability results are discussed separately for main (rainy) and dry season crops while fruits and perennial trees are discussed in terms of year-round use of land resources.

Suitability for rainy season crops 1. Rice. Rice requires relatively flat land and poorly drained soils to store rainfall to meet its relatively high water requirement. The soils in the lowland of UPB match this requirement. Large portions of the land with high values of CSI for rice are located in Mae Kuang and Mae Ping Section 2 sub-basins (Figure 3-32) largely due to good access to irrigation water from Mae Kuang, Mae Ngad-Mae Fak and Mae Taeng irrigation projects. Smaller parts of suitable land for rice are found in smaller valleys in various sub watersheds where small-scale irrigation systems organized by communities adequately supplement rainfall during rice growing season to meet water requirement for paddy. Chapter 3. How have market opportunities changed? Page 129

Box 3-1. Multicriteria Land Evaluation in GIS The land evaluation process in GIS starts with creation of a Land Mapping Unit (LMU), a relatively ho- mogeneous land area with respect to key land attributes affecting long term crop production. LMU is created by overlay analysis of various map layers including soil boundary, climate zones, and irrigated area in GIS. Hence, land characteristics such as soil properties, effective rainfall, temperature and water availability are linked to each polygon of LMU, and Land Characteristics (LC) are derived. Land Quality (LQ) is then determined by comparing LC with Land Use Requirements (LUR) of Land Utilization Types (LUT). Selected LUTs were used in this study according to the extent of their cultivated areas. For the rainy season, paddy rice, field corn, and soybean were chosen, while rice, garlic, onion, soybean and corn were selected for the dry season. Longan, litchi, citrus, mango, and rubber are fruit and perennial trees used in the study. Details of LUR for each LUT were modified from those published by Department of land Development [Tansiri and Saifak, 1999]. In the DLD procedure, LUR is the assemblage of LC for each severity level of each LQ, i.e., suitable (S1), moderately suitable (S2), marginally suitable (S3) and not suitable (S3). In addition, the physical suitability assessment for LMU in the DLD method is based on a multiplication decision rule assuming equally weighted LQ. Results are expressed as suitability levels (S1, S2, S3, and N) for each LMU and LUT. Thus, it causes problems in ranking suitability of relative crops, compared to using the continuous value of crop suitability. In this study, a Multi-criteria Decision Making (MCDM) approach [Malkowski, 2004] was used to evaluate LMU for specific and relative suitability. LQs were considered as criteria for this decision problem. Since the criterion values differ greatly in ranges and measurement units, fuzzy functions [Burrough, 1989] were used to standardize LC into a land quality index ranging from 0 to 1. These functions approximate the sufficiency of each criterion to sustain crop productivity. Once the relative weight of importance for each criterion had been assigned, weighted linear combination was then employed to derive crop suitability index (CSI) for each LMU. The crop suitability index is a continuous number ranging from 0 (least suitable) to 1 (the most suitable). The suitability index has certain advantage to the traditional categorial value of suitability level because it conveniently ranks relative suitability of all crops being considered for determining the most suitable crop for a given LMU. The implementation of land evaluation in GIS is a complex process (left figure, below) involving spatial data preparation to create criterion maps, standardized criterion maps and decision analysis. The results are repeatable and sensitivity analysis of criteria can be achieved. A graphic user interface is necessary to facilitate and interact with the the users through the approved procedure. Such an interface in Thai was developed (Samranpong et al., 2007) to facilitate user to identify criteria (LQ) and their associate weights of importance prior to the analyses (right figure, below). Process of multi-criteria land evaluation in GIS User interface to facilitate evaluation process

• Spatial Databases • Objectives Preparation Constraints • Criteria • Create LMU

Assign Weights Standardized Scores (wi) (xi)

Decision Rule

S=6wixi

Crop Suitability Index Relative Crop Suitability Maps Maps

The user may select the suitable functions to generate standardized criterion maps before decision analysis; the suitability index map is displayed as a result. Since land resource is adequate to support multiple cropping in some areas, land suitability assessments were conducted separately for main (rainy) and dry season crops while fruit and perennial trees will be discussed in terms of year round basis use of land resources. Page 130 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

In lowland rainfed areas CSI decreases to the vicinity of 0.4-0.6, and drops further to 0.2 where slope of the land rises.

2. Field crops. In contrast to paddy rice, field crops require less water, better soil drainage, deeper root penetration and optimal soil acidity. Results of crop suitability assessment for corn suggest that high CSI is found in upland areas of Mae Lee, Mae Ping Section 3, Mae Ngad and Mae Ping Section 1 (Figure 3-33a). Lower CSI for corn were found in irrigated lowlands of Mae Kuang, Mae Fak-Mae Ngad, and Mae Ping Section 2 sub watersheds as the consequence of poor drainage following excessive rainfall during the rainy season.

Similar results were observed from suitability assessment for soybean. In general, uplands in Mae Lee, Mae Ping Section 3, Mae Ngad and Mae Ping Section 1 exhibit higher land quality for producing soybean than in irrigated lowlands in the rainy season (Figure 3-33b). How- ever, soybean is slightly less sensitive to water logging and unfertile soils, so that slightly higher CSI values were detected in both lowlands and uplands for soybean compared to corn.

Figure 3-33. Crop suitability for corn and soybean in rainy season

(a) corn (maize) (b) soybean

Suitability for dry season crops The amount of rainfall is not adequate to support annual crops during the dry season. Thus, moderately high to high values of CSI are located in areas where irrigation water is drawn from various sources. Chapter 3. How have market opportunities changed? Page 131

1. Rice: In irrigated areas, CSI values range from 0.4-0.9 Figure 3-34. Crop suitability index in service areas of Mae Kuang, Mae Ngad-Mae Fak and of dry season paddy rice Mae Taeng irrigation projects (Figure 3-34). However, this assessment assumed adequate water for rice, which rarely occurs during normal years. In the rainfed lowlands, no irrigation is available during the dry season, and therefore CSI values for rice drop to 0.

2. Field Crops: Soybean and tobacco seem to be more well suited for LMUs within service areas of different irrigation projects during the dry season than are corn and potato (Figures 3-35 and 3-36). However, those LMUs have several limitations for corn and potato, including heavy soil texture and poor soil drainage, resulting in relatively low CSI values for corn and potato. Figure 3-35. Crop suitability for corn and soybean in dry season

(a) corn (b) soybean Figure 3-36. Crop suitability for potato and tobacco in dry season

(a) potato (b) tobacco Page 132 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

3. Vegetables. Major vegetable crops such as garlic, onion Figure 3-37. Crop suitability and shallot have similar land use requirements. They prefer index for garlic, onion, and good drainage and light soil, and have less irrigation re- shallot in dry season quirements than rice and field crops. Results of land evaluation indicate that CSI values for these crops range from 0.6- 0.8 in most lowland irrigated areas while values drop to 0 in areas where irrigation water supply is unavailable during the dry season (Figure 3-37).

4. Fruit Trees. In this study, emphasis of land evaluation for fruit trees was on major species commonly grown in UPB i.e., longan, litchi and mango. However, tangerine was included due to its recent expansion in upper parts of the watershed.

x Longan Longan is the most important fruit tree in the upper north of Thailand. Production area is close to 112,000 ha, mostly in UPB. Longan requires deep soil, good access to water, good drainage and a specific range of temperature during flowering stage. Figure 3-38 shows distribution of crop suitability index for longan. Moderately high values of CSI (0.6-0.8) are associated with irrigated lowlands, with highest CSI values (>0.8) found along banks of the Ping river in Mae Ping Section 3 sub watersheds where good irrigation from EPS and well drained soils coexist. Most rainfed uplands are associated with CSI values ranging from 0.3-0.5 due to inadequate water supply for irrigation during the dry season which coincides with flowering and fruit settings.

x Litchi and Tangerine. Crop requirements of Litchi and Figure 3-38. Crop suitability Tangerine are similar to Longan except that lower tem- index for longan perature and slightly better drainage are required. High- land and upland areas where temperature and effective rainfall are favorable provide good land quality and hence high CSI for litchi and tangerine. These areas are located in the upper part of Mae Ping Section 1 watershed (Figure 3-39).

x Mango. Distribution of CSI for mango is shown in Figure 3-40a. Most lowland irrigated areas are suitable for mango cultivation particularly in well drained soil. Rainfed areas in Mae Hard and Mae Tuen sub-basins are slightly less favorable to mango due to lower water availability.

x Rubber. Rubber requires similar land quality to longan but higher water availability. Results of matching land quality with crop requirements reveals that moderately high CSI for rubber are scattered in many sub watersheds (Figure 3-40b). Since the temperature requirement used in this land quality assessment is for va- Chapter 3. How have market opportunities changed? Page 133

rieties commonly grown in the southern part of Thailand, a new assessment should be made once data on cultivars from China become available.

Figure 3-39. Crop suitability index for litchi and tangerine

(a) litchi (b) tangerine

Figure 3-40. Crop suitability index for mango and rubber

(a) mango (b) rubber Page 134 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Comparisons with existing land use Spatial distribution of CSI for each crop was overlayed with existing land use in 2000 to assess the agreement between crop suitability classes and farmer’s choice for land use type. CSI was grouped into four classes: suitable (0.7-1.0), moderately suitable (0.4-0.7), marginally suitable (0.2-0.4), and not suitable (0-0.2). Results of this analysis for main season rice and longan are shown in Figure 3-41. It clearly indicates that rice farmers grow rice mostly on the suitable land; some suitable lands were not used for growing rice in year 2000 mainly because farmers converted paddy fields into longan plantations through small investments to provide better soil drainage during the rainy season. Practices such as moving soil to form mounds for longan or digging drainage ditches are common among these growers. Results also reveal that there are still some suitable lands for longan available to support longan expansion if there is high market demand of this crop.

Figure 3-41. Comparing crop suitability assessment with existing land use for paddy rice in rainy season and longan

Cultivated on suitable land

Cultivated on moderately suitable land

Cultivated on marginally suitable land

Cultivated on not suitable land

Suitable land, but not cultivated

Moderately suitable land, but not cultivated

Marginally suitable land, but not cultivated

Not suitable and not cultivated (a) paddy rice (b) longan

Relative suitability The above discussion of land evaluation has focused on individual crop suitability. Although this is useful for identifying land resources for specific crop production plans, further information on which crop best suit each LMU may also be of interest. In order to help answer such questions, spatial analysis is required to compare CSI of all crops for main (rainy) and dry seasons. For each LMU, the highest CSI value and its associated crop are identified and the crop code and name is assigned to the LMU for display. For annual crops such as rice, field crops and vegetables, analyses were conducted separately for each growing season. Since fruit and perennial trees occupy land throughout the year, their CSI values were compared with other crops in the main season. Once they were assigned to a particular LMU, they Chapter 3. How have market opportunities changed? Page 135 would also occupy that LMU for the dry season. Figure 3-42 illustrates relative crop suitability maps for rainy season and for dry season. In this case, free competition for the same LMU was imposed based on distribution of CSI values alone for each crop. Results indicate that paddy rice was over distributed in the irrigated lowlands both in rainy and dry seasons in comparison to existing land use. However, irrigation water supply was adequate for only part of the irrigated area in the dry season and rice was allowed to be grown only in a limited area.

Figure 3-42. Crop relative suitability for rainy season and dry season

Dry Season Rice Corn Tobacco Soybean Potato Shallot Paddy Onion Corn Garlic Soybean Rubber Rubber Citrus Citrus Lytchee Lytchee Mango Mango Longan Longan Non Suit Crop Other

(a) rainy season (b) dry season

Production zones Results of relative suitability analysis still have some limitation for use in crop production planning since they do not take into consideration existing land use, or relative importance of crops in relation to agricultural policy and target acreages of production to meet marketing demand, irrigation water supply, and other policies. Decision rules for relative suitability can be set so that allocation is based on existing land use, crop priority (which may be changed according to market demand, policy or economic returns), CSI values, and target area of production. These results may be considered as a crop production zone. Examples of crop production zones in UPB for rainy and dry seasons are displayed in Figure 3-43 (a) and (b). Page 136 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 3-43. Generated crop production zone in main season and dry season

(a) main season (b) dry season .

These concepts of spatial analysis may be extended to generate most suitable areas for crop area expansion or reduction. In the case of crop expansion, crop name(s), their relative priority and new target areas were assigned through a customized interface that works with Ar- cGIS. This system follows decision rules to guide spatial analysis that are similar to the ones described above, and generates the resulting maps. Figure 3-44 is an example of a map resulting from plans to expand longan and rubber growing areas to meet new targets of 80,000 ha and 1,000 ha respectively. However, due to the sizes of land mapping unit, the actual areas allocated to longan and rubber were 79,984 and 9,996 ha respectively. A crop reduction strategy may also be constructed, as shown in Figure 3-45. In this case, 2,000 ha of garlic was to be reduced, and 1,000 ha each of soybean and corn were to substitute for garlic. The garlic areas that needed to be replaced were identified from LMU which have lowest values of CSI for garlic and the selected area was accumulated until the reduction target area was reached. Selected LMUs were then assigned to soybean first as indicated by its higher priority than corn (Figure 3-45), and corn was assigned to remaining LMUs until it also met the target area of replacement. This illustrates the utility of this type of tool in dynamic and strategic land use planning to cope with changes in market conditions and policy. Chapter 3. How have market opportunities changed? Page 137

Figure 3-44. Crop expansion strategy for longan & rubber with the resulting production zone

Planning strategy: • Expand Longan area to 80,000 ha • Expand Rubber area to 10,000 ha

Target Relative Cultivated Resulting Area Crop Cultivated Area Importance Area (ha) (ha) (ha)

1 Longan 56,289 80,000 79,984 2 Lytchee 21 20 21 3 Citrus 29 30 29 4 Mango 10,089 10,100 10,031 5 Rubber 0 10,000 9,996 6 Paddy 52,153 52,000 52,002 7 Corn 9,225 9,200 9,210

8 Soybean 630 630 625

9 Others 61,991 28,247 28,175

Figure 3-45. Crop reduction strategy for garlic and the resulting production zone Page 138 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Remote area issues in the Mae Chaem sub-basin of UPB The previous section demonstrates the complexities of decision-making dynamics in areas of the UPB where farmers and various levels of decision makers are faced with a multitude of changing opportunities for commercial crop production. Land use assessments clearly indicate the relative resource quality advantages of lowland and lower montane zones for production of many crops present in the UPB. To complete this overview of changing opportunities, we now turn to land use patterns in the Mae Chaem sub-basin of the UPB, where limited data on soil properties make suitability assessments difficult, and policies are mixed.

The Mae Chaem sub-basin is officially divided by an arbitrary demarcation into upper and lower Mae Chaem sub-basins, which can be seen on the western side of all the maps of the UPB in the previous section. A quick review of the maps will verify the very small amounts of area deemed suitable for major crops grown in the UPB, as well as Mae Chaem’s almost insignificant share of major commercial agricultural production systems.

The section began with a brief mention of land use policy constraints on access to land resources in the UPB. Maps of protected areas and watershed classification displayed the nature and extent of these constraints (Figure 3-25). These maps clearly show how watershed restrictions and state forest lands are overwhelmingly dominant in Mae Chaem and other UPB sub-basins with land located primarily in middle and upper montane zones.

All this does not mean, however, that there is no agricultural activity in Mae Chaem. Indeed, Mae Chaem has a rich history of changing settlement patterns and land use by several ethnic groups (Figure 2-13) that pre-dates by far establishment of government zones for watershed or forest protection. The majority of people are ethnic Karen, with minorities of Lawa and Northern Thai, while Hmong and a few Lisu came to the area more recently. Except for very small lowland areas near Mae Chaem district town, traditional agroecosystems feature mosaic patterns of forest, upland fields, regenerating forest associated with rotational forest fallow shifting cultivation techniques, and small patches of paddy fields where terrain allows.

The first major impacts from commercial cropping came with establishment and growth of the opium economy. Driven and managed by powerful outside stakeholders, upper montane zones along the north-south ridges on both sides of Mae Chaem became important areas for opium production and many local residents become part of the labor force. Thus, after opium was banned and crop substitution projects were launched, upper montane zones of Mae Chaem were among their earliest targets.

Development programs aimed at opium crop substitution arrived in the 1970’s and 80’s, in tandem with new protected forest areas. Areas in the eastern mountains around Thailand’s tallest peak (Inthanon) were declared a national park and later a second park extended protected status to the south, and forestry watershed protection units were established at strategic locations around the sub-basin. Villages in or near protected areas were the first targeted by development projects with the twin aim of substituting intensive cash crops for opium in the highland (upper montane) zone, and stopping all forms of shifting cultivation in all zones.

Chapter 3. How have market opportunities changed? Page 139

As these approaches were extended to other parts of Mae Chaem, projects built road networks in both lowland and montane zones, and encouraged lowland agricultural industries in the private sector to establish production relationships in the sub-basin. They also brought electricity, health centers, and schools. But recognition of land holdings was withheld from all but lowland zones on the pretext of their reserved or protected forest status, and after 1985 their watershed protection status. Thus, access to credit and government agricultural extension services appropriate for mountain conditions have lagged far behind mainstream lowland areas of the UPB. Lack of even recognition of their basic citizenship was a problem for most people until the 1980s and 1990s.

These sometimes contradictory government policy-led efforts to transform livelihoods and landscapes in Mae Chaem still continue, and they still continue to generate tensions between state agencies and local communities, and uncertainty about opportunities for market production. In response to this situation, most local communities have begun establishing their own informal land use zoning arrangements. These efforts have been (informally) encouraged by forestry agencies working with Royally-initiated projects, as well as NGO projects active in the sub-basin. Thus, a project was launched by the International Centre for Research in Agroforestry (ICRAF) and its partners to collaborate with local villagers in mapping a substantial sample of areas where local land use zoning had been done by villagers themselves. Support was provided by the Rockefeller Foundation under a previous grant. The seven sub- basins that were mapped are shown in Figure 3-46. More details on this work, which covered 125 settlements in 53 administrative villages and nearly 1,400 Figure 3-46. Sites of village land use mapping in Mae Chaem square kilometers of area, are reported by Thomas et al. [2004].

In order to help provide a broad picture of land use in these types of areas within the Upper Ping Basin, village land use maps from three sub-watersheds have been aggregated and simplified. These three sub-watersheds represent land use patterns in three different contexts that cover significant parts of the Mae Chaem sub-basin.

Mae Tum watershed (Figure 3- 47) represents areas where upland rice is still produced using forest fallow rotational shifting cultivation practices that have cycle lengths of 5 to 10 years. Page 140 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

This is verified by the area Figure 3-47. Land cover under forest fallow systems ratio of fallow fields to active cropped fields. The overall landscape also includes patches of forest that are used for subsistence purposes and others that are protected, along with some small areas of paddy land. Parts of this area were studied by Roth [2004] and Prasit [2001], and most have now been declared to be national park. Figure 3-48. Land cover under permanent field systems The Mae Kong Kha watershed (Figure 3-48) represents areas near a national park where forest fallow shifting cultivation has been completely transformed to a system of fixed upland fields and permanent forest. Fixed fields may involve crop rotations, but use chemical inputs rather that forest fallow to maintain productivity. This is the location of new case stud- Figure 3-49. Land cover under multiple systems ies under this project reported in other sections of this report, especially in relation to hybrid maize seed production under contract farming arrangements.

The Mae Suk watershed (Figure 3-49) represents areas where the overall land use mosaic is a composite of quite different patterns associated with Chapter 3. How have market opportunities changed? Page 141 villages of different ethnicity. Downstream portions of the watershed (east side) are occupied by lowland Northern Thai villages that have substantial areas of paddy fields and some permanent fields for upland crops. The northwest portion of the upper watershed is occupied by Karen communities that still rely primarily on rotational forest fallow shifting cultivation systems. Hmong communities in the southwest portion of the upper watershed were the target of opium crop substitution projects, and now they rely on relatively extensive areas of fixed fields where they conduct intensive commercial cultivation of primarily vegetables, employing technology that includes gravity-fed sprinkler irrigation using PVC pipes. Although their crops and approach have been influenced by the Royal Project, they are not part of the Royal Project Foundation network, and their production, transport and marketing systems are their own. Commercial production has been expanding into ethnic Karen villages, and Badenoch [2006] explored in considerable depth social networks and resource governance issues associated especially with water management and upstream-downstream relations.

When land use zoning maps from all seven sub-watersheds under the mapping project are aggregated, we begin to see some of the broad patterns of variation in livelihoods that have evolved in response to changing opportunities and constraints in Mae Chaem. Thus, Table 3-11 presents data on land use patterns of mapped villages aggregated first by ethnicity and then by combinations of major cropping system components: paddy rice, upland rice, field crops, and orchard. Where upland rice is produced using forest fallow systems, the ratio of fallow to upland field area is an indicator of cycle length. Data includes areas of both cultivated and uncultivated land associated with each type of system. The five administrative villages with mixed ethnicities are listed separately.

As these data indicate, variation both among and within ethnic groups is instructive. North- ern Thai villages, which mostly are clustered in lowlands around the district town, have paddy lands, some fruit trees, and fixed fields for commercial production of maize. Hmong villages, which are located in upper montane locations on mountain ridges (except one area where they relocated under an early resettlement program), all have intensive fixed field commercial vegetable or fruit tree production, depending on the area. Lawa, who are locally recognized as having settled in this area before other groups, have been able to retain their mixed paddy and rotational forest fallow upland rice systems in reasonably sustainable form.

The majority ethnic Karen, however, have systems that span the full range of variation from long-cycle forest fallow to paddy with fixed field commercial maize, vegetables or fruit trees. They also have a range of intermediate medium and short cycle forest fallow systems that allow us to see the overall gradient of transformation that has been induced by pressures that continue to be applied in Mae Chaem. Government agencies and environmentalists do not believe traditional forest fallow systems can be sustainable, so areas like Mae Tum are being annexed into national parks to force people to occupy less land. The same forces refuse any official recognition of village rights to uncultivated and forest areas villages claim as part of their agroecosystems in Table 3-11. The vision underlying official policy appears to be one of small enclave village areas with a few intensive crops and non-farm income, embedded in a huge matrix of state controlled and managed protected forest land. Page 142 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Table 3-11. Overall Land Use Strategies Reflected in Village Land Use Zoning Maps of Seven Sub-Watersheds in Mae Chaem by Ethnic Group, 2002

average land resource use per household size of examples in sample sample share system footprint major village system components ratio cultivated land uncultivated land (ha) villages practicing system percent of TOTAL persons % of % % fallow paddy all paddy upland orchard subsist protect all forest + admin natur house Land Area sample sample per land forest perm paddy rice upland rice field crop orchard /upland (ha) (ha) % % % forest forest forest fallow vill vill holds pop (ha) people land sq km cultiv fallow forest Northern Thai Villages 10 expanded - maize - 1.3 3.0 46 52 2 2 6 14 14 3 5 274 1,134 4,590 4 3 25 18 - 81 13 small - maize - 0.4 3.1 12 87 2 6 3 9 9 6 7 725 3,327 8,926 12 6 37 25 - 73 14 small - maize fruit trees - 0.6 5.8 11 65 24 4 2 6 6 1 4 199 882 2,386 3 2 37 49 - 50 18 --garden - 0.1 0.1 83 0 17 - - - - 1 3 114 473 24 2 0.02 1,970 39 - - Lawa Villages 1 small long forest fallow 10.7 0.4 2.3 19 81 - 2 3 5 25 1 1 46 237 1,268 1 1 19 9 74 17 2 medium forest fallow 6.2 0.1 1.6 8 92 - 0.1 2 3 13 1 1 65 375 947 1 1 40 11 65 22 3 expanded medium forest fallow 7.8 1.5 3.7 41 59 - 5 12 17 34 2 3 116 610 4,400 2 3 14 10 45 44 Karen Villages 1 long forest fallow 14.0 0.2 2.4 9 88 3 1 15 19 48 3 10 233 1,447 11,973 5 9 12 5 57 38 2 small medium forest fallow 4.7 0.4 3.4 12 87 1 2 11 14 28 5 16 494 3,290 15,556 12 11 21 11 44 45 3 expanded medium forest fallow 7.3 1.3 3.4 38 62 0.2 8 18 27 42 3 7 189 1,231 8,659 4 6 14 7 34 58 4 short forest fallow 3.3 0.1 2.9 4 96 - 11 7 19 29 1 2 42 226 1,336 1 1 17 9 29 61 5 expanded short forest fallow 1.7 1.8 8.3 21 75 4 35 10 47 58 3 9 259 1,605 17,294 6 12 9 12 16 71 6 expanded short forest fallow maize 1.8 1.9 9.5 20 80 1 27 23 51 65 3 10 234 1,918 17,530 7 13 11 13 18 69 7 small short forest fallow vegetables 1.2 0.6 2.9 22 74 4 1 5 16 19 1 4 121 539 2,665 2 2 20 13 12 73 8 small fixed field maize - 0.4 4.9 7 91 2 3 4 6 6 1 3 68 295 761 1 1 39 44 - 55 9 expanded fixed field maize - 1.0 3.6 28 72 0.2 3 14 19 19 4 9 339 1,648 7,861 6 6 21 16 - 84 11 expanded - vegetables - 1.9 3.2 62 38 - 5 39 44 44 1 2 72 380 3,405 1 2 11 7 - 93 12 expanded - fruit trees 1.3 4.2 31 - 69 5 11 17 17 2 5 216 1,117 4,602 4 3 24 20 - 78 13 - maize - 0.1 9.2 1 98 1 13 26 44 44 1 1 54 235 2,980 1 2 8 17 - 81 Hmong Villages 15 - fruit trees - 0.1 3.6 4 2 95 1 1 3 3 1 1 25 355 165 1 0.1 215 55 - 43 16 - vegetables fruit trees - 0.05 11.3 0.4 55 44 2 33 35 35 1 1 44 278 2,039 1 1 14 24 - 75 17 small - vegetables 0.2 0.4 11.4 4 93 3 2 10 14 17 3 6 263 3,168 7,479 12 5 42 40 9 50 Mixed Villages 3 expanded medium forest fallow 3.7 0.8 5.4 14 86 0.1 9 14 24 41 1 3 90 790 4,225 3 3 19 11 36 52 9 expanded fixed field maize - 0.8 3.1 26 72 1 2 14 16 16 1 6 156 661 3,004 2 2 22 16 - 83 17 - vegetables 0.2 0.1 5.6 2 96 2 6 10 19 20 3 6 172 1,214 4,469 4 3 27 22 3 72

Overall Study Area 1.8 0.8 4.6 17 76 7 7 10 19 25 53 125 4,610 27,435 138,546 100 100 20 15 21 63 Chapter 3. How have market opportunities changed? Page 143

3.3.2 Commercialization and diversification of local economies

Upper Ping Basin in Northern Thailand In Northern Thailand, the agricultural economy has become more diversified during recent decades, no longer relying on only a few crops or livestock, but rather a diverse range of field crops, vegetables, fruit trees, ornamental crops and livestock. Contract farming and processing of farm products is common. High-income markets are tapped with good packaging technology and marketing skills. Speedy transportation and communication via good roads, railways, airline, postal, telephone and internet services have expanded market outlets for crops and products.

A study by Benchaphun et al. [2005] found that farming systems in Chiang Mai and Lam- phun are very diversified with many crops grown. While farmers still grow rice in the wet season, they have adopted diversified cash crops in the dry season, including soybean, garlic, shallot, tobacco, baby corn, potato, tomato, sweet corn, onion, cabbage, and many types of vegetables (Table 3-12). In Chiang Rai, maize is a popular cash crop both in wet and dry season.

Table 3-12. Farming in Chiang Mai, Lamphun and Chiang Rai, with net farm income per household by cropping patterns, 2002-2003

Average farm Net income per Province Cropping patterns size (ha) household (baht)1/ Chiang Mai Rice-garlic (fresh) 1.02 20,518 Glutinuous rice 2.06 21,272 Rice-tobacco (fresh) 1.09 22,372 Double cropping of glutinuous rice 1.58 26,869 Rice-shallots (fresh) 0.56 29,726 Rice-soybean 1.62 34,219 Rice-tobacco (dry) 1.09 46,084 Rice-sweet corn 2.08 49,491 Rice-onion 0.78 59,290 Rice-potato 0.67 121,300 Rice-garlic (dry) 1.02 128,288 Rice-potato-sweet corn 0.67 129,125 Lamphun Rice-baby corn 0.48 19,515 Rice-tobacco (fresh) 1.09 23,093 Rice-shallots (fresh) 0.61 24,138 Glutinuous rice-non-glutinuous rice 0.93 24,667 Rice-garlic (fresh) 1.02 35,085 Rice-tobacco (dry) 1.09 48,980 Chiang Rai Rice-soybean 0.56 9,699 Rice-field corn 0.70 11,955 Glutinuous rice 2.42 24,764 Glutinuous rice-non-glutinuous rice 3.38 62,477 1/ Include in-kind income but do not yet deduct value of family labor Source: adapted from Benchaphun et al. 2005 Page 144 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Highland communities are also now quite market-oriented and monetized. At the site in the Mae Kong Kha sub-watershed in Mae Chaem, for example, growing maize for seeds is popular among farmers under contract farming with a multinational company (Table 3-13). In the Mae Wang watershed, farmers have grown onion and tobacco as a cash crop since 1960. These crops need well-organized input and output markets. In the last 10 years, sweet corn is grown in the areas under contract farming with an agribusiness processing and export company. Longan, shallot, garlic, soybean and many other vegetables are grown as cash crops with very competitive input and output markets together with processing plants. Simi- lar cash cropping takes place in other areas of the North. In Chiang Rai, for example, tea, coffee, orange, litchi and pineapple plantation are now common.

Table 3-13. Changes in cropping over time in Mae Chaem and Mae Wang sites, Chiang Mai

Time line Mae Chaem (Mae Kong Kha) Mae Wang 12 year forest fallow rotation upland Paddy rice, soybean, sesame, onion, 40-50 years ago rice, paddy rice, maize, soybean green cabbage, garlic Paddy rice, soybean, sesame, to- 9 year forest fallow rotation upland bacco (contract farming), onion (co- 30-40 years ago rice, paddy rice, maize, soybean operatives), green cabbage, garlic, shallot, longan (fruit trees) Paddy rice, soybean, tobacco (con- 7 year forest fallow rotation upland tract farming), onion (cooperatives), 20-30 years ago rice, paddy rice, maize, soybean green cabbage, cauli flower, garlic, shallot, longan (fruit trees) Paddy rice, onion (cooperatives), 3-4 year rotation upland rice, paddy soybean, green cabbage, tobacco 10-20 years ago-now rice, maize, soybean, shallot (contract farming), longan (fruit trees), maize Paddy rice, 1-2 year crop rotation of Paddy rice, longan (fruit trees), soy- upland rice, soybean, shallot, maize, 10 years ago-now bean, shallot, tobacco (contract farm- hybrid maize for seeds (contract farming), sweet corn (contract farming) ing), pumpkin, longan (fruit trees) Source: CMU field survey, 2006

A survey of farm households in Chiang Mai, Lamphun and Chiang Rai conducted by Ben- chaphun et al. [2005] found that non-farm income constituted approximately one-third of the total household income. Such income came from a very diversified range of activities, including trading, handicrafts, food processing, wood carving, construction, wage labor in neighbors’ farms, factories, remittances, etc. As the non-farm sector grows, employment opportunities for farmers and their household members also grow. Moreover, growth of the tourist sector in Northern Thailand has also provided many villagers with income earning opportunities, including those related to provision of guest houses, restaurants, rafting, trekking and souvenirs. In Mae Wang watershed, for example, the research team found that ecotourism services as well as handicraft production for tourists has flourished, and now provides very substantial supplementary income for villagers. Chapter 3. How have market opportunities changed? Page 145

Tea production sites in Northern Vietnam Diversification of the economy of Vietnam is reflected in Hoang Nong and Phu Xuyen communes of Dai Tu district in Thai Nguyen province, where farming system and livelihood analyses were carried out. Both the communes belong to the buffer zone of Tam Dao Na- tional Park, which is located in the Tam Dao mountain range. Findings presented here are about market and resource access of poor tea growers.

Currently, most households living in these communes obtain the majority of their income from agricultural activities, such as paddy farming, rearing cattle and tea cultivation. Among them, livestock rearing, and especially cattle rearing, yields the highest economic return for farmers (Table 3-14). Additionally, local farmers, and especially poor households, also earn their living through forestry-related activities, including hunting, wildlife trafficking, exploiting medicinal trees, growing orchids, breeding cattle, and especially acquiring firewood.

Due to the high population density in buffer zone areas (218 people per km2) together with the intensive farming and forest-related activities mentioned above, pressure on wildlife and plants in the nearby Tam Dao national park is high.

Table 3-14. The relation between wealth groups and farming system groups at Vietnam tea site

Wealth groups (no of hh) Farming System groups - based on main income Poor Poor Medium Medium Better- Total source (n=200) with tea without with tea without off with land tea land land tea land tea land Other crops as main income 18 2 24 - 1 45 Tea as main income 17 - 34 - 4 55 Animals as main income 8 1 59 4 6 78 Off-farm as main income 521 - -8 Non-farm as main income 4-81114 TOTAL 52 5 126 5 12 Source: Structured questionnaires for 200 households, 2005

Tea is considered as a crop with a ‘comparative advantage’ for conditions in the buffer zone of Tam Dao National Park. But during the last few years, changes in the export market have forced a price decline.

In order to earn a living, farmers in the Tam Dao National Park and its buffer zone are intensifying their tea plantations, using high chemical inputs of fertilizers and pesticides. A survey conducted in 2004-2005 [NOMAFSI 2006] showed that Thai Nguyen tea growers use about 20 different types of chemicals, 14 of which are pesticides. The high input of poi- sonous chemical pesticides, together with bad spray management, reportedly leaves residual poisons in tea. High inputs of Nitrogen (N), Phosphorus (P) and Potassium (K) compared with harvested crop yields, also shows inefficiency of fertilization. This has had several negative consequences, including high soil acidity (pH is less than 4) and low soil fertility (Soil Organic Matter is around 1.4%) in the area, a reduction in the number of natural pest preda- tors, a low tea price, and a low income for tea growers. As a consequence, tea growers’ have become poorer.

Page 146 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Vegetable production site Yunnan Yunnan’s winter climate is ideal for cool-season vegetable production, when winter prices in northern China are at their highest. In recent years, vegetable production has become increasingly important in Yunnan, and planted area and income continue to grow. In 2004, the total area in vegetable production in the province increased to 7.8 million mu (520,000 ha), up 15 percent from the previous year. The total vegetable yield in 2004 was 9.5 million tons and valued at 9.5 billion Y, equivalent to 20 percent of the market value of all crops in that year. In areas where vegetables are planted in the cool season, farmers earn an average of around 2,100 Y/mu, but can earn up to 10,000 Y/mu, particularly in areas that specialize in commercial vegetable production.

The rapid growth of vegetable production by small-scale farming households over the last few years has occurred through external introduction of a comprehensive production system. Vegetable farming typically follows the “Company + Household” pattern, with vegetable traders from outside the local area introducing the entire production system and signing purchase contracts for the harvested goods. The traders provide seeds and other inputs (fertilizers, pesticides, plastic sheeting) as well as technical support for cultivation and harvesting. In most cases, they also select the type of crop and specific variety, so that the farmer need only provide manual labor. Without this access to new techniques and inputs, farmers in the region are limited to minimal production for local markets. This system is the predominant means of introducing new market opportunities to the area, as a comprehensive package of new crops, inputs and technology. In just one step, farmers are supplied with a new crop and guaranteed market access.

NTFP’s and rubber in Northern Laos Mountain communities of Northern Laos, as in many montane areas of mainland Southeast Asia, have traditions based on diverse sets of livelihood activities. In contrast to many other parts of the region, however, opportunities for commercial production have been relatively few. But due to an evolving sequence of government policies related to regional economic integration and land use in upland areas [Fujita 2006], rural livelihoods are becoming increasingly integrated into the market economy [Thongmanivong & Fujita 2006]. Commer- cial crop production has been expanding most rapidly in areas near larger towns and near borders with neighbouring countries where companies seek to expand production into Laos.

Various non-timber forest products (NTFPs) have long had significant value for rural households in Laos, providing sources of both food and income [Foppes & Ketpanh 1997; Clendon 2001]. Access to NTFPs is very important for the rural poor as a buffer against food shortage, and Raintree [2001] claims revenue from NTFPs accounts for up to 80 percent of cash income of the rural poor, who have very limited alternative market opportunities. With increasing commercial sale of NTFPs such as bitter bamboo others to traders from China, studies began indicating that sustainable commercial production of NTFPs has great promise for meeting needs of rural livelihoods while also promoting natural resource conservation [Morris & Ketphanh 2002]. Recent efforts to support local efforts have included wider local organization and market anaysis [Foppes & Phommasane 2006].

Chapter 3. How have market opportunities changed? Page 147

During recent years, however, restrictions on shifting cultivation practices in the uplands, coupled with recent rapid expansion of commercial agricultural production are reducing areas of fallow forest where NTFPs are collected. Village relocation programs are redistributing settlements to lower areas near roads, while land use allocation programs are defining new local land use boundaries. Commercial production of crops such as sugarcane and watermelon has primarily affected border areas, whereas the reach of crops like maize and a variety of more minor crops such as Job’s tears, paper mulberry, etc., has been deeper into mountainous rural areas [Thongmanivong & Fujita 2006].

But the recent boom in rubber production is driving rapid conversion of agricultural and forest areas to rubber plantations as it sweeps south from the Chinese border. Studies are now pointing out dangers associated with over-concentration on mono-cropping of rubber as a replacement for diverse traditional livelihoods in the region [Alton et al. 2005]. Potential negative impacts are expected to be particularly strong on poor households in rural areas that depend on NTFPs as an important source of food and income.

3.3.3 State and private sector roles in commercial production

Initiatives by both state and private sectors can have important impacts on emergence of new market opportunities. Thus, this section summarizes findings associated with our study sites in the region.

Contract farming arrangements Since contract farming arrangements are commonly seen as an appropriate model for helping rural households and communities engage in production for commercial markets, we have examined examples of contract farming operations in both Northern Thailand and Yunnan.

Contract farming and agribusiness the Upper Ping Basin Our case study in Mae Wang and Mae Chaem watersheds in Northern Thailand shows the importance of private sector initiatives through contract farming and agribusiness. In Mae Wang, an agribusiness company dealing with sweet corn processing and exporting was established in the watershed. They worked not only with farmers in the local area, but also in many areas of other Northern districts and provinces, providing seeds, fertilizers and technical knowledge to farmers. Once production begins, they provide a market for farmers at a guaranteed price. The sweet corn is then processed into canned or frozen products for domestic and export markets. In this case, the popularity of this sweet corn contract farming among farmers was at an average level, and the company complained that it could not expand to more farmers. The main reason is that sweet corn production competes with rice farming in paddy areas, and forced to choose, most farmers prefer rice farming to sweet corn cultivation.

At the more remote site in Mae Chaem, farmers grow hybrid maize for seeds using contract farming. The maize seed company comes to provide seeds, fertilizers, technical know-how and a market for output at a guaranteed price. Production of hybrid maize for seeds needs Page 148 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region quite a bit of experience, but farmers could learn how to do it in return for a better price for their product. Such contract farming arrived within the last 10 years (1995 onwards). Farmers reported that they like this arrangement because they do not have price risks. The guaranteed price for the seed was 8 baht per kg as against 3.5 baht for normal maize output, but output is lower for hybrid seed compared to maize for feed. An important obligation for contract farmers is to sell the output only to the contracting company. If this is not the case, the contract is breached and the company will blacklist the farmers and discontinued dealing with them. Unlike the sweet corn case in Mae Wang, Mae Chaem farmers grow their maize in the uplands and it has seemed to be the best commercial crop for farmers for many years.

Both of these cases demonstrate innovations in maize seed technology, cultural practices, marketing, and logistics. Such innovations have taken place through intensive research and extension by the private sector, with various types of support from the public sector. Thai government agencies have supported the role of the private sector through various means, including seed subsidies, provision of credit, quota allocations, etc.

Contract farming of vegetables in Yunnan Although the state no longer directly controls agricultural production in Yunnan, it still plays a central role in the agricultural economy through taxes, macro-economic policies, and the selective promotion of particular crops. There is a growing tension in western Yunnan between state planning for land use and crop production on one hand, and the interests of private companies and rural households on the other. Government bodies at all levels continue to draft 5-year plans for agriculture, including the total area to be planted to different crops and expected yields and income. However, as market information becomes more readily available, and private companies directly approach farmers to promote commercial crops under a so-called ‘Company + Household’ model, government officials face the choice of either supporting private sector initiatives or attempting to thwart them by providing economic incentives for their preferred crops, or sometimes even through intimidation. Examples from our case study site are summarized in Table 3-15.

In lowland valleys of western Yunnan, local government officials typically promote tobacco and sugarcane. Tobacco is the only agricultural product that is currently taxed, so government has strong incentives to maintain production levels. Sugarcane is promoted because local government usually owns shares in nearby sugar factories, and also receives benefits from company investment in roads and irrigation.

Tobacco planting is managed by local stations of the state-owned tobacco company, which sets annual targets for planting area in each township. The company promotes the crop, often offering incentives or subsidies to farmers, and provides all necessary inputs and technical assistance. At the beginning of the winter season, there is competition between the tobacco company and vegetable traders to sign production contracts with households. Local government officials often cooperate with tobacco company representatives to meet their annual goals, with methods ranging from cash payments to more coercive techniques. In one village, for example, vegetable seedlings were uprooted, and the tobacco company then offered to pay compensation for damage to farmers who would agree to plant tobacco in the ruined fields. Chapter 3. How have market opportunities changed? Page 149

Other incentives are offered at village scale, with the tobacco company offering to repair irrigation systems or local roads in exchange for meeting a specified quota of tobacco cultivation.

Table 3-15. Role of government at vegetable production case study sites in Yunnan, China Government role in Case study details vegetable production Vegetable production was boosted through a project by the district agriculture bureau to Government support establish a centralized vegetable purchasing market from 1999 to 2004. This attracted for market vegetable traders from other areas, who contributed additional information on varieties, inputs, and market conditions. The township government established a unique ‘stock cooperative enterprise’ (gufen hezuo qiye) in 1999 to promote vegetable production and act as a purchasing agent. The vice-director of the township was made manager, and it was staffed by government Government employees. Official poverty alleviation funds were used to start up operations and dem- introduces vegetable onstration sites were planted to improve technical knowledge and promote crops. Now, production and seeks the private sector has entered the market, and around 60% of vegetable traders are private investor from other areas. The township cooperative welcomes the influx of private traders, and has now shifted its emphasis to other economic activities such as value-added processing. The role of the cooperative is to facilitate economic development, rather than to earn a profit. A cooperative was established with support from the district government. It operates on a contract basis, providing seeds, chemicals and technology to farmers who sign a Government sales agreement. As the local market is relatively saturated, the cooperative is expand- cooperative co-exists ing into other villages with no previous experience in vegetable production. The main with private traders difference between this vegetable cooperative and other traders is that the cooperative has access to government capital. The local government tried to enter the vegetable market in 2006 by establishing its own cooperative to purchase vegetables. The head of the organization was the former Government attempts local Party secretary. When farmers continued selling to the established private trader, to compete with the government forced him out of business. The first day that he closed down, the co- private traders operative offered only a very low price to farmers, which caused extensive protests and eventually required police intervention. The cooperative was shut down and the private trader requested to resume operations. Although the local village director professes to fully support vegetable production as a Government way to increase household income, other officials are clearly not in favor of the transi- concerned over tion. At the township level, they are concerned that a reduction of sugar cane and to- revenue threat from bacco production will severely limit their revenue, with a loss of the special agricultural vegetable production product tax on tobacco, and a loss of sales tax from the sugar factory if cane production drops to the point that the factory decides to relocate. An outside cooperative set up business, with around 190 mu under contract to plant beans. This was seen as a threat to the tobacco company, and bean seedlings were Government actively destroyed in over 100 mu. The tobacco company then promised to compensate house- opposes vegetable holds 500 Y/mu if they switched to cultivating tobacco in the ruined fields. Several production months later, compensation had still not been received. This action was apparently taken with the implicit support or even cooperation of the local government.

Sugarcane is widespread in lowland river valleys, and is a popular choice because it is a ‘lazy crop’ (i.e. low labor requirements) with a guaranteed buyer in the nearby sugar factories. However, it is gradually being pushed out by more profitable crops such as cool-season vegetables. In villages with more commercial crop options, sugarcane is planted only in upland areas with no access to irrigation. Long-season sugarcane in particular is declining as farmers switch to a two season rice/vegetable production system. To maintain sufficient yields, the sugar company is often forced to offer additional incentives to farmers. In one village, the Page 150 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region company promised to complete road repairs in exchange for a 3-year commitment to plant 75 percent of the village area to sugarcane. This type of arrangement is made in cooperation with local government officials.

Sugarcane production is most prominent in villages adjacent to the factories, due to both the convenience of transportation and sales, and to the typically close relationship with local governments. There are several sugar mills in the region that were owned by the national government until just a few years ago. In 2003 and 2004 sugar mills in the case study areas were re-organized under local management. The township governments are now closely linked to these enterprises, and usually own shares in the company.

Although the state no longer explicitly controls agricultural production at the household level, the continuing influence of local government on crop selection should not be underes- timated. The government is usually either directly or indirectly involved in the introduction or promotion of any new economic crops – whether through establishment of a market or marketing association, joint cooperation with businesses, subsidies for ‘dragon-head’ enterprises (such as tax breaks or cheap land rental), or simply by allowing farmers to deviate from the official economic plans for commercial crop production.

Conflict arises between the goals of increasing local incomes and of maintaining government revenues, and government officials are often influenced by their close involvement with various state-owned or private sector companies. In one site, the tobacco company hired the village secretary to work full-time as a tobacco technician to oversee local tobacco cultivation. In another village, the decision to support the former Party secretary in the establishment of a vegetable cooperative proved disastrous, and was eventually abandoned. Even in the village which established a government-funded produce cooperative to support development of the private sector, the village committee has included a scheme for dramatic expansion of tobacco area in their latest 5-year economic plan (2006-2010). Meeting those objectives will compete directly with vegetable production, and likely require some sort of subsidy or coercion.

Stakeholders in the tea market chain in Vietnam Effects of trade reform by the state on livelihoods and food security will, to a large extent, depend on the structure of the economy, and the assets and vulnerability of the poor. Imber et al. [2003] suggest that analysis of the impact in any specific country should start with the identification of the poor, their assets and vulnerability to change, and the current trade realities. The poor at our tea production site and their assets were presented in Chapter 2. The current trade realities are analyzed through the tea market chain. The market within Dai Tu district seems to be influenced by the private sector, while the market outside Dai Tu is decided by both private and state-own companies (Figure 3-50).

In group discussions, farmers shared their understanding of the stakeholders involved in the local tea markets, how the local market acts and how their voices are heard in the market. After processing, they usually bring tea to local markets to sell. The weekly market is the most dominant market for all kinds of tea among all surveyed households (Table 3-16). The second most prominent market was the wholesale market at Dai Tu town. Chapter 3. How have market opportunities changed? Page 151

Figure 3-50. Tea chain in Dai Tu district, Thai Nguyen province, Vietnam

Source: Field survey in Dai Tu district, Nguyen Le Hoa, 2005)

While most farmers usually bring their processed tea to the local market to sell, through observation it was found that some households with better quality tea have middlemen or private traders who come to their houses to buy the tea. Results from all focus group discussions showed that, normally, farmers receive a total income from tea of around 10-20 million VND per year. The cost of tea production accounts for 40-50 percent of total income. As a whole, most of them are satisfied with the current price for tea, which is approximately 25-50 thousand VND per kg of dry tea. The price depends on quality and kind of tea. Normally, they often have to accept the price that private traders or middlemen fix because they don’t know much about national or global market prices.

The price of tea is very unstable, and farmers especially mentioned the price decrease in 2003 which greatly affected their tea production. Tea is a very perishable commodity both before and after processing. Green tea leaf cannot be stored for longer than six hours without damaging its quality, and it is recommended that there should be a maximum three hour interval between plucking and processing for good quality tea. Processed tea has a shelf life of only a Page 152 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region year before experiencing a serious drop in quality [Oxfam 2002]. Moreover, farmers need money for their lives, so they sometimes have little choice in whom to sell their tea to, and in such cases they are forced to sell their tea in accordance with prices offered by middlemen.

Table 3-16. Places for selling tea of households in different groups by type of tea Poor with tea land Medium with tea Better-off with tea land Type of tea (n=52) land (n=126) (n=12) & location No % of total No % of total No % of total Grafted Tea Weekly market 2 3.8 6 4.8 Low-mountainous produced tea Local daily market 2 1.6 Private company 1 0.8 Private processors 4 3.2 Private traders 1 0.8 Weekly market 11 21.2 49 39.5 4 40.0 Wholesales market 2 3.8 18 14.5 1 10.0 Seeded tea Local daily market 1 0.8 Private traders 1 0.8 Weekly market 37 71.2 41 33.1 5 50.0 TOTAL 52 100 124 100 10 100 Source: Structured questionnaires for 200 households, 2005

Rubber production in MMSEA Although production of para rubber and State Rubber Farms were introduced in the Yunnan province of China more than 50 years ago, most of the world’s rubber production has been located in more equatorial zones of Southeast Asia. Recent changes in markets, policies and technology, however, are resulting in considerable new growth in rubber production in portions of montane mainland Southeast Asia (MMSEA) zones, and both state and private sectors are playing active, closely related, and sometimes overlapping roles in its development.

Expansion of rubber production in the Lao PDR Recent rapid expansion of para rubber plantations in the Lao PDR has become the focus of considerable attention. Global demand for rubber has increased since the early 1990’s, driven largely by booming economies in China and India, with Asia now accounting for more than 50 percent of global consumption [Vongkhamor et al. 2007]. In Northern Laos, the increasing demand for natural rubber in China and the spreading of the “success story” of rubber planting in Had Nyao village in Luang Namtha province has led many farmers to invest in rubber planting. A recent study of the economics of smallholder rubber production in Luang Namtha based on production data from Had Nyao village confirms that rubber production can be profitable under current market conditions and with subsidized low-interest credit for investment [Manivong & Cramb 2007]. The provincial government in Luang Namtha ex- plicity supports rubber as a means to stabilize shifting cultivation and alleviate poverty [Weiyi Shi 2008].

Chapter 3. How have market opportunities changed? Page 153

While some farmers are planting rubber on their own (especially in Luang Namtha), the primary vehicles for current large-scale expansion of rubber is land use concession and contract farming agreement contracts that are being signed between Chinese companies and Lao government authorities at provincial and district level. Concession agreements specify the total amount of land area that a company can develop, but do not specify where those areas will be located. Often, consideration of land suitability for rubber plantations is not part of the process, local communities are not consulted, and local land allocation zoning is not considered. Discrepancies between legislation on foreign investment and land management provide further room for reinterpretation by local authorities. Farmers mention that forest areas are being cleared for rubber plantations, which is decreasing communal areas available for NTFP production and affecting water supply to paddy fields [Vongkhamor et al. 2007].

At a study site in Namo district of Oudomxay province [Vongkhamor et al. 2007] found that the contract between the company and the District Governor stipulated that the company will provide seedlings and technical support, and that it will purchase the latex when tapping begins. This is in line with the “2+3 scheme” advocated by the Ministry of Agriculture and Forestry, wherein farmers supply land and labor, and companies provide technology, markets and investment. The contract indicates farmers will receive a 60 percent share of profits from production, while 40 percent will go to the company. Profits include those both from latex production and from the sale of timber once plantations become over-mature. The price for rubber will be the current market price, but with a floor guarantee of 750 USD per ton. The contract is valid for 30 years, with an option to extend for an unspecified period.

This study also found that most farmers expressed dissatisfaction with the profit sharing arrangements, arguing that a 70-30 arrangement would be more fair when considering that farmers are to be the main source of labor throughout the life of the plantation. Thus, many farmers are hesitating to enter into agreements with the company, and specific household contracts have not yet been developed. The head of the district agricultural extension office argues that the 60-40 arrangement allows the company to recover initial investment costs, including development of a processing factory and feeder roads to the plantations that would potentially provide benefits for others in the district [Vongkhamor et al. 2007]. While the provincial government in Luang Namtha supports 70-30 contract farming arrangements, a recent study there found the ‘2+3’ scheme has often become a ‘1+4’ scheme, wherein farmers provide only land and may (if they choose) work as hired labor. Thus, contract farming can end up very similar to a simple plantation concession [Weiyi Shi 2008].

Emerging rubber in Northern Thailand Growth of rubber production is also becoming an issue in northern Thailand. In 1991 Thai- land emerged as the world market leader in natural rubber production. By 2005 natural rubber production was worth 205 thousand million baht (US$ 5.1 billion) [RRIT 2007]. Be- tween 1997 and 2006 area planted still increased by 20 percent to 2.3 million hectares [OAE 2006]. Average yields (kg ha-1) in Thailand (1,369) are higher than most other leading producers including Vietnam (969), Malaysia (881), China (713), and Indonesia (694), but not India (1,331) [OAE 2005].

Page 154 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Between 2004 - 2006 the Thai government promoted para rubber plantings in new regions outside peninsular southern Thailand, including the North and Northeast regions, with fast track project areas targeting expansion by another 160,000 hectares. Total areas planted to rubber in 2006 in the North reached around 32 thousand hectares (about 1.4% of Thai- land’s total area under rubber), while the Northeast had just over 246 thousand hectares (11% of total) [OAE 2006]. Areas considered to have potential for reasonable rubber productivity total at least 330,000 hectares in the northern region, and 768,000 hectares in the northeast.2

Smallholder expansion of crops and plantations in upland areas of Thailand’s northern region has been long constrained by land use classifications and policies. But there are indications that the attractiveness of rubber may test and challenge these policies. In March 2007 at least 3 farmers living at the foot of a hill area in Chiang Rai province were arrested, and others living in 3 villages were warned by the Chiang Rai regional forestry office not to use land in forest reserve areas for rubber plantations.3 Ethnic Lahu villagers were reported as say- ing they wanted to use the land to grow rubber trees like the others, but they couldn’t because of the protected area status.4

Conflicts over use of reserved and protected forest areas for para rubber plantations occur in several regions of Thailand, but the outcomes differ. In Southern and the Eastern regions, the government is more likely to compromise on economic grounds -- there are already almost 70 thousand hectares of rubber within national forest reserve lands [DLD 2005].

Expansion of para rubber plantations in northern Thailand could be beneficial to livelihoods in some areas, but given current land policies would likely trigger major land-use conflicts among groups promoting narrow conservation objectives everywhere, other groups concerned more with securing resource access and benefits for minorities and other disadvantaged groups, and wealthier, influential, investors focused more on commercial opportunities that would be opened up by new ways to access land.

Highland crops in North Thailand The Royal Project The Royal Project in Northern Thailand has been another form of organization that is difficult to categorize in terms of state vs private sector, since it has various attributes of both. In case studies of four Royal Project sites, however, one sees the importance of the Royal Project in providing new opportunities to farmers. The Royal Project Foundation (RPF) has alto- gether 36 development sites in Thailand’s Upper North Region.

The Royal Project began in 1969 with promotion of new crops to replace opium poppy. In the early days, it solicited wide cooperation from many government and non-governmental

2 Official Department of Agriculture tables and maps of areas with potential for rubber production available at: http://www.doa.go.th/rubber/index.html 3 Naew Na newspaper: 25 June 2007. 4 Manager newspaper: 18 September 2005. Chapter 3. How have market opportunities changed? Page 155 agencies including foreign donors and technical assistance agencies. Through these partnerships it conducted much on-farm research in new, alternative crops suitable to highland conditions of Northern Thailand. Most of the crops introduced in Project sites were temperate, high-value, capital intensive crops, such as vegetables (lettuce, strawberry, Japanese pumpkin, zucchini, bell pepper, carrot), flowers (such as statis, gypsophylla, carnation), and fruits (such as avocado, peach, pear, apricot, apple). Later, it became necessary for the RPF to launch marketing strategies, including creation of Royal Project outlets, shops and a brand name (Doi Kham). Technical assistance has been contributed by a range of professionals with experience in the private sector. Resulting new lines of products have been very successful in tapping well-off urban segments of the market. Packaging and processing of agricultural products has been improved continuously.

After more nearly 40 years of operations, RPF has been quite successful in establishing many new crops and products from the highlands. Operated as a foundation, it is neither a private company, nor an NGO, nor a government agency, but combines characteristics found in all of them. It is an organization producing many innovations and success stories. While its organizational structure, its personnel and access to technical assistance, and its privileged status are not replicable, its lessons learnt and approaches can be useful for others.

Re-emergence of coffee in Om Koi As described in chapter 1, Omkoi is a remote district of Chiang Mai province where livelihoods of the primarily ethnic Karen population combine traditional forest fallow agriculture with modest amounts of cash cropping. In contrast to cabbages and tomatoes, which are cash crops developed in Omkoi by the private sector, coffee was developed in the public sector and has now been transferred to the private sector. While coffee is not yet a major crop in Omkoi, recent growth in domestic demand for fresh-brewed coffee and substantial new investments to expand production suggest it may become much more important.

In the public sector, Arabica coffee (Coffea arabica L.) was officially introduced in 1957 when the Thai Agriculture Department obtained four cultivars from Brazil that were planted at crop experiment stations in North Thailand. Since no substantial research was being conducted on coffee, seeds from imported cultivars were planted at government stations and distributed among upland farmers in the vicinity. But progeny of these imports did not survive an epidemic of leaf rust disease (Hemileia vastatrix). Research on Arabica coffee finally began under the highland Royal Project in 1974 because its fit with the upland climate and environment made it one of the crops on trial as potential substitutes for opium under opium eradication schemes. With assistance from USDA, improved leaf rust resistant cultivars were brought from a Portuguese coffee research institute, and further study of leaf rust resistance was conducted by the plant pathology unit of the Department of Agriculture, including trials at research stations of the Royal Project. Despite promotion as an opium replacement crop, however, low quality output and a poor market in Thailand resulted in little expansion.

But since the 1990’s, shops in Thailand serving freshly-brewed coffee have been strongly promoted, and during 2002-3 this sub-sector grew by 10.2 percent (Euro-monitor 2005). With coffee becoming a good business, private companies began picking up where develop- Page 156 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region ment projects left off years ago. Furthermore, with high market margins for processing and pressure to ensure supply from environmentally sustainable sources, along with related strategic moves by multinational corporations, local companies now have strong incentives to roast their own coffee beans. While coffee markets in areas such as Chiang Rai are now well established, more remote areas like Omkoi have lagged behind. Five years ago, however, this began to change when the private company VPP Progressive Ltd, who conducts its coffee business under the consumer brand label “Café D’Oro”, began building a regional coffee production center in Omkoi. The goal of VPP is to produce 20 tons of shade grown roasted coffee daily with most of the raw material from Omkoi.

While the private company (VPP) is now taking the lead, it is building on various earlier public sector efforts. Indeed, the new project was encouraged by a former Minister of Agri- culture who knows the CEO of VPP personally. Its design and operations draw on research and extension experience of a Royal Project retiree considered one of the most knowledgeable coffee experts in Thailand, and it has recruited staff for their experience working as officials in highland agricultural extension projects. It also uses sixth generation leaf rust resistant cultivars developed under the government coffee breeding program.

New links with the public sector are also part of this process. Since, as in Mae Chaem, most land in Omkoi has been declared protected forest, protected watershed zones, and reserved forest, land security for local communities has been a longstanding and often bitter issue. Thus, the project requires government, private sector, and local Karen communities to work together with science providing the right coffee hybrid, and shade coffee being accepted as a sustainable development alternative. Moreover, suitable land must be made available for coffee plantation by negotiating rights for villagers to use land made available through a government “land reform” scheme. Accordingly, VPP began building a partnership with a project in Omkoi under the Office of Agricultural Land Reform (Sor Por Kor), which enables some areas of “degraded forest” to be used for agriculture. But the process of land allocation, as well as development of associated road and irrigation infrastructure by additional agencies, have proved difficult, and after 10 years are not yet completed.

In order to help facilitate the process, VPP rented some land from the land reform office (SPK) to build its production facility. It also launched a credit scheme for farmers already occupying the land reform area who wish to join the program. Farmers received a 15,000 baht loan from which they were required to use 10 percent to purchase enough coffee seedlings to plant about 0.5 hectare; farmers decided themselves on how to use the remainder of the loan. VPP also guaranteed to purchase all coffee produced at a minimum price of eight baht per kilograms. Most of the coffee planted, however, did not survive the dry season. While a company extension agent believed this was because farmers did not invest enough in taking care of their coffee trees, their coffee expert identified the problem as a result of not properly selecting and managing litter to cover the ground between trees, a practice that is very rare in the area.

Under a parallel second strategy, VPP is also working with the parastatal Bank for Agricul- ture and Agricultural Cooperatives (BAAC) under another coffee financing scheme. Here Chapter 3. How have market opportunities changed? Page 157 the company provides coffee seedlings at 5 baht each, and guarantees to purchase coffee in cherry form at 8 baht per kilogram. The loan from BAAC is based on group repayment guarantee, so it requires a group with a production plan that is credible to the bank officer. While this approach is more flexible about where coffee can be planted, upland farmers seldom have experience with such types of arrangements, and business partnerships beyond household level are quite rare in Karen communities. Moreover, coffee financing linked with SPK or BAAC must compete with contracts for short season vegetable production, wherein the produce output can be used as collateral for loans provided in the form of production inputs.

Currently VPP buys most of their coffee in Omkoi from remaining plantations initially promoted by UN development projects, in addition to looking for sources as far as 200 kilometers away. But company extension officers are searching for potential areas to promote coffee cultivation and expect to create more nearby suppliers. They are also working through village headman and seeking to convince local governments (TAO) to buy seedlings for local dem- onstration and experimental plots. Slowly, VPP is seeing coffee plantation area grow.

Since most coffee plantations in the past died, many Karen farmers remain skeptical. But remaining remnant coffee trees left from UN experimental plots also offer hope that coffee could be successful in the area. Farmers suspect that coffee requires much more care than what company extension officers told them in the past. They also know it takes three years after investment before beginning to reap benefits, whereas tomatoes and cabbages let them see the results of their labor (success or failure) in a short growing cycle. Agricultural area is also limited – primarily by the amount of effort required for fencing to keep cattle out of their fields. Whereas vegetables require exclosures only during very short crop cycles, coffee requires fencing that must be maintained for years. Moreover, farmers must allocate land and labor to continue swidden agriculture for food security, at least in the near term, while forestry departments are always trying to further restrict total agricultural areas.

Thus, many villagers ask VPP if coffee plantation will be considered as agricultural land or land protected by the forestry department. But the answer is not yet clear. Although forest departments have warmed somewhat to the idea that people and forest could co-exist, they are strongly opposed to mono-cropping or swidden agriculture within boundaries of “their” forests. And while some forms of agroforestry appear promising, it is still unclear what types of agroforesty solutions may be possible and acceptable. Whereas protection of biodiversity is an important issue for forestry agencies, maintenance of native flora has not been a strong value in the agricultural research community. The agroforestry vision in VPP came largely from India, where both coffee and shade trees are exotic species. Thus, VPP is now working to find local species that can be used for shade trees. One option they are exploring is Sator (Parkia speciosa), which is native to South Thailand. But it is not yet clear whether this would be considered as native in Omkoi.

If it is to be successful, Arabica coffee needs to find ecological, legal and economic contexts that enable it to be a superior alternative to current agricultural practices. And in order for Karen communities in Omkoi to embrace coffee production, returns and risks must clearly be superior to currently competing investments in cattle, vegetables and upland rice practices. Page 158 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

“I am a business man and my vision is to make Omkoi the coffee capital of northern Thailand’ said the CEO of VPP as he looked over land where the processing facility will be built with machinery imported from Brazil. “The challenge is difficult but I know it is possible to be done.” His science advisor, who has been associated with the Royal Project for 40 years, agreed to help because he believes that successful implementation of the VPP program will improve living conditions of the people as well as improve the condition of the forest. “I have served and been supported by money from Thai citizens” he said, and noted that even in retirement he is still burdened by the responsibility to do good for the country.

3.3.4 Linkages between lowland and upland economies in the UPB

Our review and studies of development in the Upper Ping Basin point out different types of linkages between montane and lowland zones that have strongly affected directions in which market-oriented production has developed and continues to evolve in montane areas.

Case studies of Royal Project sites and the integrated production and marketing systems developed under the Royal Project Foundation allow us to see quite clearly the importance of linkages between production opportunities in montane zones and the lowland economy. High-value cash crops are marketed in the lowlands, and affluent urban consumers provide the main market for these crops. Thus, collection, post-harvest handling, storage, sorting, grading, packaging, shipping, and transportation services for agricultural products from midland and highland sources to lowland markets must be speedy and of sufficient quality to ensure that agricultural produce will be fresh and marketable. The Royal Project Foundation has invested in refrigerated trucks to transport some products from its highland collection and grading operations to its lowland assembly and distribution facilities. Agricultural produce is shipped daily to Chiang Mai and Bangkok by trucks or sometimes by air freight. Fresh produce and processed products are on display at supermarkets in Chiang Mai and Bangkok, as well as at airports in both cities.

Transportation infrastructure is clearly a very important element in developing such systems, and transportation networks within Chiang Mai, Lamphun and Chiang Rai provinces, and from these areas to Bangkok are generally good with all-season roads and highways. The research team has also encountered other farmers in the uplands of Chiang Rai who ship their vegetables via air freight to Bangkok on a daily basis. In Bangkok, some restaurants have now specialized in upland vegetables. Moreover, improved roads have also enabled both domestic and foreign tourists to gain access to mountain areas and ethnic minority cultures, resulting in additional markets for agricultural products, as well as local handicrafts and services.

The Mae Wang watershed is located in mountains that form the western ridge of the Chiang Mai-Lamphun Valley, which allows them to market their agricultural produce in the lowlands quite easily. And since their proximity to Chiang Mai City is close enough that tourists can visit Mae Wang and return to the city in a single day, ecotourism “day trip” activities have been emerging, including rafting, trekking, sight-seeing, elephant riding, handicraft sell- Chapter 3. How have market opportunities changed? Page 159 ing, etc., as well as homestays for those who want to stay on a little longer. These lines of activities provide another growing set of jobs and income opportunities for uplanders.

At more remote sites in the Mae Chaem watershed, hybrid seeds produced by Mae Chaem farmers are sent to the Maize Seed Company situated in the lowlands, from which seeds are then marketed nationwide. Production of maize for animal feed elsewhere in Mae Chaem is also linked with lowland agribusiness operations that have expanded into mountainous areas during recent decades. Vegetables produced by Mae Chaem farmers, including soybean, cabbages, shallot, garlic, corn and others, are assembled and shipped to Chiang Mai city. And while promotion of commercial agricultural production in the highlands originally focused on products such as temperate vegetables and fruits that would not be in direct competition with lowlands, highland production now includes some of the same crops produced in the lowlands, but takes advantage of climatic differences that allow them to be grown during the off-season for the lowlands, when usually higher prices can offset transport costs.

These situations have all become possible because of improved road and marketing networks in the areas and within the Northern economy in general. As infrastructure and economic systems are further integrated across the Greater Mekong Region, similar opportunities are emerging, as well as challenges related to competition from areas further away that is sometimes reducing the importance of more local relative differences between upland and lowland areas that have provided the basis for economic specialization in the past.

Yet another side of linkages between lowlands and uplands in the UPB relates to changing perceptions and values in lowland urban centers. On one hand, these can provide incentives for further improvement of upland production. One example is growing urban concerns about consumer safety that result in higher price differentials for agricultural products that are grown with little or no use of chemical pesticides. This provides incentives for producers to overcome the technical challenges involved in order to maintain or improve their profits, while at the same time reducing the environmental impact of their operations. Another example is growing demand in Thailand for shade grown Arabica coffee, which may provide incentives to overcome technical and tenurial problems faced by potential small-scale producers in mountain areas.

On the other hand, growing environmental concern in affluent lowland urban centers is also increasing support for efforts to close midland and highland zones to agricultural production. These interests have lobbied strongly against efforts to provide long-overdue recognition of land use claims in montane zones of Thailand, and some are pushing for all montane areas to be incorporated into national parks and wildlife sanctuaries. Their arguments are usually based on urban beliefs that this is the only way to maintain biodiversity, watershed functions, and environmental sustainability in general. And their influence on land policy is very strong.

Thus, increased linkages between lowland and montane areas can have various types of impacts on livelihood opportunities in upland areas. While they can open new realms of possibilities for market production and economic integration, they can also increase exclusion. Page 160 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

3.4 Changing market opportunities and constraints

How have market opportunities changed? As we have seen, economic systems in the region have changed in many ways at various levels during recent decades, and clearly this has brought new market opportunities for many people. But to help facilitate a more specific answer to this question, Figure 3-51 reproduces our conceptual framework for assessing response to market opportunities that was introduced earlier as Figure 3-6.

Figure 3-51. Conceptual framework for assessing response to market opportunities

Development Policies, Land Use Investment & Programs Policies

Technology Market Structure Natural Resource Land use Access and Access Access patterns

Commercial Alternative Knowledge & Opportunities Responses of production Development information for commercial different (productivity, Scenarios access production household types profitability)

Local domain

Spatial Public sector Private sector Livelihood information Livelihoods of initiatives and initiatives and Capacities and management rural poor incentives incentives Entitlements systems

In the context of this framework, we can see that development policies, investment and programs have undergone radical change as countries of the region “opened” their economies, beginning in the early 1960’s in Thailand and expanding to include all countries by the mid- 1980’s. Key elements have involved emphasis on commercialization and export production in agriculture, economic restructuring that shifts more emphasis to industrial and services sectors, rapid technical change based largely on importing and adapting foreign technologies, strong emphasis on international trade, and rapid growth in domestic and foreign investment in production enterprises, as well as in the infrastructure and support services required to enable economic systems to function and grow. As a result, growth everywhere in the region except Myanmar has ranged from very promising to highly impressive.

The impacts of this growth in economic activity, however, have not been uniform. We can see substantial and growing disparities both among countries and among sub-national regions and sectors within each country. Thus, the answer to our question in the context of poor upland areas in the Greater Mekong Region requires a bit more focus, which the following sections seek to provide.

Chapter 3. How have market opportunities changed? Page 161

3.4.1 Expansion of market opportunities for mountain areas

As we saw in Chapters 1 and 2, mountainous areas of the region are primarily relatively remote, rural and poor areas inhabited by people who are often ethnic minorities in the context of their larger societies. Moreover, their traditional livelihoods are often diverse, but subsistence-centered and based in agroecosystem management practices that result in mosaic landscapes that are looked upon with disdain by lowland-dominated larger societies. Not surprisingly, then, governmental efforts to integrate these areas into rapidly changing national societies are frequently in the context of welfare-oriented programs to help ‘backward’ poor people become more ‘modern’ or ‘civilized’. Nevertheless, substantive change in the market opportunities available in mountainous areas has been taking place.

Especially in China, Vietnam, and Lao PDR, countries had passed through a socialist period of collectivization, so that processes of economic “opening” have also been associated with allocation of responsibility for assets, and especially land, back to individual households and local communities. This has shifted the nature of market opportunities by enabling households and local groups to formulate and implement their own entrepreneurial initiatives. Along with relaxation of monopolies operated by state enterprises, this has also allowed emergence of a new generation of “private” merchants, industries and associated players in production, processing and marketing chains linked with national and international markets. Thus, an expanded range of initiatives and incentives from new mixtures of private and public sector sources are influencing market opportunities available in local domains. We have seen examples of these processes at work in relation to tea production in Vietnam, to vegetable production in Yunnan, and to commercialization of NTFP production and expansion of rubber in Laos.

Since Thailand did not pass through a similar period of socialist reorganization and began its process of economic “opening” earlier, economic restructuring and development of private sector entrepreneurial activity is at this point more extensive and complex than in other states of the region. Although state enterprises and public sector initiatives have also influenced various parts of the economy, there has been little serious attention to reallocation of basic assets or even recognition of land holdings in midland and highland areas, and the main focus of government investment has been in infrastructure to support primarily private sector- led development of the market economy. As we have seen in the Upper Ping Basin, most state investments in irrigation and other types of physical infrastructure in mountain areas has been concentrated in lowland zones of major valleys, where increasingly complex and dynamic intensive cropping systems and production zones have emerged. The first important exception was investment in road networks in montane zones, initially motivated primarily by national security and opium crop substitution programs. Thus, market production opportunities in mountain areas have come primarily from two directions: up from the lowlands, in the form of linkages with agro-industrial companies such as those associated with hybrid seeds and sweet corn processing in examples from Mae Chaem and Mae Wang; and down from the highlands in the form of intensive commercial production of vegetables and fruits that began with opium crop substitution programs, and are now epitomized by the Royal Project. Further growth and development of these opportunities has been facilitated by Page 162 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region emergence of district and more local marketplaces, as well as by development and elaboration of electricity and communications networks, along with gradual improvement of other types of infrastructure and support services. The new round of promotion of highland shade grown coffee production being led by private companies may reflect new types of private initiative.

Moreover, expansion of market opportunities in montane zones around the region have not been limited to agricultural crop production, as we have seen in the roles of livestock and non-farm income in several case study sites. Wage employment in expanding labor markets is now a source of opportunities in many areas, as are various non-farm production activities associated with expanding tourism and other parts of services sectors. Improved transportation and communications systems widen the domains within which people can seek wage labor and non-farm opportunities, and more distant employment opportunities are providing incentives for people to migrate out of montane zones on a temporary, seasonal, or permanent basis.

Another important dimension of the expansion of market opportunities in the region is the increasingly dynamic nature of market incentives as economic systems become more regionalized and globalized. Thus, new market opportunities can arise and fade. One example is when differences in local resource characteristics provide a basis for profitable specialization in the context of local or national markets that disappear when market integration brings competition from more distant locations with even more favorable resource characteristics. We have seen examples of this in the Upper Ping Basin. And, product quality and marketing strategies that were adequate in the past may no longer be sufficient under more globalized conditions, as we have seen in the case of tea in Vietnam. Moreover, entrance of new opportunities can threaten or displace others, as may be the case with NTFPs and rubber in Laos. But globalization also stimulates demand for more environmentally friendly products such as shade grown coffee, medicinals or NTFPs, which may result in important new opportunities if policies, practices and livelihoods can be appropriately adapted.

3.4.2 Role of technical innovation

Virtually all of the changes we have seen in market opportunities are associated with technical change. In some cases, such as commercial NTFP production in Laos, for example, change is primarily based on adaptations of local or indigenous technical knowledge that is already part of livelihood capacities within local resource domains. But even there, new knowledge from the additional market factor domain is required for effective organization and marketing. Similarly, our case study of tea in Vietnam shows the important role of technical adaptation and change, even in crops that have been commercially produced for some time.

In other cases, such as with commercial vegetable production in Yunnan or hybrid maize seed production in Mae Chaem, technologies required for effective production require entire “packages” of new technology, including seeds, inputs, cultivation practices, post-harvest handling, quality control, etc. While much of this technology is not “new” in the sense of technical invention, it is new to households and communities in mountain areas where these Chapter 3. How have market opportunities changed? Page 163 opportunities are emerging for the first time. Moreover, there are always aspects of adaptation and “localization” of technologies requiring innovation by local producers.

Many of these new technologies also require production inputs, equipment and tools that must be purchased through emerging or expanding input markets. This requires access to capital and to input markets themselves, as well as sufficient knowledge to make the most appropriate purchases, and knowledge of how to employ these inputs in an efficient and effective manner. Thus, various gaps in the availability of capital and knowledge need to be filled if opportunities are to be translated into effective commercial production realities.

Sources of technical knowledge can be from various channels. Many outsiders think of government extension agencies and promotion campaigns as the primary providers of new technical knowledge. While they can play an important role, they are far from the only source of knowledge, and often not the most effective one. We have seen examples of contract farming where usually private companies provide technical knowledge, as well as examples of knowledge coming from non-governmental or international projects, or from friends or relatives through social networks. As engagement in commercial production activities continues to evolve over time, continuing technical change and innovation are more likely to come from local farmers and farmer groups themselves, as we can see in the Upper Ping Basin, but also among some of the more innovative tea growers at our case study site in Vietnam and elsewhere. Thus, the combination of experience, access to information and communications, and educational advances will be of great importance over the longer term.

One very important aspect of technical change and innovation that is important across the region, including all of our case study sites, centers on change in production efficiencies and product forms, quality, processing, packaging and marketing that will allow producers to effectively compete in globalizing markets where demand and price fluctuations and trends are affected by a myriad of factors beyond the control of local producers. Indeed, perhaps the most important challenge is how to facilitate development of entrepreneurship and associated capacities to rapidly adapt production resource mixes, practices, tools and facilities to effectively cope with a constantly changing market environment.

3.4.3 Role of the state in expansion of opportunities

At the macro-level it has clearly been changes in state policies that have opened the door for emergence of market production opportunities in states of the region. An important central theme in these processes has been that the state apparatus should “back off” from strict central planning and state enterprise monopolies, and allow emergence of private sector initiatives to shape and manage production for commercial markets. At the same time, however, there are needs for states to coordinate policies and support aspects such as research and development, in order to provide an environment where private initiative can flourish and provide opportunities in which poor mountain communities can effectively participate.

While there is no doubt that there has been much change in this direction in the region, we have also seen that, especially for countries undergoing “transition” processes, what and who Page 164 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region is “state” and what and who is “private” often requires operational definition within local contexts. Roles of state bureaucracies and organizations, including military and political components, are still strong in all states of the region, and there are frequent links where both agencies and individuals play active and important roles in both spheres.

That being said, we have also seen examples of emerging tensions between state and private sectors, such as in the vegetable production case study in Yunnan, which indicate that differences are emerging and competing for engagement by local farmers and communities. There are also many efforts to either privatize or at least transform state enterprises to operate in a manner that more closely resembles a private enterprise. And there are efforts to transfer leadership of some programs initiated in the public sector to more entrepreneurial private sector actors. These types of change, however, appear to be quite difficult, and likely to require changes in thinking in both public and private sectors that may require generational change.

We have seen examples of how state organizations at various levels sometimes seek to effectively “tax” emerging local, domestic or foreign enterprise by imposing requirements for improving infrastructure or facilities, contributing funds, or assisting state-promoted programs, that are well beyond the operating domain of the enterprise. State “leverage” in negotiating such agreements can include contracts with agencies or local governments that are required for enterprise to operate in their areas of jurisdiction, or even threats of harassment or intimidation. Results include various combinations of lower prices for local producers or lower enterprise profitability, and can sometimes lead to inability of the enterprise to compete with other producers. While these types of approaches are sometimes advertised as “showing social responsibility” or “returning benefits to society”, there is a limit to how much a private enterprise can contribute to such activities and still survive. Beyond issues of transparency and accountability, there are also some serious questions about impacts such approaches can have on prices received by poor farmers where they are the producers and government policies also include poverty alleviation.

Where there is most widespread agreement on a strong role for the state is in provision of physical infrastructure and at least basic services. Expansion and upgrading of road networks in the region have been a critical factor for enabling emergence of opportunities for market production, and especially when they are accompanied by electricity and telecommunications. While these types of physical infrastructure appear to have been necessary for emergence of most of the opportunities we have seen in both lowland and upland contexts, they are sufficient only for those who are otherwise already prepared to effectively participate in market production. Especially in the context of montane zones, such people are quite rare.

Basic services where state leadership is also seen as extremely important include at least basic levels of health care and education, as well as research and credit services in areas where there are insufficient incentives for private sector initiatives. While most states have made very substantial progress in the reach and quality of these services, most still have considerable disparities in distribution between urban and rural areas, as well as between lowlands and uplands, and among different social strata of society. There are also often special issues and considerations where major components of local populations have different ethnic, linguistic or Chapter 3. How have market opportunities changed? Page 165 cultural characteristics, as is commonly the case in montane zones. Of course, the same is true in most parts of the world, but that does not change the degree to which it affects disparities in economic opportunities among these different components of the population.

Additional services are also often provided by government agencies or their parastatal offspring, including, for example, provision of subsidized agricultural inputs such as seed, planting materials, fertilizers, or chemicals, production quotas under state monopolies, or information through extension materials in various types and formats. They also often use various incentives and/or disincentives to induce formation of different sorts of groups to engage in activities they promote, and sometimes provide credit or direct subsidies to them. Such services are frequently associated with national campaigns to promote one or another commodity or product and are often aimed at meeting politically determined production targets.

Various state agencies and programs have sought to move further beyond infrastructure, service and subsidy roles into direct operational involvement in enterprise development and management. While roles of state enterprise monopolies are generally being de-emphasized, they are still associated with many new “private” enterprises that are being “spun-off” from their operations, and many state military, administrative and political officials are involved to some degree in many new “private” ventures. These factors can and do affect the range and nature of market opportunities available in local areas, and especially in more remote areas where the range of livelihood options is usually more limited.

3.4.4 Constraints on opportunities

While the range of opportunities for market production in montane zones has clearly been expanding, efforts by people living in these areas to incorporate these opportunities into their livelihood strategies still face several types of important constraints.

Despite advances that have been and are currently being made in physical infrastructure, physical access is still an important constraint in many montane areas. And even when basic physical infrastructure and services are in place, the terrain and relative remoteness of many areas in montane zones still impose higher costs in time and transport on the inputs they require and the products they produce. This makes it difficult for these areas to compete directly with areas that have a locational advantage, unless other factors such as seasonality or product characteristics or quality can offset such constraints.

Limited information, knowledge and expertise impose further constraints on opportunities, and these constraints are usually more severe in montane zones. In addition to more difficulties in physical access, low non-poor densities in montane zones are indicative of the general scarcity of successful entrepreneurs and sources of knowledge and expertise. Generally lower levels of education and literacy are also indicative of the broader set of issues, which can be further complicated by language and cultural issues associated with ethnic minority populations. Moreover, there can be disparities in access to many programs and services that relate to ethnicity or affiliation with groups that are marginalized by society. We have also seen in Vietnam, however, that there are some newer government support programs where the tables Page 166 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region have been turned so that ethnic minority status can be an advantage in accessing support. While it is still an open question how much such programs will be able to affect the overall balance of constraints faced by ethnic minority groups, at least it appears to be a good start. We have also seen in Yunnan, where ethnic diversity is part of the provincial identity featured in marketing in its “backbone” tourism industry, that ethnicity seems to have little relationship with poverty status.

Critical gaps in production, processing and marketing chains are often very important constraints that are again more difficult to fill in montane zones. We have seen how vertical integration that incorporates contract farming mechanisms appears to be a promising approach, yet results and acceptance by farmers appears to be mixed. And where systems have been put into place largely through initiatives from lowland agro-industry companies, resulting areas of intensive production in mountain regions, sometimes based on only one or a few commodities, are coming under increasing criticism and restrictions related to their perceived environmental impacts.

If maintenance of diversity is to be one of the priorities for mountainous areas, then the example of chains that have been developed by the Royal Project Foundation in northern Thai- land may be indicative of the types of systems that need to be put into place in order to have well-functioning mechanisms for capturing value added and effectively marketing products into high value urban niche markets. The fact that there appears to be so few examples where this has been accomplished and the unusual characteristics of the RPF are indicative of the difficulties involved. One of the least discussed, but perhaps one of the most important aspects of what the RPF has been able to accomplish is establishment of systems and operations that are generic enough that the same facilities and systems can be used for product lines that include a relatively diverse and evolving set of products, rather than the single commodity or narrowly focused chains that are more common in the region. At this point, there are still very few examples of private or public sector initiatives that have been able to effectively develop such “backbone” systems capable of supporting diverse product lines that play on the relative advantage of complex ecological conditions found in mountainous areas.

But perhaps the single most important set of constraints for people living in montane zones in many parts of the region relates to access to land resources. In some cases, especially in parts of Vietnam, this is associated with increasing population density resulting from high rates of population growth. But in many more areas it is not so much population growth that underlies land resource access issues and problems, but rather various combinations of lack of recognition and security in local claims to land resources, redistribution of settlement patterns associated with induced resettlement and land allocation programs, and increasing exclusion from access to land resulting from state land use policies. Many of the underlying issues here are associated with the nature of traditional agroecosystem management practices, which have been difficult to integrate into the conceptual framework of mainstream land tenure schemes, and which include practices that mainstream societies find extravagant in terms of the areas they occupy, and unacceptable in terms of their perceived environmental impacts. Additional aspects of these issues will be discussed further in subsequent chapters. Page 167

4.What strategies have been used to respond and adapt to changes in opportunities?

Previous chapters identified where montane zones of the Greater Mekong Region are located, the distribution of poor areas and people according to different definitions and measures, and how opportunities for market production have changed during recent decades. This chapter shifts to a finer scale of resolution in seeking to examine the strategies that different households and communities have taken in responding or otherwise adapting to the changing sets of opportunities that have emerged within their local domains. This is intended to help provide insight into differences associated with responses to market opportunities that also relate to poverty and inequality in the region.

4.1 Access of the poor to markets opportunities

We saw in the first chapter that poverty is associated with deprivations that prevent people from being able to pursue with dignity livelihoods that can enable them to achieve their aspirations. These deprivations can be associated with five types of capital assets: natural capital, human capital, financial capital, physical capital, and social capital. When some people are able to assemble appropriate mixes of these types of capital assets while other are not, inequality and poverty are likely results.

A recent review of inequality in Asia [ADB 2007] emphasizes distinctions among three aspects of inequality: Inequality in outcomes is what can generally be measured using tools such as Gini coefficients or quintile ratios. Inequality in effort reflects the different degrees of striving, ambition, and diligence, as well as different aspirations among people in a population. Inequality in opportunity reflects underlying issues, structures and processes in society that deprive some portions of the population from having the capacity and a chance to pursue their aspirations with dignity. Indicators of inequality based on income are either already fairly high (Thailand) or appear to be growing in all states of the region. Such indicators are considered to be measures of inequality in outcomes. And as we have already seen, distributions of this type of inequality are not necessarily similar to distributions of poverty incidence, depth or densities.

Most measures of poverty are based on comparisons with national or international poverty line standards, and efforts to establish poverty lines seek to differentiate what is sufficient to provide basic opportunities for people. One major problem with most conventional approaches, however, is that they focus primarily on income or consumption expenditure-based outcome measures. Although these measures can then be correlated with indicators of other characteristics of poor and non-poor populations to try to identify “determinants” of poverty, there are often still important difficulties in distinguishing between correlation and causation.

One line of alternative approaches centers on participatory poverty assessments, such as the one employed in the Lao PDR that seeks “…to define, in a manner that is representative of Page 168 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region the country as a whole, what poverty means to the poor themselves, what they experience in their own words, what causes they identify for poverty, and what their recommendations are for the alleviation of poverty” [Chamberlain 2007]. Participatory poverty assessments have also been conducted in Vietnam [World Bank 1999] and Thailand [Srawooth 1999 ], as well as many other countries [Narayan et al. 2000], as part of efforts to develop a global report on poverty [World Bank 2001].

One of the major global products of this work identified ten dimensions of the deprivations and disadvantages endured by the poor [Narayan et al. 2000]: x Livelihoods and assets of the poor are precarious, seasonal, inadequate x Places where the poor live tend to be isolated, risky, unserviced and stigmatized x The bodies of the poor tend to be hungry, exhausted, sick and in poor appearance x Gender relations are often troubled and unequal x Social relations with the poor are often discriminating and isolating x Security of the poor is often characterized by lack of protection and peace of mind x Behaviors toward the poor reflect disregard and abuse by those more powerful x Institutions often treat the poor in ways that are disempowering and excluding x Organizations of the poor themselves tend to be weak and disconnected x Capabilities of poor are limited by lack of information, education, skills, and confidence Moreover, these dimensions are often tightly interlocked, making it difficult for poor people to better their lives. One aspect of particular overall concern is the “…seemingly insurmount- able problems of accessing market opportunities, government services and civil society resources.”[Narayan et al. 2000]

The focus of assessments under our study is on market and resource access of the poor in upland zones of the Greater Mekong Region. While it is beyond the scope of our work to attempt to provide in-depth coverage of all the above aspects of deprivations associated with poverty, it is also clear that we need to consider carefully what we mean by access.

Access The most common, and perhaps the most basic way in which access is perceived is in terms of physical access. Especially in largely rural areas such as those found in most montane zones, one of the most basic limits on access to resources is the type and characteristics of natural resources present within a local area. As we have seen, land, water, plant and wildlife resources in mountain areas tend to be very diverse, and thus the amount or extent of any particular type of resource tends to be limited. Different types of resources have different productivities for yielding different types of products in return to investments of different types of capital assets. Who can gain physical access to do what kinds of things with which particular types of natural resources is mediated by institutions in human social systems that are nested from very local to national and international levels. Terms of access can vary widely with regard to exclusive versus joint access, timing (e.g. seasonal, temporary, permanent), or types of use allowed (e.g. gathering, hunting, timber, grazing, cropping, etc.). Moreover, rules under institutions at different levels may conflict with each other, and all are subject to change over time. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 169

Physical access also has its basic costs. Perhaps the most basic of these is the cost in human time and energy associated with travel to and from a site where a particular type of resource use is possible. Costs can also increase depending on the types of tools and inputs needed to transform the natural resource into a useful product or service, and to relocate products to where they will be used, consumed, or traded for something else. There are also various costs in terms of social or other types of capital assets associated with obtaining and maintaining physical access under social institutions that regulate access to and use of natural resources.

Social groups and organizations at different levels can mobilize and invest various types of resources in development of physical capital assets in the form of infrastructure that can decrease costs of physical access (e.g. trails, bridges, roads) or increase productivity of natural assets (e.g. irrigation, drainage). The distribution of costs and benefits associated with building, maintaining and operating such infrastructure is again mediated by social institutions.

All of these types of processes have been occurring for centuries at many locations across the Greater Mekong Region. Many would agree with Jodha [2005], however, that in the past the gradual rate of change in mountain regions and their relatively high costs associated with great distances resulted in evolution of livelihood strategies that were diverse and closely linked with natural resource characteristics of upland mountain environments, including consideration of risks and sustainability.

From this point of view, what is happening as a result of the relatively recent changes occurring across the region discussed in the previous chapter is not really a change in these basic principles. Rather, it is that changes in institutions and investments at higher levels are bringing rapid change that is often imposed on upland mountain areas without consideration of the context and constraints these areas face. As a result, institutions, infrastructure, production arrangements, and other factors associated with ‘modernization’ and market integration are both pushing and pulling people in mountain regions in directions that degrade fragile natural resources, marginalize and exclude mountain people, and increase their risks and vulnerabilities. High poverty levels are seen to be one result of these processes.

Others argue, however, that problems in upland mountain areas are associated with insufficient access and integration with globalizing economic systems. From this point of view, what is needed is more extensive and efficient infrastructure for transportation, communications and energy (the focus of GMS infrastructure programs), together with more access to markets and financial capital (credit), as well as education, public health and social service programs to build human capital. From this point of view, local economies and livelihoods will then be able to restructure themselves around products or services for which they can find a niche in the globalizing economy, or relocate to another location or economic sector.

While we see that high poverty incidence in the region is often associated with relatively remote montane areas, it is also clear that poverty is not limited to such areas. As the survey of poverty in chapter 2 indicates, there are both poor and non-poor components of populations everywhere in the region. Moreover, in areas of high population density the number of poor Page 170 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region people can be even greater than in areas with high poverty incidence but low population density. And inequality can be high in areas where poverty is considered to be quite low.

This raises at least two important issues for our examination of resource and market access. The first issue is what elements of access are associated with particular types of locations or areas? This issue appears especially relevant for areas where poverty incidence is high and non-poor density is low, which suggests that location-based constraints may be very important. The second issue is what are the underlying access-related issues associated with poverty in areas where relatively large proportions of the population are able to maintain livelihoods that keep them above the poverty line? These situations suggest location-based constraints on access may be of less importance than other types of constraints. And in either case, it may be important to try to distinguish differences in access between components of the population that may be temporary or transient poor, versus others that may be chronically poor [Hulme & McKay 2005], and how these are changing over time.

Research approach Our approach to investigating these issues has been to examine the types of livelihood strategies found in case study research areas, and to group them into classes that reflect degrees and types of response to and engagement with market opportunities that have emerged in recent years. We have then explored the characteristics of households who adopt these different types of strategies, with particular attention to the composition of their portfolio of livelihood assets. Additional information includes views they have expressed themselves about their choice of strategy, directions in which they want to progress, constraints they face, and how they are seeking to address those constraints, as well as data and information from studies of how strategies have changed over time. Analysis of this data provides the basis for our overall assessment of differences in strategies, response capacities and institutional influences, as well as our perceptions of directions in which inequality appears to be changing in these areas.

4.2 Access constraints and efforts to reduce them

This section explores three dimensions of access constraints and efforts to reduce them at different sites and levels in the region. First, the distribution of various factors that physically constrain access to land, water, and markets are surveyed in the context of the Upper Ping Basin using spatial information technology. The second dimension turns to government programs in Vietnam specifically that specifically target reduction of constraints to access to natural resources, markets, and services for poorest communities in remote and mountainous areas. The third dimension brings us back to North Thailand to explore ways in which poor people obtain and use assets and entitlements that support each other in order to gain access to additional livelihood options as they further build their capacity to achieve a better life, resulting in patterns of livelihood change that can be seen as climbing an asset-entitlement ladder. Together, these three examples of access constraints and approaches to overcoming them set the stage for our explorations of various household strategies for responding to new market opportunities section 4.3. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 171

4.2.1 Physical access to resources and markets in the UPB

Our Upper Ping Basin case study site in northern Thailand is sufficiently large and diverse for us to begin with an examination of differences in physical access to natural resources and markets among locations in different parts of the basin. We begin with a brief discussion of land access issues that were already introduced in the previous chapter, followed by a spatial assessment of access to various types of water resource infrastructure that have been developed through investments in the basin. We then turn to a spatial assessment of differences in access to economic and social infrastructure associated with different locations and investments in transportation infrastructure in the basin.

Access to natural resources: Land The introduction to discussion of land use production systems in the UPB in the previous chapter was divided into two parts. The first part demonstrated the spatial distribution of complex and dynamic agricultural production systems that continue to evolve in response to globalizing market conditions. It is clear that the overwhelming focus of this system is in lowland and lower montane areas of the Chiang Mai-Lamphun valley, where assessments indicate land and locations are suitable for a substantial range of commercial crops, and land use tenurial rights are primarily fully recognized under the national system of land titling. Access to land in these areas is mainly limited by one’s ability to inherit or purchase land at increasingly expensive market prices that rise with close physical proximity to major urban centers that are expanding into surrounding agricultural lands.

We also saw in Figure 3-25, however, that large areas of the UPB located outside the Chiang Mai-Lamphun Valley have been declared protected forest areas, or have land use constraints associated with the national watershed classification system. Most all forms of land use by local communities is legally excluded from protected forest areas and class 1 watershed lands, and restricted to various degrees by other watershed classes in montane zones. The overall impact of these constraints is that there are very few areas where local communities have any form of official recognition of their land use rights. Yet we saw examples from the Mae Chaem sub-basin of the various types of agroecosystem management practices that exist in most of these areas, and how they are being increasingly excluded from expanding protected areas and pressured to transform their traditional mosaic landscape management practices into small areas of intensive commercial crops supplemented by non-farm wage employment.

Thus, in the UPB we do, indeed, see very great overall differences in access to land resources between lowland and upland areas. In both cases, however, the poor face increasing access constraints – by exclusion in the uplands, and by land prices in the lowlands.

Access to natural resources: Water Irrigation systems of different types and capacity have been developed in UPB. The service area of a large-scale irrigation project is at least 12,800 ha, while medium and small scale projects are categorized by service areas of from 480 to 12,800 ha, and less than 480 ha. The number of projects and service areas of different types of systems are shown in Table 4-1.

Page 172 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Table 4-1. Irrigation projects and service areas in Chiang Mai and Lamphun provinces

Large-scale Medium-scale Small-scale Province Number Service area (ha) Number Service area (ha) Number Service area (ha) Chiang Mai 3 71,878 15 15,671 428 72,833 Lamphun 0 0 9 17,200 127 23,434 Total 4 71,878 24 32,871 555 96,267

Large and medium irrigation schemes are operated by the Royal Irrigation Department (RID), and are located mainly in lowland areas where large volumes of water can be diverted or stored before allocation to farmlands through extensive canal networks and structures. The four large scale projects are Mae Taeng, Mae Fak-Mae Ngad, Mae Kuang and Mae Ping Kao.

Service areas of large-scale irrigation projects total 71,878 ha, and cultivated areas for main season and dry season crops in each system are shown in Table 4-2. During the rainy season, cultivated areas receiving irrigation water from these systems range from 60 percent in the Mae Taeng Project to 83 percent in the Mae Kuang Project. Crops are mainly paddy rice. During the dry season, however, only 22, 40, and 66 percent of service areas in Mae Kuang, Mae Taeng and Mae Ngad Projects are under cultivation. The low proportion of cultivated area in the Mae Taeng Project is the consequence of expansion of housing development areas during the past twenty years. Main crops vary in different irrigation systems; soybean, paddy and onion are major dry season crops in the Mae Taeng Project, while paddy and tobacco are predominant in the Mae Kuang Project. Significant amounts of irrigation water are also used for water supply to the city.

Table 4-2 Irrigable and cultivated areas in large-scale irrigation projects, 2001 Service area Cultivated area (ha) Proportion Irrigation Project (ha) Main season Dry season Main season Dry season Mae Kuang 28,000 23,131 6,286 0.83 0.22 Mae Taeng 27,878 16,603 11,233 0.60 0.40 Mae Fak- Mae Ngad 16,000 12,510 10,636 0.78 0.66 Total 71,878 52,244 28,155 0.77 0.29 There are about 20 medium-scale irrigation projects in the UPB, with service areas of about 56,000 ha. These systems can support paddy areas during the rainy season that total about 85 percent of their total service area. But during the dry season, only 35 percent of their service area can be used for paddy and soybean cultivation. Some longan production areas are also under irrigation from these medium-scale irrigation systems.

Small scale irrigation systems are mainly diversion weirs managed by farmers in local communities. Some of these systems have been in service for over 1,000 years [Vanpen 1986]. They are mainly diversion weirs originally constructed with wood and rocks, but recently replaced by concrete to reduce annual maintenance requirements associate with wooden materials. Water is diverted to farmlands by earth canal and field ditches through communal efforts. Unlike larger irrigation structures, networks of small irrigation weirs are extensive in lowland, upland and highland zones (Figure 4-1b). Some small irrigation systems also have reservoirs constructed under rural development projects initiated by the government. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 173

Another source of irrigation water is from electric pumping station projects (EPS) initiated by the former Ministry of Science Technology and Environment, but later transferred to be under the administration of RID. The main objective of EPS is to provide irrigation water for dry season crops by pumping water from rivers and perennial streams. Water is pumped at the rate of 0.5 m3/s to storage ponds, and allocated to service areas (80-800 ha) by gravity through a network of main canals (usually paved for 3 kilometers) and laterals up to 6 kilometers in length. There are at least 77 EPS scattered in Chiang Mai and Lamphun provinces, most of them in the Mae Ping Part 3 sub-watershed (Figure 4-1a). Major crops that benefit from EPS are paddy during the rainy season and longan in the dry season. Local management of water distribution is conducted by local sub-district governments (TAO).

Figure 4-1. Irrigated areas classified by type of source and type of structure

(a) irrigation sources (b) irrigation structures

Ground water is also an important source of irrigation water, particularly outside irrigation project areas. Figure 4-1b shows the distribution of tube wells in UPB, and clearly indicates that farmers living in lowland areas have more access to ground water for irrigation than those who live in the uplands and highlands. The depth of ground water in the highlands and uplands prohibits small farmers from investing in deep wells for cultivation.

Overall physical accessibility to water for irrigation may be assessed as the proportion of irrigated area in local level 4 sub-watersheds, as displayed in Figure 4-2. Highest values appear to be concentrated in sub-watersheds that are located in the lowlands, where investments in large and medium scale irrigation systems have been made by the government during the last forty years. But highland and midland zones have higher annual rainfall, and water is diverted from smaller streams by farmers for irrigation in small local valleys. Thus, although Page 174 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region smaller proportions of irrigated area are Figure 4-2. Access to irrigation expressed as found in montane zones, significant access percent of irrigated area in level 4 sub- is provided through local small scale weir watersheds diversion systems. With increasing exclusion from areas for upland fields, most of these are now being expanded to the limits imposed by terrain and water supply. But investment costs for irrigation from groundwater are too high for small farmers in these zones to further expand their irrigated areas.

Access to economic and social infrastructure: Transportation Physical access to markets, information, and services depends to a large extent on the quality and density of road networks, and can be assessed by estimated travel time from sources to destination. Important locations for sources of market information and services are commonly district towns and provincial cities, while destinations are villages, or in an aggregated local sense, the centroid of each local (level 4) sub-watershed.

Estimates of travel time from villages and sub-watersheds to districts and provincial cities were constructed using the “Network Analyst” extension in ArcGIS software [ESRI 2002]. Minimum geo-databases for this analysis are location of villages, sub-watersheds, districts and provincial city, and road networks. Local sub-watershed and district boundaries created as polygon features were converted to point locations using the “centroid function”.

In order to estimate travel time, the road network of UPB (Figure 4-3a) was connected to origins (villages and sub-watersheds) and destinations (districts and province). Since road length (m) and traveling speed (km/hr) for each road section are required to calculate travel time, they were estimated by classifying roads into 3 types (local street, major road and high- way), and assigning a travel speed to each road type. Average speed of travel for highways was assigned as 60 km/hr., while major road and local street types have average speeds of 40 km/hr. and 20 km/hr) respectively.

Once origin and destination (OD) maps were prepared from the road network map layer, the OD cost matrix function in Network Analyst was used to estimate travel time (minutes) from each original location to each destination. The output of this analysis was a matrix of shortest paths between each origin and destination pair. This information was then joined to villages and sub-watersheds as attributes of those features that may be displayed as maps.

Transportation networks and road density in UPB are displayed in Figure 4-3. The most dense road network is clearly seen in lowland irrigated areas around the city of Chiang Mai, Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 175 where values as high as 9.5 km/sq. km. are found. As expected, lowest road density values coincide with highland areas in Mae Chaem and Mae Tuen sub-basins.

Figure 4-3. Transportation network and road density in UPB

(a) transportation network (b) road density

Physical access to agricultural services from district towns may be expressed as travel time from the centroid of each sub level 4 watershed (Figure 4-4a) and from villages (Figure 4-4b).

Figure 4-4. Travel time (hours) from local sub watersheds and from villages to district town

(a) travel time from local sub watersheds (level 4) (b) travel time from village Page 176 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure4-5. Travel time (hours) from local sub watersheds and from villages to City of Chiang Mai

(a) travel time from local sub watersheds (level 4) (b) travel time from villages

These results clearly differentiate physical accessibility to Figure 4-6. Distribution of agri- markets among farm communities in different parts of chemical stores and local markets the UPB. It would take a household in the highlands a much longer time to access agricultural inputs, outputs and information from district towns in general, and from the provincial city in particular (Figure 4-5). Accordingly, significantly higher transportation costs will increase costs of purchased inputs and decrease net revenues from sale of products. Sites of agri-chemical stores and local markets for trading products (Figure 4-6) also favor lowland irrigated farming areas, where more profitable commercial farming enterprises are located. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 177

4.2.2 Programs to improve access and livelihoods in the uplands of Vietnam

Access and rural livelihoods in upland areas of Vietnam are affected by two national programs for poverty reduction that began implementation in 1998: Hunger Eradication and Poverty Reduction (HEPR -- Decision 133), and Poor Communes with Extreme Difficulties in Mountainous and Remote Areas (PCED - Decision 135). Together, they are commonly referred to as the national HEPR programs. The Ministry of Labour, Invalids and Social Af- fairs (MOLISA) is the responsible agency for Decision 133, while the Committee for Ethnic Minorities has responsibility for Decision 135. HEPR programs promote a multi-sectoral approach, aimed at improving clean water, educational enrollment, productive capacity, cultural and social knowledge, infrastructure, transportation and communications, training of leaders, and access to credit. The government has specifically named relevant ministries and institutions to support these programs, such as the Ministries of Agriculture and Rural De- velopment, Education and Training, and Health.

Decision 133 was enacted for the period of 1998-2000, and was superseded by Decision 143 for the period of 2001-2005. The decision applies to extremely poor communes, mountainous areas, borderlands, islands, and remote and scattered communities, based on a national list of 1,715 poor communes. Components of the decision include extension services for income generation through agro-forestry and fisheries, capacity building for poverty reduction in poor communes, and support to ethnic minority groups living in extreme conditions. The goal was to reduce the proportion of households living under the national poverty line to less than 10 per cent by 2005. The estimated budget for Decision 133 (Decision No.133/ 1998/QD-TTg) was 10 trillion VND (approximately 700 million USD) and 22.6 trillion VND (approximately 1.7 billion USD) were allocated for Decision 143 [VNA, November 4, 2001, cited in Morris et al. 2004].

Decision 135 was enacted for the period of 1998-2005. It targets the 1,000 poorest communes in remote and mountainous areas, otherwise known as “communes in extreme difficulties” (CEDs). Its goal was to reduce the proportion of households living under the national poverty line in CEDs to 25 per cent by 2005, from their previous poverty rate of 91 per cent of households in CEDs in the Central Highlands, and 73 per cent of households in CEDs in the Northern Region (according to the 1998 Vietnam Living Standards Survey). Little information is available on the outcomes of the programs. Anecdotal successes have been hailed in the media for increasing incomes and generating improvements in food security, health, road access, forest cover, and technologies for agriculture and animal husbandry.1 However, the media has also criticized the programs for slow rates of capital disbursement, lack of general awareness about the programs, overlap between projects, hiring of unqualified consultant companies and, ultimately, failing to meet the real needs of poor people.2

The ten poorest provinces in Vietnam are all in the northern uplands, and their poverty is probably related to the mountainous landscape, distance to major markets, limited infrastructure and high share of the population belonging to ethnic minorities [Minot & Baulch

1 Vietnam News Agency, November 4, 2000; April 19, 2001; November 27, 2001 2 Vietnam News Agency, November 4, 2000; February 3, 2001, May 12, 2001 Page 178 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

2002]. Market access is one of the few variables that can be influenced by policy makers [IFPRI 2003]. The poor in upland zones are heavily dependent on agriculture. Agriculture accounted for 24 percent of national GDP, but 42 percent of GDP in the northern Uplands in the year 2000. Because of the bigger role of agriculture in the north of Vietnam, the government is focusing their poverty alleviation programs mainly on agriculture in this area. The government has a number of program and policies to promote new crops, particularly in poor upland regions [Minot 2005]. However, within these regions it is the least poor people who mainly diversify their agriculture by trying new crops, even though overall crop diversity among the poorest is higher in order to reduce risks [Minot 2003].

There are many programs for subsidized seeds or breeds for farmers, but most of them are regional. Rural and mountainous areas are often assigned high priority as they are found to be the poorest. National programs include animal breeding and subsidized seed import and multiplication, together with an extension program where seed prices are subsidized (60 percent in mountainous areas and 40 percent in plains areas). Many farmers have subsidized seeds, irrigation, fertilizers and electricity. Loans with preferential interest rates can also be taken by Vietnamese farmers (30 percent lower interest rates for farmers in mountainous areas, or on islands or belonging to the Khmer minorities) [Nguyen & Grote 2004].

Infrastructure has been found to be one of the public investments that have greatest impact on income and poverty reduction in the Hong (Red River) delta area. Therefore, investment in roads in the northern uplands is predicted to provide a significant boost to agricultural production and rural incomes [Minot 2003]. However, the largest share of funds for infrastructure currently goes to improving irrigation systems, which are mainly in lowland areas [ADB 2000].

In any event, development of a well diversified rural economy will in the long term require massive investment in physical infrastructure, including irrigation systems, roads, electrifica- tion, ports and communication systems (the hardware). But most of these investments will be expensive, take a long time to implement, and risk becoming inadequate, environmentally damaging and/or unsustainable, depending on how they are carried out. Meanwhile, in the context of limited resources, it may be appropriate to shift more investment toward capacity building, research, extension and policy and project analysis (the software). These types of investments are less expensive, and have potential to identify more suitable and less expensive investment options for “hardware” implementation [ADB 2000].

Several types of social organizational assets are well developed in the uplands. The mountainous Hoang Nong commune in Dai Tu district of Thai Nguyen province is a good example. Five political organizations, including a farmers association, women’s union, veterans group, youth union, and father front; one social organization (aging association); 5 local authorities (Peoples committee, justice, land administration, banks, extension); and one project (GTZ), are mentioned as the most important institutions influencing farmer livelihoods (Table 4-3).

Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 179

Table 4-3. Importance of organizations in Hoang Nong commune, Dai Tu district, Vietnam Livelihood activities Institutions Poverty reduction & Environment Loans Training Land issues ethnic support monitoring x = less important, xxx = most important 1. Political organizations Farmers xxx xx xx xxx Women xxx xx xx xx Veterans xx x Youth xx xx Father front xxx 2. Social organizations Aging xx 3. Local authorities People’s Comm xxx xxx Justice Land admin. xxx xxx Banks Extension xxx 4. Projects, programs 134 xxx 135 xxx GTZ xxx1 Source: PRA survey, 2007 1Support money for training in improved kitchen for tea processing, raising rabbits, bees, planting Acacia as shade tree for tea.

Land resource accessibility situations are quite complicated in upland areas. In Hoang Nong commune, land allocation programs were conducted during the 1990s, resulting in the issu- ing of land use certificates for different land categories as shown in Table 4-4:

Table 4-4. Land allocation situation in Hoang Nong commune, Dai Tu district, Thai Nguyen province Different certificates 1991-1992 1997 2008 Completed, only for period To be re- Red book for agricultural land until 2003 allocated Green book for forest land (with and Competed for without forest) 50 years Completed, permanent, with Red book for residential land (home 5 rights (mortgage, selling, garden, housing land, water area) exchange, gift, inherit) Source: PRA survey 2007

Each household can have 11-12 plots of land, with a total cultivation area (tea and rice) of between 500 m2 to more than one hectare. Due to large variation in land quality, it is difficult to consolidate land plots using land exchange rights. There are no landless farmers, but some households rent out their land in order to have time to work with non-farm activities.

Government programs also seek to develop human capital and improve access to financial capital for highlanders. Hoang Nong commune has been receiving support since 2005 from program 135, which is used for two purposes: (1) providing health insurance for all people in the commune, and establishing 3 schools: kindergarten, primary and secondary schools; and (2) supporting poor farmers in developing their livestock (focus on raising cattle), in improving tea processing (purchasing processing equipment), and in paying school fees for their children. The support provides about 80 percent of total costs, while farmers pay 20 percent Page 180 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region themselves. Local people use “red book” land use rights for collateral in mortgaging their land to obtain loans from the agri-bank. Poor households can also borrow smaller amounts of money from the ‘Social Policy’ bank at reduced interest rates.

4.2.3 An upland asset-entitlement ladder

As part of a study on upland livelihoods, we carried out qualitative, but systematic surveys during 2002-03 in seven villages in Chiang Rai, Chiang Mai and Mae Hong Son provinces. Our aim was to get a better understanding of how different assets and entitlements, as well as circumstances, affected the range of livelihood options available to ethnic minority (Akha, Pwo Karen, Sgaw Karen) households in upland settings [Lebel et al. 2003].

The results of our study can be summarized graphically by the notion of an asset-entitlement ladder (Figure 4-7). In this figure we imagine a household can move around the space defined by ladders of assets (y-axis) and entitlements (x-axis). As you move up the asset or entitlement ladder the range of livelihoods options available, and their quality, for instance in terms of returns-for-labor, go up.

The way changes in assets and entitlements affect livelihood activities suggests that there are a series of thresholds each of which opens up a new set of opportunities, especially when assets and entitlements gained so far support each other. This is an asset-entitlements ladder. For livelihoods in Northern Thailand, critical material assets are: ownership of swidden fields, livestock, paddy rice, cash cropping fields, motorbike and a pickup truck.

Figure 4-7. Assets-entitlement ladder for household livelihood strategies of upland households in northern Thailand Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 181

A motorbike, for example, is a crucial tool for the transport of non-timber products to collection points or markets, especially in difficult mountain tracks. A motor bike is also crucial for access to crop land. A farmer can go farther to find suitable fields closer to markets or with suitable soil and water conditions, for example, for paddy rice.

For increased mobility and use of market channels, however, nothing compares to the pickup truck. First owners of a pick-up in a village or cluster of villages are immediately in tre- mendous demand for their services, opening up opportunities for two-way flows of products, ideas, and cash. Human capacity, in terms of education and skills, changes in parallel, especially as knowledge and language skills are important for interpreting market information and bargaining.

A similar set of even more discrete steps are related to entitlements, and especially for property, credit and participation in decision-making about local development. Moreover, when people have few rights, accumulated assets can easily be lost.

While assets and entitlements often co-evolve, reinforcing each other (middle trajectory, Fig- ure 4-7), this is not invariably the case. There may be some substitutability of assets for entitlements. Thus, for example, an Akha villager with a pick-up (key asset), but no citizenship and only a restricted “hilltribe” card (key entitlement), could ‘pay’ his way down the hill to market in order to sell bamboo shoots. Wealth doesn’t necessarily bring with it the full set of rights necessary to integrate and navigate mainstream Thai society, but it often helps “smooth channels” which might otherwise be barred.

Finally the convertibility of assets is another important factor affecting the range of livelihood options available to a poor household. Livestock, for example, have a large role in many upland farming households with cattle and pigs representing, essentially, savings accounts.

Page 182 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

4.3 Case studies of strategies for adapting to opportunities and constraints

We now turn to our case study sites for evidence of how people have actually been responding to changing market opportunities in the context of the various types of constraints they face. Rather than seeking to identify a mythical strategy of the poor or passing judgment on good and bad strategies, these examples seek to capture major dimensions of the diversity in household livelihood strategies and responses present in specific local areas. Thus, this discussion is divided into three sections: The first section provides an initial overview of household typologies that have emerged from empirical studies of households and basic components of their livelihood strategies at sites in northern Thailand and our case study site in northern Vietnam. The second section then examines in more detail the major characteristics of households who have adopted different types of household livelihood strategies, with attention to livelihood assets and associated issues. In the third section we assemble evidence from various sources about how different strategies appear to be faring and evolving over time.

4.3.1 Types of households & strategies

Households and strategies in North Thailand In Northern Thailand, several case studies have investigated different types of households and their strategies in the uplands. In one example, Charal et al. [1997] studied a highland village called Mae Salaep in Mae Chan watershed of Chiang Rai province, where change is associated with increased pressure on agricultural systems due to population pressure, scarcity of farm land, reduced fallow periods of shifting cultivation, and new opportunities in cash cropping. These changes all culminated in different farmer strategies, and transformation of agricultural systems that resulted in farmers becoming more differentiated since 1980.

Their analysis divided farmers into 3 main groups: Type A farmers having a cash crop-based, market-oriented strategy with limited capital, Type B farmers having an upland-rice based, self-sufficiency strategy, and Type C farmers having a paddy-based, investment and market- oriented strategy. Type C farmers were more capital rich than Type B and Type A, while Type B farmers had both more land and more capital than Type A farmers. Within each type of farmers, there were different attitudes toward risk, some being more risk taking than others. Those with more risk taking behavior grew high-income high-risk ginger and cabbage, while those with risk-averse behavior grew low-income-low-risk crops like maize, soybean, sesame and groundnut. Type C farmers with their higher resource base and capital endowment invested in paddy rice fields, livestock, fruit trees and non-farm occupations.

In subsequent case studies conducted in four sites of the Royal Project in Chiang Mai and Lamphun provinces, Benchaphun, Methi and Tanya [2001] compare farmers of different types similar to Charal et al. [1997], although here five types of farmers are classified accord- Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 183 ing to their orientation towards commercialization: Type A, B, C, D and E farmers are identified, although type names do not resemble those of Thong-ngam et al3: x Type A farmers are subsistence farmers4 who planted low-value-low-risk upland rice, maize, and groundnuts, with only a small proportion of cash crops; x Type B are semi-subsistence5 farmers, planting a combination of subsistence and cash crops, including upland rice, paddy rice, mungbean, groundnut, maize, fruit trees such as lychee, longan, local peach, coffee, or persimmon, and vegetables such as red cabbages, lettuce, Chinese cabbages, flowers, green pepper and carrots x Type C are semi-commercial6 farmers who planted crops similar to Type B farmers, but with more varieties and a greater extent of vegetables x Type D are fully commercial7 farmers who are highly cash crop-oriented with little upland rice or paddy rice. They grew more exotic crops such as zucchini, potato, green pepper, or plum, as well as cabbages, carrots, and lettuce. They also grow vegetables more intensively throughout the year. x Type E are those having a more long-term investment strategy8, who have more areas de- voted to fruit and beverage tree crops, such as persimmon, plum, lychee, local peach, avocado, coffee.

Many of these crops were contracted and marketed by the Royal Project. Livelihood strategies are associated with farmers’ entitlements in relation to natural, physical, financial, social, and human capital. Access to markets and information facilitated by the Royal Project are seen as key in determining how farmers would opt to adopt certain strategies. Facilitated transportation and communication, together with their years of experience with cash cropping, also influence how commercialized they would like to be.

The Karen ethnic minority group is often considered to be more subsistence-oriented, while the Hmong are generally seen as being more commercialized through their past experience in opium production and trade. Recently, however, this distinction is becoming less obvious as the Karen are becoming more commercialized than the past, and the Hmong acquire paddy fields for cultivation.

Household wealth endowments also help determine their strategies, since some strategies are more capital intensive than others. For example, the Karen reported that they lacked their

3 Charal’s type C resembles Ekasingh’s type E. Charal’s type B resembles Ekasingh’s type A and B1. Charal’s type A resembles Ekasingh’s type C. To differentiate these studies, Ekasingh et al type will be denoted in italics. 4 Defined as farmers who have more than 75 per cent of their production for household consumption 5 Defined as farmers who have between >50-75 per cent of their production for household consumption, the rest are for sale 6 Defined as farmers who have between 25-50 per cent of their production for household consumption, or 50- 75 per cent for sale 7 Defined as farmers who have less than 25 per cent of their production for household consumption, or more than 75 per cent for sale 8 Defined as farmers who have more than 50 per cent of their production come from fruit trees and not being in Type A-D. Page 184 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region own means for transporting their products to market, whereas the Hmong would generally acquire their own pick-up trucks and ship their products to city markets themselves. Many Hmong are now turning to be local assemblers. Karen, on the other hand, tend to rely on merchants to come to buy their products in the village, and in some cases are dependent on Royal Project personnel for access to markets. More often than not, they would not be able to obtain satisfactory prices for their products.

Nutcha [2003] studied different farmers’ livelihood strategies according to ethnic groups and household economic status in the Mae Hae Royal Project development village in Mae Chaem District of Chiang Mai province. In this area, she found that, despite the fact that agriculture remained dominant in all income classes, off-farm wage employment was the main source of supplementary cash income for poor farmers, and was especially more prevalent among the ethnic Karen. Trading was more common among well-off households. Renting more farm land and borrowing for farming investment (e.g. fruit tree farming) was more prominent among poor ethnic Hmong than among poor Karen. The poor Hmong were seen to have more active responses to commercialization of agricultural systems, and as more active in seeking access to markets for their products than the Karen – often bringing products to the city for sale. Most Hmong households were classified as semi-commercial or commercial households, and no households in the Hmong village were subsistence households producing mainly for themselves and not the market. Poor Karen households engaged in commercial agriculture--many of them by necessity, while one-fourth of them were still mainly subsistence households. Compared to the Hmong, a relatively smaller proportion of Karen households were semi-commercial and commercial households. Karen were generally more passive in their response to the market, and were often vulnerable to market fluctuations. Karen were also more ready than the Hmong to employ birth control as a long-term strategy for helping to fight poverty. In her study areas, poor farmers would borrow from merchants more than from friends, relatives, village agricultural cooperatives or village funds. Village fund committees usually would lend less to the poor, in line with their capacity to pay back their loan. Both the poor Hmong and poor Karen sought to reduce their consumption expenditures by relying on wild food and on products from their home gardens.

Poor households at this study site can be divided into subgroups as follows: x Subsistence households (produce less than 25 percent for the market) were more reliant on off-farm occupations—their off-farm income constituted 48 per cent of their total income. The main off-farm occupations among these farmers were wage employment in the localities and wage employment in the city. x Semi-commercial households (produce 25-75 percent for the market) were more diversified in their off-farm occupations. Some had wage employment in the localities or in the city. Some drove trucks of vegetables to be delivered in town, some engaged in trading, some would conduct handicraft activities, and others would do construction work. About 30-35 per cent of their total income was from off-farm occupations. x Commercial households (produce more than 75 per cent for the market) would do less off-farm jobs, with only 20 per cent of their income from off-farm occupation. Off-farm Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 185

work included wage employment, both in the village and in the city, driving a vehicle, trading or construction work.

Livelihood strategies for poor Hmong and poor Karen varied slightly. Poor Karen would seek wage employment in the localities. They would also seek more land to farm by asking to use land for free, and they would reduce spending by seeking wild foods. Birth control was also an adaptive strategy for the poor Karen. As for the poor Hmong, they would do more in seeking better deals with employers or markets with better prices, renting more land, trying to go for high-value fruit trees or investments in inputs and trying to succeed in commercial agriculture by improving soil, practices or new ways of doing things. They would also try to reduce expenditures by seeking wild foods and having more home-made processing, but they dealt less with birth control as an adaptive strategy (Table 4-5).

Table 4-5. Comparison of livelihood strategy components of poor household in Mae Hae, Mae Na Chon subdistrict, Mae Chaem District

Adaptive strategies Poor Hmong Poor Karen Agricultural production x Commercial agriculture ŶŶŶ ŶŶ x Soil improvement and fallow ŶŶ Ŷ x Investment and use of inputs ŶŶŶ ŶŶ Off-farm employment x Wage employment in the localities ŶŶ ŶŶŶŶ x Contract employment with high pay ŶŶŶ Ŷ Market exchange x Selling in the local market ŶŶŶ ŶŶŶŶ x Selling in the market which gives higher prices ŶŶ Ŷ Assets related x Renting more land if there is not sufficient land ŶŶŶ Ŷ x Asking to use land for free when there is not sufficient land ŶŶ ŶŶŶ Spending behaviour x Reduce expenditure and rely more on natural foods, and owned food ŶŶŶŶ ŶŶŶŶ processing x Reduce long-term expenditure by having birth control ŶŶ ŶŶŶŶ What to do when in time of need x Go out for wage employment ŶŶ ŶŶŶ x Borrow relatives and friends ŶŶ x Borrow village funds or cooperatives ŶŶ Long term investment x Grow high-value fruit trees ŶŶŶ ŶŶ Source: Nutcha [2003] Note ŶŶŶŶ highest intensity ŶŶŶ high intensity ŶŶ medium intensity Ŷ low intensity Page 186 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Households and strategies in North Vietnam

In our case study of strategies of different households in Hoang Nong and Phu Xuyen communes of Dai Tu district in Thai Nguyen province, 200 households were subjected to a questionnaire survey [Nguyen Le Hoa 2005]. Households were stratified according to whether or not they had land for tea production. A second grouping was according to farming systems, which obtained information on main income sources (Figure 4-8).

Figure 4-8. Farmers’ typology in Hoang Nong and Phu Xuyen communes of Dai Tu district

Farming Systems Groups: Wealth Groups: 1. Main income: Other crops 1. Poor with tea land 2. Main income: Tea 2. Poor without tea land 3. Main income: Animals 3. Medium with tea land 4. Main income: Off-farm 4. Medium without tea land 5. Main income: Non-farm 5. Better-off with tea land

Wealth ranking was based on a list of poor, medium and better-off households that was already available from local commune staff. The poor group was classified according to households that have income per capita =< 200,000 VND/person/month (following the new poverty line). The better-off group includes the households having an income per capita > 900,000 VND per person per month. Others belong to the medium group.

A farming system analysis of 200 households in Hoang Nong and Phu Xuyen communes indicated that livelihood strategies of different wealth groups can be described as follows:

Most poor households are either “self-sufficient”, which in this case means relying on “other crops”, or have tea as their main income source. Poor groups also appear to have the greatest contribution from off-farm activities compared to other groups. Furthermore, the off-farm group has much smaller land area compared with other groups. The highest percentage of university-educated people is in the group having their main income from non-farm activities. The off-farm group has the highest percentage of high-school educated heads (Table 4- 6). This sounds realistic as one would think that people who go to university more often have other professions than farming compared to those with lower education. It is however interesting that none of those with university education were in the better-off group.

Table 4-6. Education level of head of household by farming system groups (%) Other crops Tea Animals Off-farm Non-farm Education level (n=45) (n=55) (n=78) (n=8) (n=14) Primary school 44 25 33 25 36 Secondary School 49 65 55 63 50 High school 4 4 8 13 7 University 2 3 7 Not specified 2 4 1 Total 100 100 100 100 100 Source: Structured questionnaires for 200 households, 2005 Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 187

Animals are providing the main income for 50 percent of the medium households. For the better-off households, both tea and animals provide their main income. Better-off and medium households without tea land have many more buffaloes and pigs than the other groups. Reasons for this may be the investment cost. Farmers who can invest more in their animals will of course get higher outputs if they have more animals and better quality (better price). Similarly, high incomes from tea are explained by farmers as due to higher inputs (Table 4-7) and larger areas for tea. Better-off households also have better contacts with traders that se- cures their market for tea they produce [PRA survey 2007].

Table 4-7. Expenditures of different groups by quartile Quartile1 Quartile4 Item Quartile2 Quartile3 (poorest) (richest) Poor (n=52) Tea (1000 VND) 725 1,126 1,374 2,072 % of total 26 25 27 27 Total (1000 VND) 2,830 4,509 5,037 7,580 Medium (n=126) Tea (1000 VND) 1,186 1,847 2,112 4,376 % of total 23 24 22 28 Total (1000 VND) 5,240 7,722 9,773 15,824 Better-off (n=12) Tea (1000 VND) 3,345 5,330 9,973 6,145 % of total 23 23 30 13 Total (1000 VND) 14,485 23,117 32,983 46,123 Source: Structured questionnaires for 200 households, 2005

4.3.2 Characteristics of different household types

North Thailand sites In her study of the Mae Hae Royal Project area in Mae Chaem, Nutcha [2003] found that poor households had about 9 rai (1.4 ha) of land per household, often with poor soil and sloping land. Most had no irrigated land. They grew rice with vegetables and fruit trees. Poor ethnic Hmong had more land than poor ethnic Karen, with a range of 6-17 rai (1-2.7 ha) per household compared to from 2-11 rai (0.3-1.8 ha) per household for ethnic Karen. Many poor households had aging household heads, a woman as head, insufficient labor or had more dependent members in the family. Household heads typically had low education and many do not speak Thai language well. These households had insufficient rice for consumption; they had some access to loans but would borrow to a small extent only for consumption. Their kinship network was weak. There were some livestock in poor households, but mostly pigs and chickens. Health of household members was usually not very good.

In the study by Charal et al. [1997], their Type A cash crop-based, market-oriented farmers were late settlers in the hill village, and they had limited capital and land. As the latest groups of settlers, these farmers only had access to whatever land others did not want, which was usually purchased at cheap prices. They were typically young, with an average age of 32, and had average land holdings of around 1.3 ha per household with 5.4 members in the Page 188 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region household. So in terms of labor, they had good labor availability. But as newcomers, the majority of them did not have Thai nationality, which limited their mobility for non-farm jobs outside the village. They first started with upland rice and maize, but due to their limited land holdings, output was not sufficient for consumption and the land had high weed pressure. Thus, they had to progressively reorient their production system towards cash crops. But they lacked the capital or village social position required for longer-term investments such as livestock, orchards, or paddy. The objectives of this group of farmers were to maximize income, and to satisfy family consumption needs in the short term.

Charal’s Type B farmers (self-sufficient type), on the other hand, had more land compared to those in Type A. They were all early settlers or descendents of early settlers. Objectives of these farmers were to secure self sufficiency in rice, and secondarily to maximize regular family income over the longer term. They had no access to paddy fields, but they had manageable weed pressure levels and enough land to grow upland rice. Average land per household was 1.7 ha. The majority of them had Thai nationality, which offered them good opportunities for off-farm activities, and good social position among other villagers. Family size was 5.2 members per household, most of them young with an average age around 35 years old.

Charal’s Type C farmers were old settlers and older in age, and they were part of the big households averaging 9.4 members per household. They had paddy land and large farms with an average of 3.6 ha of available land per household. They were well established farmers in the village with favorable environmental and socio-economic situations, and most had Thai nationality. Their objectives were to maximize income and to have stability through long-term investment activities, such as orchards, livestock, and paddy land. In their paddy land, they could also conduct double cropping in half of the areas, providing them with enough rice for consumption and cash for further investment. With their good social position relative to other villagers, they could have high off-farm income, and access to subsidized inputs and planting materials from development agencies. They were relatively secure in their villages, and they continued to invest in long-term farming opportunities, including perennial crops, terraced paddies, and land under fallow.

With respect to risk, all three types of farmers had those who were risk averse and risk takers. Risk attitude was relative. Risk averse farmers tend to adopt low risk strategies, while those risk takers would be willing to take more risk in return for higher income opportunities.

In their study of four Royal Project sites in Chiang Mai and Lamphun, Bechaphun, Methi and Tanya [2001] found there was a difference in land ownership between self sufficient farmers (Type A) and commercial farmers who had long term strategies (Type E). Self sufficient farmers had less land (1.3 ha) and labor (2.79 laborers per household) than commercial farmers with long-term strategies (4.7 ha and 3.11 laborers per household). Semi-self- sufficient farmers (Type B) also had less land than semi-commercial and commercial farmers (Type C and D). Commercial farmers obtained 62 percent of their capital needs from their own savings, compared to self-sufficient farmers who obtained 80 percent of their capital needs from their own savings. Type E farmers also relied less on borrowing because they were among those with more wealth. Table 4-8 shows land availability, labor and use of Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 189 capital from savings for each of the farmer types in the study by Benchaphun et al. [2001], and Table 4-9 displays the distribution of farmer types in the four sites. In the Angkang site, the majority were commercial farmers, as in the Nong Hoi site, but farmers invested more in fruit trees than in Nong Hoi. In Mae Hae, unlike Angkang and Nong Hoi, farmers invested in fruit trees and were also relying on rice for subsistence. In Prabat Huaytom, most were Karen groups, and their attitudes and preferences were predominantly self-sufficient. In Mae Hae, about half of the villages in this site were Karen villages. More farmers in the survey were better educated in Mae Hae, and to a lesser extent in Nong Hoi.

Table 4-8. Land, labor and capital assets of different types of households in four Royal Projects in Chiang Mai & Lamphun, 2001

Land availability Average labor Percent of capital (ha/household) per household from own savings Type A (self-sufficient farmers) 1.31 2.79 80 Type B (semi-self sufficient) 1.83 3.29 65 Type C (semi-commercial) 2.58 3.3 75 Type D (commercial) 2.59 3.48 62 Type E (commercial, long term strategies) 4.73 3.11 78 Average 2.45 3.25 70

Table 4-9. Distribution of farmer types by site, Royal Project, Chiang Mai & Lamphun, 2001 Ang Kang Nong Hoi Mae Hae Prabat Huaytom Chinese Yunnanese, Hmong, Hmong, Ethnicity Shan, Lahu, Yao, Lisu, lowland Karen Karen, Lisu Palong Thai Education among those surveyed -- percent of total at site -- No formal education 71 39 42 63 1st -4th year primary education 10 31 12 12 5th -6th year primary education 17 20 26 18 Secondary education & higher 29207 Farmer types -- percent of total at site -- Type A (self-sufficient farmers) 5.1 9.4 10.6 39.4 Type B (semi-self sufficient) 11.9 11.0 18.2 28.8 Type C (semi-commercial) 17.0 26.6 25.7 18.2 Type D (commercial short-term) 52.5 51.6 19.7 12.1 Type E (commercial long-term) 13.6 1.6 25.8 1.5

Another survey was conducted by the research team in Mae Wang and Mae Chaem watersheds of the UPB during 2006 to investigate in more detail questions concerning the impact of agricultural changes and responses by different household groups, especially on the poor. Thirty-five households were interviewed in 6 villages in Mae Wang (Tung Pi and Ban Kad subdistricts), and 72 households in 3 villages in Mae Chaem watershed (Mae Kong Kha sub- watershed in Kong Kaek subdistrict). Mae Wang watershed is nearer to Chiang Mai city— about 30 km southwest from Chiang Mai with good roads. The Mae Chaem watershed is further from Chiang Mai city—about 150 km. southwest from Chiang Mai city. Simple classification of income was identified here without differentiating their farmer types. Never- theless, most farmers were of semi-commercial types. They put high emphasis on planting rice for consumption. Mae Chaem farmers reported not being able to continue upland rice farming due to low yields but expressed preference to grow paddy rice. Cash cropping for them was a supplementary income and in most cases, it is a necessity for them.

Page 190 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Annual income per household was used initially to divide farmers into 3 income groups: “poor”, “medium” and “well-off” farm households. Poor households in this case are those with lower than 60,000 baht per household per year; “medium” farm households have incomes between 60,000-120,000 baht per household. Those more than 120,000 baht per household per year are classified as “well-off”. Among the 107 households interviewed in these 2 districts, about 48 percent of the households interviewed were within the “poor” category (52 households), 42 percent were “medium” (45 households), and 10 percent were in the “well-off” category (10 households).

Smaller households were found to have more income per person per day. Overall average household size is 4.07 persons, but average size of Mae Wang households is smaller (3.48 persons) and higher in Mae Chaem (4.32 persons). Thus, at 60,000 baht per household per year, households in Mae Chaem would earn 38 baht per day per person or approximately $USD 1 per person per day (at 38 baht= $US 1 in 2006), while those in Mae Wang would earn 52 baht per person per day or approximately $USD 1.37 per person per day. In other words, households in Mae Wang with smaller household size, more irrigation facilities, and more job opportunities, even with the same level of household income were somewhat better off than their counterpart in Mae Chaem.

But what are the characteristics associated with poor households versus medium and well-off households? As shown in Table 4-10, the majority of households surveyed were poor households. Average age of household heads was higher for the poor and the well-off in Mae Wang (over 50 years old) while it was lower for household heads in Mae Chaem area (43 years old). The education of household heads was higher in the well-off group in Mae Wang (10 years) as compared to 4-6 years for other groups. Poor households had lower proportions of persons with high education (high school or higher). Nevertheless, it is remarkable that for all groups in both areas, there were household members with better education than the heads of the households (10-15 years as compared to 4-6 years for the heads). This shows that households invested in their children’s education even in poor households.

Well-off households had more access to paddy land than medium and poor households (Ta- ble 4-11). Poor households had limited access to paddy land and less land ownership. Mae Wang farmers had more access to paddy land than Mae Chaem farmers. The poor in Mae Wang had access to about 0.6 ha per household, but the poor in Mae Chaem had only about half this size. On the other hand, upland availability was more limited for Mae Wang households in comparison with those in Mae Chaem. The poor in Mae Chaem still had 2.4 ha of upland available to them. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 191

Table 4-10. Income range, family size and proportion of high education among semi- commercial farmers in Mae Wang and Mae Chaem watersheds, Northern Thailand Types of Households Poor Medium Well-off Average family size (persons) - Mae Wang 3.15 3.85 4.5 - Mae Chaem 4.28 4.37 4.25 Average age of household head (years) - Mae Wang 51.1 47.6 54.0 - Mae Chaem 42.3 44.0 43.1 Average years of education of household head (years) - Mae Wang 3.2 4.3 10.0 - Mae Chaem 4.2 6.0 5.7 Average years of education of the highest educated person in household (years) - Mae Wang 9.7 10.7 15.3 - Mae Chaem 9.6 8.9 10.2 Proportion of household members with secondary schooling or higher1/ - Mae Wang 18.3 25.9 65.0 - Mae Chaem 25.2 21.9 28.3 1/ Having secondary education or higher Source: field survey, 2006

Table 4-11. Land ownership among semi-commercial households in each income class, Mae Wang and Mae Chaem watersheds, Northern Thailand Types of Households Poor Medium Well-off OwnedLandarea(ha) - Mae Wang 0.6 0.82 1.76 - Mae Chaem 2.4 2.91 3.45 Rented land area (ha) - Mae Wang 0.27 0.43 0.32 - Mae Chaem 0.03 0.03 0 Land used with no charge (ha) - Mae Wang 0.3 0.69 0.69 - Mae Chaem 0.29 0.76 0.76 Paddy area (ha) - Mae Wang 0.59 0.67 1.96 - Mae Chaem 0.32 0.37 0.45 Upland/orchard area (ha) - Mae Wang 1.0 0.8 0.8 - Mae Chaem 2.4 3.96 3.96 No. of paddy plot - Mae Wang 1.5 1.4 2.5 - Mae Chaem 1.0 1.0 1.5 No. of upland/orchard plot - Mae Wang 1.5 1.3 2 - Mae Chaem 2.2 2.3 3 Source: field survey, 2006

In terms of assets, one can see from Table 4-12 that well-off and medium households possess greater assets than poor households. They possess to a greater extent, motorcycles, tractors, cars/pickup trucks, refrigerators, pumps, televisions and gold. In terms of livestock, medium and poor households have similar levels, while the well-off have less livestock. Farm households in Mae Wang invested more in car/trucks, pumps, walking tractors, radio-recorder, televisions and refrigerators than those in Mae Chaem, while those in Mae Chaem invested more in livestock such as cows, pigs and chickens, and to a small extent gold, than those in Page 192 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Mae Wang. Nevertheless, well-off farmers in Mae Wang held livestock in greater proportions than the well-off in Mae Chaem.

Table 4-12. Assets in semi-commercial households by income class, Mae Wang and Mae Chaem, Chiang Mai, Northern Thailand, 2006

Type of Households Poor Medium Well-off Proportion having ------% of the income group------Mae Wang Car/pickup truck 45 46 100 Motorcycle 75 100 100 Gold 30 31 67 Walking tractor 40 54 67 Pump 55 77 100 Radio recorder 75 77 100 Television 75 100 100 Refrigerator 65 100 100 Cows 5 0 33 Buffaloes 0 0 0 Chicken 55 61 67 Pigs 0 0 0 Ducks 0 0 0 Fish 0 0 0 Mae Chaem Car/pickup truck 28 47 63 Motorcycle 69 91 100 Gold 28 31 88 Walking tractor 25 56 25 Pump 9 13 12 Radio recorder 53 69 75 Television 59 78 88 Refrigerator 38 72 75 Cows 16 15 12 Buffaloes 3 3 0 Chicken 91 87 75 Pigs 59 59 37 Ducks 0 0 0 Fish 0 0 0 Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 193

North Vietnam site Characteristics of types of households at our case study sites in North Vietnam are compared using basic aspects of their livelihoods, including farming characteristics, consumption, assets, credit, tea processing, and labor. Farming characteristics: The average number of crop species grown is very low in this area, and households without tea are few. Most farmers have planted tea for the last two decades, and the area of tea grown increases with wealth. Results from questionnaires clearly indicate that both income from tea and prices received for tea increase with increased wealth (Table 4-13), suggesting that tea influences wealth positively. However, the percentage contribution from tea to total income does not differ very much among wealth groups.

Three types of tea are grown in this area: grafted, low-mountainous, and seeded tea. Seeded tea is the easiest to grow, receives the lowest price, and is grown in relatively smaller areas than other tea varieties. Grafted tea is the most expensive to grow, while low mountainous tea is grown in the largest areas and receives the best price. The biggest problems in tea production are (1) pests and diseases, (2) processing technology and (3) field altitude (most farmers have medium altitude sites, but some have better higher altitude sites). Different tea types are more or less suitable for conditions in the study area.

Table 4-13. Average crop diversity & tea production of households in five wealth groups Tea price at Average No Total Area of tea Harvested Tea Distance farmgate Yield Wealth groups of crop years of cultivation area of tea output from home (VND/kg dry (kg/ha) species tea (ha) (ha) (kg/yr) to field (m) tea) Poor with tea land (n=52) 2.1 16.6 0.083 0.079 125.0 22,269 1,664 331 Poor without tea land (n=5) 1.0 Medium with tea land (n=126) 2.5 18.3 0.142 0.138 276.4 23,659 2,392 364 Medium without tea land (n=5) 2.2 Better-off with tea land (n=12) 2.5 16.5 0.349 0.349 683.5 26,750 2,093 613 Averages 2.1 17.1 0.2 0.2 361.624,226 2,050 436 Source: Structured uestionnaires for 200 households 2005

Farmers’ knowledge concerning tea production and household economics is good enough for them to be able to calculate production costs and incomes fast and fluently. They made most calculations by themselves, and households usually remembered exactly what they bought, while some noted all expenditure items in their family book (but some items are not very precise). It should be noted that expenditures are in this case only what the households bought from outside, and do not include valuation of their own production.

Some better-off and medium households with tea and animals as their main income sources also have other occupations (non-farm activities), most of which are known for not yielding much cash, such as workers, employees, staff and retired (Table 4-14). It is interesting that policemen and employees obtain more net income from growing tea or keeping animals than from their salary. However, their position seems to provide them with better access to information, as well as market contacts (according to both a 2005 questionnaire survey and a 2007 PRA survey).

Page 194 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Table 4-14. Main occupations of household heads by farming system groups (%) Other crops Tea Animals Off-farm Non-farm Main occupation (n=45) (n=55) (n=78) (n=8) (n=14) Farmer 100 94 85 100 100 Worker 2 1 Employee 2 3 Policeman 1 Staff 2 8 Retired 3 Total 100 100 100 100 100 Source: Structured uestionnaires for 200 households 2005

The poor household group with main income from “other crops” seems to be the group with the least income from outside sources, and thus the most likely to be self-sufficient overall. Furthermore, a higher percentage of households with their main income from “other crops” than tea have only attended primary school, and none have studied at a university. As expected, most of them are also not very market-oriented, which may relate to their limited access to information on management and marketing of tea. According to a 2005 questionnaire survey, information from extensionists and the farmer union, for example, reached twice as many medium and better-off households than poor households. Land allocation in the village during 1991-1992 led to households receiving land allocations of equal farm size. But younger households formed since land allocation now have limited access to land, and thus most of them are among the poor households. Consumption patterns From data gathered in these villages (Table 4-15) it is clear that expenditures rise with increasing income. Better-off households spend the most for food, whereas poor households spend least, which suggests greater relative self-sufficiency of poor households. This is confirmed by the fact those with crops other than tea as their main income source are mainly poor households, which also indicates higher levels of self-sufficiency.

Table 4-15. Expenditure items of different groups of farmers

Medium with Medium Poor with tea Poor without Better-off with tea land without tea Type of expendi- land (n=52) tea land (n=5) tea land (n=12) (n=126) land (n=5) ture 1000 %of 1000 %of 1000 %of 1000 %of 1000 %of VND total VND total VND total VND total VND total Foods and Drink 360 7 212 13 768 8 700 8 1,147 4 Clothes 208 4 150 9 378 4 280 3 764 3 Electricity, water 149 388 5 281 3 190 2 817 3 Daily use items 847 17 400 24 2,028 22 1,575 19 4,700 15 Health service 243 5 225 13 342 4 300 4 686 2 Education 547 11 0 967 10 433 5 1,800 6 Crop production 1,732 35 293 18 3,264 35 976 12 7,562 25 of which for tea 1,328 27 0 2,396 26 0 6,198 20 Husbandry 846 17 300 18 1,225 13 4,000 47 13,050 43 Total 4,932 100 1,667 100 9,253 100 8,454 100 30,525 100 Source: Structured uestionnaires for 200 households 2005

Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 195

Household assets Most households have their own simple machines for use in processing tea. Some farmers also earn money (off-farm income) by renting out their machines to others. Poor groups have the least assets compared to others, but highest percentages of households having common family use assets occur in the medium group without tea land (Table 4-16). The medium group with tea has the greatest variety of assets, but the better-off group has higher percentages with many common assets. Television, which is thought to be one of assets that best indicates wealth status, is in this case very similar for better-off and medium (with and without tea land together) groups, while percentages for poor groups are considerably lower.

Table 4-16. Assets owned by different wealth groups for different uses Poor with Poor without Medium with Medium with- Better-off with Tea production tea land tea land tea land out tea land tea land Type of asset or family use (n=52) (n=5) (n=126) (n=5) (n=12) -- percent of households in each group -- Television 4 20 37 60 50 Wardrobe 4 11 20 8

Table and chairsuse 10 13 40 8 Family Milling machine 8 production 942 Motorbike family use 2232033 production 18 Bicycle family use 15 20 32 60 25 production 6 Water pump family use 217 production 15 54 83 Crushing machine family use 2 production 23 21 8 Drying box family use 2 Other assets for tea production 12 46 84 processing Source: Structured uestionnaires for 200 households 2005 Credit Many farmers try to obtain credit in order to invest in their farm activities. The most common uses of credit for tea production are to buy pesticides, to process tea, or to buy a new machine for processing (Table 4-17). But the biggest loans are taken for buying seeds and fertilizer for tea, which accounts for nearly 50 percent of total credit for tea. Sources of credit for farmers in Vietnam are further discussed in chapter 6.

Table 4-17. Credit for tea by purpose, 2004

Average amount % of total credit % of total house- Purpose (1000 VND) for tea holds with credit Buying pesticide (n=9) 1,389 11.2 60.0 Buying grafted tea (n=1) 1,000 8.1 6.7 Buying seed and fertilizer (n=1) 6,000 48.4 6.7 Buying Tea drying machine (n=2) 1,500 12.1 13.3 Processing tea (n=2) 2,500 20.2 13.3 Total 12,389 100 100 Source: Structured uestionnaires for 200 households 2005 Page 196 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Tea processing Before tea is sold, all farmers process it in various ways. Depending on their skills, machines and labor availability, there may be many processing steps before tea is sold (Figure 4-9). If there is a lack of resources required to complete a step, tea may be sold early at a lower price for someone else to do the processing. First the tea is collected by hand, which is usually done by women since it is not too heavy and requires good eyes and fast-working hands. After picking, some households choose to categorize (grade) the tea by sorting leaves according to their quality. This results in higher prices, but since it also requires more time, relatively few include this step. Next is to crush the tea leaves, after which they are dried. Most farmers sell their tea after completing these steps, but some will continue with the additional step of adding fragrance to the tea, which also results in a bit higher price.

Figure 4-9. Order of processing stages before tea is sold

Categorize (Grade) Crush Dry Fragrance Collect

SELLING TO MARKETS/PROCESSORS/COMPANIES

Source: Structured uestionnaires for 200 households

Collection, grading and fragrance setting of tea are all done by hand. Crushing is done with a simple machine, and drying can be done either by machine or in the sun (if the weather is reliable). Costs of different processing steps vary, depending on the tools employed and how carefully it is done. Collecting and drying are the two most expensive stages of processing, and thus it helps to have enough household labor and to dry when the weather is favorable. All processing steps become more expensive for wealthier households, perhaps because they process more carefully to get better prices (Table 4-18).

Table 4-18. Average cost of stages of tea processing for different wealth groups, 2004

Order of Stage of tea processing Poor with tea Medium with tea Better-off with tea process land (n=52) land (n=126) land (n=12) -- average cost ( 000 ND/kg) -- 1 Collecting tea (n=102) 672 1,132 2,668 2 Categorizing tea (n=6) - 70 100 3 Crushing tea (n=163) 257 503 909 4 Drying tea (n=90) 604 1,183 5,344 5 Taking fragrance (n=1) - - 20 Source: Structured uestionnaires for 200 households 2005

Nearly all farmers who have tea are collecting, crushing and drying the tea themselves. Fra- grance was added by only one farmer, who is a better-off farmer for whom non-farm activities are his main source of income. Two poor and four medium farmers graded (categorized) their tea. Three of the farmers who did one of the extra processing steps had tea as their main income, while the others had animals and other crops as their main source of income. Educa- Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 197 tion levels of the husband and wife in these households were not different from other farmers, and they had no special experience with tea. Labor Family size actually increases with wealth (Table 4-19). This may indicate the importance of labor availability, especially since most people are within working ages. In all groups, there is on average only 1 child (below 18 years old) in each household, which was less than expected.

Table 4-19. Numbers of households and household members by wealth groups Average No People <18 People >=18 Total No of % of total Wealth groups of people in years old in years old in all people in all hhs hhs all hhs hhs hhs Poor with tea land (n=52) 26.0 3.1 54 108 162 Poor without tea land (n=5) 2.5 2.2 3 8 11 Medium with tea land (n=126) 63.0 4.0 125 374 20 Medium without tea land (n=5) 2.5 4.0 6 14 56 Better-off with tea land (n=12) 6.0 4.7 12 44 499 Total (n=200) 100 3.6 200 548 748 Source: Structured questionnaires for 200 households, 2005

Labor is important for all crops, but tea has especially high labor demands during the harvesting period. Generally, groups growing tea spend more hours per year on labor than other groups. Among them, the medium group spends the most time, and the poor group spends the least (Table 4-20). Extra labor invested in tea by better-off households may help explain to some extent the better quality of their tea, but should not be the only reason.

Table 4-20. Labor distribution of different wealth groups of households by activities Total husbandry Total crop Seasonal hired Tea cultivation Type of HH (excl. tea) labour Total no. % no. % no. % no. % Poor with tea land (n=52) No of labor (persons) 4 44.4 2 22.5 1 11.1 2 22.2 9 No of hours person-1 day-1 9 31.4 5 17.7 8 26.1 7 24.8 29 No of hours person-1 year-1 2,449 36.5 1,081 16.1 1,540 23.0 1,631 24.3 6,702 Poor without land for tea (n=5) No of labor (persons) 2 58.8 1 41.2 - -3 No of hours person-1 day-1 4 39.3 5 60.7 - - 9 No of hours person-1 year-1 1,280 60.5 836 - - 2,116 Medium with tea land (n=126) No of labor (persons) 6 34.4 6 35.8 3 16.3 2 13.5 17 No of hours person-1 day-1 17 26.8 27 43.1 10 16.0 9 14.1 62 No of hours person-1 year-1 5,429 29.3 9,588 51.7 1,383 7.5 2,133 11.5 18,533 Medium without land for tea (n=5) No of labor (persons) 3 50.0 3 50.0 - -6 No of hours person-1 day-1 8 30.1 19 69.9 - - 27 No of hours person-1 year-1 2,710 37.3 4,560 62.7 - - 7,270 Better-off with tea land (n=12) No of labor (persons) 5 46.6 3 27.0 3 26.4 11 No of hours person-1 day-1 13 31.2 8 18.2 10 23.7 30 No of hours person-1 year-1 3891 37.8 3,904 38.0 2,488 24.2 10,283 Source: Structured questionnaires for 200 households, 2005 Page 198 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Why are the poor poor? In comparing these three wealth groups, we can identify several constraints and possibilities: x The poor in this study are mainly self-subsistence farmers who generally have small land areas for food crops, and little or no land for tea. Some also have an occupation with a very low salary that takes a lot of their labor, so that they cannot spend much time on their farm. Only a low level of inputs is used in their cultivation, and thus the price they receive for their tea is lower due to the poorer quality of their products and their small harvests. This makes it difficult for the poor to increase their wealth. x The poor without tea land have the lowest total income, only half of what other poor households receive, averaging only 123,000 VND per person per month, or less than 1/3 of 1US$ per day. Their low incomes can be explained by several factors. This group owns the least number of animals, has the least number of crops (often only rice), and because of their low incomes, they have the lowest expenditure levels. Household size is smallest in this group, and they have only one-third of the labor found in other poor households. The poor without tea land also have the lowest education levels among all groups, which probably helps explain why they have no non-farm income and only small amounts of off-farm incomes to supplement their own farm activities. x Medium farmers tend to have more diverse cropping and animal patterns, which give them higher security and sometimes enough benefits to expand or invest. They also have more opportunities to identify products with a good market, so that they can focus more on these crops. This group has a more diverse market for their tea, which is interesting and may relate to how they became medium from having been poor. x Better-off households either have had large areas of land from the beginning, or they have managed investments well and bought more land, thus advancing from medium to better-off status. Better-off households have less diverse farming systems and less diverse markets for their tea, perhaps because they don’t need the security that diversification can give them. They already have their security in the bank. x Access to land and credit are probably the main constraints for poor farmers in increasing their incomes. Sources of income from off-farm and non-farm activities are limited because these villages are remote and the distance to cities or towns is relatively far. What limits them on their farm is mainly land, but capital for farming inputs and labor is also needed to improve the quantity and quality of their products. x Thus, emphasis on tea varieties and livestock may help improve conditions of poor farmers. Since the type of tea seems to affect both price and harvest, low mountainous tea varieties would be preferred. Other than tea, it seems like animals are a good source of income for many farmers, and animals do not need a lot of labor compared to other farm activities.

The farming systems analysis concluded that middle and well-off groups seem to be the ‘winners’, while those with poor incomes have far fewer market opportunities. This is explained by the poor having less access to land, and by the poor quality and quantity of their Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 199 tea, resulting in low prices and low incomes. This, together with low market accessibility (in terms of both infrastructure and market information) leads to low benefits.

4.3.3 How strategies have fared and changed over time

North Thailand Mae Salaeb study The study by Charal et al. [1997] demonstrated that through time, farmers have very different socio-economic performance and thus standing in their communities. Trajectories of different household types through time are shown in Figure 4-10. x Market-oriented farmers with short term strategies (Type A) would end up generally

Figure 4-10. Evolution of different types of farmers in Mae Salaeb, North Thailand

Capitalization Type C3 (IR,CC2, off-farm) Type C2 and C3 Type C2 (IR, CC2) Type C1 (IR, CC1) Type C1 Type B4 (UR,animals) Type C Type B3 (UR,CC2) Type B1 and B2 Type B (UR,CC1, off-farm) Type A3 (CC1,CC2,animals) Type A2, A3 Type A2 (CC1,CC2) Type A and B Type A Type A1 Type A1 (CC1) Type O Self Land Weed Sufficient

1981 1985 1987 1989 1994 Time IR : Irrigated rice CC1: low value cash crops (maize, groundnut, soybean) UR : Upland rice CC2 : high value cash crops (ginger, cabbage) Source: Thong-ngam et al, 1997

poor, insecure and the most fragile. With higher risks, they may not be able to continue farming. Some were seen emigrating from the villages to find non-farm jobs. Those who stayed had to struggle to survive as they had limited resources. x Self-sufficient farmers (Type B) seemed to be more preoccupied with stability than with innovation or adaptation. Nevertheless, they need to be more innovative in order to survive. Some who have more money will turn entrepreneurial like some of those in Type C (market-oriented with long term strategies). Upland rice farming is foreseen to be a disappearing crop. Self-sufficient upland rice farmers are unlikely to sustain their strategies and production systems under increasing land pressure. Some type B farmers (self- sufficient) would eventually turn to be Type A farmers (market-oriented with short term strategies) and will be just as vulnerable. Page 200 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Market-oriented farmers with long term strategies (Type C) with ability to invest will become highly diversified, and dependent either on paddy rice production or on marketable cash crops, with greater animal, tree crop and off-farm components.

As a consequence, there appears to be four trends among farmers in this watershed area (Fig- ure 4-11): x Trend 1: Farmers with high investment capacity, market integration, high diversity of activities. These include some Type C farmers (market-oriented with long term strategies) + some of Type B farmers (self-sufficient) who could accumulate assets through animal husbandry and off-farm activities. x Trend 2: Autonomous farmers, not very dependent on the market, stability due to paddy fields. These are mainly more conservative farmers among the Type C (market-oriented with long term strategies) group. x Trend 3: Farmers in a very insecure situation, very dependent on the land. This probably includes insecure Type A farmers (market-oriented with short term strategies) and Type B farmers (self-sufficient). x Trend 4: Farmers stopping their farming activities due to the land pressure. This involves some Type A (market-oriented with short term strategies) and B (self-sufficient) farmers being pushed out of agricultural production by lack of sufficient land.

Figure 4-11. Trends of different farmer types, Mae Salaep, North Thailand Capitalization

First trend: Farmers with a high investment capacity, market integration. High diversity of activities

Second trend: Autonomous farmers, not very dependent on the market. Stability due to paddy fields Future Threshold

Third trend: Farmers in a very insecure situation, very dependent on the land

Current threshold

Time Fourth trend: Farmers stopping their farming activities due to the land pressure

Source: Thong-ngam et al, 1997

Charal et al. [1997] predicted that Type C farmers (market-oriented with long term strategies) consisting of average and relatively rich households would be able to adjust to changes in farming systems. On the other hand, Type A (market-oriented with short term strategies) and B (self-sufficient) farmers in poor households with a limited resource base would not be Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 201 able to survive through farming in the future, as they had neither good land nor capital to invest. Moreover, soil degradation and increased weed pressure would make upland rice productivity very low and unsustainable.

This study confirms that access to resources by Northern farmers is fundamental to their livelihood, and those with less access will have difficulty surviving as farmers in the changing market-oriented economy.

Contract farming and agribusiness At case study sites in Mae Wang and Mae Chaem in Northern Thailand, there were cases of contract farming and agribusiness. In Mae Wang watershed, an agribusiness firm was present in the area, and there were contract farming arrangements for sweet corn production. It provided people in the area with an option to participate with them, and also provided employment for local people. In the Mae Chaem watershed, there was contract farming for hybrid corn seed production. Farmers like growing hybrid corn for the company because they obtain higher prices for their product. In both cases, income from contract farming was higher than without it, but not substantially greater. Contract farming offers higher output prices, but also includes stringent output quality standards and higher skill requirements. In both cases, farmers needed to obtain production inputs, including seeds, fertilizers, pesticides, etc. and supplied outputs to the company at guaranteed prices. In this way, farmers did not have to have high capital investment requirements for agricultural production, and it was convenient for them. Interviews with farmers in Mae Chaem indicated they liked these arrangements, and mentioned that it provided both a market for their crop and a guaranteed price. They wanted other crops to also have guaranteed prices and markets.

Cases at Royal project sites also resembled contract farming, although they were not operated by a private company. Farmers in Royal Project sites are a bit more free to sell their output to people other than the Royal Project, and sometimes the Royal Project encourages them to do so because supply cannot be totally absorbed by the Royal Project. In terms of inputs such as fertilizers and capital, farmers were also free to obtain them from other merchants. The Project supplied mainly seeds, technical advice and market outlets. Guaranteed prices were also offered. The list of Royal Project members was closely monitored and services were confined to members only. Unlike a private company dealing with contract farming, the Royal Project was more limited in its area coverage.

Royal project sites In all sites of the Royal Project, there are farmers with access to Royal Project services (members) and those who are not members. A research team found that those who do not have access to the services of the Royal Project were generally poorer [Benchaphun et al. 2001]9. Table 4-21 shows the incidence of poverty for those involved in the Royal Project and those who were not.

9 Members of the Royal Projects in Nong Hoi and Mae Hae Royal Project Sites had about 30 per cent more income than those who were not members. Page 202 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Table 4-21. Poverty incidence among members & non-members of Royal project sites in Ang Kang, Mae Hae, Nong Hoi and Prabat Huay Tom, 2000

Above poverty line Below poverty line All ------% of interviewed farmers in each group------Members 49.1 50.9 100 Non-members 27.1 72.9 100 Source: Benchaphun, Methi and Tanya 2001 Note: Poverty line was defined by Narinchai and Kamol, 2000 using criteria from the National Economic and Social Development Board, at 10,095 baht per person per year (approximately 27 baht per person per day or $USD 0.74 per person per day at the foreign exchange rate of $USD1=37.5 baht)

Ethnic Hmong were found to have 80 percent higher incomes than ethnic Karen in the study sites. The question remains, however, whether participation in the Royal Project lifted people from poverty, or if access to the Project was only possible among the well-off. While our study was not able to establish a clear relationship, we expect that both propositions are true. More specifically, participation in the Royal Project has been more skewed toward clans of village elites, but for those who participated, the Project lifted them from poverty. Table 4- 22 shows that Type E farmers were most well-off as a result of their commercial orientation with a long-term strategy. On the other hand, Type A (self sufficient) farmers were not doing well financially. Using 60,000 baht per household as the poverty line, this table shows that Types A, B, and C were still in poverty, while Types D and E could escape poverty through commercialization. Self-sufficiency or semi-commercialization as livelihood strategies still leaves farmers in poverty under these highland conditions. Nevertheless, it should be noted that commercialization in this case was with a development project’s assistance with marketing and price guarantees -- which makes this a special case.

Table 4-22. Income of each type of farmers in the four sites of Royal Project Cash income Non-farm In-kind from agricul- cash in- All income income ture come ------Baht per household per year---- Type A (self sufficient) 2,171 21,207 13,191 36,569 Type B (semi-self sufficient) 11,075 16,060 16,038 43,173 Type C (semi commercial) 25,892 11,853 14,298 52,048 Type D (commercial, short term strategy) 60,765 12,900 7,383 81,048 Type E (commercial, long-term strategy) 72,852 30,676 10,342 113,870 Source: Benchaphun, Methi and Tanya 2001

Market response gradient in Om Koi

During 2004-05, we twice carried out quantitative surveys of a sample of households in three villages at different distances along the main road to Om Koi district town. The three villages were selected to represent a range of circumstance along a gradient of “market” access. The trip to farthest village usually takes about 3 hours in the wet season and 1 hour in the dry. The closest village in contrast is about 15 minutes away in both seasons. The road is not paved.

Demographically, households in the three villages were similar and all Pwo Karen, except for an occasional official like a teacher (Table 4-23). Around 15 percent of households in each Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 203 village were Christian and the rest animist. All three villages are well established with individual house locations having been used on average for 44 years. The villages are formally recognized and have TAO representatives.

Table 4-23. Demographic characteristics of sampled households in three villages in Om Koi district

Distance Village Nos. HH Mean Mean % HH with % HH % HH pri- Ave HH % HH illness from District (sampled) House- Nos. Motorbike with mary occu- cash disrupts work Centre hold Size Children pick-up pation Up- Income last month (< 15) land Rice (Baht/yr) Far Baina 75 (40) 5.6 2.4 12 0 75 10,000 48

Mid Mae 60 (30) 5.6 2.2 23 0 60 34,000 43 Ramid Near Yang Pao 100 (31) 5.6 1.7 55 3 23 22,000 21 Neur

As anticipated in the study design, ownership of key assets like motorbikes was highest close to Om Koi town. Average monthly cash incomes are very low in the remote village, in which some households live an almost cash-less existence (Table 4-23). In the month prior to being interviewed during two different times of the year, almost half the households had no work- related income sources at all. Sale of livestock, handicrafts, crops and wage labor are their most common income sources. Households in Yang Pao Neur have paddy, borrow money and are in debt, whereas external loans in Baina are rare. Wage labor was important in Mae Ramid during the year we surveyed because of a period in which daily work on road- upgrading was available to almost households. This explains why they had incomes higher than even the nearest village (Table 4-23).

Follow-up study just 6-9 months later indicated some substantial changes, including decreases in households focused on upland rice farming, increases in average incomes, and a few more households with motorbikes in all three villages. In Baina this change in fortunes was observable in new roofs and houses. Qualitative work over a longer period during 2003 to 2007 reinforces the observations of differential dynamics. Villages nearer to Om Koi (not just those above) have widely adopted a series of cash crops. Coffee has been reintroduced at even some remoter sites and this time may be succeeding. Wage labor is keenly sought everywhere and children go to school for more years (and further away from home). Even so, swidden fields and access to forest products still remain very important for many households in the more distant villages.

Highland village crop diversification in Mae Chan One household strategy in the highlands of North Thailand to cope with risks in output, market and prices is crop diversification. Farmers were found to be growing a variety of crops, including fruits, vegetables, flowers, field crops, etc. Since these products have relatively high prices and are sold to urban Thai consumers and to some extent foreign tourists, their market outlets are not very extensive. Thus, by diversifying crops, highland farmers spread the risks of oversupply. Nevertheless, a minimum volume is needed to market a particular crop. Good marketing skills and experience are also key to success. On-farm trials of Page 204 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region these crops and extension services are also needed. Table 4-24 presents cash crop diversification in Royal Project areas of Chiang Mai and Lamphun by income range. Each of these crops has its own stories of successes and failures in terms of agronomic, economic and marketing aspects. But all have been grown by highland farmers in Northern Thailand with varying degree of profitability.

Table 4-24. Income of different crops grown by households in four Royal Project Development Cen- ters, 2000

Income range Vegetables Flowers Fruit & tree crops Field crops Kale, beet root, green Marigold Longan, banana, tea Red kidney bean, <5,000 baht / hh cabbage, brussel sprout, mung bean, rice turnip, Leek, purple cabbage, Statis, rose, Pear, coffee Groundnuts, field 5,000-10,000 baht / hh chrysanthemum corn Lettuce, green lettuce, Gypsophilla Persimmon, local 10,001-15,000 baht / hh taro, potato peach, strawberry, avocado Cabbage, Chinese cab- Litchi 15,000-20,000 baht / hh bage, michilli, >20,000 baht / hh Carrots, green pepper Improved peach Source: Benchaphun et al. 2001

Vietnam: Tea grower strategies Livelihoods in the two tea growing villages in Vietnam where PRA studies were conducted (Doan Thang and Dinh Cuong) changed radically in 1991 due to land allocation. The ethnic Kinh village immigrated to the area during the early 60s, while the Dao group had settled there since the 1940’s. Since the 1960’s, villagers experienced various different forms of land ownership, from village-scale cooperatives (1973-1982), to commune-scale land use (1986), to private holdings in 1991. Following change in land ownership, there were major shifts in crop composition, and tea production became the dominant livelihood activity in both villages. Currently, a newly formulated cooperative model is being developed in the area, which includes private land ownership, but joint efforts in finding markets, developing a brand name and improving cultivation.

In order to further improve their livelihoods, tea growers aim at having tea land and obtaining money for buying more fertilizers, but also look to wage employment, population control, and reducing expenditures [questionnaire survey 2005]. In order to move from average to wealthy, strategies of tea growers in both villages include sending their children out for higher education, savings, better food, applying technologies, investment, marketing and obtaining market information, loans and expanding to larger-scale farms, having direct connections with traders, and producing ‘clean tea’ (Table 2-14). Two among 12 of the tea growers studied in Doan Thang village shifted from the poor group to the medium-well-being group in 1997, and to the well-being group in 2007. Their main strategies over time were savings, working hard, and good management of diversified agricultural activities (Table 4-25).

To help better understand the market situation, SWOT analysis was also conducted in the study villages; results are summarized in Table 4-26. Tea is seen as a reliable crop, and public Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 205 private partnerships are viewed as means for improving opportunities. But problems include poor infrastructure, services and prices. Farmer groups in both villages express concerns about the instability of prices in the tea market, as middle-men control the price in both villages. In addition, paying fees for a seat in the market also upsets farmers very much. Farmer’s land for growing tea is often small and scattered, and in order to ensure regular supply for buyers, local farmers need to work together. However, their concern is that there are no regulations that can be applied to the neighborhood. People live in communities and cannot implement business schemes and rules like cooperatives. Some outside companies have ordered farmers to produce tea at one time, but contract farming from some tea companies did not work well, due to the low price they offered to local farmers [PRA survey 2007]. Thus, while optimistic, they still remain somewhat skeptical about the new government-supported tea project.

Villagers are also concerned about how new opportunities can fit with seasonal demands for their labor. Figure 4-12 displays patterns of seasonal variation in tea prices, weather and tea production activities. In general, tea growers are very busy during the period from April to October every year, but are less busy during November to December due to no tea for picking, and from January to April due to fog and no tea leaves for picking. If direct marketing links can be obtained, tea growers can work more during these less busy periods on tea processing activities, such as adding fragrance or packaging, in order to improve tea price.

Table 4-25. Change in household stages of progress & poverty status over time, Vietnam study site Note: stages 1, 2 are under poverty line; 3, 4 are average; 5,6 have good well-being Major Events Sample 82-86 1991-92 1997 2001 2005 2007 house- Land alloca- Sell young ‘safe tea’ Reasons for changes Electricity holds tion; Red labor to cooperative available book issued south started Children grow up, health The 1 3 improved, hard working (14 hours/day) Old parents, pay for small Nhi 4 3 children go to school Purchase more land for tea, Hai 2 3 children get bigger Hang 2 3 Children get bigger Thanh 2 3 Parents are less sick Business service, selling Hong 1 2 4 equipment for tea and drying processing, selling pesticides working with tea, children Lan 2 3 4 grow up, more labor Lang 3 4 4 more labor, creative, pension good management, diversify Thom 3 4 agricultural activities Lam 3 4 More labor No children at the beginning, have invalid subsidy and Hanh 2 4 6 5 reduced school fee due to working in the army healthy, no children from Loc 1 3 4 5 beginning, safe minded and hard working Source: PRA Survey, 2007 Location: Doan Thang village, Hoang Nong commune, Thai Nguyen district, Vietnam Page 206 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 4-12. Seasonal patterns of variation in tea prices, weather and tea production activities

Source: PRA Survey, 2007 Location: Doan Thang village, Hoang Nong commune, Thai Nguyen district, Vietnam Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 207

Table 4-26. Market situation SWOT analysis of Doan Thang & Dinh Cuong villages, Dai Tu district Strengths Weaknesses The commune has established a safe tea cooperative The market is currently regulated by the private sector enterprise and its brand and logo – Hoang Thien – have and intermediaries. Although there are 14-15 tea compa- been approved by the province. nies in Dai Tu district, they do not provide useful support and often offer very low price. Investment in tea cannot be completely lost. You can only lose one picking time rather than an entire crop Bad road, lack of a bridge. High use of chemical inputs for tea and non-hygienic tea processing makes tea not safe, which leads to low price in the market. Opportunities Threats There is an opportunity for tea development since there is However, internal evaluation of this project from the point a new project during 2006-09 focusing on high tech tea of view of communes shows the project will face major production and establishment of a tea material zone. This challenges because the price offered is too low. project is proposed by the Department of Technology and approved by Ministry of Agriculture and Rural development. The project implementer is Thai Nguyen Export and Import Company. NOMAFSI will be responsible for technical support and pest management. Consumers prefer to have safe tea products Some companies have started production of black and O Long tea for planting in the area. Source: PRA survey 2007

Lao PDR: Rubber and NTFPs As discussed a various points in this report, upland policies in the Lao PDR have emphasized stopping shifting cultivation, relocation and consolidation of remote villages into lower zone transportation and development corridors, land use zoning and land allocation, commercialization of agriculture, and alleviation of poverty.

Implementation of these policies has been inducing many changes in local livelihoods and agroecosystems. Many households, and especially those without paddy land, can no longer produce enough rice for their consumption needs. And as the economy becomes more monetized, most all households are seeking sources of cash income.

Responses by villagers at study sites in Oudomxay and Luang Prabang provinces have largely focused on increased production of cash crops (largely maize and Job’s tears) and livestock, as well as commercialization of non-timber forest products (NTFPs) [Vongkhamor et al. 2007]. While many NTFPs have long been part of household livelihood systems, improvement of the main road and increasing trade with China began opening opportunities for commercial sales of some NTFP products, such as bitter bamboo, peuak meuak (Boehmeria malabarica), cardamom, rattan, and others. As it became apparent that these types of products have potential as long-term sources of cash income, villagers began managing local forest areas more carefully. Since this source of income requires maintenance of forest areas, they began attracting support from forestry officials and development organizations. Producer groups have been formed for collective management and marketing, and they have been able to increase household incomes and generate funds for their village [Thongmanivong & Fujita 2006]. Page 208 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Village relocation and consolidation has brought increased populations and ethnic mixing to the area as ethnic Hmong have moved from their higher elevation more remote villages, where grazing of large livestock was an important part of their livelihoods, down into the development corridors where they have joined with Tai Dam and Khmu villages. Efforts are being made to zone village land use and allocate lands for household agricultural use, but higher population densities mean less land is available for household agricultural fields and for community forest and grazing uses. Improved management of village forest areas for NTFP production has appeared quite promising because households could join such activities regardless of their agricultural land endowments or wealth status.

But since 2003, there has been a new boom in rubber production that has swept south from the Chinese border through Luang Namtha into Oudomxay and Luang Prabang provinces (see section 3.3.3). While much of the huge surge in planting of rubber trees is driven by contract farming and plantation concession arrangements with primarily Chinese Compa- nies, there is also considerable planting being done by local farmers themselves.

At the study sites in Oudomxay and Luang Prabang, most rubber planting is being conducted villagers themselves, and primarily by two groups of households. Better off ethnic Hmong have been converting livestock assets to investment in crop production activities as village reorganization and relocation has decreased areas of community lands available for grazing activities. Now they have incomes from cash crops and their investment expansion is moving toward longer-term investment in tree crops. Since the ethnic Tai Dam are early settlers in the area, some households are also relatively well-off in terms of their access to paddy lands and generally larger land holdings. Those with enough capital and labor available in their household have also become interested in tree crops. Overall, households planting rubber clearly have more land and labor than others. Both Hmong and Tai Dam groups of households have social networks that include relatives in rubber growing areas of Yunnan, which has been an important source of information regarding rubber [Vongkhamor et al. 2007].

Thus, as a result of the rubber ‘boom’, many upland areas are now being converted from forest into rubber plantations. Displacement of forest is, in turn, threatening commercial production of NTFPs by reducing the area of village forest land available for this purpose. While those planting rubber are making long-term investments in perennial cash crops that appear to be in line with major government policies, there are still many questions about the future of rubber production in Laos [Vongkhamor et al. 2007, Weiyi Shi 2008]. But even if rubber production proves to be successful, if it continues to displace village forest, the potential diversity of local sources of income will have been reduced. Moreover, it is the poorest households with insufficient livelihood assets to invest in rubber, who will have lost one of their most promising entrepreneurial responses to new market opportunities.

Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 209

4.4 Diverse strategies and response capacities

Based on the evidence presented in this and preceding chapters, this section returns to the question “What strategies have been used to respond and adapt to changes in opportunities?” We have identified various types of household livelihood strategies and explored various relationships with livelihood assets and institutional contexts, and we now seek to identify overall patterns and trends. Thus, in addressing this broad question, the following discussions seek to synthesize findings according to four more specific sub-questions: (1) How do household strategies vary regarding engagement in commercial markets? (2) How do asset capacities affect response to market opportunities? (3) How do wider institutions affect response to opportunities?, and (4) Is inequality growing? Answers to these questions help reveal general patterns we have found in household responses, and underlying forces and issues with which they are associated.

4.4.1 How do household strategies vary regarding engagement in commercial markets?

In the Upper Ping Basin of northern Thailand, where commercial markets have been developing for several decades, we have seen evidence of household strategies that represent a spectrum of responses to emerging market opportunities. In order to summarize these different types of responses, we can aggregate observed strategies into three groups:

Self-sufficient farming At one end of the spectrum are strategies that have been the most conservative in terms of market engagement. Overall objectives of self-sufficient farming households at study sites in Thailand tend to seek stability more than innovation or adaptation, and they appear to have the most risk averse livelihood strategies. With less than 25 percent of their agricultural production for sale in commercial markets, strong emphasis is placed on being self-sufficient in rice and mixtures of other subsistence crops, and often on food and other products gathered from wildland resources. They may also produce small amounts of low-value, low-risk cash crops for sale, but tend to depend quite heavily on off-farm wage employment for cash income, usually in relatively low wage rate jobs in rural areas or nearby towns, and sometimes in provincial cities.

Thus, their wealth status depends heavily on the amount and quality of natural capital assets to which they have access, as well as the reliability and wage rates of local wage labor markets. Those able to maintain livelihoods above poverty line levels usually have at least some paddy land, large enough areas for upland rice crops with sufficient fallow to keep weed pressure at manageable levels, at least some access to wildland and forest resources, and sufficient labor. Effective management of local forest resources and rotational forest fallow systems are also especially reliant on maintenance of associated local social institutions.

Medium to longer term prospects for self-sufficient farming in upland areas, however, appear to be linked with the degree of household and community dependency on upland rice pro- Page 210 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region duction and wildland resources, and with their abilities to accumulate assets through savings, livestock, education or other means. Although population growth has slowed, state land use policies are likely to continue applying pressures to exclude households from access to forest resources and to sufficient upland areas to maintain sustainable production of upland rice using traditional forest fallow shifting cultivation techniques. And experience has shown that decreasing land availability leads to shorter fallow cycles that bring increasing weed pressure and decreasing productivity. Accordingly, the longer term viability of self-sufficiency strategies that are heavily dependent on upland rice production and forest products appears to be highly questionable, unless there is very significant change in Thailand’s land use policies in montane zones.

At our study site in Vietnam, self-sufficient farmers are those whose main occupations are growing crops other than tea. They also have few large livestock, and often seek income from off-farm sources. Many tend to have relatively little land, lower levels of education, and limited access to outside information. Some are younger households formed since land was allocated among households. These tend to be the poorest households in their communities.

Commercial farming At the other end of the spectrum of household strategies are those where households have shifted their objectives and efforts to become fully commercial producers in the market economy. Within this category, however, there are two rather distinct patterns:

Commercial short to medium term strategies Households with fully commercial short to medium term farming strategies focus on short- season and annual crops, and sell more than 75 percent of what they produce to commercial markets. Thus, they tend to have little paddy or upland rice. Their focus tends to be on intensive year-round vegetable production, often including some more exotic high value crops.

These households tend to be less dependent on off-farm employment than self-sufficient or semi-commercial households, but their sources of off-farm employment are often fairly diverse. They also tend to be less dependent on their own savings for production costs, and thus more reliant on credit from outside sources. Moreover, they tend to be keenly interested in innovation and gaining access to new technology that can increase the profitability of their ventures. This can come through their own efforts, such as developing gravity fed sprinkler irrigation or purchasing transport equipment such as pickup trucks for direct access to more distant higher price markets, or it can come through establishing links with outside sources of improved production or post-harvest technology or market chains and channels.

There are still differences in attitude toward risk among commercial farming households, however, which is reflected in choice of crops. Risk-takers are more likely to invest to a greater degree in crops that have higher risk of agronomic or economic failure, but which also have the potential for much higher returns if successful. Longer term prospects for households employing these types of strategies appear fairly promising, but are dependent on their entrepreneurial capacities to remain successful in producing products with good acceptance and prices in commercial markets, including their ability to withstand periodic crop failures Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 211 or economic downturns. They may also be vulnerable to increasing state land use exclusion and restrictions in montane areas, and especially where their use of water and agricultural chemical inputs is perceived as threatening to downstream populations.

Commercial long term strategies This type of strategy is also heavily integrated into commercial markets, but is based on investments aimed at returns over longer periods of time. Thus, orchards and other types of tree crops are often prominent components of these strategies, as well as land improvement and conservation farming practices. In order for such components to be viable, they are usually mixed with additional components based on paddy fields, livestock and/or off-farm employment. Some intensive short-season cash crops may be grown, but production is usually limited to paddy lands. These households tend to be less reliant on outside sources of production credit, but also show strong interest in establishing channels and linkages that can provide access to new technology and markets. Some household members usually engage in off-farm employment, and it tends to be at relatively higher paying types of work.

The longer term prospects for this type of strategy may be the most promising because of its tendency toward income diversification, as well as the way it is perceived by environmentalists and state land management organizations. Households who are able to establish and maintain this type of strategy are often associated with relatively high social standing in local communities, and their investments in land improvements and permanent tree cover help improve their standing with state agencies and environmental interests. However, their ability to expand into some types of tree crops, such as para rubber, may be limited by state land use policies at least in some areas.

In Vietnam, the most commercialized households at our study sites rely heavily on income from various combinations of tea and large livestock. These households tend to be relatively better-off, and invest larger amounts of labor and capital in their tea and livestock production operations. Those who produce tea tend to have relatively large plots, and often receive good prices due to their higher quality outputs and good relationships with traders. Some households have members who also have non-farm occupations outside the village, many of which often do not pay well, but provide valuable channels for contacts and information.

Semi-commercial farming This category of strategies occupies the middle of the spectrum between self-sufficiency and commercial farming, and is thus quite diverse. These households still produce 25 to 75 percent of their crops for subsistence use, but this also means that between 25 to 75 percent of their crops are for sale to commercial markets. And while they are somewhat less dependent on off-farm wage employment for cash income than those with self-sufficiency strategies, they tend to be involved with a more diverse range of non-farm and off-farm work.

One of the reasons for the wider diversity found within this group of strategies relates to the different types of situations in which these mixed strategies are employed, some of which are transitional in nature. Some of the situations we have seen, for example, include: Page 212 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Insufficient subsistence. Some households are basically forced into commercial production because they are unable to maintain a self-sufficiency strategy. This is usually because of inadequate capital assets of one type or another. Insufficient amounts of land or poor land quality are one common constraint, and this can be due to exclusion from upland fields by state agencies, or to inadequate land available for newly formed or newly arriving households. It can also be due to insufficient labor in the household, sometimes due to poor health or aging, especially where weed pressure on upland rice is high, or to inability to access wage labor due to lack of citizenship, language skills, or sufficient wage labor opportunities. Attitudes toward risk can vary considerably, but these types of households often engage in production of lower-risk, lower-price crops. These are often the poorest and most vulnerable types of households. x Start-up commercial farming. Some households with livelihood asset limitations employ a mixed strategy during what they at least hope is the start-up phase for their entrance into a fully commercial farming strategy. This type of situation is especially common with young households, for example, who use a partial subsistence strategy to minimize expenditures so that they can invest crop profits and wage employment income into improving and expanding their commercial farming operations. Their future prospects are highly dependent on their entrepreneurial skills and ability to accumulate sufficient capital assets to shift to a fully commercial farming strategy. x Non-farm or off-farm base. We have also seen some cases where a mixed self-sufficient and commercial farming strategy is employed by households whose main objective is to move more into non-farm or off-farm occupations. Thus, their commercial production component may be a means to provide income to help some household members obtain more education or skills in order to obtain better off-farm income. Or, as we have seen with some households in Mae Wang, their main focus may be on developing capital assets that will allow them to gradually shift their livelihoods to activities associated with tourism in the services sector. Thus, commercial cropping is a supplementary form of enterprise, and their future prospects are dependent on their success in other activities. x Secure diversified households. There are also some households who appear to consciously and willingly adopt a diversified income strategy that includes both self-sufficient and commercial farming components. Such households frequently include members with secure sources of income from non-farm or off-farm sources, along with other members who wish to pursue self-sufficient or commercial farming activities on a full or part-time basis. Relatively recent additions to this category may include some who have become convinced by the ideological values promoted under the self-sufficiency economy banner.

For all these types of situations other than those in the secure diversified household category, including other variants of reasons and circumstances underlying adoption of mixed self- sufficient and commercial production strategies, these households are commonly in quite fragile and vulnerable situations. For those who seek to move into commercial farming or non-farm occupations and are successful at doing so, this is a temporary phase. For some, however, vulnerability to fluctuations in environmental, economic, or health conditions may thwart their efforts to make the transition to another strategy. And some of those forced into commercial production because of inability to maintain a self-sufficiency strategy may also be Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 213 unable to overcome social constraints related to their citizenship, language skills, ethnicity, or other factors. Those who remain in this category over the longer term without other secure sources of support tend to be the poorest and most insecure households, and it appears likely that their circumstances will force many of them, or at least their children, out of farming livelihoods in the future.

In Vietnam, many of the households at our study site villages employed mixed self-sufficient and commercial strategies. It appears that most, however, wish to move in the direction of increased commercialization – at least at this point in time through improved and expanded production of tea and livestock. Current household shortages of land, labor, capital and knowledge are frequently cited as constraints on their commercialization, and many of the strategies they employ for achieving the next “stage of progress” in well-being are aimed at overcoming these constraints.

4.4.2 How do asset capacities affect response to market opportunities?

Under the framework of our study, household capacities are based on effective command over mixes of five types of livelihood assets in their household asset portfolios. Thus, our response to this question is organized according to these five types of capital assets:

Natural capital. Access to natural resources is a major factor in determining which types of strategies are viable options. Adequate areas of land of reasonably high quality appear to be a basic requirement for both self-sufficient and commercial components of farming strategies. Paddy land seems particularly valuable in this regard, and especially where small scale water resources are available for irrigation. In upper montane (highland) areas, where paddy land is particularly scarce, areas with good soil combined with micro-climates suitable for off-season, sub- tropical or temperate crops, especially where water is available from mountain springs or streams and road access is available, have also provided the basis for profitable commercial fruit or vegetable farming operations.

Especially in Thailand, early settlers in an area usually have had the advantage of selecting highest quality sites for their agricultural fields, and this is reflected in their relatively high representation among households with viable self-sufficient and commercial farming strategies. Vietnam and Yunnan have implemented relatively recent land reform programs that have sought an equitable distribution of land resource allocations among households in local communities. Although Laos is also conducting a land allocation program, it is often complicated by associated relocation of villages wherein early settlers may still have some advantage in access to most desirable land resources. In all cases, however, poorest households are often associated with relatively small amounts of land, poor land quality, and little or no access to water for irrigation.

Moreover, access to group and community managed natural capital also appears to be important, especially for livestock grazing and forest products, including wild foods and medicines upon which both the transient and chronic poor rely to help reduce consumption expendi- Page 214 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region tures. Viable forest fallow shifting cultivation systems, which in Thailand are an especially important part of self-sufficient livelihood strategies of ethnic groups such as the Karen and Lawa, have traditionally been managed at both household and community levels. Thus, these types of natural capital are linked with forms of social capital. Vietnam and Yunnan have implemented programs to recognize and secure village and household claims to wildland resources, and this is an important component of on-going land allocation processes in Laos. In montane zones of North Thailand, however, community claims to wildlands remain informal and contested by state authorities, and legal recognition of such claims is very rare.

Natural capital is converted into other forms of capital primarily through selling or renting out household land assets, or by letting relatives or others use the land with no immediate charge, but an implicit understanding that some form of reciprocity will occur at some point in the future. Similarly, access to natural capital is acquired through purchase, renting, share- cropping, or through free use arrangements that imply future reciprocity, all of which require varying combinations of other types of assets in exchange.

Financial capital. While access to financial capital is increasingly important for all types of livelihood strategies, it becomes especially important where commercial farming components are present. Finan- cial capital assets are stored as cash, deposited in savings accounts, or converted to gold, jew- elry or similar types of easily redeemable types of property. Financial assets are sometimes loaned out to others, with or without interest payments. Moreover, financial capital is readily convertible into most other types of capital assets, which can also be used to store wealth.

Many households have financial capital deficits – or financial debts. Temporary debts in- curred through borrowing money to fill critical asset gaps needed for commercial farming production cycles are a common part of commercial production at all levels. In Thailand, semi-commercial and commercial farmers with short to medium term objectives appear to have at least some access to credit and borrow significant proportions of the funds required to complete their production cycles. Commercial farmers with long-term strategies, on the other hand, tend to be able to draw primarily from their own savings and assets. Poorest households, however, are associated with very little savings, as well as often severe constraints on their access to credit due to lack of collateral, lack of citizenship, lack of social standing and low repayment credibility.

Access to credit from commercial and agriculture banks is commonly limited in montane zones of Thailand by lack of official land use rights that can be used for collateral. The parastatal BAAC may be able to provide smaller amounts of credit based on a group guarantee when a group of farmers can develop a plan that is credible to a bank officer. Similarly, access to loans from village funds and similar sources appears to increase with the social standing of a household in the local community and their credibility for repaying the loan. Thus, semi-commercial farmers with very limited assets tend to also have the most restricted access to credit, making it more difficult to stay out of poverty and accumulate assets that would allow them to make the transition to another livelihood strategy. Contract farming or share cropping are sometimes seen as a good options by farmers in these types of situations. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 215

Patron-client relationships with merchants or other more wealthy households are another common option. Assistance through kinship networks sometimes help, but amounts of funds are often limited. Access to informal money lenders is sometimes available, but interest rates tend to be high. Households with limited overall productive capacity who must frequently borrow for consumption are likely to accumulate debts which become unmanageable, which often further decreases their ability to gain access to additional financial assets.

In Vietnam, upland farmers can use their land certificates for collateral for loans from the agricultural bank, and farmers in mountain areas can obtain substantially lower interest rates. A separate social policy bank also provides a lower interest window for the poor, and special programs for poorest communes and ethnic minorities provide more investment assistance. Various forms of contract farming are being employed in Yunnan, Vietnam and Laos, and terms and arrangements continue to evolve.

Physical capital Various forms of physical capital assets are needed to effectively operate and further develop different livelihood strategies. Housing, outbuilding structures and non-farm facilities are often among the more obvious types of physical capital assets.

In North Thailand, water resource development is most commonly conducted by construction of small scale diversion weirs and distribution canals, and paddy land must be developed by leveling and constructing bunds. Such investments are only possible where terrain allows, and such areas are usually dominated by early settlers. On sloping land different types of investments in physical assets are required, which sometimes include contour strips or various types of terracing, as well as water holding ponds, pipes and sprinkler systems. Various types of pumps and additional equipment are sometimes also required for operation and maintenance of irrigation systems. Since many types of water resource development assets are established, operated and maintained by groups of households, these are also linked with social capital assets.

Other examples of physical capital assets that directly affect the viability and performance of commercial components of livelihood strategies include farm equipment, such as walking tractors, hand tools, spraying equipment, etc., as well as equipment used for processing and storing various products, such as tea at our study site in Vietnam. Transportation is very important and motorcycles, and increasingly small trucks, are now considered to be nearly essential for viable commercial farming operations. Equipment for communication and accessing information are also of growing importance, so that radios, televisions and cell phones are now commonly found in mountain households, and even a few computers are beginning to appear. While most households at all our study sites aspire to have full ownership over these types of physical assets, they are sometimes jointly owned by groups of households. More- over, owners of some of these types of physical assets sometimes offer them for hire, or offer services in which they are used, for other households who do not yet have their own, thereby helping to defray the cost of acquisition. Especially semi-commercial and self-sufficient farmers often depend on others for services using more expensive physical assets. Although these Page 216 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region types of physical assets can be sold or otherwise converted to other forms of livelihood assets, their value depreciates with use and over time.

Livestock are considered another type of physical asset, although some feel it would be more appropriate to consider them a form of natural capital. In any event, they provide a range of products and services and are considered important assets at all our study sites. Livestock are sold or traded for other assets, and food provided by livestock often help minimize cash expenditures for household consumption. And while animal power is being replaced by farm machinery and vehicles, larger livestock are often used especially by poor to medium (and sometimes well-off, as in Vietnam) households to store and accumulate assets. Thus, one important advantage of this type of living physical asset is its ability to reproduce and increase in value over time. At the same time, however, livestock lose value after a certain age or if its health fails, and are vulnerable to losses through disease, theft, etc. Social status, especially in some minority cultures, is sometimes still linked with livestock ownership and its use in ritu- als and feasts. And since common property natural assets are often used as a source of food for livestock, there are also linkages with social capital assets. Poorest households, however, often have difficulty raising financial capital for initial investments in large livestock and lack associated social capital that is also required.

Human capital. The most common measure of the quantity of human capital is the size of the labor force in a household or community. The basic adequacy of labor is usually considered in relation to the number of dependents that must be supported, i.e. those who are too young, too old, in school, or otherwise limited or unable to participate in income generating activities conducted by the labor force. Accordingly, small households, which are often headed by elderly persons with few or no working age children in their household, or young households with high dependency ratios, frequently have insufficient labor to fully utilize some other livelihood assets that may be available, and not enough financial or other convertible assets to hire labor to help. On the other hand, labor can also be ‘sold’ and off-farm employment appears to now be an important component of most all livelihood strategies in North Thailand, as well as other study sites where it is an available option. Poorer households and those with self-sufficiency strategies tend to be particularly dependent on low wage labor as a source of household income.

The other very important dimension of human capital assets relates to their quality. Basic health is fundamental, and various types of physical and mental strengths and capacities are important for different types of work. Constraints on these capacities are often found in poor households. Beyond that, various types of knowledge, skills and experience are required for effective implementation of different livelihood strategies. Local knowledge derived from traditional sources and long experience and familiarity with local conditions are especially important for self-sufficient strategies, but are also sometimes important in developing successful commercial components of livelihoods, such as NTFPs in Laos and other examples. People particularly skilled in certain areas, such as traditional medicines, water resource development or management, construction, etc., have long provided specialist services in local communities, and in some cases are able to commercialize their services in emerging local or Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 217 wider markets, either as a service provider or through wage employment. Recent arrivals often bring useful local knowledge from other places, but lack familiarity with local conditions.

Effective participation in market economies and the associated changing social context, however, also requires new types of knowledge and skills, and this appears to be very widely recognized by those employing all types of livelihood strategies we have observed. Perhaps the clearest indicator of this is the very high priority that appears to be placed on investment in education for children, which is clear in data from both North Thailand and Vietnam. Re- gardless of livelihood strategy or wealth status, educational attainment of young household members tends to exceed that of household heads. The main exception is where children are excluded from education by lack of citizenship, as in some cases in Thailand, or where extreme remoteness and/or poverty put especially higher levels of education beyond their grasp. Substantial inequalities in educational services between rural and urban areas also tend to disadvantage rural and ethnic minority children in access to affordable but highly competitive higher levels of education. While education reflects a fairly long-term strategy for improving human resources, a more immediate objective is often improvement of security and wage rates of off-farm employment components of livelihood strategies; it also appears to help improve social standing in the local community. And although sending children to urban areas for higher education can result in “brain drain” situations where they do not return to reside with the household, remittances provided by them are sometimes important sources of household income.

More immediate efforts to increase the range and depth of knowledge and skills are also very common, and especially among households with livelihood strategies that include commercial production and/or non-farm components. There is substantial variation in the degree of effort put into acquiring new knowledge and skills, and in applying them in innovative and entrepreneurial ways to overcome constraints and improve production processes. In North Thailand, some generalized differences have been seen among ethnic groups, but differences within ethnic groups now appear to be as great or greater. In areas where participation in contract farming, Royal Projects, or other initiatives is possible, these are usually important sources of information, knowledge and training. In these areas and elsewhere, wider kinship networks often help provide channels for gaining access to new information, ideas, and experience elsewhere. All study sites have examples of how interaction with merchants, innovative and successful producers, and public and private extension services are sometimes useful, and production or kinship groups sometimes collaborate in these efforts.

Social capital. Social capital assets play important roles both in framing the livelihood strategy options available to households, and in assuring their viability and sustainability over longer terms. Moreover, there are multiple levels and dimensions to social capital assets.

At the local level, social capital based on community, group or kinship relationships are usually important in gaining access to various types of group or community-mediated asset management processes. In North Thailand, for example, to the extent that self-sufficient or semi- commercial strategies depend on traditional rotational forest fallow shifting cultivation sys- Page 218 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region tems, social relationships are important in gaining access to upland fields and to joint and exchange labor used in field and fallow management, as well as in crop production. In more traditional systems, periodic reallocations of areas for household cropping are made as needs change with household development stages and cycles, and community relationships can affect one’s allocation. In Yunnan and Vietnam land allocations and reallocations are conducted through official channels. Similarly, households with access to paddy lands commonly participate in groups managing small-scale diversion weirs and canals. Community natural assets such as forest and grazing areas are also subject to management at community levels, and their use has been subject to increasing regulation during recent years.

Important roles in these types of groups (either currently or in the past) are often associated with strong social standing in communities where they are or have been important. Good social standing is also sometimes achieved through education or exceptional performance, and especially if it is linked with generosity in participating in or contributing to community or clan functions or institutions. While this is often difficult for poorest households, their efforts to participate may help them gain access to some forms of assistance. Good social standing in the local community appears to be associated with more ready access to community revolving funds, where they exist, as well as with better access to local off-farm employment opportunities, and access to assistance from development programs. Village leaders and elders often play a role in allocation decisions of such processes.

At wider levels of society additional levels of social capital become important. Those with useful “bridging” links with outside institutions or people at distant locations can benefit directly from those links, and often indirectly through better social standing in the local community. In North Thailand, many households with commercial farming strategies with long- term objectives have developed good relationships with government agencies that can sometimes help fend off efforts to exclude their communities from access to natural assets, and provide them with access to subsidized production inputs and assistance. And in terms of commercial production activities, some of the most successful tea farmers at our site in Viet- nam cultivate relations with merchants and sometimes maintain poorly paid outside employment in order to strengthen contacts and information channels. The Hmong in Thai- land and Laos and the Akha in Laos have been notable for the manner in which they have drawn on wide social networks to access information and in some cases even establish their own marketing channels. But various ethnic groups also draw on wider kinship networks to help access information and more distant sources of wage employment.

Recently arrived households, such as those fleeing from Burma into North Thailand, for example, often begin with very little social capital, and must work hard to build social assets they see as important to achieve a viable livelihood strategy. Basic citizenship, or at least some form of official status is an important factor for them, and has been (and in some cases still is) a serious constraint for many ethnic minority households who have lived in Thailand for generations. Basic Thai language skills are another factor constraining access to educational, health and other services, as well as many types of off-farm employment; poor skills in the Central Thai dialect are a constraint in higher education and interactions with government agencies. Thus, they usually need to begin with building social capital and basic skills in the Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 219 local domain, which sometimes assist them in gaining access at wider levels. Less severe but similar issues affect opportunities for many mountain ethnic minorities across the region.

4.4.3 How do wider institutions affect response to opportunities?

While social capital can help households gain access to processes mediated by local institutions, institutions at wider levels can also affect household responses to market opportunities.

Basic social legitimacy. One of the most basic aspects of wider social legitimacy is the official identity and citizenship status of household members. Especially for mountain ethnic minorities in Thailand, lack of citizenship status excludes some people from various production and employment opportunities, as well as basic human services. And even for those who are officially recognized with “mountain minority” identity status, their movement and access to various opportunities is restricted. Furthermore, they have no voice or representation in political systems, and are constantly subject to paying often heavy “transaction costs” to “stay out of trouble”. Thus, their livelihood opportunities are largely restricted to those within local domains where they can build local social capital.

A second basic aspect of wider social legitimacy is some form of more official recognition of land use rights that are already recognized by local institutions. This becomes particularly important in contexts where there are substantial and growing discrepancies between what land use is recognized by institutions at these different levels. For most people in montane zones of northern Thailand, for example, there is no form of wider official recognition of their rights to use land for any purpose whatsoever, and most all land is claimed as state forest land. While local institutions continue to regulate land use locally, land cannot be used as collateral for access to normal institutional credit sources, it is difficult to defend against encroachment by outsiders, and state agencies are expanding protected forest areas that exclude all other forms of land use. Resulting tenurial insecurity is an important disincentive for livelihood strategies to include longer-term investments at either community or household levels.

Basic human services. Wider governmental institutions are primary providers of basic health and education services. Good health is essential for assuring labor availability to effectively implement livelihood strategies. Formal education for children is a highly valued component of most all livelihood strategies, and non-formal education is sometimes a source of training and skill development for farming, non-farm and off-farm components of livelihood strategies. Access to these services is dependent on official identity status, availability of services in local areas, and costs associated with obtaining services. Some special programs are seeking to reduce disparities in services for mountain areas, especially in Vietnam.

Location assets and restrictions. The availability and viability of many market opportunities are related to efforts by wider institutions to facilitate or restrict physical access to various types of livelihood assets. One of the main ways in which wider institutions facilitate physical access is through development of physical infrastructure that becomes an asset potentially available to all people in locations that it services. Primary examples include roads, electricity, telecommunications and water resource development, which are viewed by people at all our Page 220 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region study sites as important factors influencing the viability of various components of livelihood strategies. Extension or upgrading of such infrastructure in a particular area requires investment decisions that are mediated by wider institutions. In northern Thailand, elected sub- district governments (TAO) have relatively important roles in deciding among locations and assigning priorities for infrastructure investments, although agencies and higher levels of government still have strong voices in determining allocations of funds among sub-districts. Pri- vate sector concessionaires also influence decisions on placement of investments such as telecommunications. Thus, the relative political voice of local communities and their representatives at these different levels is often reflected in these types of investment decisions.

Wider institutions can also restrict physical access to livelihood assets in particular locations. Clear examples in northern Thailand include expansion of protected area status and watershed classification aimed at excluding and restricting various forms of land use. Basic decisions on when and where to declare and enforce these types of restrictions are usually made at higher levels of government with little or no participation by local communities or local governments. Thus local voice often depends on linkages with elected representatives, local agency officials, or non-governmental groups with access to and active roles in higher level political decision making arenas.

Livelihood support and development services. There are various additional types of services provided by several types of wider institutions that also influence decisions to adopt livelihood strategies, as well as viability of components within strategies. Examples include: x Credit. Access to financial capital is often available from wider institutional sources for those who qualify. Normal institutional sources for individual loans usually require either collateral (most commonly some form of land use rights) from the borrower or from a sponsor who co-signs the loan. Some institutions (like the BAAC in Thailand) also provide loans without physical collateral when all members of a small group of people accept responsibility for repayment of the loan. And government-linked banks or special banks (like the social policy bank in Vietnam) sometimes have provisions for small or poor farmers to borrow funds at very low interest rates. Thus, some combination of natural, physical and social assets is required, as well as a credible plan for production that should be profitable enough to repay the load within the specified time period. x Government extension. In many areas, government extension services have been important sources of information, training, access to subsidized inputs, and other forms of assistance that help households, various types of farmer groups, and communities in developing their livelihood strategies, options, and assets, as well as their production processes. It is not uncommon, however, for government extension agencies to emphasize support for production approaches and systems that have been developed in the context of lowland farming systems, which may or may not be appropriate for conditions in montane zones. Moreover, access to government extension services are often limited in montane zones, either because of logistical or staffing difficulties in these areas or, as in many areas of northern Thailand, because they are located in areas officially designated as forest land so that policies limit or restrict agricultural extension services. In any event, access to government services and programs is often mediated by the official village-subdistrict-district Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 221

government hierarchy, which tends to favor those with good social standing as perceived by members of the hierarchy. Thus, local social assets that link with these officials may help provide or improve access to such government services. x Private sector initiatives. Commercial production by its very nature is based on a chain of activities that link producers and consumers. As commercial production becomes more integrated into larger markets and economic systems, production and marketing chains become longer and more complex. A common sequence in the Upper Ping Basin has been that once basic infrastructure im- proves physical access to a mountainous area, various private sector merchants and/or middlemen begin to explore production possibilities in the area. One of the first targets is often timber or other natural plant or wildlife assets, but production of crops and other commodities favorable to local conditions usually follows. New local producers often only see the face of these local middlemen or merchants, who sell or provide inputs, purchase outputs, and provide various types, amounts and quality of information. As producers become more experienced and entrepreneurial, however, they begin to understand more about the production and marketing chains, as well as costs and prices involved at different stages. At the same time, increasing commercial production often attracts others to engage in livelihood activities that can fill gaps or improve stages in these chains. Thus, in many cases, chains tend to become more competitive and efficient over time. In other cases, however, differences between production costs at remote montane locations and prices at district or provincial markets are not sufficient to attract development of complex chains of specialized operations. And for some crops this problem is being exacerbated by low cost imports from distant areas with more favorable environments and production costs provided through globalizing market economy systems. In many such cases, including many parts of the Mae Chaem sub-basin of the UPB, main opportunities for commercial farming may be low-risk but low-price industrial commodities such as rice, maize and soybeans. There are, however, two additional types of private sector initiatives that have emerged in some of these areas. The first type of initiative has been led by medium to large scale business firms. For commercial crop production, these initiatives often focus on contract farming arrangements. Examples in our study sites in the UPB have included “baby corn” to supply a canning factory established at a nearby location, production of hybrid maize seed for a large agribusiness conglomerate, and coffee production in Omkoi. The first encountered difficulty because production was in direct competition with other livelihood strategy components that are highly valued, while the second has been operating quite successfully for a number of years in a somewhat more remote area. The third is still struggling with difficulties associate with remote mountain areas. These examples reflect the mixed experience with contract farming that has occurred in Thailand. In addition to crop production, however, outside investors have also been developing resorts and recreational facilities of various sorts in some remote areas with characteristics favored by tourism markets. Some of them are beginning to purchase some products from local communities, usually food or handicrafts, but the main opportunities they provide are usually modest- wage employment. Page 222 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

The second type of initiative has been led by growing local entrepreneurship within some remote areas. In these cases, particularly ethnic Hmong communities like those in the Mae Suk sub-watershed in Mae Chaem, have developed effective commercial farming strategies that include their own pickup truck-based transportation system for purchasing inputs and selling products at relatively distant market locations. They also draw on widespread networks among Hmong communities for information and experience that can help them build and improve their production systems. Some more successful producers are now beginning to specialize more in assembly and marketing stages of the chain, and are providing services and support for members of other ethnic communities in the area who wish to enter the production system. Similarly, in Mae Wang we have seen emergence of tourism activities owned and operated by local households and communities themselves that include rafting, elephant rides, handicrafts of increasing quality, and now expansion into homestays and related activities. x Projects. Various types of projects conducted by wider institutions can also influence choice and viability of livelihood strategies and various component activities. Many montane areas, including the Mae Chaem sub-basin, have been sites for various types of development assistance projects. Most such projects tended to be short to medium-term in duration, and especially those supported by international agencies or organizations. They often set up a local “bubble” of highly assisted and often subsidized operations that were effective and viable only under conditions that occurred during project implementation. After the projects ended, production operations often collapsed. Now that the era of development assistance projects has largely ended in the UPB, it is instructive to see what continues to influence local livelihood strategies. Among the most enduring impacts have been those from roads, electricity and physical infrastructure that projects were able to construct or influence government agencies to construct. In some cases, crops introduced by projects have continued, especially where linkages were established with Thai agribusiness companies. Overall, introduction to approaches to commercial production may have been a more useful and enduring contribution than introduction of any specific crop or animal. Indeed, the highland commercial vegetable farming strategies of Hmong communities in Mae Suk were influenced by opium crop substitution projects, although few of the crops they grow today were directly introduced under those projects. The Royal Project in northern Thailand has been unusual in various ways, and is a very noteworthy exception. Beginning as what was an extraordinarily long-term project, it has evolved into what now appears to be a permanent institution. Moreover, as already described in previous sections of this report, it is a vertically integrated system that addresses issues throughout the entire production and marketing chain, while still retaining a generic enough structure for production of changing lines of products rather than just a few specific products. New government efforts to promote expansion and replication of project operations at new sites may test the degree to which expansion of this type of institution can be effective, and it remains as a challenge for the private sector to be able to construct and successfully operate similar systems. Although focused on a single commodity, the recent efforts to re-launch coffee production in Omkoi may provide a useful new example of how private sector initiatives can build on earlier project experience associated with the Royal Project. Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 223

4.4.4 Is inequality growing?

After several decades of increasing integration into commercial economic systems, it does appear that inequality among livelihood strategy outcomes is increasing in the Upper Ping Ba- sin. While many are now better off in terms of income and assets, the rate of improvement is not the same among different areas and groups. At study sites in neighboring countries, processes of integration into commercial markets has begun more recently, so that trends related to inequality are less clear. These countries have also been experimenting with policies and programs associated with socialist ideologies that seek to minimize or reduce inequalities among communities and households, but how effectively they will be able to perform this function in the longer run remains to be seen.

Some of the inequality among livelihood strategy outcomes emerging in the UPB relates to inequalities of effort invested in them, which reflects the diversity of objectives, aspirations, and striving among different individuals, households, groups and communities in the population. In our review of data on inequality in chapter 2, we saw the relatively high levels of inequality present in Thailand. While some areas with high income inequality are also associated with high levels of poverty incidence and depth, many others are not. We have also seen evidence of high income heterogeneity in areas of the UPB considered to have relatively low poverty incidence, wherein households with radically different income levels appear to live together in communities with little class conflict. Moreover, we have seen that households classified as poor do not always perceive themselves as poor or living particularly difficult lives, whereas some classified as well-off feel they do have difficulties. And at all our study sites we have seen examples of inequalities in wealth that are associated with different stages in household life cycle development or various types of household problems that result in inequalities that may be more temporary than chronic in nature.

At the same time, however, there also appear to be important structural inequalities in opportunity among different components of the UPB population, and at least some dimensions of these inequalities may also be growing. Much of the inequality in opportunity that we have seen relates to four factors: x Location and public investment. At a broad level, there are clearly quite significant differences in general livelihood outcomes between lowland and montane zones of the UPB. Lowland areas are where the greatest concentrations of commercialization and urbanization are located, and their urban centers are the major nodes of economic, transport and communications networks that link the UPB with economies at national, regional and global levels. Thus, they are also the centers of political and economic power, as well as the highest concentrations of private sector operations. Not surprisingly, public investments in physical infrastructure such as water resources, energy, transport, telecommunications, etc. have also been far greater in lowland zones. Similarly, the quantity and especially the quality of basic public economic and social services, such as health, education, and production support services, are greatest in the lowlands, and especially in the vicinity of urban centers. As in other parts of the region and the world with relatively strong economies, these areas are growing and developing most rapidly and their poverty incidence rates tend to be relatively lower, especially in and near urban centers. Page 224 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

More remote, and especially montane, areas of the UPB have two types of disadvantages in terms of location and public investment. The first relates to logistical and political considerations in terms of allocating resources for public investment in infrastructure and services. The spatially dispersed configurations of rural populations and the complex terrain in most montane zones increases the per capita costs of providing local access to infrastructure and services at the same levels found in lowland and especially urban areas, making it politically difficult to justify such investments. While many areas in montane zones of the UPB have seen significant levels of investment especially in roads, but also in electricity, health and education services, the associated structures and facilities in montane areas are usually much more basic than in the lowlands, and they have often been justified on the basis of national security or opium eradication concerns. The second type of disadvantage is that even where investments have been made in infrastructure and services, their economic and livelihood impacts may be less than the lowlands. While improved roads, for example, provide improved physical access, high transportation costs to and from remote mountainous areas increase the costs of production inputs and decrease profits received by farm households, and even those from outside wage employment. At the same time, it is often difficult to operate and maintain quality health and education services when the most competent health workers and teachers aspire to live and work in lowland or urban areas. Vietnam has been implementing several major programs aimed at exploring means for specifically targeting and helping address various of these types of issues in mountain areas, while policies in the Lao PDR have been seeking to induce relocation and consolidation of small remote villages into valley corridors where infrastructure and services can hopefully be provided in a more efficient and effective manner. Substantial public investments are also being made in many mountain areas in Yunnan, especially in infrastructure. While at least some aspects of these policies and programs appear promising, it is still too early to assess their overall longer term impact on lowland – upland disparities. x Natural resource qualities and access. As we have seen, access to natural assets in the form of land, water and forest resources is an extremely important component of rural livelihoods generally, and especially in montane areas where land-based components of household livelihood strategies are dominant. In the UPB, many of the crops favored in recent and current commercial markets are viewed as most suitable for lowland and foothill areas where soil conditions, water resources and ready market access are most favorable. Many of these areas have very high land values and are being converted to urban and suburban development. While small valleys in montane zones provide some areas seen as suitable for these types of crops, such areas tend to be very limited and insufficient for the population. Rather, most montane zones are dominated by sloping lands where sustainable production of such crops is more difficult and requires additional types of investment. Highland (upper montane) zones in the UPB, however, have some areas where natural resource qualities can help offset higher costs of distance, especially where they allow production of high value temperate, sub-tropical or off-season specialty crops. In all of these natural resource contexts in the UPB, early settlers have usually been advantaged by being able to claim the most desirable and productive resources, and this is reflected in their livelihood strategies and overall wealth status. Newer and more recently Chapter 4. What strategies have been used to respond and adapt to changes in opportunities? Page 225

arrived households must develop livelihood strategies that are constrained by less productive resources. Exceptions in some areas include newly arriving people who are wealthy and/or well-connected enough to displace early settlers and obtain legal recognition of their new land holdings. Furthermore, it is often household fields in more marginally productive (at least for major lowland and industrial crops) sloping land areas that are the first to be targeted by agencies seeking to exclude agricultural production and expand protected forest areas, thereby further exacerbating livelihood inequalities. Moreover, while natural resources in highland zones can often be quite productive for specialized agriculture, they are also where most hill evergreen forests are located, making them priority targets for conservationists and excluding any possibility of legal recognition of other local uses. Thus, highland communities not under protective umbrellas such as the Royal Project are very vulnerable to land use conflict, which is further reinforced by increasing downstream concern about impacts of highland production activities on water quality and the quantity and timing of stream flow that feeds expanding lowland irrigated agriculture. Given their impacts on livelihood assets and opportunities, these patterns and processes are fueling asset, income and wealth inequalities among households and communities in the UPB, and these disparities appear to be generally increasing over time. Major land reform programs in Yunnan, Vietnam and the Lao PDR seek to minimize inequalities of land assets among households in local communities. We have seen evidence, however, that enough time has passed since initial land reforms in Yunnan and Vietnam that inequalities are beginning to re-emerge as household configurations and needs change over time. Both countries are considering new rounds of land re-allocation, but it is not clear how much longer such re-allocation programs will be feasible. x Security and risk. Another source of inequality in opportunities relates to differences in land and livelihood security, and associated perceptions of and vulnerability to risk. The issues related to land security and vulnerability discussed above tend to have strong effects on willingness of households to adopt long-term investment strategies that include perennial crops and/or land improvements. Indeed, some investments are made to reduce risk of eviction more than to improve productivity or sustainability. At the same time, however, farm households face risk associated with fluctuations in environmental conditions, and production for commercial markets adds risk due to fluctuating prices. We have seen that self-sufficient and asset-poor households tend to seek stability by producing relatively low risk but also low price crop commodities. Many more commercial and well-endowed households, on the other hand, are willing to accept higher risks associated with higher value crops because their asset endowments provide them with resilience to shocks associated with periodic crop failures or price collapse of specific commodities. Over the longer term, evidence from the UPB indicates that household production portfolios that include wisely managed higher risk activities will yield higher returns, and thus further increase inequalities in overall wealth. On the other hand, high-risk production that is poorly managed or backed by insufficient asset reserves, as we have seen with some semi-commercial or short-term commercial strategies, can have devastat- ing impacts on households when crops or markets fail. And even when contract farming arrangements include price guarantees that reduce or remove the market risk component, risk of crop failure or quality below minimum standards due to environmental conditions Page 226 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

such as weather or pest epidemics is still born by farmers and results can be the same. Differential results from management of these processes have been associated with longer term trends that are “sorting” livelihood strategy outcomes in various study areas into those who are succeeding and those with trends that make them likely to be driven out of agriculture in the future. Thus, inequality among households and communities also appears to be increasing as a result of such trends. x Ethnicity and marginalization. There has been considerable discussion of ethnic minorities and their livelihoods in relation to both land use and poverty in the region. Since many of the areas where ethnic minority communities are most prominent are also quite remote, some of the inequality associated with ethnicity can be seen as more closely associated with spatially disadvantaged locations and/or natural resource endowments that are poorly suited for profitable commercial production or investments in supporting infrastructure and services. In addition, many ethnic minorities have been strongly stereo- typed by national societies regarding cultural traits that affect their relative willingness and/or competence to participate in commercial enterprise and “modern” society. Yet, while some evidence of general tendencies toward different types of livelihood strategies has been identified, study findings generally indicate that differences within ethnic groups is now often as great or greater than differences among groups. But at sites in North Thailand where studies have been most extensive, we also see evidence of ways in which ethnic minorities are being marginalized and blocked from access to various types of livelihood opportunities. The most obvious is where areas with traditional agroecosystem management practices are made targets for protected forest expansion primarily because the practices are seen as primitive, backward, or extravagant in their use of land. It is also quite obvious when minorities are either denied legal identity or given a status that does not allow them to fully participate in society and economic activity, and consequently subjects them to harassment, intimidation and/or extortion if they attempt to do so. Moreover, there is also evidence of discrimination in employment and access to services due to language, cultural norms, religion, or even physical characteristics that prevent them from being accepted as “Thai”. While ethnic discrimination also occurs in neighboring countries we have studied, its impacts on livelihood opportunities appear to be most severe in Thailand. There is also some evidence, however, that at least social dimensions of ethnic discrimination in Thailand may be slowly improving.

Most countries understand that some degree of livelihood outcome inequality is natural and a reflection of diversity in human societies. But to the extent equal opportunity is an important goal in society, inequalities driven by these types of opportunity inequalities need to be carefully assessed and addressed.

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5. How might larger transitions in society affect opportunities and responses?

Previous chapters have explored poverty and how it is distributed in the region, and how livelihood opportunities for the upland poor have been changing, as well as the strategies that the upland poor have employed to cope with and adapt to the changing livelihood opportunities and constraints they face. But what about the future? Can we assume that current trends will continue and that all that is needed is to assist the poor in “fixing” the problems and constraints they currently face? Or can we anticipate that, as in the past, societies may undergo wider transitions that will further change the overall framework within which local livelihood strategies are formulated and pursued? Since the answers to these questions are themselves fraught with uncertainty, this chapter explores approaches for better understanding uncertainties of the future, and potential implications for alternative trajectories of change.

5.1 Future transitions

Market opportunities which emerge and become accessible, and for which particular places and peoples are able to respond and engage in competitively, are strongly shaped by broader transitions in society. This is true whether we take our unit of analysis as an individual, household, village or other social grouping. The changes can be internal, largely operating within mainland Southeast Asia, or for a few key factors, from well beyond.

Some key changes are well known, and within bounds, predictable because of the momen- tum the present has with respect to the future. Vast regions, for example, are undergoing major demographic fertility declines that will result in an aging population that will, in time, begin to shrink, even though today they may still appear to be growing year in and year out [Jones & Pardthaisong 2000; Pardthaisong 1986].

Other changes are much more uncertain, but equally significant for well-being. Assumptions about several more decades of rapid economic growth across Southeast Asia are contingent upon international relations, especially in trade and military security spheres, as well as the availability of fossil-fuel and alternative energy sources [Lebel 2005a]. Cycles of political reform resulting in lurches toward democracy and administrative decentralization, and retreats following military coups, “security concerns” and other transformations [Ockey 2004], reflect a never ending pursuit of shifting concentrations of power and institutional tools of governance.

Some relationships seem clear when circumstances and contexts are present. Thus, improved road and telecommunication infrastructure in areas where they are now limited will have major impacts on commercialization and development of economic institutions, such as markets for credit, labor and crops [Foran & Lebel 2007]. These are likely to bring new economic opportunities, as well as associated social, business and ecological challenges [Ducourtieux et al. 2006; Kanok et al. 1994; Walker 2004].

Page 228 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Interaction among local and regional sources of uncertainty, social change and ecological processes of varying degrees of resilience, can have profound impacts on livelihood strategies and wellbeing of poor and disenfranchised peoples. Without citizenship, clear rights of mobility and work, or protection from discrimination, many of the benefits of new markets do not go to minorities [McCaskill & Kampe 1997; Vandergeest 2003]. Without sensible, enabling and caring policies with respect to natural resources, education and health, assets of hard working, but cash-strapped households, cannot be invested or built upon to create new surplus.

Exploration of development alternatives for the uplands and by their inhabitants needs to be framed in ways that acknowledge the real uncertainties at both local and more regional levels, including those which arise from contests and negotiations among divergent interests [Lebel 2006]. In this chapter we take a step outwards and forwards to explore how various transitions that are underway or envisaged by some actors might affect the opportunities and responses of peoples in diverse, but often challenging situations and circumstances across montane mainland Southeast Asia.

5.2 Scenarios: an overview

One of the ways to approach uncertainties is through scenarios. Scenarios are stories about how the future may unfold. They have been a tool of business and military strategists for a long time, and are now also used in studies of environmental change and development [Gal- lopin et al. 1997; Swart et al. 2004]. Scenarios can be qualitative and quantitative, and they can be told looking forward from today or looking backward from an envisioned future [van Notten et al. 2003].

Scenario building approaches vary with their purpose [Masini & Vasquez 2000; Neumann & Overland 2004]. One approach we felt useful in this project was to use scenarios to “test” ideas about medium-term community or agency-based strategies aimed at improving the livelihoods of vulnerable groups such as upland farmers belonging to minority ethnic populations. Another was using scenario-building exercises to help dialogues in which diverse stakeholders learn about each others’ interests and aspirations, as well as some of the biophysical and natural resource constraints to development [Lebel & Bennett 2004; Wollenberg et al. 2000]. We give examples of both approaches in this chapter.

5.2.1. Key uncertainties and contrasting scenarios

In our approach, identification and articulation of a key type of uncertainty provides a basis for constructing an axis of potential outcomes with characteristics that can vary from an extreme type of outcome at one end of the axis to a contrasting or opposing extreme type of outcome at the other, or potentially any intermediate point between the two contrasting extremes. Combining axes that represent two types of key uncertainties allows us to identify four quadrants of systematically varying outcome domains that can be used to explore contrasts and complementarities among four contrasting potential scenarios. Actual outcomes, or those that may be viewed as most likely, desirable or undesirable, of course, can potentially be Chapter 5. How might larger transitions in society affect opportunities and responses? Page 229 located at any point within any of the four quadrants. This section seeks to clarify and illustrate this approach through examples of sets if contrasting scenarios developed through selection of key uncertainties through an expert approach, and through a more participatory dialogue-based approach.

Expert-driven multi-level scenarios In order to facilitate understanding of how broader transitions in societies can interact with and influence forces of inertia and change at a local level, contrasting scenarios were developed according to key uncertainties at each of these levels:

At the local level The first step in developing an initial set of contrasting scenarios was to identify the major environmental and social uncertainties relevant to upper tributary watershed landscapes and livelihoods at the local level. x Environmental uncertainties. In the uplands the qualities of ecosystem goods and services relative to how they are used is a crucial factor affecting livelihoods and wellbeing [Tho- mas 2002; Thomas et al. 2004]. While some societies are very heavily dependent on locally renewable land and water resources, other societies are increasingly dependent on external inputs such as fertilizers and fossil fuels. Such relationships can and often do change rapidly with improved access to credit, technologies and markets, and with capital accumulation [Lebel et al. 2003]. The degree to which social-ecological relationships are internalized or externalized is an important axis of uncertainty for upper tributary locations. Thus, the horizontal axis in Figure 5-1 labeled as “local ecosystem-livelihood fit” captures uncertainties about how conditions can vary from internalized to externalized. x Social uncertainties. The extent to which local minority populations are empowered through formal representation in political and administrative organizations, as well as through informal networks influential in resource governance, is another key local uncertainty. It matters because it can greatly alter the set of available entitlements, such as, for example, free mobility to off-site locations for employment opportunities or for trading activities [e.g. Attwater 1997; Hansen 1998; Pinkaew 2000; Lebel 2005b; Walker 2006]. As we also saw in the previous chapter, lack of full citizenship, discrimination, and de facto insecure land tenure are frequently related sources of marginalization for upland households [Neef 2005; Vandergeest 2003]. Thus, the vertical axis in Figure 5-1 labeled as “power” captures uncertainties about the degree to which local populations may be empowered or marginalized. These 2 axes of uncertainty define at their extremes the four local-level scenarios labeled in Figure 5-1 as “assisted development”, “self-determined”, place-based” and “marginal subsistence”. The general characteristics of each scenario in terms of the two types of key uncertainties are indicated by the quadrant in which they are located. Subsequent sections illustrate how story lines can be developed to further articulate each scenario, and how relationships between local level and regional level scenarios can be further explored. Page 230 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 5-1. Upland watershed scenarios Four scenarios (boxes) are shown arranged against different combinations of uncertainties at the upper tributary level related to local empowerment (vertical) and resource base of livelihood systems (horizontal)

Source: Modified after Lebel 2006

At the regional level A second set of regional-level scenarios was constructed to capture the great uncertainties about how broader markets and political structures would interact with local landscapes and livelihoods (Figure 5-2). These were derived from previous reviews and scenarios of environmental change and socio-economic trends for the Southeast Asia region [Lebel 2005a, 2006; Lebel et al. 2002]. x The first axis, connectivity, varying from “localized” to”globalized”, captures the contrasting ideas that production systems could be primarily oriented to use of local resources and local consumption, or they could be largely oriented towards capture of external resources and to producing goods for export (Figure 5-2). Political systems may likewise vary, from emphasis on empowering local entities to transnational corporations. x The second axis, relations varying from “unified” to “diversified,” is meant to indicate the relative level of economic and political diversification (Figure 5-2). Economic diversification in the context of mainland Southeast Asia in the early 21st century is inversely related to the level of dependence on agriculture. In a diversified economy, agriculture is still important, but manufacturing and services employ more people and contribute more to household incomes. In a unified economy, there is heavy emphasis on agricultural and agriculture-related businesses. In political terms, “diversified” implies pluralism, whereas “unified” implies greater unity and integration of purpose, ideology and administration.

Chapter 5. How might larger transitions in society affect opportunities and responses? Page 231

Figure 5-2. Regional scenarios Four scenarios (boxes) are shown arranged against different combinations of regional uncertainties relating to social networks for exchange and influence (horizontal) and sectorial development (vertical).

Source: Modified after Lebel 2006 The labeling of scenarios is important but can be misleading. In this set, for example, the food bowl scenario is a short-hand for a process that is about development centered on expansion of agro-industrial businesses [Lebel 2006]. It is conceivable that in some variants of this scenario much of the crop production is not for food per se, but rather commodities for secondary processing as in bio-fuels. Dialogue-based regional scenarios The regional-level scenarios described in Figure 5-2 were expert-driven and converged the way they did largely because of the views and understanding of their author [Lebel 2006]. Another more participatory scenario building exercise focused on a similar set of issues – development in the North-South Economic Corridor (NSEC) and the wider region, with a focus on borderlands and uplands (Box 5-1). This led to some similar but also some important different possibilities for describing the space of interesting and plausible futures (Figure 5-3).

Thus, one group saw the degree of regionalism and environmental protectionism in national policies as being critical to how the region would develop (Figure 5-3). The free-for-all scramble for natural resources, especially water and forests, without any regional institutional checks on trans-boundary impacts was viewed, for instance, as a highly undesirable set of conditions for the people living in the region. It was nevertheless a story of the future which the group felt could conceivably unfold in the absence of any multilateralism and lack of any political interest in environmental conservation. Page 232 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Box 5-1. Building scenarios together. An exploration of development, water and trade futures in the North-South Economic Corridor region at a dialogue event held in Chiang Mai October 2007

A Road network under construction or completed as part of the Greater Mekong Sub-region North- South Economic Corridor (NSEC) portfolio of infrastructure projects promoted by the Asian De- velopment Bank.

B Scenario-building process used in the dialogue. C Front-cover of the draft report made available for public comment.

D One of the regional-level round-tables building a scenario set together.

Source: Foran & Lebel 2007 Chapter 5. How might larger transitions in society affect opportunities and responses? Page 233

Figure 5-3. Regional scenario developed by participants in the NSEC workshop

Source: Foran & Lebel 2007

At the same workshop (Box 5-1) two working groups also developed scenarios at the “global” level by making coherent sets of assumptions about broader transitions outside the region which will be important to the region’s future (Figure 5-4). Scenario names – rat, turtle, tiger and dragon – immediately give a sense of some of the imperatives and how they are pursued

Figure 5-4. Set of global-level (or extra-regional) scenarios developed jointly by one of six working group at a dialogue event on water and trade futures Left panel shows uncertainties and named scenarios and the right panel shows some of the details of the timeline under each scenario.

Source: Modified after Foran & Lebel 2007 Page 234 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Roles for participation in scenario development The role of participation in developing contrasting scenarios that reflect key uncertainties in potential trajectories of change deserves careful consideration. Building scenarios usually involves expert input and desk research [Neumann & Overland 2004]. Some proponents also seek broader stakeholder inputs or public participation. Participation is interpreted in many ways [International Association for Public Participation 2000]. It can vary from being little more than telling others about the findings through to active involvement in setting goals, refining stories and drawing policy recommendations [Lebel & Bennett 2004]. Our experience with a dialogue-based regional-level approach is an example of one type of participation.

Conveners are those who coordinate, facilitate, and in other ways, support, a scenario- building exercise. Why do conveners recruit other participants to scenario-building exercises? Scenarios of regional futures are made for different purposes. As a consequence, their rationales for different levels and forms of participation differ (Table 5-1).

Table 5-1. Rationales of conveners for participation in building scenarios

Rationales of conveners Key participants sought Public Participation Mode Introduce alternatives Supporters – articulate advocates Inform Door Openers Improve understanding Experts, target groups Consult

Facilitate social learning Stakeholders, consulting experts Empower Source: Lebel & Bennett 2004; Lebel et al. 2006b

The form and extent of public participation in building scenarios of regional change matters for what issues get addressed, which sources of knowledge are drawn on, and their use and impact. Decorative participation has no purpose other than to give the appearance of having consulted with a wider group. As such it is deceitful. Sometimes there are good reasons not to consult or engage with wider group of stakeholders in a scenario-building exercise, and conveners should not be frightened of being honest. Meaningful participation, on the other hand, has as its goal empowering those involved to alter the dynamics, content and impact of building scenarios. It can do so in several ways, but each brings with it important challenges. x First, having diverse inputs means more factors, interactions and interests. It also means that less well known thresholds, feedbacks and trends can be tabled, but maybe ignored. Bringing these together into internally consistent and plausible individual scenarios, however, is likely to be much harder than with fewer inputs. The temptation is dilution. Ne- gotiating a set of scenarios that will yield informative contrasts gets harder as well. x Second, social interactions can build understanding and trust without necessarily leading to consensus. It changes the way people think about the future and thus, conceivably, re- shapes the future. People who are always challenging and thinking about uncertainties demand more attention be paid to adaptive capacities rather than one-time-only solutions. It can be very difficult for bureaucracies built on conventional division of labor, the fear of short-term election cycles, and fixed mandates, to bring more adaptive approaches into their management strategies and operations. It can also be difficult for citizens. But, Chapter 5. How might larger transitions in society affect opportunities and responses? Page 235

ultimately this shift to embracing uncertainties and thinking more about adaptive capacities is essential for regional sustainability. x Third, compared to a firm with a relatively narrow set of goals, regional social-ecological systems are extremely heterogeneous. There are more goals and interests but fewer levers for management to pull. Building scenarios in this latter context is inherently a different activity than it is in a firm, or military strategy group. The outcomes are more ambiguous, and plausible response options are broader. And links with decision-making are usually indirect and vague. In this situation, building scenarios is one tool (among several) for supporting “dialogues” rather than a more narrowly construed “decision-support” tool as it has often been framed in other fields. The tension between exploring and giving advice is real, but it belongs in the realm of politics.

With meaningful participation, scenario-building exercises become much more than a variant of conventional approaches to strategic planning, because they turn the activity into a platform for dialogue. Scenario-building is a plausible way for stakeholders, researchers and decision-makers to engage with the complexity of regional development and explore alternative futures.

The story lines and illustrative applications of scenario analysis in the following sections return to a more “expert-based” approach. Especially those related to the UPB, however, which has been the main focus of our scenario efforts under this project, our analysis is synthesized from a quite extensive range of studies, findings from interaction with a substantial range of stakeholders, and secondary sources of information. This includes many of the materials contained in other chapters of this report.

5.2.2. Scenario story-lines

Under the expert-driven process used in developing scenarios for further use under this project, after the main uncertainties to be explored were identified, literature was reviewed and spatial and time series data analyzed to strengthen understanding about key processes, interactions and sequence effects [Lebel 2006]. The storylines here were developed as a set that would span an interesting, but plausible, space of trajectories. They are plausible in the sense that it is possible to find stakeholders which articulate some of the key features of each scenario as an either desirable or possible outcome.

Although scenarios were originally distinguished on the basis of just two “uncertainties”, storylines were refined by identifying other key variables for which the scenarios would also be likely to differ from each other. Since these additional assumptions effectively form the core building blocks for writing storylines under each scenario, substantial effort was made to create consistent sets of assumptions within any scenario. In practice, there were some itera- tions among (a) this table of key assumptions, (b) a graphical timeline that could help in considering sequence effects (Figure 5-5), and (c) a qualitative model of the dominant drivers and feedbacks present. Page 236 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 5-5. Time lines with key events and issues for four regional scenarios are used to help make storylines more coherent

Chapter 5. How might larger transitions in society affect opportunities and responses? Page 237

We illustrate here the story line of the regional level glocalization scenario (Figure 5-2), as well as all four of the local level scenarios (Figure 5-1). Other regional story lines are described elsewhere [Lebel 2006].

Regional “glocalization” scenario In the glocalization scenario significant economic growth occurs, but through exploiting local comparative advantages in agriculture, manufacturing and tourism rather than through adoption of more uniform technologies and production systems (Figure 5-2). Engagement with global markets is highly selective and perhaps also filtered through protective state legislation that tries to embed ecological and social externalities within the prices of traded goods.

This scenario could arise from a reaction against social injustices and environmental consequences arising from how liberalization of investment and globalization of trade have unfolded in practice (Figure 5-5). Fair trade becomes an important principle guiding policy and international cooperation. There is a sharp contraction in long-distance trade for all but specialty and higher-value items. This stimulates innovation and creates, somewhat surprisingly, a massive rise in “boutique” and “super-value-added” products, as trade within the region benefits from the slow-down in global-scale trade. Chinese trading companies grow to dominate the trade of medium-distance commodities across the Mekong Region. Improved information systems allow sharing of knowledge and creation of specialized market chains, making it possible for other aspects of the scenario to unfold. A second wave of portable, hand-held information technologies, for example, creates the social connectivity conditions that allow farmers to talk to farmers, and software programmers to other programmers. Gov- ernment agencies and large corporations lag way behind small private sector entrepreneurs and their networks. Academics in 2040 are still trying to figure out how it all happened.

Sustainability and local well-being principles are added to “fair trade” to become the pillars of regional cooperation and collaboration. Although profitability is never as high as in some of the boom industries, returns are viable, and prospects for long-term income streams without excessive labor inputs (always volatile) make investments in the agro-forestry sector attractive. Various global environmental institutions re-emerge after several climatic and other extreme events, providing additional incentives for central and regional government support. The control for which local governments have fought through decentralization creates polycentric and multilayered governance that allows some coordination but still substantial flexibility at local levels. Against claims to the contrary made by big business, these changes do not “re- tard” economic growth but are responsible for continuing rises in measures of well-being, especially among the poorest sectors of society.

In upper tributary watershed contexts, more specialized markets and political decentralization create many new opportunities for viable livelihoods and profitable local firms. The glocalization scenario unfolds first in Yunnan province of China, building on expansion of rubber and a history of cross-border markets developed for non-timber products from forests and swid- dens in the region. Landscapes are once again viewed as multi-use. Conservation-only pro- Page 238 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region tected area systems across the region are replaced by local landscape stewardship councils under control of farmers experienced in complex agro-forestry operations.

How glocalization and each of the other regional scenarios (Figure 5-2) enhances or con- strains development in particular upper tributary watersheds depends on the characteristics of those places as well as how key uncertainties unfold at the local upper tributary level (Figure 5-1). A multi-level scenario analysis opens up the possibility of exploring “discords” among levels, which occur when a scenario unfolding at one level makes it very hard for a particular scenario to unfold at another level (Table 5-2).

Table 5-2. Cross-level interactions in scenarios

Local Upland Scenario Assisted Marginal Regional Scenario Self-Determined Place-Based Development Subsistence Plausible with poor Food Bowl Plausible Unlikely Unlikely outcomes Services Park Plausible Plausible Plausible Unlikely Unstable, shifts to Glocalization Unlikely Plausible Plausible place-based Rural First Plausible Unlikely Plausible Plausible Source: After Lebel 2006

Local-level scenarios In order to help illustrate the overall process, this sections provides examples of very brief story lines for each of the local upland watershed scenarios (Figure 5-1), together with a brief discussion of its plausibility under conditions implied by the set of regional-level scenarios (Figure 5-2), as summarized in Table 5-2.

Marginal subsistence The local marginal subsistence scenario is similar to recently experienced conditions in more remote areas (Figure 5-1). Inhabitants in these areas have little direct say in national land development and conservation policies which impact them, produce most of their own food, receive little government aid, and draw on wider systems of exchange for only a few special goods. This storyline can arise either from the persistence of neglect, or from the withdrawal of state and private support for development in territories at the periphery.

The marginal subsistence scenario is unlikely to develop under the services park scenario as such land uses and settlements would be strongly discouraged, given the emphasis on clear separation of land uses and technological modernization (Table 5-2). This local scenario is also unlikely to persist under a glocalization scenario because of the infusion of market-related opportunities. The most viable outcomes for upper tributary watersheds are likely to be under the rural first regional scenario, as these policies would be most consistent with relatively un-intensified fallow-field landscapes dominated by small scale farming (Table 5-2). The Chapter 5. How might larger transitions in society affect opportunities and responses? Page 239 greatest vulnerabilities to upland societies would probably occur under the regional food bowl scenario, as only the least profitable and often poorest agricultural lands would be left and there would be little other assistance.

Assisted development The local assisted development scenario is similar to much current experience in the uplands (Figure 5-1) where state and non-state agencies provide development assistance with the aim of altering land uses and livelihoods in upper tributary watersheds. Local communities are taught, lured and coerced, and have little political influence beyond their involvement as project “partners”. This storyline can emerge in previously remote areas where road access is improved, leading to provision of public services and greater activity by authorities.

The assisted development scenario for an upper watershed is plausible all other regional scenarios but is not likely under glocalization because of its emphasis on local resources and empowerment (Table 5-2). But assisted development may be especially likely under the regional food bowl scenario. With agricultural commodities and trading services in low-lying areas in deltas and main valleys competing strongly with urban and industrial towns, landscapes in upper tributary watersheds would become more and more integrated with mainstream agriculture as production areas for more temperate crops, new varieties, and seed production. With state authorities and non-state organizations playing a large role, local specificities are unlikely to emerge strongly, with the consequence that livelihoods in different locations are more likely to be in direct competition, with favored crops and services converging on more similar configurations.

Place-based The local place-based scenario reflects current emphasis of many community-based initiatives on local stakeholder control and responsibility for local resources (Figure 5-1). It seeks to build on local assets and skills. Upward and downward accountability mechanisms are likely to be crucial to long-term performance on ecological and social justice criteria.

The place-based scenario is unlikely under the regional food bowl scenario because of the lack of control placed with local authorities, states or communities, but it is plausible under all other regional scenarios (Table 5-2). Livelihoods are likely to vary widely among places but be relatively specialized in the goods and services of particular landscapes. With local control and competition in wider markets, comparative advantages will shift along with local capacities and assets as well as the unfolding of regional scenarios.

Self-determined The local self-determined scenario is perhaps the most radical of local-level upland scenarios, given the current context where most upland dwellers are politically marginalized and lack the assets and skills to take advantage of new information, markets and technologies (Figure 5-1). Moves towards self-determination could produce substantial surprises in terms of livelihoods and land uses, including increased mobility and, perhaps, migration.

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The self-determined scenario, however, would be unlikely to emerge in either the food bowl or rural first regional contexts because of lack of local influence over resource access and flows (Table 5-2). When the self-determined scenario emerges, there are possibilities of both high levels of resource conservation as well as exploitation made possible by substitution with inputs from elsewhere. Livelihoods are likely to diversify the most under this scenario, and migration to urban-industrial areas could be significant.

5.2.3. Implications of scenarios for livelihoods and landscapes

The approach espoused in this chapter emphasizes learning from contrasts among scenarios, including from interactions among different levels, rather than trying to construct our particular “favorite world”. In this mode, it is not necessary for experts to decide, or for stakeholder groups with different interests to agree on what is the most desirable scenario. Rather, the much more modest objective is for an overall set of scenarios that spans an interesting and relevant space around which to identify and deliberate the plausibility of various alternative assumptions about what is likely to happen, what would be necessary for it to happen, what would likely follow from its happening, and what would likely be prevented from happening at all.

In the context of the scenarios described in previous sections, some of the general implications that each of the four local-level scenarios for upland watersheds (Figure 5-1) are likely to have for livelihood opportunities of local upland farmers, and for goods and services provided by local landscape ecosystems, are summarized in Table 5-3. The plausibility of any of these local scenarios actually occurring, however, depends on characteristics of each regional level scenario, and the degree to which the two levels are compatible or in discord.

Table 5-3. General implications for landscapes and livelihoods of four local scenarios where they are plausible under a corresponding regional scenario

Implications Assisted Development Place - Based Marginal subsistence Self - determined Livelihood opportuni- Significant as agricultural Diverse and numer- In situ unlimited but very Many opportunities ties for upland farmers laborers or agro-industry ous opportunities in restricted set of opportuni- most of which are wage earners. Health situ. Some differen- ties. Primarily subsistence off-site and thus and wealth outcomes tiation still likely due or locally exchanged involve seasonal or depend greatly on de- to variation in com- products and services. permanent migration gree of corporate and parative advantages Difficult, but not impossi- into urbanizing state attention to social of place and skills of ble to maintain health, regions. justice. people. education and research services in this context. Landscape ecosystem Likelihood of reduced Most services and Opportunities for signifi- High quality conser- goods and services areas of high natural substantial biodiver- cant low impact food vation areas in biodiversity, but with sity likely to be main- systems to emerge but uplands but with substantial human inter- tained especially much depend on strength little economic bene- ventions aimed at main- where compatible of political institutions to fits apart from tour- taining or enhancing with mosaic and support “innovative” coop- ism and transfer watershed functions to multi-use land- erative rather than con- payments for main- support agricultural pro- scapes. ventional private sector- taining watershed duction activities. based competitive models services used by for rural development. lowlands. Source: after Lebel 2006 Chapter 5. How might larger transitions in society affect opportunities and responses? Page 241

5.3 Illustrations and applications in case study sites

Having developed a general set of potential future scenarios for both regional and local levels, this section turns to more specific illustrations and applications in the context of our case study sites. These are presented in three sub-sections. The first briefly explores three illustrations of emerging changes in the context of some of our case study sites that could lead to transitions with important implications for future development of agriculture in those areas. The second seeks to provide a more general summary of current and potential directions of pressures for conservation in the uplands at wider levels within which our study case sites are nested. The final sub-section then turns to specific applications of scenario analysis, which have primarily been conducted in the context of the Upper Ping Basin and its Mae Chaem sub-basin.

5.3.1 Signs of potential transitions in agriculture

Current patterns of change in our study site locations include evidence that various transitions in upland agriculture may be on the not too distant horizon. In order to help illustrate some of the issues involved, the following discussions provide three examples. The first focuses on how change in upland agricultural production systems in North Thailand may be moving toward a transition to systems that place greater emphasis on processing and markets than on crop production. The second explores how urbanization and industrialization in China may be inducing changes in migration and land policies that could have strong implications for agriculture and rural livelihoods. The third explores how very strong emphasis on educational achievement by children in rural households in Mae Wang may be leading to a generational transition in aspirations that would have major impacts on agriculture.

Shifts to higher value processing and niche markets in North Thailand Most policy and development concern and support related to upland agriculture has focused on farm production and its links with input and commodity markets. This has helped set in motion processes that have greatly diversified commercial crop production. During recent years, however, changes in demand for agricultural products, changing structure of market chains, and efforts to capture more value added, appear to be inducing some important further transitions in agricultural production systems in North Thailand.

Indeed, crops that have become popular among farmers in Northern Thailand during recent years are mostly newer crops, such as temperate vegetables, exotic flowers and fruits. Apples, pears, avocados, strawberry, zucchini, lettuce, broccoli, brussel sprouts, carnation, chrisan- thymum, etc. are among a set of newer higher-value crops aimed at specialty niche markets. And as urban populations in Thailand become wealthier and their lifestyles change, demand for these crops is increasingly for purchase from supermarkets rather than in fresh markets.

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While the Royal Project has been a major pioneer in introducing many of these newer crops, other agribusiness companies are also now expanding into more vertically integrated operations for specialty crop production, processing and marketing. For example, x Coffee is produced by highland farmers, but marketed through various channels, mostly in high-income outlets. It is processed, branded and priced differently by different suppliers. Some, as we saw in the case study from Omkoi, are aimed at niche markets for shade-grown coffee from certifiable sustainable production systems. x Large head onions are a high value crop demanded by restaurants and fast food outlets for Western style food. As we learned from onion growers in Mae Wang, onion seed is imported from Europe each year by the Onion Growers’ Association and their supply is tightly controlled to help reduce boom and bust cycles. Nevertheless, onion farmers still report oversupply drives down prices during some years. x Sweet corn is grown by contract farmers, but instead of sales in the fresh market, their output is quickly either frozen or canned, and shipped for sale in export markets or in the domestic wholesale-retail chain. As these examples indicate, the agribusiness companies involved in these types of operations need to be quite advanced in their technology, information and management skills.

Longan is also commonly grown in areas like Mae Wang, but due to often low and fluctuating prices, farmers in Mae Wang are beginning to shift to organic production of longan in order to tap into higher value and more reliable specialty organic markets. Although the Thai Department of Agriculture has extended their “Good Agricultural Practice” (GAP) program to longan production in Mae Wang, farmers report that this still has not addressed the marketing constraints for their product.

And even in the vertically integrated system of the Royal Project Foundation, production and products continue to change, with exotic flowers and ornamental plants now becoming some of their most popularly demanded products. And in order to meet this demand, flowers and ornamentals must be harvested, packaged and transported in special ways to assure the characteristics and quality that attract and satisfy their mostly urban consumers.

Overall, experience and trends of Northern Thai agriculture in general indicate that the greatest difficulties and constraints faced in producing newer high-value crops for specialty markets are not at the farm production level. Rather, the most important constraints are insufficient entrepreneurship and management skills associated with the processing, packaging and marketing of these higher value products into specialty niche markets. For those operations that have been relatively successful, good entrepreneurship among local merchants and traders play essential roles in this kind of business. As new waves of opportunities and challenges emerge with changing trade arrangements at international and global levels, further transitions in agricultural production systems appear likely.

Chapter 5. How might larger transitions in society affect opportunities and responses? Page 243

Working on the farm in China: labor and migration In China, continuing rapid urbanization and industrial growth appear to be providing incentives for a significant transition in state labor and migration policies that could have important implications for agriculture and livelihoods in rural areas. Indeed, state policies on migrant labor and land tenure are two key factors in the future of the rural landscape, as they strongly influence labor allocation practices of rural households. Shifting the country’s surplus rural labor (estimated at 300 million in the year 2000) to off-farm employment is a crucial component for sustaining economic growth and poverty reduction, and has been encouraged by government policies.

The 1994-2000 Poverty Alleviation Program stated that by the end of the year 2000, every household in a poor area should have one family member working either in a rural enterprise, in an agricultural sideline, or as a migrant in a developed region [Zhang 2003]. One campaign slogan was, ‘The migration of one person frees the entire household from poverty.’ However, there are still significant obstacles to rural-urban labor flows. Until 2005, farmers were still required to provide a land tax in grain or cash to their local township, which effectively locked some labor from each household into the agricultural sector [Kung 2002].

Recent rural and urban policy reforms have made it easier for rural residents to migrate. By 2005, almost all rural taxes and fees were eliminated, removing a significant burden from rural households. The lack of urban public services for migrant workers, such as education and health, is also starting to be addressed. Several urban areas have allowed access to social services for those with temporary resident certificates, and some have approved the establishment of schools for migrant children [Wang 2004]. And growing acceptance of the informal transfer of rural land use rights means that farmers can reduce their responsibilities at home without forfeiting rights to their agricultural land. The main obstacle remaining is the hukou (household permit) system, which remains largely intact, despite experimentation by some cities and provinces with relaxing hukou requirements.

The difficulties of transferring household registration, and the current land tenure system under which land cannot be sold, mean that rural residents maintain strong ties to their an- cestral land. Those ties create a circular migration pattern, as young adults leave to work in urban areas, but return to set up households at their rural origins. The effect of this migration on agricultural production varies, with some locations maintaining agricultural output and others in decline due to a lack of able-bodied labor. Often children and the elderly are left behind in the village, while those of working age spend most of their time in provincial cities or factories in China’s southeast. In other cases, contacts and business experience provided by off-farm employment actually help to boost agricultural productivity and diversification.

If state policy on population movement and household registration continues to relax, circular migration may be reduced as rural residents find it easier to permanently relocate to urban areas. The flow of rural workers to urban areas would increase, reducing labor and also capital availability in rural areas. This could have a variety of effects on agricultural production. The loss of labor and financial resources may reduce the prospects for improving agricultural production. Alternatively, as population pressure is reduced, the opportunities for cultivation Page 244 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region of commercial crops may actually increase due to consolidation of land resources and a shift away from subsistence agriculture.

Aspirations of the next generation in the UPB: education and livelihoods A generational transition in livelihood aspirations seems to be emerging in some rural areas of the Upper Ping Basin, and appears to have the blessing of members of the older generation. During field interviews conducted by the Chiang Mai University team with villagers in Mae Wang watershed in 2006, villagers reported that their children are mostly all in schools pursuing higher education opportunities. Upper high school and tertiary levels of education are common among children of farmers in this area, and many have children in universities.

Parents encourage and support their children to obtain the highest level of education they are able to achieve, especially among those who can afford it. Moreover, student loans and scholarships have also become available from the Thai government during the last 10 years, which has enabled many more students from medium and poor families to finance their study at schools and universities by themselves. After completing higher studies, most children seek jobs outside of the agricultural sector – some work in factories, others in hospitals, private companies, government offices, self-employed jobs, etc.

Parents are well aware that their children are not likely to continue in farming, although some may be willing to maintain their parents’ longan orchards. Farmer parents report that they intend to farm their land until they become too old to do so, but that their lands may not continue to be farmed when they are passed to their children. Indeed, they say they do not know what will be the future of farming in their area.

Since the Mae Wang watershed is part of Chiang Mai Valley, these households are near enough to quite easily travel to Chiang Mai City and return in the same day. This phenomenon of dramatic single generation change in education and aspirations appears to be emerging in such areas more quickly than in other more remote areas. But we have also noted in studies at more remote upland locations in the UPB, as well as in the uplands of Vietnam, that even poor upland household’s place strong emphasis on education for their children.

5.3.2 Future of conservation: land constraints in the uplands

As we have already seen in previous chapters, transitions are not new to mainland Southeast Asia, including our case study site areas. In recent history, the colonial era brought a range of geopolitical, administrative, economic and social transitions to countries of the region. In section 3.1 we saw how a new series of geopolitical transitions emerged around the middle of the 20th Century, including the end of colonial rule, socialist revolution and self-sufficiency campaigns in China, revolutionary movements and international responses resulting in devas- tating wars in several countries, and defensive responses in Thailand that included launching of national security programs and economic development plans. Beginning in the mid- 1970’s, new waves of transition followed the end of armed conflict and completion of geopolitical struggles, and by the mid-1980’s all countries had undergone economic and political transitions that increasingly “opened” their economies to broad international trade and in- Chapter 5. How might larger transitions in society affect opportunities and responses? Page 245 vestment, as well as growing forces of globalization. Periodic economic reforms have continued, as well as cycles of reform and various retrenchments in political and social arenas.

While central focus of these successive waves of transition was largely in lowland zones, impacts on upland areas were also important and increasingly strong. Harvest of forest timber for commercial markets, for example, had its first major impacts on Myanmar and Northern Thailand during the colonial period, but impacts have spread across the region in recent decades. Impacts of war were sometimes very heavy, and still linger in some areas. Upland areas were also affected by the opium economy that began during colonial times, followed by spread of drug control and crop substitution programs. Similarly, national security programs of various types have affected upland areas, and pulled remote mountain communities more strongly into national administrative and “development” systems. Especially during recent decades, these efforts have become more closely linked with provision of government services and poverty alleviation programs, including welfare-oriented programs for mountain minorities. Many such programs have also sought to end traditional agricultural practices involving shifting cultivation of various forms, which are looked upon with disdain by mainstream lowland societies, who view them as primitive, backwards and wasteful. Meanwhile, economic integration has brought market production opportunities for a growing range of crops.

One result of these cumulative waves of transition has been growing national concern about environmental impacts of land use in upland areas, which is now being strongly reinforced by environmental dimensions of globalization processes. Since lowland zones in the region are most all heavily settled and converted to irrigated agriculture and urban areas, it is primarily upland zones that have become targets for expansion of protected forest areas, conservation farming and agricultural chemical reduction campaigns, and other types of environmentally- oriented programs. Indeed, upland mountain areas have become the main arena for discussions and debate related to “linkages” and “trade-offs” based on “upstream-downstream”, “conservation-development”, “poverty-environment”, “agriculture-forestry” and similar types of relationships. We see various manifestations of these issues at all of our study sites.

Thus, as we look to the future, it is also important to consider various types of potential further transitions that may result from demands from wider societies for increasing types and levels of conservation in “upland” montane zones. Directions such transitions may take will depend to a large extent on answers to three questions: Conservation of what? Conservation for whom? Conservation by whom?

The basic object(s) that are likely to be the focus of conservation can be grouped into three categories: goods, land, and environmental services. x Current evidence indicates that conservation of goods is likely to focus either on timber and/or other forest products, or else on “agricultural” output of local livelihood systems, which can be consumed, sold to markets for agro-industrial commodities, or produced for specialty niche markets. Conservation of forest for timber production was a major issue in the past, and could re-emerge in areas where it is ecologically and politically feasible. Conservation directed toward production of agricultural goods could take various directions, and at study sites we have seen campaigns aimed at reducing chemical use, pro- Page 246 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

moting shade-grown coffee, “safe” tea, organic longans, etc. Most of these examples involve economic incentives from specialty markets that assign higher value to such crops. x Conservation of land relates primarily to activities involved with “non-natural” uses of land, and has two important dimensions: quantity and quality. The quantity dimension is most often reflected in efforts to impose land use zoning and land allocation regimes that “rationalize” and limit various types of land use. This is one aspect of major land allocation programs that have been conducted in the uplands of Yunnan, Vietnam and the Lao PDR, which often designate bounded areas for “forestry” and “agriculture” types of land use. The quality dimension of land conservation emphasizes requirements for soil conservation and conservation farming practices, usually within “agriculture” land use zones, and frequently including use of trees or other perennial plants in various spatial and/or functional configurations. x Conservation of environmental services is a more recent conceptualization, but is now one of rapidly increasing concern. There are currently four primary types of environmental services that are the focus of most concern: (1) Water conservation focuses on flows of water within watershed landscapes, in terms of water quantity, timing and quality. (2) Biodiversity conservation is more ambiguous, and can focus on conservation of individual species, habitats and communities, or entire ecosystems; spatial scales can vary widely, and agricultural or other human components may or may not be included. (3) Carbon conservation focuses primarily on the amount of carbon that is sequestered in a particular area, and is aimed at contributing to reduction of carbon dioxide in the atmos- phere and its impact on climate change. (4) Scenic beauty conservation is the most intan- gible and subjective type of environmental service, but can be quite highly valued by various parts of society for its contribution to recreation, tourism, and quality of life.

As this very brief summary suggests, primary beneficiaries of conservation can vary. But wider societies at various levels are generally the main beneficiaries toward which conservation policies are directed. Levels can vary from relatively defined and often fairly localized “downstream” beneficiaries of various forms of water conservation, through national societies who value some of these goods and services as national assets, to global beneficiaries of efforts to conserve planetary biodiversity and moderate climate change. Thus, it should not be surprising that forces driving change in conservation policy are largely based at watershed to national and global levels. At the same time, however, many of the arguments forwarded by conservationists emphasize benefits that will also be accrued by local communities. Such arguments have three major themes: (1) local people will also benefit from improved sustainability of their livelihood systems; (2) local households can benefit from higher values associated with production for “green” markets; and (3) local people also benefit as members of wider societies at national and global levels.

Questions of who will be the agents and managers of conservation, and how conservation efforts will be conducted, tend to generate two types of answers in this region, and have sometimes fostered heated and divisive debate. One school of thought places primary responsibility and authority in the hands of state agencies and their “experts”. Thus, in its extreme form, government agencies formulate and implement upland conservation programs Chapter 5. How might larger transitions in society affect opportunities and responses? Page 247 that include “appropriate” land use zoning, including establishment of protected forest areas, watershed classification zones, water resource investments, etc. These are authorized by laws and regulations passed at central government levels, and specialized agencies are empowered to enforce regulations and implement programs, and induce and supervise any needed groups in local areas. The second school of thought, on the other hand, places primary emphasis on the role of local communities. Thus, in its extreme form, local communities decide on what is “appropriate” for land use zoning in areas under their jurisdiction, and formulate their own programs to conserve natural resources and maintain environmental services, in a manner that adapts to changing local conditions. Efforts to address the concerns and needs of “downstream” or other wider communities or societies are conducted through iterative processes of negotiation rather unilateral decisions. While these two depictions represent extreme cases, and more realistic and viable outcomes are likely to be located somewhere between the extremes, we have found advocates associated with case study sites who reflect a substantial range of views along this continuum.

How these questions and issues are addressed within particular national and local contexts will determine the range of potential upland livelihood and landscape outcomes that are likely to be viable in the future. For example, will there be strong government pressure, as we see in Thailand, for expansion of protected forest areas that return large areas to completely forested landscapes managed by government agencies? Will forestry and agriculture be segregated into largely agency-managed forest landscapes with only small enclaves of small plots where intensive commercial agriculture and off-farm employment are the only viable alternatives? Will local people be able to have areas of community forest where they can make their own production and management decisions? Will more integrated mosaic landscapes with forestry, agroforestry and agricultural components that are managed to maintain specified environmental services while still providing resources for diverse local livelihoods be acceptable? Will there be “space” and mechanisms for negotiating landscape configurations and allocation of benefits and costs among local and more distant stakeholders? Will there be some forms of compensation for upland communities whose livelihood opportunities are severely constrained in order to provide benefits for downstream or other wider societies?

It is still quite difficult to predict the direction and extent of conservation policies across the region, and how their impacts will be manifest in any specific areas. From the evidence we have seen in countries of the region and our case study sites, however, it appears to be quite safe to assume that conservation constraints on upland livelihoods and landscapes will play an important role in their future.

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5.3.3 Scenario applications at case study sites

Our application of the scenario approach at case study sites began with its use as a tool to help us more clearly identify and understand past transitions that have affected livelihoods and landscapes of poor communities in the Mae Chaem sub-basin of the UPB. Building on this experience, our most extensive effort expanded to include the entire UPB. Here we focused on potential future trajectories of change that incorporate processes of urbanization and upland-lowland interactions at levels both within and beyond the boundaries of the UPB. Our third example is a very preliminary application to upland tea producing communities at our site in Vietnam.

Looking back at scenario transitions in Mae Chaem Although most of our exploration of transitions has been looking forward, looking backward at local histories from the position of the present may also be helpful for understanding what kinds of change are possible, what sorts of relationships are highly resilient, and what processes and relations might be broken under certain conditions.

Thus, local histories of development of different locations may suggest transitions among the more extreme versions of scenarios in a set established to maximize their contrasts. Thus, we may see how it was possible to break-out of one set of coherent processes and move into another. Taking the example of upland areas in the Mae Chaem sub-basin in North Thailand, past trajectories can be schematically mapped against local scenario spaces (Figure 5-6).

Figure 5-6. Past trajectories of change in the Mae Chaem sub-basin, North Thailand Transitions among contrasting scenarios may sometimes become possible for particular places and circumstances, for example, as a result of forceful higher level change in policies and drivers, or because certain thresholds are reached that change the way factors co-vary within a location.

Chapter 5. How might larger transitions in society affect opportunities and responses? Page 249

This diagram reflects an associated explanatory narrative: x Many Mae Chaem localities with a long history describe an increasingly distant past when communities had something more similar to a “Place-based” independent existence, where their livelihoods emphasized self-reliance and communities were largely able to make and implement their own decisions with few constraints imposed by outsiders. x Gradually, however, outsiders associated first with logging concessions and the opium economy, and later with increasing penetration of state administration and declaration of reserved forest lands, began claiming and transforming local natural resources, and reducing and altering local livelihood options. As a result, communities began to live in more of a “Marginal subsistence” context, wherein they were still responsible for developing and conducting their own subsistence strategies, but felt increasingly “boxed in” (or “fenced out”) and constrained by outside interests. While this context continued for many years in a few of the most remote areas (Position 1, Figure 5-6), this approach has more recently become untenable. x Beginning in the 1970’s, large national parks began to be declared in the eastern ridge of the Mae Chaem sub-basin, forest watershed management units were established at various locations, and state forest plantations began to be planted into areas that were part of local forest fallow agriculture systems (see discussions in section 3.3.1). Roads began to be improved and expanded, and by the 1980’s, major projects backed by the government and international donors had been launched in Mae Chaem, aimed at opium crop substitution, anti-communism interventions, stopping shifting cultivation, and other government programs including education and public health. As projects spread to more parts of the sub-basin, village histories began to reflect more characteristics associated with an “Assisted Development” scenario. Many villages continued to wander around in such a space, as internationally supported projects ended and some activities they promoted collapsed. They were then followed by various waves of government, Royally-initiated, and NGO projects, all seeking to induce various changes in livelihoods and natural resource management in various parts of the sub-basin. x Then, with the 1997 constitution and government reforms associated with strengthening elected local governments (TAOs), many villages found themselves, for the first time, moving toward the types of political representation and power found in the “Self- determined” quadrant. More local initiatives began to appear, including informal multi- village networks and locally-organized studies, with some gaining assistance from NGOs, the Thailand Research Fund, and other sources. x Following the last military coup, discarding of the people’s constitution, and strengthening of older forms of governance, however, many now feel a “Self Determined” scenario may have become only a legend or dream (Position 3, Figure 5-6). x At least a few communities, however, have not yet lost hope and continue the pursuit of “Self Determined” scenarios (Position 2, Figure 5-6), based on various contexts that include their locally organized and managed informal networks, and in some cases growing economic strength and influence at least in the local context Page 250 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Urbanization, upland-lowland linkages, & potential transitions in the UPB While much change is driven by developments at national and regional levels, lowland zones and their increasingly influential urban centers also play important roles in shaping directions of change in livelihoods and landscapes in the UPB. With an understanding of the multi- level dependencies inherent in urbanization, it should be possible to consider some of the key linkages across these scales. Two appear important for Chiang Mai livelihood, water and land issues. First is the upstream-downstream physical and political relationships with Bangkok and the central plains, while the second is linkages within the UPB between upland areas and lowland zones where urbanization is occurring (Figure 5-7). As we note in discussion of historical transitions, water management within the Upper Ping is partly determined by interest downstream in the lower basin.

Figure 5-7. Upstream – downstream linkages: central plains and Bangkok factor

Urbanization and Ping water management transitions In Thailand, national land and water policies have been largely been driven by interests centered in the capital, Bangkok, and surrounding rural and industrial areas of the Delta [Lebel et al. 2007a; Molle 2007]. Indeed, the first World Bank assessment in Thailand, which was part of preparations for the first national 5-year economic development plan, emphasized the role of the North as the source of water for Central Plains agriculture and Bangkok [World Bank 1959]. Subsequently, massive areas in the North (and elsewhere in the country) were declared reserved forest, followed by establishment of protected forest areas and a watershed classification system that are especially restrictive for land use in the North.

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Dams on main tributaries of the Chao Phraya River were built and operated to produce electricity for industrial-urban development and to regulate monsoonal-varying flows for irrigation in the Central Plains. The centralized administrative system strove to bring standardiza- tion and orderliness to diverse locally managed irrigation and rain-fed farming systems, up- scaling levels of resource planning, development and allocation in the pursuit of export- oriented economic development initially founded in agriculture, but subsequently shifting toward industrialization. The imperative for actors that would make use of key institutions of the state to secure and expand power has been, when expedient to do so, to look north (as well as northeast) and appear to attend to those distant rural interests. This need has flowed seamlessly through excursions into electoral democracy punctuated by military rule.

While the Upper Ping River basin itself has a long history of leaders and elites deploying institutions of the state to control and manage people and water extending back at least 700 years, it also has a long history of self-organization by communities to solve water management problems [Cohen & Pearson 1998; Uraivan 1983]. Over the last five decades, water and land-use has been transformed by expansion and intensification of agriculture, by urban- industrial growth and by tourism. The urbanizing Chiang Mai – Lamphun Valley region is one of the most economically important areas outside the Chao Phraya Delta [Hung 1998; Lebel et al. 2007b]. With demand mounting for water for dry season irrigation and expanding residential, commercial and industrial areas, water shortages are a now a recurrent, nearly annual source of conflict toward the end of the dry season. Conversely, floods during the wet season pose increasing burdens and risks to urban areas built on former agricultural and flood-plain lands.

At the same time, controversy and conflict over upland watershed policies has also centered on this region because forest cover has been retained and people still live in forest areas [Pinkaew 2000; Thomas et al. 2002; Walker 2006]. The popular media, government bureaucracies, and the public in Bangkok blame deforestation in “upland areas” for both flooding and drought. These views have had substantial impact on forest and watershed policies that have become increasing restrictive toward land use in upper tributaries, and especially those that feed the Chao Phraya river system. Scientific evidence for many of these impacts is quite weak, however, while there is still much less discussion or consideration of rapidly increasing demands for water for agriculture, industry and urban settlements, or of impacts of activities such as road construction on sedimentation.

The significance of the Ping River is underscored by its strategic position: the largest tributary of the Chao Phraya River system, with the Bhumipol hydroelectric dam at its lower-end supplying electricity to Bangkok. It is not surprising that the Upper Ping was one of the two pilot sites from 25 basins in the country for introducing River Basin Organizations [CMU 2004; Thomas 2005] and promoting integrated water resources management (IWRM).

Based on our study of historical documents and interviews, we recognized four primary transitions in how water has been managed during the last five decades (Figure 5-7). Transitions partially overlap in time, may be left incomplete, and are contested. The manufacture and avoidance of crises [cf. Lebel et al. 2006a] are important in mobilizing support both for and Page 252 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region against transitions. Each of the transitions expands the domain of active management in a particular way. From transitions one to four, expansion was in terms of: the time horizon, number of water users, water stocks and flows, and values beyond flow (Table 5-4). These correspond to key structuring variables for management regimes and transitions between them (Box 5-2).

Box 5-2. Conceptualizing transitions We conceptualize transitions as a regime shift. This can be visualized as a trajectory across a system space defined by a few key structuring variables [Gunderson & Holling 2002; Holling 2001]. This space may have strong “basins of attraction” reflecting combinations that are very plausible relative to others which are not (Figure below). A management regime is an assemblage of plans, investments, technologies, infrastructures and preferred ecosystem configurations. For example, in the Upper Ping River Basin, some actors have a strong preference for managing water resources so as to avoid dry season water shortages whereas others place greater emphasis on eliminating the risks of flooding in the wet season. Actors also differ in how much they believe should be invested in physical infrastructure to control water flows. In this figure below “risk strategy” and “efforts at control” are postulated as key structuring variables. A transition from a et Rice irst to a ruit irst or rban irst management regime represent a major shift described by the two management variables selected for display. Regimes differ in their resilience and the system space can be relatively smooth or discontinuous with thresholds. Some transitions may be largely irreversible and path-dependent. In the Upper Ping, for example, the et-rice-first regime persisted for centuries, but now the hydrology of the basin has changed substantially and it may be very hard to return to.

Source: Lebel et al. 2007a

The farm to city transition, for example, emphasizes needs to control floods (Figure in Box 5- 2), expands services considered to include “flushing” and “assimilation”, and introduces institutions that secure piped water supplies (Table 5-4). The goods to service transition expands legible resources even-further and starts to consider technologies that link and re-use water.

The capacity to turn support for a particular transition into policies, procedures and programs that help institutionalize practices often requires alliances among local and national Chapter 5. How might larger transitions in society affect opportunities and responses? Page 253 level politicians and bureaucrats. Each of the transitions has involved institutional reforms as part of the suite of changes promoted or realized. There have been examples of efforts to institutionalize practices in different components of water management (Table 5-5)

Table 5-4. Four key transitions in how water has been managed in the Upper Ping River Basin Management Planning Implementation Legible Institutional Transition Objectives Technologies Resources Flavors Wet Diversion of wet to all Small to larger stor- Main valley sur- From right to use to to dry year around irrigation age and delivery face river flows coordinated allocation. supply canals Water user groups. Farm Secure urban sup- Water treatment & Groundwater, From development to to city plies and prevent pipe delivery infra- flows for flushing economic efficiency. floods structure; Drainage pollutants Service agreements. River Manage full water Monitoring, modeling Groundwater, rain- Basin or watershed to basin budget not just sur- and GIS fall and run-off management and land- face river flows use planning (IWRM) Good Maintain diverse Treatment, re-use, Multiple, including From using to paying To service services not just di- rain and groundwater watershed ser- for services (PES) rect consumptive management, land- vices uses use planning Source: Lebel et al. 2007a

Thus, under the river to basin transition, efforts to engage stakeholders have been framed by the Department of Water Resources to focus on certain types of small infrastructure projects and a complex planning procedure that allows traditional experts in the bureaucracy to regain control of the outcomes. At the river sub-basin level, institutionalization has intentionally sought to be much more diverse [Thomas 2005, 2006], but it is unclear that such an enabling framework for local government and user groups will continue to be pursued. Institu- tionalizing under the goods and services transition (Table 5-5) is also fairly exploratory, with discussion about payment for ecosystem services underway but not yet implemented.

Table 5-5. Institutionalizing practices in the four key transitions in how water has been managed in the Upper Ping River Basin Management Planning Developing Allocating Using Transition Wet Gaining public ac- Financing and invest- Water User Groups Rights to use based To dry ceptance for new ing in infrastructure on fees (rather than infrastructure labor contributions) Farm Urban-industrial Investing in delivery Securing supplies Waste water stan- To city and regional devel- infrastructure. Service through service dards and water opment planning contracting. agreements treatment technologies River Basin and Sub- Multi-stakeholder ne- Multi-level planning Multi-level coordina- To basin Basin planning gotiations and budgeting tion procedures activities Good Acknowledging and Incentive and payment Land and water use Monitoring & ac- To service sometimes valuing schemes planning counting systems services

Page 254 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

The net outcome of the various incomplete transitions (Table 5-4) has been a substantial increase in institutional density and complexity of governance [Garden et al. 2006; Uraivan et al. 2005]. Water and land governance from the highlands through to the lowlands is affected by the practices of actors and emergence of formal and informal rules at multiple levels [Lebel et al. 2005]. Cutting across these level-dependent features are important cross-scale interactions, some designed, but many, not. With multiple levels, services and interest alliances to take into account, negotiation becomes critical to articulating plausible systems of rights to water [Molle 2004]. Finally, a range of both local and wider networks create opportunities for influence and knowledge to be exercised and shared in ways that can break some types of scale-dependencies.

The growth of political actors and arenas for decision-making around water and land management was checked again with the 2006 military coup that removed the popular, decisive and sometimes divisive Prime Minister Thaksin Shinawtra, and threw out the progressive 1997 Constitution. This history of lurching towards democratization and empowerment of local levels has been an important context in which all 4 transitions have unfolded.

The notion of actors with divergent strategies pulling society away from certain management regimes towards others can explain a lot of what has been observed in the recent history of the Upper Ping River basin. But it does not, on its own, explain satisfactorily the lags, the periods of relative institutional stasis, or conversely, rapid paradigmatic shifts. For that we needed to explore more carefully ideas that some management regimes are sticky, or resilient, whereas others are more brittle. Crises associated with dry season shortages and abnormally severe flood events gave some insights into these dynamics. Interplay is also a key component of coevolution: in the Upper Ping River basin new institutional forms are overlain and interact with earlier systems rather than replace them. The outcome is a complex, but highly adaptive infrastructural, organizational and institutional mix of state and communal, formal and informal, hierarchical and network, elements.

Uplands as “setting” for lowlands and urban centers In addition to the role of upland and highland areas as upper watersheds that collect and convey water to downstream agriculture, hydroelectric facilities, and urban and industrial users, upland areas have additional attributes that affect urbanization and development processes in the lowlands in various ways. In the Upper Ping Basin, mountain forest lands, tourism, and ethnic diversity have played especially important roles: x Mountain forest lands. During the last century, evolving lowland and urban views about forests have been reflected in activities of forestry agencies. During the 1880s -90s most valuable old-growth timber resources of the northern region began to be sold-off as teak concessions to British companies, with logs floated down the Ping River to ports for export. Key fortunes were made by families well-connected to the northern nobility or further downstream, who still play large roles in political and corporate life in Thailand. By the mid-1950’s little valuable large old-growth timber remained. As national 5-year development plans began implementation and the Bhumipol dam was completed, legal processes also completed conversion of state claims to forest timber species into claims to vast “reserved forest” lands. As the economic role of timber became overshadowed by Chapter 5. How might larger transitions in society affect opportunities and responses? Page 255

other sectors, urban views of forest links with nature, recreation and biodiversity grew. Many forest reserves began to be “upgraded” to protected area status as national parks or wildlife sanctuaries, and the conservation side of forestry agency operations began their ascent. The current extent of forest land claims in the UPB was displayed in Figure 3-25. Meanwhile, expansion and intensification of lowland agriculture has resulted in the vir- tual elimination of lowland forest ecosystems. Only small transformed pockets of “community forest” remain scattered among expanding orchards in the foothills to serve as areas where useful products can still be extracted mostly for domestic consumption, or to support local art and craft industry. But the many forested areas on mountains around urbanizing valleys have long provided a wide diversity of goods and services that residents of Chiang Mai have consumed directly, or used as inputs into production for trade. Only in recent decades has growing emphasis on conservation and tourism brought sharp cur- tailment of the range of direct uses. Today, relationships between urban actors and upland biodiversity are more subtle than in the past, and one of the most important is perceptions of domestic and international visitors that the north is beautiful because of its forests and mountains [Lebel et al. 2004]. Symbolically, this is reinforced by successful maintenance of high forest cover on the face of Doi Suthep Mountain that faces Chiang Mai town. While this is a scene that is increasingly harder to appreciate as all “unused” visual space in the city becomes filled with advertising signs and billboards, it is an important part of Chiang Mai urban identity. This symbolic power is strongly amplified by presence of the very popular, revered and wealthy temple perched on the mountain near one of the Royal Family’s palaces.

x Tourism has been a high priority since the Sixth National Economic Social Development Plan with significant investments in public infrastructure in key destinations like Chiang Mai stimulating even greater private sector investments. Doubling since the mid-80s, annual tourist arrivals to Chiang Mai have grown from 3 to nearly 4 million since 1997, and conventions are common. Average duration of stay is between 3 to 4 days, and more than 40 percent of visitors are international. There was a further surge in tourism during 2006 due a Royal Expo, but it then dropped with political instability and strengthening value of the Baht. Tourism is an important contributor to provincial gross product and employment, and is a major user of energy. In addition to the role of forested mountains in painting an attractive image for tourism, operations and impacts of tourism activities concentrated in the city also spill strongly over into areas in smaller mountain valleys near the Chiang Mai urban zone. Thus, over the past two decades the Mae Sa Valley, located 20 km from Chiang Mai town, has been transformed from rice and mixed agriculture into a 15 km stretch of golf courses, hotels, resorts, butterfly, snake and orchid farms, and brothels [Singhanetra-Renard 1999]. Vari- ous other valley areas around Chiang Mai have also been transformed, but perhaps less dramatically. Locally owned tourism operations in Mae Wang are described in earlier chapters. Some areas in and near the city are also sites for vacation homes for Bangkok and Chiang Mai elites, as well as retirement homes for both Thais and foreigners. Some operations and impacts also penetrate still further into mountain areas. Chiang Mai is a key launching point for trekking tourism that over the past 2 decades has transformed Page 256 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

from low-key alternative tourism [Dearden & Harron 1994] into a major industry for more conventional tourists [Tourism Authority of Thailand 2000; Weaver 2002]. For those wanting more remote and less well-traveled adventures, the city also serves as a base for trips to remote mountain areas in adjacent countries. Dependence on tourism provides special incentives to maintain and improve urban air quality and public transport infrastructure, since deteriorating air quality and traffic con- gestion decrease the city’s competitiveness as a tourist destination. As in other cities in that benefit from tourism-related economic growth, Chiang Mai must come to terms with the concomitant rise in various urban environmental management challenges, or face the prospect of destroying one of its more important income streams.

x Ethnic and cultural diversity. Ethnic, cultural and institutional diversity is a very significant feature of the Upper Ping Basin. It helps drive the tourism industry, reveals a history of discriminatory practices, and on historical time-scales probably played a major role in the “resilience” of the overall upland-rural-urban (elite) system. The different world views and practices that arise from this diversity are a source of both conflict and innovation [Lebel et al. 2004]. The main ethnic minority groups in the UPB include: Karen, Lawa, Hmong, Lahu, and Lisu, along with smaller numbers of Yao, Htin and Palong, as well as enclaves of Yun- nanese Chinese. Distribution of their settlements is mapped in Figure 2-13, along with those of ethnic Northern Thai (“Khon Muang”), who earlier identified themselves with the Lanna Kingdom. While distributions such as this have been used to cluster ethnic groups according to the altitude zones where most of their settlements are located, minority groups are increasingly mixing with Northern Thai in lowland and some upland areas. Moreover, younger generations are increasingly migrating both temporarily and permanently to urban areas, along with those from other areas in North Thailand such as the Akha, working in tourism and other sectors. And in recent years, Shan populations have grown in both rural and urban areas as they fled from persecution, hardship and political conflict in Myanmar. Urban areas also include Thai from other historical regions, Chi- nese, and various groups from a growing range of other countries and continents. Within and across groups there is a large diversity of languages, cultural norms, and traditional institutional arrangements, local knowledge and natural resource and agroecosystem management practices and skills. For many lowland and urban Thais, tourism operators, and outside observers, there has been a tendency to develop ethnic “packaging” that seeks to lock ethnic groups into static stereotypes that can be marketed to tourists as “quaint” or “exotic”. They are also used as a basis for discrimination in employment, access to social services, and social acceptance and mobility. Thus, one of the most difficult issues for many to grasp is that “these groups” are not monolithic but contain significant heterogeneity in views and practices, and these are dynamic. While there is evidence of some general differences in livelihood strategies among ethnic groups in parts of the UPB, for example, we find even greater differences within groups. Moreover, with differences within groups increasing more rapidly than differences among groups, the overall dynamic is negating the basis for ethnic “packages”. At the same time, however, there is Chapter 5. How might larger transitions in society affect opportunities and responses? Page 257

potential for an emergent synthesis that might take the form of a neo-Lanna society that incorporates contributions from a diverse range of origins. In this regard, there is also a need to recognize that “culture” is not static, and is reproduced, re-molded, and re-invented to suit particular purposes. For issues of water and land management and rights of access, for example, ethnic identities, “traditional” institutions, and “culture” have often been used as part of political strategies by various sides of conflicts over natural resource management [Chayan 2003; Pinkaew & Rajesh 1992]. Moreover, even many rural ethnic minority communities are themselves now “reinvent- ing” their identities in a quest for dignity and a way forward for them, and especially their children. Given the nationalistic zeal that often emanates from Bangkok, however, and its use of concepts like “Thai-ness”, a more inclusive synthesis for Chiang Mai would likely need to be driven by strong local initiative.

As a consequence, in part, of high profile of environmental conflicts and “crises” in northern Thailand related to these factors, there is now also a huge number of “new” stakeholders: local and international NGOs installing water systems, Royal Project Foundation initiatives experimenting with specialty crops, conservationist monks delineating “sacred forests”, community-based activists facilitating dialogues, forest department officials patrolling and demar- cating village and park boundaries, government extension agents teaching good agricultural practices, and military and police moving in and out in the interests of “national security”.

These “crisis” players come in addition to the middle men and women entrepreneurs linking growers to markets for inputs, credit, commodities and labor, as well as un-coordinated local government and state line agencies conducting various types of “development” projects.

Urban scenarios To further explore multi-level processes associated with urbanization and interplay among them, two parallel sets of scenarios were developed at the northern Thailand scale. One scenario set seeks to capture processes affecting the Mae Ping Basin as a whole including upland areas, while the other scenario set focuses on processes in the main inter-montane valley where the urbanized Chiang Mai – Lamphun area sits. Scenarios were constructed to intentionally capture the large uncertainties about how livelihoods and regions could engage with wider markets and social structures. At the northern Thailand scale of analysis, the four scenarios are labeled after the kind of market integration they imply (Figure 5-8). Inner boxes represent ways the urbanizing area within this regional development pattern are likely to develop, and are labeled with the kind of “catchy titles” that are already to some extent floating around discussions in the region: Village Life, World Kitchen, Neo-Lanna, and Smart Growth. x The Neo Lanna scenario is characterized by appeals to the past for values, styles and organizing principles, but at the same time a willingness to adopt modern technologies, and thus, selectively engage in trade and court external investments. More than any other scenario this requires the region to maintain a significant degree of control over how urbanization and other development processes unfold within it. This is achieved socially by re-creating a “neo-Lanna” identity that is beneficial for firms developing niche markets for higher-value products and services. Page 258 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Figure 5-8. Urban scenarios embedded in larger regional socio-economic scenarios for how landscapes may evolve

Ecologically, the emphasis on regional values means that the quality of the environment in the basin receives a high priority, not as “wilderness” but rather as an aesthetic contribution to the cultural landscape. Cultural diversity is fostered to the extent it doesn’t challenge the “emerging” regional identity. This is prefixed with “neo” because invariably it includes significant contributions from ethnic minority and Chinese culture, as well as values fostered by decades of high levels of western tourism. Cultural heritage tourism provides a critical starting point for this scenario to take hold. Some of these forces are given added support by national level reactions against locally destructive forms of globalization. Neo-lanna rhetoric fits well with ideas of regional sustainability and with its emphasis on arts and culture sees urbanization as a strong contributor. Overall urban growth continues with, however, significant change in form as a result of constraints placed around development that would adversely impact historical areas. Surrounding district capitals take away many commercial and administrative functions formally entirely centralized in Chiang Mai. This is enabled by an effective system of light rail between these district centers that, in turn, stimulates substantial corridor (along lines) and nodal (at switching centers) urbanization. The areas away from these major routes stabilize as high quality agriculture zones that include a high proportion of less labor intensive tree based products, not just fruit, but also various lacquers and other secondary products used in the large interior decorating and household implements industry. x The Village Life scenario is probably the most radical of the scenarios given current political and economic trends. It is anti-modernist and local in perspective. It is sold as pro- rural and pro-poor and labeled by its opponents as everything from “communist”, through “nostalgic” to “reactionary”. It sees the purpose of economic development as serving rural areas and the poor rather than the other way around. The city is seen as a place of concentrated services for rural areas, including developing the capacities of the Chapter 5. How might larger transitions in society affect opportunities and responses? Page 259

rural poor. In practice the scenario does not unfold as radically as any group argues, but emerges as a compromise. Significant parts of wealthier segments of society, including many from outside the region, migrate to the basin as part of a growing voluntary simplicity movement that has taken hold across Asia. This is based on a vegetarian diet, low energy, and a low mobility lifestyle. Households are not necessarily food self-sufficient, but communities at the village or tambon scale are often nearly so. Markets and other systems of exchange, such as labor and cultural services, are still important institutions, but more diverse in form than current patterns. One of the main problems is imagining what kinds of triggering events would be needed for such a scenario to become more plausible, apart from various complete breakdown scenarios resulting from war or a prolonged global economic recession that greatly reduced trade and international investment. Once started, however, it could be strongly reinforcing because participants in it could be rewarded by improved well- being without necessarily increasing wealth or consumption. x The World Kitchen scenario is based on a notion that engagement with larger scale commodity markets for food, and technological and other inputs required to produce it, is the broad and dominant force of socio-economic change and land-uses. Regional economic development is pursued primarily through agricultural and agri-business industrialization, and although the manufacturing industrial sector also expands, its land-use implications are not large, at least directly, but may be important for water and energy resources. Chiang Mai is re-oriented towards this primary production role with huge investments in agricultural, processing, and marketing research and development. As a result of the unhindered flow of capital, commodities and, eventually, labor for agriculture, individual locations within the region go through wild booms and busts. Com- modity price swings, and major shifts and shuffling among commodities produce a highly dynamic landscape if viewed in terms of crop-types, but overall land allocated to crops grows fairly steadily with the typical fluctuations of agriculture business boom-bust cycles. The challenge is whether the rates of innovation and skill improvement in agricultural firms can outpace those of other major competitors. The primary source of labor in the first few decades is Myanmar, but over-time and after further political upheavals, labor also comes from further a field, in south Asia, and possibly, the poorest regions of China. This is assisted by the gradual breakdown of restrictions on immigration for work between countries in the region. At the same, time intensification and mechanization of agriculture reduce the labour requirements per unit production. The most important advance as the transition continues is in the shift to value-adding and the creation of large volumes of food products for the supermarkets of the world. The assembly lines and industrial kitchens, although partly automated, still require a huge labor force and this drives additional urbanization, primarily around satellite towns of Chiang Mai where the land costs were lower at times the factories were initially set up in “kitchen estates”. This scenario is already implied by various official visions. The region is seen as rich in natural resources, the people skilled in agriculture, and the potential for rapid and sustained growth over several decades a distinct possibility as a result of relatively low labour costs. The success of commercial agri-business sees small-scale farming essentially disap- Page 260 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

pear except for specialist high-value ingredients, like herbs and spices. Farmers without the capital or business skills loose out completely to larger better organized firms. Market mechanisms loom large in inputs and dealing with externalities. Water is costly and a major constraint in production until a series of innovations in farm management aided by breeding and GMO technologies sees large improvements in water efficiency and re- cycling. The primary livelihood option is labor on larger commercial farms. Because of competition from cheap labor from Burma, this causes some unemployment and social disturbance. The implications for the environment are complex, but many serious problems are avoided because local firms need to meet rising standards to successfully compete in international consumer markets. x The smart growth scenario comes closer than the other scenarios to purporting to balance multiple objectives of economic growth, industrialization and conservation. The main pattern being that different commercial, conservation, recreation, settlement and other activities become increasingly segregated spatially. It places a strong emphasis on spatial planning, controlling land-uses and the allocation of resources like water and high quality soils. Technical expertise is highly-valued and engineering solutions are sought for any limitations to continued growth arising from environmental feedbacks. The well- managed industrial estate is the symbol of this scenario. The poor record in industrial management [Forsyth 1994], however, suggests that better governance structures and capacities will be crucial if such a scenario is to unfold in ways that will not further degrade the environment. In the Chiang Mai context, such a growth strategy is diversified, with significant agricultural activities still occurring in the basin, but also with continued emphasis on strengthening industrial-manufacturing and service sectors. As a consequence, Chiang Mai is no longer thought of as an agricultural or primary tourist town. Agriculture contracts substantially in area and proportional contribution to regional economic development. The philosophy of segregating activities means that urbanization will continue as a dominant trend for several decades, bringing most of the basin’s population into urban-type settlements and lifestyles. Continued diversification in the industrial sector will be a key initial driver, and over time this diversification could lead to a significant intermediate technology and information technology industries. The strategy to attract high-skilled labor and the relevant firms is fraught with difficulties of competition and new risks from modern environmental technologies, but the incentives are there as large markets for intelligent household appliances and computer equipment soar in the newly industrializing economies emerging in the region. One of the key developments may be bilateral partnerships with Chinese technology firms as the valley is seen as an attractive place relative to more heavily industrialized regions in China. Tough conservation measures in the upland areas will see forest cover increase to high levels that reinforce the attractiveness to urban-based factory and design workers. The implications of this scenario for the rural and urban poor, upland farmers and potential economic migrants from neighboring countries are not particularly good. Without requisite skills, employment opportunities in the informal and low-end service jobs are small and highly sought after. Out-migration to more rural-oriented regions is one possible Chapter 5. How might larger transitions in society affect opportunities and responses? Page 261

outcome. Some of the major sources of conflicts under this scenario could arise around water resources if some of the industries and lifestyles become water demanding. The technical orientation of the bureaucracy means that this is likely to be “solved” by large infrastructure projects, that is, inter-basin transfers with tunnels and canals from neighboring countries. Such plans are already visible, but now still mostly talked about as securing water for farmers.

The four scenarios represent plausible-at-stretch trajectories for Chiang Mai, but as a set span a more plausible space of trajectories. Each scenario has its key vulnerabilities [Lebel et al. 2004]. The Neo Lanna scenario, for example, because of its dependence on tourism is susceptible to insecurities, like terrorist attacks that affect foreign travel or otherwise scare visitors away from Chiang Mai in particular or any part of the region as a general fear. The Smart Growth scenario is really contingent on the quality of innovation of northern Thai firms relative to the global market place. The World Kitchen could be undone by fierce periods of competition from much larger Chinese producers or shortage of cheap Burmese labor.

Vietnamese highland tea in wind tunnel

The viability of different household livelihood strategies depends on socio-economic class, tea prices and wider regional development. These relationships were further explored by using regional development scenarios (Figure 5-2) as a wind-tunnel for exploring the plausibility of different livelihood strategies (Figure 5-9). In this figure value-adding strategies are considered to fall within a hierarchy of: no tea, collecting, crushing, drying and fragrance management. Only the highest expected levels of value-adding in a particular scenario are shown (Figure 5-9). Boxes with the terms poor, medium and better-off in Figure 5-9 refer to the opportunities available to particular households recognizing that some value-added strategies may require higher levels of assets and other capacities that come with wealth.

Under a Rural First scenario, tea prices will be low as there is no opportunity for wider market access. Only poor households are likely to be engaged in just collecting if tea is part of their household strategy at all. Such a household strategy is likely to be resilient, in the negative sense of providing little opportunity for improvement.

With much larger volumes of tea trade under the Food Bowl scenario, opportunities for poor and medium households expand to include crushing and drying (Figure 5-9). Tea prices, however, are unlikely to rise very much for undifferentiated tea, and only modest increases are likely for value-added products. When prices are low it may be quite difficult for poorer households to do more than collect tea (as in Rural First).

Fragrance management as a value-added strategy becomes most plausible under Glocalization and Services Park scenarios (Figure 5-9). Under Glocalization this is because of the niche- market opportunities created, and under Services Park because of the overall higher levels of technological innovation and economic development. Opportunities for medium and better- off households to engage in tea expand, while opportunities for poorer households are elimi- Page 262 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region nated or very restricted, for example, as wage labor in collecting. Of course, some poorer households would be expected to become better-off under this scenario during periods of reasonable to high tea prices. If prices remain low, however, poor households may not benefit much from value-adding activities especially where trade volumes (in Glocalization scenario) are modest.

Figure 5-9. Opportunities for different household classes for growing tea in Dai Tu district

Opportunities will depend on tea prices & region development scenario as tea is export-oriented commodity.

Source: Hoang Minh Ha and Louis Lebel

Of course this type of analysis is highly speculative and does not take into account details of how land and credit factors interact. The analysis serves primarily to show how wind-tunnel approaches might be used to explore value-added strategies. It should be noted that some of the differences among alternative future “scenarios” may themselves be played out within larger landscapes as differences among specific local places. For instance, places with very poor road access and few market or credit channels may behave as if they were in a Rural First regional setting, whereas places closer to major towns may behave more like a Services Park context, and so on. Chapter 5. How might larger transitions in society affect opportunities and responses? Page 263

5.4 Responding to larger transitions and uncertainties

This chapter has underscored the dynamic nature of processes that shape livelihood opportunities and constraints found in upland landscapes across mainland Southeast Asia. We have employed systematic exploration of alternative future scenarios as an approach for helping clarify uncertainties about how processes may continue to unfold, how decisions and events at various levels can influence their direction, and how various vectors of change can converge to reinforce or negate emergence of different types of conditions and their associated sets of livelihood opportunities and constraints.

The central theme underlying this exploration has been to help clarify our understanding of how larger transitions in wider societies might affect future livelihood opportunities at more local levels in the uplands of mainland Southeast Asia, and the manner in which local households and communities are willing and able to respond to those opportunities.

5.4.1 The past may not be a good guide for the future

We already noted that past and current trends create inertia for continued movement in current directions. We have also seen, however, several indicators of emerging uncertainties and transitions that may shift change into some quite different directions. With the help of scenario analysis, we have explored implications of some “plausible” alternative trajectories of future change that reflect ideas and directions of change advocated by various stakeholder groups, officials and activists.

Examination of past events and processes in Mae Chaem demonstrate that transitions among states described by alternative scenarios can and do occur. But change is not inevitable. Un- der some wider contexts the possibility for economic stagnation in remote locations is real. Households that are relatively poor under scenarios which maintain isolation and poor access conditions may create communities without options for change. Change in these circumstances could come primarily from migration (e.g. of younger generation) rather than introduction of innovations that change land-uses, sources of income or access to natural resources. The opportunities from large-scale infrastructure development, for example, as explored around the north-south economic corridor, do not necessarily “trickle-up” to the headwaters if they are accompanied by repressive conservation policies or if the road upgrades are confined to long-routes between major cities.

In some locations, changes to livelihood options as a result of the intersection between improved market access, local capabilities and regional development processes are profound. Too narrow a focus on current problems and constraints from a perspective based on historical experiences may be completely misplaced. Thus, some of the tensions about upland forest losses could be made irrelevant by migration of younger generation to urbanizing regions for employment, education and, eventually, settlement where minorities do not face discrimination barriers to urban education and employment. Some problems may “solve themselves” without much active policy change. The past may not be a reliable guide to the future.

Page 264 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

5.4.2 Market opportunities depend on both local and wider scales

Scenario analysis has important limitations when exploring the evolution of market opportunities. Rarely, for example, can analysis be made very commodity specific because markets are wont to differentiate; on the other hand, analyses for categories of similar goods, like perishable, high value per weight, may be fairly robust. In any case, both expert and more participatory approaches to thinking about the future underline the importance of taking into consideration processes both at more local and at wider regional levels. Factors at both levels will be important for the emergence and maintenance of new market-related opportunities for upland poor households.

Access to markets for products is only part of the barrier and opportunity story. Other markets are also very important, in particular, credit and labor. These other factors can vary in importance with more regional factors that are also uncertain, such as exchange rates, trade and security relationships with neighboring countries, and so on.

Analyses of sets of scenarios derive much of their value from comparison rather than predic- tive qualities. They help to reveal assumptions about development, capacities and constraints in markets for the poor. In our example earlier in this chapter, analyses of tea-based livelihood strategies illustrated how conventional business-oriented wind-tunnel approaches might be applied to explore value-added strategies of poor and better-off households.

Finally, it should be noted that some of the differences among “scenarios” as alternative futures may themselves be played out within larger landscapes as differences among specific local places. For instance, places with very poor road access and few market or credit channels may be have as if they were in a Rural First regional setting, whereas places closer to major towns may behave more like a Services Park context, and so on.

5.4.3 Political roles and resource access and stewardship may co-evolve

Broader political changes, in particular those which deepen democracy through providing accountable and representative local government, potentially have major implications for natural resource management and, consequently, livelihoods of upland households. These broader political transformations are uncertain, rarely uni-directional over time, and may be spatially incomplete and heterogeneous. Scenario exercises have often underlined the importance of “protection” and “conservation” norms in society for both policies on paper and their implementation on the ground. Local authorities often re-make national policy in more pragmatic ways.

There are uncertainties about how multi-level governance will unfold over time in particular locations. Individual projects, both state-led and non-government-led, can reshape power relationships of upland farmers with others. Against this backdrop, households pursue and adjust their livelihood strategies as far as they are able. Although most of our work has focused on access to natural resources, in some instances, it is access to political process which Chapter 5. How might larger transitions in society affect opportunities and responses? Page 265 may have the most profound impacts on long-term trajectories of livelihoods and landscapes in the uplands.

Perceptions about changing conditions of forest, land and water resources, as well as the capacity of local government and communities to manage these resources are based on preju- dices, observations of current conditions, and expectations about future constraints and opportunities. Developing coherent scenarios to explain recent past and explore alternative futures often reveals how mental models of the world shift with perceptions. One consequence is that the political roles for local farmers and other resource users (e.g. in cultural or nature- based tourism) can be expected to co-evolve with rights of access and responsibilities for landscape stewardship. Page 266 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

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6.What are the implications of state policies for market opportunities & access for the poor?

State policies have, sometimes, played an important role in shaping market opportunities and access for the poor across the region. But seldom has the policy process with respect to upland zones of the Greater Mekong Region been simple or linear. National policies and program have often had unintended or adverse consequences on livelihoods or landscapes even when state intentions were to benefit the poor. As society considers and pursues alternative visions of the future that address poverty in the uplands it has become increasingly important that these deliberations and decisions be well informed by analyses of the outcomes of past policy experiments in different places and circumstances. This chapter builds on previous chapters in exploring the policy dimensions of findings under our study.

6.1 Policies and their impacts in upland areas

State policies are generally seen as inherently national level phenomena. Thus in one sense, articulation of policies can be seen as a reflection of at least some level of consensus among those with voice, power and authority in the national policy making arena regarding the subject of the policy and the stability or directions of change it seeks to achieve. While societies differ in terms of their political ideologies and processes for arriving at policy decisions, there appear to be various areas of convergence where similar interests and sets of external factors tend to limit options and drive change in similar overall directions. We have seen evidence of this in changes in various macro-economic policies in the region during the last 20 years.

Both history and current evidence indicate, however, that another important dimension of policy concerns the manner in which policies articulated at a national level are translated, adapted or reinterpreted as they cascade down through hierarchies of social organization that are expected to implement those policies within specific contexts at very local levels. More- over, differences among specific local contexts can strongly affect the nature of policy impacts and the degree to which they bring about change that is desired or undesired. Thus, policies aimed at improving livelihoods or reducing poverty can in some circumstances have quite the opposite effect. On the other hand, actual impacts of poorly formulated policies can sometimes be improved through reinterpretation in increasingly specific local contexts.

During significant periods of history, “upland” areas in montane zones of mainland South- east Asia were remote and quite weakly connected with centers of political, military and economic power associated with empires based largely in lowland zones. As we have seen, however, important processes of change, especially during the last 50 years, have brought both motivation and tools for increasing integration of remote upland areas into national political, economic and social systems. Moreover, increasing integration has come from various directions and sectors. While local interactions among impacts of different types of integration can sometimes be synergistic, they can also sometimes be much more negative. As claims on and interests in upland resources multiply in ever more complex ways, the range of stakeholders Page 268 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region also grows, and needs for communication, negotiation, coordination and collaboration increase. Sections in this chapter take a somewhat closer look at issues in some key policy areas at regional and case study site levels.

6.2 Major areas of policy concern in the region

Project findings presented in previous chapters suggest four general areas of policy concern across the region that appear to be very important for livelihoods of the poor in upland areas, both in the past, and especially in the future. They include (1) mountain land use, (2) commercialization, competitiveness and comparative advantage, (3) infrastructure and services, (4) identity and citizenship, and (5) governance and subsidiarity. The following discussion includes a sub-section on each.

6.2.1 Mountain land use: protection versus development

Previous chapters have already demonstrated that montane zones of mainland Southeast Asia are where most remaining forest cover is located, that they are often viewed as catchment areas for water that feeds lowland irrigation and urban water systems, and that they have increasingly moved to center stage in relation to conservation issues and targets. And in section 5.3.2, we summarized points related to emergence of three major thrusts of conservation issues and programs directed primarily toward the uplands: (1) conservation of goods, (2) conservation of land, and (3) conservation of environmental services.

As a result of increasing concern and pressure from agencies, experts, activists, and other interests from fairly local to global levels, societies and their governments are formulating and implementing a growing range of state policies that aim to increase conservation in upland montane zones. Major components of most of these policies are directed toward how access to land in upland zones is controlled and allocated among different users and uses, and regulation of how users may use land within different types of areas.

Previous chapters have also demonstrated, however, the very important role that access to land and other forms of natural capital plays in most livelihood strategies of households and communities living in upland areas. Indeed, limited access to land has repeatedly been mentioned as a key characteristic of households who are among the poorest and most vulnerable.

Thus, policy makers in each society in the region are faced with trade-offs and often difficult decisions in formulating upland land use policies that provide the most “appropriate” mix of efforts both to protect their natural resource base, and to provide livelihood opportunities for often poor minority communities living in those areas, who are dependent on land for their livelihoods. Three basic areas of land use policy that reflect these issues include policies related to protected forest areas, protected watershed zones, and land allocation processes.

Protected forest areas National policies for establishing and managing protected forest areas are primarily directed toward conservation of natural biodiversity. This approach seeks conservation of biological diversity through preservation of natural communities, habitats and ecosystems, and special Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 269 management considerations may be directed toward particular species, especially those classified as endangered. Thus, the focus is clearly on natural landscapes, so that agriculture and human settlements are seen primarily as threats, and it usually (but not always) tends to pay little or no attention to conservation of biodiversity in agricultural systems or agroforestry landscapes. Emphasis is usually on segregation of natural forest from other land types of use.

As part of the environmental dimension of globalization processes, nations from around the world have joined global programs associated with establishment, expansion and management of protected areas. In association with the UN Environment Programme, there is a World Commission on Protected Areas, and a World Conservation Monitoring Center, as well as a World Database on Protected Areas. Systematic definitions of categories of protected areas have been developed by the International Union for Conservation of Nature (IUCN), along with criteria and standards for management of each of the six major categories. The global database registry includes protected areas established under the authority of national governments themselves, as well as those that are associated with national commit- ments under international treaties, such as Ramsar (wetlands), World Heritage, Man and Biosphere Reserves, and others, as well as new regional programs such as those being developed under the Association of Southeast Asian Nations (ASEAN). Figure 6-1. Internationally registered protected forest areas (all IUCN types)

Protected Protected areas in areas in red red

FRA Forest Cover masl Data: WCPA 2006 Alpine 3,000 & more Forest - closed Global Protected Areas Dataset high 1,000 - 2,999 FRA 2000 Montane middle 500 - 999 Forest - open or fragmented low 300 - 499 upper 100 - 299 Other wooded land Lowland Data: WCPA 2006 coasta l <100 Global Protected Areas Dataset Other land cover HydroSHEDS SRTM DEM Water (a) with altitude zones (b) with forest cover

In order to provide an overview of the current distribution of protected forest areas in the region, Figure 6-1 displays protected areas in red color, which is overlaid on maps of altitude zones (Figure 6-1(a)) and forest cover (Figure 6-1(b)) for mainland Southeast Asia. Areas in red color include terrestrial protected areas in all national and international categories of the international registry, without distinguishing among parks, wildlife sanctuaries, etc.

While most protected areas tend to be located in montane zones, the degree to which these protected forest areas generally exclude or restrict access to natural capital assets in upland areas varies among countries. The vast protected areas on the Tibetan plateau are mostly un- Page 270 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region populated areas in the upper reaches of major river basins. And while an increasing number of protected areas are located in mountains along the common border of Vietnam and the Lao PDR, the heaviest concentration of protected areas is in montane zones of northern and western Thailand, where few forest areas remain outside of protected areas.

The significant amount of area covered by these internationally registered protected areas tends to include areas with the most strict laws and regulations for excluding or severely restricting alternative forms of land use. Yet these maps still do not fully reflect restrictions on upland land use related to forest conservation. For example, these maps do not include the various types of provincial and local level categories of production, protection, and conservation forests in the Lao PDR, which cover many montane zone forest areas, especially in the North. Nor do these maps include the vast areas of reserved forest land that precludes legal land holdings by households in most all montane zones in Thailand.

Protected watershed zones A second component of national land use policy that is increasingly common around the region is associated with establishing national watershed classifications. Basic notions underlying this approach center on mapping of physical landscape characteristics associated with their vulnerability to damage due to “inappropriate” land use that would degrade watershed services provided by those areas. While the general theory provides a range of variables that Figure 6-2. Watershed classification in Thailand and the Lower Mekong Basin

Watershed Classes Wa ters hed Cla sse s

1 1 2 2 3 3 4 4 5 5 (a) with altitude zones (b) with forest cover should be used in articulating and assigning watershed class status, in reality the primary factors have been hill slope and altitude zone, but in various areas there have been some adjust- ments associated with geology, soil type (where known), forest type and cover, and minimum mapping unit size. Classification is usually an expert-driven process conducted by agencies and/or consultants, wherein any form of local input or consultation is viewed as unnecessary. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 271

Watershed classification systems in the region tend to all use a five-level classification approach wherein Class 1 indicates zones for greatest restriction, and usually it is said only natural forest cover should be allowed. Classes 2 and 3 allow increasing levels of human activity and influence, but use is still highly restricted and limited to forms of forest or tree plantation management with strong soil conservation practices. Class 4 requires only milder forms of soil conservation, while land use in Class 5 areas is unrestricted. Distribution of the most restrictive watershed classification classes (zones 1-3) for Thailand and the Mekong River Ba- sin are mapped in Figure 6-2 as overlays on maps of altitude zones (Figure 6-2(a)) and forest cover (Figure 6-2(b)). As these maps indicate, the most restrictive watershed classification zones are mostly all in montane altitude zones, where they blanket vast areas.

Land allocation and tenure While the previous two components of national land use policies focus on exclusion and restriction of livelihood opportunities for local communities that require natural capital assets, this policy component is directed toward defining and recognizing areas where such activities can occur, and providing at least some degree of legitimacy and security for them.

x China. Since the socialist revolution in China, land tenure arrangements in Yunnan have passed through various phases. While land reform and allocation were part of programs that quickly followed the revolution, forestlands were nationalized, and by the mid-1950s land ownership was collectivized and communes and state rubber farms were established in Yunnan. During the next two decades, state and collective forests were differentiated, and successive campaigns aimed at increasing grain production led to deforestation in upland areas of Yunnan. By the late 1970’s, agricultural land was de-collectivized and placed under household responsibility through land allocation programs, while campaigns promoted “opening” of “wastelands”. During the early 1980’s, 22 new nature reserves were established in Yunnan and remaining forestland was de-collectivized and allocated under programs known as the “Forestry Three Fixes”. Subsequent programs during the last 20 years have increased emphasis on tourism and “bio-resources” protection and management in Yunnan, including new national forest parks and the Great Rivers World Heritage site. Watershed concerns are being addressed with economic incentives under upland conversion and “grain for green” programs, and further forest land reforms are being conducted to enhance private ownership. As we saw in previous chapters, some reallocation of agricultural land has occurred, and land cannot be sold. Given the incentives for people to move into wage employment and urban areas, potential changes in land ownership and labor migration policies may bring much more change.

x Vietnam. After its socialist revolution, Vietnam also passed through a period of land collectivization that affected remote mountain areas and their ethnic minority communities in various ways. Many were also affected by “sedentarization” programs aimed at stopping shifting cultivation practices, and by programs to establish New Economic Zones wherein groups were resettled from very densely settled lowland and delta areas into “under-populated” upland zones. National forest lands were primarily in the hands of state forest enterprises. After Doi Moi reforms began during the 1980’s, communal “coopera- Page 272 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

tive” forms of management and organization were phased out, and during the early 1990’s major land allocation programs distributed agricultural lands among households and gave them long-term “red book” certificates that legitimized their land entitlements for both residential and agricultural uses. Recognizing that household land needs change over time, only residential rights are permanent, and further re-allocations of land are expected in the future. And while national protected forest areas for biodiversity conservation were established, additional government land allocation programs during the late 1990’s allocated other forest land areas and provided “green book” certificates to provide a legal basis for land use security, although purposes for which the land could be used are more limited (but longer term) and substantial areas went to state forest enterprises.

x Lao PDR. Laos also experienced a period of collectivization after its socialist revolution, although impacts on traditional ways of life of ethnic minority communities in more remote mountain areas were quite variable. And, under economic reforms associated with its “New Economic Mechanism” during the late 1980’s it abandoned collectivization, and household managed agriculture returned. With most of its large proportion of mountain areas considered by the state to be forest land, legal recognition of land tenure rights has been closely linked with forestry policies and agencies. A general policy to end shifting cultivation of all forms has featured prominently in forest and land policies for the uplands since the 1970’s, and still remains in place. This approach is seen as com- plementing and reinforcing newer policies related to opium eradication and concentration of development at “focal sites” that include inducements for relocation and consolidation of small villages near valley and foothill locations where road and service corridors are being established. One inducement is a village land allocation program that demar- cates village boundaries and allocates officially recognized land areas for both household and village use. While a promising “participatory” land use planning process is promoted for village land allocation, it has been somewhat slow and difficult to implement in many areas, and large portions of village lands are often zoned for use as village zones for forest production, protection or conservation. Official land documents have not yet been issued to upland households, and district and province governments still maintain considerable authority to enter into land use agreements with outsiders, including companies.

x Thailand. In contrast to its neighbors, Thailand did not experience any period of land collectivization, and it has been the most reluctant to provide any form of legal recognition for land used as livelihood natural capital assets by households or communities living in its montane zones. Whether viewed as benign neglect, marginalization or part of national security strategy, mountain minorities were officially “invisible” as logging concessions exported valuable timber during the region’s colonial era and were subsequently converted into massive “reserved forest” lands. Minority communities soon became seen as a “problem”, however, because of their role as producers in the opium economy, uncertainties about their loyalty in terms of national security, and their traditional shifting cultivation practices seen to be degrading national forest and watershed resources. In order to “reclaim” state forest lands, protected forest areas were launched in the 1970’s and expanded steadily for the next 20 years, and during the 1980’s watershed classification and zoning (previous section) was established. Meanwhile, various waves of development projects promoted intensive commercial crops to replace opium, built roads and brought Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 273

education and public health services, and induced “settled” agriculture through schemes that ranged from subsidies to intimidation. Yet, with a few very small exceptions, village land use was never officially recognized. Rather, their land use security has depended completely on patron-client relationships with forest agencies, projects, or others with power to shield them from eviction. It has also both facilitated informal cross-border movements, and allowed agencies to claim that old settlers are recent migrants. Ironically, now that villages in areas such as Mae Chaem have citizenship, or at least legal identity, many find themselves fully legal and functioning components under local governance reforms associated with the 1997 constitution, but all of the land where they live and upon which their livelihoods depend is completely illegal, and continually subject to claim by expanding protected forest areas. Only a few areas of foothill “degraded” forest are being allocated to households under Thailand’s “land reform” program, which is primarily directed toward recognizing some long converted areas of forest reserve land in other regions of the country. Not surprisingly, huge uncertainties and much anxiety remain.

Inflexible national policies Across each of these policy domains and in their combination the key problem has been in- flexibility. National policy-making has assumed a “one-size fits-all” approach for each type of policy, and in doing so, upper tributary watersheds in upland areas have often come out at a distinct disadvantage in terms of access to resources used and managed by people.

Thus, within a relatively short period following the disastrous Yangtze floods in 1998 China introduced a range of policies to conserve forests and protect watersheds. These include bans on commercial logging, reforestation, and restrictions on upland farming and controls on grazing [Melick et al. 2007]. Some of these policies include the first large-scale experimentation in the region with economic incentives associated with the concept of payment for environmental services. Yet as elsewhere in montane mainland Southeast Asia, policy implementation has been applied without regard to huge variation in rural livelihoods and landscapes. Forest-dependent people in upper tributary watersheds, for example, in Yunnan province, have been put at a disadvantage and many of their locally-derived institutions for management have been ignored or made dysfunctional [Jianchu & Ribot 2004; Melick et al. 2007].

Land policies in Vietnam have placed primary emphasis on huge national programs for land allocation in combination with establishment of protected forest areas. While allocations of land for smallholder agriculture (red book) and forest (green book) uses may seem clear to planners, it is not always so clear for mountain communities with opportunities to produce perennial crops such as tea, coffee, cashew, rubber, or others. Indeed, green books provide longer tenure, which is more compatible with investment in perennials. Moreover, many important environmental services can be provided by agroforestry configurations based on mixtures of perennial crops and natural tree species, such as tea or coffee grown under shade, while also producing products for emerging high value niche markets. Some ‘buffer zone’ projects for protected areas are already recognizing needs for more land use flexible policies.

In Thailand watershed protection, conservation and land tenure policies have also been characterized by efforts to apply uniform national legislation across regions and localities of the Page 274 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region country with very different ecological and social contexts. Inflexible policies themselves are a product of centralized decision-making (see 6.2.5), lack of trust in more localized decision making processes, poor representation of interests of ethnic minorities, and lack of public deliberation in policy formulation. Flexibility is only provided by lack of local enforcement, or in areas where informal relationships with influential patrons can shield or adapt enforcement. In those few areas where local use is recognized by ‘land reform’ certificates, few traditional agroforestry systems or uses of natural forest qualify for recognition. While some policies urge upland communities to invest in conservation farming and tree crop production, and stop using agricultural chemicals, difficulties they face include lack of land security, no collateral for financing such investments, little technical support, and many others.

National policies in the Lao PDR have induced widespread relocation and consolidation of villages at sites along roads. While localized zoning of land in these areas has reflected efforts to provide some local flexibility, as in other countries of the region, emphasis has been on compact areas for intensive commercial agriculture and much larger areas for forest. But as commercial production opportunities began emerging, rapid widespread planting of rubber in association with sometimes substantial land policy reinterpretation at provincial and district levels, is currently throwing uniform central policies on upland land use into disarray.

As these examples indicate, if upland communities are to find an acceptable balance between conservation and development in the context of increasing integration into the globalizing economy, more flexible land policies (see also 6.3.1) will be needed that take into account local needs, capabilities and landscape dynamics. These will probably require more attention to multi-level systems of governance (see 6.2.5).

6.2.2 Competitiveness and comparative advantage

We have already seen in chapters 1 and 3 how change in macro-policies related to modes of production, and especially toward international trade and investment, have brought dramatic change in growth and structures of national economies across the region during the last two decades. Production of agricultural commodities for export markets has grown rapidly, resulting in Vietnam emerging as a key producer of various commodities for world markets, China becoming globally prominent in both production and consumption of many commodities, and Thailand continuing to be an important food exporting country. Moreover, structural change has been associated with even faster growth in industrial and service sectors, driving especially rapid growth in urban areas, as well as dramatic growth and evolution of domestic markets for an increasing range of agricultural and forestry products.

We can see various impacts of these types of policies in Northern Thailand, where policies were implemented earliest and the agricultural sector has become quite monetized. Social relations in agricultural activities have given way to a cash economy. Increased wage labor and market dependence of individual households has reduced various social and cultural relationships among people of the North. Traditional exchange labor during rice planting and harvesting is now being replaced by hired labor, making farming more expensive as cash is needed at all stages of production. With increased urban-based non-farm employment, labor Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 275 is becoming a scare resource for agriculture with high opportunity costs. Rental of equipment and machinery is common. Thus, farm production needs more cash investment and costs are higher [Nuanmai 2004], while the role of traditional local organizations is being replaced by individual management of labor and land [Decho 1996].

And now recent and expected international trade agreements are bringing still more new waves of change following from closer integration with global markets. The agricultural sector in North Thailand, and especially in Chiang Mai, Lamphun and Chiang Rai, is now modernized, diversified, competitive and commercialized. It is open to world and interregional competition. Farmers must constantly improve efficiency and seek new crops, markets, products and niches. In order to survive, they must find ways to produce their products at cheapest prices, and constantly look for new crops and innovations. Traders and suppliers of products must find niche markets and ways to process, handle and ship products speedily, efficiently, and according to consumer demand. Agricultural products are competing with regional and world markets not only in the lowlands, but at least in some cases in the uplands and the highlands as well. Comparative advantage in producing agricultural products is at play as GMS countries open their economies and adopt free trade principles, with each competing for lowest costs and best quality.

As competition in global markets becomes more intense, attributes of location and resource configuration become more important in helping determine the distribution of “winners” and “losers”. For example, under a bilateral free-trade agreement (FTA) between Thailand and China that took effect in October 2003, tariffs on trade between the two countries are being eliminated, beginning with fruits and vegetables (116 items as listed by Thai customs). Since implementation began, trade between the two countries has been increasing. China exports more fruit (especially pear, apple and grape and orange) and vegetables (mainly garlic, onion, broccoli, carrot and Chinese radish). Value of Thai exports to China has also increased in terms of both fruit (mainly fresh and dry longan, and durian) and vegetables (mainly cassava). While the value of Thai exports to China has been greater than imports from China, the value of Thai exports depends on a very narrow range of fruits and vegetables compared to the much wider variety of fruits and vegetables imported from China.

There are favorable and unfavorable effects of this agreement, in terms of both exports and imports. Some Thai producers of fruit like longan benefit from increasing export volume and value, and Thai consumers around the country also benefit from cheaper prices and more variety of fruit to consume, and especially urban consumers with increasing levels of dispos- able income. But adverse effects are felt by farmers in North Thailand whose livelihoods have focused on growing sub-tropical and temperate vegetables and fruits. One example is garlic, onion and shallot farmers, who have been negatively affected by increasing amounts of imported garlic, onion and shallot in the market, causing a decline in both wholesale and farm level prices. The apparently much lower production costs of these crops in China provide Chinese farmers with a definite comparative advantage over Thailand.

More generally, negative effects of the Thai –China FTA are likely to be felt most by farmers in Northern Thailand who have been producing competing crops. In addition to growers of Page 276 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region garlic, onion, and shallots, growers of a range of temperate fruits and vegetables will likely be adversely affected in the long run. While Thai producers are able to export more longan, cassava and rubber to China, the main production centers for cassava and rubber are not in the North. Thus, the free trade agreement creates real challenges for fruit and vegetable farmers in the northern region, who have been quite successful in the past, by introducing new waves of threats to often poor farmers as they face increasing international competition.

Public sector investment policies are sometimes aimed at helping to mitigate such negative impacts. The Thai Ministry of Agriculture and Cooperatives offered a program to assist garlic farmers in switching to ornamental tree production by paying compensation to help reduce supply of garlic in the market during 2005. But switching to a new crop has not been easy for garlic farmers in North Thailand, due to their longtime focus on garlic cultivation and difficulties they have found in adjusting to planting techniques for new crops.

In these types of situations, farmers’ need for strategies to help them rapidly adapt under competitive pressure. Such needs are likely to become more common in other areas and countries in the region in the future. Indeed, there is a need for policies that can help facilitate and foster innovation and investment from the private sector, and to foster development of local entrepreneurship among local growers and producers. These are not areas where government agencies and programs have a strong performance record.

6.2.3 Infrastructure and services

Public investment policies aimed at providing infrastructure and services with strong impacts on livelihoods can be grouped into three major categories, according to their main focus: x Basic physical connectivity infrastructure focuses on physical capital that can help reduce locational disadvantages of many upland areas, such as through improvements in transportation infrastructure in the form of roads, railways, and airport facilities, as well as in energy or telecommunications systems. At the GMS regional level, this has been a central focus of initial phases of investment by member states and the ADB (section 3.2.5). At the most local level, local governments appear to be assuming increasing levels of responsibility for directing and maintaining especially road infrastructure, whereas at intermediate levels, various government agencies usually have strong influence over government investment decisions. But at all levels, system design and location can greatly influence the spatial distribution of benefits derived by different local communities and areas. x Basic public sector services focus on systems to improve human capital, largely through public health, education, and access to information (which can include basic agriculture extension services), as well as systems to improve access to other types of livelihood assets in short supply, such as financial capital (through credit) and natural capital (through land tenure). An example of policies aimed at directly targeting improvement of such services in the uplands might be the set of HEPR programs in Vietnam. A more indirect type of policy might support research or development of information or technology needed for development of private enterprise, but constrained by inability to mobilize private sector investment. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 277

x Private sector services focus mainly on private sector strengths in providing access to markets and more advanced forms of technology, innovation and entrepreneurial skills. Pub- lic policies can seek to enable, facilitate and promote emergence of these types of services, and can also try to channel or weight incentives to favor services provided by large, medium or small scales of private sector operations. And sometimes just as important, public policies can also be aimed at reducing barriers to emergence of such services, or excessive “taxes” (of various forms) or other state obstacles that prevent them from being viable.

6.2.4 Identity and citizenship

Upland zones are home to people of diverse ethnic identities. State policies regarding citizenship, identity and migrants have, and continue to play a significant role in the livelihood opportunities of some of the poorest households in the region. Discriminatory policies and practices can have major implications for access to natural resources, as well as for access to employment and to government services, such as health and education (chapters 3 & 4). Ba- sic social legitimacy is a prerequisite for full participation at both local and wider social levels.

As we saw in earlier chapters, mountain areas with high proportions of ethnic minority populations are generally characterized by high poverty incidence percentages, with Yunnan being the only apparent exception. We have also seen, however, that some general components of rural poverty in these areas are related more closely to location than to ethnicity per se. Thus, for example, rough terrain and long distances to urban market centers impose additional production costs that put remote areas at a disadvantage, while quality of health and education services in remote areas is often constrained by logistical and staffing difficulties. Some of these disadvantages can also cascade to other levels, as when off-farm employment opportunities are limited by the relatively poor education received in remote schools. These types of issues are common to remote area disparities found in most parts of the world.

We have also seen, however, indications that additional factors can be involved. National identities of states in the region have been primarily shaped by lowland ethnic groups that have grown to dominate society within each state. The main dominant ethnic groups in areas under this study include the Han in China, the Kinh in Vietnam, the Lao Loum in the Lao PDR, and the Central Thai in Thailand. All states in the region have a relatively recent history of viewing ethnic minority cultures, lifestyles, and livelihood practices as ‘primitive’ and ‘backward’, and all states share a disdain for traditional land management practices that include forms of shifting cultivation. Thus, all have in various ways seen it as their duty to bring ‘civilization’ and ‘modernity’ to mountain minority communities.

Yet at the same time, efforts by minorities to become more integrated into “mainstream” society have often met various forms of discrimination. We have seen examples of how inadequate fluency in dominant languages or dialects can reduce access to higher education, training and some types of employment. Access to social capital assets at different levels of societal organization can also be limited by perceptions that include ethnic discrimination, and this can limit access to financial or other types of livelihood assets. Moreover, we have seen con- Page 278 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region sistent reference to wage rate differentials that place ethnic minorities at lower levels than their ethnic mainstream counterparts.

We can also see, however, that some ethnic minority groups are seeking to ‘reinvent’ their identity in the context of the commercializing and globalizing world. Although tourism is one of the first venues where economic benefits may be seen, minorities must often struggle to participate with dignity and achieve a fair share of the benefits produced. It appears that progress is being made in some areas, however, and that a wider range of other possibilities may be opened if development pursues more place-based or self-determined directions.

While such generalizations appear appropriate across the region, additional aspects of how processes are playing out within individual states are instructive: x Vietnam. The state recognizes that ethnic minorities are primarily located in montane zones, and that these areas have the highest levels of poverty incidence and severity. While there is also now increasing recognition that many past upland and minority policies were based on misunderstanding of upland natural resource capacities and traditional land management practices of mountain minority communities, there is still a general insistence that growing population density requires different practices. There has been a specialized agency to consider issues and policies related to ethnic minorities for many years, but during recent years their emphasis has shifted more toward management of special poverty reduction programs that target poor minority communities. At least at some local levels, impacts of such programs include children of mixed marriages between ethnic minority and Kinh parents increasingly being registered as ethnic minorities in order to gain access to support services provided. There also appears to be substantial representation of minorities in at least local to mid-level leadership positions, and at least evidence from our case study site indicates quite good local working relationships among ethnic groups. x Lao PDR. At the national level, Laos has the largest proportion of ethnic minorities. As in Vietnam, the state recognizes that montane zones are populated primarily by minorities, and this is where the highest rates of poverty incidence and severity are located. In earlier times, most of these areas had relatively weak links with the central government, and some ethnic groups sometimes opposed central government regimes. Recent state policies in Laos, however, have emphasized relocation and consolidation of remote mountain communities into lower elevation road corridors where development programs are focused. One result is a growing number of multi-ethnic villages, although village housing and farm lands are often still clustered by ethnic groups. Social capital at the overall village level is still usually weak in such communities, and other types of livelihood assets have often been weakened or disrupted by relocation and consolidation processes. Local leaders are often from ethnic minority groups, but may be associated with a particular faction more than the overall community. How these processes will continue to play out and drive reshaping of ethnic identities and local politics still remains to be seen in many mountain areas. x Thailand. Policies associated with mountain ethnic minorities in Thailand were for many years focused primarily on opium production, national security, and stopping shifting cultivation. Since most were considered ‘non-Thai’ and not allowed to have citizenship status, their land use claims were basically ignored during establishment of forest reserves and pro- Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 279

tected areas. Seen mainly as a ‘problem’ by central government authorities, mountain ethnic minority groups were lumped together under a term officially translated as ‘hilltribes’, and their official relationships with the state were primarily administered through a special welfare-oriented unit of the Ministry of Interior. During more recent years, a large number of people in minority communities such as those in our case study sites have obtained Thai citizenship. Most of the rest have obtained ‘hilltribe’ identity cards, which still highly restrict mobility, employment, and many rights and privileges, while most of those remaining ‘undocumented’ are recent arrivals fleeing persecution or lack of livelihood opportunities in Myanmar. Those with less than citizenship status make frequent payments to ‘stay out of trouble’. With local governance reforms associated with the 1997 constitution, most communities began participating in ‘normal’ local governance processes associated with elected subdistrict governments (TAO), and now the role of ‘hilltribe’ welfare agencies is being de- emphasized. Local governments in mountain areas still face many extra difficulties, including inability to levy land tax because of the absence of legal tenure. While acceptance by ‘mainstream’ institutions and urbanizing lowland societies is gradually improving and minority voices and leaders are beginning to become part of local governance, there are still usually strong limitations on the types of employment in urban centers open to most minorities, and representation at higher levels of governance or society is still extremely rare. x Yunnan. Within the context of China, Yunnan is recognized as the province with the greatest ethnic diversity. Especially since the 1949 revolution, processes to integrate Yun- nan more fully into national systems have been operated largely by members of the Han majority, including for example, those who relocated to Yunnan to establish state rubber plantations and various state enterprises. Minority communities have always been viewed as members of Yunnan society, however, and expected to implement major government programs. Local leaders from minority communities are common, and some have risen to quite high levels in Yunnan society. With dramatic economic growth based largely on industrialization and urbanization during recent years, substantial numbers of Han have relocated to urban areas or returned to other parts of China to seek attractive livelihood opportunities there. Some minorities are moving to fill vacancies left in some of these institutions, while others are developing production relationships with emerging ‘private’ business operations. While colleagues in Yunnan confirm there are still some linkages between ethnicity and poverty, our assessment of poverty data in chapter 2 indicates such linkages appear to be far weaker than what is found in other countries of the region. In any event, specially funded poverty alleviation programs have been targeting poor areas for more than a decade, and poor households are encouraged to send members to work in urban industries. Moreover, large programs seeking to change land use in upper watersheds have been compensating people dependent on these lands, and ethnic diversity is being celebrated as a central theme in Yunnan’s ‘backbone’ tourist industry, which is among the top 10 favorite domestic destinations for Chinese tourists. If policies on land ownership and migration are indeed modified, it will be instructive to see how this plays out for ethnic minorities, and how well minority migrants will be able to compete in urban labor markets.

While there appears to be progress in reducing discrimination, much remains to be done before these issues are fully addressed. Reforms in governance processes may be able to help. Page 280 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

6.2.5 Governance and subsidiarity

Policies related to governance are also very important for market opportunities and access for poor households and communities in upland areas. Several trends in governance policies have been associated with the various waves of reform that have been sweeping through the region during the last two decades.

But before considering governance policies and on-going types of reforms, we first need to remind ourselves of the hierarchies of administrative systems that currently exist in the region. Thus, Figure 6-3 displays boundaries of sub-national administrative units of all GMS states except Myanmar (for which comparable data is not available) at three increasingly local levels of jurisdiction. Note that since the district is the lowest official level in Laos, it is re- peated at the third level. As these maps help make clear, increasingly more local levels of jurisdiction allow administration to focus on more specific local conditions, priorities and interests, and increase the possibilities for direct participation and voice by local communities and other stakeholders. At the same time, however, processes requiring some form of coordination across broader areas or populations become vastly more complex and challenging.

Figure 6-3. Administrative units in GMS states at three levels

Counties Prefectures Townships

Tambon

Provinces Districts

Communes

(a) Level 1 administrative units (b) Level 2 administrative units (c) Level 3 administrative units

Especially during their collectivization phases, socialist countries placed great emphasis on highly centralized policy formulation and planning processes, under which more local levels of jurisdiction were seen mainly as having responsibility for implementing central policy. And the same was true in Thailand during its early 5-year plans. During the various reform processes of the last 20 years, however, there has been increasing interest in and movement toward increasing roles for more local levels of jurisdiction in governance processes. These changes are associated with polices aimed at two types of change in these processes: Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 281

x Decentralization of administration enables government agencies to implement central policies and programs with more sensitivity to the needs and circumstances at specific localities. In order to benefit from avoiding “one size fits all” types of central policies and programs, however, policies must be designed with sufficient flexibility to allow local adaptation, and with sufficient mechanisms for transparency and accountability to prevent abuse or corruption. Thus, many ministries and their agencies have established offices at provincial, district, or even more local levels, sometimes under authority shared with government leaders at those levels, such as provincial governors or district officers. x Devolution of decision-making takes another step by assigning decision making authority to more local levels. Thus, while central policies may be used to establish a general direction and framework, local jurisdictions would essentially be allowed to establish their own “sub-policies” and plans through their own decision-making processes. This is where the principle of subsidiarity becomes particularly important, wherein various types of decisions are made at the lowest level at which they are appropriate, effective and viable. While examples of real devolution are still relatively rare around the region, local governance reforms in Thailand associated with the 1997 constitution (which was abolished in 2006) were moving in that direction in several areas of management.

But decentralization or devolution of governance does not imply anarchy. Rather, it requires a systems approach, wherein systems of governance and management decision-making and operations are conducted in a more distributed manner. Thus, while more local units of administration and management operate with more independence in many regards, they are still responsible for playing their role as part of a larger system.

One key element in enabling decentralized or devolved systems to function effectively and efficiently is the need for improved approaches and policies for obtaining, maintaining, distributing and using information. While centralized systems have a tendency toward information stockpiling, control and secrecy, this approach is not viable in decentralized or devolved systems. Sufficient quality and flow of information among components is essential. Lack of suitable attitudes, policies and technologies related to information is one of the most important current constraints faced by efforts to decentralize or devolve governance in the region.

A second set of constraints on these efforts centers on inadequate mechanisms for coordination among local jurisdictions, and for providing funding and support for their development and operations. Especially when boundaries and scales of jurisdictions do not match with various problems and/or management needs, systems often fail to provide appropriate management functions. Yet as we saw in chapter 5, interactions and interplay among different spatial and social levels of organization can be very important components of processes of change and development.

Another important dimension of decentralization and devolution policies and issues in the region that is especially important for upland zones and mountainous areas relates to organizational levels, units and mechanisms for improving governance processes related to natural resource management. We have explored the importance of conservation policies in section 6.2.1, including the timber, land resources and environmental services from upland areas that Page 282 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region are highly valued by urbanizing Figure 6-4. River basin & administration hierarchies lowland-oriented national societies. In their search for more Major River Systems International RBOs effective approaches to govern- National Level ance of these natural resources, Regional Level watershed and river basin frameworks are now becoming River Basins Provinces more important. Generic levels of river basin catchments and River Sub-Basins Districts government administration units are compared in Figure 6-4. The rough equivalency among levels Local Sub-districts of the two hierarchies actually sub-watersheds varies quite widely, and general patterns across the region are Catchment levels Administration levels that boundaries of administrative units only occasionally coincide with the ridge-based boundaries of river basins and watersheds. Thus, many natural resource management issues that require coordination at the level of natural units such as watersheds are proving very difficult to manage through conventional administrative hierarchies, and decentralization or devolution can make various issues even more complex and difficult to resolve.

Thus, countries like the Lao PDR and Thailand have already introduced polices that establish “official” boundaries at both river basin and sub-basin levels. These river basins are most all sub-units of the major river systems discussed and mapped in chapter one. National-level initiatives in Thailand have established river basin organizations (RBOs) in all 25 of its official river basins, and both countries are experimenting with pilot programs to develop management organizations at sub-basin, and less formally at even more local sub-watershed levels that are within domains where local communities, organizations and networks can at least in principle play a much more active role.

One of the major issue these types of initiatives face relates to “identity” and “turf” struggles in relation to other groups, organizations and institutions, and especially those that are part of the government administrative structures whose jurisdictions already blanket the entire country. Thus, while additional hierarchies such as those based on natural units such as water catchments may appear to have promising roles to play in decentralization and/or devolution of various aspects of resource governance, their development can be expected to be a long-term and quite complex process [Lebel et al. 2008; Lebel et al. 2005; Thomas 2005, 2006]. The same would, of course, also be true of other types of units that might be promoted as a basis for decentralization or devolution of governance functions, such as production zones, market service areas, etc.

Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 283

6.3 Policy issues and impacts at case study sites

Since we have already presented considerable discussion related to policy issues and impacts of change in state policies at our case study sites, our discussion in this section summarizes some of the main points discussed in more detail in other sections of this report.

6.3.1 Land use policies

In our discussion of land use policies for mountain zones of the region in section 6.2.1, we have already summarized major policies related to land use at national levels. Thus, the following points about land use policy impacts at study site areas are made in the context of national policy approaches and history within each country.

In Yunnan, vegetable producers at our study site have shown how they are adapting to higher level policies regarding land allocation and ownership, by actively engaging in land rental arrangements and contract farming. We have also seen, however, how higher level policies encourage development of private sector production systems on one hand, but still emphasize government planning and crop production campaigns on the other. Moreover, elimination of state taxes on products produced though private systems, has perhaps inadvertently set up incentives for local governments and state agencies to campaign more aggressively for production of crops under their planning and management domain that can still yield taxes, and thus revenues for their own continued operations. Thus, local farmers appear to be caught in the middle of competing production systems.

In Vietnam, evidence from our case study site has clearly indicated how state land allocation policies that provided households with agricultural land backed by “red book” certificates, played a key role in providing a basis for development of tea production and a surge in local development more generally. Moreover, prospects for further development of livelihood opportunities are promising in relation to “safe” tea production and related activities in forest lands that have been allocated and backed by “green book” certificates. Their location in the “buffer zone” of a protected forest area reinforces some of these directions.

In Thailand, we have see how livelihoods and agricultural production in upland areas continue to evolve in a context where local land use security is based almost entirely on informal patron-client relationships that can help shield or adapt local impacts of high-level land use polices. Official policies focus primarily on expanding exclusion of local mountain communities from protected forests and watersheds, and increasing restrictions on their livelihood production systems. For areas outside of areas shielded by patrons, various important actors seek to effectively limit communities to marginal subsistence scenarios. We have seen how these pressures have helped shape livelihood opportunities and responses in upland areas such as Mae Wang, Mae Chaem and Omkoi, where uncertainty and anxiety levels can run high, yet communities adapt and forge ahead, increasingly in partnership with various levels of private sector enterprise.

Page 284 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

In the Lao PDR, we have seen how national land use policies emphasize orderly transition to more “rationalized” landscape configurations, which are to be based in village domains where participatory land use planning and land allocation processes have been conducted. Mean- while, however, the increased market value of natural rubber has created a boom in rubber production that is spreading across the country. As a result, upland rice fields and fallow lands, particularly those near roads, are rapidly being converted into rubber plantations by smallholders and companies alike. Among smallholders, those with sufficient capital and labor are often the first to make claims to lands by planting rubber, as formal titles under village land allocation programs have not yet been issued. In their case study of Sing district in Luang Namtha Province, Thongmanivong and Vongvisouk [2006] indicate that early settlers have greater access to agricultural land, including rubber fields, while recent migrants who have been induced to relocate from more remote areas have limited access to agricultural lands. At the same time, the still ambiguous status of communal lands is becoming a source of conflict as investors seek concessions to land on which villages claim customary rights, but which may not be formally registered as being within the village boundary under their land allocation scheme [Mahaphonh et al. 2007, Seidel et al. 2007, Vongkhamhor et al. 2007].

6.3.2 Trade policies: uncertainties and new opportunities

We have already seen in section 6.2.2 some of the impacts of market integration and trade agreements in North Thailand, in terms of increasing competition and comparative advantage factors, and how they are affecting different types of livelihoods associated with resource and investment configurations in various lowland and upland areas of the UPB. Shifts in international trade policies inevitably result in ‘winners’ who benefit from new production and trade opportunities, as well as ‘losers’ whose livelihoods suffer as a result of competition from distant areas with a comparative advantage in production. The current situation in the UPB has all of these characteristics, including the uncertainties, anxieties and adjustment difficulties that are part of the package.

At sites in the Lao PDR, the situation is a bit different. Since rural mountain areas in North Laos have had much less previous experience with production for commercial markets, competitive impacts from expansion of rubber production are being largely felt by those engaged in production of NTFPs and subsistence crops in terms of competition for land. Moreover, with growth of demand for rubber in China exceeding its production capacity, expansion in Laos is not linked with decline elsewhere, at least under current market conditions. Of course the growing prominence of rubber may also bring greater dependence and vulnerabilities associated with uncertainties about the future of rubber markets and production elsewhere.

At our study site in Vietnam, we saw in section 3.2.2 how national policies that include membership in the World Trade Organization (WTO) have begun shifting the context of tea production. This is resulting in changing product price structures and quality standards that are bringing strong incentives to improve tea quality, productivity, and competitiveness. While this is bringing adjustment difficulties form many, and especially poorer tea producing households, it is also leading to experimenting with production of “safe” tea and better brand identity. We see parallels in promotion of shade grown coffee in Omkoi in North Thailand, and in growing interest in “green” markets generally around mountain zones of the region. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 285

Our explorations of alternative future scenarios in chapter 5 also indicate plausible alternative visions of the future include various elements of pro-free trade and anti-free trade policy. Thus, while uncertainty is already growing about what will happen under emerging trade agreements, both in the near term and in the longer term, there is also some uncertainty about how strongly future policy directions will support further expansion of free trade.

6.3.3 Emergence of private extension services and business strategies

We have already seen trends toward production of new crops in both lowland and upland zones in North Thailand. In introducing new crops and methods for growing them, it is often necessary to have some extension staff with detailed knowledge of cultivation methods to work with farmers. Government extension officers often do not know details about new crops, and are now usually busy working with data collection and compilation for their agencies. As a consequence, they have neither the knowledge nor the time to provide support services for farmers investing in new crops.

Lessons from case studies in North Thailand reveal that extension services for new crops have most frequently been provided by private companies that also deal with the marketing of those crops. This is true in Mae Wang, Mae Chaem and the Royal Projects, where techniques for cultivating sweet corn, hybrid corn seeds, temperate fruits, vegetables and flowers had to be provided by relevant company or development project extension agents. It is also true in Omkoi, where a private company is providing extension services for coffee production by building on expertise and extension experience developed under the Royal Project.

Moreover, as many new crops are grown in highland areas, policies of the Thai government preclude provision of public agricultural extension services. Agricultural activities in forest lands or highland zones are in principle not encouraged, and thus lie outside the jurisdiction of the Department of Agricultural Extension. This policy leaves the poor in upland/highland areas excluded from access to agricultural knowledge via public channels. Thus, private extension services for specific crops are emerging to meet local needs and fill this gap in current production chains.

In northern Lao PDR, a study of smallholder rubber conducted by NAFRI [Vongkhamhor et al. 2007] indicates that farmers planting rubber are mainly learning their approaches and practices for planting rubber through informal social networks (such as relatives or other villagers), because there are no formal extension services related to rubber production that are offered through agencies of the Ministry of Agriculture and Forestry. In addition to informal social networks, other sources of extension services for rubber production are beginning to be provided by private companies engaged in contract farming and concession operations.

In Yunnan, vegetable growers are producing new crops using comprehensive production systems introduced by the private sector through their “company + household” pattern supported by vegetable traders from outside local areas. While higher levels of government encourage such approaches, we saw in section 3.3.3 how local government officials sometimes Page 286 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region see private systems as competing with government agricultural planning and promotion campaigns, which can result in conflict and problems for both companies and local growers.

Business strategies We can see in these examples from various countries that production conducted in association with private business is conceived and operated as part of an overall business strategy of the private firms. As these examples suggest, apart from access to extension services and financing, competitiveness of upland farming could be strengthened with improved business strategies that allow producers to function effectively and efficiently in the context of increasingly integrated and globalizing economic systems.

Such business strategies have been lacking in many upland development programs. In Teng- chong County of western Yunnan, for example, farmers have adapted to new market opportunities by planting higher value crops and trees like Chinese fir despite challenges to ecological sustainability because of the much better returns-to-labor [Shiro et al. 2007]. Here and elsewhere, insufficient attention has been given to possibilities of value-added processing opportunities for higher value crops like and what technical and business training is needed to develop such local business capacities.

But in the case of tea and coffee, there are some interesting experiences in Vietnam and Thai- land. We saw in section 3.3.3 how coffee production now appears to be re-emerging in Om Koi district of North Thailand after its unsuccessful promotion during earlier decades. The main difference is that the new approach centers on a carefully considered business strategy initially formulated by a private business firm that is being further developed and elaborated in collaboration with local communities and agency stakeholders in the area. In the case of tea production at our study sites in Dai Tu district in North Vietnam, we have seen in several sections of this report how more successful tea producing households are able to obtain higher prices and capture more value added by employing strategies that improve the quality and extend the processing of their products. This is seen as very important as the tea market is reshaped by free trade agreements. Several interests are now joining together to explore production of higher value “safe tea”.

And even in the context of the special-status Royal Project in North Thailand, much of its success as a business operation has been due to its attention to development of a vertically integrated operation from smallholder production to retail marketing, and to the collaborative assistance it has received from private business. This has enabled it to effectively produce and market suites of products that shift by season and market demand. We have also seen that even in highland vegetable production areas outside of the Royal Project domain, more successful smallholder household operations often group together in producing a changing array of crops that responds to market prices and local environmental comparative advantage, as well as in developing their own capacity to transport their products to various markets.

It remains a major challenge across the region to formulate and implement policies that can further stimulate and support such smallholder-based business strategies in upland areas. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 287

6.3.4 Access to financial capital

Previous chapters provide substantial evidence that access to financial capital through credit is an increasingly important issue for mountain livelihood systems as they become more commercialized and integrated into larger economic systems. Credit is especially important for households in poor and medium wealth categories, who lack savings or other types of livelihood assets that can be readily converted into financial assets when needs arise. Moreover, credit for production costs is a common component of commercial production systems of all types and at all levels and scales of production. Thus, policies that seek to improve access to credit are often an important component of rural development programs.

At our study sites in Yunnan and the Lao PDR, primary sources of financial capital for new commercial production activities are from household savings or through contract farming. Households who develop commercial production operations independently are usually those from relatively higher wealth categories who have accumulated savings in various other types of livelihood assets that can be converted to financial capital. But for those in medium or poorer wealth categories, the most active channel we have found has been contract farming arrangements with companies through which products will be marketed. Thus, we found “company + household” arrangements in Yunnan, and the “2 + 3” arrangements in Laos, both of which recognize the role of credit as part of partnerships with private companies.

Experiments with credit in Thailand At UPB case study sites in Mae Wang and Mae Chaem, we found that when farm households face financial difficulties in addressing their livelihood problems, most households in both will borrow money (Table 6-1). Households in the medium wealth category tend to borrow slightly more than poor households, whereas poor households will seek wage employment to a larger extent. Overall, a substantial majority of farmers in Mae Wang and Mae Chaem report having problems with capital availability (Table 6-2). Poor households experience such problems more than medium or well-off households, with about 90 per cent of the poor reporting problems with financial capital. When it comes to borrowing, however, medium wealth households tend to borrow to a larger extent than poor or well-off households, especially in Mae Wang. The poor in Mae Wang report that they cannot borrow or cannot borrow very much because they do not have adequate means to repay the loan. Only 70 per cent of poor households borrowed in Mae Wang, as compared to 97 percent of the poor in Mae Chaem, and the well-off in Mae Chaem also borrow more than their counterparts in Mae Wang. Indeed, borrowing seems to be a popular adaptive strategy for all wealth groups in Mae Chaem, where the poor seem to have better credit access.

Policy-related measures that appear to have helped poorer farmers include those that have improved availability of credit at cheap prices, such as from village funds or from the Bank for Agriculture and Agricultural Cooperatives (BAAC). Credit sources at study sites include:

x Banks. BAAC, the bank for agricultural credit in Thailand, was founded in 1966 and is operated as a state enterprise. It has been very successful in providing credit to millions of farmers. In its initial phrase, it needed government support in designing regulations fa- Page 288 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

vorable to its operations, such as a requirement for commercial banks to provide a fixed percentage of credit going to agriculture, which provided funding to BAAC from commercial banks. The BAAC is now more independent from commercial banks, and operates on funding and borrowing from the Ministry of Finance, overseas sources, and shares and savings from the general public [BAAC 2005]. It has gained a reputation of being a financially healthy public enterprise that can operate without much subsidy from the government. In 2005, BAAC provided 239 billion baht in credit to 5.5 million households, and in North Thailand, BAAC loans to farmers and agricultural cooperatives increased from 31 billion baht in 2001 to 70 billion baht in 2005. Repayment rates have been good, but many farmers must borrow from other sources to try to repay their loans. Our study site interviews indicate current interest rates from loans obtained directly from the BAAC are about 6 percent per year, while interest on loans from cooperatives, which also obtain their funds from the BAAC, is currently about 12 percent per year.

Table 6-1. Adaptive financial strategies of households in Mae Wang & Mae Chaem Household wealth category Poor Medium Well-off ------% of the group------In times of financial difficulties, households would: x Borrow money 60 67 55 x Seek wage labor employment 39 20 - x Seek forest products 429 x Other means (sell assets, find 62 - other occupations) No financial difficulties 0 0 27 Could not specify 8 11 9 Source: field survey, 2006 Table 6-2. Capital availability problems, borrowing & loan sources, Mae Wang & Mae Chaem Household wealth category Poor Medium Well-off Overall ------% of the group------Do you have problems concerning financial capital? Yes Mae Wang 90 46 0 67 Mae Chaem 88 75 63 79 Do you borrow money? Yes Mae Wang 70 100 67 81 Mae Chaem 97 94 88 94 Where do you borrow from? BAAC Mae Wang 50 69 33 56 Mae Chaem 19 59 63 42 Cooperatives Mae Wang 15 8 33 14 Mae Chaem 28 25 38 28 Village funds Mae Wang 35 46 33 39 Mae Chaem 84 81 88 83 Saving groups Mae Wang 20 8 0 14 Mae Chaem 6 9 0 7 Relatives Mae Wang 10 8 0 8 Mae Chaem 13 6 0 8 Merchants Mae Wang 0 8 0 3 Mae Chaem 0 0 0 0 Source: field survey, 2006 Loans obtained directly from the BAAC are widely reported at study sites in both Mae Wang and Mae Chaem, and are the most prominent source of credit in Mae Wang (Ta- ble 6-2). Evidence indicates that BAAC can provide a larger loan over a longer term than Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 289

cooperatives, village funds or savings fund. Some farmers can obtain 5-10 year loans from BAAC for livestock and fruit orchards. Farmers with land or property that can be used as collateral can obtain 100,000-150,000 baht loans. Those who have no collateral, such as farmers in Mae Chaem with no official land documents, can still borrow through group lending. A group of 10-15 BAAC members can borrow approximately 50,000 baht each under a 1-year short-term loan based on a guarantee by the group to repay amounts on which any group member may default. In Mae Chaem, BAAC loans are more accessible by well-off and medium farmers, who usually have better social capital, whereas less than 20 percent of the poor reported BAAC loans. In Mae Wang, where more households have land documents, 69 percent of medium and 50 percent of poor farmers reported BAAC loans. Well-off farmers borrow less from BAAC in Mae Wang as they may not need loans. Cooperatives have a smaller role in providing credit at both sites, but are more prominent in Mae Chaem, where they provide loans to more poor households than more direct BAAC channels.

x Village funds. Access to credit by poor households has been improving. Since 2001, the Thai government initiated a popular credit policy called the “1 million” village fund program, under which one million baht was provided by the government to every village. This policy was implemented nation-wide and benefited millions of farmers during 2002-2006. Unlike other credit programs, village funds are managed by villagers themselves, under a village committee set up to oversee use of the fund. Typically, the fund was divided among those who wanted to borrow. On average, the 1 million baht would allow some 50 households to borrow about 20,000 baht each, but local variations in details were designed by village fund committees. Normally, the villagers could borrow some 15,000-20,000 baht to be repaid in a year along with 6 percent interest. At our case study sites, village funds have been an important source of credit in Mae Wang and especially in Mae Chaem, where more than 80 percent of households in all wealth categories reported loans from this source (Table 6-2). Interviews indicate the village committee would assess villagers’ ability to repay before making a loan, so that some poor households would be able to borrow only a half or a quarter of the amount loaned to medium to well-off households. As this fund was a one-time allocation by the government, most village fund committees tried to make sure loans are repaid by fellow villagers. Contrary to claims by government critics, village funds in our study sites appear quite successful and repayment rates have been good, although there are selected cases of loan defaults. The majority of farmers surveyed in Mae Wang and Mae Chaem report they could repay, although sometimes not on schedule and with various difficulties.

x Savings groups. Establishment of local savings groups has been encouraged by various government agencies and non-governmental organizations. Farmers in our Mae Wang and Mae Chaem study sites also have various savings groups, such as pig-raising groups, fertilizer groups, crop savings groups, and housewives’ groups. After a period of savings, members can borrow from these savings group at low interest rates. Amounts of loans that can be obtained from these savings groups are usually quite small, and all are made to households in poor to medium wealth categories. Savings groups are generally more active in Mae Wang than in Mae Chaem (Table 6-2).

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x Informal sources. Informal credit from relatives, neighbors and merchants has been decreasing in importance over the years. Interest rates from these sources vary from 0 percent to 60 percent per year. At our study sites, loans from relatives were reported by about 10 percent of poor households, and a smaller proportion of medium households. Loans from merchants were only reported by 8 percent of medium households in Mae Wang (Table 6-2). No well-off households reported loans from these types of sources.

Credit for the poor in Vietnam Various government programs seek to develop human capital and improve access to financial capital for highlanders in Vietnam. National programs that began in 1998 under the banner of Hunger Eradication and Poverty Reduction (HEPR) have included components seeking to promote various aspects of development in communes classified as poor, and especially those considered to have “extreme difficulties”, many of which are in mountain areas and include ethnic minority populations.

At our study site, for example, Hoang Nong commune has been receiving support since 2005 from program 135 for “Poor Communes with Extreme Difficulties in Mountainous and Remote Areas (PCED)”, which operates under the national Committee for Ethnic Minori- ties. In addition to providing health insurance and schools, funds have also been used to support efforts by poor farmers to develop their livestock (focus on raising cattle), to improve tea processing (purchasing processing equipment), and to pay school fees for their children. Sup- port provides about 80 percent of total costs, while farmers pay 20 percent themselves.

In addition to poverty reduction programs, however, many farmers try to obtain credit from institutional sources in order to invest in their farm production activities. The most common uses of credit for tea production are to buy pesticides, to process tea, or to buy a new machine for processing (see Table 4-17). But the biggest loans are taken for buying seeds and fertilizer for tea, which accounts for nearly 50 percent of total credit for tea. Sources of credit are often banks, but friends and relatives also can help if amounts needed are not too much (Table 6-3). Government policies directly related to providing credit in rural areas are primarily focused on two major institutions: x The Vietnam Bank for Agriculture and Rural Development (VBARD) is a common source of credit for all wealth groups. Also known as AgriBank, VBARD was established in 1988 as commercial banking was reintroduced to Vietnam under Doi Moi reforms. Today, the bank offers a range of credit programs. Households at our case study sites are able to use their “red book” land use rights for collateral in mortgaging their land to obtain loans from VBARD. While the interest rate is the same for all groups, medium and better-off households on average are able to obtain larger loans. Some other banks give still larger loans, but most banks have a current interest rate around 1.0 percent per year. x The Vietnam Bank for Social Policy (VBSP) has been operating since 2003 as an independent bank to extend loans for production, business, job creation and living standard improvements that contribute to meeting targets of national programs on poverty reduction and social stability. Loans to poor households and for job creation account for more than 90 percent of its outstanding loans. Various relatively poor households at our study Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 291

sites report borrowing from VBSP at low interest rates for the poor (0.6 percent). Loans from this source are smaller loans, however, which may be why few medium and no relatively better-off farmers use it.

Table 6-3. Credit amounts and interest rates for purposes other than tea production by source Bank for Bank for Friends, Other Borrowing source Agriculture Social Relatives Banks and RD policy Amount Poor with tea land (n=8) 1,500 1,250 1,833 (1000 VND) Amount Poor without land for tea (n=3) 2,000 300 5,000 (1000 VND) Amount Medium with tea land (n=20) 2,333 1,000 2,000 5,500 (1000 VND) Amount Medium without land for tea (n=2) 5,000 4,000 (1000 VND) Amount Better-off with tea land (n=3) 6,000 3,000 (1000 VND) Amount Average 3,367 850 1,917 4,375 (1000 VND) nterest Rate Cost 1.0 0.6 0.0 1.0 year Source: Structured questionnaires for 200 households, 2005

There are also many programs for subsidized seeds or breeds for farmers. Most of these programs are regional, and rural and mountainous areas are often assigned high priority as they are found to be the poorest. National programs include animal breeding and subsidized seed import and multiplication, together with an extension program where seed prices are subsidized (60 percent in mountainous areas and 40 percent in plains areas). Many farmers have subsidized seeds, irrigation, fertilizers and electricity. Loans with preferential interest rates can also be taken by farmers, with 30 percent lower interest rates for farmers in mountainous areas or on islands or belonging to Khmer minorities [Nguyen & Grote, 2004].

6.3.5 Education and access to opportunities

Across most all of our study sites, we have been repeatedly impressed by levels of interest and investment in education for children of farm households. And, although current educational levels are often higher for households in medium to relatively well-off wealth categories, even poor households appear to be investing heavily, both in terms of financial costs and the opportunity costs of labor that might otherwise be contributing to household livelihood production activities. Thus, policies that improve access to higher quality education in rural upland areas appear to receive strong support and response from local communities.

While reasons for investing in education may vary somewhat among households and across societies, there are also some very commonly encountered themes. The most prominent theme is that education can bring access to better livelihood opportunities. What those opportunities are and where they are located can also vary, but they are very often seen as lying outside of agriculture, and not uncommonly in often distant urban centers. This is perhaps most obvious in China, where poverty alleviation policies actually strongly encourage some members of poor households to go work in industrial urban centers and remit part of their Page 292 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region earnings to help lift their rural families out of poverty. But it is also a common theme in Vietnam and Thailand, where more certain and higher levels of prosperity are seen by rural households as lying outside of the demanding but uncertain and poorly rewarded world of agriculture. Additional common themes for parents include better social standing in their communities and more likelihood of security in their old age.

Role of education in opportunities and access in uplands of the UPB Our investigations in Mae Wang and Mae Chaem watersheds included a component that focused on the importance of education. Nearly all household interviews confirmed that education is important for providing opportunities and access to better paid jobs and occupation. Only 2 per cent of farmers reported that higher education was not desirable because they needed labor on the farm, or that higher education made their children leave their home and local community. Another 2 per cent reported that they wanted their children to have higher education, but do not have the means to do so. All the rest (96 percent) reported that they view education as important to very important, and that they want to send their children to achieve the highest level of education that is possible for them.

Most households say that higher education for their children will enable them to engage in other occupations that are better than farming—which is hard work and has high risks. Households with more highly educated members receive more respect from others in the community, while at the same time having more means and better access to knowledge, income and wealth. Table 4-10 in Section 4.3.2 reveals that while education of the household head is about 4-6 years (primary education), education of their children is about 9-10 years (secondary education). In well-off households in Mae Wang, most children have tertiary education. Moreover, most households want to see their children working in occupation where regular salary can be earned. In Mae Chaem and Mae Wang watersheds, young men and women with 12-16 years of education obtain work in companies, government service, factories and other non-farm employment. Education is viewed by farmers as a way to escape poverty and hard work. Some also say they send their children for higher education in order for their children to have higher income and thus be able to support their parents when they get old. Thus, the future of farming is uncertain as these children are not expected to come back to work on their parents’ farm.

In 1996, the Thai government initiated a student loan programs called Kor Yor Sor, under which students of poor households can borrow to pay for their studies. After finishing their studies, they are required to pay the cost of their education back to the government in in- stallments with an interest rate of 1% per year over a term of 17 years. This program has enabled poor students to access higher education at both secondary and tertiary levels, and by 2006 it had dispersed some 200 billion baht to students. While the program has had a reasonable degree of success, the default rate has nevertheless been high (around 30 per cent) [Pakapat, no date]. Therefore, the Thai government readjusted this program in 2006 to reduce the subsidy rate and increase efficiency of the program. The new program is called “In- come Contingent Loan” (ICL), and unlike the earlier loan program, ICL is not subject to poverty criteria, but rather to the cost criteria of higher education. It remains to be seen how successful this program will be. Nevertheless, the two student loan programs (Kor Yor Sor Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 293 and ICL) have undoubtedly enabled many poor students to have access to higher education. And the continuing popularity of such programs in rural lowland and upland communities indicates motivations for education and movement out of agricultural occupations remains strong. This is consistent with data presented earlier in Table 3-1 that shows consistent movement out of agriculture into industrial and especially service sectors across the region.

6.3.6 Experiments with local resource governance

Previous sections underscore the complexities and uncertainties associated with growing concentration on conservation policies in the uplands, as well as with commercialization of agriculture and the impacts of economic and trade policies on competitiveness and the role of comparative advantage. We have also seen that given the uncertainties that they face, many upland households are borrowing funds and making investments both to be able to survive and hopefully prosper under changing production and market conditions, and at the same time to enable the next generation to escape the difficulties of rural life in the uplands for the perceived better future they may be able to build in other economic sectors and locations.

At the same time, however, various policies across the region are aimed at improving rural life and livelihoods, and the ability of rural upland communities to derive benefits from participating more fully in economic and social change without having to permanently migrate to lowland urban centers. In order for this to happen, however, ways need to be found to stimulate and support local innovation, creativity and entrepreneurship in identifying and addressing local problems, and in building more productive, equitable, healthy, reliable and sustainable livelihoods and social and biophysical environments.

Decentralization and devolution of resource governance institutions appears to be a quite fundamental aspect of what is required to achieve such goals. But in order to be effective, these approaches require considerable amounts of restructuring of a range of associated policies, organizations, attitudes and institutional arrangements. This will not be easy.

Sub-basin management organizations in the Ping River Basin Complementary studies and activities conducted in parallel with this project included collaboration with a pilot project managed by the Office of Natural Resources and Environ- mental Policy and Planning (ONEP) in Thailand, directed at exploring development of river sub-basin management organizations in the Ping River Basin. Detailed context and findings of studies and pilot project results have been reported elsewhere [Thomas 2005, 2006].

The key issues driving these efforts centered on parallel trends under policies associated with the 1997 constitution that supported decentralization of government administration, as well as devolution of numerous governance functions to much more local levels of social organization in the country. Change related to most governance functions focused on the hierarchy of administration levels that range from national to local sub-district (tambon) levels. But difficulties were encountered in relation to especially natural resource management, which includes water, agricultural land and forest lands, as well as pollution and other factors with impacts on environmental quality and public health. Some saw growing polarization between Page 294 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region local institutions focused Figure 6-5. Location & administration context of Ping River Basin on livelihood improve- Ping Basin Sub-basins ments on one side, and Chiangmai NO NE higher level agencies more Chiang Mai Ping CE concerned about conserva- Ping E Vientiane tion on the other side. In Vientiane Chao Phraya River System response to these issues, SO Districts efforts had been underway Regions Sub-basins for some years to establish Sub-basins river basin management ChaoChao Phraya organizations (RBOs) that Phraya could help manage natural resource and environment- BangkokBangkok al issues in units that corresponded to the Provinces Tambons physical realities and Source: after Thomas 2007 boundaries of natural resources. Such efforts were drawing criticism, however, because many perceived that they focused on very large areas and top-down types of organization, and appeared to be trying to displace or compete with more local governance institutions that were elected by local populations. The location and administrative context of the Ping River Basin is displayed in Figure 6-5.

In order to better address such issues, various leaders both within and beyond Figure 6-6. Spatial scales of Ping Basin hierarchies the Ping River Basin proposed that 1,000,000 National Level Chao Phraya River System organizational efforts explore other levels 100,000 Northern Region of river basin watershed hierarchies. As Ping River Basin 10,000 Ping Provinces indicated in Figure 6-6, spatial scales of Area 1,000 catchment unit and administration unit (sq km) Ping Sub-basins Ping Districts hierarchies help suggest levels at which 100 Local sub- Ping watersheds Tambons various cross-linkages may be especially 10 important and appropriate. At the levels 1 of the Chao Phraya river system, or even Catchment units Administration units the overall Ping River Basin, linkages with Source: Thomas 2005 national to provincial levels of administration appear appropriate and logical. At the level of locally-elected sub-district governments, on the other hand, it may be most appropriate for them to work with various local sub-watershed levels within their domain, where many local groups have already been taking their own initiatives in many areas. Indeed, this assessment helped make it clear that the sub-basin level of organization may be the level that can offer the most “value added” by providing a venue where more local institutions and groups can join together in efforts to address issues that are larger than what they can manage themselves, while at the same time providing “middle ground” where local groups and initiatives based in “bottom-up” processes can interface with “top-down” agencies and wider societies. Together, they could form a system through which more suitable approaches could be nego- tiated and implemented to meet both “upstream” and “downstream” needs and concerns.

Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 295

Thus, an “official” set of sub-basin boundaries were authorized by the Ministry of Natural Resources and Environment (Figure 6-7), which project studies suggested should be grouped into upper, middle, and lower categories that reflected real differences in their characteristics [Thomas 2005]. One pilot sub-basin was selected within each of these groups for further efforts in developing sub-basin Figure 6-7. Official sub-basins of the Ping River Basin organizational and planning processes.

Considerable debate then arose over what would be the most appropriate form that sub-basin management organizations should take. Based on review of experience at international and Ping River Basin levels, several aspects of organizational structure and operations were proposed for priority consideration in developing models of organization for river sub- basin management organizations (RSBOs) [Thomas 2005]. Particular emphasis was on: 1) the scope of the RSBO mandate, which reflects how integrated activities are intended to be; 2) the duties and roles of organization in managing sub-basin natural resources and environment; Source: after Thomas 2005 3) the main sources of the organization’s authority; 4) the range of stakeholder groups represented in the organization, and the manner in which representatives are selected; 5) key leadership positions, source of candidates and selection procedure; 6) primary organizational linkages at higher and lower levels of organizational hierarchies; and 7) main potential sources of funding to support the organization and its activities.

While various options exist under each of these considerations, they tend to ‘cluster’ around alternatives that are internally consistent and able to support viable RSBO structures and functions. To help clarify how different compatible combinations can provide a set of realistic alternative structures for RSBOs, five alternative organizational models were described to represent variations under three generic types of organization (Box 6-1). In order to facilitate sub-basin stakeholder discussion and consideration of these alternatives in the context of conditions in different sub-basins, a comparison chart of the major structural characteristics of each type of model was also developed (Figure 6-8). Stakeholders within pilot sub-basins then explored these alternatives and what would be most appropriate in their local context. Page 296 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Box 6-1. Organizational Models for Ping River Sub-Basins A. Government-oriented organizations. These models continue past trends toward establishing RBOs through central government initiative aimed mainly at improving government programs. xType 1: Focused government model. The main objective under this model is to assist and improve programs of the lead ministry. Emphasis is on improving efficiency and effectiveness of using institutional arrangements under a single ministry to implement activities within its mandate. It would move beyond ‘business as usual’ to provide real coordination among departments, clearer ministry- wide policies and roles for local organizations and communities, reduced confusion, and improved implementation and enforcement. xType 2: Broader government model. The main emphasis under this model is still on efficiency and effectiveness in using government institutional arrangements and mechanisms, but the scope is broadened to include activities within the mandates of multiple ministries. Given the difficulties in coordination among ministries at high levels, provincial local administration hierarchies are brought in as a partner to assist with coordination and integration of plans at more local levels.

B. Multi-level partnerships. These models employ multi-level partnerships to establish the sub-basin level as the primary venue for an interface between top-down and bottom-up processes. xType 3: Central–local partnership model. Emphasis under this model is on creating a real partnership among groups and organisations from central to local levels, but with a degree of asymmetry that assigns somewhat greater weight to central and provincial government agencies. Primary coordination and integration functions are shifted to provincial and local levels, and implementation plans are integrated into regular development planning processes. This model represents a context where central ministries reach downward in administrative and natural resource hierarchies to form real partnerships with local agencies, local governments, civil society and other stakeholder groups. While the ministry and province administrations still provide a degree of leadership, this model encourages and requires much more active local participation and decision-making. xType 4: Local–central partnership model. Under this model, emphasis is also on creating a real partnership among groups and organizations from central to local levels, but with a degree of asymmetry that assigns somewhat greater weight to local government and civil society groups and institutions. Thus, this model represents a context where local governments and organizations organize and reach upward to form partnerships with provinces, central agencies under relevant ministries, and other stakeholder groups. Its structure helps reduce threats of government domination, but requires strong local leadership, participation, and initiative.

C. Non-government alternatives. This model views the sub-basin organization as a further extension of bottom-up non-governmental processes. xType 5: Local non-governmental model. The main emphasis of this model is on effectiveness in mobilizing non-governmental groups and civil society institutions to formulate, advocate and monitor activities within the mandate of the sub-basin organization. This model represents a context where local non-government groups and organizations lead efforts to organize themselves into an independent organization outside the government sphere, and to conduct independent analyses, planning and monitoring activities that advise and assist local government, provinces and central agencies. They also emphasise strong efforts to raise public awareness, support and pressure for integrating improvements into relevant decisions in the policy arena. Source: Thomas 2005 Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 297

Figure 6-8. Comparison chart of characteristics of alternative forms of organization for Ping River sub-basin organizations Government-Oriented Multi-Level Partnerships Non-Government Focused Government Broader Government Central-Local Partners Local-Central Partners Local Non-Government ScopeofMandate water resource use X X X X X forest lands X X X X X agriculture land use X X X X pollution X X X X X solid waste / trash X X X X X health X X X X education X X X infrastructure X X X livelihoods X X X Duties identify & analyze problems assistance assistance lead lead lead planning assistance assistance lead lead lead / advise implementation advise advise advise / assist advise implementation monitoring advise advise assist advise environmental monitoring assistance assistance lead lead advise / assist impact monitoring advise lead lead lead / assist Main authority sources ministry ministries - prov min - prov - local govt local govt - prov - min Local govt advisor / public Representation ministries MoNRE agencies MoNRE, agric, health MoNRE, other relevant MoNRE, other relevant invited advisors province / district Prov - Dist Officers* Prov - Dist Officers* Prov - Dist Officers* Prov - Dist Officers* invited advisors local government TAOs - municipalities TAOs - municipalities TAOs - municipalities TAOs - municipalities invited advisors business / industry selected selected invited / voted voted / group-selected voted / group-selected livelihood groups selected selected invited / voted voted / group-selected voted / group-selected civil society selected invited / voted voted / group-selected voted / group-selected local communities selected PYB selected + PYB invited / voted voted / group-selected voted / group-selected Leadership chairman / deputies Officials Officials voted voted voted local non-gov Secretariat Officials Officials officials / voted voted voted Technical info/advice Officials Officials / consult gov / acad / non-govt gov / acad / non-govt gov / acad / non-govt Primary Linkages Upward Ministry PingRB / Ministries PingRB / Prov / Min PingRB / Prov / Min PingRB / networks Downward Min units / District Districts / Local govt Districts / Local govt Local govt / Networks Networks / local govt Main funding sources MoNRE Ministries Min / Prov / Local govt Local govt / Prov / Min / non-gov Local govt / grants / non-gov * can also include kamnan and village headmen source: Thomas 2005 Page 298 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Many lessons were learned from this and other components of project activities in pilot sub- basins [Thomas 2006]. Overall, local leaders and communities in both lowland and upland areas expressed very strong interest in becoming involved with sub-basin management efforts, and most appear to understand quite clearly most of the issues related to interactions among livelihoods, natural resources, public health, pollution and the environment more generally. While there are some substantial differences of opinion among different upland and lowland stakeholders, most feel there is an important need for processes that can improve mutual understanding of their needs and concerns, and for negotiation processes that can help achieve more equitable outcomes. Furthermore, most all agree sub-basin processes will need to build upon existing local organizations and institutions, including informal groups and local networks, and to collaborate with local governments rather than try to compete with them. No one wants another competing level of bureaucracy.

It is also evident that there are substantial differences among sub-basins in social relationships and local approaches to organization, including their perceptions of the best balance between local initiative and agency initiative. Especially in sub-basins dominated by upland conditions, local groups and leaders have very strong desire to have more voice in policy matters, including more responsibility and authority in natural resource governance. Similar feelings are expressed in areas near Chiang Mai urban centers, but since issues are seen as more complex and social organization is more difficult, they see a need for more balanced partnerships with various central agencies, at least until sub-basin organization can build strong support among the complex range of stakeholders. In lower Ping sub-basins, where relationships with Central Thai culture are most strong, however, government agency initiative and styles of organization are more acceptable, and local organizations are seen as playing more of a supportive role. It is interesting to note, however, that sub-basin representatives and leaders all express respect for different approaches in other sub-basins, and feel they will have no problems in working together with them on matters of mutual concern.

Among the needs identified by all sub-basins if RSBOs are to be further developed are: x Clear government policy and commitment to support and engage with sub-basin organizations to help motivate stakeholders to invest their time and energy, to help other local and provincial governance institutions see the importance of sub-basin efforts, and to help motivate central government agencies to participate with sincerity and consistency. x Clear mandate to actively engage with all stakeholder groups, including partnerships with private sector enterprise and non-governmental organizations, so that stakeholder needs and concerns can be addressed in the most equitable manner possible x More access to information and data (and methods for understanding and using it) is a need that is strongly expressed in all sub-basins. There is a common sense of frustration with outside experts from agencies or elsewhere who claim to have information and data to which they have no access, but with is used to make and implement policies that have strong impacts on their livelihoods and lives. x Support in the form of technical assistance, training and support that responds to their needs and helps them monitor conditions, identify problems, and assess impacts of policies and projects using evidence that will be accepted by stakeholders at different levels. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 299

6.3.7 Improving access to information in Thailand

As evidence in this report clearly indicates, efforts to cope with change that is occurring at an increasing pace at multiple levels can no longer be based on decisions by a small centralized group of elites making policy decisions that are then simply implemented at all other levels of governance. From urbanizing lowlands to remote mountain areas, livelihood opportunities and abilities of households to respond to those opportunities are increasingly closely linked with complex, multi-level, and globalizing processes, forces and patterns with biophysical, economic, social, political and cultural dimensions and impacts. If skills associated with innovation, entrepreneurship and creativity are needed to effectively participate in the world of today and tomorrow, a growing sense of urgency needs to be associated with formulation and effective implementation of policies that will develop the information and information distribution systems that will be critical for meeting demands created by these processes.

Of our case study sites in the region, the Upper Ping Basin in North Thailand is where change associated with commercialization, market integration, and globalization have had the longest and strongest impacts. It is also where our project has its closest links with colleagues who are closely involved in efforts to identify major emerging needs for information related to livelihoods, agriculture and natural resource management, and to develop pilot approaches for addressing those needs. As we saw in sub-basins around the Ping River Basin, needs for more access to better data are already strongly expressed by local groups and leaders. Thus, this section provides a brief summary of progress that is being made toward IT policy development and implementation in the context of Thailand.

National IT framework In 1996, the Thai government launched its first information technology policy. This policy aimed for nation-wide IT development by focusing on building basic information infrastructure, human development and information reform in the government sector. Five years later, the second IT policy (2001-2010) set a vision for Thailand becoming a knowledge-based society, building good governance, and enhancing competitiveness for better livelihoods of Thai society. The 10 year policy has five flagships: e-Government, e-Commerce, e-Industry, e-Education, and e-Society [NECTEC 2002]. Key strategic plans include: x Utilizing IT to improve efficiency in delivering convenient, speedy, easily accessible and good quality public services. It was expected that 70% of government services would be on-line by 2003, and that overall goals will be achieved by 2010. x Supporting application of IT for agricultural and agro-industry development. x Promoting development of information service content that is relevant to needs of communities and society. x Closing gaps in access to information and knowledge within Thai society. x Encouraging knowledge networking among local wisdom, communities and universal knowledge to develop alternatives for sustainable development.

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Data Demand and Supply In response to this policy, related ministries and organizations set up strategic plans and actions that cascade from central to sub-district levels of administration. Consequently, there is rapidly growing demand for spatial and non-spatial data from both public and private sectors, as well as from government agencies. Furthermore, newly emerging problems and challenges require more accessible, accurate, and up-to-date information: x In order to tackle poverty problems efficiently, it is essential to identify who would be affected, where they are, how well they would be able to access natural resource, markets, and services, as well as what are the potential alternatives to improve their livelihoods. x To cope with potential ramifications of trade agreements there is need for information on location and extent of growing areas of crops that will be potentially affected, as well as alternative crops for replacement. x Increasing frequency and damage of floods, landslides and drought require more accurate models for prediction of such events, which in turn requires up-to-date and more accurate biophysical and socioeconomic data in both spatial and non-spatial forms.

On the supply side, two main organizations serve as data providers for most basic spatial databases in Thailand: the Royal Thai Survey Department (RTSD) and the Geo-Informatics and Space Technology Development Agency (GISTDA). RTSD is the key provider of digital map layers for topography and infrastructure (roads, villages, and other landmarks) at the scale of 1:50,000, which is the standard map scale most organizations use for their spatial databases. GISTDA provides data services relating to space technology and geo-informatics, and provides access to satellite data from sources including Landsat, SPOT, IRS, Radarsat, and NOAA. Other organizations provide specific data and information in the form of spatial features and tables that are required for agricultural and natural resource management. Some of the key providers of these types of specific data include:

x Land data. The Land Development Department (LDD) is responsible for soil resource inventory, and monitoring of land use for improving land use policy for sustainable development. It also provides services for analyses of soil, water, plant, and fertilizer samples to farmers and others involved in land development. LDD routinely give recommenda- tion on land improvement and rehabilitation to farmers and other organizations, through data and information in forms such as maps, tables, and reports. LDD is an example of government agencies that deliver different forms of information to the public both online and in multimedia. Access to online information is through its website (www.ldd.go.th), which includes databases such as: (1) Organic agriculture and low chemical inputs farming database; (2) Volunteer “soil doctor” database; (3) Small scale water resources database; (4) Soils of Thailand knowledge-base; (5) Vetiver grass information. LDD is also active in developing and distributing spatial information system data related to soil and land resources. The first product distributed as shape files is a Soil Group map layer, containing spatial data used in many applications, such as land evaluation, soil erosion estimation, and land-use planning activities. Information on soil groups is now available as a WebGIS at www.gissite3.ldd.go.th. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 301

Another map layer produced by the LDD is Land Use. This map layer has been updated from time to time, and the most recent one was published in 2006 for major cash crops. Although demand for land use maps is high for use in many fields of study, LDD has not distributed this data as widely as in the case of soil maps. Recently, LDD commissioned a private company to produce digital color orthophotos of the entire country at the scale of 1:4,000 and 1:25,000. Accompanying products under this project include a digital elevation model (DEM) and contour lines with contour interval of 2 m in flat areas and 5 m in the highlands. These products are now being used by various government agencies, including LDD to refine soils maps, Land Reform Of- fice to support land right approval, Royal Irrigation Department to help water resource planning and management, and Ministry of Natural Resource and Environment to reshape boundaries of state forest lands. As a result, spatial data produced by these government agencies is expected to be more accurate in the future. Thus far, however, access to these products has mainly been limited to specialized government agencies.

x Natural resources data. The Ministry of Natural Resource and Environment is developing a WebGIS (www.warehouse.mnre.go.th) to facilitate access to spatial data on forest resources, environmental resources, geology, water resources, and ground water resources. Information on current water situations can be accessed from the websites of the Royal Irrigation Department (www.rid.go.th), and the Hydro and Agro Informatics Institute (www.haii.or.th). HAII is also developing an Agricultural Network (www.thaiag.net) that is an excellent example of coordination among different agencies to organize a common database and query system to facilitate access to data on socioeconomics, population, health, risk prone area, water situation, agriculture, energy, and village funds. Results of queries are to be displayed as tables with statistics and maps, but the system is still under construction.

x Agriculture data. The Department of Agriculture (www.doa.go.th) has on their website information related to improving quality of important crops and use of hazardous chemicals used in Thailand. The Department of Agricultural Extension site (www.doae.go.th) provides information on recommended practices for major crops, local knowledge, and ecotourism, and a WebGIS on planted area and yield of major crops. Data on macro and micro economics, agricultural production statistics, current prices of commodities and inputs, as well as commodity profiles and country profiles to support agricultural trade can be accessed at the Office of Agricultural Economics site (www.oae.go.th).

x Local socio-economic data. One of the most widely used datasets in rural development is the NRD2 dataset that contains results of village surveys conducted every other year since 1984 under the Community Development Department (CDD). This database covers basic information on villages in rural areas of Thailand, such as general description, economics, education, local participation, strength of community, health, labor, drug addic- tion, etc. CDD also provides data on household basic need status based on surveys conducted annually since 1990. Recent datasets can be accessed at the CDD website (www.cdd.go.th) and data is distributed on CD. It is still very difficult, however, to link these data with spatial features such as village location for further analysis in GIS systems.

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Overall progress in implementing online services of such data providers vary. Promising basic improvements have been seen in GISTDA services, in terms of both the method of data distribution (an option for online data download) and the speed of response to clients. And, RTSD has updated new digital map layers to their L7018 series, and now uses WGS84 as the standard datum, which provides more widespread compatibility. And various of the specialized data providers are gradually improving data content and distribution.

Many difficulties still remain, however. In terms of basic issues, various types of data are still not accessible beyond small circles of government agency elites. Other data are either not put into formats to facilitate access, or access is provided in a manner that it cannot be used in analysis or problem solving by clients. In terms of basic specific operational issues, response time to clients of RTSD needs to be further improved, and their method of data distribution should be similar to GISTDA practices. Users still have to struggle with RTSD labels for villages, which is a key link to other important databases such as NRD2. Located under the CDD, the NRD2 is one of the most potentially widely useful and most frequently updated datasets. Access and usability of NRD 2 data could be greatly improved by simply providing a link with village location feature datasets produced by RTSD. Because of the lack of common village codes to link these two important databases, many analyses cannot be conducted, and in those that are, a huge amount of skilled effort is being wasted to match villages ID codes and names. Problems such as this are increased whenever new administrative boundaries are revised. One of the most frequently asked question among GIS users is who has correct sub-district boundary files, which vary widely among sources. This issue should be simply addressed through an internet download service by as specifically authorized data provider. This would be a simple way to save an immense loss of time by GIS users. These types of problems reflect the difficulties inherent in trying to make government agency services become more user-oriented and user-friendly.

Although WebGIS technology seems to be a good way to meet user demand for accessibility, up-to-date information, and access with no requirement for GIS software, one major problem is the poor speed of information access on the internet in Thailand at present. Users who visit the WebGIS sites discussed above suffer from slow response to request for map information access largely due to inadequate investment in web and database servers of data providers. At the time of this report, very few sites are at a mature stage of WebGIS development, and many are still experimenting with their design, contents, and story lines. Another major limitation of most WebGIS is the difficulty in integrating key essential data related to agricultural and natural resource management, and the inability to perform spatial analysis needed to answer many types of specific queries. This is partly due to the narrow focus of each agency in providing its own authorized information, and partly due to limitations in the software itself. While WebGIS can help meet some needs, it is inadequate by itself.

Moreover, the nature of problems and challenges in improving rural livelihoods and resource management in the context of broader patterns of change often call for a tool that serves as a platform for data integration and visualization. This is especially necessary in planning process that involves different agencies and levels of governance, where multidimensional datasets are required to assess problem situations at different hierarchical levels. An example of such a Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 303 tool is Decision Support System for Agricultural Resource Management and Services (DSSARMS) developed in the Project supported by Thailand Research Fund (TRF) as described in Methi et al. [2005] and briefly overviewed in Box 2. This tool was used in conducting analyses and constructing visualizations related to the UPB that have been presented in numerous parts of this report.

Box 6-2. DSSARM (A GIS Tool for Integrating Spatial Data) Decision Support System for Agricultural Resource Management and Services (DSSARMS) was designed to offer a GIS-based user interface in Thai and to serve as a platform for integrating spatial data to support and promote uses of spatial information in agricultural and natural resource management [Methi et al. 2005]. Users may import different types of features and grids in DSSARMS, select map symbols and rename the fields in Thai to facilitate visualization and interpretation of results in inter- disciplinary groups or meetings, or under integrated development projects. Users may also join or relate tables to map features in order to further explain the features on the map. DSSARMS also provides necessary tools for users who are not familiar with GIS so that they can benefit from using agricultural resources databases to support their decisions. The system facilitates both attribute and spatial queries to ensure effective uses of spatial information in strategic planning and management of agriculture and natural resource management at the provincial level. Quantitative data may be displayed in graphical forms in DSSARMS to enhance visualization and interpretation in order to facilitate communication among various groups of users ranging from practitioners to policy makers. Users may design their own map layout for printing. In order to help support integrated development projects, results generated from other analysis packages such as MCE-GIS may be imported into DSSARMS for display with other map layers already available. Although DSSARMS was originally designed for the users at the provincial level, it has been well employed in the current Project where watersheds are used as a operational units instead of administrative boundaries. To accomplish this, all spatial data were organized into 3 hierarchical levels of nested watersheds, the Upper Ping, the watershed level 3, and watershed level 4. The geodatabases were then imported into DSSARMS using tools provided for importing and editing. Once spatial data have been imported and organized, they can be displayed, identified, and queried from the geodatabases using their attributes and features (Figure 6-9) Figure 6-9. Integrating different data types and searching village data in the UPB

(a) integration of feature & grid data (b) search for less developed villages continued on ne t page Page 304 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

Box 6-2. (continued)

The window on the left in Figure 6-9(a) illustrates the list of map layers that were organized and ready to be displayed together with other map layers. In this figure, distribution of the irrigated areas and sites of dams, reservoirs and weirs in UPB may be exhibited by dragging the appropriate map layers on the list to the center of the screen. Similarly, one may display transportation network and distribution of land use in the UPB to explore spatial data and possible relationships among the spatial variables that are being investigated. The user may make a query from the attribute searching widow (Figure 6-9(b)), for example, select query from the village layer for communities which have low development index and low education opportunity, the villages that meet both conditions are shown as the blue symbol in Figure 6-9(b). Attributes query can be made as many conditions as required using standard Boolean operators, and may be made from attributes of any feature types, i.e., points, lines, and polygons. For instant, the user may query on land use map layer to identify the areas in the UPB where possible effects of the FTA agreement may reach. The production systems which are highly vulnerable to this policy would be the garlic and onion; both crops are grown after rice. The result of the attribute query on rice-garlic or rice- onion cropping systems in UPRB would be highlighted in the map. Figure 6-10. Examples of spatial query and data displays in DSSARMS

(a) spatial query for potential ecotourism sites (b) displaying quantitative data as pie charts

Figure 6-10(a) illustrates the result of spatial query on the potential stream for ecotourism development and search for the villages within 1.0 km on both side of the selected stream. The result in this figure shows the selected stream, its 1.0 km buffer, the location and names of the villages within this buffer. Detailed information on these villages can also be found to support the final site selection.

DSSARMS also provide a tool for presenting quantitative attribute, an example in Figure 6-10(b) displays the chart representing the proportion of forest, rainfed agriculture and irrigated agriculture land in sub watersheds level 4 of Mae Khan. Various ways of visualization of spatial data and attributes of different nature in DSSARMS can greatly enhance sharing information in a meeting for planning and decision making in an integrated development project.

DSSARMS and associated databases have been installed in UPB provinces, and we had hoped to help explore its utilization at provincial and more local levels under this project. But due to the turn of political events in Thailand that included abolishment of the 1997 Constitution and emphasis on previous styles of governance, this has not been possible. Thus, like further development of local governments and governance institutions such as sub-basin organizations in the Ping River Basin, testing and further development of information systems to support more distributed decision making are “on hold” until new policies provide the “space”, the commitment, and the incentives for further activity and innovation. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 305

Roles of experts: case of remote-sensing As innovations in distributed information systems continue to evolve, the role of experts in land-use policy, planning and management may be changing. This can be illustrated with respect to rapid changes in use and users of remote-sensing information within Thailand.

The conventional model of how remote-sensing-based information and its expert interpreters contribute to land-use planning, management, and policy has been linear and technocratic (Fig 6-11a). The pathway from imagery to maps, through classification schemes and then land-use plans and policies, is portrayed as part of support for technical decisions, and thus beyond the realm of politics [Lebel et al. 2007].

Figure 6-11. Two perspectives on remote sensing contributions to land planning & management Dotted lines focus on primary remote-sensing products, while solid lines are more processed and integrated products with communications. Boxes represent individual and collective actors

Source: After: Lebel et al. 2007

In the innovative future (Fig 6-11b), however, remote-sensing imagery and derived products are easily accessible to many actors in a more distributed system providing information support for decentralized and devolved decision-making processes. When this begins to occur, even the way products are prepared – such as defining of classification categories and associated uncertainties - is not left unquestioned [Lebel et al. 2007]. Thus, the rational basis for decision support begins to become more transparent. Accordingly, policy-related positions Page 306 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region adopted by decision makers, civil society, and lobby groups must be more spatially explicit, clearly articulated and justified, and open to scrutiny. And since performance can be monitored independently, key actors at various levels can be held more accountable.

Under this type of approach, remote-sensing researchers are no longer the hand-maidens of planning agencies. Rather, they see their role in development as helping create arenas for discussion and debate, and as contributors helping to better inform deliberative processes. They no longer provide e-governance or geo-spatial solutions to only a single set of interests, but actively explore options for open access by many.

Moreover, information and knowledge from various important stakeholders can be integrated to better inform remote sensing classification and interpretation processes. We have seen in section 3.3.1 one example of how remote sensing has been used as part of participatory mapping of land-use planning and zoning (Figure 3-46-49) conducted by local villagers themselves in parts of the Mae Chaem sub-basin where all local land use remains officially unrecognized [see also Saipothong et al. 2005; Thomas et al. 2004].

This type of information can be used to improve understanding of land use implications of local livelihood strategies (e.g. Table 3-11). But it can also be used to help better inform discussion, debate, and negotiations, as well as design and implementation of activities by local governments, multi-village resource management networks, emerging sub-basin management networks and organizations [Thomas 2005], and various other types of interests, groups and organizations as they continue to evolve. Moreover, Figure 6-12. Prototype information support system for participatory watershed management Figure 6-12 illustrates relationships among components of a prototype local information support system for participatory watershed management. Components of the system have been tested in the context of Mae Chaem [Thomas et al. 2004]. Although subsequent further support for this type of approach is not yet forthcoming from higher levels of governance, Source: Thomas et.al. 2004 local efforts based on sub- basin level networks of more local networks continue to work in directions that confirm the future relevance of this type of approach. Further improvements that have already been suggested include its expansion to incorporate more dimensions of local knowledge, livelihood development, and channels for linking with multi-level governance systems, which local communities hope will receive renewed emphasis in the not too distant future. Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 307

6.4 Implications for upland policies

This section provides a brief synthesis of findings under our project regarding implications of how state policies affect livelihood opportunities in upland areas, and abilities of poor households and communities to respond, both now and especially in the future.

6.4.1 Conservation-based constraints on upland land use and development

Natural resource conservation and environmental management are policy areas of rapidly increasing activity in all states of the region, and reflect growing public concern within national societies and at international levels. Those promoting and formulating such policies, however, need to be aware of the especially strong impacts many of these policies are having on livelihood assets and opportunities of poor households and communities in upland areas. Most of these areas already face many constraints in responding to new opportunities that are providing pathways for other people in society to escape poverty. x Some states, such as Vietnam, seek to address these issues by providing land use certificates that can also be used as collateral for subsidized institutional credit, as well as special assistance programs for especially poor areas and those adjacent to protected forest areas. x Others, like China, allocate land but also encourage poor households to send members to work in industrial areas, and provide economic incentives for households and communities to increase tree cover in sloping areas seen as important for river basin management. x But in states like Thailand, policy focus seems to be mainly on increasing uncertainty and constraints related to conservation, with little concern about impacts on local livelihoods. In all countries there is increasing rhetoric and campaigns to promote more “green”, “safe”, or “environmentally-friendly” types of technology and production approaches to produce for higher-value “green” markets, which suggest movement toward a place-based future scenario. There are also policies and campaigns to promote transformation of livelihoods to focus on ecotourism or related support services, which would be most compatible with glocalized or services-parks regional scenarios. But since many of these campaigns are conducted thus far in more of a government-assisted mode, many upland households and communities are under- standably still very skeptical about making major changes in their livelihood strategies until it becomes clearer that such approaches and activities are really viable under their conditions. In any event, if national policies are to further pursue development of upland areas as “conservation zones” under anything other than a marginal subsistence scenario, then related policies and programs will need to be much more transparent and accountable to local populations. More serious attention also needs to be given to coordination of different relevant policies, including public investment and support service policies, to help achieve conservation objectives while still improving livelihood opportunities in upland areas. Especially if states wish to pursue more place-based or self-determined approaches, they need to consider a wider range of policy options, as China has already begun doing, including providing rewards or even payment for environmental services provided by upland areas as a consequence of constraints being placed on upland livelihood opportunities. Page 308 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

6.4.2 Basic infrastructure and physical connectivity

State policies related to investment in infrastructure and basic services can clearly have strong impacts on upland livelihood opportunities. Indeed, in many areas access to roads, electricity and telecommunications have resulted in bursts of various types of development, especially in areas where private sector entrepreneurs have emerged to provide efficient links in production and marketing chains without distortions from monopoly control that can result in exploitation or focus on resource extraction.

Despite the progress that has been made in improving physical connectivity infrastructure in upland areas in various parts of the region, much remains to be done. While GMS states are increasing macro-level physical connectivity through investments such as those supported by the ADB, basic design of these systems tends to focus on efficiency of flows between major lowland urban centers. But intermediate and local levels of infrastructure are needed to complete the overall systems, especially in areas such as many parts of North Laos where little complementary infrastructure is currently in place.

Moreover, in chapter 5 we highlighted uncertainties associated with connectivity as an important axis in identifying plausible alternative scenarios for the region. While connectivity in that context has various dimensions, there are considerable implications related to development of the physical connectivity upon which further dimensions of connectivity must rely. Flows of goods, services, information and people all depend on roads, electricity and telecommunications, while costs of movement and access to information are determined by their efficiency, and risks and uncertainties are associated with their reliability. Upland areas tend to be relatively disadvantaged in all these dimensions compared to lowland and urban areas. Public investments that can help reduce the disparities can assist upland areas greatly.

But ultimately, of course, impacts of physical connectivity infrastructure depend on how it is used. Thus, distinctions made by ADB consultants (section 3.2.5) between “hardware” providing basic physical connectivity and “software” needed for corridors of multi-dimensional connectivity, opportunity and development may sound a bit overly-dramatic and optimistic, but are basically probably appropriate. The nature of infrastructure design and operation is likely to vary according to the type of development scenario pursued by policies of each state, region and locality, and the type of connectivity that is required to achieve desired outcomes. But in all cases, progress in achieving desired outcomes and avoiding undesired ones will relate closely to overall policy consistency, sequencing and coordination.

6.4.3 Improving access to financial capital in upland areas

Policies directed toward expanding access to financial capital through institutional borrowing also appear to be making substantial progress in the region. We have seen in examples from Thailand and Vietnam that institutional credit programs in the region are improving and providing access to financial capital for many rural farming households, including those in upland areas. While access to their major lending facilities is easier for those with sufficient land and assets to use for collateral, group credit is also possible if households have sufficient social capital. Thus, some of the poorest households can still have problems.

Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 309

Experimentation with village fund credit mechanisms in Thailand appears to be interesting. Although somewhat controversial, it appears to have dramatically increased the reach of access to credit among upland minority communities with no land documents in Mae Chaem. But since village “bankers” still share some similar views with institutional bankers, poor households with little social capital may find amounts they can borrow are relatively small, and access and loan amounts are linked with repayment credibility.

For growing numbers of poor upland households, contract farming is another channel that can help address constraints on access to financial capital needed for production inputs. State policies encourage such arrangements in all countries as a form of farmer-private sector partnership. While overall experience has been mixed, many promising examples have been identified. Some of the problems that have emerged in various cases appear to be related to provision of production inputs in kind with prices determined by the company, together with commitment to sell production output to the company at a price perceived as too low. Some farmers are also concerned that they must bear all crop failure risks, or that “share- cropping” contracts for long-term crops like rubber may not be equitable. Policies supporting more open competition among contracting companies, mechanisms to insure contracts are fair, informed and voluntary, or possibly some types of crop insurance schemes are possible directions for further exploration by state policies to help address such issues and concerns.

Access to financial capital is also sought by many households through off-farm employment, and in China this approach is encouraged under poverty alleviation policies. In other states, however, there appears to have been relatively little policy intervention or even rhetoric related to off-farm employment in upland areas. Student loans, however, have been supported by state polices in Thailand, and appear to be receiving a quite enthusiastic response. It is not clear how much these policies are intended to serve as a mechanism for enabling the young generation to leave the agriculture sector and rural upland areas, but that appears to be one of the most important motivations for parents and students participating in the program.

6.4.4 Emerging private alternatives for production support services

One major focus of state rural development policy has been on providing state extension services. Especially in socialist countries, but also in Thailand, extension systems have often been used as agents for conducting campaigns to promote production of various crops selected through central planning processes. And in some cases, during recent years most nota- bly in Vietnam, various campaigns have resulted in very dramatic increases in crop production and export levels that have even affected global commodity markets. In many other cases, however, crops have been promoted largely on advice from agronomists, resulting in a “marketing problem” when farmers found they could not sell their crop products.

But in many upland areas, even access to state extension services has been limited by human resource, logistical or budgetary factors, and in Thailand by policy that excludes state extension services because the state does not want to encourage agriculture in montane zones. And even in upland areas where extension services have been provided, there have been frequent complaints that crops, technologies, and practices being promoted were developed in the lowlands and not suitable for upland conditions.

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Moreover, past extension services in upland areas of the region have often been provided under various types of development or opium crop replacement projects, or under programs to stop shifting cultivation and/or promote conservation farming technologies. While some projects, such as the Royal Project in Thailand, have been quite successful in supporting development of viable commercial production, many projects were overly dependent on subsidies and artificial conditions that collapsed after the end of the project. Indeed, one of the most longstanding and most reliable sources of “extension” information for many remote mountain areas across the region has been through kinship and social networks of various sorts.

During recent changes across the region, however, private enterprise has started to emerge as an increasingly important provider of extension and related types of agricultural services. This is especially clear in terms of new crops and technologies that are responding most quickly and effectively to changing market and production opportunities associated with changing trade policies and integration with wider markets. Indeed, most of the progress in exploring and developing production for the types of “green” markets promoted under upland conservation policies is being led by private companies in direct partnership with local producers and communities. We have already noted the importance of contract farming in relation to access to credit, but the contract farming approach is equally important in providing technology, inputs and markets, as well as experience with commercial production approaches.

Thus, policy reforms need to consider shifts that are occurring in the roles of state and private sectors in providing various types of support services. For example, one of the important strengths of the Royal Project in Thailand has been its ability to draw on experts and consultants from research agencies and academia for help with basic research issues, while at the same time drawing on help from private sector companies regarding issues related to products, practices, equipment and marketing. While the Royal Project Foundation is difficult to replicate because of its privileged status that allows it to function the way it does, its relative success in mixing sources of support services can be instructive. In Omkoi, we have also seen an example of private company efforts to draw on Royal Project experience in building its own support services, as well as in developing working partnerships with state agencies to help reduce production constraints and risks associated with land use policy. In Yunnan, on the other hand, we have seen how emerging success by private companies can be seen as a threat to the tax base and revenues of local government, state agencies and state enterprise.

Since policies in all states of the region claim to promote expansion of the role of the private sector in their agricultural production systems, there clearly needs to be more attention to the incentives and impacts of different policies that affect private sector operations and development. Such assessments may also need to consider how policies may provide incentives and impacts that differ among large, medium, small-scale or even non-profit enterprise components within the private sector. Moreover, reforms directed at improving the policy environment for development of private sector services, or reductions in disparities among private sector actors, will need to be formulated and implemented in collaboration with those who have direct experience in the private sector itself.

This process could also provide an opportunity to improve and refine public investment policies for related public sector institutions. For example, one result might be that public sector comparative advantage is seen to be moving more toward areas like basic types of research Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 311 and development in which private sector companies are not yet able to invest, which is a pattern familiar to technically advance countries. In this case, perhaps investment policies should shift more emphasis in public institutions to longer-term research and development, which now receives relatively little public support in most countries of the region.

6.4.5 Roles for education and information technology policies

Development of vibrant urban and industrial centers able to successfully compete in the global marketplace is most always associated with migration of both lower wage labor and bright educated young people from rural areas. Thus, it is not surprising that education is seen as one of the most important channels for achieving a better life and social mobility, or that national policies are constantly trying to further expand access and improve the quality of education. We have seen quite clearly the widespread support for and response to such policy even in poor ethnic minority households in remote areas. At this point, it appears the main role of education is to provide access to work that will provide young people with an escape from the drudgery and uncertainties of upland agriculture-based livelihoods.

Although this may be considered as an achievement of national policies, it still begs the question about the degree to which educational policies should also be producing more knowledgeable and skilled people to live and work in upland areas. At this point, it appears that the “brain drain” relates largely to two issues: (1) desire for the security that comes from salaried non-farm occupations, and (2) the perceived lack of more rewarding livelihood opportunities in upland areas. That these perceptions are real and widespread is reflected in national economic and employment data discussed in earlier chapters that show movement out agriculture and into service and industrial sectors associated with lowland urban areas. While governments have no desire to reverse these overall trends, it does underscore questions many are now asking about the future of agriculture and life in smaller towns and rural areas.

Indeed, we have seen that many of the new opportunities in upland rural areas that are emerging in association with greater economic integration, increased emphasis on conservation, and globalization more generally, relate to increased diversification of agriculture into more production linked with high value specialty and now ‘green’ markets, as well as new livelihood opportunities linked with services such as tourism, and now especially ‘ecotourism’. And exploration of mechanisms for rewarding upland areas for maintaining or improving environmental services that benefit wider society may add complementary opportunities. In our explorations of plausible alternative future scenarios, we have seen that at least under some sets of conditions, these types of opportunities could basically transform upland life.

But in order for these types of opportunities to fully unfold and have such impact, they must be able to link with education and with development of information technology. Many types of new ideas, attitudes and entrepreneurial skills will be necessary to produce the innovations and private sector linkages required to make these operations viable in a manner that significant components of “value added” can be captured by upland livelihoods. As education policies must put major emphasis on trying to meet the needs of societies that are undergoing major restructuring and transformational processes, it may be possible to allocate a bit more of this effort toward needs associated with similar processes in upland areas. Tendencies in Page 312 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region educational systems to portray agriculture and rural life as “the past” may need some balance by visions of potential “successful” upland livelihoods and their rewards and requirements.

Moreover, most recent education and IT policies tend to recognize that information technology is a very important pathway and toolkit for building the type of multidimensional “connectivity” that is fundamental for many of the most important emerging opportunities of today and tomorrow. But societies of the region currently place most emphasis on relationships between IT and opportunities in urbanizing and industrializing areas. While this is extremely important and should remain a central focus, more attention is needed on elaboration of the overall IT system and its components that can link more widely and deeply with broader society in countries that are much larger and more complex than urban city-states.

In Thailand, we have seen some of the progress being made under IT policies aimed at building information technology systems in the government sector, including some of the issues, problems and difficulties that are being encountered. These difficulties are exacerbated by poor physical infrastructure for access from outside of Bangkok, by inadequate investment in provider systems, and by attitudes of some key actors who still want to limit information access and resist coordination with others. But we have also seen how innovations such as the DSSARMS approach may be able to help bring about significant transitions in how complex and sophisticated data and information can become much more accessible and useful for a new and much broader range of actors in Thai society. In this regard, government provincial planners are only the first step in processes that are needed to open access to – and especially use of – information by stakeholders that can even include communities and private entrepreneurs in upland areas. Approaches for achieving this type of vision are likely to also require more serious attention to decentralization and devolution of governance.

6.4.6 Policies on decentralization, localization and subsidiarity

Many types of upland policies tend to be based on static notions of a rural peasant class that is simple, ill informed and dependent on more knowledgeable and sophisticated outside patrons for guidance and help. Traditional agricultural systems are often seen as backward, unsustainable and inappropriate for the modern world. Thus, development policies have sought to “settle” them into fixed field agriculture on “farms” that are segregated from forests, and integrate them into “modern” commercial agricultural production systems. But because upland areas provide environmental services that are important to outsiders, policies now tell them to make additional investments in conservation farming practices and reduce use of production inputs that play an important role in increasing agricultural productivity elsewhere. Many upland policies are also welfare-oriented and associated with publicity photos of patrons passing out food, blankets or other one-time subsidies to show their generosity.

Yet upland policies based on strengthening capacities, reducing constraints, and building partnerships are relatively rare. Although many improvements can be cited, their lives are often still difficult as they invest their limited livelihood assets into production activities associated with environmental risk and growing economic uncertainties. In many areas, however, one decision such “simple” households are making for themselves is to invest heavily in edu- Chapter 6. What are the implications of state policies for market opportunities & access for the poor? Page 313 cation for their children, in order to provide them with a chance to escape from difficult and poorly rewarded upland livelihoods.

Trends under increasingly open trade policies now suggest that upland livelihoods need to diversify into production for specialty markets in the globalizing economy, as well as into services such as those associated with ecotourism. Thus, polices are now beginning to urge upland households and communities to become more innovative, outwardly engaged and entrepreneurial. But, assuming these policy directions continue, historical evidence from many societies indicates that higher skilled, and more innovative, outward-looking and engaged populations want their own voices to play a larger role in helping determine their own futures. Innovation tends to be seriously constrained under conditions where the innovators have little or no voice or influence in policies and programs that have impacts on them.

Moreover, various increasingly complex sector-oriented policies seek to pull or push activities in upland areas in often conflicting directions, or else require support from other policies that have not yet been implemented. Thus, there are also growing needs for better policy coordination and sequencing, including monitoring and feedback processes that can adjust, correct, and improve implementation to better achieve desired policy impacts in local contexts. And, there are often also needs for negotiation among various stakeholders affected by policies regarding impacts and the distribution of costs and benefits among stakeholder groups. Such negotiations require mutual respect among stakeholder groups, and removal of barriers and biases based on ethnicity or other forces that have marginalized various groups in the past.

Policies promoting decentralization are often aimed at trying to improve “localization” of development policies to make them more suitable and effective under specific local situations and conditions. Close interaction with and participation by the full range of local stakeholder groups is usually a key element of this approach. These processes also tend to include coordination and sequencing of implementation under various types of development policy components and initiatives, because needs and appropriate configurations can also vary among situations. Indeed, it is difficult to identify potential alternatives to decentralization that could effectively conduct such tasks.

While progress that is being made in decentralization policies across the region needs to continue, emerging efforts to implement policies that require more proactive local participation, innovation and entrepreneurship are likely to also require more devolution in at least some components of governance. The fundamental issue here will be improvements in effectiveness, efficiency and sustainability that can be achieved through application of the principle of subsidiarity, so that various types of decisions can be made at the most appropriate and effective level. Resulting multi-level governance systems are likely to be based on decisions that are distributed among levels, but also on cross-level interactions that enable the overall system to perform more efficiently and effectively. We have seen examples of some implications in the context of river basin management from pilot explorations in the Ping River Basin. Ap- plications under a wide range of other contexts are also very possible.

Indeed, without more progress in these types of directions, it is highly likely that the bright- est young people will all continue to leave the uplands for better opportunities elsewhere, Page 314 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region leaving long-term prospects in the uplands likely to center on stagnation, marginalization, poverty, conflict, and eventual depopulation. Page 315

7. Summary and Conclusions

This study has been a preliminary comparative analysis of market and resource access of the poor in upland zones of the Greater Mekong Region. This final chapter provides a brief summary and synthesis of our findings and conclusions. More detailed findings, maps, dia- grams, tables and references are provided in previous chapters.

7.1 The Uplands

Our explorations began with an operational definition of upland areas, a brief overview of their general characteristics, and a survey of where they are located in the Greater Mekong Region. At the regional level, we have defined the ‘uplands’ as encompassing the ‘montane’ zones that is found between 300 to 3,000 meters above sea level. This includes three sub- units operationally defined as lower (300-500 masl), middle (500-1,000 masl) and upper (1,000-3,000 masl) montane zones. The ‘lowlands’ are defined to include coastal (0-100 masl) and upper (100-300 masl) lowland zones, while areas located above 3,000 masl are defined as being in the alpine zone. The distributions of these zones across the entire region are mapped in Figure 1-2, as well as in the context of major river systems (Figure 1-3) and national boundaries (Figure 1-4). These zones are used in quantitative assessments presented in various chapters of this report.

We then briefly surveyed of patterns of demographic and economic change across the region since 1970, to help set the context for understanding the importance of underlying forces of change that have made market integration a major issue in the region. Societies in the region and their governments have come to view economic growth and change as a force of central importance in achieving a better life. They have also sought to address issues associated with demographic change by reducing their population growth rates and supporting urban development. As they assess their progress, they are also recognizing more clearly how unevenly participation in and benefits from economic growth and change have been distributed. While dramatic growth and change is taking place in major centers in lowland zones, significant components of the population remain in conditions defined as poverty, and governments have clearly declared their intentions to reduce these inequities.

At the same time, states of the region are formulating policies and building programs to address the still more recent twin challenges of environmental sustainability and globalization. While globalization is most frequently viewed in terms of sweeping changes in the global economy being induced by new trade agreements, there are many additional dimensions of growing global connectivity. Among these are global awareness and measures to address dimensions of environmental sustainability including biodiversity, water, and climate change.

These issues have now converged in their attention to ‘upland’ montane zones of the region. Efforts to reduce rural poverty in disadvantaged upland zones are taking place in the context of evolving regional trends toward greater restrictions on upland land use induced by environmental concerns, generally more pluralistic and participatory multi-level governance (despite periodic setbacks), and an increasingly globalized economy. National and regional de- Page 316 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region velopment policies emphasize investments in infrastructure that are expected to bring upland rural communities into the growing market economy. Skeptics, however, are concerned that poor minority communities cannot effectively engage in production for globalizing markets, that national and local institutions will not be able to provide appropriate governance and information, and that market economics will only bring additional hardship and deterioration of environmental services. How to address these concerns is one of the greatest development challenges in the region today.

This study has sought to build on promising innovative efforts in the region to combine livelihood approaches with modern information systems technologies, in order to improve understanding of how poor upland households and communities have responded to and been affected by market opportunities. In the process, we have sought to provide examples of how emerging spatial information systems can be extended and adapted to help address particular conditions and problems faced by small upland farmers and enterprises. We have also explored alternative future scenarios related to current debate about directions development should take in the region, in order to more dispassionately assess likely impacts on patterns of livelihood opportunities and landscape transformation.

7.2 Multiple Poverties

Poverty has many faces and causes. Our explorations of who and where are the poor in the Greater Mekong Region were presented in Chapter 2. Findings from these explorations at both regional and local levels reveal different types of poverty that depend on how it is conceptualized, measured and perceived. They also underscored the multi-dimensional nature of poverty, and the relevance of the sustainable livelihoods approach for assessing livelihood assets in subsequent parts of our analysis in a manner that can help us classify dimensions of poverty and suggest causal links.

7.2.1 Poor areas, poor populations, and inequality

Our broad survey of poverty in the region using the conventional conceptualization of poverty as material deprivation based on monetized levels of income helped us identify three different types of poverty distributions. Broad spatial assessments of poverty using nationally- determined poverty lines and income data from relatively small local areas were used for preliminary identification of distributions of poor areas, poor populations, and general inequality in wealth status. Chapter 7. Summary and Conclusions Page 317

Our first encounter with multiple types of poverty arose when discrepancies occurred between the findings of approaches based on poor areas or numbers of poor people. x The Lao PDR is the most obvious case where poor areas also contain greatest numbers of poor people. Both are located in extensive but sparsely settled areas in montane zones. x Vietnam had the largest discrepancy between assessments based on poor areas (poverty incidence, gaps or severity) and numbers of poor people (poverty density). The poorest areas are in montane, and especially remote middle to upper montane zones, whereas the greatest numbers of poor people are in far more densely settled rural areas in lowland zones. This underscores the fact that there are different types of poverty in the country, which are likely to have different underlying causes, so that different approaches and priorities may be required to address poverty issues. x In Thailand these types of discrepancies are mixed. In the northern region, highest poverty incidence and severity is associated with more remote, sparsely settled areas in montane zones largely inhabited by ethnic minority groups, resulting in discrepancies that are similar to those in Vietnam, but with lower magnitudes. In the Northeast region, however, distributions of poverty incidence, severity, and density show similar patterns. x Many remaining parts of Thailand and areas in Yunnan show more modest levels of both poverty incidence and poverty density, suggesting persistent poverty among certain components of the population. We saw evidence of heterogeneous combinations of poor and non-poor households and/or communities in studies from the Upper Ping Basin.

We also found discrepancies between income inequality, as measured by the Gini coefficient, and distributions of poverty incidence or density based on national poverty line standards. x Although Vietnam has the highest levels of poverty incidence and density, it also has the lowest levels of inequality, and its highest inequality levels appear to be in areas where poverty incidence is high and poverty density is low. x Yunnan and Thailand both have much lower overall levels of poverty incidence and density, but inequality in Thailand is by far the highest in the region, whereas Yunnan has relatively low levels of inequality that appear to be relatively evenly distributed.

In order to explore the degree to which at least some components of the population are able to achieve livelihoods that exceed poverty line standards, we also mapped distribution of the density of non-poor populations. Findings revealed generally very low levels of people with incomes above poverty line standards in montane zones across the region. This is in considerable contrast to lowland areas of Vietnam, for example, where large numbers of both poor and non-poor live in the same very densely settled areas.

These results underscore the diversity and complexity of poverty distributions, and provide fairly strong evidence that over-simplistic approaches to poverty alleviation are likely to be only partially effective at best. And since access to markets and resources are important factors related to poverty programs, there is a need to understand more clearly the nature and roles of constraints and impacts that occur in different contexts. Page 318 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

7.2.2 Perceptions of poverty

Additional faces of poverty were revealed through more local-level studies at our research sites. We found material income is also frequently used as an indicator of wealth at local levels. But here income seems to be more commonly used in the context of articulating relative wealth categories or rankings, in a manner more similar to a measure of inequality. It is also more common at local levels for placement of people, households or groups into wealth categories to be subject to modification by additional information about their characteristics.

At very local levels it is quite common to find perceptions of poverty status based on some mixture of asset indicators and information about the intentions, capacities and/or trajectories of people or households. Thus, for example, poor people may be seen as either “hard working” or “lazy”, based on their individual characteristics, their family history, their ethnicity, or other factors. They may also be seen as unfortunate, such as households headed by elderly women whose children have died or moved away and are not willing or able to help to “properly” care for their parents during old age. Or they may be seen as being “temporarily” poor, as in the case of young couples with several young children who thus have high dependency levels and small labor force assets.

These more complex and sometimes more intuitive faces of poverty reduce the relevance of efforts to seek a single definitive ‘standard’ for defining and assessing poverty. This may suggest that indicators and measures of inequality may be preferable for characterizing areas and populations, as well as for understanding local self-perceptions of relative poverty. Assess- ments of inequality introduce notions of equity. Social acceptability often relates to whether inequality results from differences in outcomes or opportunities. Differences in livelihood outcomes are generally more acceptable, whereas differences in access to opportunities can result in accumulation of social pressures that in the longer term can lead to social and political instability.

Indeed, local self-perceptions often appear to include factors related to levels of inequality that are seen as equitable, or at least acceptable, as indicated in areas of heterogeneous wealth status in North Thailand. Such perceptions are often based on rather complex judgments that may also reflect values and aspirations by integrating abstract notions of satisfaction or happiness associated with quality of life. Thus, some people classified as poor may not perceive themselves as experiencing hardship, whereas some people classified as quite wealthy may perceive themselves as living with only a moderate level of comfort – presumably either because there are people who have more than them, or because they feel it is not culturally appropriate to flaunt your wealth or status.

On the other hand, some well-off elites view themselves as having superior fates or attributes that are responsible for their better fortune, so that the poor (and often other ethnic groups) should only aspire to a much more meager status and position in life. For example, a quite well-known Bangkok-based Thai environmental guru recently told one of the authors of this report: “Stop talking about the upland poor. They are surviving, so they are not poor. Be- sides, they could never be like us anyway.” These types of perceptions also help us better understand apparent contradictions in Thailand as manifest in the nationally promoted princi- Chapter 7. Summary and Conclusions Page 319 ples of the sufficiency economy, which in practice is promoted primarily among lower strata of society, while media and advertising feature Bangkok’s top-level shopping centers and their highly publicized celebrations of extreme material wealth and consumer excess.

In any event, governments across the region recognize the importance of eliminating, or at least minimizing poverty and perceived inequities in opportunities in their societies, and this recognition tends to be based on some combination of three lines of reasoning: x Moral. Poverty (inequity) can be a moral or ideological issue, and governments engage in extensive rhetoric about how their programs will help everyone in society to meet their basic needs and pursue prosperity. x Economic. Reducing or eliminating poverty (inequity) is an economic issue because of the cost of programs to help poor people, at least in times of crisis. And as people above poverty levels produce and consume more, it can stimulate the economy. x Security. Poverty (inequity) can be a national security issue because of threats to political stability that can arise when significant components of the population are not able to meet their basic needs, or feel they are excluded from access to prosperity.

Moreover, all governments in the region have proclaimed that increased market integration is a central component of their approach to poverty (inequity) alleviation. There are many different views on how this can or should be achieved, and many additional factors seen as important for promoting broader notions of improved well-being and quality of life. And while more immediate improvements in livelihoods and reduction of poverty are important, sustainability of change needs to be understood in the context of generational change. Neverthe- less, promotion of broad effective participation in globalizing market economies is a key element of their approach, and action programs are being designed and implemented.

7.3 Changing opportunities, responses and constraints

Our explorations of changing livelihood opportunities and responses in upland areas were divided into two parts. One part examined how market opportunities have been changing in the uplands (chapter 3), while the second focused on strategies that have been used by upland households and communities to respond and adapt to these changes (chapter 4). Insights into important constraints on how people can respond to changing opportunities emerged from both parts. This summary of our main findings and conclusions focuses on market opportunities, response strategies, response capacities, and major constraints.

7.3.1 Market opportunities

In order to help clarify the broad context of changing opportunities, we surveyed the recent history of key regional geo-political events, and broad patterns of national economic change associate with economic “opening” that began in Thailand in the 1960’s and spread to all states in the Greater Mekong Region by the mid-1980’s. Common patterns have involved emphasis on commercialization and export production in agriculture, economic restructuring that shifts emphasis to industrial and services sectors, rapid technical change based largely on Page 320 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region importing and adapting foreign technologies, strong emphasis on international trade, and rapid growth in domestic and foreign investment in production enterprises, as well as in infrastructure and support services required to enable economic systems to function and grow. As a result, growth everywhere in the region except Myanmar has ranged from very promising to highly impressive. The impacts of this economic growth, however, have not been uniform. There are substantial and growing disparities both among countries and among sub- national regions and sectors within each country.

But despite many disadvantages and disparities that have marginalized mountain areas, market opportunities have been changing at an increasingly rapid rate. Since China, Vietnam, and Lao PDR had passed through a socialist period of collectivization, processes of economic “opening” have been associated with allocation of responsibility for assets, and especially land, back to individual households and local communities, enabling them to formulate and implement their own entrepreneurial initiatives. Along with relaxation of monopolies operated by state enterprises, this has allowed emergence of a new generation of “private” merchants, industries and associated players in production, processing and marketing chains linked with national and international markets. We have seen examples of these processes at work in relation to tea production in Vietnam, to vegetable production in Yunnan, and to commercialization of NTFP production and expansion of rubber in Laos.

Since Thailand did not pass through a similar period of socialist reorganization and began its process of economic “opening” earlier, economic restructuring and development of private sector entrepreneurial activity is now more extensive and complex than in other states of the region. Although public sector initiatives have influenced various parts of the economy, there has been little serious attention to reallocation of basic assets or even recognition of land holdings in midland and highland areas. The main focus of government investment has been in infrastructure to support primarily private sector-led development of the market economy. In the Upper Ping Basin, most state investments in irrigation and other physical infrastructure has been concentrated in lowland zones of major valleys, where increasingly complex and dynamic intensive cropping systems and production zones have emerged. The first important exception was investment in mountain road networks, initially motivated primarily by national security and opium crop substitution programs. Thus, market production opportunities in mountain areas have come primarily from two directions: up from the lowlands, in the form of linkages with agro-industrial companies such as we saw in Mae Chaem and Mae Wang; and down from the highlands in the form of intensive commercial production of horticulture crops that began with opium crop substitution programs, and are now epitomized by the Royal Project. Further growth and development of opportunities has been facilitated by emergence of more local marketplaces, elaboration of electricity and communications networks, and gradual improvement of other types of infrastructure and support services. A new round of initiatives led by private companies is reflected in the example of highland shade grown coffee production.

Parallel patterns of economic change are occurring across the region: x Yunnan’s economic growth and change is led by markets for products, services and labor in other parts of China’s globalizing mega-economy. Since the area of crops such as rub- Chapter 7. Summary and Conclusions Page 321

ber is already about maximized, more production must come from increased yields or expansion into neighboring countries. State enterprise crops are now encountering competition from emerging private sector operations and less-taxed, often higher value alternative cropping opportunities, as we saw with vegetables. Demand for crop products in urban markets is increasing and evolving, while crops that depend on sub-tropical areas face increasing competition from neighboring countries. x Vietnam’s economic growth and change is surging with heavy international trade and investment, and high population density forces pursuit of urbanization and industrialization. Past emphasis on high volume of low value industrial crops faces limitations in upland areas, as well as changing international market demands and standards under trade agreements, as we saw with highland tea production. Mountain region sub-tropical or temperate crops face increasing competition from China. x Lao PDR is trying to zone land use and commercialize agricultural production, while seeking a suitable position in regional patterns of international trade and investment. Ini- tial opportunities emphasize becoming a spatial add-on for markets and operations in neighboring countries producing industrial crops using standard technologies developed in lowland areas, as we have seen with rubber. But some are urging newer directions of specialization in potentially higher value and more environmentally friendly niche products and services. Policies must consider the scale and urgency of national needs, as well as limited resources and leverage in international arenas and markets.

Moreover, expanding market opportunities in montane zones are not limited to agricultural crops, as we saw from roles of livestock and non-farm income in case study sites. Wage employment in expanding labor markets is now an important opportunity in many areas, as are non-farm activities associated with tourism and other services. Improved transport and communications systems widen domains within which people seek wage labor and non-farm opportunities, providing incentives for people to migrate out of montane zones on a temporary, seasonal, or permanent basis. In China, incentives for labor flows from rural into urban areas and industrial zones are bringing pressure to further ease constraints on migration.

Market incentives in upland areas are also becoming increasingly dynamic as economic systems become more regionalized and globalized. New market opportunities can arise and fade. Thus, differences in local resource characteristics that provide a basis for profitable specialization in local or national markets can disappear when market integration brings competition from distant locations with more favorable characteristics. We have seen examples in the Up- per Ping Basin. And, product quality and marketing strategies that were adequate in the past may no longer be sufficient under more globalized conditions, as we have seen with tea in Vietnam. Entrance of new opportunities can also threaten or displace others, as with NTFPs and rubber in Laos. But globalization also stimulates demand for new market opportunities if policies, practices and livelihoods can be appropriately adapted, as we have seen with tea in Vietnam, coffee in Om Koi, and ecotourism in Laos and Mae Wang.

Technical change & innovation. Virtually all changes in market opportunities we have seen are associated with technical change. In some cases, change is primarily based on adaptations of local or indigenous technical knowledge, but new knowledge is still required for effective Page 322 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region organization and marketing. We have seen needs for technical change even in crops that have been commercially produced for some time. In other cases, technologies required for effective production require entire new “packages” of inputs and practices. As these technologies are new to mountain areas, adaptation and “localization” will require innovation by local producers. Moreover, many technologies need production inputs, equipment and tools that require access to capital and input markets, as well as sufficient knowledge to make appropriate purchases and employ them in an efficient and effective manner. Technical knowledge can come from government extension agencies and promotion campaigns, but we have seen examples of contract farming where usually private companies provide technical knowledge, as well as examples of knowledge coming from non-governmental or international projects, or from friends or relatives through social networks. As engagement in commercial production activities continues evolving over time, technical change and innovation appear more likely to come from local farmers and farmer groups themselves, as we can see in the Upper Ping Basin and among innovative tea growers in Vietnam. Thus, combinations of experience, access to information, and educational advances will be of great importance over the longer term. But perhaps the most important need is for entrepreneurship and capacities to rapidly adapt production resource mixes, practices, tools and facilities to effectively cope with a constantly changing market environment. This is necessary to improve production efficiencies and product forms, quality, processing, packaging and marketing so that local producers can effectively compete in globalizing markets where demand and price fluctuations and trends are affected by a myriad of factors beyond their control.

Role of the state. Macro-level state policies that have opened the door for emergence of market production opportunities emphasize the need for states to “back off” from strict central planning and state enterprise monopolies, and allow emergence of private sector initiatives to shape and manage production for commercial markets. States are to focus on coordinating investment policies to create an environment where private initiative can flourish and provide opportunities in which poor mountain communities can effectively participate. While there has been much progress in this direction, we also see some blurred boundaries between “state” and “private” sectors. State bureaucracies and organizations, including military and political components, still have strong roles in all states of the region, and there are frequent links where agencies and individuals play important roles in both spheres. But examples of emerging tensions between state and private sectors, such with vegetable production in Yun- nan, indicate differences are emerging and competing for engagement by local farmers and communities. There are also efforts to privatize or transform state enterprises to behave more like private enterprise, and to transfer some public sector initiatives to more entrepreneurial private sector actors. But such changes may require new thinking in both public and private sectors that is likely to require generational change. Other aspects of state roles include:

x Infrastructure. There is widespread agreement on the state’s role in providing physical infrastructure and basic services. Expansion and upgrading of road networks have been critical for emerging market opportunities, especially when accompanied by electricity and telecommunications. While such physical infrastructure appears necessary for most opportunities we have seen, they are sufficient only for those who are otherwise prepared to effectively participate in market production. Especially in montane zones, such people are quite rare. Chapter 7. Summary and Conclusions Page 323

x Services. Basic services where state roles are seen as very important include health care and education, as well as credit, information and research services when there are insufficient incentives for private sector initiatives. While most states have substantially improved the reach and quality of these services, there are still considerable disparities between urban and rural areas, between lowlands and uplands, and among different social strata of society. There are also often special issues where local populations have different ethnic, linguistic or cultural characteristics, as is commonly the case in montane zones. Other services often provided by government agencies or their parastatal offspring include subsidized agricultural inputs, production quotas under state monopolies, or information through extension materials, along with various incentives or disincentives to induce formation of groups to engage in activities they promote. Such services are frequently associated with national campaigns to promote one or another commodity or product and are often aimed at meeting politically determined production targets. With the emergence of growing private sector initiatives, states must carefully consider comparative advantages in providing such services, and ways in which their role can most effectively target constraints faced by poor and marginalized components of society.

x Hidden taxation. We have seen examples of state organizations at various levels effectively “taxing” emerging private enterprise by imposing requirements to improve infrastructure, contribute funds, or assist state programs. While such approaches are often advertised as “showing social responsibility” or “returning benefits to society”, there is a limit to how much an enterprise can contribute and still survive. There are also issues of transparency, accountability, and impacts on prices received by poor farmer producers where policies include poverty alleviation.

7.3.2 Response strategies

In the Upper Ping Basin, where commercial markets have been developing for several decades, we have found household strategies that represent a spectrum of responses to emerging market opportunities. These response strategies can be aggregated into three basic groups:

Self-sufficient farming. These strategies are the most conservative in terms of market engagement. Overall objectives of these households seek stability more than innovation or adaptation, and they have strong aversion to risk. With very little of their agricultural production for sale, there is strong emphasis on being self-sufficient in rice, other subsistence crops, and products gathered from wildland resources. They may produce small amounts of low- value, low-risk crops for sale, but depend heavily on off-farm wage employment for cash income, usually in low wage rate jobs in rural areas or nearby towns, and sometimes in provincial cities. Those with livelihoods above poverty levels tend to have at least some paddy land, large enough areas for upland rice with sufficient fallow to keep weed pressure at manageable levels, some access to forest resources, and enough labor. Effective management of forest resources and forest fallow systems relies on associated local social institutions. Medium to longer term prospects for these strategies are linked with dependence on upland land and forest resources, and with abilities to accumulate assets through savings, livestock, education or other means. State policies are likely to continue pressure to exclude households Page 324 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region from access to forest resources and to upland field areas sufficient for sustainable production of upland rice using forest fallow techniques, leading to shorter fallow cycles, increasing weed pressure and decreasing productivity. Thus, longer term viability appears highly questionable without significant change in Thailand’s upland land use policies.

Commercial farming. At the other end of the spectrum of strategies are those where households have shifted their objectives and efforts to become fully commercial producers in the market economy. Within this category, however, there are two rather distinct patterns:

x Commercial short to medium term strategies. Households with these strategies plant short- season and annual crops, and sell most all of their produce to commercial markets. With little paddy or upland rice, their focus tends to be on intensive year-round vegetable production, often including exotic high value crops. They tend to be less dependent on off- farm employment, but sources of off-farm employment are fairly diverse. They are also more reliant on credit from outside sources for production costs, and keenly interested in innovation and access to new technology to increase profitability of their ventures, such as sprinkler irrigation or pickup trucks for direct market access, and in links with outside sources of technology or market chains and channels. Those willing and able to accept more risks are likely to invest more in crops with higher risk of agronomic or economic failure, but potential for much higher returns if successful. Longer term prospects for these types of strategies appear fairly promising, but dependent on entrepreneurial capacities to produce products with good acceptance and prices in markets, and on ability to withstand periodic crop failures or economic downturns. They may be vulnerable to state land use restrictions, especially where their use of water and agricultural chemicals is perceived as threatening to downstream populations.

x Commercial long term strategies. This type of strategy is heavily integrated into commercial markets, but based on investments aimed at returns over longer periods of time. Or- chards and other tree crops are prominent, as well as land improvement and conservation farming practices. Overall viability is increased by additional components based on paddy fields, livestock and off-farm employment. Some intensive short-season cash crops may be grown, usually on paddy lands. There is less reliance on outside sources of production credit, but strong interest in channels and linkages providing access to technology and markets. Some household members usually engage in off-farm employment, and it tends to be at relatively higher paying types of work. Income diversification under this strategy makes its longer-term prospects the most promising. Households with this strategy are associated with high social standing in local communities, and their investments in land improvements and permanent tree cover improve their standing with state agencies and environmental interests, although state land policies may limit their expansion into some types of tree crops, such as rubber.

Semi-commercial farming. These strategies are intermediate between self-sufficiency and commercial farming, and thus quite diverse, including a diverse range of non-farm and off- farm work. One reason for the wide diversity within this group is the different types of situations in which these mixed strategies are employed, some of which are transitional in nature. For example: Chapter 7. Summary and Conclusions Page 325

x Insufficient subsistence. Some households feel forced into commercial production because they are unable to maintain a self-sufficiency strategy. This is usually due to inadequate livelihood assets of various types. Insufficient amounts of land or poor land quality are common, often due to exclusion from upland fields by state agencies, or to lack of land availabile for newly formed or arriving households. Insufficient household labor is also common, due to poor health, aging, or inability to access wage labor for various reasons. Attitudes toward risk can vary, but often results in production of lower-risk, lower-price crops. These are often the poorest and most vulnerable types of households. x Start-up commercial farming. Some households with livelihood asset limitations employ a mixed strategy during what they hope is the start-up phase for their entrance into a fully commercial farming strategy. This is especially common with young households using a partial subsistence strategy to minimize expenditures so they can invest crop profits and wage income into improving and expanding their commercial farming operations. Their future prospects are highly dependent on their entrepreneurial skills and ability to accumulate sufficient capital assets to shift to a fully commercial farming strategy. x Non-farm or off-farm base. We have seen some cases where a mixed strategy is used by households seeking to move more into non-farm or off-farm occupations. Their commercial production is a means to provide income for helping some household members obtain more education or skills so they can earn better off-farm income, or for developing assets that will allow them to shift their livelihoods to other activities, such as services associated with tourism. Thus, commercial cropping is a supplementary form of enterprise, and their future prospects are dependent on their success in other activities. x Secure diversified households. There are also some households who appear to consciously and willingly adopt a diversified income strategy that includes both self-sufficient and commercial farming components. Such households frequently include members with secure sources of income from non-farm or off-farm sources, along with other members who wish to pursue self-sufficient or commercial farming activities on a full or part-time basis. Relatively recent additions to this category may include some who have become convinced by the ideological values promoted under the self-sufficiency economy banner.

For situations other than those in the secure diversified household category, households with mixed self-sufficient and commercial production strategies are commonly in quite fragile and vulnerable situations. While this is a temporary phase for those who are successful in moving into commercial farming or non-farm occupations, others can fail due to their vulnerability to fluctuations in environmental, economic, or health conditions. And some of those forced into mixed strategies by asset limitations may be unable to overcome other constraints related to their citizenship, language skills, ethnicity, or other factors. Those remaining in this category for long periods without other secure sources of support tend to be the poorest and most insecure households, and it appears likely that their circumstances will force many of them, or at least their children, out of farming livelihoods in the future.

At our study site in Vietnam, where commercial production is more recent and tea is the main commercial crop, somewhat parallel strategies could also be identified: Page 326 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Self-sufficient farmers are those whose main occupations are growing crops other than tea. They tend to have few large livestock, and often seek income from off-farm sources. Many have relatively little land, lower levels of education, and limited access to outside information. Some are younger households formed since land was allocated among households. These tend to be the poorest households in their communities.

x Commercialized households rely heavily on income from various combinations of tea and large livestock. These households tend to be relatively better-off, and invest larger amounts of labor and capital in their tea and livestock production operations. Those who produce tea tend to have relatively large plots, and often receive good prices due to their higher quality outputs and good relationships with traders. Some households have members who also have non-farm occupations outside the village, many of which often do not pay well, but provide valuable channels for contacts and information.

x Mixed self-sufficient and commercial strategies are employed by many households, but it appears that most wish to move in the direction of increased commercialization. The best way for doing so is currently seen to be through improved and expanded production of tea and livestock. Current shortages of household land, labor, capital and knowledge are cited as constraints on commercialization, and strategies they employ for achieving the next “stage of progress” in well-being are usually aimed at overcoming these constraints.

Upland household strategies for responding to market opportunities are clearly not homoge- neous or static. Some have strategies that reflect their aspirations fairly well. Others have transitional strategies, while still others are just doing the best they can to get by. This diversity in response strategies is strongly influenced by household capacities to adopt different response options. Response capacity is closely related to a household’s livelihood assets.

7.3.3 Response Capacities

The diversity of response strategies we found in our study sites in the Upper Ping Basin and North Vietnam are associated with diversity in household asset endowments. Under our study framework, household capacities to respond to opportunities are seen as based on effective command over mixes of the five types of livelihood assets in household asset portfolios:

x Natural capital. Access to natural resources is a major factor in determining which types of strategies are viable options. Adequate areas of land of reasonably high quality (including water and micro-climate characteristics) are a very important basic requirement for both self-sufficient and commercial components of farming strategies. Poorest households are very often associated with relatively small amounts of land, poor land quality, and little or no access to water for irrigation. In terms of access, early settlers tend to be advantaged in Thailand and to some extent Laos, but land allocation has sought greater equity and security for upland land use in Yunnan and Vietnam.

x Financial capital. While access to financial capital is increasingly important for all livelihood strategies, it is especially important for commercial farming components. Many households have financial debts. Temporary debts to fill critical asset gaps are common in commercial farming, and households with commercial farming components usually have sufficient access to institutional credit to borrow significant proportions of the funds re- Chapter 7. Summary and Conclusions Page 327

quired for their production cycles. Exceptions tend to be commercial farmers with long- term strategies, who can draw from their own savings and assets, and semi-commercial farmers with limited assets, who tend to have the least access to credit. Thus, semi- commercial farmers often see contract farming arrangements as particularly attractive. Poorest households usually have very little savings and severe constraints on credit access due to lack of collateral, citizenship, social standing and/or repayment credibility. Households with limited overall productive capacity who must frequently borrow for consumption are likely to accumulate debts that become unmanageable, further decreasing their ability to access additional financial assets.

x Physical capital. Various forms of physical capital assets are needed to effectively operate and further develop different livelihood strategies. Structures, land improvements, and equipment required for irrigation and conservation farming on sloping lands are often important, as are various types of farming equipment, such as walking tractors, hand tools, sprayers, etc. Processing and sorting equipment are needed for some crops, such as tea at our study site in Vietnam, motorcycles or pickup trucks are increasingly viewed as essential for commercial production, and equipment for communications and accessing information is increasing. For more expensive forms of physical capital, households may help defray costs by renting them out or offering services to others who cannot afford their own. Livestock are also considered physical capital and are important assets at all study sites, both for products they provide and as a means to store and accumulate assets.

x Human capital. The most basic quantity of human capital is commonly seen to be the size of the labor force in a household or community, and its adequacy is assessed in relation to the number of dependents that must be supported. Households with insufficient labor to fully utilize other livelihood assets may need financial or other readily convertible assets to hire additional labor. For most households, off-farm employment is an important component of most all livelihood strategies where it is an available option. Poorer households and those with self-sufficiency strategies tend to be particularly dependent on low wage labor as a source of household cash income. Quality of human capital relates to basic health and capacities to conduct various types of work, including knowledge, skills and experience. Those with specialized skills often provide local services that may become commercialized. Most upland households, regardless of farming strategy or wealth category, are investing as heavily as they can in education for their children. Some households, usually with commercial production or non-farm activities, also actively seek new knowledge and skills from a range of outside sources that they can apply in innovative and entrepreneurial ways to overcome constraints and improve production processes.

x Social capital. Social capital assets are important in framing livelihood strategy options and assuring viability and sustainability over time. At local levels, social capital based on community, group or kinship relationships are important in gaining access to various group or community-mediated asset management processes, and especially those related to land and water. Good local social standing often comes from roles in such groups, or through education or exceptional performance, especially if linked with generosity in contributing to community or clan functions or institutions. Good social standing is associated with more ready access to community revolving funds, where they exist, as well as with better access to local off-farm employment opportunities, and development assis- Page 328 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

tance where village leaders play roles in allocation decisions. At wider levels of society additional levels of social capital become important. Those with useful “bridging” links with outside institutions or people at distant locations can benefit directly from those links, and often indirectly through better social standing in the local community. Efforts to participate in community activities may help poor households gain access to some forms of assistance, either from village sources or through links with outside sources.

7.3.4 Key constraints

While the range of opportunities for market production in montane zones has clearly been expanding, efforts by poor people living in these areas to respond to these opportunities by modifying their livelihood strategies and developing their livelihood assets still face several types of important constraints.

x Location characteristics. Despite advances that have been and are currently being made in physical infrastructure, physical access is still an important constraint in many montane areas. And even when basic physical infrastructure and services are in place, the terrain and relative remoteness of many areas in montane zones still impose higher costs in time and transport on the inputs they require and the products they produce. This makes it difficult for these areas to compete directly with areas that have a locational advantage, unless other factors such as seasonality or product characteristics or quality can offset such constraints and help establish a comparative advantage.

x Access to information & knowledge. Limited information, knowledge and expertise impose further constraints on opportunities, and these constraints are usually more severe in montane zones, and especially for poorest households. In addition to more difficulties in physical access, low non-poor densities in montane zones reflect the general scarcity of successful entrepreneurs and sources of knowledge and expertise. It is a very common complaint from local leaders that they and their communities need more access to information and data, and more capacity to understand and apply it in their efforts to improve local livelihoods and communities. Many are growing weary of outside “experts” who claim to have definitive information about their areas to which they have no access, or business interests who are able to exploit them by providing only partial information.

x Access to education & basic services. Generally lower levels of education and literacy are also indicative of broader issues, which can be further complicated by language and cultural issues associated with ethnic minority populations. Moreover, disparities in access to many programs and services often relate to ethnicity or affiliation with groups that are marginalized by society. We have also seen in Vietnam, however, that some newer government support programs seek to turn the tables so that ethnic minority status can be an advantage in accessing support. While it is still an open question how much such programs will be able to affect the overall balance of constraints faced by ethnic minority groups, at least it appears to be a good start. We have also seen in Yunnan, where ethnic diversity is part of the provincial identity marketed in its “backbone” tourism industry, ethnicity seems to have little relationship with income-based measures of poverty status.

x Production chain gaps. Critical gaps in production, processing and marketing chains are often very important constraints that are more difficult to fill in montane zones. We have Chapter 7. Summary and Conclusions Page 329

seen how vertical integration that incorporates contract farming mechanisms appears to be a promising approach, yet results and acceptance by farmers appears mixed. And where systems have been put into place largely through initiatives from lowland agro- industry companies, resulting areas of intensive production in mountain regions, sometimes based on only one or a few commodities, are coming under increasing criticism and restrictions related to their perceived environmental impacts. Newer more ‘green’ technologies may help, but many poor farming households remain skeptical. If maintenance of diversity is to be one of the priorities for mountainous areas, then the example of chains that have been developed by the Royal Project Foundation in northern Thailand may be indicative of the types of systems that need to be put into place in order to have well-functioning mechanisms for capturing value added and effectively marketing products into high value urban niche markets. The fact that there appears to be so few examples where this has been accomplished and the unusual characteristics of the RPF are indicative of the difficulties involved. One important aspect of what the RPF has been able to accomplish is establishment of systems and operations that are generic enough that the same facilities and systems can be used for product lines that include a relatively diverse and evolving set of products, rather than the single commodity or narrowly focused chains that are more common in the region. It has also managed to draw on expertise from both private and public sector sources. At this point, there are still very few examples of private or public sector initiatives that have been able to effectively develop such “backbone” systems capable of supporting diverse product lines that play on the relative advantage of complex ecological conditions found in mountainous areas.

x Access to land resources. But perhaps the single most important set of constraints for people living in montane zones in many parts of the region relates to access to land resources. In some cases, especially in parts of Vietnam, this is associated with increasing population density resulting from high rates of population growth. But in many more areas it is not so much population growth that underlies land resource access issues and problems, but rather various combinations of lack of recognition and security in local claims to land resources, redistribution of land use patterns associated with induced resettlement and land allocation programs, and increasing exclusion from access to land resulting from state land use policies. Many of the underlying issues here are associated with the nature of traditional agroecosystem management practices, which have been difficult to integrate into the conceptual framework of mainstream land tenure schemes, and which include practices that mainstream societies find extravagant in terms of the areas they occupy, and unacceptable in terms of their perceived environmental impacts. Other issues are associated with urban-based policy visions of protected mountain forest landscapes without settlements or agricultural activities.

7.4 Potential future pathways

Our exploration of potential future transitions and alternative potential pathways for future development in chapter 5 underscored the dynamic nature of processes that shape livelihood opportunities and constraints found in upland landscapes across mainland Southeast Asia. There is a range of important uncertainties about how processes may continue to unfold, Page 330 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region how decisions and events at various levels can influence their direction, and how various vectors of change can converge to reinforce or negate emergence of different types of conditions and their associated sets of livelihood opportunities and constraints.

While assessments of previous change and current trends can help us understand past transitions and how factors at multiple levels have influenced change and responses, they have also increased our awareness of how emerging transitions can change the context of opportunities and responses to an extent that the past may no longer be a reliable guide to the future. We have seen indications of some potential transitions at our case study sites. Moreover, at the time this report is being completed, global oil prices are at an all-time high, sharply increasing costs of transport and fuel for oil-dependent energy grids. At the same time, food costs are surging, including prices of rice, maize, and dairy products. There is also growing discussion and debate about economic impacts of competition from purchase of maize, and increasingly other crops, for use in bioenergy production.

At the broadest level, growing economic integration and openness appear to have been simul- taneously increasing livelihood opportunities, uncertainties, and vulnerabilities. These trends are being driven by macro-economic policies and increasing integration into regional and global markets, and most people are assuming these directions will continue. But change is not inevitable, and there are still alternative variants in these directions that will likely be influenced by policy choices, such as: x What will be the balance between conservation and production in upland areas, and to what extent must these be segregated or allowed to be integrated in upland landscapes? x Will patterns of national investment in economic and infrastructural development encourage concentration in urban and industrial centers with access through migration, or will they encourage a more widespread distribution of participation and prosperity? x Will patterns of support for production of exports from the uplands emphasize a few high volume commodities, or a diverse range of lower-volume specialty products? x Will investments in improved connectivity be narrow and centrally-oriented, or will they seek to build connectivity that is more multidimensional and distributed? x Will society accept and seek to build on diversity and devolution, or will it pursue a narrow social bandwidth directed by central elites?

Our exploration of scenarios has helped demonstrate how answers to these types of questions, which will come largely from political processes at international, national and local levels, will have strong influences on what type of alternative futures will be plausible and most likely in various upland areas of the region. Furthermore, these influences will be further narrowed by how combinations of these types of uncertainties are resolved, as well as interactions among resolutions reached at different levels, since not all combinations are viable or stable. More- over, the whole system of interactions is dynamic and decisions reached at any specific location in the system are always subject to change. Complexity and uncertainty appear to be the main characteristics of the future that are most clear.

Chapter 7. Summary and Conclusions Page 331

7.5 Policy issues and processes

Policy is about making social choices among alternative pathways for stability and/or change. Since the mandate of this study is to examine market and resource access of the upland poor (Figure 3-6), this concluding section on policy-related findings targets market access and natural resource access issues. More detail on policy implications can be found in chapter 6.

7.5.1 Improving market access

State policies aimed at improving market access of the poor in upland zones need to expand their consideration of various inter-related factors that include. x Transferring lowland strategies. It is often far from clear that technologies and development strategies that may be effective in easily accessible lowland locations are readily transferable to upland areas. In particular there is often concern that higher transport risks and costs, as well as limitations, for example, with respect to water storage, can mean margins for upland competitiveness in shared markets are very low. Where road improvements can be made, they can clearly help. But in general, most solutions for upland livelihood and landscape issues are likely to require extensive adaptation and localization for upland settings, including specialized support from research and information technology systems. x National policy uniformity. Related to the issue of transferability, is the preponderance of blanket, inflexible, or highly uniform policies with respect to economic development, land, and natural resource management. Ecological and social conditions in upland zones are diverse and often substantially different from the main agricultural production areas of those making policies. This is why moves to decentralize and devolve development decision-making are so vital to upland interests and needs. At the same time it is important that such “re-distribution” also takes place with respect to public research and development and information systems that could stimulate private investment. x Impacts of international trade on relationships within domestic markets. Recurring cross- scale interactions affect prices, demand and availability of labor. Very often, for example, information about consumers within a country, much less about those across borders, is very limited in upland zones, so that producers in these areas may be even more dependent on (and vulnerable to) middlemen. On the other hand, private sector initiatives have often been at the forefront of innovation, establishing new production systems and linking producers to new and wider markets (see section 6.4.4). Policies should seek to facilitate private initiatives, but at the same time support wide access to cross-scale flows of information in order to help widen opportunities, build capacity, and reduce exploitation. x Niche-oriented production strategies. In many upland locations, limited areas ecologically suitable for production of a particular crop, as well as seasonal availability of labor, means that boutique or niche-oriented strategies that may include value-added processing will often provide greater benefits than mass or bulk production volume strategies. One challenge is that such options often require significant investments in both technical and market dimensions of research and development. Another may be need for ‘backbone’ types of production and marketing chains for ‘suites’ of niche products. Policies may also Page 332 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

be needed to support labeling and certification schemes to reduce risks that place-based specialties (like teas) can be out-competed by inferior but misleadingly marketed products from elsewhere. Of course recognizing rights to land, water and farming activities in the first place is an important pre-requisite for establishing such place-based approaches. x Non-agricultural goods and services. There needs to be more policy recognition that markets of interest are not only for agricultural commodities, but also for other goods and services derivable from upland landscapes. Non-farm incomes are an important but ne- glected component of livelihood strategies of the upland poor. Economic development policies for mountain areas should pay much more attention to existing and improving non-farm related capacities and skills. Education clearly has a crucial role. It is also important to recognize that non-farm incomes could help stimulate innovation and improvement of farm-related activities if investments are recycled into upland areas. x Off-farm employment. Off-farm wage employment is an important supplemental component of most upland household livelihood strategies whenever such options are available. The poor are particularly dependent on it for cash income. For the poor, upland options often tend to be choices among low-paying agriculture, dead-end menial jobs, or low-paying service sector jobs often associated with tourism or urban areas. Yet off-farm employment is also seen by some as a means for escape from such options. Since many see dignity and security as epitomized by salaried jobs with government or a big company, parents are investing heavily in education for their children to improve their chances for such employment, probably at some distant urban location. Without education, some of those unable to develop other marketable skills often end up in urban slums, or seeking income from darker activities such as drug deals or prostitution. Yet only China appears to have any policies directly related to off-farm employment by poor rural households in upland areas. x Diverse response capacities. Households vary hugely in their capacity to take advantage of emerging market-related opportunities. This is reflected in the diversity of particular responses and overall strategies. In upland zones, “self-sufficiency” components often remain an important part of household resilience to environmental, economic and political shocks. At the same time, ability to enter into long-term commercial farming and non- farming sources of income is crucial for many households, communities and areas to escape poverty traps. A range of different livelihood assets are important for capacities to respond to and cope with changes in opportunities and challenges. Policies and poverty programs need to provide options that can assist poor households in building those assets that limit their capacity to participate in opportunities and pursue their aspirations. x Multiple dimensions of poverty. Market access is only one of the factors contributing to poverty in the upland zone (see section 2.4.2). Policies to improve access for groups of the poor more broadly – and there are many more poor people in lowland than upland areas in some countries (section 2.4.1) – will need to include some upland-specific components, and especially ones that help address both physical and social barriers to access. Social barriers, and especially those related to ethnicity and social legitimacy, have especially strong impacts on upland households and communities. Vietnam is experimenting with focused programs for its poorest communes in mountain areas. Other important Chapter 7. Summary and Conclusions Page 333

dimensions include technical innovation, which is invariably a key partner in the expansion of market opportunities, and development of a range of entrepreneurial skills.

7.5.2 Access to natural resources

State policies have generally not been aimed at improving access to natural resources of people in upland zones. But improving opportunities for commercial production without also attention to issues of natural resource access and capacities (see Figure 3-6) is unlikely to be effective. In order to compensate, or to make exceptions, that would benefit poor households, policies need to expand consideration of several issues: x Natural resource management policies across the region have generally been quite different among countries. This is apparent, for example, in comparing policies related to (1) conservation by exclusionary protected areas, (2) support for non-timber forest product markets, and (3) responsibilities for watershed management. Thailand and Laos have had more similar policy objectives for upland zones with respect to watershed conservation and expansion of protected areas, especially in upper montane zones where both seem to want landscapes wherein agriculture and forestry are segregated. But Laos is seeking to implement localized zoning processes aimed at providing security for land use by local households and villages, including recognition of village forest areas and local commercial production of NTFPs. Thailand, on the other hand, appears to prefer forms of land and forest access dependent only on patron-client relationships, and limiting any local use of forest products to subsistence purposes. Policies in Vietnam and China appear to have been considerably less aggressive in expanding exclusionary protected areas or restricting production of NTFPs. x It has become increasingly apparent through environmental research that maintenance of key watershed functions is not incompatible with multi-functional landscapes that include areas for growing crops, agroforestry practices, or sustainable harvest of forest products. Policy, however, often continues to lag behind both local and research-based knowledge in this area. In Laos, and especially in Thailand, policies have tended to support segregated rather than more integrated approaches to conservation and development for the poor. Policies in China and Vietnam appear considerably more flexible and willing to accept multi-functional agroforestry landscapes in many areas. While large-scale watershed programs in China promote replacing upland fields with trees on sloping lands, their approach has placed more emphasis on compensation for changes in upland land use using concepts similar to those in payment for environmental services schemes. x Natural resource access needs of poorest households may be substantially different from needs of average low income households in the uplands. Policies to address poverty in these circumstances need to look carefully at entitlements: are basic human rights and needs being respected and met in an equitable manner? Resource access issues may be particularly acute and adversely affected by wider policies that support intensification of agriculture and industrialization within a landscape framework that clearly segregates ecosystem-based and energy-based activities, as in a Services-Park scenario (see chapter 5). Page 334 Comparative assessment of resource & market access of the poor in upland zones of the Greater Mekong Region

x Incentives and responsibilities for local government, and thus place-based policy orientation, have often not been well aligned with those of line agencies and their uniform approaches under narrower centralized policy objectives. In Thailand, although TAOs are an important form of representative local government, they have not systematically taken on environmental management responsibilities even when mandated, due in part to contradictory policies of various centralized line agencies claiming exclusive authority over such matters, and to lack of legal authority in upland areas where local land use is unrecognized and technically an illegal encroachment on land ‘belonging’ to agencies. There are also higher scale-related dimensions to this issue, for example, at levels of provinces versus the nation, as well as among various levels of the natural resource hierarchy from local subwatershed to sub-basin to river basin to river system (see section 6.3.6). x Rules of access to natural resources have often not been applied uniformly across different interests. Rather, they tend to favor those with least need for special assistance, such as large commercial or parastatal interests. Examples include state support for private sector mining, resorts, estates, large concessions and hydropower related access, in contrast to the restrictive rules and regulations applied to poor farming households. The “public interest” appears to often be more closely aligned with narrow elite private interests than with securing livelihoods of poor households with much fewer investment options. Im- proving local participation in governance in the uplands is critical to addressing poverty. x Local capacities to manage natural resources, including the complex and diverse set of goods and services that can be derived from upper tributary watersheds, have often not been supported by management initiatives at higher levels. Rather, agency-directed top- down schemes are usually pursued, even for upper tributaries where agencies often have little implementation capacity. Management of natural resources, especially in the type of river basin frameworks being emphasized in Thailand and Laos, stand very little chance of being effective without serious attention to and application of principles of subsidiarity (see Chapter 6). This needs to include capacity for cross-scale interaction, for example where local land managers in upper tributary watersheds can enter into direct negotiations with downstream interests who believe they are suffering negative impacts. Moreover, such negotiations need to be based on evidence rather than emotions stirred by calls about ‘crisis’ or about need for ‘stability before change’.

Moreover, attractive market-based opportunities for the upland poor need to offer expectations of reasonable levels of returns to labor and acceptable risk of failure. People need to have sufficient connectivity, information and access to livelihood assets to be able to respond to them and invest in their further development. And especially over the longer term, opportunities need to have characteristics associated with people’s aspirations, and especially for the young this is likely to include their perceptions of a ‘modern life’. Vibrant, entrepreneurial and responsibly engaged upland communities where people feel they have dignity and a good quality of life and want to invest in the future for themselves and their children, appear to be possible. But they are unlikely to be achievable until important barriers to their achievement are reduced and such aspirations are integrated into society’s vision of the future. Page 335

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