Lao People's Democratic Republic Data Collection Survey on Selecting the Processed Food to Be Focused and Promoting Foreign Direct Investment in Food Business in Laos Final Report March 2012 Japan International Cooperation Agency (JICA) IC Net Limited SAP JR 12-018 Final Report Laos and Neighboring Countries i Final Report Abbreviations ADS Agricultural Development Strategy AFA Areas Focused on Agriculture ASYCUDA Automated System for Customs Data CADC Clean Agriculture Development Center DAFO District Agriculture and Forestry Office DPI Department of Planning and Investment FAO Food and Agriculture Organization of the United Nations FDQCC Food and Drug Quality Control Center FTA Free Trade Agreement GAP Good Agricultural Practice GPM Good Manufacturing Practice HACCP Hazard Analysis Critical Control Point IFOAM International Federation of Organic Agriculture Movements JICA Japan International Cooperation Agency IRRI International Rice Research Institute MAF Ministry of Agriculture and Forestry MOCI Ministry of Commerce and Industry NSEDP National Socio-Economic Development Plan PAFO Provincial Agriculture and Forestry Office PDM Project Design Matrix PPC Plant Protection Center SAFREC Southern Agriculture and Forestry Research and Extension Center SAZLM Special Agricultural Zone Lao Model SEZ Special Economic Zone S-NCSEZ Secretariat Office of the Lao National Committee for Special Economic Zones TEU Twenty-Foot Equivalent Units UXO Unexploded Ordnance WHO World Health Organization WTO World Trade Organization ii Final Report Table of Contents Summary ....................................................................................................................xi 1. Background and Objective of the Study ........................................................................... 1 2. Overview of the General Situation and Macroeconomy of Laos ....................................... 2 2.1 Socioeconomic Situation ............................................................................................................. 2 2.2 Development Plan and Strategy on Agriculture and Food Processing ........................................ 7 3. Five Aspects of Processed Food to Be Focused ...................................................................... 8 3.1 Current Situation of Raw Material Production and Issues .......................................................... 8 3.1.1 Elements of Raw Material Production .................................................................................. 8 3.1.2 Raw Material Production .................................................................................................... 10 3.2 Current Status and Issues on Food Processing .......................................................................... 12 3.2.1 Processed Foods in Laos ..................................................................................................... 12 3.2.2 Current Situations of Food-Processing Industry in Laos .................................................... 13 3.3 Current Situation and Challenges of Processed Food Market ................................................... 15 3.4 Current Situation and Challenges of Food Distribution ............................................................ 15 3.4.1 Geography........................................................................................................................... 15 3.4.2 Land Transportation, Roads, and Bridges ........................................................................... 16 3.4.3 International Border Gates .................................................................................................. 22 3.4.4 Seaport and Sea Transportation .......................................................................................... 23 3.4.5 Airport and Air Transportation ............................................................................................ 24 3.4.6 Current Situation of Logistics ............................................................................................. 25 3.4.7 Cross-Border Transport ...................................................................................................... 26 3.5 Current Situation with and Challenges to Policy, Legal Framework, and Taxation Related to Food .......................................................................................................................... 28 3.5.1 Food Safety System ............................................................................................................ 28 3.5.2 Legal Framework on Land Use .......................................................................................... 32 3.5.3 Taxation and Export Duty ................................................................................................... 32 3.5.4 Export Formalities .............................................................................................................. 33 3.5.5 Framework of Foreign Investment ..................................................................................... 35 3.5.6 Other Related Systems ........................................................................................................ 37 4. Four Types of Japanese Food-Related Businesses in Laos............................................ 38 5. Short List of Potential Food Items to Be Promoted in Laos ............................................. 40 5.1 Coffee ........................................................................................................................................ 40 5.2 Processed Vegetables ................................................................................................................. 41 5.3 Rice ............................................................................................................................................ 41 5.4 Processed Tropical Fruits........................................................................................................... 41 5.5 Tapioca Starch ........................................................................................................................... 42 5.6 Cacao ......................................................................................................................................... 42 5.7 Sesame ....................................................................................................................................... 42 5.8 Tea ............................................................................................................................................. 43 5.9 Instant Noodles .......................................................................................................................... 43 5.10 Liquor ...................................................................................................................................... 43 5.11 Dry Sausage ............................................................................................................................. 43 5.12 Spice ........................................................................................................................................ 44 6. Potential Food Items to Be Promoted in Laos ................................................................. 45 6.1 Coffee ........................................................................................................................................ 45 6.1.1 Activities of Japanese Businesses and Potential of the Product ......................................... 45 6.1.2 Raw Material Production .................................................................................................... 45 6.1.3 Processing ........................................................................................................................... 50 iii Final Report 6.1.4 Market ................................................................................................................................. 51 6.1.5 Distribution ......................................................................................................................... 57 6.2 Processed Vegetables ................................................................................................................. 57 6.2.1 Activities of Japanese Businesses and Potential of the Product ......................................... 57 6.2.2 Raw Material Production .................................................................................................... 58 6.2.3 Processing ........................................................................................................................... 66 6.2.4 Market ................................................................................................................................. 68 6.2.5 Distribution ......................................................................................................................... 72 6.3 Rice ............................................................................................................................................ 73 6.3.1 Activities of Japanese Businesses and Potential of the Product ......................................... 73 6.3.2 Raw Material Production .................................................................................................... 73 6.3.3 Processing ........................................................................................................................... 82 6.3.4 Market ................................................................................................................................