Towards improving profitability of teak in integrated smallholder farming systems in northern Laos
Stephen Midgley Michael Blyth Khamphone Mounlamai Dao Midgley Alan Brown
Canberra 2007 The Australian Centre for International Agricultural Research (ACIAR) was established in June 1982 by an Act of the Australian Parliament. Its mandate is to help identify agricultural problems in developing countries and to commission collaborative research between Australian and developing country researchers in fields where Australia has a special research competence. Where trade names are used, this constitutes neither endorsement of nor discrimination against any product by the Centre.
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© Australian Centre for International Agricultural Research, GPO Box 1571, Canberra, ACT 2601
This review was commissioned by ACIAR to obtain further information on the subject area. The conclusions of this report are not necessarily endorsed by ACIAR.
Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64, 95p.
ISBN 1 86320 536 5 (print) ISBN 1 86320 537 3 (online)
Technical editing: Jo Mason, MasonEdit Cover design: Design One Solutions Typesetting and layout: Clarus Design Pty Ltd Photographs: Stephen Midgley; Dao Midgley (Figure 2.4b) Printing: Goanna Print Pty Ltd Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Foreword
One of the poorest countries in South-East Asia, the Lao People’s Democratic Republic (PDR), or Laos, is characterised by low population density, high ethnic diversity, poor infrastructure and geographical dispersion of its people. Agriculture employs over 80% of the population and generates 53% of GDP. Forests are a vital economic resource. In rural areas forests provide the basis for one of the few available economic activities and, in forested areas, non-timber forest products contribute more than half of family incomes. Occurring naturally in Laos, teak is one of the world’s finest timbers. The high sustained demand for teak wood, coupled with significant shortages of supply from natural forests, has stimulated the development of plantations in many tropical countries. There are now over 10,000 hectares of teak around Luang Prabang in northern Laos and, for the farmers who have been involved, the sale of even relatively small logs significantly supplements typically very low annual incomes. Broader adoption of teak planting would confer a higher level of economic robustness to farming communities in this area. There are two significant impediments to realising the economic potential offered by teak in northern Laos: first, the relatively long wait (at least 15 years) for a financial return; and second, the reluctance of farmers to undertake pre-commercial thinning, which in turn restricts the production of the higher value larger size classes of timber. This study examines the socioeconomic and technical constraints to the incorporation of teak planting into farming systems in northern Laos. It specifically evaluates the economic prospects for integrated systems involving interplanting of teak with tree species that are used locally for the production of non-timber forest products, in particular paper mulberry. This is based on the premise that harvest of the non- timber component could provide an early return to the farmer, while at the same time allowing the silvicultural release required to optimise value production from the teak. The study also identifies research challenges relating to increasing the profitability of teak smallholdings in northern Laos. It is hoped that the recommendations will provide a guide to several donor agencies that are active in the Lao PDR.
Peter Core Director, Australian Centre for International Agricultural Research
3 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Among timbers, teak holds a place which diamonds maintain among precious stones and gold among metals.
Dietrich Brandis, Inspector General of Forests, India, c. 1855 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Contents
Foreword 3 Abbreviations 7 Currency (June 2006) 7 Acknowledgments 8 Dedication 8 Notes on the authors 9 Summary 11 1 Laos and its forestry sector 13 Laos 13 The Lao forestry sector 14 Luang Prabang province 15 The approach for this study 16 2 Teak growing 18 Natural teak forests 18 Teak plantations 20 Teak in Laos and Luang Prabang province 25 3 Teak markets and marketing 29 International teak markets 29 The wood processing sector in Laos 29 Teak marketing in Luang Prabang province 30 Market channels for teak 33 Availability of teak for future markets 33 4 Socioeconomics of teak smallholdings in Luang Prabang province 34 Emerging regulations relating to teak smallholdings 37 Land allocation and national policies 37 5 Smallholder study: Village growers in Xieng Ngeun and Luang Prabang districts 39 Survey procedure 39 Village conditions 40 Market information 44 6 Economic aspects of integrated teak farming systems 46 Stabilising agriculture 46 Profitable integration of teak into smallholder farming systems 47 Current smallholder farming systems 48 Teak farming systems 49
5 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Cash crop options for growing with teak 53 Potential for production of non-timber forest products in association with teak smallholdings 54 Paper mulberry, Broussonetia papyrifera (posa-Lao) 55 7 Assessing profitability of integrated teak farming systems for smallholders 59 Underlying assumptions 59 Traditional long-fallow shifting cultivation system 61 Transitional short-fallow system 61 Unmanaged teak 64 Managed teak 66 Integrated teak 67 Comparing system profitability 68 8 Conclusions and opportunities for ACIAR to contribute 71 Opportunities for ACIAR 72 Market components 73 Technical components: teak 73 Technical components: integrating companion food crops and NTFPs with teak 74 Socioeconomic components 74 Networks 74 9 References 75 Further selected reading on teak 80 Personal communications 80 10 Appendixes 81 1 ACIAR’s project proposal 83 2 Project questionnaires 84 3 People consulted during the field study 87 4 Donor agencies and projects in the forestry sector of northern Laos 89 5 Sources of information and cooperation 93 6 Regulation of the timber trade in Luang Prabang 94
6 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Abbreviations
ACIAR Australian Centre for International LARP Lao–Australian Reforestation Project Agricultural Research LDSC State Company for Land Development and ADB Asian Development Bank Services APAFRI Asia Pacific Association of Forestry LPA Lao Plantation Authority Research Institutions LUSLOF Sustainable Land Use Practices for the APFORGEN Asia Pacific Forest Genetic Resources Uplands of Vietnam and Laos: Science and Programme Local Knowledge for Food Security. ASB Alternatives to Slash-and-Burn Cooperative Project—NAFRI, NISF Consortium Vietnam, ICRAF, Rockefeller Foundation ASEAN Association of Southeast Asian Nations MAF Ministry of Agriculture and Forestry CGIAR Consultative Group on International mai mean annual increment Agricultural Research MMSEA Montane Mainland Southeast Asia CIAT International Center for Tropical MSEC Management of Soil Erosion Consortium: Agriculture CGIAR CSO clonal seed orchard NAFReC Northern Agriculture and Forestry DAFO District Agriculture and Forestry Office Research Centre, Luang Prabang province DANIDA Danish International Development Agency NAFRI National Agriculture and Forestry dbh diameter breast height Research Institute EU European Union NGO non-government organisation FAO Food and Agriculture Organization of the NPV net present value United Nations NTFP non-timber forest product FLUPLA forestland-use planning allocation process PAFES Provincial Agricultural and Forestry FSC Forest Stewardship Council Extension Service GDP gross domestic product PAFO Provincial Agriculture and Forestry Office GoL Government of Lao PDR PDR People’s Democratic Republic GTZ German Technical Cooperation: Deutsche PMO Prime Minister’s Order Gesellschaft für Technische RIWI Research Institute for Wood Industries, Zusammenarbeit GmbH Chinese Academy of Forestry ICRAF International Centre for Research in SADU Smallscale Agro-enterprise Development Agroforestry for the Uplands Project IPGRI International Plant Genetic Resources sed small-end diameter Institute SIDA Swedish International Development IRR internal rate of return Cooperation Agency IRRI International Rice Research Institute SLU Swedish University of Agricultural ITTO International Tropical Timber Sciences Organization SNV Netherlands Development Organisation IUARP Integrated Upland Agricultural Research SPA seed production area Project (NAFRI, IRRI, ICRAF, CIAT, Teaknet Teak Network for Asia and the Pacific IWMI) TIC Teak Improvement Centre, Royal Thai IUFRO International Union of Forest Research Forest Department Organizations TLUC temporary land-use certificate IWMI International Water Management Institute UNIDO United Nations Industrial Development JICA Japan International Cooperation Agency Organization
Currency (June 2006)
US$1 = 10,000 kip US$1 = baht 38 US$1 = A$1.36
7 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Acknowledgments
The authors gratefully acknowledge the roles of the versity of Laos. In Luang Prabang, Kaysone Vong- many people and communities who have provided khamheng, Head of the Provincial Agricultural and input for this study. To the teak growers in the vil- Forestry Extension Service; Sianouvong Savath- lages of Ban Gok Gniew, Ban Xieng Lom and Ban vong, Forestry Director of the Provincial Agriculture En who gave their time during the busiest period of and Forestry Office; and Homchitsavath Sodarak, the agricultural calendar, our sincere thanks. The Director of the Northern Agriculture and Forestry field work would not have been accomplished Research Centre (NAFReC), and his colleagues without the good will, efficiency and energy of our Khamen Soubangxay and Saysana Inthavong shared local coordinators Mme Bounchanh and Tan Pheng their publications and long experience on teak in of Ban Gok Gniew, who made excellent arrange- northern Laos. ments to coordinate meetings and sharing of informa- tion at all three villages. The Women’s Committees From the industry and processing sectors, Peter of the three villages kindly organised meals and Fogde of the Burapha Company and industry con- refreshments during the fieldwork. sultant Thongthanh Southitham shared their experi- ence with teak processing and markets; and the The Ministry of Agriculture and Forestry of the proprietors of Sawmill Thongsavang, Lak 15, and Government of Lao PDR and the Department of For- Laksi Sawmill, Luang Prabang, obligingly provided estry offered full support and access to recently pub- information. lished policies and national strategies. To Xeme Samontry in the Ministry and Sousath Sayakoum- Several donor-supported programs offered valu- mane and Khamphachanh Boungnakeo at the Plan- able advice and perspectives: thanks are due to the ning and Cooperation Division, Department of SIDA team through Michael Victor and his col- Forestry, our thanks. Within the National Agriculture leagues Peter Jones and Bhandith Ramangkoun in and Forestry Research Institute (NAFRI), the Deputy Vientiane and Paulo Pasicolan in Luang Prabang; the Director General, Monthathip Chanthaphengxay, SNV program via Souvanpheng Phommasane in and her colleagues Bounhom Thapavong and Vientiane and Martin Greijmans in Luang Prabang; Chanthavisay Keobounnam offered support and Mr Bernhard Mohns from the GTZ program at Ban information. Houay Xai (with apologies for cancelling our pro- A great many people generously shared informa- posed visit); Phousit Phoumavong of the Japanese- tion on teak growing in northern Laos: in particular, supported Forest Management and Community Thongsavanh Keonakhone of NAFRI, who recently Support Project (FORCOM) in Luang Prabang; and completed a MSc thesis on teak, and Sengdouane John Connell of CIAT for sharing his perspectives on Wayakone of the Faculty of Forestry, National Uni- market-oriented extension research.
Dedication
This study is dedicated to the memory of the late Gniew in 1962 and who enthusiastically shared her Phengdy Sinhotha, an innovative farmer who estab- information with the team before her death in July lished and managed teak smallholdings in Ban Gok 2006.
8 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Notes on the authors
Stephen Midgley Khamphone Mounlamai
Stephen Midgley is a specialist in forest genetic Khamphone Mounlamai is a senior research scien- resources who began a long association with the Lao tist with the Lao National Agriculture and Forest forestry sector in 1973 via the Lao-Australian Refor- Research Institute (NAFRI) and is National Project estation Project. Since that time and during his career Manager of the Lao Tree Seed Project. Khamphone with Australia’s national research body, CSIRO, he has professional interests in the commercial develop- has worked continuously in Asia through long-term ment of teak, eucalypts and other species of commer- projects in Nepal, Sri Lanka and China and via short- cial potential in Laos. term projects in many other countries. Dao Midgley Michael Blyth Dao Midgley has had a long association with for- Dr Michael Blyth is an agricultural economist and estry development projects in many Asian countries. development specialist. He worked as a research Fluent in several languages in addition to her native economist for the Australian Bureau of Agricultural Lao, Dao has a strong interest in anthropology and and Resource Economics and in strategic planning in possesses skills in cross-cultural communication. CSIRO. He has worked with many research and development organisations throughout Australia, Alan Brown AM Asia and the Pacific in the areas of planning, priority Alan Brown, a former Chief of the CSIRO Division setting, evaluation and management improvement. of Forestry, ACIAR project leader and member of CIFOR’s Board, is currently Production Editor of Australian Forestry.
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Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Summary
Teak (Tectona grandis) is a tropical hardwood which A challenge to profitable teak growing is the long occurs naturally in Laos. The high sustained global rotation, which ties up land and capital for at least demand for teak wood coupled with significant short- 15 years. In this study the prospects for improving ages of supply from natural forests has stimulated short-term returns to teak investments are explored establishment of plantations in many tropical countries, by appraising a number of integrated teak farming so that the total area is now 5.7 million ha. Increasing options. Data and information from a range of inter- amounts of plantation-grown teak wood are being sup- national and domestic Lao sources are used to set the plied to and accepted on world markets. Reports from context for teak production, marketing and several countries indicate increasing investment in teak processing in Laos. From these investigations a plantations and farmer smallholdings of teak, and a number of suggestions are made for further research strong international market for the wood produced. to increase the profitability of teak smallholdings in This report examines the background to the estab- northern Laos. lishment of large numbers of teak smallholdings near Primary data were collected from interviews with the city of Luang Prabang, northern Laos. An estate personnel from relevant government agencies and of 10,000 ha of privately owned plantations in blocks their supporting donor organisations and projects, and varying in size from 0.1 to 1.0 ha has been estab- from private businesses involved in teak growing and lished close to roads and rivers over the past 15 years. processing. Meetings and structured interviews were A field study examined market forces and social and held with community leaders and growers in three vil- institutional changes that have underpinned commu- lages near Luang Prabang. An extensive review of lit- nity enthusiasm for planting teak. erature was conducted, drawing on previous studies in Laos and relevant international sources. The forestry sector is important for the economy of Past studies of smallholder teak production near the Lao PDR, and plantation establishment features Luang Prabang, and the interviews in the three highly in government policies and priorities. Integra- sample villages—each with a long history of planting tion of teak plantings into smallholder farming teak—indicate a common enthusiasm for planting systems in northern Laos is consistent with these pol- teak, and reveal technical and social challenges icies. It has produced a regional resource with an esti- facing ongoing expansion. Challenges facing teak mated standing market value of US$80 million smallholders include the long time between planting (based on an average price of US$10 per tree at age and generation of income, indifferent genetic quality 15–20 years) and an estimated semi-processed value of planting material, and lack of development and (as squared logs for export) of US$332 million. The transparency in the supply chain. estimated current harvest of teak wood from small- This preliminary appraisal of a number of farming 3 holdings is 4,000 m /year. This is expected to system options found that integration of teak into 3 3 increase to 18,000 m /year in 2010 and 60,000 m / upland farming systems is a profitable option for year by 2020, offering opportunities for primary and smallholders. The results are indicative of the finan- secondary wood processing within Laos. cial potential of teak-based farming systems in Private teak plantings have been recorded in northern Laos. Enterprise gross margins for alterna- northern Laos since 1950. They are largely confined tive land uses are assessed and compared using net to areas close to roads or rivers, which allow efficient present value of returns per hectare and labour access and transportation of logs to mills. Since 1990 returns per person per day. there has been a ‘boom’ in teak planting near Luang The highest returns to land and labour inputs were Prabang, with the total area increasing from 500 ha to for a managed teak system with periodic thinning and over 10,000 ha. pruning, and a teak–paper mulberry intercropping
11 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. system. While the managed teak system generated unequivocal community-level support for such initi- high returns, its attractiveness to smallholders may be atives, including a strongly expressed willingness to limited by the lengthy period without positive cash undertake research on individual farms. This support flow and competition for land for food and cash mirrored that expressed by government agencies at crops. On the other hand, the integrated teak and both provincial and national levels. paper mulberry system generates positive cash flow Program components for ACIAR to consider in most years. Further research into the technical and include: financial feasibility of this latter system is warranted • farming systems incorporating companion crops, by these preliminary results. including food crops and fibre crops such as paper Individual smallholders’ land-use decisions are mulberry, with teak plantings subject to many conditions including the availability • agronomic and market information for companion of suitable land, family labour, financial resources crops including opportunities for primary and knowledge. For this study a number of assump- processing tions are made about the availability and status or • support for development and deployment of nature of each of these factors. Variations in the fun- improved teak germplasm damental factors of production can be explored more • market information system development to allow comprehensively through whole-farm modelling to farmers to better evaluate the market value of their assess the feasibility of alternative land uses. This plantations and logs, and time their sales would also need to take into account financial, social accordingly and other goals of smallholders. To complement • preparation of local communities to capture improvements in land and labour productivity, greater value from the increasing volume of teak improvements further along the supply chain for food logs that will mature over the next decade. and fibre products, including teak wood and paper Several international donors, NGOs and CGIAR mulberry bark, are also needed. Off-farm improve- research centres are offering support to develop ments are likely to provide added incentives for improved farming systems which include teak and smallholders to adopt more intensive teak-based other trees in northern Laos. The components sug- farming systems. gested above would complement programs spon- An opportunity exists for ACIAR to foster a sored by other donors. program of participatory, on-farm research in While this study focused on Luang Prabang prov- northern Laos to address these and other challenges ince, the conclusions have relevance to other areas in relating to increasing the profitability of teak small- northern Laos, a region that accounts for 41% of the holdings in northern Laos. The field study revealed area and 33% of the population of the Lao PDR.
12 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
1 Laos and its forestry sector
Laos egories: Lao Loum (lowland) 68%, Lao Theung (upland) 22% and Lao Soung (highland) 9%. About The Lao PDR (Laos) is predominantly a moun- 83% of the population is rural and 66% of the people tainous country with some plains and plateaus and a depend on subsistence agriculture (Roder 2001). All land area of 236,800 km2. It is land-locked, sharing major ethnic groups of the country are engaged in borders with China, Myanmar, Cambodia, Vietnam slash-and-burn agriculture. and Thailand; the Mekong River forms a large part of Laos has a tropical monsoonal climate featuring a the western boundary with the latter (Figure 1.1). rainy season from May to November and a dry Laos has a small population of 5.6 million dispersed season from November to April. The seasons unevenly across the country and increasing at an esti- strongly influence Lao agricultural and cultural cal- mated annual rate of 2.3%. Most people live in endars. valleys of the Mekong River and its tributaries. The Laos is a poor nation by Asian standards, with an population is ethnically diverse, with more than 60 estimated annual per capita GDP (2006) of US$491 ethnic groups (Stuart-Fox 1986). Based primarily on (Government of Lao PDR 2006). Agriculture ethnic, linguistic and geographic characteristics, employs an estimated 81% of the population and pro- ethnic groups have been divided into three broad cat- duces 53% of GDP. Subsistence rice farming domi-
Figure 1.1 Laos in South-East Asia
13 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. nates the sector. Other rural activities involve coffee, sector, as summarised by the Swedish International corn, sugarcane, vegetables, tobacco, ginger, water Development Cooperation Agency (SIDA) (2004), buffalo, pigs, cattle, poultry, sweet potatoes, cotton, were to: tea and peanuts. Fallow land in slash-and-burn • ensure food security for all Lao people systems may account for 6–10% of the land area. • enhance market orientation, transforming agriculture from subsistence to commercial The Lao forestry sector farming • maintain an agricultural growth rate of 4–5% per Laos is endowed with valuable, productive and eco- annum logically unique forests. They are a vital economic • diversify and modernise the agriculture and resource, providing essential contributions to the forestry sector livelihoods of the rural population, especially the • promote commodity production, especially for poorer communities. Some 80% of the population export rely heavily on forests for timber, food, fuel, medi- • improve rural livelihoods cines and spiritual protection. In rural areas forests • transfer technology through improved research provide one of the few available economic activities, and extension and in forest-rich areas non-timber forest products • strengthen rural financing. (NTFPs) contribute more than half of family incomes The most important agricultural policies and prior- (Department of Forestry 2006). ities that affect development in upland areas such as Through log production, forests contribute 3.2% of Luang Prabang province are to: GDP. However, this figure does not include subsist- • stabilise shifting cultivation and eradicate poppy ence use, wood processing and NTFPs. Wood prod- cultivation ucts currently contribute some 25% of total export • conserve the environment, and protect species and earnings, and log royalties make a substantial contri- habitats bution to government revenue (23% in 2000–01). At • maintain healthy, productive forest cover the same time, they provide habitat for the nation’s • generate a sustainable stream of forest products, rich natural biodiversity and protection of its soils, including NTFPs watersheds and water resources. • implement decentralisation and participatory Forests with more than 20% crown cover occupied planning some 41.5% of the total national area in 2002, down • encourage village consolidation and land from about 47% in 1992 and 70% in the 1940s. This allocation. forest decline has led to a loss of wildlife and plant For the commercial forestry sector these national habitats. Direct causes for the loss are forest clearing policies have resulted in promotion of tree planta- and burning by unsustainable shifting cultivation, tions for commodity production, and the acceleration uncontrolled logging and conversion to agriculture of classification, delineation and management of and other land uses. This is spurred by wide-spread forests for protection, conservation and production. poverty, rapid population growth and weak law National policies acknowledge that maintenance of enforcement. Shifting cultivation in the uplands of healthy and productive forest cover is integral to the Laos was a well-adapted and sustainable farming support of rural livelihoods. Substantial areas of Laos system for centuries, but now is challenged because have been set aside for conservation, with National increased population pressure has resulted in shorter Biodiversity Conservation Areas occupying some fallow periods, an increase in weed growth, soil deg- 12% of total land area. radation and lower crop yields. The response to these development targets has The 7th Party Congress in 2001 set development been an expansion in plantation development entirely targets for 2005, 2010 and 2020 that were subse- consistent with national policies. Small-scale and quently endorsed by the National Assembly. The over- large-scale growers have been encouraged to invest arching objective is poverty eradication. The in plantations. The government is in the process of development targets include stabilising shifting culti- establishing the Lao Plantation Authority to facilitate vation by 2005 and phasing it out completely by 2010. commercial plantation development, and has also The main development objectives of the Govern- given approval for establishment of a Lao Plantation ment of Lao PDR for the agriculture and forestry Growers Association with thousands of potential
14 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. members. The main species attracting investors are Further details of the meeting are at:
15 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. since 1995 and enjoys a strong tourism industry The terrain is predominantly mountainous and (
Table 1.2 Meteorological record, Luang Prabang province (1986–96) (IWMI 2004)
Month Radiation Precipitation Evaporation Max. air temp. Min. air temp. Mean air temp. (hours/day) (mm) (mm) (˚C) (˚C) (˚C) Jan 6.1 6 64 22.9 19.3 21.2 Feb 6.9 18 96 22.9 19.3 21.2 Mar 6.1 44 120 28.0 23.5 25.9 Apr 6.8 111 126 31.7 23.4 27.7 May 6.4 149 111 30.1 27.6 28.6 Jun 4.2 194 85 28.8 26.5 28.0 Jul 3.4 260 71 29.0 26.8 27.6 Aug 4.4 275 76 28.6 26.4 27.6 Sep 5.6 137 75 27.7 25.7 27.0 Oct 5.8 133 73 26.9 24.0 25.7 Nov 5.7 52 75 25.0 21.3 23.5 Dec 5.5 24 51 20.8 21.8 20.4 Mean annual 5.6 1403 1022 26.0 23.8 25.3 Source: Meteorological Station of Luang Prabang province
16 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. ground and suggestions for research that could were interviewed and provided documents and data increase the profitability of teak smallholdings in relating to strategies and plantation management. northern Laos. The study included interviews with government Donor-supported projects, NGOs and agencies and their supporting donor agencies and international agencies projects, interviews with private businesses involved with teak growing and processing, a review of avail- A great many donor agencies, NGOs and interna- able literature, and community meetings and struc- tional agencies have substantial interests in Laos. In tured interviews with community leaders and 1999, for example, foreign grants and loans growers in three sample villages near the northern accounted for more than 20% of GDP and more than city of Luang Prabang. 75% of public investment. In the forestry sector much-valued and major long-term support has been Literature review provided by Sweden and a number of other multilat- eral and bilateral donors and NGOs (see Appendix 4). The study has reviewed literature, including ‘grey’ literature, published by several agencies and projects. Apart from the extensive international literature on Industry representatives and processors teak, its cultivation, wood markets and recent trends, Interviews were held with teak processors in the study found several earlier studies related to teak Luang Prabang, a furniture exporter in Vientiane and smallholdings in districts close to Luang Prabang an industry consultant. city, including those by Fogdestam and Gålnander (2004), Hansen et al. (1997), Keonakhone (2005), Kolmert (2001) and Southitham (2001). Field study of teak smallholders Village meetings and interviews were held in three Government agencies teak-growing villages belonging to two districts in Government officers within the Ministry of Agri- Luang Prabang province. A total of 58 people partic- culture and Forestry, the Department of Forestry and ipated in community meetings and discussions and the National Agriculture and Forestry Research Insti- 15 growers participated in face-to-face interviews. tute (NAFRI) in both Vientiane and Luang Prabang
17 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
2 Teak growing
Natural teak forests trees coppice well, and this feature has influenced several management systems (e.g. coppice with Teak (Tectona grandis) is a tall deciduous tropical standards) for natural forests, especially on dry sites hardwood which occurs naturally in a discontinuous or sites of low quality. distribution in peninsular India, Myanmar, Laos and Teak timber is mellow in colour, ranging from Thailand, as shown in Figure 2.1. It is believed to have golden to brown, with a fine grain and smooth tex- been introduced to Java 400–600 years ago (Phengklai ture. Compared with other industrial woods, it is et al. 1994), where it has become naturalised. The area strong and of average hardness. The wood density is of natural teak is about 27.9 million ha (Gyi and Kyaw 610–750 kg/m3 and rates of shrinkage are very low. Tint 1998), generally occurring on fertile, well- Teak heartwood is very durable and resistant to ter- drained soils up to 1,000 m altitude. It does not tolerate mites and fungi, but the sapwood is vulnerable to flooding or infertile lateritic soils (Phengklai et al. attack by powder-post beetles (Lyctus spp.) (Pheng- 1994). It grows best on sites with a marked dry season, klai et al. 1994). Because of its strength, pleasing annual rainfall of 1,250–3,750 mm, minimum temper- colour, attractive figure and favourable working and ature of 13–17˚C and maximum temperatures of 30– finishing properties, teak is one of the most popular 43ºC (Pandey and Brown 2000). tropical hardwoods, in high demand for: In natural forests teak is a medium to large tree • furniture growing to 50 m tall with a straight cylindrical bole • shipbuilding up to 25 m and a diameter up to 150 cm. It is a • decorative building components such as doors, pioneer species but has a long lifespan. It is light- window frames and flooring demanding and does not tolerate shade, and demon- • construction materials strates a strong capacity to recover after fire. Teak • reconstituted products.
30
Pakistan Nepa l India China
Bangla- 20 desh Myanmar
Lao
s
Vietnam Thailand
Cambodia 10
Sri Lanka
M alaysia
0 Sum
atra Indonesia Natural distribution of teak Java
Figure 2.1 Natural distribution of teak (Gyi and Kyaw Tint 1998)
18 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
It remains one of the world’s premier timbers, for The value of the natural genetic resources of teak which demand outstrips supply (Keogh 2000). and the need to conserve these are well understood in the countries of natural occurrence. All countries Conservation status of teak have considered genetic conservation strategies, and The natural teak forests of Asia have been greatly a number of in-situ and ex-situ gene conservation ini- reduced in extent by excessive harvesting and tiatives are in place in Thailand, Laos and India. encroachment for agricultural land. All countries Regional initiatives include: which have naturally occurring teak report a sharp • The Asia Pacific Forest Genetic Resources decline in these forests. FAO reports that manage- Program (APFORGEN), initiated by the Asia ment of the resource has not kept pace with demand, Pacific Association of Forestry Research and supplies of teak from natural forests have dwin- Institutions (APAFRI) in collaboration with the dled. Harvesting of teak from natural forests is now International Plant Genetic Resources Institute banned or severely restricted in all countries within (IPGRI) to develop a regional network program to teak’s natural range, except Myanmar. strengthen work on conservation and sustainable Sumantakul and Sangkul (1998) reported that Thai- use of forest genetic resources in the region. land’s area of teak-bearing forest declined from APFORGEN has the support of 14 countries in the 2.3 million ha in 1954 to 1.9 million ha in 1993. In region to foster closer collaboration and assist Myanmar the Forest Department (1998) reported that coordination and implementation of national the country’s forest resources have been decreasing due programs on forest genetic resources (FGR). to population pressure and rising demands for forest lands and products. In 1989 forest cover was 51% and • The Teak Network for Asia and the Pacific, Teaknet, had diminished by 220,000 ha annually during the was established in 1995 with the support of FAO and period 1975–89. Studies of teak stand structures indi- APAFRI. Its objective is to strengthen interaction cated that natural regeneration of teak was insufficient among all those concerned with conservation and (Forest Department 1998). Oo (2004) reported that teak sustainable management of teak-bearing forests and had the highest priority for conservation activities in plantations by sharing information and promoting Myanmar. In Laos the Department of Forestry (1998) collaborative efforts to deal with common problems. reported that both the area and the stocking of natural Unfortunately this valuable grouping, which could teak stands were being rapidly depleted due to popula- offer much to regional sharing of information, is tion pressure, shifting cultivation and forest fires. currently non-functional. Although Laos is still quite rich in forest resources by the standards of mainland South-East Asia, forest cover Table 2.1 Estimated net plantation area of teak by has diminished from 70% of total land area in 1940 to subregion, 1995 (Pandey and Brown 2000) 47% in 1992 (Phongoudome and Mounlamai 2003). In India the predominant causes for dwindling Subregion Plantation Annual forest wealth have been identified as overexploita- area planting tion, overgrazing, illegal encroachment, unsustain- (‘000 ha) (‘000 ha) able practices, forest fires and indiscriminate siting of West Sahelian Africa 4.02 0 development projects in forest areas. Overall, forest East Sahelian Africa 14.85 – cover declined from nearly 40% of India’s geograph- Moist West Africa 87.88 4 ical area a century ago to 22% in 1951 and to 19% in Southern Africa 2.80 0 1997. India’s naturally occurring teak forests have Tropical Africa 109.55 4 not been immune to these changes. Despite a recent South Asia 1,099.60 55 increase in the recorded forest area, population Continental South-East Asia 302.28 26 Insular South-East Asia 706.01 12 growth has resulted in declining availability of forest Tropical Asia 2,107.89 93 area per capita since the 1950s. Withdrawal of forest Tropical Oceania 3.03 0 products, including fuelwood and industrial timber, Central America 22.29 4 exceed the productive capacity of Indian forests. For Caribbean 8.06 – example, the annual consumption of industrial wood Tropical South America 2.72 0 is about 28 million m3 against a production capacity Tropical America 33.07 4 of 12 million m3 (Gulati and Sharma 2000). TOTAL 2,253.54 101
19 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Teak plantations a short dry season has prompted a rethink regarding the perceived need for a distinct dry season for suc- Teak plantations have been established successfully cessful teak cultivation (Krishnapillay 2000). In India in over 36 tropical countries. Estimates of areas vary. on sites where teak trees received sufficient moisture Ball et al. (1999) estimated that the net global area of for at least most of the year, Kondas (1995) reported plantations in 1995 was 2.2 million ha, and Pandey growth and volume production exceeding that from and Brown (2000) concurred with this figure. They seasonally dry sites. If proven commercially, this trend found that the rate of establishment of new teak plan- could see further expansion of teak plantings on humid tations has, as shown in Table 2.1, slowed notably sites. Based on extensive Thai experience, Kaosa-ard since 1990. (1998) reported that optimum growth occurred when Bhat and Ma (2004) have adopted a more opti- annual rainfall was 1,200–1,500 mm with a marked mistic figure, using FAO’s Global Forest Resources dry season of 3–5 months, defining such a season as a Assessment data (FAO 2001), which indicated that period when cumulative monthly rainfall is less than 5.7 million ha (3%) of the world’s forest plantations 50 mm. Under very moist conditions the trees are very of 187 million ha were teak, as shown in Figure 2.2. large but their boles are fluted. Teak is now cultivated widely in many tropical countries, with over 90% of the plantation estate in Silviculture and management of teak Asia. India and Indonesia account for over 75% of plantations the plantation resource, as shown in Figure 2.3. While teak is relatively easy to establish in planta- Most of the world’s teak plantations have been tions, the management of plantations varies between established under government planting programs, par- and within countries according to variations in envi- ticularly in India, Indonesia, Myanmar and Thailand, ronmental, social and economic conditions. which account for 87% of all plantations (Pandey and Krishnapillay (2000) recognised that the perform- Brown 2000). Ball et al. (1999) report a general shift ance and management of teak plantations are influ- from establishment of large-scale teak plantations by enced by two major issues—the relatively low the public sector to increasing numbers of smaller growth rates and the need to maximise the length of plantations grown largely either by ‘outgrowers’ (who the clear bole to enhance log value. incorporate trees into farming systems) or as small Teak is a cross-pollinating species with monoe- blocks to meet long-term commercial needs. This cious flowers that are 45–60 cm long. Flowering trend has been particularly noticeable in Thailand, begins when trees are 5–8 years old, and occurs at the Costa Rica and Ghana and is being encouraged in beginning of the rainy season with the fruits maturing some cases by government incentives. during the dry season. Early flowering is seen as a In Malaysia the promising performance of teak disadvantage for teak as it can lead to stem deformity under humid conditions on sites with high rainfall and and depress height growth (Gram and Larsen 1958).
Tropical Sri Lanka Acacia Tectona Africa Tropical 2% 4% 3% 5% America 3% Hevea Unspecified Bangladesh 6% 22% 3% India Eucalypts Myanmar 43% 11% 6%
Other Thailand broadleafs Pinus 7% 20% 22% Indonesia 31%
Figure 2.2 Distribution of plantation areas by Figure 2.3 Global distribution of teak plantations genus (FAO 2001) (Bhat and Ma 2004)
20 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Raren (1966) noted that the age of first flowering produce a 200 mm ‘stump’. Stump production is determines the length of the straight unforked bole. simple and requires little investment. They are easy Teak ‘seeds’ (technically fruits) are large (average to transport and plant but sensitive to dry spells in the 2,000 fruits/kg) and robust and have a hard coat. In first 2 months after planting. Thailand and Laos seeds are collected from the In most countries stump planting is widely prac- ground as and when they fall between February and tised because it offers reliable early survival if com- April. Table 2.2 shows the flowering and seed collec- pleted early in the wet season. In Indonesia tion seasons for a number of countries. The bladder- plantations are frequently established through direct like calyx is removed and the seeds cleaned by win- dibbling of seeds into planting holes. Potted seed- nowing. Seeds store well in gunny bags or sealed tins lings are used for commercial investment plantings. for 2–3 years (Chacko 1998). White (1991) reported that although stump plants Teak plants can be raised using either seeds or vege- were more costly than direct sowing, they were more tative tissues such as stumps, branch cuttings or tissue- reliable, they greatly simplified teak planting and cultured plantlets. Teak seed is generally broadcast they reduced the tending period by 1 year. sown into cultivated beds for germination. Nursery ger- Traditionally, plantations have been established mination of untreated seed is about 30–50% over a through the taungya system—a practice whereby the period of 50 days. Germination is sporadic and the trees are planted in association with an agricultural exact nature of dormancy is not known. The most crop which controls weed growth. Once the trees common method of pretreatment is to soak the fruits approach crown closure, the agricultural component during the night and dry them in the sun during the day, becomes unviable and is moved to another site. In repeating this for 1–2 weeks (Rachmawati et al. 2002). some parts of India taungya has been discontinued The use of improved seed from seed production areas due to declining site fertility, while in some other (SPAs), seed orchards or selected ‘plus’ trees is essen- countries the practice was not adopted at all for tial for improving growth, stem quality and other plan- various social and economic reasons (Ibrahim 1998). tation features. Wellendorf and Kaosa-ard (1988) In countries where there is direct commercial invest- estimated that improved seed enhanced growth and ment in teak plantations, intensive site preparation volume by 5–25%, depending on seed source and practices similar to those used for other commercial planting site. A review of recent literature and country plantation trees are followed. Although a wide range reports confirms that the tight supply of seed of high of initial spacing is used, stocking rates are normally genetic quality is a major hurdle to any expanded 1,000–2,000 stems/ha. Following a major study a planting of teak. The seed requirements can be large, 3 m × 3 m spacing, which is equivalent to with Kaosa-ard (1998) estimating that a plantation of 1,100 stems/ha, is routinely used in Thailand (Kaosa- 1,000 ha at 3 m × 3 m spacing would require 15 t of ard 1998. seed, representing the annual yield from 500 ha of SPA The rotation length for teak plantations varies with Nurseries produce either potted seedlings or site and grower needs—50–90 years within its stumps, which are 6–12-month-old seedlings which natural range or 40–60 years outside this range (Ball have had both roots and shoots (80:40) pruned to et al. 1999). Economic pressures favour short rota-
Table 2.2 Flowering and seed collection season of teak in selected countries (Kaosa-ard 1998)
Country Flowering season Seed collection Bangladesh June–August February–January China (Hainan) July–December December–February India June–September December–March Indonesia December–February July–September Laos PDR July–September February–April Malaysia December–February July–September Myanmar July–September February–April The Philippines June–September January–April Sri Lanka December–February July–September Thailand July–September February–April
21 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. tions, and their duration has steadily declined to less cial investment plantations typically have three or than 20 years in many areas. Growers face the choice four thinnings before harvest at age 20–25 years. of felling early (15–20 years) to generate income Early and repeated thinning ‘from above’, i.e. quickly, or leaving their trees longer (40–50 years), removing the largest trees as they progressively reach when they can receive the best log prices (Keogh marketable size, detracts significantly from overall 2000). Mustain Billah (2005) recognised the need in yield because the genetic quality and vigour of the Bangladesh to reduce the length of rotations to find a stand is steadily reduced. If at the end of the rotation balance between financial returns and production of seed is collected from remaining trees for the suc- market-quality timber. His study concluded that the ceeding crop, the enterprise is certain to suffer signif- optimal rotation for teak plantations in order to make icant and increasing loss of potential yield. management efficient and long-term investment It has been demonstrated that pruning in commer- financially remunerative and attractive would be 20– cial teak plantations has a positive impact on stand 21 years. growth and wood quality. Viquez and Perez (2005) Average growth for teak varies from 5 to 16 m3/ha reported on experiments in Costa Rica which showed mean annual increment (mai), depending on site and that under an intensive pruning regime a teak tree at management. Dupuy et al. (1999) report best growth a rotation age of 20 years may yield over 60% of the of 10–16 m3/ha/year in West Africa from wetter tree volume as merchantable wood, and over 40% as forest areas, while Ball et al. (1999) record maximum knot-free volume. Centeno (2000) acknowledged the growth rates of 12–21 m3/ha/year on best sites in expense associated with intensive pruning regimes of Asia. teak, but felt that these would be justified as the demand and price for high quality tropical hardwood Yield tables for teak in a number of regions and increases. In Laos, Keonakhone (2005) reviewed a countries have been published, e.g. Indonesia, the pruning study and concluded that pruning had a pos- Philippines, Myanmar, India, Thailand, Trinidad, itive impact on tree growth, although the growers Puerto Rico, El Salvador, Jamaica and Ivory Coast interviewed as part of this study were unaware of (Kjaer and Foster 1996). If local yield tables are not this. The propensity to produce epicormic shoots and available, those from regions with comparable soils adventitious branches next to the scars caused by and climate may be used as guidelines. The gradual pruning needs to be managed. acceptance of teak wood from short-rotation planta- Insect damage is a serious problem in teak planta- tions has fostered a stronger interest in both manage- tions, the most common insects being defoliators and ment for fast growth and the processing of timber of stem borers. Defoliation reduces growth rates and smaller dimensions. Enters (2000) suggests that apical dominance. The most important defoliators 3 yields of 15–20 m /ha/year on a short rotation of causing severe damage in teak plantations 20 years should be viewed as the upper limit with throughout the tropics are Hyblaea puera Cramer present technologies. Claims of higher yields should (Hyblaeidae) and Eutectona machaeralis Walker be treated with caution. (Pyralidae) (Kaosa-ard 1998). Outbreaks of these Thinning prescriptions vary with site quality and insects may occur two or three times during the from one locality to another, and are often governed growing season and the plantation growth rate may by financial rather than silvicultural considerations. be reduced by as much as 75%. Leuangkhamma and Chacko (1998) reported that good quality plantations Vongsiharath (2003) reported that, although defolia- in Kerala, managed on a 50-year rotation, are thinned tion did not kill the trees, H. puera attack caused an at ages of 4, 8, 12, 18, 26 and 35 years. The first thin- average loss of 44% in potential increment in planta- ning is commonly carried out when the trees reach tions 4–9 years old. Nair (2001) reported some 187 about 9 m and the second at about 18 m. If thinning is insects on teak, with H. puera, the most serious, too early or too heavy, the trees have a greater ten- causing extensive defoliation in India each year. dency to produce epicormic shoots and side branches Stem borers can cause severe damage; in young (Krishnapillay 2000) which may lead to defects in the plantations (1–5 years old) damaged trees may die final bole. In Laos, Keonakhone (2005) and others back or their top may break, reducing growth rate and have conducted thinning studies and have reported stem quality. The most important borer in young teak substantial increases in growth following removal of plantations is the red or coffee borer Zeuzera coffeae 50% of trees at age 6 years. Fast-growing, commer- Nietner (Cossidae). In older plantations, i.e. over
22 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
10 years of age, the beehole borer Xyleutes In Indonesia provenance trials commenced in ceramicus is the most important. It causes severe 1932. A long history of related research has con- damage to the standing trees and also reduces the cluded that, in general, there is no reason to plant value of timber (Kaosa-ard 1998). exotic teak on a large scale since the best Java variety Though teak is a very hardy species, it is prone to has qualities equal to those of the best exotic prove- attack by a number of seed-borne fungal pathogens. nances. A formal genetic improvement program Seed-borne Fusarium pallidoroseum causes nursery commenced in 1974. Seed production areas cover mortality. A number of pathogens are responsible for 3,700 ha and, as of 1995, 1,139 ha of clone banks and damaging teak plants through root diseases, stem and clonal seed orchards (CSOs) had been established branch canker and dieback, collar rot, heart rot in dry (Suhaendi 1998). coppice teak and mortality in natural teak forests. In Thailand the Teak Improvement Centre (TIC) Amylosporus campbellii root rots, Fusarium pal- within the Royal Thai Forest Department was estab- lidoroseum canker and F. oxysporum root rot have lished under a bilateral agreement between the Royal recently been reported from high-input plantations Thai and the Royal Danish governments in 1965, and (Jamaluddin 2005). has been the key institute to facilitate the supply of superior teak seed for plantations (Sumantakul and Pure teak plantations are considered to be suscep- Sangkul 1998). Over a 30-year period (1965–94) the tible to erosion. The dense canopy creates heavy TIC enjoyed notable successes including: shade which restricts the growth of understorey spe- • 357 teak ‘plus’ trees selected and propagated in cies. After the trees shed their foliage in the dry teak seed orchards at five localities season the leaf litter is sometimes burnt, leaving the • 1,831 ha of teak seed orchards established soil surface bare and vulnerable to erosion at the • 1,120 ha of teak SPA established in two localities. beginning of the rainy season. Surface run-off International provenance trials were established in through plantations in the absence of an understorey the early 1970s under the coordination of FAO and can also cause soil erosion. Without effective soil the Danish International Development Agency’s management, productivity of successive teak rota- (DANIDA) Forest Seed Centre, the evaluation of tions can diminish. which showed important differences among prove- nances for growth and stem quality traits (Nair and Tree improvement and deployment of high- Souvannavong 2000). quality germplasm The development of a bud grafting technique enabled CSOs to be established in Thailand, based Most countries with large estates of teak have tree upon phenotypic ‘plus’ tree selection in natural improvement programs to enhance the quality of forests and old plantations (Wellendorf and Kaosa- planted teak by providing germplasm of high genetic ard 1988). CSOs were subsequently established in quality, e.g. Tanzania, Thailand, India, Indonesia, India and countries outside teak’s natural range from Myanmar, Bangladesh, Papua New Guinea, Sri the late 1970s onward. Seed production from these Lanka, China and Costa Rica (Kjaer et al. 1999). CSOs has been limited (Kaosa-ard et al. 1998), and Nakata and Isoda (2004), in a study financed by the this constrained supply is both hindering the progress International Tropical Timber Organization (ITTO), of teak improvement programs and seriously limiting consolidated information on teak improvement pro- realisation of the potential benefits from tree grams in Thailand, Myanmar and the Indian state of improvement. Egenti (1981) reported that produc- Kerala. They concluded that one of the main hin- tivity of CSOs in Nigeria is more than fivefold that of drances to high-quality teak plantation development those in Thailand and India. Nair and Souvannavong remains the insufficient production of good seed. (2000) reported that there was no problem with seed In India provenance testing of teak began in the production in CSOs established in Côte d’Ivoire. 1930s. Systematic teak improvement started in 1962 Despite the considerable long-term investments with the introduction of a program for the genetic made in teak improvement in several countries in Asia, improvement of teak. Following this, the improve- the seed needed for expanding teak plantation pro- ment activities gained momentum and almost all the grams cannot be met from improved sources. In India teak-growing states have now joined teak improve- supply of improved seed remains a significant chal- ment programs (Subramanian et al. 1994). lenge. India has 3,100 ha of SPAs and an additional
23 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
900 ha of CSOs for teak. The seeds from these supply prompted incentive programs and investment only 30–35% of the national demand (Katwal et al. schemes in many countries. These programs have 2003). In Myanmar the seed needs for their annual helped to greatly increase the global area of commer- 20,000 ha teak plantation program cannot be met from cial teak plantations. For example, in Thailand the improved sources (Oo 2004). In Thailand, despite con- government currently offers private growers subsi- siderable achievements in teak improvement, the dies of up to US$780/ha over 5 years for tree planting annual production of improved seed of 20 t/year is (Sumantakul and Sangkul 1998). Costa Rica also has unable to meet the estimated total national requirement an incentive program which includes a direct of 164 t/year (Sumantakul and Sangkul 1998). For this payment to plantation owners for the provision of reason many teak programs have developed and environmental services (Pandey and Brown 2000). adopted micro-propagation techniques for teak, and The world’s largest private teak plantation is owned tissue-cultured plantlets are used in commercial nurs- by the Floresteca Group (www.floresteca.nl), which eries. The extent to which tissue-culture techniques consists of a holding and operating company in the can substitute for conventional practices such as using Netherlands and operating companies in Brazil. It now cuttings and seedlings remains unclear (Nakata and has some 22 million teak trees in over 20,000 ha of Isoda 2004). production plantation in 25 production units, and the It is expected that the immediacy associated with group plans to increase the area to 50,000 ha of pro- high-intensity plantations will probably boost clonal duction plantations. It follows through its large-scale selection. A sound long-term strategy, combining teak farming with processing of teak in sawmills and sexual and vegetative reproduction to retain genetic kilns. The Floresteca forestry programs are certified by diversity while continuing to capture significant the Forest Stewardship Council (FSC), SGS and ISO- genetic gain, is needed (Kaosa-ard et al. 1998). 14001 standards and are reported to follow the German TÜV environmental certification. No details Plantation establishment costs of investment or anticipated returns are available at their website (July 2006). Cost of plantation establishment varies from site to In Costa Rica, Tropical American Tree Farms site and is influenced by labour costs, site character- (
24 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
The Rewards Group (
25 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. native forests is severely restricted by the Lao PDR produced 4 million stumps which were sold at 700 kip Government, and harvesting is largely limited to old (US$0.07) each (Vongkhamheng, pers. comm. 2006). logs left in the forest from earlier logging operations. The initial spacing used varies from grower to The average annual harvest of teak logs from native grower and site to site, and is sometimes governed by forests is only 500 m3 (Department of Forestry availability of planting material. Typically, teak is 1998). planted at a 3 m × 3 m spacing (1,100 stems/ha). Recognising the value of teak and the limitations Few of the teak plantations in Laos have been of supply from native forests, teak plantations were thinned. This is a result of perceptions by plantation initiated in Laos in 1942. In response to strong and owners who treat their plantation as a bank account sustained market demand for teak timber and to per- from which withdrawals must have a realisable ceptions of future wood shortages, the government value. Southitham (2001) and Keonakhone (2005) and land owners have established small plantings of have reported the benefits of judicious thinning in teak in Laos for over 30 years. A large proportion of Laos. Unfortunately, there has been limited (or little the teak plantation estate in Laos was established and accessible) demonstration of this and most growers is being managed by private, small-scale owners and, remain unconvinced. Pruning is uncommon, and for this reason, accurate estimates of the relevant area village interviews indicated that it causes a flush of are difficult to make. The total area of teak planta- unwelcome epicormic growth. Hansen et al. (2005) tions in Laos exceeds 15,000 ha (FAO 2001 and recognised the lack of informed management as a assumed annual plantings). Luang Prabang province major constraint to the growth and quality of trees. has the greatest concentration of teak plantations in Most trees in smallholdings are harvested at ages of the country, an estimated 10,000 ha (Siannouvong, 15–25 years. Rotation length is a function of the pers. comm. 2006), of which 98% belongs to farmers farmer’s needs rather than silviculture. and the private sector. Much of this resource is con- The importance of teak to local communities and fined to areas close to road or river access because of to the national economy encouraged the Lao PDR marketing considerations and the need to transport Government to establish the Teak Improvement logs. Centre at Keng Ben, near Luang Prabang, in 1991. Teak is well suited to northern Laos, although not This centre has received significant support from the to sites which are flood-prone, have gravelly or acidic Lao–Swedish Program and aims to: soils or are above 700 m altitude (Hansen et al. • improve the quality of teak plantations 1997). These factors exclude its cultivation from • conduct R&D on techniques for tree improvement, about 45% of northern Laos and concentrate planting seed procurement and nursery production in the more populous areas, where pressures of • test teak provenances swidden (slash-and-burn) agriculture are high. • establish orchards to produce better quality seed. Teak plantations are usually established in associa- Laos shares the insect pests recorded for teak in tion with swidden agriculture, in what is known as a Thailand and elsewhere, and villagers have reported ‘taungya’ system (Figure 2.4). Trees are interplanted an increased incidence of insect attack as the area of for 3 years with agricultural crops such as upland rice, teak plantations has increased. Kim and Savathvong sesame and pineapples, this process offering adequate (2005) identified the main insect pests in teak planta- weed control and protection during the early years of tions in Luang Prabang province. These are the defo- establishment (Hansen et al. 1997). Traditionally, teak liators H. puera and E. machaeralis, termites stumps have been planted, many of which have been (Isoptera), bark beetles, bagworm and Platypus sp. distributed from government nurseries. Commercial (Coleoptera: Platypodidae). They found that H. puera nurseries are now selling teak stumps and seedlings, occurred on the trees in late April when there was a and village-level growers collect or buy their own seed flush of new leaves. The infestation mainly occurred and raise their own nursery stock. Seed from general during the May–September rainy season, and the unselected trees in the district is available for purchase timing of the first peak of damage was not uniform for from the Provincial Extension Service for 5,000 kip/ all plantations in a given area. A second peak of kg (US$0.50/kg). Alternatively, improved teak seed is damage can occur if weather conditions are favorable. available from the Lao Tree Seed Centre’s managed Defoliation can be extensive; at one site around 80% SPAs at 20,000 kip/kg (US$2.00/kg). In 2006 the of the foliage was lost but the trees recovered in about Luang Prabang Provincial Extension Service nursery a month.
26 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
(a) (b)
(c) (d)
(e) (f)
Figure 2.4 Teak plantations in northern Laos. (a) Long-rotation crops like teak are better suited to steep slopes than annual crops like rice; (b) Young teak interplanted among pineapples; (c) Teak seedlings in a villager’s nursery; (d) Small teak plantations and a large-scale teak nursery, Kengban Teak Improvement Centre; (e) NAFRI teak seed production area near Luang Prabang: Pak Lay provenance, planted in 1971, thinned and converted to SPA in 2004 with 383 trees over 3 ha; (f) Produce of the teak plantations, squared logs, processed in simple local sawmills, is a significant export commodity
27 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
At harvesting, trees of a minimum 15 cm diameter as other high-value hardwoods became scarce and breast height (dbh) are selected by the grower and more costly. offered to the buyer. Chainsaws are used for felling The benefits of, and challenges facing, teak establish- the trees, which are then cut usually to 2-m lengths. ment and management in northern Laos were recog- These logs are then carried by hand to the roadside or nized by Hansen et al. (2005), who reported that riverside for transport to sawmills in Luang Prabang although teak cultivation provided high incomes and or Vientiane (Southitham 2001). The mills visited in was readily adopted by farmers, returns were limited by: Luang Prabang as part of this study were very simple, • poor management of teak plantations with few safety features. Southitham (2001) esti- • inferior genetic material mated that over 4,000 m3 of plantation-grown teak • competition with agriculture for arable land was harvested annually, and predicted that this would • inability of farmers to hold on to plantations for rise to 10,000 m3 because of its reasonable price and 20–30 years.
28 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
3 Teak markets and marketing
International teak markets • US$270 per m3 for 10-year-old logs 18 cm in diameter (at mid-log length) and 8 m long The physical and aesthetic qualities of teak have • US$450 per m3 for 14-year-old logs 24 cm in given it a worldwide reputation as a premium timber. diameter (at mid log-length) and 8 m long It is highly sought after for shipbuilding and the man- • US$750 per m3 for 18-year-old logs 31 cm in ufacture of both interior and exterior furniture. The diameter (at mid-log length) and 8 m long. current total global production of teak, around The FOB price for teak logs with diameter above 3 million m3 annually, is small in relation to the total 16 cm from Guatemala was US$240 per m3 in early volume of world timber production, but teak is rec- 2006 (ITTO 2006), with 70% of the exports destined ognised as a high-value hardwood in global timber for the Indian market. The average FOB price from markets. It enjoys special status and has sustained Guatemala was US$219 per m3 in 2005. strength in the marketplace. The largest manufacturers of teak products are India remains the world’s largest market for teak Indonesia, Thailand, India, Vietnam and China. India wood (Padmanabha 2006; Somaiya 2005) although produces sawn timber and decorative plywood there is substantial demand from the large furniture almost exclusively for its domestic markets (Pandey markets of China, Thailand and Vietnam. In Thailand and Brown 2000). China, Vietnam and Thailand have harvesting teak from natural forests has been banned relatively large teak processing industries based since 1989. In Indonesia, which has substantial teak largely on imported roundwood or squared logs. A plantations, the export of teak logs is banned. India substantial portion of this production is exported to banned teak harvesting in natural forests in 1982, and Europe and North America as finished consumer in 1997 the Supreme Court of India further restricted items. Pandey and Brown (2001) observed that the felling of timber of any kind in natural forests. volumes of national imports and exports of teak In the early 1980s the overall size of the teak products were poorly documented or inaccessible. market in India was 7.5 million m3 annually. All teak Suppliers of plantation teak to international logs consumed in India are now imported— markets believe that there is only a small risk of teak 2.5 million m3 of logs in 2005 (Padmanabha 2006). prices dropping over the next 30 years because of Teak of natural forest origin is imported from high demand and the long rotation (Precious Woods Myanmar but about 60% of the teak imports to India 2005). The importance of certification in the global are from plantations in countries in West Africa, and marketplace is also increasing and, although certain Central and South America. Much of this is 6–15- traditional teak markets are not yet too concerned year-old plantation-grown wood. Timber from thin- with this, many teak producers will seek to meet the ning operations has flooded Indian markets, various criteria of sustainable forestry management adversely affecting prices (Somaiya 2005). There are and certification under credible schemes in order to fears within the teak industry that supplies of teak ensure the long-term viability of their ventures logs from Africa will be constrained within 5 years as (Hardwoodmarkets 2004). the resource base of mature plantations declines. The global price for teak logs depends on quality, The wood processing sector in Laos size, age and origin. Padmanabha (2006) offered the following guidelines for FOB (freight on board) Following a major study by UNIDO (2002) of the prices for teak logs from plantations: wood processing sector in Laos, a strategy for the • US$169 per m3 for 6-year-old poles 13 cm in development of the industry was developed. The diameter (at mid-log length) and 8 m long study found that the industry concentrated on rela-
29 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. tively few commercial species (6) and that most of and income for the country. The UNIDO study also the mills in Laos used old equipment and technology encouraged the certification of plantations to facili- (Figure 3.1). The installed capacity of the primary tate improved access to the high-value markets of wood processing industry (sawmills) far exceeded Europe and the USA. the capacity of the forests to supply logs. Few safety standards were observed and most mills offered an unsafe working environment. In addition, sawn wood Teak marketing in Luang Prabang recovery was low and there was excessive waste due province to inaccurate cutting. The report concluded that Laos had not maximised Southitham (2001) reported that over 4,000 m3 of the potential benefits from wood processing in a prof- logs were harvested from teak plantations in Luang itable and sustainable way, and that foreign sec- Prabang province in 2001, and estimated that the total ondary processing industries were using Laos as a primary consumption of teak from the province was source of cheap raw material. Despite the high level 3,000–4,000 m3 in 2001 (most as squared logs), the of traditional Lao skills with wood, the secondary remainder being exported from the province as logs. wood industries (such as furniture and flooring) in This represented a small part of the 2001 national log Laos were underdeveloped (Figure 3.1c). The study harvest of 578,000 m3 (Southavilay 2002). South- encouraged Laos to follow the example of other avilay reported four sawmills, one miniature sawmill ASEAN neighbours by fostering a secondary wood and 74 furniture factories in Luang Prabang province. processing industry, and observed that such a change Southitham estimated that there were about 103 in focus would provide greater value and more jobs wood processing plants in Luang Prabang district but
(a) (b)
(c) Figure 3.1 Small-scale processing of teak. (a) Logs awaiting milling; (b) A typical sawmill; (c) Village-level manufacture of chairs
30 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. only some of these processed teak. Savathvong (pers. either to a trader or directly to the growers, who select comm. 2006) reported 12 sawmills which used teak suitable trees for harvest. The sawmiller, or his trader in Luang Prabang district, of which six were totally intermediary, are responsible for all paperwork and dependent on teak. The capacity of these mills varies formalities and arrange for harvest and transport to from 1 m3 to almost 1,000 m3 per year, with most the mill. The buyer makes a visual estimate of processing about 2–5 m3 per year. Teak products standing volume of the selected trees and, based on manufactured in Luang Prabang province consume a quality (straightness, branches and size) and distance small proportion of the volume of wood cut from teak from the road, makes an offer. The average payment plantations. Products include chairs, tables, flooring, by one sawmiller was 1 million kip for 10 trees of parquets, desks, beds and wardrobes. Some of the dbh 30 cm (US$10 per tree). Another had a sliding larger sawmills in Vientiane purchase plantation- scale of prices governed by size, which is presented grown teak logs from Luang Prabang province. The in Table 3.2. export of squared teak logs derived from smallholder plantations is a legitimate business opportunity for Table 3.2 Notional scale of prices for standing sawmillers, but there remains the important opportu- trees (Luang Prabang sawmill) (This nity for Laos to use more of this material in its own study 2006) secondary wood processing industries. Tree girth/diameter (cm) Price Price Sawmillers interviewed in Luang Prabang prov- (kip/tree) (US$/tree) ince expressed confidence in the long-term market 70/22 70,000 7.00 prospects for teak and in the availability of a sus- 80/25 80,000 8.00 tained supply of plantation-grown logs in the prov- 90/29 90,000 9.00 ince. To operate they require a licence from the >100/32 150,000 15.00 Provincial Agriculture and Forestry Office to buy >150/48 1,500,000 150.00 and transport logs. A permit is also required from the District Agriculture and Forestry Office (DAFO). Sawmillers generally prefer trees which will Mills are granted quotas and pay annual licence and provide a 2-m butt log with small-end diameter (sed) maintenance fees. No taxes are paid as wood is of 25 cm to produce a 20 × 20 cm squared log, and shifted between provinces. They are not limited by two top logs used to produce 15 × 10 cm and government regulations in buying, sawing and trans- 10 × 10 cm squared logs. There is no market for logs porting plantation-grown teak. with a sed <10 cm, although Savathvong (pers. Southitham (2001) outlined the administration comm. 2006) reported that there was some harvest of fees, taxes and service charges levied on commercial logs at 10 years of age for sale into the expanding harvesting of plantation-grown teak, reproduced in Vietnamese furniture market. Most sawn timber is air Table 3.1. These charges are either waived or dried; little kiln drying is used because of the reduced when trees are cut for local household use. expense, estimated to be about US$25/m3. The person responsible for harvesting takes respon- sibility for paying fees and levies. Table 3.3 Estimated standing values of teak trees, Luang Prabang province (Savathvong, Table 3.1 Taxes, fees and service charges relating pers. comm. 2006) to teak harvest (Southitham 2001) Age Av. Av. Volume/ No. of Price Government levy Commercial use Household use (years) dbh ht tree trees/ (US$/m3) (kip/m3) (kip/m3) (cm) (m) (m3) m3 Survey charge 1,000 500 12–15 16 10 0.094 10.64 50 Log measurement 1,500 1,500 17–20 20 12 0.218 5.00 70 Log marking fee 500 500 25–30 30 16 0.734 1.36 100 Sales tax 25,000 – >30 35 17 1.111 1.00 150
Processors interviewed for this study reported that Table 3.3 presents a guide to standing tree volumes they purchase trees from growers on a tree-by-tree and prices for average trees at a variety of ages basis. They provide the required size and numbers (Savathvong, pers. comm. 2006) The sharp increase
31 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. in value for larger trees is acknowledged by growers, sawmillers receive graduated prices for their Thai but the extended rotations are a disincentive. sales depending on size, as shown in Table 3.4. Hansen et al. (1997) recorded that, in 1996, the Table 3.4 Delivered mill door prices for squared minimum size of roundwood accepted by Luang logs 2 m long in Vientiane (for export to Prabang sawmills was from trees 20 cm in dbh, a size Thailand) (this study 2006) expected to be available at 15 years of age. That study estimated that four trees of 18 cm dbh would Log section Price per cubic metre 3 (cm) make up 1 m of roundwood. Growers were paid Baht US$ US$25 per standing tree of 18–20 cm dbh (about 3 10 × 10 7,000 184 US$100/m ) by traders, who sold the logs for 3 20 × 10 10,000 263 US$130–140/m to local sawmills. At this time teak 10 × 15 12,000 316 roundwood was sold in Vientiane for US$230/m3 20 × 15 14,000 368 and into the Thai export market for US$350–600/m3 20 × 20 14,000 368 depending on size and quality. The market price for sawn plantation-grown teak in Luang Prabang at that 3 3 The main business of the sawmills visited was time was US$450/m , and in Vientiane US$650/m . squared logs 2 m long, varying in cross-section from Southitham (2001) found that the purchase of 25 × 25 cm to 10 × 10 cm, for sale in Vientiane or standing teak trees in plantations was negotiated Thailand. Larger squared logs (15 × 20 cm and between the buyer and the grower. For example, a above) were sold to Vientiane for export to Thailand. standing tree of 90 cm girth (~29 cm dbh) was worth about 90,000 kip (US$9.40), and with a girth of The main market for the smaller 10 × 10 cm logs was 100 cm (~ 32 cm dbh) 100,000 kip (US$10.50), per Xieng Khong district in Thailand (near Chiang Mai); tree. At that time the processor could expect to receive these were sold via agents in Bokeo province. The about 1.7 million kip/m3 (US$180/m3) for 2-m round sawmillers understand that some of the Thai buyers logs of average diameter >25 cm. The price of re-export squared logs to Indonesia and Malaysia. squared logs varied with size: for end profiles smaller Prices for squared logs delivered to Nong Khai (Thai- than 15 × 15 cm the price was 1.5 million kip land) were 14,000 baht/m3 (US$368) for all catego- (US$158) and for end profiles larger than 15 × 15 cm ries of squared logs larger than 10 × 15 cm. Some about 2 million kip (US$210).
Tax
Tax Tax Local traders Small sellers 1% 3%
Teak growers Wood process units Domestic Tax consumers 2% Outside 95% Furniture traders makers
Vientiane
50% 10% 40%
Thailand Vietnam China
Figure 3.2 Marketing channel of teak logs in Luang Prabang province, Lao PDR (Keonakhone 2005)
32 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Market channels for teak Availability of teak for future
Farm income from teak sales is influenced by trans- markets parency in the supply chain. Keonakhone (2005) described the teak market flow, illustrated in Figure Southitham’s estimate of 4,000 m3 of logs harvested 3.2, and showed that because growers could not in 2001 was based on a teak estate of 500 ha which access processing units directly, their teak trees were was over the age of 15 years at that time. Based on an sold via local and outside traders. It was estimated assumed (and modest) average mean annual incre- that 99% of the teak logs in a village were bought by ment of 5 m3/ha for teak smallholdings in Luang outside traders and only 1% by a local trader. Prabang province, and the annual establishment Keonakhone (2005) estimated that about 95% of figures offered by provincial authorities (see Figure the teak wood produced in Luang Prabang province 4.1), this log harvest could increase to 18,000 m3 in was exported. The remaining 5% of the teak logs 2010 and 60,000 m3 in 2020. The availability of this were used locally, mainly in the form of residues commercially significant volume of high-value plan- obtained from pre-processing. Of this 5%, 60% (in tation hardwood offers substantial opportunities for absolute numbers) was sold to small sellers and 40% value-adding above that currently being undertaken was used for making furniture in Luang Prabang. in Laos. The current (estimated) log harvest, with low Savathvong (pers. comm. 2006) estimated that about technology and inaccurate primary conversion to 50% of the squared teak logs produced in Luang squared logs (yielding a recovery of only 50%), is Prabang was exported to Thailand, 40% to Vietnam estimated to provide exports as squared logs from and 10% to China. Luang Prabang province worth about US$560,000 Southitham (2001) estimated that the processing of annually. With the same low technology (perhaps teak into furniture or flooring can generate 10–40 times the price paid for a standing tree. He also esti- using some of the reported existing surplus mill mated that processing to final products increases the capacity) and assuming the same market prices, the mill-door price of logs or squared logs delivered to a export value of squared logs will increase to furniture factory in Vientiane by a factor of 20. US$2.5 million in 2010 and US$8.4 million in 2020. Adequate market information and effective links There are opportunities to further increase the value with traders and processors are seen as critical to the of this expanded teak wood harvest in Luang Prabang successful production of teak and other forestry and province through improvements in primary agricultural commodities. Few, if any, grower groups processing productivity, conversion to sawn timber, have been established and local knowledge of market use of kiln drying and the manufacture of basic fur- chains is extremely limited. niture components.
33 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
4 Socioeconomics of teak smallholdings in Luang Prabang province
Thailand, Malaysia, Ghana, India, Brazil and Costa permanent settlements and farmers were less Rica have significant numbers of teak smallholdings, likely to resettle at frequent intervals; thus, long- reflecting confidence in the reputation and future of term investments such as teak plantations became teak (Ball et al. 1999). In Java farmers are increas- more realistic) ingly planting teak as an investment and to meet the 4. expansion of the road system, which made future wood needs of their children (Bhat and Ma plantations possible in new areas (consequently, 2004). Nair and Souvannavong (2000) and Subrama- very few plantations are established away from the nian et al. (1999) also noted the emergence of teak roads, since farmers do not expect investors to be cultivation by farmers as an integral part of farming interested in buying inaccessible timber or land) systems, in small woodlots, in home gardens or in 5. land allocation schemes that give additional land mixtures with other trees and agricultural crops. for the production of perennials (in principle, 1 ha In northern Laos the physical geography and social of land can be allocated to each household conditions limit land-use options. The main land-use specifically for planting timber or fruit trees, but pattern is shifting cultivation, which is primarily farmers lose the right to such land if it is used for semisubsistence agriculture. There is limited forest other purposes) cover and sloping land dominates. Widespread 6. promotion by private investors through financial poverty and low food security are compounded by support, the production of stumps and information limited access to markets. As population increases dissemination and densities near the roads change due to resettle- 7. promotion and provision of extension services by ment programs, land use intensifies and areas of government agencies. commercial field crops and teak smallholdings Teak plantations in Luang Prabang province are expand (Mahathirath et al. 2001). predominantly privately owned (Savathvong, pers. Within this setting, teak planting has flourished in comm. 2006), with only 2% of the area (233 ha) Luang Prabang province. Teak is preferred to other managed by the government. Private plantings have perennial tree species because of perceived demand been recorded in northern Laos since 1950. As the certainty. It is also easy to propagate and manage, network of roads in the province has expanded, teak grows fast in the early years and is tolerant to fire. planting has become an option for many more Hansen et al. (1997) identified a number of predis- farmers. Teak has been established in a mosaic of posing changes in Laos which fostered enthusiasm small blocks, ranging from 0.1 to 1.0 ha, with most and confidence for planting teak, including: trees in a single block being of the same age. There 1. depletion of wood supply from natural forest and has been a boom in teak planting near Luang Pra- the emergence of a market for relatively young bang, with the total area increasing from 500 ha to teak timber (15–20 years old) almost 10,000 ha over the past 15 years, as shown in 2. the possibility of and confidence in secure private Figure 4.1. This privately owned estate has become a land tenure (after periods of insecure tenure and significant asset, with an estimated standing market doubts about government land policy, farmers value US$80 million (based on an average price of became assured of their user rights to land used US$10 per tree at age 15–20 years) and an estimated productively, including for tree planting) semi-processed value (as export squared logs) of 3. the permanent settlement pattern adopted by most US$332 million. villages (after years of war and unregulated access Roder et al. (1995) identified teak as the most to land, the Lao PDR Government encouraged important perennial species planted on upland fields
34 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
5,000
4,000 State
3,000 Private
Area (ha) 2,000
1,000
0 1975– 1981– 1986– 1991– 1996– 2001– 1980 1985 1990 1995 2000 2005 Period
Figure 4.1 Recent establishment of teak plantations, Luang Prabang province (Savathvong, pers. comm. 2006) in northern Laos. He also noted that farmers growing Farmers have obtained loans of between 40% and teak were more likely to belong to the lowland ethnic 60% of the estimated value of their plantation. groups (Lao Loum) and to own lowland rice fields. Hansen et al. (1997) estimated that 1 ha of 3-year-old They found that farmers favoured teak over fruit trees trees could be sufficient for a loan of US$1,000– and coffee because of its better market potential. The 1,500. The authorities have, in recent years, imple- main reasons for planting teak were to produce cash mented land allocation schemes that assign up to four income or wood for construction (82%). Securing plots of land per family for cyclical shifting cultiva- land tenure was of less importance (18%). The main tion. In addition, each household can obtain 1 ha of reasons cited for not planting teak were insufficient land for production of perennials. Although many financial resources (41%), non-availability of land households have planted teak on this land, a signifi- (39%), lack of seedlings (35%), lack of labour (28%) cant number may not be capable or motivated to and lack of experience (13%). manage such plantations, which are therefore likely In a study of five villages in Luang Prabang prov- to be sold. ince in 1997 Xayvongsa (2001, reported in South- itham 2001) confirmed that 15% of annual household Hansen et al. (1997) also found that farmers usually income was derived from the sale of teak trees. In the claim that selling timber or using the wood domesti- villages studied teak wood production was the cally are the main reasons for planting teak. This was second most important agricultural source of income, in line with the official development strategy, which ahead of livestock. was promoted through the extension system. How- ever, the study found that a more likely, but unstated, Hansen et al. (1997) also found that the most common reasons given by growers for establishing motivation for upland farmers is the possibility of teak plantations were to: selling the plantations when just 1–3 years old to investors such as local businessmen and government 1. sell timber staff. Hansen et al. (1997) and Kolmert (2001) 2. use the timber domestically for construction of reflected on the opportunity to sell teak plantations houses, boats etc. soon after establishment. In 1996, depending on the 3. use the plantations as collateral for obtaining location and the age of the trees, growers could expect credit to sell plantations for US$700–2,000/ha. While it was 4. ensure land-use rights expected that the sale would include only the trees at 5. sell the plantations to investors shortly after maturity, many such arrangements include the land as establishment. well.
35 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
In 1997 extension staff estimated that, given the province, using data from a survey under the collab- opportunity, 80–90% of upland farmers would sell orative and multilateral LUSLOF project in 2005. their plantations. Between 1993 and 1997 this The objective of this survey was to examine con- occurred in villages close to Luang Prabang. In some straints and improve the management of teak through villages it was reported that the establishment of better knowledge of the teak market, the household plantations was financed by external investors, who economy and the relationships between trees and soil took over the land-use rights after farmers’ intercrop- in teak plantations. Four villages where teak small- ping had ceased. Ambiguity surrounding the laws for holdings had been a feature of land management for transfer of tenure rights at that time was largely about three generations were studied. Growers used responsible for this activity. Kolmert (2001) also teak for house construction, sale and barter. Results reported that prior to 1997 several farmers took the from the study, shown in Figure 4.2, revealed that opportunity to plant teak on sites adjacent to roads, teak was a more significant part of the household and to sell these blocks after 3 years to investors from economy for those who were relatively better off in Luang Prabang and Vientiane. This led to the aliena- the villages (52%) than for the poorer groups (14%), tion of some high-quality agricultural land to teak where rice accounted for the dominant part (32%) of plantations. New legislation since 1997 restricts teak the total household income. It was suggested that establishment on flat agricultural land and allows poorer groups used most of their land to grow rice growers to sell the trees, but not the land, in a teak and other crops for home consumption rather than to plantation. plant teak. Hansen et al. (1997) also found that domestic use Farmers in the Luang Prabang province, especially of teak is a marginal motivation to farmers, as shown those near road or river access, remain highly moti- by the near absence of teak in those villages without vated to plant teak. This is confirmed through the road or river access. However, it is likely that small- figures of the Provincial Agriculture and Forestry scale teak plantings for home construction may Extension Service, which expects to grow and dis- increase, even in remote areas, as the natural wood tribute some 4 million stumps and seedlings in 2006. supply diminishes, as shifting cultivation communi- This government-supplied planting stock is sufficient ties become more settled, and as farmers get easier to plant an area equivalent to some 3,600 ha. The access to planting material. research found that most growers produce their own Keonakhone (2005) reported on the role of teak in planting material, an observation also made by the household economy in villages in Luang Prabang Kolmert (2001) who estimated that 71% of teak
60
50 Wealthy
40 Middle
30 Poor
20 Income (%)
10
0 Rice Teak Bamboo Other Crop
Figure 4.2 Income from rice, teak, bamboo and other plants as a fraction of total income from farm production in Pak Check village (LUSLOF fieldwork report in Keonakhone 2005)
36 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. stumps planted on private lands had been prepared by In upland areas shifting cultivation forms the basis the growers themselves. These findings suggest that of agricultural production. It is a sustainable form of teak plantings in 2006 could be as large as 7,000 ha in production if fallow periods are sufficiently long for Luang Prabang province. soil fertility to be restored. However, fallow periods are becoming shorter as a result of increased popula- Emerging regulations relating to teak tion pressure. The policy objective of the Govern- ment of Lao PDR (GoL) is to reduce and stabilise the smallholdings area under shifting cultivation through a variety of measures and schemes, including resettlement of Faced with the challenge of fostering wise manage- upland villages and the introduction of sustainable ment of the large, expanding and valuable community production systems such as agroforestry and planta- teak resource, the Provincial Governor of Luang tion forestry (SIDA 2004). Prabang issued updated administrative guidelines in The forestland-use planning allocation process 2004. These relate to the sale of trees and logs, timber (FLUPLA) remains the primary mechanism to processing and export of semiprocessed logs implement GoL policies on allocation of land-use (Appendix 6). The guidelines require traders and proc- rights to rural villagers, tax collection and stabilisa- essors to be licensed and smallholdings to be regis- tion of shifting cultivation (Sigaty 2003). This tered, and they clearly enunciate tax obligations. These process aims to: convert shifting cultivation practices guidelines impose a level of government control and to other forms of agriculture production to stabilise involvement not imposed on any other privately the livelihoods of rural populations; reduce land con- grown agricultural crops in the province. While the flicts; increase production of agricultural commodi- new regulations will bring a measure of structure and ties; and increase forest protection and prevent illegal control to the booming teak plantation business sur- timber harvest and forest fires. The FLUPLA rounding Luang Prabang, the requirement for govern- program allocates degraded land to households at the ment licences, surveys and approvals may prove to be village level for commodity production and tree a barrier to expansion of successful businesses. planting through temporary land-use certificates (TLUCs). Land allocation and national The allocation process for the purpose of planting policies trees is supported by legislation including the Land Law, Forestry Law and the Prime Minister’s Instruc- The Forestry Strategy offers a history and context for tion on Implementation of the Land and Forest Allo- the plantation sector in the Lao PDR. Tree planting has cation Process. Besides the Forestry Law, specific been a national priority since liberation. In 1979 PM’s support for tree planting is provided in MAF Regula- Provision No. 74 promoted tree planting on bare land, tions No. 196/2000 on Tree Plantation Development and in 1980 a National Tree Planting Day (1 June) was and No. 1849/2000 on Tree Plantation Registration; designated. Under the current 5-Year National Socio- and the annual PM Orders regulating forestry activi- Economic Development Plan (2001–2006) tree ties (PMO 11/99, PMO 10/2000, PMO 15/01 and planting for commodity production is strongly pro- PMO 18/02). moted, with a target of 134,000 ha. Annual planting Within this legislative framework the state author- areas and seedling production targets are set in the ises individuals and households within a village to National Socio-Economic Development Plans and use 3 ha of degraded forestland per labourer in a distributed to provinces for implementation. family for tree planting. Those who wish to use more Land is state-owned and allocated to farmers for can apply for a lease from the state. In practice the short-term use. Although villagers describe land as district administrative authorities coordinate with being ‘sold’, in the official view the transactions village authorities to allocate the 3-year TLUCs to would involve only the rights to land use. The land plant trees on degraded forestland not suitable for law provides for the allocation of land-use rights to agriculture. The provincial land office should convert families with a maximum of 1 ha for paddy rice, 3 ha TLUCs to permanent land title after 3 years if the for orchards, 3 ha for commercial tree planting and land has been used for its intended purposes con- 15 ha of grassland for livestock. Farmers can also sistent with regulations and without claims or dis- apply to lease more land. putes.
37 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
A 2003 report by the Asian Development Bank property rights on planted trees, land tax exemption (ADB) indicated that, since 1991, 600,000 to for registered plantations and free distribution of 900,000 TLUCs had been issued in over 5,000 vil- seedlings to farmers and organisations. lages, but none had been converted to permanent title. This was primarily due to lack of clear and effi- Land allocation is a sensitive and complex issue in cient guidelines for titling rural land and the reluc- the Lao PDR. A number of useful references in a tance of village authorities to subject themselves to a series of land policy studies conducted by the Lao land titling system that potentially restricts their tra- Land Titling Project II in the Lao PDR in preparation ditional land tenure and use patterns (Xaynari and for a coherent and comprehensive ‘National Land Sigaty 2003). Policy Statement for Lao PDR’ by 2007 provide To achieve targets GoL provides incentives, useful background (Schumann et al. 2006; Soulivanh including allocation or lease of land for tree planting, et al. 2004, 2005).
38 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
5 Smallholder study: Village growers in Xieng Ngeun and Luang Prabang districts
A socioeconomic study was undertaken in three teak- Survey procedure growing villages close to the Nam Khan River, south-east of Luang Prabang city in Luang Prabang Survey data were gathered through interviews and province. The three villages selected were: Ban Gok meetings in the three villages using two structured Gniew in Luang Prabang district, and Ban Xieng Lom questionnaires. These are reproduced in Appendix 2. and Ban En in Xieng Ngeun district, as shown in Figure Meetings were arranged with the Ni Ban (village 5.1. These villages were chosen on the basis of their heads) of each village to explain the nature and long history of private teak planting (smallholdings in purpose of the community meetings and individual Ban Gok Gniew were established in 1962—Sinhotha, pers comm. 2006), a demonstrated willingness to try interviews. Each Ni Ban provided some basic statis- new cash crops, and an expectation that villagers would tics for each village, and subsequently arranged for be happy to share with us in meetings and interviews meetings and discussions with interested teak data and information on their current farming activities growers. The meetings and interviews were con- and their intentions for the future. This chapter outlines ducted over one day in each village during June 2006. the background to the smallholder study and describes The process had to be sensitively managed, as early the current physical, social, land-use and institutional June is one of the busiest times on the agricultural cal- conditions governing the smallholders. endar. The Women’s Committee from each village arranged for lunch and refreshments for meeting par- ticipants. A total of 58 people participated in commu- nity meetings and discussions, and 15 growers participated in face-to-face interviews. At Ban Gok Gniew some people from neighbouring villages (Ban Laksip, ‘Km 10’) also attended the meeting as they had a strong interest in the profitable cultivation of teak. The details are shown in Table 5.1.
Table 5.1 Sources of local information: Ban Gok Gniew, Ban Xieng Lom and Ban En
Activity Village Ban Gok Ban Xieng Ban En Gniew Lom Ni Ban interview 1 1 1 Community 28 11 19 meeting (no. of participants) Structured 555 Figure 5.1 Location of study villages interviews
39 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Attendance at all meetings was voluntary (Figure Increased numbers of bicycle travellers, on a day 5.2). Selection of the five interviewees in each village loop route from Luang Prabang, are passing through was made by the Ni Ban and based on two main cri- Ban Gok Gniew and Ban Xieng Lom. teria: family self-sufficiency and available land to participate in any future experimental trials (3–5-year Social time frame). In addition, the Ni Ban told interviewees that they would be expected to contribute towards The average family size for the three villages was labour requirements associated with any future on- 6.4 persons. On average 3 persons from each family farm experiments in the event of a project being worked on the farm. Of the farmers interviewed, 80% developed. received part of their income from off-farm work such as government employment or through taxi ownership. Off-farm income for the 15 farmers inter- Village conditions viewed averaged 38% of their total income, with Physical farming activities generating the remainder. Sixty per cent of the farmers interviewed owned at The altitude of the villages is 360–390 m above sea least one motor cycle, while just over 70% had at level. Each village has good road access and all are least one bicycle. Only a third of the farmers had a close to the main highway running south from Luang cultivator, with most using manual labour to prepare Prabang to Vientiane. Traditional river transport has fields for planting. All respondents had at least one fostered strong links between Ban En and Ban Xieng television and about 70% had either a landline tele- Lom. The three villages are close physically and phone or a mobile telephone. These data are pre- there are strong family ties between the three. Ban En sented in Table 5.2. was established in 1840, Ban Xieng Lom in 1852 and Within the cultures of the diverse ethnic groups in Ban Gok Gniew, more recently, in 1935. They are northern Laos there are perceptions of the roles, predominantly farming villages and have soils of activities, responsibilities and needs of men and good agricultural quality. women. A concern was raised and discussed during Given their proximity to Luang Prabang and its meetings that the establishment of teak woodlots or growing tourist industry, and their location by the future establishment of teak-based farming systems banks of the Nam Khan River, Ban En and Ban Xieng might disadvantage one gender or the other. In the Lom are experiencing increased exposure to travel- villages visited men were clearly responsible for the lers making day trips by canoe to Luang Prabang. clearing of land and site preparation. Men and
Figure 5.2 Completing the questionnaires
40 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. women worked together during planting and both Gniew may be directed towards these important participated in weeding. Teak planting was a mar- social development needs. ginal additional activity to normal swidden manage- ment and did not, according to discussions, Land-use activities disadvantage either men or women. Farmers from all three villages said that decisions to plant teak or to Data provided by the Ni Ban for each village indi- sell teak were generally a family decision, and were cated that teak planting was a well-established and not gender-based. This was confirmed during inter- integral part of the farming systems in all three vil- views with the Ni Ban in Ban Gok Gniew and Deputy lages, as shown in Table 5.3. At least 60% of house- Ni Ban in Ban En, but the Ni Ban at Ban Xieng Lom holds in each village owned teak smallholdings. The felt that the decision to sell teak belonged to males. average area of teak planting ranged from 1.5 to Tree harvesting was done by teams of men working 3.8 ha. All the farmers interviewed had teak plantings for the buyer of the trees, and did not involve the and all had intentions to plant more in the future. household. It appeared unlikely that strategies to Table 5.4 presents details on farming activities for the improve productivity of teak, such as intercropping surveyed villages. or enhanced management, would disadvantage either Table 5.3 Village land use gender. Given the longer term benefits and the stated equality involved in making decisions about har- Attribute Village vesting teak, it was concluded that teak and teak- based farming systems are gender neutral, with ben- Ban Ban Ban En efits accruing to both men and women within the Gok Xieng family unit. Gniew Lom Total population 915 786 468 Table 5.2 Social characteristics of smallholders Total families 143 159 94 (average per smallholding) No. of teak-growing 85 100 94 Characteristic Unit Value families Portion of community 60 63 100 Family size No. 6.4 with teak (%) Farm workers per family No. 3 Area of teak plantations Motorcycle ownership % 60 322 150 51 in village (ha) Bicycle ownership % 73 Cultivator ownership % 33 Average area of family 3.8 1.5 0.54 Television ownership % 100 teak holding (ha) Landline telephone ownership % 40 Source: Interviews with village Ni Ban, June 2006 Mobile telephone ownership % 47 No telephone % 27 Table 5.4 Smallholder farming activities (average per smallholding) Source: Interviews with village smallholders, June 2006 Characteristic Units Value Important social development issues identified by the community in Ban Gok Gniew were the village Paddy ha 0.85 Swidden ha 3.64 school, which struggles to accommodate the needs of Poultry No. 23 an expanding population and neighbouring villages; Pigs No. 5 and the water supply, which can no longer meet the Buffalo No. 5 needs of the village. Ban Gok Gniew does not receive Teak trees No. 3,039 the same level of government development funds as Source: Interviews with village smallholders, June 2006 its neighbours in Xieng Ngeun district, which is a poor rural district. Luang Prabang district is classi- Growers broadly followed planting procedures fied as a rich district and receives fewer development described earlier in this report. Most (85%) grew funds. It is hoped that some of the additional income their own planting material from locally collected generated by improvements in agricultural produc- seed, and small nurseries were common in village tivity and agro-forestry land-use systems in Ban Gok gardens. More than 70% of farmers preferred to plant
41 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. stumps in the fields over seedlings because of their Companion crops better establishment and survival. Only two of the 15 interviewees purchased their seedlings or stumps. Despite lengthy experience in growing teak as a Based on foregoing estimates of the current rate of stage in the management of their swidden fields, planting, the 2006 requirement for planting stock growers had not considered actively combining the would have been about 37,400 seedlings or stumps, growth of trees and companion crops for extended and 32,000 of these would have been produced in periods. They saw considerable attraction in growing farmers’ nurseries. two crops on the same block at the same time, as this Planting was conducted at a convenient time offered potentially more money as well as security if between March and early June. Plant spacing used by the price for one crop declined. Growers recognised farmers varied from 2 m × 2 m to 5 m × 3 m, the that there was insufficient light for their existing suite most popular being 3 m × 3 m. The survival of of companion crops under closely planted teak, and planted teak was 80–90%. New plantings were were curious as to what crops might be tried and how weeded up to nine times over the first 3 years. No they would be combined. thinning was reported and only two interviewees did The villagers had responded positively to govern- any pruning. There was a perception that pruning ment calls to revise agronomic practices to limit soil increased epicormic growth and could devalue ulti- erosion. In the late 1980s, in response to encourage- mate log quality. ment from government officials, farmers planted a Strong winds were common at Ban En and teak tree variety of leucaena (possibly K8) after harvest on trees provided useful windbreaks. swidden fields. The attraction was that fast-grown leucaena would be suitable for charcoal production Leaf-eating insects (probably Hyblaea puera) and could be sold in Luang Prabang and other local defoliated teak plantings in May–June, and were a markets. Unfortunately, although the leucaena grew concern for all farmers at Ban Gok Gniew and a few well, there was poor market acceptance for leucaena at Ban En, but were not mentioned at Ban Xieng charcoal and the system collapsed. Lom. Recent visitors to Ban Xieng Lom had promoted Farmers rarely use purchased inputs such as ferti- planting of Aquilaria, but seemingly offered a biased lisers or sprays to enhance crop productivity. As rota- assessment of this tree crop. Farmers were not recep- tion periods shorten and land use intensifies, there tive to these promotions in view of the perceived high may be increased need for farmers to purchase inputs risk and limited information on potential returns. to sustain productivity. On the other hand, as the Smallholder teak growers regard each tree planted market demand for organically grown produce as having a future potential value, which explains increases, farmers will be seeking organic solutions their reluctance to remove trees in thinning opera- for maintaining fertility and protecting crops from tions. Should external or domestic agencies wish to pests and disease. demonstrate the benefits of thinning on smallholders’ Some farmers indicated that they used hired teak plots, some recompense would be expected for labour, especially to help with land clearing. Many the trees removed. If use of small teak logs becomes smallholder families exchange labour and help each financially attractive and markets for small logs other out when there is a peak need. Labour inputs are emerge, farmers indicated a willingness to remove critical to all stages of teak and other crop production. trees as thinnings. The steepness of most land limits the use of mechan- Following harvesting of their trees, most farmers ical cultivators and bullocks for land preparation. indicated an interest in continuing with teak, either Past experience with teak and cash crops varied replanting teak stumps (50%) or managing coppice among the villages. In recent years farmers have regrowth (43%). However, farmers’ knowledge of planted upland rice, maize, sesame, Job’s tears, pine- profitable management of coppicing was limited. apples, sweet potato, coffee, peanuts and soybean on their swidden land with mixed success. Grazing land Motivation for growing teak close to the villages was limited, restricting livestock numbers. Farmers from the three villages indicated a Villagers expressed a range of motivations for willingness to try new crops on their swidden land. growing teak, most of which were in accord with those found in earlier studies. The most commonly stated reasons for planting were income generation
42 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. and the prospect of future commercial sales, as well topic was avoided by villagers both in open discus- as a commitment to creating household wealth for sion and in formal interviews, but spoken of in children and future generations. The successful informal conversation. Teak plantings had been sold history of teak in all three villages had demonstrated in times of financial stress, usually at very low prices. the long-term benefits that can accrue from teak There was no market price index or information planting, and were a good example to current service that allowed landholders to make a reason- growers. able assessment of the value of either their land or People were extremely confident about the long- teak trees. Ambiguity surrounds the sale of planta- term prospects for teak, described by one interviewee tions in this area. While some growers believe that as being ‘better than putting your money in the bank’. they have sold only the trees to investors, others Growers regarded their teak plantings as a secure and understand that they have sold the land as well. In negotiable source of wealth that could be drawn on in Ban Gok Gniew, which has grown significantly in times of need and that provided a measure of house- recent years due to relocation and movement from hold financial security. Teak trees were sold in other villages, the original families controlled most response to immediate financial needs (e.g., births, accessible land and most of the teak plantations. marriages, deaths and schooling were all quoted as Despite the potential, no consideration has been reasons for selling trees) or simply to make a with- given to renting land to investors for teak planting. drawal from their ‘teak bank’. There was no knowledge of rents that might be While recognising the value of other hardwoods, charged. teak growers felt that other high-value trees required long rotations that were unacceptable. One inter- Markets viewee from Ban En expressed an interest in agar- wood (Aquilaria sp.) and another from Ban Xieng The major attractions for teak were its perceived Lom in smallholder rubber. reliable long-term market demand, stability of prices and being able to sell trees all year round (i.e. not con- From discussions at meetings and interviews, it is fined to any particular season). As an asset with clear that there is a common expectation that teak increasing market value, teak plantings played an smallholdings in all three villages will continue to important role in increasing household wealth, and increase. All growers who participated in the struc- were drawn upon in times of financial need. Teak is tured interviews had plans to expand their area of treated as a capital asset rather than another land-use teak when the opportunity presented itself—either enterprise. when they had clear tenure over a block of land or when teak planting suited their swidden cycle. The 15 Most growers intend to begin selling their teak interviewees collectively estimated that they would trees once they reach 15 years of age, when they are plant (or had planted) about 2 ha in 2006. Assuming expected to be 22–25 cm dbh. Farmers’ expected that other teak growers in these villages have similar prices for trees of this size and age vary widely from planting intentions, the combined teak plantation 100,000 to 200,000 kip per tree, a reflection of the estate in the three villages could expand by 37 ha in way the market works and the power of the traders in 2006. setting prices. For a farmer, selling a tree is like with- drawing money from the bank to pay for urgent Land ownership and tenure family needs. The buyers exploit this situation as well as farmers’ limited market knowledge and experi- All growers interviewed owned the land on which ence. For example, a smallholder from Ban Xieng they had planted teak. Village discussions confirmed Lom was paid only 120,000 kip (US$12) for a that, in the past, teak plantings were regarded as a standing tree of 35 cm diameter because she needed good way to establish secure land tenure. This is con- money quickly for medical reasons. Under different sistent with the findings of previous studies in the circumstances, with less urgency and more market province (Fogdestam and Gålnander 2004; Hansen et information, such a tree could fetch more than twice al. 1997; Keonakhone 2005; Kolmert 2001; South- that price. itham 2001). Although there were many credible Most farmers sell one tree at a time rather than a reports of investors from Luang Prabang and Vien- whole plot of trees. The buyer arranges for the tiane purchasing blocks of teak on village land, this removal of the tree and its transport to the market.
43 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
The supply chain for annual cash crops and the sion Service (PAFES) and Northern Agriculture and operations of markets for these crops were poorly Forestry Research Centre (NAFReC) could offer. No understood by farmers. Farmers found them to be extension posters or other extension material were volatile and unreliable, and most preferred to sell displayed in public places such as schools, shops or their surplus produce directly to informal markets in community halls—a disappointing outcome for vil- nearby villages. lages close to the main road and through which NAFReC staff travel each day on their way to work at their research station! Market information Less than 30% of the farmers surveyed used gov- ernment extension services. Many farmers sought At all meetings and in all interviews farmers information from family members or neighbours, expressed their frustration at not having access to while a third indicated that they did not use any reliable market information for teak, cash crops and external sources of information to support their non-timber forest products. They felt totally at the farming activities. mercy of traders and were obliged to accept whatever prices were offered. There was no mechanism for Land taxes growers to obtain accurate market information to assist them to negotiate with buyers from a position Respondents were asked to estimate annual land of greater strength. In addition, there was no mecha- tax payable for their teak plantations. This proved to nism within the village to share and disseminate be difficult for the interviewees to provide. Land information. The growers of teak and other crops assets in the study area are assessed for tax purposes have not established growers’ associations, coopera- either on a simple area basis, or on an aggregate basis tives or other forums for representing their commer- for a farmer’s total land assets. It is not possible to cial interests, negotiating with traders or exchanging divide this value between the teak and other parts of information. a landholding. Land taxes in Xieng Ngeun district There was a lack of awareness among participants (15,000 kip/ha/year in Ban Xieng Lom or, on the of how much their teak plantations were really worth opposite side of the Nam Khan River, only 5,000 kip/ and of being able to use their teak plantations as col- ha/year, and in Ban En 10,000 kip/ha/year) are gen- lateral for bank loans. This perhaps reflects both the erally lower than those in Luang Prabang district. villagers’ traditional suspicion of banks and a lack of Ban En and Ban Xieng Lom have lower land taxes proactivity on the part of the banks. than Ban Gok Gniew. The typical total annual land tax for a modest land holding of 4–5 ha (including the Opportunities for value-adding home and agricultural land) is of the order of 150,000 kip in Ban Gok Gniew. One grower at Ban The meetings and discussions revealed that Gok Gniew reported that land tax was 3,000 kip/ha/ farmers were keen to examine opportunities for year for unused swidden land and 13,000 kip/ha/year primary processing of cash crops, believing that this for teak plantations. In Ban Xieng Lom another would help buffer them against seasonal price fluctu- grower reported that annual land taxes for his teak ations. Processes of interest included cheap, labour- blocks were 25,000 kip/ha/year. saving ways to husk maize, and preparation of sesame oil should sesame prices again collapse. Cooperation and partnerships to improve profitability Information, research and extension All people interviewed expressed a strong and A great deal of information has been published on enthusiastic wish to participate in any future ACIAR- the community teak plantations of northern Laos but supported on-farm research—a demonstration of none of this was accessible in the three villages their interest in improving existing teak-based sys- studied. The interviews revealed poor access to tems. They undertook to offer access to land and extension services, which were either underused or labour. At the end of any joint on-farm research, the unavailable. The teak growers interviewed were farmers expect that the produce (including teak trees) unaware of the range of support and demonstration would belong to them. They also expected that they that the Provincial Agricultural and Forestry Exten- would be adequately reimbursed for any trees
44 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. removed during the collaboration (i.e. for thinning Gok Gniew had frequently been approached for trials or demonstration) because they were not con- surveys and participation in research. Their experi- vinced that thinning enhanced long-term returns ence had been that agencies collect information and from their plantings. Because of their willingness to then simply leave the village, avoiding any responsi- try new things and their relative proximity to the bility for delivering any results of their work. highway and to Luang Prabang, the villagers at Ban
45 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
6 Economic aspects of integrated teak farming systems
Recent changes in policy and the institutional envi- ernor has promoted the integration of forestry and ronment are influencing teak planting decisions and agriculture within permanent subsistence areas in an contributing to changes in land-use patterns in the effort to alleviate poverty and improve the liveli- uplands of Laos. Farming systems are in a period of hoods of smallholders in the province. transition, with governments, communities and indi- Agricultural land use in the uplands of Laos is going vidual smallholders seeking options that are econom- through a major transition from shifting agriculture to ically attractive and sustainable over the long term. sedentary agriculture. The Government of Lao PDR plans to eradicate shifting cultivation by 2010. At the Stabilising agriculture same time the government is decentralising power, conferring responsibility for meeting central govern- Increasing interest in planting teak in Laos (Figure ment targets on provincial and district authorities 6.1) is being driven by government policy decisions (NAFRI 2004). Important policy targets include the coupled with environmental, social and economic stabilisation of shifting agriculture, eradication of factors. Since 2001 the Government of Lao PDR has opium cultivation, reduction in the number of village pursued the protection of natural forest, discouraged administration units, and improvement in land-use shifting cultivation practices and established perma- planning and land allocation. The National Growth nent subsistence areas. The protection of soil and and Poverty Eradication Strategy (NGRES) of the water resources, especially in steep country, has also central government is aimed at increasing collabora- been an objective of both the national and provincial tion between agencies and provinces to ensure greater governments. In Luang Prabang province the gov- harmonisation of action plans to meet agreed targets.
Figure 6.1 Newly planted teak
46 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
A workshop held in Luang Prabang in January 2004 our survey nominated the commercial attractiveness revealed that rural communities practising shifting of teak as the primary reason for planting it. This is cultivation in the uplands have experienced a wors- associated with farmers’ perceptions that demand for ening of their livelihoods under these changes (NAFRI teak is likely to continue to grow. Given their treat- 2004). This was associated with the ineffectiveness of ment of teak as a capital investment, they are also policy implementation, policy inconsistencies, inade- attracted by its relatively stable and high price com- quate extension services, underinvestment in market pared to other tree species, and the ability to sell trees services and inadequate access to rural credit and at any time during the year or at convenient times development funds for farmers. during the rotation. One of the critical changes for smallholders asso- Other factors that facilitate the integration of teak ciated with the stabilisation of shifting cultivation is plantings into upland farming systems include shortening of the fallow period. To maintain family (Hansen et al. 2005): livelihoods and land productivity, changed farming • the possibility of securing private land tenure practices are likely to be introduced over the next • government promotion and extension services decade. These may include: • the permanent settlement pattern adopted by most • increased use of purchased inputs which embody villages (despite practising shifting cultivation, technological advances village sites have tended to remain fixed) • the need for more technical knowledge associated • expansion of the road system which makes with new crops and farming practices plantations possible in new regions (plantings tend • closer integration with the market economy to occur close to roads to facilitate harvesting and • labour management in more diverse production transport to processors or traders) systems • land allocation schemes that provide additional • gaining access to and use of additional land land for perennial crops resources. • the depletion of wood from natural forests and the The learning curve associated with these changes emergence of markets for younger teak wood ‘can be long and difficult’ (Van Gabsberghe 2005, • promotion by private investors through financial p. 53). support, supply of planting material and technical Food security remains the top priority for all information for tree and land management. farmers, ahead of cash crops and other alternative land uses such as trees. Because cash crops are Constraints subject to production and price risk, farmers will seek In Chapter 2 it was noted that, despite its attrac- options that provide diversity and a buffer against tions, the benefits of teak plantings are limited by: variable returns. Other issues of importance, as pro- • poor management, especially insufficient pruning duction systems intensify, include: and delayed thinning of trees • the need for more farm fencing • use of inferior genetic material because of the • better management of water resources strong demand, limited supplies of improved seeds • complementary development of infrastructure to and associated high prices facilitate the transport of farm produce to markets • competition with agriculture for arable land, • fair prices for farmers. resulting in teak being planted on marginal land, as border plantings or in small plantations Profitable integration of teak into • length of rotation and the difficulty for farmers to smallholder farming systems retain trees for 20–30 years. Farmers surveyed for this study identified a Teak is a priority tree species for plantation expan- number of additional constraints or difficulties that sion. Planting targets have been set by government limit teak planting: and incentives provided to growers to establish plan- • poor infrastructure development tations. Teak is preferred to other perennials because • unsympathetic land allocation policies it grows quickly in the early years, is easy to manage • inadequate market information systems and is fire tolerant. Most farmers from the three vil- • limited investment in value-added processing lages in Luang Prabang province who responded to • conservative farmer attitudes and culture
47 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
• limited access to and use of government extension ally subsistence based, although most upland farmers services do not produce sufficient rice to meet their annual • farmers’ scant knowledge of teak. household needs (Schiller et al. 2001; Shrestha et al. Efforts to successfully integrate teak into more 2006). sedentary land-use systems must tackle these limita- Upland rice-based cropping is practised on a rota- tions. tional basis. A single wet-season crop may be fol- In this study some of these limitations are lowed by a period of fallow in the range 2–10 years. addressed. The options of pruned and thinned planta- A second and third rice crop may be planted, tions are considered, as well as various intercropping although yields decline rapidly depending on the soil alternatives including annual subsistence crops, cash conditions. Crops such as pineapples, maize and crops and short-rotation perennials. Useful insights Job’s tears often follow a rice crop as they are less into the benefits of using improved genetic material prone to yield decline in subsequent years. and planting larger areas of trees per farm are also The benefits of traditional long-fallow cropping provided. While the length of rotation is a problem, systems include partial restoration of soil fertility, especially for annual cash flow, the attractiveness of reduction of soil erosion due to infrequent tillage, and teak planting for timber production compared to little or no use of chemical pesticides and fertilisers annual cropping suggests that financing arrange- (de Rouw 2005; Linquist et al. 2005). ments that support and sustain smallholders until plantation harvest would be of value to the commu- Short-fallow cropping systems nity. Other limitations listed above are more difficult to address in this preliminary assessment but should The traditional long-fallow cropping system is in be part of a more detailed study. Particular attitudes decline in northern Laos. Increasing population pres- or perceptions of farmers that may need to change for sure has reduced fallow periods for traditional upland teak to be successful include the use of modern tech- rice production, but compensating changes in man- nology, the use of borrowed funds, and treatment of agement practices have not been introduced. As a teak trees as a capital investment. In this preliminary consequence rice yields have declined and the inci- assessment of teak-based management systems we dence of poverty among rural communities has indicate how a change in attitude or approach by increased (Linquist et al. 2005). The practice is farmers can potentially improve their livelihood. unsustainable and is likely to be replaced by shorter rotation cropping systems embodying higher levels of technology and knowledge that will reverse the Current smallholder farming decline in soil fertility and productivity. systems Saito et al. (2006) concluded that ‘the long-term productivity of upland rice cannot be sustained with To enable valid comparisons with teak farming enter- increased cropping intensity using the current man- prises, budgets and cash flows are estimated for current agement practices. Therefore, improved crop and land uses. Upland rice production with 1–3 years of resource management technologies are necessary for cropping followed by up to 10 years of fallow is the tra- sustainable production’. ditional crop rotation system. This long-fallow system provides one baseline farming enterprise for our study As the uplands are in a period of land use transition, of alternative land-use systems. However, in view of it is appropriate to take a future perspective in this the government’s wish to reduce and stabilise long- study and to include farming activities and practices fallow shifting cultivation by 2010, a short-fallow crop- which may develop over the next 10–20 years. In the ping system, which is likely to be common in the future upland rice production is likely to be character- future, is also included. This is a second baseline ised by sustainable short-fallow systems incorpo- system for comparison with teak-based systems. rating shrubby legumes which can add nitrogen and other nutrients to the soil and reduce weed competi- Traditional long-fallow cropping systems tion. Research by Linquist et al. (2005) has identified a number of promising fallow species including leu- Upland rice is the principal crop grown within a caena (Leucaena leucocephala), pigeon pea (Cajanus shifting cultivation (swidden) system in the high- cajan), crotalaria (Crotalaria anagyroides) and paper lands of Laos. The slash-and-burn system is gener- mulberry (Broussonetia papyrifera). Paper mulberry
48 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. is not a legume like the others but is included because separate plots (Hansen et al. 1997, p. 8). After the it is indigenous in northern Laos and has soil- third year of production, intercropping ceases as improving properties. Linquist et al. (2005) found that shading by the young teak trees limits the production farmers prefer paper mulberry and pigeon pea, espe- of the companion crops. cially the latter, because of the higher potential eco- Various initial planting or stocking rates are used nomic benefits. Research into fallow technologies to for commercial teak plantations. Where the aim is to stabilise upland rice farming systems in West Africa produce large marketable logs in the shortest time, a found that legumes can suppress weeds and offer the spacing of 3 m × 3 m is typically used. However, potential to sustain rice yields under intensified crop- where it is important to maintain sufficient light to ping (West Africa Rice Development Association support companion crops, a wider spacing is pre- 1999). ferred. Government extension services advise In view of the attraction of paper mulberry, and farmers to use the 3 m × 3 m spacing, and almost given its potential as a companion crop for teak, a 50% of the farmers surveyed for this study used this rice–paper mulberry rotation is selected as an alter- spacing. In the absence of attractive and proven com- native baseline farming system for comparative pur- binations of crops and trees, many growers near poses. Luang Prabang favour closer spacing including 2 m × 2 m and 2 m × 3 m. At these densities the teak Rice–paper mulberry trees soon capture the available light, nutrients and moisture on a site and limit aggressive understorey After the rice is sown and established the paper growth, reducing the frequency of weeding and sim- mulberry can be planted and continues to grow after plifying future clearing should the land be converted the rice has been harvested. Paper mulberry is to agricultural use. On the other hand, wider spacing harvested 18 months to 2 years after establishment. offers the opportunity for intercropping with com- Harvesting continues until the next rice crop, at panion crops for a number of years but increases the which stage the trees are cut down and the field prepared for the rice crop. Paper mulberry risk of weed growth to the farmer, especially when regenerates from roots, stems and seeds during the the companion crops are harvested. next rice growing season. However, survival is better Once the teak is established the trees receive for seedlings (80%) compared to root suckers (42%). minimal attention, with the exception of removing Paper mulberry is not intensively managed in diseased and dead trees. Few farmers prune the lower existing systems, but as market prospects improve branches or forked trees and thinning is not practised that is likely to change. Furthermore, labour until about year 15, when the larger and best-formed requirements for paper mulberry complement those trees are selected for harvest. for rice, which adds to its attraction as a short-fallow rotation species. On the downside, however, paper In 1997 regulations were introduced restricting mulberry fields have to be fenced as cows and buffalo planting of teak on agricultural land with a slope of like to graze it. Linquist et al. (2005) found that rice less than 12%. Extension services advise farmers to yields in the first year when paper mulberry was plant teak on marginal land, not on their good agri- established were 1.83 t/ha, which is 14% above cultural land. natural fallow rice yields (i.e. without a fallow crop). Clearly there is much scope for improving the pro- Rice yields decline in the second year as the paper mulberry growth increases. ductivity and profitability of teak in northern Laos. However, any improvement is not simply a matter of technology but must also involve consideration of cul- ture, family needs (food security), financial capacity and farmers’ technical knowledge and skills. Teak farming systems Teak farming systems appraised in this study Teak has been cultivated in the Lao uplands for over include: 60 years. It is commonly grown in a taungya system • long-fallow rice–cash crop (e.g. pineapples, Job’s (i.e. interplanted with agricultural crops) during the tears or sesame)–teak with and without pruning first 1–3 years. This makes weeding easier after and thinning establishment and is less demanding on labour • rice–teak intercropped with paper mulberry with resources than if teak and food crops were planted in wide spacing, pruning and thinning.
49 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Thinning and pruning teak and wood quality and to increase market value. Pruning removes branches from the stem while they Thinning is the deliberate reduction of the number are small to produce high-value knot-free timber. of trees growing in a stand. There are many benefits Pruning also provides an opportunity to manipulate associated with thinning. Reducing the number of the tree canopy to offer more light to companion trees in a stand potentially favours vigorous trees of crops. Initial spacing, thinning and pruning interact good form by providing more space for crown and with each other in a complex manner to influence root development, enabling remaining trees to reach stand value. an optimum size sooner. Larger trees command Most teak trees observed near Luang Prabang better market prices. In addition, thinning may demonstrated good apical dominance and form. The remove dead or diseased trees for reasons of stand close initial spacing used by growers had limited the hygiene (Evans and Turnbull 2004). development of side branches, and pruning was not Thinning is a common practice in commercial teak regarded as a high priority. In a study near Luang Pra- plantations to maximise production of large, high- bang, however, Keonakhone (2005) reported that quality logs. Typically, in an intensively managed pruning had a positive effect on tree growth, although × plantation with an initial spacing of 3 m 3 m growers interviewed for this study were unaware of (equivalent to 1,100 trees/ha) and a rotation of 20 this information. Viquez and Perez (2005), working years, non-commercial thinning is scheduled at in Costa Rica, reached a similar conclusion. 4 years of age (to 500 stems/ha), followed by a com- There is compelling evidence that growth rates and mercial thinning at 14 years (to 125 trees/ha) before market values for teak grown on smallholdings in final harvest at 20 years. In a study conducted near northern Laos can be significantly increased through Luang Prabang, Keonakhone (2005) found that thin- changes in management practices. Growers surveyed ning resulted in greater annual volume increment. were unaware of the field trials which substantiate Southitham (2001) found that diameter growth and this assessment, and remained unconvinced that any ‘commercial height’ (log length) of teak were both change from existing practices would improve their increased by thinning. household incomes and cash flows. A strong case can Smallholder growers near Luang Prabang consider be made for establishing highly visible and acces- all planted trees to have some commercial worth. Con- sible demonstration blocks and using participative sequently they manage their trees to generate cash action research to share outcomes with growers. flow as early as possible. They remove and sell larger trees from unthinned stands as soon as the trees reach Intercropping with teak a saleable size, normally at about 15 years of age. This practice (‘thinning from above’), while responding to Species mixtures in agroforestry systems provide immediate household needs for income, significantly diversity and the prospect of income stability in case reduces the opportunity to produce high-value larger of market changes. logs later in the rotation. In village discussions it was Teak planting is usually scheduled towards the end clear that the growers are not convinced of the long- of a swidden cycle following agricultural crops such as term benefits of more conventional thinning ‘from upland rice, maize, pineapple, Job’s tears and sesame; below’. Markets for small thinnings—below 15 cm and occasionally cash crops such as peanuts and dbh—do not exist and they see removal of such trees soybean grown on contract. Douangsavanh et al. as a waste. Growers also reported an increase in epi- (2003) reported on several local agroforestry practices cormic shoots and side branches on the remaining in Luang Prabang province, including teak–upland trees after removal of trees for sale, which is consistent rice and upland rice–teak–‘mak kaen’ (Zanthoxylum with observations by others (Krishnapillay 2000). sp.) combinations. Typically, as reported in commu- If teak is to be grown in association with com- nity interviews for this study, swidden crops are grown panion crops, thinning can prolong the period during on a site for up to 5 years before weed competition and which these crops can be grown. However, if thin- declining soil fertility prompt a change to a new site. ning is to be accepted by smallholders, there is a need At year 3, teak stumps or seedlings are planted and to develop local markets for the small-diameter logs. nurtured through the remainder of the swidden cycle, Pruning in commercial plantations of high-value until they are well established and offer considerable tropical hardwoods is undertaken to improve stem competition to any other plants. Established teak trees
50 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. compete strongly for light and nutrients, effectively Smallholders in Luang Prabang province are controlling weeds and woody regrowth, and allowing familiar with the vagaries of markets and the effect easy conversion should the site use revert to swidden. on the market price when supply exceeds demand. Elsewhere in Asia there are examples of successful This has been the case with pineapples. Discussions intercropping high-value hardwoods with cash crops with farmers at Ban Gok Gniew, a community which or woody perennials. Rubber, for example, has dem- has enjoyed success at cultivating and marketing onstrated a considerable capacity to accommodate pineapples for 30 years, revealed their concern at the intercropping. Rubber intercropping systems include widespread promotion (with donor project support) rubber with food crops such as rice, maize, cassava of pineapples to many other villages in the area. They and banana; and with cash crops such as tea, coffee, reported that this resulted in a substantial oversupply sugar cane, pineapple chilli and cardamom (Raintree in the 2006 season and a collapse in prices to the 2005). Smallholder growers of rubber in Xishuang- lowest ever. banna, southern China, successfully practise a Changing market demand for Job’s tears was rubber–tea agroforestry combination which balances reported to have caused hardship for some families at reliable income from tea against the attractive, but Ban Gok Gniew. During a time of high demand, volatile, income from rubber. In a series of operations farmers were approached by a company offering seed rubber plants are established with crops such as rice, in return for exclusive access to the resulting crop. maize or peanuts, which are followed by pineapples When the price for Job’s tears collapsed, the and then tea in year 4. Rubber is tapped from years 6 company abandoned the farmers and most of the crop to 30, and tea harvested from years 7 to 30. was left to rot, and it was too late in the season for farmers to plant alternative crops. The company was An important consideration in the choice of crops exposed to minimal risk (the cost of seed and some is the timing of essential operations and the demand time) while the farmers risked their season’s produc- for labour. Table 6.1 summarises the timing of oper- tion and lost the opportunity for some extra income. ations in our study area and indicates competitive and Because of the critical importance of markets and complementary combinations. market information, a workshop entitled ‘Market infor- During the course of this study it became clear that mation systems for agriculture and forest products’ was farmers grow teak as one stage in their use of agricul- held in Luang Prabang in July 2005. Three broad cate- tural land. None had considered combining cultiva- gories of crops grown for commerce in Luang Prabang tion of teak with companion crops on a long-term province were recognised (Phaphonsai 2005): basis. In discussions growers revealed that they did • long-term crops—timber (such as teak) and rubber not have the knowledge to change their practices trees either for teak or for possible companion crops to • mid-term products—livestock, fruits accommodate longer term interplanting and were • short-term crops—Job’s tears, sesame seed, maize, unaware of any market imperatives to do so. paper mulberry, soybean, sticklac and cardamom. Another recurring concern revealed in community The workshop identified some key issues to be discussions was the uncertain nature of markets for resolved in marketing these products: cash crops which can be grown in association with • Luang Prabang’s central but remote location, teak. This concern is shared by donor-supported which results in high transport costs projects, which have identified market limitations as • insufficient development in human resources, a major impediment to rural development in the needed to improve economic and social services uplands (e.g. the SADU Project—see Chapter 8). • lack of quality control and irregular supply of Village growers are at a distinct disadvantage in the products. supply chain. Without adequate market information, A preliminary analysis by Inthongxay and Rattan- firm contracts or any ability to undertake basic primary tray (2005) of the marketing chains for maize and processing, they bear considerable risk when dealing other export products in neighbouring Sayabouli with fluctuating prices in commodity markets for province revealed that the key issues facing growers crops such as maize, sesame, pineapples and Job’s dealing with such markets were: tears. They are further disadvantaged when they are • lack of transparency in price information, which dealing in perishable products, being unable to effec- may result in farmers not receiving a fair price for tively store or process them into higher value products. their produce
51 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. 12 (based on Douangsavanh et al. 2003) a PlantPrepare Plant PlantPrepare Weed Plant Plant Weed Weed Weed Harvest Weed Weed Harvest Harvest Weed Harvest Harvest Harvest Harvest prepare prepare prepare 1234567891011 Seasonal agriculture calendar: main crops, cash crops and NTFPs The basis for this classification is not entirely clear Weather Wet season Cool season Hot season Main annual crops Paddy riceUpland rice Slash BurnPosa Weed, Pao pet Cardamom PloughBamboo NurseryTua mae (worms) NTFP planting Transplant PlantPuak muak Cardamom WeedPosa Ginger a Harvest Harvest Harvest Job’s tearsSesameMaizeVegetablesCash crops SlashKhaem Harvest Slash, burn Slash Burn, Harvest Plant Slash, burn Slash Weed, Plant Slash, burn Plant Weed Plant Harvest Weed Plant Weed Weed Harvest Prepare Harvest Plant Weed Harvest Weather and crop Month Table 6.1
52 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
• storage losses, which further reduce farmers’ pating in a contract maize production system. For profits example, seed grain was provided to growers at Ban • lack of on-farm processing, which reduces Gok Gniew for 2,000 kip/kg and the husked grain farmers’ ability to add value to products. was purchased by the trader for 500 kip/kg at the During group discussions at all three villages these farm gate. Despite clear contractual agreements with three issues were raised many times, and were the growers, the traders were reported to dishonour regarded as impediments to successful cultivation of contracts if the market circumstances went against cash crops. Any proposal to cultivate companion them. While this might reflect the reality of market crops with teak must include consideration of the forces, it demonstrates how vulnerable rural growers development of markets for these crops and the in northern Laos can be. supply chain connecting growers and consumers. One aspect of marketing not reported in the market Job’s tears (adlay) (Coix lacryma-jobi subsp. information systems workshop, and an opportunity ma-yuen) not considered by growers, was the potential to market swidden crops as ‘organically grown pro- In mainland South-East Asia, endemic edible vari- duce’. Crops such as pineapples, sesame, Job’s tears, eties of Job’s tears have traditionally been cultivated maize and peanuts are all grown in swidden systems on a small scale for household consumption, without the use of chemical fertilisers or pesticides. although production is decreasing as this crop is The large and expanding tourist industry in Luang replaced by rice and maize. The grains are eaten Prabang may be receptive to marketing of organic whole in soup, or ground into flour and eaten as por- produce, which presents an opportunity for local ridge or cakes. Farmers in parts of Luang Prabang growers to exploit. province have begun commercial farming of intro- Possible companion crops for teak include known duced improved varieties of Job’s tears. Each plant cash crops and plants that produce non-timber forest bears a large number of ears which mature at dif- products. Most of the farmers interviewed had expe- ferent times and are hand-picked as they mature. rience with commonly planted cash crops, and pros- Grain is exported to Japan, which has become pects for most of the cash crops were broadly dependent on imported supplies for its expanding understood. Agencies such as NAFRI have R&D and health food market (Ochiai 2002). It is also processed market support programs in place, but these services into beer and sweets in Japan (Nakatsuji 2004). Grain were not well-understood in the study villages. is also exported to Thailand from where it is re- Details of crops commonly grown by upland farmers exported to Taiwan. There is great potential for are presented in the following sections. value-added processing within Laos for export directly to Japan, Taiwan and emerging markets in North America and Europe (Douangsavanh et al. Cash crop options for growing 2003, pp. 24–25). with teak The changing status of edible Job’s tears, from a relic minor crop to a cash crop, has had local Maize impacts. In Chomphet district (opposite Luang Maize is the second most important crop in Laos Prabang city on the other side of the Mekong River) after rice. It is cultivated primarily in swidden sys- cultivation of Job’s tears has increased rapidly since tems, and some 4,700 ha were harvested in Luang 2001 and, in 2003, it was the most valuable sector in Prabang province during 2000, yielding over the district, yielding US$300,000 (Figure 6.2) 10,000 t (Ministry of Agriculture and Forestry 2001). (Boomsma 2004). Some of this production is grown for commercial sale As a consequence of its increasing popularity and and export, with maize production for export to oversupply, the price of Job’s tears was reported to China beginning in the late 1990s in some parts of have dropped to 1,000 kip/kg in 2002 before recov- northern Laos. This expansion has affected the local ering to 2,800 kip/kg in 2003. The Chomphet study farming and livelihood systems and also female demonstrated the unpredictable nature of markets for labour, because women work until late at night cash crops. Although the production of Job’s tears husking the maize by hand. Informal reports demon- increased enormously, maize, peanuts and soy bean strate how vulnerable growers can be when partici- production also went up in 2002 but declined in 2003.
53 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Pineapples 1,200 Ban Gok Gniew is a local leader in pineapple cul- Maize tivation. It is believed that plants were introduced in 1,000 Sesame Laos from Singapore in the late 1950s, and subse- Soy quently were cultivated in the village. The modest Peanuts prosperity that the village has enjoyed over recent 800 years has been largely due to the demand for pine- Job’s tears apple. In 2006 the price collapsed due to oversupply. Cucumber In 2005 farmers received 10,000 kip per fruit at the 600 farm gate, but in 2006 the farm-gate price fell to 400 kip by mid year. Three years ago donor agencies, keen to help national government policies aimed at 400 reducing poverty, began a program to widely dis- tribute up to 100–200 free pineapple shoots per household. The resultant increased plantings have 200 caused a glut in a small but important market.
Potential for production of 0 2001 2002 2003 non-timber forest products in Date association with teak smallholdings Non-timber forest products (NTFPs) play an impor- Figure 6.2 Sales volume, Chompet district crops tant role in rural areas of Laos, where they serve a wide range of subsistence needs and provide oppor- Sesame tunities for earning additional income. At the national level NTFPs provide about 2.5% of annual exports Sesame is an ancient oilseed with unusually high from Laos. Foppes and Ketphanh (2000) reported oil content—around 50% of the seed weight, com- that NTFPs provide 50–55% of the cash income of pared to 20% in the seed of soybeans. Sesame is a rel- rural villages, where 80% of the population lives. atively high-value food crop, harvested for its whole They estimated that the value of subsistence use of seed which is used in baking, and for cooking oil NTFPs would be equivalent to 20–30% of GNP. The which is extracted from the seed. Sesame is used reported export value of NTFPs was about widely in Lao cuisine. US$6.3 million in 1993. Of the NTFPs exported, Sesame (Sesamum indicum) is a broadleaf plant medicinal plants represented 70% of the total export that grows to 1–1.5 m high and is adapted to areas value, followed by fibre products at 15%, resin 8%, with long growing seasons and well-drained soils. It edible products 6% and incense 2% (Vantomme et al. is considered drought tolerant but needs moist soil to 2002). Most NTFPs are exported to China (especially get established. It is not adapted to poorly drained medicinal plants), Vietnam and Thailand. Some soil and will not tolerate water-logged conditions. products are exported to Japan and Europe as well. Soils close to a neutral pH of 7.0 are recommended. From rural surveys villagers identified over 757 In Chomphet district Boomsma (2004) showed species of plants and 150 species of animals that are that cultivation of sesame (along with Job’s tears) used. Many species have yet to be botanically identi- had increased rapidly since 2001, as illustrated in fied, however, and frequently names used in reports Figure 6.2. In 2003 sesame was the second most val- are inconsistent (Vantomme et al. 2002). Most uable crop in the district, with production worth NTFPs are collected from the wild, and generally the US$166,000. Its price grew strongly from 4,000 kip/ resources have been exploited unsustainably. The kg in 2001 to 7,000 kip/kg in 2003. process of domestication has begun for a few species such as Amomum villosum (cardamom), Styrax tonk- inensis (benzoin), Pentace burmanica (‘si siet’ bark), Thysanolaena maxima (broom grass), rattan
54 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
(Calamus spp.), bitter bamboo shoots (Indosasa keting group and clear sales guidelines fostered a sinica) and tout tiang (Boehmeria malabarica—pos- sixfold increase in village income (Soydara and Ket- sibly Debregeasia longifolia, ‘puak muak’). Cur- phanh 2005). rently cardamom, broom grass, rattan shoots, While NTFPs are important for generating cash for bamboo shoots and culms, and paper mulberry are subsistence farmers in Laos, Bounthong et al. (2003) collected from small-scale plantations, agroforests noted that NTFPs are most important for poorer rural and home gardens (Foppes and Ketphanh 2000; households. Research conducted by the NGO Concern Foppes et al. 2004; Vantomme et al. 2002). in the northern province of Bokeo found that, despite Despite progress in domestication and modest NTFPs being able to contribute to income generation, market demand, some NTFPs may be incompatible their potential is not being realised because unsustain- for intercropping with high-value hardwoods. For able harvesting techniques are being used and market example, although considerable progress has been forces generally operate against these products and made with some species of rattan, Ali and Barizan their producers. Foppes and Ketphanh (2000) noted a (2001) found that intercropping rattan with rubber and decline in traditional forest management practices oil palm caused problems for both plants. The har- which underpin sustained production of NTFPs. The vesting of rattan could damage the rubber, and rubber reasons for this included rapid population growth, con- management could damage the rattan. Rattan is likely version of forests to agricultural land and insecurity to present similar challenges when grown with teak if over land tenure. the trees are harvested tree-by-tree over a 10-year The agronomy for most NTFPs is unproven, with period. Edible shoots from rattans (Daemonorops only a few approaching a level of domestication that jenkinsiana and Calamus tenuis) are a speciality in could ensure reliability in cultivation by resource- Luang Prabang cuisine. Evans (2001) reported an poor farmers. The added complexity of growing attractive market in South-East Asia and with Asian NTFPs in association with plantations of high-value communities in France and the USA. It is unclear hardwoods limits the reliability of any technical whether this specialist market would respond posi- inputs, based on existing information, which might tively to additional supplies of edible shoots grown by be offered to farmers. Markets from the supply side interplanting among high-value hardwoods, or are usually unreliable, poorly formed or dependent whether new supplies could compete with supplies on opportunistic trade. It is unlikely that markets will from commercial planting reported elsewhere in Laos be substantially improved without increased produc- and northern Thailand (Evans 2002). Discussions tion (risking overexploitation) or some affirmative with village producers of rattan shoots, ‘nyot vway’, market intervention. In the absence of expanding and near Luang Prabang revealed that harvesting was an reliable markets, it is difficult to see how incomes unpleasant task due to the thorns, and that market derived from most NTFPs can be increased, and it prices were barely attractive. Given that these edible could be argued that any ongoing reliance on NTFPs rattans prefer sites that receive regular flooding and commits suppliers to a subsistence livelihood, a situ- full sunlight, it is unlikely that they would be an agro- ation at odds with the Lao PDR Government’s une- nomic success with teak on well-drained slopes. quivocal commitment to poverty reduction. Foppes et al. (2004) identified 60 organisations There are a few NTFPs which have both proven working actively on NTFPs in Laos, more than 40 of agronomy and mature markets. Among these is paper which attended the NAFRI/SNV workshop entitled mulberry, a plant with promising market potential ‘Networking non-timber forest products in Lao PDR’ that has been traditionally grown and harvested in in 2004. Among the many issues identified at this northern Laos. meeting were that NTFPs were becoming rare, mainly through overexploitation, and that opportuni- ties were being lost to Laos because of lack of market Paper mulberry, Broussonetia information, poor skills and few opportunities for papyrifera (posa-Lao) primary processing. The value of effective marketing to increased profitability has been demonstrated in Paper mulberry is a pioneer shrub or small tree com- the case of bitter bamboo, ‘mai khom’ (Indosasa monly found in fallow after slash-and-burn cultiva- sinica), in northern Oudomxay province. The estab- tion. It is very versatile, with a wide distribution in lishment of a sustainable harvesting system, a mar- the Pacific and Asia, including the northern Lao
55 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. provinces of Luang Prabang, Oudomxay, Phongsaly, Almost all paper mulberry grown in Laos is Luang Namtha, Sayabouly and Bokeo, where it has exported in an unprocessed state to Thailand, where it been used for hundreds of years. A resurgence of is processed for export to Japan and Korea. Demand interest in handmade paper using bast fibre of paper is strong and estimated to be growing at the rate of mulberry has resulted in expanded commercial culti- 15–20% each year. About 18,000 t of bark are vation in Thailand and Laos (POSAA 2001). Trends exported to Thailand from Laos each year, providing in production and yields for the districts of Kenthao additional income to an estimated 20,000 households and Paklay are presented in Table 6.2. in northern Laos (NAFRI 2006). Paper mulberry bark is collected and dried in Laos Paper mulberry can provide an income for rural and then prepared for export to Thailand without communities and can be established either into grading or other value-adding. It enters Thailand upland crops (e.g. rice, maize or sesame) or by itself worth US$0.86 million and leaves as processed as described earlier in this chapter. The advantages paper and other finished products worth of establishing it with upland crops include greater US$50 million. Given that Laos supplies 80% of the farmer acceptability and availability of income bark processed in Thailand, it should be possible for from the companion crops. In addition, yields of Lao traders to negotiate better prices and trade con- companion crops may not be reduced by paper mul- ditions, which would flow on to farmers and stimu- berry (NAFRI 2004). Douangsavanh et al. (2003) late supply and improvements in quality control. To report paper mulberry in existing indigenous agro- improve trade conditions, both the volume and forestry systems with upland rice, Job’s tears and quality of supplies from Laos must be improved. For pineapple. example, Aubertin (2004) found that returns from The agronomy of paper mulberry is well under- paper mulberry production could be improved con- stood by growers. NAFRI advises that seedlings siderably through better grading and quality control, (raised in polybags), root suckers and root cuttings a sentiment strongly endorsed by Mohns (pers. can be used as planting materials. Seedlings give the comm. 2006). best survival and growth results, followed by root Farmers in some areas are already moving to suckers. Root cuttings are not recommended because domesticate paper mulberry. Simple technologies of low survival, but these could be planted first in such as boiling can extend the collecting season, polybags before outplanting in the field. Paper mul- reduce labour and improve the quality of the bark. berry should be planted between late May and late Beyond such technical interventions, however, it is June. Best survival is obtained when seedlings and more important that traders of paper mulberry in root suckers are planted immediately after rain. The Laos develop a common position for negotiation and plants coppice readily after harvest. maintain standards for quality (Phommasane 2006).
Table 6.2 Areas and production of paper mulberry in northern Laos (Aubertin c. 2004)
Location and 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 attribute Kenthao district Area (ha) 118 118 128 384 427 203 300 Production (t) 117 117 128 460 513 243 360 Yield (t/ha) 1 1 1 1.2 1.2 1.2 1.2 Paklay district Area (ha) 10.35 40 124 244 357 360 240 300 450 450 600 Production (t) 7.24 31.5 85 95 324 324 312 390 585 585 780 Yield (t/ha) 0.7 0.82 0.68 0.66 0.9 0.9 1.3 1.3 1.3 1.3 1.3 Source: Statistics of the Agricultural Departments of the Kenthao and Paklay districts. The shaded figures are surprisingly uniform, and may be affected by transcription error.
56 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Province level Thailand Other provinces • Transport cost to Xiengkhane-Sanakhame, VTE province: two • Bakeo Thailand 100,000 k/t Thai buyers (women: 0) • Xayabouly (by Board) Xieng Khong-Bokeo province: 4 buyers (w: 0) • Oudomsay • Fee/tax 5% of selling Chanvat Leuy-Xayabouly: 4 buyers (w: 0) • Luangnamtha price Buying price: 5,000–6,000 k/kg • Vientiane • Drying and grading Volume: unlimited (hire labour cost 1,500 k/t) Paper sheets selling
District level Luang Prabang province • Selling to Luang Prabang Handicraft Nine companies (women: 3) transport cost 120,000 k/time selling (by their Hyundai) Selling price: 5.000–6,000 k/kg • Selling to Thailand Buying: 4.500–5,000 k/kg 100,000 k/t • Fee/tax 5% of selling price Paper companies • Trade section 5,000 k/t Number: 3 • Grading (hire labour: 30 k/kg) Buying price: • Drying (lost weight: 30%) 4,500–5,000 k/kg Volume: 120 t/year
Xieng Ngeun district Other districts Five traders (women: 3) • Park Ou Selling price: 4,000–4,500 k/kg • Parseng • Phoukhoune
Village trader
Four persons (women: 1) Village trader Selling price: 3,800–4,000 k/kg Three persons (women: 1) Selling at the village Volume: 6 t/year Selling price: 3,800–4,000 k/kg Volume: 10 t/year
Village Ban Houy Hia • Packing and storage Ban Long Leuad • Cleaning and drying Collectors: 50 families (m+w+ch) Collectors: 120 families (m+w+ch) • Posa harvesting from nature Selling price: 3,500–3,800 k/kg Selling price: 3,500–3,800 k/kg and garden Volume: 6 t/year Volume: 10 t/year
Figure 6.3 Marketing channels for mulberry paper (posa): Long Leuad and Houay Hia villages, Xieng Ngeun district, Luang Prabang province (Mounlamai 2005). Ch = children; m = men; w = women; k = kip
57 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
A market information system is not available to ular spacing of the intercrop. The farmers obtained an growers, with villagers selling their paper mulberry in income during the first few years from paper mul- traditional ways in Luang Prabang province (Moun- berry, and then from teak trees thinned from ages of lamai 2005). Villagers did not know the exact price in about 6–8 years depending on the site and vigour of the market and contracts were not available to the teak. In a series of intercropping experiments on growers. Buyers and sales were controlled by traders, nine sites in Thailand, Thaiutsa and Puangchit (2001) and growers felt there was considerable insecurity found that paper mulberry with teak planted at associated with the paper mulberry market. The paper 4 m × 6 m gave better growth and yields than paper mulberry supply chain is shown in Figure 6.3. mulberry with either eucalypts or banana. A workshop on paper mulberry, held at Luang Paper mulberry is strongly demanding of light, and Prabang in May 2006, brought together growers, if it were to be grown as a companion to teak there traders, government agencies and donor agencies. would have to be compromises to traditional methods Among the priorities identified at the workshop was of cultivation of both crops. Thaiutsa and Puangchit the need for better marketing and the development of (2001) recognised the light requirements of paper mul- value-adding opportunities in Laos, particularly in berry and recommended that, if it is managed as under- relation to bark grading and paper production. Estab- storey, the overstorey intercrops should be thin- lishment of grower groups, quality control and better canopied or deciduous species such as teak. The tech- links with traders were seen as specific areas for nical feasibility of such as system would have to be action. demonstrated to smallholders to gain their acceptance. Paper mulberry has been intercropped with teak One of the several attractions of paper mulberry as for some time. Thaiutsa and Puangchit (2001) a companion crop is that the busy time of harvest reported an intercropping system using paper mul- does not clash with critical periods within the agricul- berry and teak in Luang Prabang province which had tural calendar (Douangsavanh et al. 2003). As noted been in existence for several decades. Farmers grew earlier, this fact makes it an attractive option as a cash teak at a spacing of about 4 m × 4 m, with an irreg- crop for intercropping with upland rice.
58 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
7 Assessing profitability of integrated teak farming systems for smallholders
This review of integrated teak cropping systems in The assessments made here are indicative of the rel- northern Laos has identified a number of options ative returns from more intensive farming systems suitable for smallholders. Due to increasing popula- and the introduction of managed teak farming. Data tion pressure and the decision by government to erad- used were drawn from many sources including the icate shifting cultivation by 2010, land-use decisions survey of village communities and smallholders made by farmers will be influenced increasingly by undertaken for this report and the results of previous profitability. Sustaining productivity of the land research. There were many gaps in the data required under shorter rotations presents a new challenge for for this comparative assessment, necessitating a smallholders. Furthermore, as land-use intensity number of assumptions. increases, so too does the demand for labour, espe- cially for weeding which is critical to successful crop Underlying assumptions establishment and yield. Alternative cropping systems need to be able to These assessments are based on gross margins for sustain profitability and productivity over the long each of the cropping alternatives. A gross margin is term, and generate better returns for each additional the difference between the annual gross income from labour input required than can be achieved in alterna- an enterprise or farming system and the variable tive employment, such as off-farm work. In this costs incurred by the enterprise or system. Fixed study we assess long-term returns to land and labour costs such as the cost of land and capital equipment resources for a selection of alternative land-use are not included as they are incurred irrespective of systems available to smallholders in northern Laos. which enterprises are included in the farming system. The following cropping systems are assessed: The assessments presented here are not dependent 1. traditional long-fallow swidden including rice and on the availability of labour or land on a typical farm. a cash crop, maize They are cropping enterprise gross margins, which 2. transitional short-fallow cash cropping system are similar to operational budgets. Each gross margin based on rice and paper mulberry is expressed on a per-hectare basis to facilitate com- 3. unmanaged teak, without pruning or thinning, parison. From the perspective of an individual farmer within a medium-length fallow system based with whose plots may range from 0.1 to 1 ha, the esti- rice and pineapples preceding teak mated margins presented here may seem high. Selec- 4. managed teak, with pruning and thinning, tion of an optimal combination and sequence of crops preceded by rice and pineapples by an individual smallholder must take into account 5. integrated teak cropping, with wide-spaced teak the total and seasonal availability of family labour as intercropped with cash crops of pigeon peas and well as the availability of land suitable for particular paper mulberry, thinned and pruned. uses. Within each of these systems variations can be All input costs are expressed on a per-hectare basis explored such as the use of purchased inputs (ferti- in Lao kip. All returns are expressed in net present liser and pesticides) for cash crops, the time for teak value (NPV) terms given that each of the farming to reach a commercially harvestable volume, the systems appraised extends over many years. Most availability of a market for young teak thinnings (less systems are estimated over a 20-year horizon. than 10 years old) and the length of fallow. The Given the critical importance of labour to upland extent to which variations such as these can be farming systems, returns are presented on a per- explored depends on the availability of suitable data. labour-day as well as per-hectare basis. Return to
59 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. labour is the wage rate that sets the NPV equal to villages in Luang Prabang province indicated that zero. Where the returns to labour exceed the average each farm had an average of three workers available daily wage rate, individuals with their own land are for farm work. After land, labour is the most critical better off farming than working in off-farm activities. input into upland farming systems in Laos. It is This is a useful primary indicator of profitability for unlikely that farmers in Luang Prabang province will smallholders. adopt farming systems that depend on hired labour. All farm outputs are priced at their farm-gate When labour demand exceeds supply for an indi- values. This is to facilitate comparison between the vidual farm family, it is common to exchange labour systems. In most cases farmers retain their rice with other farm families and pay a rate that is below harvest and portions of cash crops for their own use. the market rate for farm labourers (Figure 7.1). However, as land use intensifies, smallholders will Family labour hours are not costed by smallholders change their land-use practices and patterns. This in their operations. However, given the increasing may include changing from growing rice to growing demand for labour in the more intensive land-use crops with higher returns. systems that are expected to be implemented in the uplands over the next 5 years, it is appropriate for this Discount rate analysis to cost labour at its opportunity cost. The opportunity cost of labour is the best return that can To compare expenses and income, which occur in be achieved from alternative employment. From the different years over the period of each cropping survey of farmers conducted for this study the system, it is necessary to express outputs in equiva- average price paid per day for hired labour was lent terms. A discount rate allows all amounts to be 12,600 kip. This rate is used in all assessments. expressed in present value terms. A discount rate of 10% is assumed for determining the NPV of each It is assumed that all farming activities are com- cropping system. The sensitivity of the results can be pleted without the need for specialised mechanical explored using lower and higher discount rates. equipment. Where practical, machines such as culti- vators can be used for land preparation, which Labour requirements reduces the demand for labour. However, on steep slopes it is difficult to use machinery or bullocks for It is assumed that all labour requirements are land preparation. Also, there is evidence that cultiva- sourced from the farm family. Our survey of the three tors are not as effective in reducing weed growth after
Figure 7.1 Teak is an increasingly significant crop on steep slopes. Seasonal tasks like planting are commonly undertaken cooperatively
60 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. the crop has been established, which increases the capacity to pay, ready access to such inputs and need for labour (de Rouw 2005). knowledge on their effective use. While this situation The first stage in all the cropping systems assessed may change over the next decade, it is assumed for is clearing and preparing land following a period of this appraisal of alternative farming systems that pur- fallow. This involves slashing and burning vegetation chased chemical inputs are not used. using family labour and hand tools. The duration of Labour requirements for harvesting vary for each slashing operations varies with the volume of biomass particular crop. In some farming systems it is neces- to be cut, from 100 hours/ha for a herbaceous to bushy sary to erect fences around the crop to keep livestock fallow (fallow period of 2–3 years) to 500 hours/ha out. for an older fallow of 10 years with trees (Van Gan- The labour requirements, in person days per hec- sberghe 2005). Machetes are most commonly used for tare, for each of the farming systems appraised are cutting the vegetation although bigger trees may be presented in Table 7.1. cut with axes and occasionally saws. After allowing the slashed vegetation to dry in the sun for about 3– 4 weeks, it is burned. A second burning may be Traditional long-fallow shifting required before larger debris is removed from the cultivation system field. Clearing may require 50–250 hours depending on the volume of organic material to be reburnt or This baseline cropping system represents the tradi- removed (Van Gansberghe 2005). tional swidden system, which is being phased out by Following clearing, land may be tilled before the Lao PDR Government. The system is based on a sowing, although under shifting cultivation crops are 7-year fallow period, after which 3 years of crops are generally sown directly into the cleared field without sown. In the first year after the land is cleared and additional cultivation. Fields sown under short fallows prepared, rice is sown. This is followed by 2 years of or used for a second or third consecutive year are tilled maize, after which the land is rested for another and weeded using a small hoe. This is commonly done 7 years. In the eighth year the cropping sequence by women and can take about 100 hours/ha. recommences. Tables 7.1 and 7.2 present key inputs Sowing or planting the crop is an important family and outputs of the system. Data sources used for activity, and is accompanied by religious and social specifying this system include: Seidenberg et al. rituals. In the case of a newly cleared field, seeds are (2003); Siphandouang et al. (2002); Van Gansberghe planted in holes made by a dibbling stick. For fields (2005); and Chantavisay Keobounum and Sounthala that have been tilled following a first- or second-year Latsayavong (NAFRI), pers. comm., Vientiane crop, seeds are broadcast. Sowing usually takes (8 June 2006). between 70 and 150 hours/ha according to experi- ence (Van Gansberghe 2005). Transitional short-fallow system Once a crop is established, weeding is the most critical activity. Weeding generally accounts for An alternative baseline cropping system is one that is around 50% of total labour inputs of a cropping compliant with the government’s stabilisation plans system (Seidenberg et al. 2003; Van Gansberghe for upland farming systems. This is a rice–paper mul- 2005). Van Gansberghe reported that weeding may berry system with 2 years of fallow. This short-rota- require 400–1000 hours/ha in 3-year fallow fields. It tion system may be practised by villages that have is widely believed that labour requirements for undergone land allocation which provides them with weeding under short fallows are higher than under three discrete plots of land (Linquist et al. 2005). long fallows because of greater weed growth, After the fallow land is cleared, a rice crop is sown in although scientific evidence is inconclusive (Seiden- conjunction with paper mulberry. It is assumed that berg et al. 2003). Linquist et al. (2005) reported that smallholders use selected traditional upland rice vari- farmers need to weed up to five times per year in eties that are suitable for short fallows and can yield fallows of 2 years or less compared with only twice 0.3–0.5 t/ha more than local check varieties. in fallows of 10 years or more. The paper mulberry is maintained for 4 years, after Within upland farming systems it is not common which the land is fallowed for 2 years. The rotation for farmers to use chemical fertilisers, herbicides or repeats in year 7 for another 4 years and again in pesticides for a number of reasons, including years 13 and 19 within a 20-year horizon. Linquist et
61 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. 1 1 8 2 50 92 152 8 10 45 25 12.5 6.25 106.75 Continued on next page 8 45 67 120 8 50 92 150 8 2 50 92 152 8 15 55 25 95 10 45 25 12.5 6.25 106.75 15 55 25 103 15 40 50 56.3 161.3 Year 8 45 67 120 8 50 92 150 8 2 50 92 152 8 30 25 20 75 10 45 25 12.5 6.25 106.75 30 30 60 35 40 75 35 30 65 45 67 112 8 45 25 70 15 55 25 95 50 92 150 8 8 8 2 20 50 78 15 55 25 50 92 103 152 1 23456 7 891011121314151617181920 5 0 8 15 40 10 45 25 15 40 10 25 56.3 12.5 6.25 56.3 146.3 161.3 106.75 Labour requirements for upland farming systems (person days per hectare) System and operation Traditional long-fallow Land clearing Cultivation Planting Weeding Fencing Harvesting Total Transitional short-fallow Land clearing Cultivation Planting Weeding Fencing Harvesting Total Land clearing Cultivation Planting Weeding Fencing Thinning and pruning Harvesting Total Unmanaged teak Table 7.1
62 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. 1 1 1 1 1 1 4.5 4.5 1 10 48 59 10 48 58 20 48 68 20 48 68 Year 25 48 73 25 48 73 6.9 6.9 25 48 25 48 0.5 0.5 73.5 73.5 2 6 2 6 25 18 72 25 18 72 8.5 8.5 12.5 12.5 10 96 30 30 10 96 106 106 2 20 96 25 20 47 20 96 116 116 25 96 15 25 30 70 25 96 121 121 45 96 45 96 25 40 65 141 141 9 9 11 50 69 11 50 69 45 30 75 9 9 8 50 18 50 18 20 50 25 5.5 5.5 103 81.5 81.5 1 23456 7 891011121314151617181920 9 9 16 45 10 43 16 45 10 43 15 40 10 25 56.3 56.3 56.3 178.3 178.3 146.3 (cont’d) Labour requirements for upland farming systems (person days per hectare) Integrated teak–paper mulberry without thinning Land clearing Cultivation Planting Weeding Fencing Thinning and pruning Harvesting Total Integrated teak–paper mulberry with thinning Land clearing Cultivation Planting Weeding Fencing Thinning and pruning Harvesting Total System and operation Managed teak Land clearing Cultivation Planting Weeding Fencing Thinning and pruning Harvesting Total Table 7.1
63 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. al. (2005) describe a number of short-rotation crop- assuming 20% losses, the labour requirement for har- ping options such as rice–paper mulberry. These are vesting is set at 67 days/ha. aimed at improving rice production (self-sufficiency) Another attraction of paper mulberry is that and providing cash crops as a basis for diversification farmers can easily change to another crop and let the and to generate income that can be used to purchase paper mulberry sprout again in the following year, rice. Sustainability is an important criterion. They depending on market conditions. found that farmers were attracted to paper mulberry An important aspect of profitable paper mulberry because of its potential market returns. Other impor- production is the maintenance of quality from the tant criteria for short-rotation species include labour field to the processor. Best prices are received for requirements, management ease and impact on rice bark that is properly dried and free of mould and yield. According to Aubertin (2004, p. 224) farmers fungi. It should be clean and free of dirt and sticks appreciate paper mulberry ‘because they accelerate when offered to traders. There is much scope to the regeneration of soil fertility (thanks to their exten- improve the quality control of paper bark harvesting, sive carbon-fixing root system and their large drying, storage, transport and processing within leaves), along with their rapid growth, resulting in Laos. Aubertin (2004, p. 230) suggests that traders rapid canopy closure, which in turn reduces weeds’. are not properly accounting for quality in the price they offer suppliers. Improvements in market infor- Table 7.2 Traditional long-fallow system mation systems, product logistics and quality control along the supply chain would add significant value to Key inputs and outputs Quantity Value the paper mulberry crop for growers, traders and (kg/ha) (kip/kg) processors. Rice seed 65 3,500 Data sources used to specify this system include Rice yield 1,700 Aubertin (2004) and Linquist et al. (2005), in addi- Farm gate price for rice 1,900 tion to those used for the traditional long-fallow Maize seed 36.8 system. Tables 7.1 and 7.3 present the key inputs and Maize yield 3,000 outputs of this transitional short-fallow cropping Farm gate price for maize 900 system. Indicators of profitability NPV (kip) 5,426,975 Table 7.3 Traditional short-fallow system Return to labour (kip) 25,521 Discount rate 10% Key inputs and outputs Quantity Value (kg/ha) (kip/kg) Linquist et al. (2005) reported that research is con- Rice seed 65 3,500 tinuing on rice–paper mulberry systems in the areas Rice yield 1,830 of establishment of paper mulberry, bark yield, Farm-gate price for rice 1,900 planting density, impact on rice yield and nutrient Paper mulberry plants (plants/ha) 625 900 cycling. This production system has potential under Paper mulberry yield (dry bark) 560 more intensive land use, especially given the good Farm-gate price for dry bark 3,000 market prospects for paper mulberry, smallholders’ Indicators of profitability familiarity with the crop and the complementarity of NPV (kip) 13,400,276 labour demands of the rice–paper mulberry system. Return to labour (kip) 28,421 Discount rate 10% A feature of paper mulberry compared to other cash crops is the high demand for labour for har- vesting. It is high because the process of stripping the Unmanaged teak inner bark from the stems is labour intensive. Aubertin (2004, p. 226) estimated that the labour This farming system describes the situation where requirement amounts to 120 days for 1 ha supporting smallholders plant teak after rice and a cash crop such 5,000 plants at spacing of 1.5 m × 1.5 m. The system as pineapples. In this system the teak trees are not described here assumes that paper mulberry is thinned or pruned to enhance production. Trees are planted with rice at the equivalent of 4 m × 4 m, selected for harvest after year 15 on an as-needs basis which is a density of 625 plants/ha. At this rate and rather than a commercial basis. As such, harvesting
64 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. rates are low compared to those typical of commer- (2001) explains, under the land allocation policy that cial operations and the best trees are selected first. It commenced in 1996 in Luang Prabang province, a is assumed that at year 20 of the cycle, when the teak family can be allocated up to four plots of land from is 15 years old, 5% of the stock is harvested. For a 0.5 to 1.0 ha each for shifting cultivation, and they can 1 ha plot planted at 3 m × 3 m spacing and allowing also obtain 1 ha for planting perennial crops such as for 20% loss over the 15 years, 44 trees are sold. In timber or fruit trees. Many farmers planted teak reality, the decision to sell trees depends on particular before the allocation occurred, which meant that they needs of the family, and so less than the equivalent of were allocated additional plots for cash crops and 44 trees/ha may be sold. were allowed to keep their previously planted teak After clearing the fallow, rice is sown, followed by plots. For new settlers this option is not available. pineapples in year 2. These are maintained for The high short-term return from pineapples has 5 years, at which point they are shaded out by the teak made this option an attractive one in Luang Prabang trees that are planted as stumps in year 5. The teak is province for established farmers. However, as ready for harvest in year 20. Within this system there is recounted in Chapter 6, the increased interest in pine- no cash flow from the land occupied by teak from year apples has oversupplied the market and prices have 8 until year 20. This farming system depends on access fallen to low levels. This is the nature of commodity to additional blocks of land to make it a viable option markets. However, the prospects of supplying export for smallholders, as it locks up land for many years markets, developing suitable infrastructure and mar- without any returns. Alternatively, as Hansen et al. keting Lao pineapples as organically grown may help (2005) speculate, farmers could transfer ownership of to buoy the price. Tables 7.1 and 7.4 present key the plantation to a private investor in return for an input and output data and assumptions for the unman- annuity. The feasibility of establishing and sustaining aged teak system. Data sources used to specify this such financing schemes should be investigated. system include: Armitage (2004); Hansen et al. The unmanaged teak system has been an attractive (1997, 2005); Kolmert (2001); Seidenberg et al. option for smallholders as a means of retaining access (2003); Van Gansberghe (2005); and Chantavisay to land. Under the land allocation schemes, if land is Keobounum and Sounthala Latsayavong, NAFRI not used for 3 years it can be reclaimed by the govern- (pers. comm.), Vientiane (8 June 2006); Sianouvong ment for reallocation. By planting it with teak, Sawathvong, Director Forestry sector, Luang farmers are assured of land-use rights. As Kolmert Prabang province, pers. comm. (June 2006).
Table 7.4 Unmanaged teak
Key inputs and outputs Quantity Value (kg/ha) (kip/kg) Rice seed 65 3,500 Rice yield 1,700 Farm-gate price for rice 1,900 Teak stumps (no./ha) (kip/stump) planted in year 5 1,100 500 Teak trees harvested at year 20 @ 15 years old); 80% loss 44 (5%) Teak yield @ 15 years old (m3/tree) 0.157 Farm-gate price for teak (kip/tree) 100,019 Pineapple shoots (no./ha) (kip/shoot) 20,000 500 Pineapple yield (fruits/ha) 7,500–8,000 Farm-gate price for pineapples (kip/fruit) 1,750 Indicators of profitability NPV (kip) 24,302,056 Return to labour (kip) 71,355 Discount rate 10%
65 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Teak prices as for unmanaged teak, with rice sown after a fallow, then 5 years of pineapples. The teak is planted at The price of teak varies with volume and quality. 1,100 trees/ha in year 5 using stumps. The first non- At the farm gate smallholders are quoted a price on a commercial thinning occurs at year 10 when the trees per-tree basis without any formal estimation of are 5 years old. The trees are removed using farm volume and only basic quality assessments. Tradi- labour, thinning at a rate of 50%. There is no market tionally, farmers sell one or two trees at a time when for these thinnings, which may be left on the ground cash is required for a family need. In this situation or used for construction poles or firewood. The com- farmers are price takers. The lack of a market infor- mercial utilisation of young teak thinnings is likely to mation system makes it difficult for smallholders become more attractive as plantation areas expand. selling single trees to know what a fair price is. The The existence of a market for thinnings will provide farmers surveyed for this study quoted prices ranging an incentive for farmers to thin and prune their from 60,000 to 200,000 kip for a tree with a circum- stands. Options for utilisation of teak thinnings need ≈ ference of 80 cm ( diameter 25 cm). A market infor- to be investigated. mation system would allow smallholders to plan their The first commercial thinning, again at the rate of sales and improve returns. Over the longer term, 50%, occurs in year 15 when the trees are 10 years of access to market information may encourage teak age. While some farm labour is involved the task of growers to improve the management of their trees for removing logs and transporting them to the mill is volume and quality and help them to receive fair undertaken by the buyer. returns for their efforts. The benefits of thinning are reflected in increased To ensure consistency and realism in pricing for volumes of timber and higher returns. As reported in teak, we relied on data provided by Mr Sianouvong Chapter 6, there has been some research on thinning Sawathvong, Director of the Forestry Sector in and pruning of teak, although long-term assessments Luang Prabang province. Using those data we esti- in Laos have not been conducted or reported. Evi- mated a relationship between tree volume and price, dence from other countries including Panama, Costa as presented in Figure 7.2. Teak prices used in this Rica and Nepal indicates the production benefits of appraisal of alternative farming systems are based on pruning and thinning (e.g. Thapa and Gautam 2005; this relationship. Viquez and Perez 2005; Zanin 2005). The remaining trees are removed in year 20 when Managed teak they are 15 years of age. The NPV of the managed system compared to the unmanaged system demon- This farming system is similar to the unmanaged teak strates the financial benefits of thinning. Also, thin- system but with the addition of thinning and pruning ning generates income in more years than of the teak trees. The production system is the same unmanaged teak. The development of a market for
2,000 1,800 1,600 y = 1357.5x1.4086 1,400 R2 1,200 = 0.9963 1,000 800 600
Price (’000 kip per tree) 400 200 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 Volume (m3 per tree)
Figure 7.2 Farm-gate price for teak trees
66 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. teak thinnings will make this option even more 417/ha, equivalent to a spacing of 6 m × 4 m. This attractive to smallholders. wide spacing is to accommodate the companion crop, Tables 7.1 and 7.5 present key input and output paper mulberry, which is planted in year 3 in wide data and assumptions for the managed teak system. alleys between the teak rows. Paper mulberry is Data sources used to specify this system are the same planted at a rate of 4,000 plants/ha. Replanting of as those used for the unmanaged system. teak and paper mulberry occurs in the year following sowing, based on assumed establishment rates of 85% for teak and 80% for paper mulberry. Integrated teak Paper mulberry is cut from years 4 to 7, after which This farming system attempts to capture the benefits it is re-established to ensure bark quality. At this of teak and generate more continuous cash flow for point farmers can decide to plant an alternative crop smallholders. The system is based on the intercrop- depending on relative returns and growing condi- ping of teak and paper mulberry. In the first year a tions. It is assumed that a second crop of paper mul- rice crop is sown into the cleared fallow. As berry is planted at 2,000 plants/ha and continued described by Linquist et al. (2005, p. 303), pigeon pea until year 12. At this point the teak trees are at is planted a month of so after rice at a spacing of 10 years of age and the companion crop is gradually 1.25 m × 1.25 m, to minimise competition with the removed. rice. The pigeon pea is a perennial legume and con- Within this system it is assumed that the teak is tinues to grow after the rice is harvested. The pigeon thinned in year 12 when the trees are 10 years old. pea is left in the field for 2 years and two crops are This is a commercial thinning with 50% of the stems harvested. The pigeon pea has a positive effect of removed. The remaining trees are harvested in year reducing nematode infestation and suppressing 20 when the trees are at 18 years of age. Table 7.6 weeds. Teak stumps are planted in year 2 at a rate of presents the yield, price and return data.
Table 7.5 Managed teak
Key inputs and outputs Quantity Value (kg/ha) (kip/kg) Rice seed 65 3,500 Rice yield 1,700 Farm-gate price for rice 1,900 Teak stumps (no./ha) (kip/stump) planted in year 5 1,100 500 Teak trees thinned at year 10 (@ 5 years of age) 550 (50%) Teak trees thinned at year 15 (@ 10 years of age) 275 (50%) Teak trees harvested at year 20 (@ 15 years old) 275 Teak yield at 10 years old (m3/tree) 0.1 Teak yield at 15 years old (m3/tree) 0.203 Farm-gate price for teak (kip/tree) @ 10 years old 52,983 Farm-gate price for teak (kip/tree) @ 15 years old 143,641 Pineapple shoots (no./ha) (kip/shoot) 20,000 500 Pineapple yield (fruits/ha) 7,500–8,000 Farm-gate price for pineapples (kip/fruit) 1,750 Indicators of profitability NPV (kip) 31,843,071 Return to labour (kip) 91,340 Discount rate 10%
67 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
An alternative integrated teak–paper mulberry Comparing system profitability system without the year 10 thinning was considered as well. The results for this alternative are presented Key indicators of the profitability of each system are in Table 7.7. presented in Table 7.8. The results indicate that all are profitable compared to off-farm work for individ- These production systems have not been proven uals who possess land-use rights. All have positive in practice, but preliminary indications suggest that NPVs and returns to labour. The indicators also they would be valuable options for smallholders. reveal the positive financial impact of introducing One of the big advantages over alternatives is a shorter rotation cash crops and teak into upland longer period of cash flow, possibly up to year 12. farming systems. Field trials of teak–paper mulberry intercropping systems would be a worthwhile undertaking to iden- While the traditional long-fallow system generates tify sustainable farming systems for smallholders in a NPV that is 40% of that of the short-rotation system, the returns to labour for the two systems do the uplands of Laos. These investigations would not differ greatly. The short-rotation system has the have to take into account the feasibility of such advantage of more years with positive cash flow. As systems at the scale of a smallholding, among other the long-fallow system will be phased out by 2010, a factors involved in the transition of farmers to new more reliable base line for comparison is the short- farming systems. rotation cropping system. Compared to this system, Data sources used for the integrated teak–paper each of the teak-based systems generates higher mulberry options include: Aubertin (2004); Chun Lai returns to land and labour inputs. The highest returns et al. (2005); Linquist et al. (2005); and Thaiutsa and are for the integrated teak-paper mulberry system Puangchit (2001). without thinning, and the managed teak system,
Table 7.6 Integrated teak and paper mulberry with thinning
Key inputs and outputs Quantity Value (kg/ha) (kip/kg) Rice seed 65 3,500 Rice yield 1,700 Farm gate price for rice 1,900 Teak stumps (no./ha) (kip/stump) planted in year 2 417 500 Teak trees thinned at year 12 @ 10 years of age 208 (50%) Teak trees harvested at year 20 @ 18 years old 209 Teak yield @ 10 years old (m3/tree) 0.1 Teak yield @ 18 years old (m3/tree) 0.374 Farm-gate price for teak (kip/tree) @ 10 years old 52,983 Farm-gate price for teak (kip/tree) @ 18 years old 339,693 Paper mulberry plants (plants/ha) and kip/plant: Year 3 4,000 200 Year 8 2,000 Paper mulberry yield (dry bark) 800 Farm-gate price for paper mulberry (dry bark) 3,000 Pigeon pea seeds 18 17,500 Pigeon pea yield 500 Farm-gate price for pigeon pea 2,800 Indicators of profitability NPV (kip) 24,928,837 Return to labour (kip) 46,384 Discount rate 10%
68 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. which includes thinning and pruning. This indicates extension service delivery and investment in that adding various management inputs to teak pro- resource processing, especially for small-diameter duction systems generates higher returns to land and teak thinnings. labour inputs. Farmers of the Lao PDR uplands have not been as As mentioned earlier, the assumptions used in this ready as farmers in other regions of the country to analysis can be varied to test the robustness of the adopt new technologies (e.g. see Shrestha et al. results and the impact of technical and other 2006). Linquist et al. (2005, p. 4) suggest that adop- improvements. The teak systems described and ana- tion of new technologies and methods may be limited lysed here are very different to traditional systems, by the high level of diversity in the uplands in the fol- requiring increased knowledge inputs as well as off- lowing areas: farm improvements in market information services,
Table 7.7 Integrated teak and paper mulberry without thinning
Key inputs and outputs Quantity Value (kg/ha) (kip/kg) Rice seed 65 3,500 Rice yield 1,700 Farm-gate price for rice 1,900 Teak stumps (no./ha) (kip/stump) planted in year 2 417 500 Teak trees harvested in year 20 @ 18 years old 417 Teak yield @ 18 years old (m3/tree) 0.374 Farm-gate price for teak (kip/tree) @ 18 years old 339,693 Paper mulberry plants (plants/ha) and kip/plant: Year 3 4,000 200 Year 8 2,000 Paper mulberry yield (dry bark) 800 Farm-gate price for paper mulberry (dry bark) 3,000 Pigeon pea seeds 18 17,500 Pigeon pea yield 500 Farm-gate price for pigeon pea 2,800 Indicators of profitability NPV (kip) 39,712,038 Return to labour (kip) 66,444 Discount rate 10%
Table 7.8 Profitability of alternative farming systems
Farming system NPV Return to labour Return to labour (kip/ha) kip/pd relative to wage ratea Traditional long fallow 5,426,975 25,521 2.03 Transitional short fallow 13,400,276 28,421 2.26 Unmanaged teak 24,302,056 71,355 5.66 Managed teak 31,843,071 91,340 7.25 Integrated teak–paper mulberry, with thinning 24,928,837 46,384 3.68 Integrated teak–paper mulberry, without thinning 39,712,038 66,444 5.27 a Wage rate for farm labour is 12,600 kip per day (pd)
69 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
• biophysical diversity—climate and soils Enterprise gross margins for alternative land uses • socioeconomic diversity such as ethnic and were appraised and compared using basic economic cultural diversity and large differences in indicators—NPV of returns to land and returns to opportunities and constraints between individual labour. Individual smallholders’ land-use decisions households are subject to many conditions including the availa- • market diversity—particularly market oppor- bility of suitable land, family labour, financial tunities and market access. resources and knowledge. Furthermore, they must In view of the level of diversity, they advised that deal with the risks of weather, pest and diseases, and technology solutions and recommendations should fluctuations in markets. For this study we have made be site specific. Furthermore, they argued in favour assumptions about the availability and status or of participatory and adaptive research to ensure that nature of several production factors. Variations in the researchers and farmers develop solutions that are fundamental factors of production should be suited to local conditions. Further research to explored more comprehensively through whole-farm improve the technical, social and economic attrac- modelling to assess the feasibility of alternative land tiveness of more intensive teak-based farming uses. This would also need to take into account finan- systems should heed this advice. cial, social and other goals of smallholders. These results are indicative of the financial poten- tial of teak-based farming systems in northern Laos.
70 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
8 Conclusions and opportunities for ACIAR to contribute
Teak has become an integral part of farming systems tion will assist them to participate in lucrative teak in parts of northern Laos. In Luang Prabang province production. there are over 10,000 ha of privately owned teak NTFPs play an important role in rural areas of plantations in smallholdings varying in size from 0.1 Laos, where they serve a wide range of subsistence to 1.0 ha. Because of promising long-term markets needs and provide opportunities for earning cash for teak wood and expanding road infrastructure, this income. Some 60 organisations are working on resource is increasing and is now making a positive NTFPs in Laos. The potential of NTFPs to contribute contribution to household incomes and to the to income generation has not been capitalised upon regional economy. Expansion of plantations is because unsustainable harvesting techniques and entirely in accord with government objectives to inefficient markets generally operate against rural reduce poverty and policies to increase the area of producers and collectors. The agronomy for most commodity crops, and is also in alignment with land NTFPs is unproven, with only a few approaching a allocation regulations and policies. level of domestication that could confer reliability in Teak is established as a stage in the management of cultivation by resource-poor farmers. The added swidden land. Towards the end of the cropping complexity of growing an NTFP in association with period for upland rice, maize, pineapples, sesame and plantations of high-value hardwoods limits the relia- other swidden crops, teak is planted in conjunction bility of any technical package offered to farmers. In with these crops and benefits from the weeding and the absence of expanding and reliable markets, it is maintenance of the companion crop. difficult to see how incomes derived from most This study sought to assemble a foundation of NTFPs can be increased. information and to identify opportunities for small- The study collated a great deal of information holders to increase the profitability of their teak- related to teak silviculture and its management and based farming systems by improving cash flows markets that has not been available to growers through a 20-year teak rotation. Profitability of involved in teak-based farming systems. smallholdings could be improved in two ways: The annual volume of teak being harvested from • via improved management of the teak and, smallholdings in Luang Prabang province is specifically, use of better genetic stock, shorter expected to increase from the current 4,000 m3/ rotations, and timely thinning and pruning year to an estimated 18,000 m3 in 2010 and • by extending the use of companion crops including 60,000 m3 in 2020. The availability of a commer- non-timber forest products (NTFPs) in longer term cially significant volume of high-value plantation agroforestry systems. hardwood offers substantial opportunities for Challenges to these technical approaches are that value-adding and processing in addition to the growers are unconvinced of the benefits of thinning current activity. and pruning, while the concept of a more prolonged Assessments of the profitability of a number of association between teak and other crops in agrofor- cropping systems in this study indicated that more estry systems has not been considered. The study intensive integrated cropping systems based on teak concurs with the conclusions of Roder et al. (1995) offer sustainable financial benefits for smallholders that resource-poor farmers generally cannot risk the in the uplands of Laos. Further research is warranted long-term investments and credit associated with the on the technical, economic and social aspects of cultivation of teak alone, and that modified systems more-intensive production systems involving teak combining cash crops or NTFPs with timber produc- intercropped with food and fibre crops. On-farm pro-
71 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. ductivity improvements need to be complemented by Although considered gender neutral, the recent and improvements in the off-farm sector for food and continuing expansion of teak smallholdings will have fibre crops, including timber. a series of social impacts on communities. Apart The most significant challenge identified by this from offering stable land use and increased and study is effective engagement with markets for teak, secure household incomes, teak plantings by road- companion crops and NTFPs. The requirement for sides will inevitably alienate some potential agricul- such an improvement was strongly expressed by teak tural land. Incorporating teak into farming systems smallholders, government officials and donor sup- was an opportunity pursued by farmers who were porters, and was seen as a fundamental requirement to well established in their villages; new arrivals at the the success of any research-driven interventions. The villages who do not have access to traditional family markets and market chains for potential companion lands do not enjoy the same opportunity. cash crops and NTFPs were poorly understood by Increasing the profitability of teak-based farming those interviewed, who regarded them as volatile and systems in a sustainable fashion will require a unreliable. Growers lacked adequate market informa- package of information, advice and services to the tion regarding both teak logs and their teak smallhold- growers that includes (Figure 8.1): ings, and were vulnerable to unscrupulous opportunism • components on market information for both teak when selling either. Earlier studies, and farmer inter- and companion crops views associated with this study, clearly demonstrated • identification of potential companion crops and that farmers were at a great disadvantage because of their agronomy and capacity to grow with teak their lack of market information. • the social impacts of an expanding resource of Most farmers in the region had agricultural experi- privately owned teak smallholdings ence with most of the cash crops considered as poten- • the technical issues surrounding the improved tial companion crops for teak. However, little cultivation of teak itself. information was available regarding cultural modifi- cations that would have to be made if these crops are Opportunities for ACIAR to be cultivated in the longer term with teak. There was also a lack of information for farmers consid- Within the framework of a package for delivery to ering basic primary processing of crops to buffer teak smallholders involved in teak-based farming sys- fluctuations in market prices. tems, a number of opportunities are available to
Socio- economic components
Teak farming Marketing components: Technical components: teak and crops companion crops system package
Technical components: teak
Figure 8.1 Opportunities for ACIAR
72 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
ACIAR. A prerequisite will be a thorough under- • developing markets for small teak logs (thinnings). standing of the supply chains and market channels for If thinning is to be promoted in any package of both teak and potential companion crops. We suggest improved silvicultural practice, it is important that some association with the Smallscale Agro-enterprise a market be fostered for the small logs resulting Development for the Uplands (SADU) Project from these thinnings. Opportunities exist through managed by the International Center for Tropical the furniture sector and small piece sizes of kiln- Agriculture (CIAT) and its partners at NAFRI. The dried lumber. The Research Institute for Wood approach of this project—to identify and evaluate Industries (RIWI) at the Chinese Academy of market opportunities for agro-enterprise development Forestry is well acquainted with the large Chinese through local stakeholder interest groups—engages markets for tropical plantation hardwoods farmers and offers market insights. The SADU (including teak) and with a number of low-cost, approach starts in the villages and moves out along the value-adding processing possibilities including market chain, focusing initial attention on products rotary veneer. This veneer can be made on that are currently being produced and which have a inexpensive, spindleless lathes from logs as small stable or growing market demand. These products as 15 cm in diameter. The RIWI has indicated that will be teak, cash crops or NTFPs. This approach pro- it would be willing to provide access to its facilities vides assurance that there is a useful market for par- and work with ACIAR in examining improved ticular products (such as organic produce) and lays the value-adding and market prospects for plantation- framework for future market-orientated extension, grown teak from Luang Prabang province. which will establish closer links between growers, • increasing market opportunity for the expanding traders and processors. Such an activity will ensure volumes of teak from smallholdings. ACIAR that subsequent research is consistent with the over- might assist NAFRI to examine possibilities for arching commitment of the Government of Lao PDR certifying private teak smallholdings near Luang to alleviate poverty. As part of a program that seeks to Prabang under a ‘group certification’ scheme. offer improved market knowledge, ACIAR might Plantation-grown, certified tropical hardwood is encourage membership and participation in Teaknet, now gaining a premium (sometimes as high as a regional network that has recently been reactivated 30%) in the discerning markets of North America through a commitment from the Kerala Forest and Europe, and furniture industries are keen to Research Institute with modest ongoing support from gain access to increased and sustainable supplies FAO and APAFRI. An opportunity exists for the Lao of wood which are certified. Australian Forestry PDR to become a fully participating member. Standard Limited could assist ACIAR and its Lao An Australian example of an industry-wide associ- partners in this endeavour. In addition, the ation which has involved growers, processors and Tropical Forest Trust is well acquainted with retailers is the ‘Blackwood Industry Group’, which certification issues in Laos and has indicated a arose from an ACIAR project and is now sponsored willingness to share its smallholder experience by the Joint Venture Agroforestry Program. with ACIAR and work towards certification of the With the knowledge of secure markets and within teak smallholdings in Luang Prabang province. the context of a package available for teak small- WWF has also indicated such willingness. This holders, the following opportunities exist for collab- work would accurately quantify and characterise oration in Laos. the resource of plantation teak as a basis for attracting commercial processing investment. Market components • developing simple methods to value teak smallholdings as the basis for sale or for loan Important marketing issues include: agreements. • understanding supply chains and opportunities for cash crops and NTFPs selected through the SADU Technical components: teak approach of market-orientated agricultural development The main technical issues for smallholders include: • obtaining and disseminating information on prices • availability of quality germplasm and effective and trends in markets for round and squared teak dissemination of improved germplasm: establish- logs ment of SPAs and CSOs
73 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
• adequate and publicly accessible demonstrations implement this and similar teak-based systems. Par- of the economic benefits of both thinning and ticipative action research has been shown by others to pruning be most effective in the uplands. Scientists and • monitoring of insect pests and consideration of farmers work together, planning, implementing, methods of control. evaluating and revising candidate systems. These technical issues have been identified and acknowledged by Lao professionals working in Luang Prabang province. ACIAR could offer Socioeconomic components research assistance through a series of technical Important social issues include: support initiatives. • organisation or coordination of growers into formal or informal groups to support local Technical components: integrating initiatives and provide market power when selling companion food crops and NTFPs produce with teak • the impact of increasing areas of potential agricultural land being dedicated to teak The economic and ecological implications of inte- • ways through which new arrivals to villages near grating teak in mixed farming systems need to be roads can benefit from teak cultivation. better understood. Most teak research has focused on the technical and economic aspects of growing the species alone in plantations. While this has provided Networks important information relevant to smallholders, other areas such as the effects of teak on the yield of asso- Many organisations and committed professionals are ciated agricultural crops, as well as the effects of agri- working with Lao communities and scientists in cultural crops on teak productivity, need more northern Laos. Much of this current work is relevant research. Using reliable market information from the to the package which might be offered to teak small- market-oriented approach suggested as a pre-project holders. It makes good sense for ACIAR to establish activity, likely companion crops and NTFPs could be strong networks to avoid duplication and achieve selected and used in studies of their integration with complementarity with current efforts. In exploring teak in various conformations. Likely yields, agro- collaborative opportunities relating to teak-based nomic inputs and changes in agronomy will need to farming systems in northern Laos, ACIAR has con- be assessed. tributed to meetings such as the ‘Sustainable sloping The preliminary assessments conducted for this lands and watershed management’ conference, held study indicated the potential of intercropping teak recently (12–15 December 2006) in Luang Prabang. and paper mulberry. Further research into the tech- The main purpose of the conference was to explore nical and financial aspects of this intensive cropping different strategies to promote environmental sus- system is needed, along with social investigations, to tainability and enhance livelihoods of rural commu- establish the most effective way to promote and nities that inhabit upland areas.
74 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
9 References
Ali, A.R.M. and Barizan, R.S.R. 2001. Intercropping rattan seminar on teak, Yangon, Myanmar, 29 May–3 June with rubber and other crops. Unasylva 52(205), 9–10. 1995. FAO Regional Office for Asia and the Pacific Armitage, I. 2004. Aspects of agroforestry development in (RAP) Publication 1998/5, 91–98. Houaphanh province, Lao PDR. Asian Pacific Chun Lai, S., Keoboualapha, H. and Linquist, B. 2005. Agroforestry Newsletter No. 24. At:
75 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Enters, T. 2000. Site, technology and productivity of teak future’. Proceedings of the second regional seminar on plantations in Southeast Asia. Unasylva, 51 (201), 22–28. teak, Yangon, Myanmar, 29 May – 3 June 1995. FAO Evans, J. and Turnbull, J.W. 2004. Plantation forestry in the Regional Office for Asia and the Pacific (RAP) tropics. Oxford University Press, 467 pp. Publication 1998/5, pp. 27–48. Evans, T. 2001. Development of rattan for edible shoots in Hansen, P.K., Sodorak, H. and Savathvong, S. 1997. Teak the Lao People’s Democratic Republic. Unasylva production by shifting cultivators in Northern Lao PDR. 52(205), 35. Technical Report No. 9. Paper to a workshop on Evans, T. 2002. The status of the rattan sectors in Lao ‘Indigenous strategies for intensification of shifting People’s Democratic Republic, Vietnam and agriculture in Southeast Asia’, Bogor, Indonesia, 23–27 Cambodia—with an emphasis on cane supply. In: June 1997. Cornell University and the International ‘Rattan: Current research issues and prospects for Centre for Research in Agroforestry. conservation and sustainable development: Non-wood Hansen, P.K., Sodorak, H. and Savathvong, S. 2005. forest products’, FAO, Rome. Smallholder timber production: example of teak in Luang FAO. 2001. Global forest resources assessment 2000. FAO Prabang. In: ‘Improving livelihoods in the uplands of the Forestry Paper No. 140. Food and Agriculture Lao PDR’. NAFRI, NAFES and NUoL, Laos. Organisation of the United Nations, Rome, Italy. Haque, M.S. 2005. Current status, future prospects, Fogdestam, N. and Gålnander, H. 2004. Small-scale teak economics and policy issues for teak (Tectona grandis L. plantations in Luang Prabang province, Lao PDR — f.) investments by NABARD. In: Bhat, K.M., Nair, Silviculture, ownership and market. Minor Field Studies K.K.N., Bhat, K.V., Muralidharan, E.M. and Sharma, 263, Swedish University of Agricultural Sciences, J.K. (eds) ‘Quality timber products of teak from Uppsala, Sweden. sustainable forest management’. Peechi, Kerala Forest Foppes, J. 2004. Results on a survey amongst NTFP Research Institute, xiv, 669 pp. organisations in Lao PDR. Report from ‘Workshop on Hardwoodmarkets. 2004. Special focus: teak.
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1995. FAO Regional Office for Asia and the Pacific Krishnapillay, B. 2000. Silviculture and management of (RAP) Publication 1998/5, pp. 49–60. teak plantations. Unasylva, 51(501), 14–21. Kaosa-ard, A. 1998b. Teak breeding and improvement Laming, P.B. and Sierra-Alvarez, R. 2000. Fungal decay of strategies. In: Kashio, M. and White, K. ‘Teak for the Brazilian-grown teak in solid-bed assay. In Proceedings future’. Proceedings of the second regional seminar on of the XXl IUFRO World Congress. ‘Forests and society: teak, Yangon, Myanmar, 29 May – 3 June 1995. FAO The role of research’. Kuala Lumpur, Malaysia, vol. 11. Regional Office for Asia and the Pacific (RAP) Leuangkhamma, T. and Vongsiharath, V. 2005. Forest Publication 1998/5, pp. 61–82. invasive species in Lao PDR. In: McKenzie, P., Brown, Kaosa-ard, A., Suangtho, V. and Kjær, E. D. 1998. C., Sun, J.H. and Wu, J. ‘The unwelcome guests’. Experience from tree improvement of teak (Tectona Proceedings of the ‘Asia-Pacific forest invasive species grandis) in Thailand. Technical Note 50. Danida Forest conference’, Kunming, Yunnan Province, China, 17–23 Tree Seed Centre, Humlebæk, Denmark. August 2003. RAP Publication 2005/18. Linquist, B., Saito, K., Keoboualapha, B., Phengchan, S., Katwal, R.P.S., Srivastva, R.K., Kumar, S. and Jeeva, V. Sonmgyikhangsutho, K., Phanthaboon, K., 2003. State of forest genetic resources conservation and Vongphoutone, B., Navongsai, V. and Horie, T. 2005. management in India. Forest Resources Development Improving rice-based upland cropping systems for the Service Working Paper FGR/65E. Forest Resources Lao PDR. In: ‘Shifting cultivation and poverty Division, FAO, Rome, Italy. eradication in the uplands of the Lao PDR’. Proceedings, Keoboualaph, B. 2006. Agriculture and forestry NAFRI workshop, 27–30 January 2004, Luangprabang, development in Louang Prabang province, Lao PDR. Laos. National Agriculture and Forestry Research
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Nair, K.S.S. 2001. Pest outbreaks in tropical forest Precious Woods. 2005. Questions about the teak market. plantations: Is there a greater risk for exotic tree species?
78 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Shrestha, S., Boupha, T. and Khamphoukeo, K. 2006. Suhaendi, H. 1998. Teak improvement in Indonesia. In: Sowing seeds in lab and field: Socioeconomic impact of Kashio, M. and White, K. ‘Teak for the future’. the Lao–IRRI Rice Research and Training Project. Proceedings of the second regional seminar on teak, International Rice Research Institute, Los Banos, the Yangon, Myanmar, 29 May–3 June 1995. FAO Regional Philippines. Office for Asia and the Pacific (RAP) Publication 1998/5, SIDA. 2004. Lao Swedish Upland Agriculture and Forestry pp. 179–188. Research Project Phase II. Project document, September Sumantakul, V. and Sangkul, S. 1998. Teak resources in 2004. Vientiane, Lao PDR. Thailand. In: Kashio, M. and White, K. (eds) Sigaty, T. 2003. Report of legal framework of the forestry ‘Proceedings of the second regional seminar on teak’, sector for Forestry Strategy 2020, Lao PDR. Consultant’s Yangon, Myanmar, 29 May–3 June 1995, FAO Regional report to Forestry Strategy 2020 Implementation Office for Asia and the Pacific (RAP) Publication 1998/5, Promotion Project, Department of Forestry, Vientiane, pp. 211–220. 123 pp. Thaiutsa, B. and Puangchit, L. 2001. Paper mulberry as an Siphandouang, P., Wu, M-H. and Santatem, K. 2002. Lao alternative crop of agroforestry systems in Thailand. In: PDR. In: Mubaril, A. (ed.) ‘The vegetable sector in Indo- Proceedings of the paper mulberry and hand-made paper China countries: Farm and household perspectives on for rural development international symposium, Rama poverty reduction’. Technical Bulletin No. 27, Asian Gardens Hotel, Bangkok, Thailand, 19–14 March 2001. Regional Centre, The World Vegetable Centre, pp. 77–110. Thapa, H.B. and Gautam, S.K. 2005. Growth performance Somaiya, R.T. 2005. Teak trade in India. In: Bhat, K.M., of Tectona grandis in the western Terai of Nepal. Banko Nair, K.K.N., Bhat, K.V., Muralidharan, E.M. and Janakari 15(2), 6–12. Sharma, J.K. (eds) ‘Quality timber products of teak from UNIDO. 2002. Strategy for development of the wood sustainable forest management’. Kerala Forest Research processing industry—policy improvements and Institute, Peechi, 669 pp. technology transfer. UNIDO Integrated Programme for Soulivanh, B., Chantalasy, A., Suphida, P., Lintzmeyer, F. Lao PDR US/LAO/01/124. A comprehensive framework and Rock, F. 2004. Study on land allocation to individual to foster economic initiatives in Lao PDR (supported by households in rural areas of Lao PDR. Land Policy Study the Government of Luxemburg). No. 1, Lao Land Titling Project II in Lao PDR. Van Ganbsberghe. 2005. Shifting cultivation systems and Soulivanh, B., Chantalasy, A., Suphida, P., Lintzmeyer, F. practices and in the Lao PDR. In: NAFRI, NAFES, and Rock, F. 2005. Study on land markets in urban and NUOL ‘Improving livelihoods in the uplands of the Lao rural areas of Lao PDR. Land Policy Study No. 2, Lao PDR. Volume 1: Initiatives and approaches’. National Land Titling Project II in Lao PDR. Agriculture and Forestry Research Institute, Vientiane, Southavilay, T. 2002. Wood processing in Lao PDR. Lao Lao PDR, pp. 47–58.
79 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
sources for farmers in Luang Prabang) PhD thesis, important ones. Jugal Kishore and Co., Dehra Dun, Dresden, Germany. 402 pp. Xaynari, C. and Sigaty, T. 2003. Review of regulatory and Mandal, A.K. and Ansari, S.A. (eds). 2001. Genetics and legal framework. Appendix C: Tree plantation for silviculture of teak. Dehra Dun International, 228 pp. livelihood improvement project ADB PPTA 3794-LAO. Mittelman, A. 2000. Teak planting by smallholders in Department of Forestry, Vientiane, 57 pp. Nakhon Sawan, Thailand. Unasylva 51(201), 62–65. Zanin, D.K. 2005. Feasibility of teak production for Negi, S.S. 1996. Teak (Tectona grandis). Bishen Singh smallholders in eastern Panama. MSc thesis, Michigan Mahendra Pal Singh, Dehra Dun, India, 114 pp. Technological University, 137 pp. Prance, G. and Nesbitt, M. 2005. The cultural history of plants. Routledge, New York, London. Further selected reading on teak Ramangkoun, B., Khamphan, K., Sengchanoudom, L., Inthavong, P. and Mounlamai, K. 1995. Technical Anon. 2003. Bibliography on teak (Tectona grandis L.f.). manual for harvest management in teak plantations. KFRI CD No. 2, Kerala Forest Research Institute, Peechi. Silviculture Research Centre, Department of Forestry. Anon. 2004. The teak defoliator. (CD) Kerala Forest Lao PDR. Research Institute, Peechi. Savathvong, S. 2005. Planting teak as a future means of poverty alleviation. Internal Document, Prabang Forestry Anon. 2005. An annotated bibliography on teak: Tectona Service, Luang Prabang. 6 pp. grandis Linn. f./N. Sarojam. Kerala Forest Research Institute, Peechi, 549 pp. Tewari, D.N. 1992. A monograph on teak (Tectona grandis Linn.f.). International Book Distributors, Dehra Dun, Bebarta, K.C. 1999. Teak: ecology, silviculture, 479 pp. management and profitability. International Book Distributors, Dehra Dun, India. Bhat, K.M., Nair, K.K.N., Bhat, K.V., Muralidharan, E.M. Personal communications and Sharma, J.K. 2005. Quality timber products of teak from sustainable forest management. Kerala Forest Mohns = Bernard Mohns, GTZ, Houay Xai, Lao PDR Research Institute, Peechi, 669 pp. Savathvong = Savathvong, Sianouvong; Director, Luang Chand Basha, S., Mohanan, C. and Sankar, S. (eds). 1997. Prabang Forestry Service (PAFO) Teak. Proceedings of the International Teak Symposium, Siannouvong = Siannouvong Savathvong, Luang Prabang Thiruvananthapuram, Kerala, India, 2–4 December Sinhotha = Phengdy Sinhotha, an innovative farmer who 1991. Kerala Forest Research Institute, Peechi. 274 pp. established and managed teak smallholdings in Ban Gok Jha, K.K. 1999. Teak (Tectona grandis) farming. 125 pp. Gniew Krishna Murthy, A.V.R.G. 1975. Bibliography on teak: Vongkhamheng = Vongkhamheng, K.; Director, Luang Tectona grandis Linn F. A survey of the world literature Prabang Provincial Agricultural and Forestry Extension covering about 2961 references with abstracts to the more Service (PAFES)
80 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
10 Appendixes
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Appendix 1: ACIAR’s project proposal
FST/2005/180. Scoping study on teak forest products and plantation teak in Laos. In partic- and non-timber forest products as ular, the scoping study will define the prospects for this type of agroforestry system, estimate potential elements of agroforestry systems economic benefits, and identify likely constraints and in Laos other factors to be considered.
The scoping study Terms of reference The contractor is thus required to provide a pub- lishable report that includes the following: Background 1. An overview of the teak and NTFP sectors in Laos, There are several thousand hectares of teak planted including: in Laos, and good prices are now being paid to – Market chains, trade patterns, potential demand farmers for trees of harvestable size. Productivity, – Influence of developments in neighbouring however, is clearly affected by inadequate silvicul- countries ture. Non-timber forest products (NTFPs) contribute – Lao competitive advantages, with respect to a significant proportion of family income in many both growing and processing rural areas of Laos, and farmers are increasingly planting these species as an alternative to exploiting – The potential for value-adding and industry diminishing wild resources. Species involved include development in these sectors tree-form NTFPs such as paper mulberry and cin- 2. An analysis of factors that could influence the namon. adoption of agroforestry systems using teak and NTFPs, for example: As a component of its Lao forestry program port- – Availability and tenure of suitable land folio, ACIAR is considering studies aimed at – Social factors, e.g. community attitudes, gender enhancing the productivity of agroforestry systems involving teak (or other high value species) and – Government policy, priorities and programs NTFPs. The intention is to develop silvicultural – Financing requirements and limitations systems that optimise the economic productivity of – Infrastructure limitations both elements, and to develop and deploy improved – Local capacity, e.g. in management, R&D, cultivars of NTFPs. The scenario envisaged is that extension teak would be interplanted with tree-form NTFPs, 3. An analysis of prospects for more productive teak conferring the form advantages from close spacing and NTFP plantations in Laos, especially in needed for teak. The NTFP component would subse- agroforestry systems, in particular: quently be harvested, providing a significant eco- – Potential to contribute to rural incomes, also nomic return as well as releasing the teak through the more broadly through value-adding, and to equivalent of a thinning. Non tree form NTFPs could GDP. Quantitative estimates should be also be interplanted among the trees. provided. It is envisaged that, optimally designed and man- – Possible risks aged, these agroforestry systems could be low-input – Environmental impacts systems providing significant income streams, in 4. A review of relevant activities of other agencies in both the short and long term, to rural Lao families. Laos, including international donors, NGOs etc In order to determine the potential value of such 5. A synthesis of researchable issues, their studies, and to more accurately identify potential significance as impediments, and the extent to constraints and economic benefits, ACIAR has which these are issues of relevance also to decided to undertake a scoping study that will inves- Australian agencies, and to which Australian tigate the economic, social and other factors influ- agencies have a comparative advantage to add encing the production and marketing of non-timber value.
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Appendix 2: Project questionnaires
Questions for village chief, ‘Ni Ban’ 16. Do you know of any research being done on teak/ crop combinations or other land uses that might Village...... make teak more profitable? Name of Ni Ban...... 17. How do people sell teak wood? By weight? Main ethnic group...... By volume? By individual tree? 18. Who conducts measurement of the weight/ 1. How many families live in the village? volume? 2. What is the total population? 19. Does the village sell trees to the same buyer or 3. What is the age and gender structure of the village? are there several buyers competing for the trees? Males: Females: 20. Are teak trees used for construction within the 4. Current birth rate (trend) village? 5. How many years has the village been here? Do people plant the trees for their children’s benefit? 6. Highest level of education achieved by village youth: 21. What area of teak trees are owned by absentee Primary Secondary College landlords—city and foreign investors? Where do these plantings tend to occur? 7. What proportion of youth remains in the village 22. Uses of teak plantings and works on farms? – to protect farmland and soil and water 8. What access does the village have to government resources extension services—forestry, agriculture, agro- – demarcate boundaries forestry? – to provide living fences 9. What fruits are commonly consumed in the – to shelter more valuable crops village? – to provide windbreaks 10. Are there foreign-aided projects operating in the – for timber area? – for fuel wood What are they about? – for poles. Are you involved? 23. Are trees planted on the best land or marginal land? 11. How many families in the village have teak plantations? 24. NTFPs—explore current and possible future Estimate the approximate area. activities 12. Do women and men take equal responsibility in planting and maintaining teak plantations? Are Questions for farmers there any community concerns about teak Village...... plantations? Name/ethnic group...... If yes, what are they? What are the attractions/benefits and challenges I. Household background for teak in your village? 13. Who makes the decision to sell? 1. How large is your direct family? Is the decision likely to change? (a) Number and ages in the household 14. How does the village gain access to new (b) Gender and age of ‘farmer’ information about crops, and market prices for (c) Income earners both companion crops and teak? 2. Is your family self-sufficient in rice? 15. How is this information shared within the If not, how do you make up the shortfall? village?
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3. How many family members work on the farm? 8. How many trees were planted? (a) Do you only do one type of farming? 9. For the current tree crop, did you use seedlings or (b) Part-time/full-time stumps? 4. What are your main sources of income? 10. Technical details—spacing, source of seedlings, (a) Farm sources (%) cost of seedlings, month of planting, seedling (b) Off-farm sources (%) survival rate (number surviving/number planted); (c) Income from forest resources—each year? labour inputs at planting (family and hired); hours 5. What type of animals do you have and how to plant (number of trees planted and area planted) many? 11. Ground preparation—describe how land is Poultry prepared; how many hours work? Pigs Family labour only and/or hired labour? Buffalos 12. Sources of advice Cattle Neighbour Goats Other farmers 6. Do you have: Government extension service—forestry, (a) Car/motorbike/bicycle agriculture etc. (b) Motor cultivator (age) 13. What maintenance have you offered the teak (c) TV trees? (d) Telephone Mobile Weeding 7. Do you plan to purchase any of the above in the Fertiliser next 3 to 5 years? Pruning Thinning 8. What type of land do you own / control? Estimate areas of each type? Note areas owned 14. With respect to Q 13—when was maintenance and areas rented conducted and what inputs were used: Their own Labour (family and hired—hours) (a) Paddy Any purchased inputs—chemicals, fertilisers (b) Swidden Rate of application (kg/ha) (c) Fish ponds Frequency (how many times since planting) (d) Where does most of your farm income come Type of fertiliser; price per kg from? 15. Any problems with pests and diseases? 9. Do you rent land from others? How are these treated? How much and for what purposes? 16. Other risks—fire, drought, flood: likelihood and Where is the land located? potential impact? II. Teak trees 17. Do you plan to extend your teak plantings? If so, over how many years? 1. Do you have teak trees on your landholding? 2. Are you considering planting teak trees in the llI. Ownership—Land and trees next 3 to 5 years? 1. Do you rent the land on which you have planted 3. Why was this block(s) chosen for teak planting? trees? Commercial/income prospects? 2. Do you own the trees? Soil, proximity to road, slope? 4. What was the land used for before planting teak? lV. Companion crops / interplanting 5. When were the teak trees planted? 1. What crops have you tried in association with 6. Did you plant the trees or did you obtain them in teak? some other way? Dryland rice 7. How many times has teak been planted on this Job’s tears site? Sesame
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Papaya 2. What are your expectations from the trees? Sweet potato At what age do you plan to harvest the trees? Banana How will you sell them? Maize Will you sell all your trees at the same time or Peanut will you stagger sales? Pineapple 3. Would you be willing to sell the trees before Other harvest age if the offer was right? 2. Why have they been successful/unsuccessful? Have you received any such offer? Comments on profitability and productivity. How much were you offered per year? Highlight problems experienced. Did you accept or reject? Are they problems beyond farmer control or can Why? they be overcome (i.e. are solutions available)? If productivity problems could be overcome what 4. Is it possible to borrow money against the crop would you prefer to plant in association with expected future earnings from the trees? teak? If yes, what organisations/businesses offer such Why? credit? Seek details for gross margins. 5. Will you plant trees again after harvest of this 3. What research is going on to address these rotation? limitations and improve agroforestry system If not, why not? productivity and profitability? What will you plant instead of trees? If yes, will you plant teak or another species? If 4. If you tried another crop, how long do you think another species, which one—rubber, posa, other it would take to be productive? 6. Who do you expect will buy the trees? 5. Where is the market to sell these type of crops? For what purpose? 6. How were the other crops marketed? Will they sell them to other people or process Direct? Via middlemen? Farmer cooperatives? them? Unprocessed/semiprocessed; fresh/wet market or 7. What do you expect to receive when selling the for processing? trees—price? 7. Problems faced in market access— 8. Do you have any ideas of how teak planting could Keeping products fresh? be made more profitable? Sufficient volumes? Distance to market? 9. What expenses limit you to make a teak Infrastructure—roads, storage facilities? plantation? Transport services, taxes and regulations? Are there high expenses associated with 8. What other crops might be tried— harvesting and transport? Food (e.g. mushrooms) 10. Would you sell your land to a large commercial Fibre (e.g. posa) plantation company if an attractive offer was Fodder (e.g. legumes for domestic animals) made to you? 9. What new types of crop would be of interest to Yes—why? you? No—why? 10. Are you willing to participate in trial plantings of 11. Do you use hired labour? mixtures of teak and other crops in new designs? (a) If yes, for what purposes and how often? V. Economic prospects (b)What are the current labour wage rates per hour? Are they set or do they vary from 1. Why plant teak? To protect farmland and soil and village to village? water resources; demarcate boundaries; provide 12. Land rental rates—per ha per month: living fences; to shelter more valuable crops; to provide windbreaks; timber; poles. 13. Land prices—per ha:
86 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Appendix 3: People consulted during the field study
Ministry of Agriculture and Forestry Department of Forestry, Vientiane
Mr Xeme Samonty Mr Thongsoune Bounphasaisol Deputy Permanent Secretary Senior Research Scientist Department of Forestry National Agriculture and Forest Research Mr Sousath Sayakoummane Institute (NAFRI) Deputy Director Planning and Cooperation Division Dr Mounthathip Chanphengsay Department of Forestry Deputy Director Mr Khamphachanh Boungnakeo Mr Bounhom Thaphavong Planning and Cooperation Division NAFRI Department of Forestry
Mr Chanthavisay Keobounnam In Luang Prabang Farming Systems Research Mr Kaysone Vongkhamheng Mr Sounthala Latsayavong Head Farming Systems Research Provincial Agricultural and Forestry Extension Mr Peter Jones Service Land Management Advisor Mr Sianouvong Savathvong NAFRI Forestry Director Provincial Agriculture and Forestry Office Mr Michael Victor Acting CTA, SIDA Northern Agriculture and Forestry NAFRI Research Centre (NAFReC) Mr Bhandith Ramangkoun Mr Homchitsavath Sodarak SIDA Projects, NAFRI Director, NAFReC National University of Laos (NUoL) Mr Saysana Inthavong Deputy Director, NAFReC Dr Sengdouane Wayakone Mr Khamen Soubangxay Faculty of Forestry Head, Kengban Teak Improvement Centre Forest industries, Vientiane Mr Thongsavanh Keonakhone Senior Research Scientist, NAFReC Mr Peter Fogde Director, Burapha Group Dr Paulo Pasicolan Forest Research Advisor, NAFReC Mr Thongthanh Southitham Mr Martin Greijmans Forest Industries Consultant NTFP Advisor, NAFReC Project staff, Vientiane Project staff, Luang Prabang Mr John Connell CIAT in Asia, SADU Mr Phousit Phoumavong Acting Manager Mr Souvanpheng Phommasang Forest Management and Community Support Project NTFP Marketing Advisor, SNV (FORCOM)
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Mr Phetsakhone Soulygnalath Forest industries, Luang Prabang Technical Officer Forest Management and Community Support Project Mr Bounthan (FORCOM) Director, Sawmill Km 4, Luang Prabang Mr Thongsavi Director, Sawmill Km 15, Luang Prabang
88 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Appendix 4: Donor agencies and projects in the forestry sector of northern Laos
Several donor agencies, international organisations Consultative Group on International and NGOs support activities related to strengthening Agricultural Research (CGIAR) farming systems, tree planting and improving markets in the northern provinces of Laos. Among Several CGIAR centres have had a strong relation- those identified are: ship with Laos since the establishment of NAFRI in 1999. This is best demonstrated through NAFRI’s Integrated Upland Agricultural Research Project Donor and international (IUARP), which involves IRRI, ICRAF, CIAT and organisations IWMI, and receives support from ACIAR. The main aim of IUARP is to develop sustainable upland live- Swedish International Development lihood systems through an integrated and participa- Cooperation Agency (SIDA) tory research approach. The target area consists of seven villages in Pak Ou district, Luang Prabang The Government of Sweden has provided substan- province, in northern Laos, representing a range of tial technical assistance to the Government of Lao ethnic, socioeconomic and market conditions. PDR in the natural resources sector since 1977. Until the mid 1980s the assistance focused on support to World Agroforestry Centre (ICRAF) the Department of Forestry and two State Forest Enterprises. From 1985 assistance was expanded to ICRAF operates the Agroforestry Support Project include support for the establishment of a forestry for Vietnam and the Lao PDR (ASP—V&L), which training organisation including the Forestry Techni- receives support from SIDA. The project enables cian School at Mouang Mai. In the late 1980s the ICRAF to progressively engage partner institutions Lao–Swedish cooperation was further expanded to and colleagues in Vietnam and Laos in collaborative cover the stabilisation of shifting cultivation and activities related to agroforestry research and devel- nature conservation. During the first half of the 1990s opment, as well as to support further linkages and the cooperation gradually changed to institution collaboration within the Montane Mainland South- building and strengthening of the Department of For- east Asia (MMSEA) ecoregion. Commencing in July estry at the centre and in selected provinces. SIDA 2001, the ASP—V&L activities built upon the foun- also supports a number of initiatives being imple- dation and informal network of partners established mented by CGIAR centres and the Southeast Asian through the Vietnam Agroforestry Capacity- Network for Agroforestry Education (SEANAFE), Building (VACB) project, which was supported by which works with member institutions in Vietnam, SIDA from May 1998 to June 2001. the Lao PDR, Thailand, the Philippines and Indo- ICRAF also participates in upland research in Laos nesia. Phase 1 (2001–2005) and Phase II (2006–) of via the ASB global partnership: Alternatives to the Lao-Swedish Upland Agriculture and Forestry Slash-and-Burn Consortium and the SLU/ICRAF/ Research Project (LSUAFRP) work through NAFRI Rockefeller Foundation project on Sustainable Land and aim (among other things) to develop productive Use Practices for the Uplands of Vietnam and Laos: upland technologies and land management recom- Science and Local Knowledge for Food Security mendations that are acceptable to farmers for poverty (LUSLOF). alleviation and sustainable use of natural resources. SIDA is in the process of developing a new Upland International Center for Tropical Development and Poverty Alleviation Project Agriculture (CIAT) (UDPAP) that will be closely linked with Phase II of LSUAFRP. The Smallscale Agro-enterprise Development for the Uplands (SADU) Project works with NAFRI. Among the objectives of this project are to identify and evaluate market opportunities for agro-enterprise
89 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. development through local stakeholder interest • introduction of permanent upland plots—contour groups, and to design and facilitate the implementa- farming, hedgerows and cover crops, economic tion of agro-enterprise initiatives with supply chain hedgerows ( paper mulberry), soybean cultivation participants. • livestock improvement, live fences, veterinary services International Rice Research Institute (IRRI) • inland fisheries • small-scale irrigation—infrastructure develop- IRRI is conducting relevant work via the Lao– ment, rotational use of paddy lands (soy beans in International Rice Research Institute (IRRI) upland the dry season) component and the Integrated Upland Agricultural • commercial aspects of small-scale forestry—use Research Project (IUARP). of bamboo International Water Management Institute • value chains of agricultural products—decentral- ised manufacture of mulberry paper pulp, bamboo (IWMI) charcoal processing, soy bean processing. IWMI coordinates the CGIAR Management of Soil Erosion Consortium (MSEC). This initiative uses an Japan International Cooperation Agency integrated, interdisciplinary, participatory and com- (JICA) munity-based approach to research that involves the land users and other stakeholders on a catchment The JICA-supported Forest Management and scale. Six partner countries are directly involved in Community Support Project (FORCOM) is based in implementing the project. The coordination of the Luang Prabang and has a target area of six northern consortium is primarily supported by contributions provinces—Vientiane, Luang Prabang, Oudansay, from the governments of Japan, France, Norway, Bokea, Luang Namtha, Houaphan and Sayaboury. Australia, Thailand and the Philippines through This program of technical cooperation seeks to CGIAR. Implementation of activities in these coun- improve forest management and encourage produc- tries is funded through the ADB-supported project tion and income generation activities which con- Catchment Approach to Managing Soil Erosion in tribute towards stabilisation of shifting cultivation Asia (ADB-RETA 5803) (IWMI 2006). and poverty reduction. The project promotes planting of teak and has established some village-level dem- In Laos the consortium partner is the Soil Survey onstration blocks. and Land Classification Center (SSLCC) and the benchmark watershed is Houay Pano in Luang Prabang province. The Institute of Research for World Bank Development (IRD) in France is a major collaborator The Sustainable Forestry and Rural Development in Laos. The other international partners in the con- Project (SUFORD) was launched in late 2003 with sortium are: financial and technical assistance provided by the • International Center for Research in Agroforestry World Bank and the Government of Finland. The (ICRAF), Indonesia project aims to establish Production Forest Areas • International Crops Research Institute for the (PFA) all over the country and implement participa- Semi-arid Tropics (ICRISAT), India tory sustainable forest management based on new • Southeast Asia Regional Center for Graduate GoL policy in eight priority PFAs located in four Study in Agriculture (SEARCA), the Philippines provinces in central and southern parts of Laos. • Asian Institute of Technology (AIT), Thailand. European Union (EU) German Technical Cooperation (GTZ) The EU supports a number of initiatives in GTZ is working on the following aspects of land northern Laos, directly and via NGO partners. The use for rural development in mountainous areas of Programme for Micro-Project Development through northern Laos: Local Communities is based in Luang Prabang • village-based land-use planning focusing on (
90 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
The Phongsaly Forest Conservation and Rural ethnic groups in remote upland areas. Among the Development Project, based in the northern province objectives is to improve the performance of agricul- of Phongsaly, promotes economic development tural livelihood systems by providing households interventions aimed at enhancing productivity from with an expanded range of viable and sustainable the sustainable management of natural resources. agricultural production options. Among several project components are agroforestry Pak Lai Forest Conservation and Livelihood and improved extension services, as well as partici- Development Project in Xayaboury province—Care patory natural resource management planning, joint International also supported this project, which forest management and conservation strategies for sought to enhance the abilities of both villagers and Phou Den Dinh National Biodiversity Conservation government staff to manage and protect the forests of Area. Pak Lai district, and to improve the livelihood of the communities there in a sustainable manner. Food and Agriculture Organization of the United Nations (FAO) Adventist Development and Relief Agency— Laos (ADRA Laos) The Marketing System Development for Non- Wood Forest Products in Lao PDR Project aims to Sericulture Promotion and Integration for Commu- contribute to the GoL development goals through nity Empowerment Project (SPICE)—now com- development of NWFP marketing systems. plete, the SPICE project was based in Luang Namtha province and promoted mulberry tree cultivation and Australian Centre for International silkworm raising to provide an alternative and Agricultural Research (ACIAR) increased income source for 100 families. The goal of the project was to increase the income and food secu- ACIAR is supporting a project aimed at enhanced rity of people in the target villages. processing of and manufacturing from Lao plantation Subsequently, ADRA Laos has supported the timbers, especially teak and eucalypts. This is aimed Poverty Reduction through Land Tenure Consolida- at capturing more value from the teak plantations of tion, Participatory Natural Resources Management northern Laos in particular. Work on the silviculture and Local Communities Skill Building Project, also of teak interplanted with non-timber forest product based in Luang Namtha province. The purpose of the tree species such as paper mulberry is also under con- support is for nine typical poor rural ethnic minority sideration. ACIAR also supports a project on the communities to be socially prepared with secure land domestication of Meliaceae species in South-East tenure and basic health and education, and able to Asia, including Laos. manage their natural resources and respond to the opportunities and challenges brought about by improvements to Route 3. Non-government organisations ADRA Laos currently supports the Sustainable (NGOs) Agro-Forestry Systems for Livelihood Enhancement of Rural Poor Project in Luang Namtha province. The Twenty-six NGOs are active in the agriculture, for- overall development objective is to bring about estry and fisheries sectors in Laos, supporting some socially, economically, environmentally and ecolog- 53 projects (
91 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64. focuses on improving practices of land-use planning, Mennonite Central Committee (Laos) land allocation and community resource manage- (MCC) ment (e.g. NTFPs). Integrated Agriculture Experimentation Project The Sisaket Sub-district Community Development Borikhamxay Agriculture and Forestry College— Project is also based in Bokeo province along the based in Borikhamxay province, this project aims to Namtha River. This project marks the first phase of provide improved agricultural production methods an integrated project which seeks to strengthen live- for villagers to ensure their food security and reduce lihood security and includes studies of NTFPs gath- poverty. It also includes the development of alterna- ered from native forests. tive models which can establish how much sloping land would typically be needed to support the needs Cooporazione e Sviluppo Onlus (CESVI— of a Lao farm family to produce its own food and Italy) income needs using improved, integrated agricultural and forestry practices. Food Security Project in Luang Prabang prov- ince—this project adopted an integrated approach Norwegian Church Aid (NCA) with the objectives of increasing rice availability and Drug Demand Reduction and Poverty Alleviation upland households’ cash income, and included activ- for Ethnic Minorities—based in Luang Namtha prov- ities related to the improvement of the productivity of ince, this project seeks to improve food security upland farming systems. through rural infrastructure, paddy land expansion and irrigation, livestock and management of NTFPs Deutsche Welthungerhilfe / German Agro in a sustainable upland agriculture system. Action (DWHH/GAA) Netherlands Development Organisation Community-Based Rural Development Project for (SNV) Sustainable Food Security in Nga district—this project has support from the EU and is based in Non-Timber Forest Products Advisory Pro- Oudomxay province. It aims to improve food supply, gramme—based in Luang Prabang province, this nutrition and health standards, and ensure that natural project operates via ‘advisory programmes’, with resources are used in an efficient and sustainable SNV advisers working alongside Lao organisations, manner. It includes activities promoting the use of but it does not fund them or implement their activi- NTFPs. ties. SNV delivers advice on a range of topics within the NTFP sector, with a strong emphasis on net- Community-Based Rural Development Project for working and research. Two SNV advisers are based Conservation—this project was also based in at the government’s Forest Research Center (FRC), Oudomxay province and is a continuation of the advising on the creation of a national NTFP network, Community-Based Rural Development Project for development of micro-enterprises and support for Conservation of the Nam Beng/Nam Mau Watershed forest users groups. One adviser is based at the implemented by DWHH/GAA in 1999–2003. The Northern National Agriculture and Forestry Research project development goal is the efficient and sustain- Centre in Luang Prabang. In order to produce able use of the natural resources to improve food increased numbers of Lao specialists in this field, security and living conditions of the local population, another adviser supports participatory curriculum and for conservation of the watershed function of the development with the National University of Laos designated headwaters and provincial conservation (
92 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Appendix 5: Sources of information and cooperation
International Union of Forest network and operations will be resumed. An oppor- Research Organizations (IUFRO) tunity exists for the Lao PDR to become a fully par- ticipating member. IUFRO has an active Working Group 5.06.02 – Uti- lization of Planted Teak (
93 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Appendix 6: Regulation of the timber trade in Luang Prabang1
LAO PEOPLE’S DEMOCRATIC REPUBLIC PEACE INDEPENDENCE DEMOCRACY UNITY PROSPERITY
The Governor of Luang Prabang Province No……./PG.LP Date DIRECTIVE FROM THE GOVERNOR OF LUANG PRABANG ON THE PROTECTION OF THE COMMERCIAL EXPLOITATION AND TRADE IN TIMBER
• Whereas the Prime Minister’s Decree on the public or private timber plantations of no less than Promotion of Timber Plantations for Commercial 5 ha per annum. These requirements will be taken Purposes and on Environment Protection, Number as indications of the strength of the foundation of 150/PM, dated 20/10/2003 the principal’s own business in the future and of • Whereas the Regulations on the Extension of the development of timber plantations and Timber Plantations issued by the Ministry of environment protection, as well as providing a Agriculture and Forestry, No. 196/MAF, dated 11/ contact office in Luang Prabang. 08/2000, and Guidelines on the Registration of 2. The interested parties must fully and correctly Tree Plantations, No. 1849/MAF dated 07/10/1999 fulfil the following state obligations: • Whereas the Guidelines on Financial Contribution from Timber and Non-Timber Products Sector, • The principal of the commercial interest must issued by the Ministry of Finance, No. 1059/MF undertake to pay all taxes on behalf of the dated 13/06/2003 growers on income derived from the sale of timer within the province of Luang Prabang. The In order to ensure that the protection of the commer- amounts of taxes to be paid will be calculated and cial exploitation and trade in timber follow official collected by the District Office of the Ministry of guidelines and regulations, the Governor of Luang Agriculture and Forestry in which the plantation Prabang province has issued a directive on the pro- is located. The calculation will be based on the tection of the commercial exploitation and trade in base price of a percentage of the unit price of sale timber. The directive is as follows: of timber within the province, that is 1. Encourage all commercial interests to participate 800,000 kip/m3 x 5% = 40,000 kip/m3 of lumber. in timber plantation business so as to increase • [The principal of the commercial interest must timber plantations of all economic sectors. The undertake to] Pay all taxes on business turnover principals of the commercial interests wishing to figures per consignment at the rate of 5% of the participate in this plantation business initiative sale price in the Vientiane market. The must be the head of a business concern that has calculation will be at the average of been approved by the Provincial Agriculture and 1,200,000 kip/m3 of the timber, with the Finance Forestry Service, Provincial Finance Office and Office doing the calculation and collection of the the Provincial Commerce Office. Only the taxes, totalling at 60,000 kip/m3. principal who owns a registered timber trading • [The principal of the commercial interest must] business or is operating timber processing mills in Pay a withholding tax at the wholesale rate of Luang Prabang province will be approved as a 35% of the 10% commercial duties, to be party to participate in this initiative. Further, the calculated by the Finance Office; that is principal concerned must not be a convicted 120,000 kip/m3 x 35% = 42,000 kip/m3. criminal, must have some operating funds in a bank deposit, and must have a plan for either • [The principal of the commercial interest must] Pay for all lodgements of documentation as required by law (Commercial Service 10,000 kip 1 This is an unofficial translation of the Lao original. per set; Assets Control Office of the Finance
94 Midgley, S., Blyth, M., Mounlamai, K., Midgley, D. and Brown, A. 2007. Towards improving profitability of teak in integrated smallholder farming systems in northern Laos. ACIAR Technical Reports No. 64.
Service 10,000 kip; excise stamps 10,000 kip; 5. Procedures for approval of the harvest and registration based on the value at the last point of transport of timber: 3 sale multiplied by 0.1%, that is 1,200 kip/m ; • The business principal can buy timber from documentation at the Customs Office 10,000 kip; individuals per tree or per plantation. The bill of Provincial Agriculture and Forestry Office for sale must specify the numbers of trees and 3 timber brand at the rate of 3,000 kip/m of logs quantity involved, the expected time of harvest 3 and 5,000 kip/m of sawn wood; authority for from the original plantation as well as the full transportation 10,000 kip; authorisation for commercial price agreed between the two parties. exploitation approval 25,000 kip. Furthermore, the original plantation must have an authorisation for planting of timber or a 3. In the case where the principal of the business registration as a timber plantation. interest wants to export the timber overseas, they • The business principal must carry out a survey of must fully comply with all tax and excise the trees to be harvested and have this survey obligations in Luang Prabang. The calculation of approved by the District Office of the Ministry of the value of these obligations will be based on the Agriculture and Forestry in which the plantation average export price of the timber. That is, the is located before he can seek approval for average export price of timber of 12,000,000 kip/ commercial exploitation of the said timber. m3 will translate to the following tax and excise • After the harvest all the cut timber must be obligations: (1) Excise on the growers 40,000 kip/ transported to an accessible location (called a m3; (2) Excise on the wholesale business turnover ‘secondary holding yard’) so that the officials 100,000 kip/m3; Withholding Tax on profit from the District Office of the Ministry of 70,000 kip/m3. Agriculture and Forestry can inspect, measure 4. In the case where the timber is harvested from a and register all the timber. private individual’s own plantation, and the • The business principal must submit the timber business principal has registered it as his own, the registration form from the District Office of the taxes will be calculated at the rate of 5% of the sale Ministry of Agriculture and Forestry, together price at the destination sale point. That is, if the with receipts for the payments of all relevant harvested timber is sold in Luang Prabang the tax duties and taxes, for approval by the Provincial will be 40,000 kip/m3; if it is sold domestically in Office of the Ministry of Agriculture and other provinces, the tax will be 60,000 kip/m3; and Forestry to obtain authorisation for the transport if it is sold overseas, the tax will be 100,000 kip/ of the timber in question. m3. The calculation and collection of these taxes This directive is effective from the date of signature will be carried out by the District Office of the until being superseded by a further or new directive. Ministry of Agriculture and Forestry in which the plantation is located. The Governor of Luang Prabang Distribution of copies [N.B. The collection of the income tax from the Provincial Commerce Office 1 copy grower will be undertaken by the district level Provincial Finance Office 1 copy offices, and the collection of all other obligations Provincial Agriculture and Forestry Office 1 copy will be done by the provincial level offices]. All District Administrative Offices 11 copies Archive 1 copy
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