bar rubber market in laos
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Describe the Rubber Market and Production in Laos.TRANSCRIPT
The University of Queensland
The Economic Potential for Smallholder Rubber Production
in Northern Laos
A thesis submitted for the degree of Master of Philosophy
at the University of Queensland
Vongpaphane MANIVONG
School of Natural and Rural Systems Management
March 2007
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Declaration of Originality
This thesis is the original work of the author except as acknowledged in the text and
in the Statement of Contribution. It has not been submitted for a degree at this or any
other universities.
Vongpaphane MANIVONG
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Statement of Contribution
The work on producing maps in Chapter 7 was assisted by Mr. Thavone
INTHAVONG, the National Agriculture and Forestry Research Institute, Vientiane,
Laos.
Vongpaphane MANIVONG
Associate Professor Rob CRAMB
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Acknowledgments
I would like to begin by thanking Associate Professor Rob Cramb for giving useful
advice during the entire process of writing this thesis. I consider myself fortunate to
have had Rob’s professional and personal support. I also wish to thank Dr. Malcolm
Wegener for his involvement in the supervision of my thesis.
Many thanks to Dr. John Raintree for advice regarding to the selection of the course
and university and to Dr. John Schiller for advice and personal support during my
time in Australia.
My sincere thanks to the National Agriculture and Forestry Research Institute and the
Ministry of Agriculture and Forestry of Laos for giving me the opportunity to study at
the University of Queensland.
Thank you to the Swedish International Development Agency for providing the
financial support during my study at the University of Queensland.
Many thanks to the Soil Survey and Land Classification Centre of the National
Agriculture and Forestry Research Institute for providing the data on soil
characteristics in Luangnamtha province.
I am grateful to the staff of the GIS Unit and Socio-Economic Unit of the National
Agriculture and Forestry Research Institute for providing maps and useful data.
Special thanks to Mr. Thavone Inthavong for producing maps.
Thanks to the staff of the Provincial Agriculture and Forestry Office and Provincial
Agriculture and Forestry Extension Services of Luangnamtha Province for providing
valuable information. Particular thanks go to Mr. Bounthon Sisavan, a research
assistant, for his wonderful cooperation and support during the data collection in
Luangnamtha Province.
Finally, I would like to give thanks to the authorities and farmers of Hadyao Village
who shared their time for the interviews and group discussions.
The Economic Potential for Smallholder Rubber Production in Northern Laos
v
List of Publications
Manivong, V., and Cramb, R.A., 2006. A Case Study of Smallholder Rubber
Production in Lungnamtha Province. Poster paper presented at the Workshop
on Rubber Development in Laos: Exploring Improved Systems for
Smallholder Production. Vientiane, Laos, 9-11 May 2006.
Manivong, V., and Cramb, R.A., 2007. Economics of Smallholder Rubber Production
in Northern Laos. Paper presented at the 51st Annual Conference of Australian
Agricultural and Resource Economics Society. Queenstown, New Zealand,
13-16 February 2007.
The Economic Potential for Smallholder Rubber Production in Northern Laos
vi
Abstract
Rubber smallholdings are being established by shifting cultivators in Northern Laos,
in response to demand from China and encouraged by government land-use policy.
This can be seen as part of a general transition from subsistence to commercial
agriculture in the uplands – in particular, from shifting cultivation to tree crop
production. This study examines the economics of smallholder rubber production in
an established rubber-growing village in Luangnamtha Province and models the likely
expansion of smallholder rubber in the Province. Data were obtained from key
informant interviews, group interviews, direct observation, and a farm-household
survey. Latex yields were estimated using the Bioeconomic Rubber Agroforestry
Support System (BRASS). A discounted cash flow (DCF) model was developed to
estimate the net present value for a representative rubber smallholding. This model
was then combined with spatial data in a Geographical Information System (GIS) to
predict the likely expansion of rubber based on resource quality and accessibility.
The study shows that, given current market conditions and credit support, investment
in smallholder rubber production in the uplands of Northern Laos can be profitable.
The results from the DCF analysis for the study village show that the expansion of
rubber planting in that village is based on good economic returns. The spatial analysis
indicates that the potential for rubber in the study village is not an isolated case; there
are also other areas in Luangnamtha Province that appear to be economically suitable
for rubber. Therefore, rubber can be considered as one of the potential alternatives for
poor upland farmers, in line with the government policy of stabilising shifting
cultivation and supporting new livelihood options for poverty reduction. However,
there are risks associated with rubber production and emerging constraints of land and
labour, hence government should move cautiously in promoting rubber where farmers
are uncertain about reducing their dependence on shifting cultivation. The role for
government, as in other countries where smallholder rubber has played a significant
role in rural development, is to ensure the provision of good quality planting material,
to assist financially during the long investment period when no income is generated,
and to invest in roads and marketing infrastructure. In particular, maintaining secure
access to the China market will be crucial for the sustainability of smallholder rubber
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vii
in Northern Laos. If carefully managed, the expansion of smallholder rubber in Laos
has the potential to contribute to sustainable rural livelihoods.
The Economic Potential for Smallholder Rubber Production in Northern Laos
viii
Table of Contents
Declaration of Originality ii
Statement of Contribution iii
Acknowledgments iv
List of Publications v
Abstract vi
Table of Contents viii
List of Tables xii
List of Figures xv
Chapter 1: Introduction 1
1.1 Research problem 1
1.2 Research objectives, framework, and methods 4
1.3 Thesis overview 5
Chapter 2: Literature Review 8
2.1 Introduction 8
2.2 Transition from shifting cultivation to cash production 8
2.2.1 General characteristics of shifting cultivation 8
2.2.2 Principles of transition from shifting cultivation to cash
production 10
2.2.3 The place of tree crops in the transition 11
2.3 Technological aspects of smallholder rubber production 14
2.3.1 Introduction 14
2.3.2 Site selection, land preparation and planting 14
2.3.3 Fertilizer application, weed and pest control, and
intercropping 16
2.3.4 Tapping, processing and marketing 18
2.4 Economic aspects of smallholder rubber production 20
2.5 Overview of world rubber industry 21
2.5.1 Introduction 21
2.5.2 Natural and synthetic rubber 22
2.5.3 Natural rubber 25
2.5.4 Future trends of natural rubber 29
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2.6 Government schemes supporting smallholder rubber production 31
2.7 Conclusion 35
Chapter 3: The Context of Rubber Development in Laos 38
3.1 Introduction 38
3.2 Physical and socio-economic environment 38
3.2.1 Location 38
3.2.2 Topography 39
3.2.3 Climate 41
3.2.4 Natural resources 44
3.2.5 Population 46
3.2.6 Transportation infrastructure 47
3.2.7 Administration 47
3.2.8 Tenure system and land/forest allocation 48
3.3 Farming systems in Laos 50
3.3.1 Overview 50
3.3.2 Shifting cultivation 52
3.3.3 Limitations of upland farming development 54
3.3.4 Government policies on improved upland farming in Laos 55
3.4 The development of rubber in Laos 56
3.4.1 Introduction of rubber into Lao upland farming systems 56
3.4.2 Government support for the development of rubber 61
3.5 Conclusion 62
Chapter 4: The Study Area 64
4.1 Introduction 64
4.2 Luangnamtha Province 64
4.3 Hadyao Village 68
4.4 Rubber production in Hadyao Village 73
4.5 Conclusion 77
Chapter 5: Resources, Rice and Rubber in the Study Village 79
5.1 Introduction 79
5.2 Data collection and analysis 79
5.3 Household resources 81
5.3.1 Human resources 81
5.3.2 Land 83
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5.3.3 Livestock 87
5.4 Rice production 89
5.5 Rubber production 96
5.5.1 Rubber planting 96
5.5.2 Rubber production techniques 100
5.5.3 Rubber yield, sales, and income 109
5.6 Conclusion 114
Chapter 6: Bioeconomic Analysis of Smallholder Rubber Production in the Study
Village 116
6.1 Introduction 116
6.2 Modelling yields using BRASS 116
6.2.1 Introduction 116
6.2.2 Climate variables 117
6.2.3 Topography and soil variables 120
6.2.4 Rubber management variables 122
6.2.5 Intercrop management variables 125
6.2.6 Model indexes 127
6.2.7 Outputs 130
6.3 Discounted cash flow analysis of smallholder rubber production
in the study village 131
6.3.1 Introduction 131
6.3.2 Principles of DCF analysis 131
6.3.3 Identifying costs and benefits 133
6.3.4 Quantifying costs and benefits 137
6.3.5 Discount rates 138
6.3.6 DCF – the base analysis 140
6.3.7 Risk and uncertainty 146
6.4 Other investment criteria 150
6.5 Conclusion 154
Chapter 7: The Scope for Expanded Smallholder Rubber Production
in Luangnamtha Province 155
7.1 Introduction 155
7.2 Defining the scenarios 155
7.2.1 Conceptual basis of the scenarios 155
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7.2.2 Levels of resource quality 156
7.2.3 Levels of accessibility 162
7.2.4 Scenarios in terms of resource quality and accessibility 166
7.3 Economic suitability of each scenario 166
7.3.1 Introduction 166
7.3.2 Yield profiles for each level of resource quality 167
7.3.3 Prices for each level of accessibility 168
7.3.4 DCF analysis for each scenario 173
7.4 Conclusion 181
Chapter 8: Conclusion 182
8.1 Background 182
8.2 Theoretical framework and methodology 183
8.3 Key findings 185
8.4 Policy implications 190
References 194
Appendices 207
Appendix 1 207
Appendix 2 211
Appendix 3 218
Appendix 4 222
Appendix 5 225
Appendix 6 228
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List of Tables
Table 2.1: Natural rubber production by region 23
Table 2.2: Natural rubber consumption by region 24
Table 2.3: Synthetic rubber production by region 24
Table 2.4: Synthetic rubber consumption by region 24
Table 2.5: Rubber planted areas by countries (’000 ha) 25
Table 3.1: Total area of land use and vegetation types distributing on slope classes
(1,000 ha) 46
Table 3.2: Three main farming systems in Laos 51
Table 3.3: Contrasting conditions in the lowlands and uplands 52
Table 3.4: Strategy for the uplands and lowlands 55
Table 3.5: Officially estimated rubber area in Laos, 2005 58
Table 3.6: Investors in rubber in Laos 60
Table 3.7: Potential rubber areas in Laos 61
Table 4.1: Farming systems in Luangnamtha Province 68
Table 4.2: Number of households in Hadyao Village 71
Table 4.3: Types of land use in Hadyao Village 72
Table 4.4: Area under rubber in Hadyao Village 75
Table 4.5: Loans for rubber production in Hadyao Village 76
Table 4.6: Production and sale of rubber in Hadyao Village 76
Table 4.7: Sale of rubber in 2004 in Hadyao Village by month 76
Table 5.1: Distribution of household size in Hadyao 81
Table 5.2: Demographic characteristics of households in Hadyao by wealth status 83
Table 5.3: Distribution of land holdings in Hadyao 85
Table 5.4: Tenure status and location of land cultivated by Hadyao households 86
Table 5.5: Household land resources in Hadyao by wealth status 87
Table 5.6: Ownership of livestock in Hadyao 88
Table 5.7: Data on livestock raising in Hadyao by wealth status 89
Table 5.8: Number of rice growing households by location and type of rice
cultivation 90
Table 5.9: Number of rice growing households by rice cropping patterns and
location of rice cultivation 91
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Table 5.10: Labour requirement for upland rice production 91
Table 5.11: Rice self-sufficiency among Hadyao households 93
Table 5.12: Rice production statistics by wealth status 94
Table 5.13: Variables included in multiple regression analysis of rice area
in 2004 (n=82) 95
Table 5.14: Results of multiple regression analysis of factors affecting
the area of rice in 2004 95
Table 5.15: Distribution of rubber plots per household in Hadyao 96
Table 5.16: Location of household rubber plots by planting phase 96
Table 5.17: Land type of household rubber plots by planting phase 97
Table 5.18: Source of household’s funds for rubber planting by planting phase 97
Table 5.19: Variables included in multiple regression analysis of rubber planting
(n=95) 99
Table 5.20: Results of multiple regression analysis of factors affecting the total
number of rubber trees planted 99
Table 5.21: Incidence of replacement planting by planting phase 103
Table 5.22: Average yields (kg/ha/year) over three years of tapping in Hadyao 109
Table 5.23: Yields (kg/ha/year) of smallholder rubber in Laos, China, and
Thailand 110
Table 5.24: Rubber production data by wealth status of household, 2004 111
Table 5.25: Variables included in multiple regression analysis of rubber
production (n=67) 113
Table 5.26: Results of multiple regression analysis of factors affecting
the production of tub-lump rubber in 2004 113
Table 6.1: Climate variables in the biophysical component of BRASS 118
Table 6.2: Rainfall and temperature data in Luangnamtha Province 118
Table 6.3: Estimated PET and solar radiation in Luangnamtha Province 119
Table 6.4: Assumed rainfall data in Luangnamtha Province 120
Table 6.5: Topography and soil variables in the biophysical component of
BRASS 120
Table 6.6: Rubber management variables in the biophysical component of
BRASS 125
Table 6.7: Intercrop management variables in the biophysical component of
BRASS 127
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Table 6.8: Comparisons of average latex yields from the survey and BRASS
(kg/ha) 128
Table 6.9: Materials used for one hectare of rubber production in Hadyao 134
Table 6.10: Annual labour requirements for one hectare of rubber production in
Hadyao 136
Table 6.11: Average yields of intercropped rice from BRASS and the survey in
Hadyao 136
Table 6.12: Cash flow analysis of one hectare of rubber plantation over 35 years
of production 141
Table 6.13: Results of DCF analysis for smallholder rubber in Hadyao
(2005 prices and wage rate of 17,000 Kip/person-day) 148
Table 6.14: Results of DCF analysis for smallholder rubber in Hadyao
(2005 prices and wage rate of 25,000 Kip/person-day) 148
Table 6.15: Cash flow budget from Year 1-11 (current prices) 152
Table 6.16: Cash flow budget from Year 1-11 (constant 2005 prices) 153
Table 7.1: The number of mapping units in each level of resource quality by
topography and soil properties 162
Table 7.2: Criteria for defining levels of accessibility 163
Table 7.3: The levels of accessibility and resource quality in each scenario 166
Table 7.4: Yields of intercropped rice and rubber wood for three levels of
resource quality 168
Table 7.5: The cost of transporting tub-lump rubber from the moderate
accessibility zone (0.5-3.5 km) to the roadside 170
Table 7.6: The cost of transporting tub-lump rubber from the poor
accessibility zone (>3.5 km) to the roadside 171
Table 7.7: Percentage change in prices for each level of accessibility 176
Table 7.8: Prices of inputs and outputs used in DCF analysis for each scenario 176
Table 7.9: Results of DCF analysis for each scenario at 8% discount rate 178
Table 7.10: Ranking of economic suitability for rubber 178
Table 7.11: Areas within each suitability rank in Luangnamtha Province 179
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List of Figures
Figure 1.1: The mountainous upland region of Northern Laos 2
Figure 2.1: World natural and synthetic rubber production 22
Figure 2.2: World natural and synthetic rubber consumption 23
Figure 2.3: Natural rubber production by major producing countries 26
Figure 2.4: Natural rubber consumption by major consuming countries 28
Figure 2.5: Price of natural rubber (TSR20) on the Singapore Commodity
Exchange in US cents per kg 29
Figure 3.1: Location map of Laos 39
Figure 3.2: Elevation map of Laos 40
Figure 3.3: Temperature map of Laos 42
Figure 3.4: Rainfall map of Laos 43
Figure 3.5: Monthly mean rainfall distribution in Luangprabang Province,
Vientiane Municipality, Champasack Province from 1975-2005 44
Figure 3.6: Forest and land cover map of Laos 45
Figure 3.7: Transportation routes map of Laos 48
Figure 3.8: Potential rubber areas in Laos 62
Figure 4.1: Location map of Luangnamtha Province 65
Figure 4.2: Monthly average rainfall distribution and temperature in
Luangnamtha Province from 1994-2004 66
Figure 4.3: Forest and land use map of Luangnamtha Province 67
Figure 4.4: Location map of Hadyao Village in Namtha District of
Luangnamtha Province 69
Figure 4.5: Hadyao Village in Namtha District of Luangnamtha Province 70
Figure 4.6: Resource map of Hadyao Village 72
Figure 4.7: A rubber smallholding in Hadyao Village 74
Figure 4.8: The sale of tub-lump rubber on market day in Hadyao Village 77
Figure 5.1: The distribution of full-time equivalent workers per household
in Hadyao 83
Figure 5.2: The distribution of cultivated land per household in Hadyao 85
Figure 5.3: The distribution of rice area per household in Hadyao 92
Figure 5.4: The distribution of rubber trees planted per household in Hadyao 98
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Figure 5.5: Land prepared for planting with rubber in Hadyao 101
Figure 5.6: Young rubber trees in Hadyao 102
Figure 5.7: The symptoms of yellow-leaf disease (left) and root disease (right)
in Hadyao 105
Figure 5.8: Rice (left) and corn (right) intercropped with young rubber trees
in Hadyao 106
Figure 5.9: Pineapple intercropped with mature rubber trees in Hadyao 106
Figure 5.10: The practice of tapping (left) and collecting latex (right) in Hadyao 107
Figure 5.11: The use of plastic bag (left) and bucket (right) for processing latex
into tub-lump rubber in Hadyao 108
Figure 5.12: Tub-lump rubber is normally kept at the farm in Hadyao 108
Figure 6.1: Variables in the biophysical and economic components of BRASS 117
Figure 6.2: Predicted latex yield in Hadyao over 35 years using BRASS 130
Figure 6.3: Undiscounted annual net returns using a wage rate of 17,000
Kip/person-day 144
Figure 6.4: Discounted annual net returns using 8% discount rate and
wage rate of 17,000 Kip/person-day 145
Figure 6.5: Cumulative NPV using 8% discount rate and wage rate of 17,000
Kip/person-day 146
Figure 7.1: Defining levels of resource quality based on the yields estimated
from BRASS 157
Figure 7.2: Defining topography and soil variables based on the soil properties
in each soil sampling site 159
Figure 7.3: The distribution of average annual latex yields for each mapping unit 160
Figure 7.4: Resource quality map for smallholder rubber in Luangnamtha
Province 161
Figure 7.5: Accessibility map in Luangnamtha Province 163
Figure 7.6: Trucks waiting to collect tub-lump rubber at the roadside 164
Figure 7.7: Transporting rubber by cart 165
Figure 7.8: Transporting agricultural and forest produce using back packs 165
Figure 7.9: Latex yields for three levels of resource quality 167
Figure 7.10: The estimation of cost of transporting the tub-lump rubber to
the roadside by distance 172
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Figure 7.11: The percentage reduction in farm-gate prices of tub-lump rubber
by distance 172
Figure 7.12: Distribution of distance to the main road of villages in the moderate
accessibility zone 174
Figure 7.13: Distribution of distance to the main road of villages in the poor
accessibility zone 175
Figure 7.14: Economic suitability ranking map for smallholder rubber in
Luangnamtha Province 179
Figure 7.15: Simplified economic suitability map for smallholder rubber in
Luangnamtha Province 180
The Economic Potential for Smallholder Rubber Production in Northern Laos
1
Chapter 1
Introduction
1.1 Research problem
Lao PDR (hereafter Laos) is a predominantly rural country with approximately 83%
of the population living in rural areas, of which 66% relies on subsistence agriculture
(Roder, 2001). The national economy is overwhelmingly dependent on agriculture,
which accounts for around 47% of GDP and absorbs approximately 80% of the labour
force (NSC, 2005a). Based on the total area of 236,800 km2 and the population of 5.6
million, Laos is the least densely populated country in Asia at only 24 persons per
km2 (NSC, 2005b), yet with the present annual population growth rate of
approximately 2.5%, the agricultural population density will double over the next 25
years (Raintree, 2002). Laos is one of the poorest nations, with a GDP per capita in
2002 of US$330 and a ranking of 135 out of 175 countries in UNDP’s Human
Development Index (ICEM, 2003; UNDP, 2003). The greatest levels of poverty are in
the mountainous uplands of the Northern Region (Fig. 1.1).
There are various factors behind the poverty in the uplands of Northern Laos, of
which pressure on resources and remoteness from markets are two of the most
significant. The current low ratio of population to land might look like a conducive
circumstance for cultivation; however, much of the land in the north is judged as
being unsuited to agricultural development. The availability of suitable agricultural
land is very unevenly distributed by regions. Most of the land along the flat plains of
the Mekong river is found in the Central and Southern regions, while in the
mountainous region in the north there is noticeably less suitable arable land for
cultivation, with only 6% of the area classified as under 20% slope and 50%
categorized as having a slope of 30% or more (Raintree, 2002). This mountainous
Northern territory is mainly under shifting cultivation (ICEM, 2003).
Shifting cultivation in Laos involves more than 150,000 households (or around 25%
of the rural inhabitants) and may account for up to 80% of the land allocated for
agriculture if the entire area of fallow fields is taken into account. Shifting cultivation
The Economic Potential for Smallholder Rubber Production in Northern Laos
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in the past was recognized as the best land use alternative for the rural inhabitants in
the mountainous regions of Laos because of low population densities, low incomes,
little opportunity for trade, and limited access to inputs (Roder, 2001). However, this
traditional agricultural production has become increasingly unsustainable, reflecting
the combined effects of population growth, growing market opportunities, natural
resource depreciation, and international awareness of environmental impacts, forcing
farmers to shorten their fallow periods. As a result, widespread problems of weed
invasion, soil erosion, and declining yields are occurring (De Rouw, 2005).
Figure 1.1: The mountainous upland region of Northern Laos (Source: Author’s
photo, August, 2005)
The Government of Laos is concerned about this problem and has put ‘reduction’ of
shifting cultivation as one of the priority national programs. As stated in the
Government’s Strategic Vision for the Agricultural Sector (MAF, 1999), the
government aims to transform the existing ‘harmful’ system of shifting cultivation to
more ecologically stable cultivation systems with proper land management by villages
and individuals. The government is proceeding with land allocation programs, the
The Economic Potential for Smallholder Rubber Production in Northern Laos
3
promotion of cash crops and livestock production, and the promotion of tree-planting
programs with a vision to accomplish effectively the aim of ‘stabilising’ shifting
cultivation by the year 2010. While this policy is controversial and its impacts on rural
livelihoods need to be closely monitored, there is no doubt that upland farmers are
involved in a significant transformation of their traditional subsistence-oriented
farming systems.
To achieve the aim of stabilising shifting cultivation and eradicating poverty in the
mountainous region of Northern Laos, it is recognized that more sustainable and
income-generating agricultural practices have to be identified and adopted. One of the
possible alternative approaches to support this transformation is the introduction of
perennial cash crops such as rubber to increase farmers’ income. Rubber was first
introduced into Laos in 1930, with the first rubber plantation established in Southern
Laos by French planters during the colonial era. However, smallholder rubber in
Northern Laos is a more recent phenomenon. Between 1994 and 1996, the Hmong
village of Hadyao in Luangnamtha Province established rubber over 342 hectares in
the form of smallholdings, and these smallholders started tapping their rubber trees in
2002 (Manivong et al., 2003). Since then, the rubber area in Laos has increased
moderately, but at a more rapid pace since 2003 as many individuals, private sector
entities (both domestic and foreign), and state sector entities have responded to high
rubber prices and the growth in demand from China. Both local and foreign investors,
especially from China, Vietnam, and Thailand, have expressed interest in investing in
rubber plantations throughout Laos by seeking land for concessions and other
arrangements (Alton et al., 2005; FRC, 2005).
In response to the growth in market demand, especially from neighbouring China,
considerable potential is believed to exist for the expansion of rubber. However, only
a relatively small area has been planted with rubber and an even smaller area is in
production, hence there is little information currently available on the potential
economic returns to smallholder producers, and on the technical and market
constraints they face, that can be used as a basis for the promotion of the crop by the
government. Is smallholder rubber a viable option? What factors contribute to its
viability? What are the risks farmers face? Over what areas is smallholder rubber
likely to be economically suitable? What are the possible impacts on village land-use
The Economic Potential for Smallholder Rubber Production in Northern Laos
4
patterns, household incomes, and the distribution of wealth? What role should the
Government play in the development of smallholder rubber?
1.2 Research objectives, framework, and methods
The overall aim of this study was to examine the economic potential of smallholder
rubber production in Northern Laos. The specific objectives were to appraise the
economics of smallholder rubber production in an established rubber-growing village,
and to model the economic potential of smallholder rubber production in a variety of
spatial settings.
The conceptual framework for the study included the theory of transition from
subsistence to commercial production; the concept of discounted cash flow (DCF);
and the concept of land use-capacity. The theory of transition from subsistence to
commercial production was reviewed, with particular reference to the adoption of
plantation tree crops, as a basis for understanding the stages through which upland
farmers in Northern Laos are proceeding and the opportunities and constraints at each
stage. This theory suggests that, in a commercializing agriculture, economic returns to
investment become progressively more important to smallholder farmers. Hence DCF
analysis was used to analyse the economic returns from the investment of household
resources in smallholder rubber production. The DCF framework expresses the
worthwhileness of a long-term investment such as a rubber plantation in terms of its
net present value (NPV), while allowing for risk and uncertainty through sensitivity
analysis. The concept of land use-capacity links the economic suitability of land for a
given use to two major components – resource quality and accessibility. Hence the
DCF model could be extended to measure the economic suitability for smallholder
rubber of different spatial scenarios in the study area.
Within this conceptual framework, the methods used included a review of existing
information from previous studies, the collection and analysis of data sets from the
study village of Hadyao in Namtha District of Luangnamtha Province, and the
extrapolation of that analysis to other settings within the Province. Hadyao Village
was selected for in-depth study as Hadyao was the first village in Laos to plant and
tap rubber. More importantly rubber in this village was planted by smallholder
shifting cultivators who are now well advanced in the transition from subsistence to
The Economic Potential for Smallholder Rubber Production in Northern Laos
5
commercial agriculture and therefore facing a number of issues of relevance to the
study.
Both qualitative and quantitative, secondary and primary data were collected for this
study during fieldwork from June to December 2005. Secondary data were reviewed
and collected from different sources. Reports related to rubber, both published and
unpublished, were collected from government agencies, non-government
organizations (NGOs), and projects at the national, provincial, district, and village
levels. Information about Hadyao Village was obtained from the village authorities
during a reconnaissance visit in July 2005, including the general information about the
village and specific information on rubber planting. Primary data were collected
through key informant interviews, group interviews, direct observation, and a
questionnaire survey of 95 farm-households in Hadyao during an extended period of
fieldwork in August 2005.
The software programs used for analysing the quantitative data were Microsoft Excel,
Statistical Package for Social Scientists (SPSS), the Bioeconomic Rubber
Agroforestry Support System (BRASS), and ArcView 3.2a. Microsoft Excel and
SPSS were used to enter and analyse the data from the household survey of
smallholder rubber farmers in the study village. BRASS was used to estimate the
yields throughout the life of a typical rubber plantation. These yield projections were
necessary for the DCF analysis of smallholder rubber production in the study village
and in other geographical settings as actual yields had only been recorded for three
years in one village. ArcView 3.2a was used to develop maps of resource quality,
accessibility, and economic suitability for rubber in the study area. These techniques
are described in detail in the relevant chapters of the thesis.
1.3 Thesis overview
The thesis is organised into eight chapters. The next chapter reviews the literature
regarding the stages in the transition from shifting cultivation to cash production, with
particular reference to the role of plantation tree crops in this transition; the technical
and economic aspects of rubber production; the recent trends in the world rubber
industry, indicating the reasons for the growth in interest in rubber production in Laos
The Economic Potential for Smallholder Rubber Production in Northern Laos
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and the longer-term market prospects; and government support schemes and policies
for rubber production in the main rubber producing countries.
Chapter 3 presents the context of rubber development in Laos. It first highlights the
physical and socio-economic characteristics of Laos. It then discusses the farming
systems practised in Laos, with particular reference to shifting cultivation and the
factors that constrain agricultural development in the uplands. This is followed by an
account of the introduction of rubber into upland farming systems.
Chapter 4 describes the study area of Luangnamtha Province and Hadyao Village to
give an understanding of the context in which rubber planting has occurred. A general
account is given of rubber planting in Hadyao.
Chapter 5 investigates the issues of resources, rice and rubber in the study village of
Hadyao. An account is given of the farming resources, activities, and outputs of the
farm households in the study village, with the main focus on smallholder rubber
production. The use of household resources including human resources, land, and
livestock to undertake the two main farming activities – rice and rubber – is analysed,
with attention given to a comparison between households of different wealth status.
Chapter 6 presents the bioeconomic analysis of smallholder rubber production in the
study village of Hadyao. The aim was to build a realistic discounted cash flow (DCF)
model of smallholder rubber production in order to assess the profitability of a hectare
of smallholder rubber in the conditions faced by a typical farmer in Hadyao. This
required modelling the yield of latex over the life of the rubber enterprise, as well as
other outputs, using the Bioeconomic Rubber Agroforestry Support System (BRASS),
which was parameterised and calibrated as far as possible to Hadyao conditions.
These simulated yields were combined with data on costs and benefits obtained from
group discussions with experienced rubber farmers in Hadyao and household survey
data, as well as from other relevant sources. Attention was given to the appropriate
valuation of household labour and the capital invested in the enterprise, as well as
examining a range of investment criteria.
The Economic Potential for Smallholder Rubber Production in Northern Laos
7
Chapter 7 assesses the scope for expanded smallholder rubber production in the study
province of Luangnamtha. The approach was first to define representative scenarios in
spatial terms, drawing on the concepts of land use-capacity, resource quality, and
accessibility, then to use modified versions of the DCF model from Chapter 6 to
estimate the economic suitability of those scenarios for smallholder rubber planting.
These scenarios were then mapped and the potential spatial extent of smallholder
rubber estimated.
The final chapter summarizes the theoretical framework and methodology used for
this study, the study findings, and the policy implications.
The Economic Potential for Smallholder Rubber Production in Northern Laos
8
Chapter 2
Literature Review
2.1 Introduction
The growth of smallholder rubber in Northern Laos needs to be seen as part of a
general transition from subsistence agriculture based on shifting cultivation to
commercial production for the market, which has occurred in many upland regions of
Southeast Asia in the past century. This chapter firstly reviews the stages in this
transition from shifting cultivation to cash production. Next, the technical and
economic aspects of rubber production are examined. Then recent trends in the world
rubber industry are reviewed to understand the reasons for the growth in interest in
rubber production in Laos and the longer-term market prospects. In other rubber-
producing countries various supporting schemes and policies have been put in place
and these are reviewed in the final section.
2.2 Transition from shifting cultivation to cash production
2.2.1 General characteristics of shifting cultivation
Shifting cultivation comprises various land-use practices that differ with location,
altitude, environment, and resources (Vergara, 2001). However, the most common
characteristics of shifting cultivation are the use of fire for land preparation and the
rotation of cropping from one field to another (Christanty et al., 1986). In other words,
fields are cleared from forests, the dried biomass burned, crops planted for one or a
few years, and then the field rested while a new field is cleared in another part of the
forest (Rambo, 1989). Shifting cultivation is judged to be one of the oldest land-use
systems (Roder, 2001). Although shifting cultivation has disappeared in temperate
regions for a long time, it is still common and remains a dominant land-use system in
many parts of the tropical and subtropical world. It is thought to be practised by at
least 250 million inhabitants and covers up to 30% of the world’s exploited land
(Warner, 1991).
The Economic Potential for Smallholder Rubber Production in Northern Laos
9
It is widely accepted that shifting cultivation is a sustainable form of agriculture as
long as the population density is low and therefore the fallow period is long enough
for the soil to re-establish its fertility (Roder, 2001). However, shifting cultivation has
been under pressure in recent decades due to increasing population and decreasing
forest areas and, as a consequence, it is no longer considered a sustainable technology
(Dufour, 1994). The dramatic growth in population has caused an enormous need for
more food production, hence the existing cleared forest is overcultivated, the fertility
of the soil decreases, and weeds and pests invade the land. This results in low
productivity, hence new forest areas have to be exploited.
According to FAO (1984), shifting cultivation can be categorised into pioneer (or
abandonment) and rotational (or establishment) shifting cultivation. Pioneering
shifting cultivation involves non-permanent villages that move into areas of primary
forest and cultivate fields intensively for a longer period of perhaps 10-15 years,
lacking the knowledge of sustainable land-use practices. After many years of
exploiting the forest and land resources, the fields and village sites are abandoned and
a new village is established in another primary forest area. In contrast, rotational
shifting cultivation is the practice of cultivating and fallowing fields in a rotation.
Cultivation is usually practised in an area of secondary forest for a shorter period of 1-
2 years, then moved to other locations in succession, eventually returning to the first
plot. The practice of this type of shifting cultivation involves rotation of plots, but the
village site is not necessarily moved.
Shifting cultivation can also be classified into ‘integral’ and ‘partial’ cultivation
systems (Conklin, 1957, cited in Christanty et al., 1986). Integral shifting cultivation
is the essential component of a subsistence farming system. Farmers employ this
system as their major occupation and devote all of their resources to it. Partial or
supplementary shifting cultivation is only a minor part of the farming system. The
main form of farmers’ production is cash crops or other forms of monetary activity,
hence less attention is given to shifting cultivation.
Peters and Neuenschwander (1988) further distinguished shifting cultivation into
short fallow periods which are generally one to three years and long fallow periods
which sometimes reach up to twenty years or more. This can be related to Boserup’s
The Economic Potential for Smallholder Rubber Production in Northern Laos
10
(1965:15-16) theory of the intensification of subsistence farming systems from more
extensive to more intensive cultivation, changing from ‘forest-fallow cultivation’ to
‘bush-fallow cultivation’, to ‘short-fallow cultivation’, to ‘annual cropping’, and then
to ‘multi-cropping’. She argued that this evolution occurred due to the growth of
population requiring more food to be produced from the same area of land, requiring a
greater input per hectare and per worker. The intensification of subsistence farming to
multi-cropping proposed by Boserup had occurred in many European countries, but
this may not be possible in an environment like Northern Laos. With the growth of
population, the expansion of market opportunities, and the improvement of
infrastructure, the possible alternative pathway of intensification for Northern Laos is
likely to be through incorporating tree crops like rubber, as happened in other
Southeast Asian nations, as it is considered to fit well within the shifting cultivation
systems practised in Northern Laos.
2.2.2 Principles of transition from shifting cultivation to cash production
Shifting cultivators in the uplands of Southeast Asia have progressively taken up cash
crops over the past century. Myint (1973:35-36) categorized two stages of the
transition from subsistence production to production for the market. The first stage
occurs when farmers use the larger proportion of their resources to produce for their
own consumption, but use their spare land and labour to produce for markets. The
second stage occurs when farmers allocate most of their resources to supplying the
markets and rely on purchasing commodities and services, with subsistence farming a
spare-time activity. In other words, farmers change from being ‘part-time’ to ‘full-
time’ producers for the market. The shift is accelerated by the improvement of
infrastructure – especially transportations and communications – and the availability
of markets.
The transition from a subsistence economic system to total production for the market
was classified by Fisk (1975:53) into four stages – ‘pure subsistence in isolation’,
‘subsistence with supplementary cash production’, ‘cash orientation with
supplementary subsistence’, and ‘complete specialization for the market’. The first
stage occurs when farmers’ consumption is entirely reliant on their own production
and the final stage occurs when farmers produce entirely for the market and rely on
The Economic Potential for Smallholder Rubber Production in Northern Laos
11
the market for all the commodities and services they need. The two stages in between
involve a combination of subsistence and commercial production and correspond to
Myint’s two stages. Farmers may produce mainly for their household consumption,
but undertake supplementary production to get access to goods and services not
available from their own resources. On the other hand, they may mainly produce to
supply the markets to earn cash income, but still produce a substantial part of their
basic food and other requirements. In reality there is rarely such a situation as pure
subsistence or pure monetary production. Farmers normally practise stage two or
stage three. For instance, although farmers may only focus on subsistence production,
they tend to cultivate cash crops additionally to get more income if they have spare
land and labour. On the other hand, despite focusing on cash production, they still
produce subsistence output because this will help reduce the risks associated with
market demand.
2.2.3 The place of tree crops in the transition For many Southeast Asian upland farmers the transition from subsistence shifting
cultivation to cash crop production has involved the planting of tree crops or other
perennials. According to Barlow and Jayasurija (1986:635) the development of
smallholder tree crop cultivation can be classified into three stages. The first stage is
‘emergence from subsistence’ when subsistence production is supplemented by a
plantation crop, followed by the stage of ‘agricultural transformation’ when
smallholder farming is rapidly commercialized, and finally the stage of ‘extended
structural change’ characterised by the increasing significance of the industry and
services sectors. It is noted that the transition from subsistence cultivation varies by
countries depending on their resource endowments, socioeconomic elements, and
government policies. The appearance of commercial cultivation of tree crops in
subsistence communities may take place by the development of estates, as in the case
of coffee, rubber, and tea in Southeast Asia and Africa, or by the improvement of
infrastructure as in the case of all tree crops in Malaysia, Sri Lanka, and Papua New
Guinea. It may be also due to market information from merchants as in the case of oil
palm in West Africa. Barlow and Jayasurija (1986) showed that the development of
smallholder rubber in Malaysia had experienced all the three stages.
The Economic Potential for Smallholder Rubber Production in Northern Laos
12
In a more recent contribution, Barlow (1997) outlined five stages of economic growth
in relation to plantation tree crops by taking account of market conditions,
technologies, institutional arrangements, and government interventions. The first
stage is ‘backward economy’ when subsistence family-based agriculture is the main
sector while services and industry are minor ones. There is little trade and fragmented
rural markets. Land is abundant and underutilized, while labour occupied in shifting
cultivation has a low marginal product. Capital is very scarce. Technology is simple
with traditional tools and planting materials. These are typical original situations in
the humid tropics, which form an essential environment for plantation crops. There
was minimum government intervention.
The second stage is ‘early agricultural transformation’ when agriculture remains the
main sector with estates and smallholdings both involved in plantation crop
cultivation, but now has a commercializing orientation while services and industry
sectors are expanding. International trade and rural market development have
commenced. Land and labour become scarce and their prices are increasing. Capital
becomes mores available. Simple labour-intensive tree crop technologies are rapidly
adopted, first by estates and then by smallholdings. Central government starts levying
taxes and providing some services. The third stage is ‘late agricultural transformation’
when agriculture remains one of the larger sectors, but services are growing and
manufacturing based on import-substitution overtakes agriculture. Rural market
development is progressing, especially with government interventions, but many
imperfections persist. Land and labour prices are rising, while capital, management,
and transport prices are declining. New land- and labour-saving but more capital- and
management-intensive high-yielding tree crop technologies are generated and first
adopted by estates and much later by smallholdings. Central government has a
steadily broadened supporting role, providing extensive rural infrastructure and
services, and promoting import-substituting manufacturing.
The fourth stage is ‘early advanced economy’ when manufacturing becomes much
larger than agriculture and moves to an export orientation and includes downstream
plantation crop processing into final goods. Rural markets are much better integrated
and competitive, and pockets of imperfection persist. The trends of resource prices in
stage 3 continue, but the rise of land and labour prices accelerates and the difference
The Economic Potential for Smallholder Rubber Production in Northern Laos
13
between rural and urban wages widens. As a consequence, labour migrates to towns.
The generation and adoption of tree crop technologies as in stage 3 continues with
concomitant spread to producers in different circumstances. Government support as in
stage 3 continues with provision of rural infrastructure and services, while previous
trade regulations are slowly removed.
The final stage is ‘late advanced economy’ when manufacturing prevails and becomes
far larger than agriculture and includes major plantation crop processing into final
goods. Natural rubber from other countries at lower levels is also imported to supply
this goods industry. Rural markets are as in stage 4 but more integrated and
competitive. The trends in resource prices as in stage 4 continue. Traditional
plantation crop production becomes unprofitable, but existing trees are still being
exploited in a ‘sunset’ situation. The generation and adoption of tree crop technology
mainly focuses on quality-improving techniques for the manufactured goods sub-
sector. Government support as in stage 4 is continuing and the support for the
remaining plantation crop is mainly as welfare for older generations.
Barlow (1997) reported that only Malaysia and Thailand had reached all these five
stages, while other rubber producing nations had only reached up to stage 3. In the
case of Laos it can be said that the transition from subsistence shifting cultivation to
cash crop production in the Northern uplands, as in the case of rubber, is still in Stage
2 of ‘early agricultural transformation’. As discussed in later chapters, rubber has
been recently introduced to Lao upland farming systems with simple labour-intensive
technology directly imported from China, though this technology is itself a ‘spillover’
from the more advanced rubber-producing countries, particularly Malaysia.
Subsistence Lao upland farmers are becoming commercialized rubber farmers. The
transition is occurring as a result of both greater integration with the regional
economies of Southeast Asia, particularly China, and the encouragement of
government policies. Most of the change has been driven by robust global demand for
rubber, especially from China. The government policy of ‘stabilising’ shifting
cultivation and generating income for upland farmers is also driving the change
(Thongmanivong and Fujita, 2006). In time, the rubber industry in Laos is likely to
move to stage 3 with the continuing development of rural markets, the generation and
adoption of new land- and labour-saving but more capital- and management-intensive
The Economic Potential for Smallholder Rubber Production in Northern Laos
14
technologies, and support from the government through the improvement of
infrastructure.
2.3 Technological aspects of smallholder rubber production
2.3.1 Introduction
There are actually many species of rubber tree, but Hevea brasiliensis, a native of the
tropical rainforests of the Amazon river basin of South America that grows to a height
of around 20 m and a girth of 2 to 3 m, has provided the major source of natural
rubber since early in the 20th century (Williams, 1975; Kochhar 1981; RBI, 2005).
This section reviews the technological aspects of smallholder rubber production,
including site selection, land preparation, planting, fertilizer application, diseases,
pests, weeds, intercropping, tapping, processing, and marketing. It should be noted
that the practices and technologies mentioned in this section may vary between estates
and smallholders as smallholders do not simply adopt the systems of rubber
management used by the estates. They often adapted the technologies to suit their
circumstances (Dove, 2002).
2.3.2 Site selection, land preparation and planting
The most suitable area for rubber planting is in the humid tropical zones; it is not
likely to be successful in drier or colder areas (RBI, 2005). The area selected for
planting rubber is based on soil quality, rainfall patterns, temperature range, and
altitude (Williams, 1975). The most favourable agro-climatic conditions for rubber
cultivation include a well-drained, fairly deep loamy soil with a pH value of 4.5-6.0; a
high atmospheric humidity; a temperature range of 24-35 °C; and a consistently even
distribution of rainfall of 1,750-2,500 mm (Kochhar, 1981). Rubber trees are very
sensitive to strong winds as their branches are easily broken. Although rubber could
perform well in areas subject to episodic desiccating winds, such rubber trees could
not provide economic production. The topography is also very important for rubber
planting. Agronomists recommend that the land should be flat or gently sloping.
Sharply sloping lands or highly dissected lands should be avoided for the cultivation
of rubber because they make the operations of production and the transportation of
products more difficult and expensive. Rubber thrives best up to an altitude of 300 m
The Economic Potential for Smallholder Rubber Production in Northern Laos
15
above sea level (Opeke, 1982). Although rubber trees can do well up to an elevation
of 1,000 m, their growth is reduced (Kochhar, 1981).
The common practice of land preparation for planting rubber is clear-felling since the
rubber tree does not need shade. After clear-felling, all trash is taken away or burned
(Opeke, 1982). In case of burning, a light burn may be carried out to demolish light
brushwood and branches of trees but too much burn may cause loss of humus and
expose the land to erosion (RBI, 2005). The remaining stumps and roots are removed
as this helps to reduce the risk of the outbreak of root diseases later on for the life of
the trees (Opeke, 1982).
In the past rubber seeds were planted directly in the field, but it has become common
practice to raise rubber seedlings in a nursery either for transplanting into the field as
seedlings or for use as root stocks (Opeke, 1982). Rubber seedlings established in a
nursery can take up to twelve months to reach maturity compared with buddings made
directly in the field (Williams, 1975). There are three types of planting materials –
unselected seedlings, budded stumps, and clonal seedlings (Polhamus, 1962). The
most commonly used planting materials by smallholders in Indonesia are unselected
seedlings or wildlings even though they know that they will get higher returns by
using clonal varieties. Seedlings are generally transplanted using seeds scattered from
nearby trees. Even though these seedlings are normally of poor quality, which is
reflected in low yields, their use is common because there is no preliminary cost other
than the time required to collect them and they need less inputs and less capital
investments (planting materials and maintenance) while the clonal seedlings require
high investment costs (Menz et al., 1999).
Planting on flat or slightly rolling lands can be implemented in a square or rectangular
pattern. For rectangular planting, lines should be taken east-west to get the utmost
benefit of sunlight. In rolling lands, cutting terraces is recommended to help soil
conservation. Contour lining is made by marking out the planting points in level lines
across the slopes. Continuous terraces along contour planting rows are initially high
cost but are economic in the long term as they form the best protection against
erosion. For economy, planting in hilly lands may be undertaken on square platforms
The Economic Potential for Smallholder Rubber Production in Northern Laos
16
about 120 cm square along contours. These are joined later to make completed
terraces or with narrow ledges of 60 cm width to facilitate movement (RBI, 2005).
Whether spaced in a rectangular or a square pattern, the recommended spacing is
typically 6 to 7 m. Experience has shown that avenue planting has facilitated the
operations of a rubber plantation and the growth of the rubber tree. Avenues can be 2
to 4 rows wide, with a space of 5 to 7 m between avenues (Opeke, 1982). Spacing
affects not only the girth increment, but also the thickness and quality of the renewed
bark. Spacing also affects the yield of rubber. The cumulative yield over the life of a
rubber plantation is higher at the denser spacing, but the yield of individual trees is
much higher at the wider spacing (Williams, 1975). Smallholders, however, have
often planted their rubber trees at the denser spacing (Dove, 2002). In practice, the
recommended density for a rubber plantation is 400-600 trees per hectare to avoid
losses due to wind damage, root diseases, and permanent drying up of latex
(Purnamasari et al., 1999).
2.3.3 Fertilizer application, weed and pest control, and intercropping
During the early years after planting, the rubber trees are a minor part of the
plantation and have to compete for soil moisture and nutrients with weeds. Fertilizer
applied during this period is intended to encourage the robust growth of rubber trees
so as to accelerate the time at which the trees may be large enough to be tapped. The
use of complete fertilizer possibly up to five years before replanting is a common
practice in order to maintain the general health of the tree and to reimburse for the
progressive immobilization of nutrients within the tree and the loss of latex from
being tapped (Watson, 1989).
Diseases are likely to be a continual danger in a new rubber plantation and must be
controlled as soon as they are detected. The predominant diseases found in rubber are
root diseases, stem and branch diseases, panel diseases, and deficiency diseases.
There are three major root diseases – white root disease, brown root disease, and red
root disease. The main stem and branch diseases are stem rot, stinking root rot, and
pink disease. The main panel diseases are mouldy rot, black thread or black stripe,
and bark bursts or cortical fissures. Farm sanitation, adequate aeration, the use of
The Economic Potential for Smallholder Rubber Production in Northern Laos
17
clean tapping tools and materials, the use of resistant clones, and appropriate
fungicides are the measures to control these diseases. Deficiencies of the important
nutrients for rubber (nitrogen, phosphorus, potassium, magnesium, calcium, sulphur,
iron, and manganese) can be solved by the application of appropriate fertilizers
(Opeke, 1982).
The main pests associated with rubber are termites, cockchafer grubs, and caterpillars.
These pests can be controlled by hand picking and killing, using nets, spraying with
insecticides or using soil fungicides, and farm sanitation. The other pests are snails,
slugs, rodents, bats and domestic animals (Opeke, 1982).
Weeds are harmful to rubber tree growth as they contend with rubber for light,
moisture and nutrients, especially during the initial years of a plantation (RBI, 2005).
Therefore, weed control has to be undertaken in rubber plantations. The establishment
of leguminous cover crops or intercrops in the initial period of a plantation can help
control weed competition. The need for weeding is significantly reduced in mature
rubber because of the crowded canopy shading out the weeds (Williams, 1975). Weed
control can be done through hand weeding or the use of chemical sprays. In the case
of chemical control, herbicides are used depending on the type of weed for effective
control (RBI, 2005). The main weed found in rubber plantations in most of Southeast
Asia is the grass Imperata cylindrica, which competes vigorously with rubber for
moisture and nutrients. In the early phases of rubber tree development it can diminish
the growth of the tree by up to 50% (Grist et al., 1998). Yields from the cropping
areas infested by Imperata can be decreased by up to 90% (Menz and Grist, 1995).
An alternative option to planting cover crops is to plant a range of crops in the inter-
row areas when the interspaces receive a lot of sunlight during the initial 2-3 years
after planting, before the canopy closes over (RBI, 2005). Intercropping is commonly
practised by smallholders in order to obtain additional income while waiting for the
rubber to come to the period of tapping. The most common intercrops are rice, maize,
cassava, watermelon, banana, tea, coffee, cocoa, pineapple, pepper, and other
perennial crops (Watson, 1989). The general characteristics of a good intercrop are
that the intercrop should not grow as tall as the rubber, should have a different root
system, should be tolerant of shade, should not be more susceptible than rubber to the
The Economic Potential for Smallholder Rubber Production in Northern Laos
18
diseases they have in common, and should not be slow to mature or have a longer
economic life than rubber (Polhamus, 1962). When intercropping is practised,
fertilizer application and weeding are required (Cottrell, 1991).
2.3.4 Tapping, processing and marketing
The major economic product from the rubber tree is the latex which is obtained by
tapping the trunk of the tree (Opeke, 1982). Tapping is a process of carefully
controlled wounding by paring off a small amount of the bark of the rubber tree, just
enough to open up the ends of the latex vessels. Tapping is undertaken with the
purpose to open the latex vessels in the case of rubber trees tapped for the first time or
to remove the coagulum blocking the cut ends of the latex vessels in the case of
rubber trees tapped regularly. In order to get highest yield, tapping should be done to
a depth of less than one millimetre close to the cambium as more latex vessels are
concentrated near the cambium (RBI, 2005). Too much exploitation of the bark
should be avoided to conserve it for rubber production in the future (Polhamus, 1962).
The amount of latex obtained is dependent on the time of tapping. Tapping in the
early morning provides the highest latex production because the flow of latex is
plentiful due to high turgor pressure in the early hours of the morning (Barlow, 1978;
Opeke, 1982). Late tapping reduces the exudation of latex (RBI, 2005). The later the
time during the day that tapping is undertaken, the lower the latex production that is
obtained. Hence, tapping operations should be done in the early morning (Opeke,
1982).
The girth at which tapping commences is a foremost factor affecting the output of a
rubber plantation (Grist et al., 1998). The rubber tree is normally first tapped when its
girth reaches 45 cm or 7 years after planting. Beginning tapping before a tree reaches
45 cm not only lessens the annual girth increment but also reduces total latex
production over the rotation period (Purnamasari et al., 1999). Smallholders, however,
often begin tapping at the girths of less than 45 cm (Grist et al., 1998).
The tools and materials used for tapping and collecting are the tapping knife, spout,
collecting cup, cup hanger, collecting buckets, churns, collecting tanks, and
The Economic Potential for Smallholder Rubber Production in Northern Laos
19
anticoagulants (sodium sulphate, ammonia) (Opeke, 1982). However, smallholders
often use local materials instead. For instance, smallholders in Sri Lankha often
substitute a half coconut for a cup, a piece of bark for a metal spout, and nails for a
hanger (Barlow, 1978). In Indonesia rubber smallholders use plastic bottles as
collecting cups (Cottrell, 1991).
Tapping techniques and tapping knives used by smallholders differ among countries.
Chinese rubber farmers use a tapping knife requiring the tapper to push the knife
upwards along the tapping angle; in contrast rubber farmers in Thailand, Malaysia,
and Indonesia use a tapping knife requiring the tapper to pull the knife at an angle
downwards towards the spout (Alton et al., 2005).
Latex yield is determined by climatic and soil conditions as well as genotype
(Williams, 1975). In general, latex yield will increase over the first few years after
tapping, then plateau, and finally begin to decline (Grist et al., 1998). At the first
tapping, only a small amount of glutinous latex pours out but the yield rises gradually
and reaches full productivity at the age of 12 years (Kochhar, 1981).
Latex can be processed and marketed in several forms and grades. The most common
forms are sheet rubber, crumb rubber, crepe rubber, cyclized rubber, superior
processing rubber, block rubber, and preserved filed latex and latex concentrates
(Opeke, 1982; RBI, 2005). Most rubber smallholders in Malaysia, Thailand and Sri
Lanka process their latex into sheets. Some is dried in a smokehouse and sold as
ribbed smoked sheet (RSS), but most is purchased from the farm as dry unsmoked
sheet and processed to RSS somewhere else. In Malaysia smoking is generally
undertaken at the village level. In Sri Lanka, most rubber is smoked before being sold
to official government rubber buying centres in the local areas. In Thailand the trading
system is different. The market chain starts from travelling traders who may in fact
buy at the farm gate price, through small town vendors, to the final stage of the chain
where rubber sheets are smoked by the traders with very large smokehouses, and who
then grade, pack and export the sheet as RSS (Blencowe, 1989).
In recent years wood from the rubber tree has become an alternative source of timber.
Rubber has the texture and feel of pine wood so when treated and processed it can be
The Economic Potential for Smallholder Rubber Production in Northern Laos
20
made into a variety of quality applications such as furniture, panelling, table tops,
flooring, and household articles (Cheo, 1999; RBI, 2005). Rubber wood is a valuable
product and important for the furniture industry in Malaysia. It is clear that nicely
patterned rubber wood is in high demand for tables and chairs. Moreover, there is an
increased demand in the construction industry as rubber wood is equivalent to other
medium hardwoods (MRRDB, 1983). The use of rubber wood would not only
decrease the quantity of biomass burnt when replanting but also give additional
income to farmers (Gouyon, 1999).
2.4 Economic aspects of smallholder rubber production
There are two phases in the growing of rubber – the immature or establishment phase
and the mature or production phase. The immature phase is when the rubber trees are
providing no latex, usually lasting about 6 to 7 years after planting. During this stage
expenditure is incurred on planting and maintenance of the rubber tree but there is no
return, except the returns from intercrops if intercropping is practised. When the
rubber trees are tappable or in the mature period, there are returns of latex production
until the end of their productive life, normally up to 35 years or even more.
There are two main costs associated with smallholder rubber production – material
costs and labour costs. These costs are incurred throughout the life of rubber
plantation. In the establishment stage, the major materials used are planting materials,
fertilizers, and weedicide. In the mature period, the materials used are tapping
materials (mangles, cups, spouts, tapping knife, pails, pan, headlamp, and formic acid)
and processing materials including the establishment of a smoke house and its
maintenance (DoA, 1985).
The production of smallholder rubber requires intensive labour use, which is the main
input apart from land (Barlow and Tomich, 1990). In the immature phase, the labour
costs for developing a rubber plantation are for land clearing, lining, terracing, holing,
planting, fertilizing, and hand weeding and/or spraying weedicide. The labour used
during the tappable period is for fertilizing, hand weeding, tapping, collecting latex
and processing (DoA, 1985). It can be seen that from the preparation for planting to
the harvesting of the rubber trees by tapping, the production of rubber mainly involves
hand labour, although labour-saving equipment has been used whenever possible.
The Economic Potential for Smallholder Rubber Production in Northern Laos
21
However, budding and tapping have not been adaptable to automotive equipment
(Polhamus, 1962).
The primary output from a rubber plantation is the latex. Hence there is no economic
return from rubber trees during the immature period. In the mature or tappable period,
the rubber trees can produce latex, the yield of which will increase over the first few
years, then plateau, and finally decline (Grist et al., 1998). However, during the
unproductive immature stage, intercropping provides an essential way of increasing
not only land-use efficiency but income (Rodrigo et al., 2001). In Southern Thailand
food crops are intercropped with smallholders’ young rubber trees during the first few
years after planting, whether for their consumption or for the market (Masae and
Cramb, 1995). Intercropping also help reduce the risk from fluctuation in the rubber
price (Raintree, 2005). Apart from the latex and intercrops, when a rubber tree reaches
the end of production, its wood can be a valuable product and provide additional
income to rubber smallholders, as noted above.
Access to capital is crucial for smallholders to invest in a rubber plantation since it
requires high capital investment. The shortfall of cash is definitely the most severe
constraint on rubber smallholders’ investment (Barlow and Tomich, 1990).
Governments, development agencies, and private entrepreneurs play an important role
in providing capital to smallholders to develop their rubber plantation. For instance,
many smallholder rubber producers in Indonesia are supported by government-
sponsored schemes which grant credit with long payback periods, usually 12 to 15
years, at interest rates of 10 to 15% (Purnamasari et al., 2002). In Malaysia,
government schemes for smallholders have included supervised planting grants or
‘subsidies’ to fill the gap in the private capital market. Likewise in Thailand,
replanting of rubber has been subsidised by a government agency. This is discussed
further in Section 2.6.
2.5 Overview of world rubber industry
2.5.1 Introduction
The world rubber industry, including both natural and synthetic rubber, has grown
steadily in the post-war period. Despite early fears that natural rubber would lose out
The Economic Potential for Smallholder Rubber Production in Northern Laos
22
to synthetic rubber, both sectors have continued to grow. This section first reviews the
production and consumption of both natural and synthetic rubber. Then the focus is
shifted to the natural rubber industry, including planted area, production,
consumption, price, and future trends.
2.5.2 Natural and synthetic rubber
Throughout the period of 43 years from 1960 to 2003, the global production of natural
rubber and synthetic rubber increased by an annual rate of 3.5% and 3.8% to be 8.01
and 11.43 million tonnes in 2003, respectively (Jumpasut, 2004; RRIT, 2005; Fig.
2.1).
Natural Rubber Production
Synthetic Rubber
Production
02,0004,000
6,0008,000
10,00012,00014,000
16,00018,00020,000
1990 1992 1994 1996 1998 2000 2002
'000
tonn
es
Figure 2.1: World natural and synthetic rubber production (Source: RRIT, 2005)
World rubber consumption has grown at an average rate of 5.9% per year since 1900
(Jumpasut, 2004) to reach 19.31 million tonnes in 2003 (RRIT, 2005). Since 1960, the
global consumption of natural rubber and synthetic rubber has been rising at annual
growth rates of 3.1% and 3.7% (Jumpasut, 2004) to reach 7.96 and 11.35 million
tonnes in 2003 (RRIT, 2005), respectively (Fig. 2.2).
The Economic Potential for Smallholder Rubber Production in Northern Laos
23
Natural Rubber Consumption
Synthetic Rubber
Consumption
02,0004,000
6,0008,000
10,00012,00014,000
16,00018,00020,000
1990 1992 1994 1996 1998 2000 2002
'000
tonn
es
Figure 2.2: World natural and synthetic rubber consumption (Source: RRIT, 2005)
The data on natural rubber production and consumption by region are shown in
Tables 2.1 and 2.2. Natural rubber is mainly produced in Asian nations (Bangladesh,
Cambodia, China, India, Indonesia, Malaysia, Myanmar, Papua New Guinea,
Philippines, Sri Lanka, Thailand, and Vietnam), accounting for around 93% of the
total production in 2003 (IRSG, 2005), with a small proportion from Latin America
and Africa. Regarding consumption, the countries from Asia/Oceania, European
Union, and North America accounted for approximately 90% of the total natural
rubber consumption in the same year, of which 58% was consumed by Asia/Oceania
(IRSG, 2005). Therefore, it can be said that Asia is the foremost region of natural
rubber production and consumption.
Table 2.1: Natural rubber production by region Region ‘000 tonnes % Latin America 166 2 Africa 373 5 Southeast Asia (a) 6,211 77 Other Asia 1,288 16 Total (b) 8,010 100
Notes: (a) Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Thailand and Vietnam (b) May include balancing adjustments
Source: IRSG, 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
24
Table 2.2: Natural rubber consumption by region Region ‘000 tonnes % North America 1,225 15 Latin America 465 6 European Union 1,332 17 Other Europe 180 2 Africa 124 2 Asia/Oceania 4,631 58 Total (b) 7,960 100
Note: (b) May include balancing adjustments Source: IRSG, 2005
The data on synthetic rubber production and consumption by region are shown in
Tables 2.3 and 2.4. The production of synthetic rubber is predominantly from
European Union, North America, and Asia/Oceania with nearly 84% of the total
synthetic rubber production in 2003 (IRSG, 2005). These synthetic rubber producing
countries are also the main consumers of synthetic rubber, consuming well over 85%
of the total synthetic rubber consumption in 2003 (IRSG, 2005).
Table 2.3: Synthetic rubber production by region Region ‘000 tonnes % North America 2,344 21 Latin America 642 5 European Union 2,767 24 Other Europe 1,166 10 Africa 77 1 Asia/Oceania 4,408 39 Total (b) 11,430 100
Note: (b) May include balancing adjustments Source: IRSG, 2005
Table 2.4: Synthetic rubber consumption by region Region ‘000 tonnes % North America 2,152 19 Latin America 691 6 European Union 2,652 24 Other Europe 925 8 Africa 117 1 Asia/Oceania 4,709 42 Total (b) 11,350 100
Note: (b) May include balancing adjustments Source: IRSG, 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
25
2.5.3 Natural rubber
The total area planted with rubber in the world was around 9.5 million ha in 2004
(Table 2.5). Most of this area is in smallholdings of only a few hectares. Almost 6.7
million ha or nearly 70% of the world’s total rubber area is in the three major
producing countries: Thailand, Indonesia and Malaysia. The other countries with a
large area of rubber are China, India, and Vietnam (RRIT, 2005).
Table 2.5: Rubber planted areas by countries (’000 ha) Countries Estates Smallholdings Total Brazil 80.0 100.0 180.0 Cambodia - - 52.3 Cameroon 39.8 2.2 42.0 Central African - - 1.0 China - - 618.0 Congo 25.0 10.0 35.0 Cote d' Ivorie 70.0 25.8 95.8 Guatemala - - 44.5 Gabon 10.0 3.0 13.0 Ghana 16.1 0.8 16.9 Guinea 4.5 1.5 6.0 India 69.0 494.7 563.0 Indonesia 549.0 2,823.0 3,372.0 Liberia 60.4 48.5 108.9 Malaysia 186.0 1,244.5 1,430.7 Mexico - - 21.0 Myanmar 46.0 58.8 104.8 Nigeria 60.0 90.0 150.0 Papua New Guinea 9.5 8.7 18.2
Philippines 92.0 - 92.0 Sri Lanka 57.0 101.0 158.0 Thailand 85.0 1,895.1 1,980.1 Vietnam 334.4 83.6 418.0 Total 1,793.7* 6,991.2* 9,521.2
Note: * These sums do not include the estate and smallholding areas of Guatemala, Mexico, Central African Republic, Cambodia, and China as their total area can not be separated into estate and smallholding
Source: RRIT, 2005
As can be seen in Fig. 2.3, Thailand, Indonesia and Malaysia are the world’s biggest
producers of natural rubber (RRIT, 2005). Currently Thailand is the world’s largest
producer of natural rubber with about 36% of total production. Rubber production of
Thailand has grown significantly since the mid 1980s, surpassing that of Malaysia in
1991, and in 2003 its output was about 2.873 million tonnes (RRIT, 2005). This
resulted from the intensive replanting programs funded by the Office of Rubber
The Economic Potential for Smallholder Rubber Production in Northern Laos
26
Replanting Aid Fund (ORRAF) over a thirty-year period (Sonluksub and
Pruksananont, 2004). It is interesting to note that despite the rapid rise in natural
rubber production in Thailand for almost 20 years, its share is not as great as that of
Malaysia in the mid-1970s when it accounted for almost half of the world’s natural
rubber production (Jumpasut, 2004).
0
500
1,000
1,500
2,000
2,500
3,000
1990 1992 1994 1996 1998 2000 2002
'000
tonn
es
Thailand Indonesia Malaysia India China
Figure 2.3: Natural rubber production by major producing countries
(Source: RRIT, 2005)
Even though there has been a gradual drop in the area planted with rubber in
Indonesia as some smallholders have shifted into oil palm, rubber production has been
rising since 1995 due to an increase in the productivity of the existing rubber
holdings. Indonesia is currently the second largest producer with 22% of global
natural rubber production in 2003 (RRIT, 2005). However, Indonesia’s share of
global rubber output dropped from 30% in 1960 to the current level in 2003 due to
more rapid growth in the output of the other producing countries such as Thailand,
India, China, and Vietnam (Honggokusumo, 2004).
Interestingly, while production from the other rubber producing nations has grown
since 1990, Malaysian rubber production declined. In fact, the drop in natural rubber
production in Malaysia began in the mid-1970s because Malaysia has gradually
substituted its rubber plantations with oil palm due to a declining world demand for
The Economic Potential for Smallholder Rubber Production in Northern Laos
27
natural rubber (Cheo, 1999) and an increasing opportunity cost of growing rubber as
the Malaysian economy develops (Barlow, 1997). Higher wages in other sectors
attracted workers and made rubber production relatively expensive (Jumpasut, 2004).
As a result, approximately one third of the total mature rubber area, or 230,000-
300,000 ha, is not tapped (Ching, 2004). However, Malaysian natural rubber
production started to rise again in 2003 in response to improved prices and Malaysia
still ranks third in production, contributing 12% of global natural rubber output in
2003 (RRIT, 2005).
It can be seen that global development has occurred in the natural rubber industry as
most producing countries have increased their output levels. However, the share of
natural rubber production from the three main producing countries (Thailand,
Indonesia and Malaysia) decreased from 80% in the late 1960s (Jumpasut, 2004) to
71% in 2003 (RRIT, 2005) as more new plantations were established in other
countries, particularly India and China, whose share of output has increased gradually.
As can be seen in Fig. 2.4, the major natural rubber consuming countries in the world
are China, the United States, Japan, and India. With an average growth rate of 8%
since 1960 (Jumpasut, 2004), China overtook Japan to become the second largest
natural rubber consuming country in the world in 1992 and moved ahead of the US to
be the world’s largest consumer in 2001. China’s consumption of natural rubber in
2003 was 1.485 million tonnes or 19% of global natural rubber usage (RRIT, 2005).
The tremendous demand for rubber in China is derived from the robust consumption
in the automotive and tyre industries. China’s economy since the late 1970s has been
developing rapidly and the average growth rate of GDP between 1990 and 2003 stood
at 9.1% (Junheng, 2004). The growth of GDP and incomes led to an enormous
demand for private vehicle ownership and, as a consequence, China has become the
fastest growing automotive market and the third largest automotive producer in the
world, behind the US and Japan. The production of motor vehicles reached 4.44
million units and it is expected that the growth of automotive production will
continue, reaching about 8 million units in 2008 (Lee, 2004). Alongside the rapid
growth of the automotive industry, the tyre industry has also dramatically increased to
reach 0.14 billion units in 2003 because most of the world’s leading tyre
manufacturers had invested in China (Junheng, 2004). A large and rapidly increasing
The Economic Potential for Smallholder Rubber Production in Northern Laos
28
quantity of natural rubber is needed to supply the tyre and vehicles industries, which
are the major rubber consumers (Jumpasut, 2004).
0
200
400
600
800
1,000
1,200
1,400
1,600
1990 1992 1994 1996 1998 2000 2002
'000
tonn
es
China United StatesJapan India Malaysia Korea France Thailand Germany Indonesia
Figure 2.4: Natural rubber consumption by major consuming countries
(Source: RRIT, 2005)
After the price of natural rubber had been dropping for about 20 years, it began to rise
again in 2002 (Fig. 2.5). During the early 1990s rubber production increased more
than total consumption, resulting in low prices. The price recovered when total
consumption grew faster in the mid 1990s, but declined further because of the
substantial drop in the exchange rate of Thailand, Indonesia, Malaysia and other
countries during the period of the Asian financial crisis. Growth in total rubber
consumption rose again in 2000 and 2001; however, large stocks protected prices
from rising. The turning point occurred in 2002 when the price of rubber started to
rise again due to the tripartite agreement between Thailand, Indonesia and Malaysia to
restrict production to push the price up, and the continuing growth in demand for
natural rubber from China due to its massive industrialization (Jumpasut, 2004). The
price of natural rubber on the Singapore Commodity Market in 2004 was about USD
1.35 per kilogram (SICOM, 2005; IRSG, 2005).
The Economic Potential for Smallholder Rubber Production in Northern Laos
29
Figure 2.5: Price of natural rubber (TSR20) on the Singapore Commodity Exchange in
US cents per kg (Source: SICOM, 2005)
2.5.4 Future trends of natural rubber
Although the market for natural rubber in developed countries is mostly saturated and
is not expected to grow in the future, it is expanding in the nations of “New Asia”
(India, ASEAN and especially China). It can be seen that the Asian region has shown
a significant increase in natural rubber consumption in comparison to other regions
over the past decade (Table 2.2). The growing trend is expected to continue in coming
years due to the current low levels of rubber consumption per capita in the Asian
region compared to those in developed countries (Jumpasut, 2004).
The growth in natural rubber consumption is being driven by a robust demand from
the Asian nations, particularly China where rubber imports increased almost 24% in
2003 (RRIT, 2005). Since 2001 China has become the world’s largest rubber
consuming country and will be the key actor driving the growth in natural rubber
consumption in the future. The demand for natural rubber from China is expected to
keep on increasing due to the recovery of the world economy, the rapid expansion of
the Chinese automobile industry, the high investment in the rubber industry, and the
growth in exports of rubber products (Rende, 2004).
Natural rubber is expected to be in short supply in the future. As forecast by
International Rubber Study Group (IRSG), the global demand for natural rubber will
The Economic Potential for Smallholder Rubber Production in Northern Laos
30
be 11.5 million tonnes, compared to only 8-9 million tonnes of production (Ching,
2004). Natural rubber producing countries are consuming more of their production
due to the establishment of industries based on rubber. As a result, the quantity left for
export to the global market is less. The proportion of world natural rubber production
that is exported has dropped significantly from 95% in 1960 to 71% in 2003
(Jumpasut, 2004).
Another factor constraining production and exports is that some natural rubber
producing countries are reaching the period when the opportunity costs are higher
than the returns from producing natural rubber. Farmers find alternative sources of
income more attractive. When they are getting higher incomes from working outside
their farms they will reduce or eventually stop producing rubber. Malaysia has already
reached that period and other major producing countries, particularly Thailand, are
likely to be the next (Jumpasut, 2004).
While the demand for natural rubber in China has rocketed, the growth of Chinese
natural rubber production has slowed since the 1990s due to stagnation in the planted
area (Jumpasut, 2004); therefore, the gap between production and consumption within
China is widening. As a result, China has heavily relied on importing natural rubber to
address the imbalance between domestic production and consumption (Lee, 2004).
The increasing demand for natural rubber from China has strongly affected the world
rubber industry as China is the global largest consumer.
Since there is expected to be an increasing demand for natural rubber while the supply
is forecast to rise less rapidly, the price of natural rubber is expected to rise in the
future. It has been forecast that the price of rubber will continue to increase for at least
10 years before it starts to plateau, and then it may fluctuate like any other commodity
(Burger and Smit, 2004).
It is inevitable, therefore, that there will be interest in expanding the area of
plantations to produce natural rubber in response to the increasing demand and the
supply shortage. As a result, some of the main rubber producing countries (Thailand,
Malaysia, and China) are encouraging new plantations (Ching, 2004). This opens up a
huge opportunity to new rubber producing countries such as Laos, with lower costs
The Economic Potential for Smallholder Rubber Production in Northern Laos
31
and available land, as the high costs of producing rubber in China and Malaysia are
significant obstacles to them competing in the global market (Jumpasut, 2004).
2.6 Government schemes supporting smallholder rubber production
In general the rubber industry in the main rubber producing countries can be
distinguished into two sectors – estates and smallholdings. Over time the relative
share of smallholdings has increased so that it is now the dominant sector. The
governments in the main rubber producing countries – Malaysia, Thailand, and
Indonesia – have launched various schemes to support the smallholder sector of the
rubber industry. Barlow and Jayasuriya (1984) identify two broad approaches to
government schemes supporting rubber cultivation – the focus and dispersal
strategies. The focus strategy involves consolidating resources in large-scale schemes
with capital- and management-intensive technology. This approach involves the use
of an input package including high-yielding bud grafted clones, fertilizers, pesticides,
legume covers, and weedicide, implemented on a large scale with centralised
management. The dispersal strategy, on the other hand, involves spreading resources
to individual small-scale farmers with less capital-intensive technology. This
approach relies on provision of inexpensive or even free improved selected seedling
materials and providing technical advice to individual smallholders.
Malaysia has pursued elements of both focus and dispersal strategies in support of
rubber smallholders. The reason Malaysia applied both strategies is because one of
the government's main policies regarding rubber production was the consolidation of
smallholdings in order to improve productivity and product quality (Balsiger et al.,
2000). The main agencies established by the Malaysian Government to support rubber
smallholdings include the Rubber Industry Smallholders Development Authority
(RISDA), the Federal Land Development Authority (FELDA), the Federal Land
Consolidation and Rehabilitation Authority (FELCRA), the Rubber Research Institute
of Malaysia (RRIM), the Malaysian Rubber Development Corporation (MARDEC),
and the Malaysian Rubber Exchange and Licensing Board (MRELB).
The first three agencies – FELDA, FELCRA, and RISDA – are concerned with rubber
production. FELDA had the major goal of promoting and assisting large-scale land
development schemes for new settlers (World Bank, 1999). In contrast, FELCRA and
The Economic Potential for Smallholder Rubber Production in Northern Laos
32
RISDA schemes were more for smallholders, but these have more recently been
consolidated into mini-estates. FELCRA was established as a result of the
government’s policy for the consolidation and rehabilitation of smallholdings in order
to improve productivity and product quality by convincing owners of small plots to
allow their land to be centrally managed. However, the effort of consolidating the
small, scattered and non-contiguous plots is often filled with difficulties including
multiple ownership, truant landlords, the view of land as a speculative asset, and the
shortage of political will to solve the problem. Difficulties in replanting are
exacerbated by the prevalence of small-scale parcels and affected by the decrease in
replanting funds, the distraction of part of these funds for replanting with oil palm,
and the removal of government top-up resources (Balsiger et al., 2000). RISDA has
broad objectives of providing assistance for replanting, development of mini-estates,
extension, provision of smallholder credit, commercial activities (marketing,
processing, product factories), and crop diversification. Benefits of all these schemes
to participating smallholders were initially quite good, with family incomes above
both poverty levels and rural standards; however, their costs were high, for instance as
far back as 1986, FELDA schemes cost US$15,000 per participating family (World
Bank, 1999).
Apart from the above agencies concerned mainly with production, RRIM was
established to invest in research and development. MARDEC was established to assist
rubber smallholders with marketing through upgrading the quality of smallholders’
rubber and participating in foreign joint-ventures in manufacturing rubber products
and related items. MRELB was established to assist in licensing the network of
private dealers who buy the rubber from the smallholders (MRRDB, 1983; Chamala,
1985). Since 1998 the Malaysian Rubber Board (MRB) was established by merging
three separate organizations, namely, the Rubber Research Institute of Malaysia
(RRIM), the Malaysian Rubber Research and Development Board (MRRDB), and the
Malaysian Rubber Exchange and Licensing Board (MRELB). The main objective of
MRB is to support the development and modernisation of the Malaysian rubber
industry in all aspects including the cultivation of rubber trees, the extraction and
processing of raw rubber, the manufacture of rubber products, and the marketing of
rubber and rubber products (MRB, 2006).
The Economic Potential for Smallholder Rubber Production in Northern Laos
33
In contrast to Malaysia, where the rubber industry was initially dominated by large
estates and then by land development schemes, most rubber plantations in Thailand
are smallholdings (Masae and Cramb, 1995). The reasons why rubber estates did not
develop in Thailand were that the Thai Government did not promote foreign
investment in this industry, there was a shortfall of estate labour, and the Government
was unwilling to encourage the required enormous influx of estate workers.
Moreover, Western capitalists thought that Thailand was not the most suitable place
for rubber plantations (Jumpasut, 1981). Hence the Thai Government has pursued a
dispersal strategy.
The major scheme for supporting rubber smallholders in Thailand is the Office of the
Rubber Replanting Aid Fund (ORRAF), which was established for supporting rubber
smallholders to replant old rubber plantations and establish new plantations with high
yielding clonal varieties, as well as encouraging rubber smallholders to take part in
the formation of cooperatives with the purpose of having more efficient production
costs, higher rubber sheet grades, and group bargaining power (IRRDB, 2006a;
Albarracin et al., 2006). Under the ORRAF program, farmers who have old rubber
plantations received a grant of about 80% of the total replanting cost, including labour
(World Bank, 1999). The extension services provided by ORRAF to rubber
smallholders are separated into two main categories – the replanting program and the
establishment of new rubber plantations. The replanting program focuses on existing
rubber plantations in the Southern provinces while the establishment of new rubber
plantations program is aimed to set up new rubber plantations in the Northern and
North-eastern provinces (Albarracin et al., 2006). The success of ORRAF can be seen
in the fast growth of rubber production. Both planted area and yield have increased
significantly. As a result, Thailand has become the number one natural rubber
exporter (World Bank, 1999).
Various organizations including processing groups, marketing groups, smallholder
cooperatives, and provincial smallholder associations have been established with
support from the Thai Government to increase rubber smallholders’ bargaining
capability as well as to improve the quality of rubber. The government has also
developed the marketing system to help rubber smallholders by introducing auction
markets, a central rubber market, and direct trading (IRRDB, 2006a). Recently, the
The Economic Potential for Smallholder Rubber Production in Northern Laos
34
Thai Government announced plans to set up a new Rubber Authority of Thailand
(RAOT), which will be created by merging and consolidating three separate
organizations including the Office of the Rubber Replanting Aid Fund (ORRAF), the
Rubber Estates Organization (REO), and the Rubber Research Institute of Thailand
(RRIT). The main objectives of RAOT are to increase Thailand’s share of the
international market by continuously replanting existing rubber areas, establishing
new rubber plantations, and achieving higher yields through improved farming
techniques; to support more research and development into the technology and
production of finished rubber products to get better quality and increase Thailand’s
share of the export market in rubber products; and to act as Thailand’s representative
in the International Rubber Conference Organisation (IRCO), which was recently
formed by Thailand, Malaysia and Indonesia to get better collaboration in stabilising
the price of rubber (IRRDB, 2006b).
In contrast to Thailand, the Indonesian Government has pursued a focus strategy,
giving support primarily for large-scale rubber plantations. As a result, most
smallholders did not receive much benefit because the focus strategy has limited the
dispersion of technologies to the rubber smallholders (Barlow and Jayasuriya, 1984).
Since the 1970s the Indonesian Government has attempted to provide some support to
rubber smallholders but the model was derived from the estate model, involving a
rubber monoculture with high use of labour and purchased inputs. Shifting cultivators
were reluctant to adopt the estate model because of the high cost of production, the
lack of credit facilities, the shortage of improved planting materials, and the
inefficiency of extension services. Moreover, the farmers preferred to practise
intercropping for food supply and income generation (Burgers and Boutin, 2001). As
a result, average smallholder rubber production is very low (Balsiger et al., 2000).
Two main types of scheme have been developed for supporting the rubber
smallholders in Indonesia. The first type of scheme was the Nucleus Estate and
Smallholders (NES) scheme. A government-owned or private estate was the nucleus
for the development of surrounding rubber smallholdings. Funding support for these
estates was provided by the government for clearing the land, building the settler
infrastructure and housing, offering employment for settlers, and establishing and
maintaining the rubber plantation. The main constraints of this type of scheme were
The Economic Potential for Smallholder Rubber Production in Northern Laos
35
the deficiency in provision of extension services, the poor organization, and the lack
of financial resources and staff. The second type of scheme was the Project
Management Unit (PMU), which focused on the development and replanting of
scattered rubber smallholdings. Under these schemes rubber smallholders were
provided the long-term credit for planting materials, chemical inputs, labour, and land
titling. These schemes also provided extension services, particularly for on-farm
processing of latex and group marketing systems. The PMU performed successfully,
but was very expensive and as a consequence the dispersion was limited (Cottrell,
1991).
Overall, the experience of the three major rubber producing countries suggests that
government assistance through the application of a dispersal strategy is better suited
to smallholders’ resource base and social and economic circumstances. In the case of
Laos, the dispersal approach is likely to be more appropriate and is in line with the
government policy of increasing income among smallholder farmers.
2.7 Conclusion
Shifting cultivation has been the dominant land use in the sloping uplands of
Southeast Asia for many centuries. Integral, rotational, long-fallow systems such as
practised in Northern Laos are considered to be sustainable. However, the
intensification sequence proposed by Boserup, with longer cropping periods and
shorter fallows, is not feasible in this environment, hence with population growth and
the improvement of infrastructure, shifting cultivators have been motivated to
incorporate cash crops, typically tree or shrub crops, in their farming system.
Myint’s theory of transition from subsistence to commercial production shows how
this typically occurs in two stages. In Stage I farmers maintain subsistence output and
use spare land and labour for the cash crop, while in Stage II, the expansion of the
cash crop involves a reduction in subsistence output and greater reliance on the
market. This enables subsistence farmers to enter global markets step by step, thus
reducing the risk they face.
Barlow’s analytical framework for plantation tree crop development takes this
analysis further, distinguishing five stages: a ‘backward economy’ (with no plantation
The Economic Potential for Smallholder Rubber Production in Northern Laos
36
crops) through to a ‘late advanced economy’ (in which plantation crops are no longer
profitable). In this framework, Laos is at the ‘early agricultural transformation’ stage,
with rapid adoption of simple labour-intensive tree crop technologies, though with the
benefit of previous technology development in other countries. To move into the ‘late
agricultural transformation’ stage will require economic growth, more extensive
government support, and the development of improved tree crop technologies.
The technological aspects of smallholder rubber production include site selection,
land preparation, planting, fertilizer application, weed and pest control, intercropping,
tapping, processing, and marketing. The expansion of smallholder rubber in Northern
Laos is based on the simple land and labour intensive technology of rubber growing,
imported from China. The technology is easily adopted by upland smallholding
farmers as it fits with their current shifting cultivation systems. In the future farmers
are likely to adopt higher level of rubber production technology in order to get higher
return from their rubber plantations.
The important issues related to the economic aspects of smallholder rubber production
are labour utilisation and start-up capital. The production of smallholder rubber
requires intensive labour use, especially during the mature period of a rubber
plantation when tapping and processing begin. Financial and credit supports are also
crucial for smallholders to invest in rubber plantations as considerable capital is
required and returns are delayed.
Global rubber production is mainly from Thailand, Indonesia, and Malaysia. The
growth in rubber consumption is being driven by a robust demand from China. As a
result the price of natural rubber has risen since 2002 after dropping for about 20
years. It has been forecast that the price of rubber will continue to increase in the next
ten years. This is helping to drive the expansion of rubber in Laos.
Rubber holdings in the main rubber producing nations include estates and
smallholders; however, smallholders dominate the rubber planted area in these
countries. Various supporting schemes for rubber development have been
implemented in these countries. Government involvement in the development of
rubber smallholders in Malaysia is larger than in Indonesia, while in Thailand the
The Economic Potential for Smallholder Rubber Production in Northern Laos
37
government had totally supported the development of rubber smallholders. In the case
of Laos, the dispersal strategy of government schemes supporting rubber cultivation
as identified by Barlow and Jayasuriya (1984) is considered to be more appropriate as
the rubber industry in Laos is currently in the early phase of development. ORRAF in
Thailand is a successful example of dispersed assistance to rubber smallholders. Some
of the Malaysian schemes like those of FELCRA and RISDA are more appropriate in
the later stages when the opportunity cost of labour is high and rubber plantations are
left untapped.
The Economic Potential for Smallholder Rubber Production in Northern Laos
38
Chapter 3
The Context of Rubber Development in Laos
3.1 Introduction
Laos is one of the poorest nations, with a GDP per capita in 2002 of US$330 (ICEM,
2003) and a ranking of 135 out of 175 countries in UNDP’s Human Development
Index (UNDP, 2003). Laos is a predominantly rural country with approximately 83%
of the population living in rural areas, of which 66% relies on subsistence agriculture
(Roder, 2001). The national economy is overwhelmingly dependent on agriculture,
which accounts for around 47% of GDP and absorbs approximately 80% of the labour
force (NSC, 2005a).
This chapter gives an overview of the physical and socio-economic characteristics of
Laos. It then discusses the farming systems practised in Laos, with particular
reference to shifting cultivation and the factors that constrain agricultural
development in the uplands. This is followed by an account of the introduction of
rubber into upland farming systems.
3.2 Physical and socio-economic environment
3.2.1 Location
Laos is a land-locked country located on the Indochina peninsula at the centre of the
Greater Mekong sub-region in Mainland Southeast Asia, between 14 and 23 degrees
north and 100 and 108 degrees east (MIC, 2000; Fig. 3.1). The total area of Laos is
236,800 km2, of which 85% lies within the watershed of the Mekong river (Roder,
2001). The distance from the north to the south is 1,700 km, the widest point is 500
km and the narrowest point is 140 km (MIC, 2000). It shares a border of 505 km with
China in the north, 1,835 km with Thailand in the west, 2,069 km with Vietnam in the
east, 236 km with Myanmar in the northwest and 535 km with Cambodia in the south
(NSC, 2005a).
The Economic Potential for Smallholder Rubber Production in Northern Laos
39
Figure 3.1: Location map of Laos (Source: GIS Unit of NAFRI, 2005)
3.2.2 Topography
Laos is preponderantly highland with around 80% of the land area classified as
mountainous or hilly (ICEM, 2003). The topography of Laos can be divided into three
distinct regions – the mountainous north, the mountainous chains, and the plains
region. The north is loomed over by mountains which have an average height of 1,500
m above sea level (Fig. 3.2). The mountainous chains, which range from the southeast
of Phuan plateau to the border of Cambodia, comprise three large plateaus: Phuan
plateau in Xiengkhuang Province, Nakai plateau in Khammuan Province, and
The Economic Potential for Smallholder Rubber Production in Northern Laos
40
Bolaven plateau in the Southern part of Laos. The plains region consists of many
small and large plains along the Mekong river. The three large plains are Vientiane
plain on the lower territory of Ngum river, Savannakhet plain on the lower territory of
Se Bang Fai and Se Bang Hieng rivers, and Champasack plain which is on the
Mekong river between the Thai and Cambodian borders. These major plains, which
contain fertile soil suited for agricultural cultivation, account for approximately one
quarter of the total land area and support more than 50% of the population (MIC,
2000).
Figure 3.2: Elevation map of Laos (Source: GIS Unit of NAFRI, 2005)
The Economic Potential for Smallholder Rubber Production in Northern Laos
41
3.2.3 Climate
Laos has a tropical climate which is dominated by the annual monsoon cycle, with the
six-month rainy season between May and October delivering around 90% of annual
rainfall. Within the six-month dry season from November to April, some months may
have no rainfall over much of the country (ICEM, 2003).
Although the weather in Laos is said to be tropical, in the mountainous north and in
the hills of the mountainous chains in the east, bordering Vietnam, it is semi-tropical.
The average temperature across the country is 25 °C and the difference between
temperatures in day and night time is 10 °C (MIC, 2000; Fig. 3.3). The temperature is
predominantly influenced by altitude in which the average temperature reduces at the
rate of approximately 0.5 °C per 100 m increase of elevation (Roder, 2001). During
the rainy season the temperature gets as high as 37 °C in Champasack Province and in
the dry season the temperature falls to as low as 8 °C in Huaphan Province (NSC,
2001).
The humidity in Laos varies according to the distinct seasons. The highest level of
humidity is registered in July and the lowest in April (NSC, 2001). The wind in Laos
blows from the northeast in the dry season and from the southwest in the rainy season.
There are around 2,300-2,400 hours of sunlight per annum in Laos (MIC, 2000).
The average annual precipitation in Laos is 1,600 mm. There is a significant
difference in rainfall among regions. Mean annual rainfall extends from less than
1,500 mm in Savannakhet Province and much of the north to more than 3,500 mm in
the Bolaven plateau (Fig. 3.4). In the eastern mountainous chains, the wet season can
last for up to ten months of the year. An amount of 270,000 million m3 of annual
rainfall flows to the Mekong river every year and contributes 35% of the total flow.
This implies a surplus of 51,500 m3 of water per capita per annum (based on the
population in 2000); the annual prevailing need of 228 m3 of water per person is only
a tiny proportion of supply (ICEM, 2003).
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Figure 3.3: Temperature map of Laos (Source: GIS Unit of NAFRI, 2005)
The Economic Potential for Smallholder Rubber Production in Northern Laos
43
Figure 3.4: Rainfall map of Laos (Source: GIS Unit of NAFRI, 2005)
The monthly average rainfall distributions for Luangprabang Province, Vientiane
Municipality, and Champasack Province are presented in Fig. 3.5. The rainfall pattern
is similar with high amount of rainfall concentrated between May and October and
less rain from November to April.
The Economic Potential for Smallholder Rubber Production in Northern Laos
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0
50
100
150
200
250
300
350
400
450
500
Janu
ary
Febr
uary
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)
Luangprabang Province Vientiane Municipality Champasack Province
Figure 3.5: Monthly mean rainfall distribution in Luangprabang Province, Vientiane
Municipality, Champasack Province from 1975-2005 (Source: NSC, 2005a)
3.2.4 Natural resources
Water, land, and forest are the main natural resources in Laos. There are many small
rivers, streams, and creeks throughout Laos, but the Mekong river (the eighth largest
in the world in terms of flow) is the main river in Laos draining around 80% of the
total land area and flowing through the country for 1,898 km from the north to the
south (ICEM, 2003). The waters of the Mekong river and its tributaries have
tremendous potential for hydropower development and irrigation capacity (Nilsson
and Svensson, 2005) and over half of the power potential in the Lower Mekong Basin
is held inside Laos (MIC, 2000). The water level in the Mekong river increases in the
rainy season from May to October and falls in the dry season from November to
April.
The forest area in Laos has been reduced significantly in recent decades (Fig. 3.6).
During the 1940s, the forest cover was estimated to be 17 million hectares or 70% of
the total land surface. In the early 1960s, it was reduced to 15 million hectares or
64%. By the late 1980s, based on aerial photos and satellite images, it was estimated
that the forest cover had dropped to 11.2 million hectares or 47%. Recently, the GTZ-
The Economic Potential for Smallholder Rubber Production in Northern Laos
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MRC project estimated that the forest cover in Laos has been reduced to about 41%,
but this estimate has not yet been confirmed (Tsechalicha and Gilmour, 2000).
Figure 3.6: Forest and land cover map of Laos (Source: GIS Unit of NAFRI, 2005)
Even though the forest coverage in Laos has been diminished considerably as a
consequence of the clearing of lowland forests for permanent agriculture, shifting
cultivation, the construction of roads and reservoirs, and the extensive logging in the
1980s (Tsechalicha and Gilmour, 2000; Nilsson and Svensson, 2005), Laos is still one
of the most heavily forested nations in Asia and one of the biologically richest
The Economic Potential for Smallholder Rubber Production in Northern Laos
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countries in the region (Raintree, 2002). Currently, there are about 11 million hectares
of natural forest in Laos, of which around 3 million hectares have been kept in reserve
as National Biodiversity Conservation Areas (NBCAs). These forests harbour very
rich biodiversity, providing the habitats of at least 10,000 species of mammals,
reptiles, amphibians, birds, fish, and vascular plants (UNDP, 2001).
The reconnaissance survey by the National Office for Forest Inventory and Planning
(NOFIP) in 1992 used satellite photo interpretation to determine the land use
categories in Laos. The results show that the land area with slopes lower than 5%, and
therefore characterized as arable land, is roughly 5.5 million hectares or 23.5% of the
total land resources (Table 3.1). However, only about 10% of Laos’ land area is suited
to intensive agriculture (ICEM, 2003).
Table 3.1: Total area of land use and vegetation types distributing on slope classes (1,000 ha)
Land use group 0-5% 6-19% 20-30% 31-59% >60% Total areaCurrent forest 2,678.8 651.1 3,795.3 3,072.0 970.8 11,167.0Potential forest 1,137.5 589.3 3,969.2 2,740.5 512.4 8,949.9Other wooded areas 515.7 70.4 339.8 323.3 195.0 1,444.2Permanent agricultural land 825.5 20.2 3.7 0.0 0.0 849.2Other non-forest land 409.8 51.1 364.4 322.5 121.6 1,269.4Total 5,567.3 1,382.2 8,472.4 6,458.3 1,799.8 23,679.7Source: NOFIP, 1992
3.2.5 Population
The population of Laos is 5.6 million with an annual growth rate of 2.7%. Based on
the total area of 236,800 km2, Laos is the least densely populated in Asia with a
density of 24 people per km2. The population density varies from 9 people per km2 in
Xaysomboun Special Zone to 177 persons per km2 in Vientiane Municipality (NSC,
2005b). More than 50% of the inhabitants have settled on the plains along the
Mekong river (ICEM, 2003), where intensive agriculture is practised (NSC, 1997).
The Lao population is ethnically diverse with 68 ethnic groups (NSC, 1997), but these
ethnic groups, based on cultural, linguistic, and geographical characteristics, are
normally divided into three broad groups: Lao Loum (Lowland Lao, who traditionally
settle in the lowlands and make a living from paddy rice cultivation), Lao Theung
(Midland Lao, who usually settle in the uplands and practise shifting cultivation) and
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Lao Soung (Highland Lao, who commonly settle in the highlands and also practise
shifting cultivation). This categorization is commonly used when referring to the Lao
ethnic groups by government and non-government organizations, and individuals at
international, national and regional levels (Roder et al., 2001). Of the total population,
the Lao Loum comprise 66%, the Lao Theung 24%, and the Lao Soung 10% (NSC,
2005b). Buddhists account for the majority of the population (65%), the others being
Animist (33%), and Christian (1%) (NSC, 1997).
3.2.6 Transportation infrastructure According to the Population and Housing Census in 2005, about 66.4% of the total
villages in Laos could be accessed by road (NSC, 2005b). However, the road
infrastructure is in poor condition and in the hilly areas in particular there is a lack of
road maintenance. In the plains along the Mekong river and within the provincial
towns there are paved roads, but in the mountainous areas almost all roads are
unpaved. In regions without road access, river transportation is used. There are many
rivers for which boat transportation is possible, but due to the small population there
are only five rivers where a public transportation service is provided: the Mekong,
Tha, Ou, Ngum, and Sekong rivers (Yokoyama, 2003; Fig. 3.7).
3.2.7 Administration
Laos is a unitary country. The state administration in Laos is divided into four levels:
central, provincial, district, and village. Administratively, Laos is separated into three
regions – the Northern, Central, and Southern Regions – including 16 provinces and
two equivalent provinces (one special zone and one municipality), 141 districts, and
10,552 villages. The Northern Region is made up of seven provinces – Phongsaly,
Luang Namtha, Bokeo, Oudomxay, Luang Prabang, Huanphanh, and Xayaboury. The
Central Region comprises five provinces – Xiengkhuang, Vientiane, Bolikhamxay,
Khammuane, and Savannakhet, and two equivalent provinces of Xaysomboun Special
Zone and Vientiane Municipality. The Southern Region covers four provinces of
Saravane, Sekong, Champasak, and Attapeu (NSC, 2005a; Fig. 3.1).
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Figure 3.7: Transportation routes map of Laos (Source: GIS Unit of NAFRI, 2005)
3.2.8 Tenure system and land/forest allocation
Prior to 1975, the ultimate ownership of land belonged to the King and typically
customary rights were applied. After the establishment of the Lao PDR in 1975, land
rights were transferred to the people, represented by the State. The State encouraged
people to cultivate their land cooperatively (Ducourtieux et al., 2005).
The great changes of land tenure in Laos have occurred since 1991 when the Lao
Government adopted a new constitution incorporating the principle that all land
The Economic Potential for Smallholder Rubber Production in Northern Laos
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belongs to the State, but villages, organizations, and individuals have the rights to use
land (ICEM, 2003). Thereafter, a more formal system of land tenure was instituted in
1993 through the government program of Land Use Planning and Land Allocation
(LUP/LA). This is the basis for the zonation of land and forest and providing farm
families with agricultural land use rights and village communities with access to
forest products (Helberg, 2003). The LUP/LA program has been developed with the
principal objectives of stabilising shifting cultivation and facilitating sustainable use
of agricultural land and forest (ICEM, 2003). Under LUP/LA, the size of the
allocation is based on each household’s available labour and resources (Thongphanh,
2004), but the allocation of agricultural land to a household is limited to up to one
hectare for rice, three hectares for cash crops, three hectares for orchards, and 15
hectares of deforested land or grass land for pasture (Yokoyama, 2003). In order to
retain tenure, the land has to be under cultivation or intensive development within
three years or the land will be returned to the state (Thongphanh, 2004). So far,
LUP/LA has been undertaken in 6,200 villages (50% of all villages in the country),
allocating land to 379,000 households (60% of all agricultural households), and
covering over eight million hectares of land (Thomas, 2003). Traditional land tenure
systems in shifting cultivation areas are still practised in villages where LUP/LA has
not yet been undertaken. Under such systems tenure was conventionally obtained
through the cultivation of land which was not already claimed by others. The
ownership rights over land remained during the fallow periods between cultivation,
but it was possible to hand over cultivation rights to others with the permission of the
previous owners (Sodarak, 2005).
Basically there are now two types of formal land tenure in Laos: temporary land use
rights and permanent land use rights. The temporary land use rights are in the form of
Temporary Land Use Certificates (TLUC) issued by a district authority to individuals
or organizations for the use of the land, but these cannot be transferred, leased, or
pledged as collateral. The permanent land use rights are evidenced by a Land Title
(LT) and can be obtained after the land has been managed and used under three years’
temporary tenure without breaking the land-use regulations. The land under a Land
Title can be transferred, leased, or pledged as collateral (Tsechalicha and Gilmour,
2000).
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3.3 Farming systems in Laos
3.3.1 Overview
Farming in Laos is traditionally subsistence-based, with the practice of rainfed and
irrigated cultivation in the flatlands and shifting cultivation on sloping lands. Besides
the production of the staple food, vegetables are also grown in small gardens and
livestock is raised to fulfil the daily needs. Lao farming is generally considered as
involving low use of inputs and extensive use of land, and is relatively susceptible to
pests and diseases, as well as adverse weather (Yamada et al., 2004).
The most significant feature of the farming systems in Laos is their diversity. They
can be categorised into three major systems of cultivation associated with the
lowlands, the sloping uplands, and the plateau environments. Table 3.2 presents three
predominant farming systems subcategorized based on crop combinations and the
typical livelihood problems related with each of these categories (GoL, 1998). In
lowland cultivation, rainfed and irrigated farming systems are practised. In the sloping
uplands, people rely heavily on shifting cultivation. In the plateau environment, cash
crops and fruit trees are extensively grown, replacing shifting cultivation.
A noticeable characteristic of the farming systems is the way that home gardens exist
in nearly all categories – only rudimentary in the areas where forests still have the
capability to supply the miscellaneous needs of shifting cultivation households and,
by contrast, highly developed in the more densely inhabited areas where forests have
vanished and home gardens have acted as a replacement for them in the household
economy. Livestock raising in different forms is also found in every system of
cultivation, as well as paddy rice, which would be practised much more extensively in
the uplands if irrigable paddy land was available for cultivation (UNDP, 2001).
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Table 3.2: Three main farming systems in Laos Farming systems Characteristics Livelihood problems
Lowland Lowland rainfed farming system
Single cropping of traditional glutinous paddy rice varieties (80%), 2-4 varieties of different maturation. Yield 2.5-3 tons/ha (official estimates) to 1.1 tons/ha (Lao-IRRI survey 1989-90). Buffalo and cattle for draft, cash income and occasional meat, free ranging during the dry season, confined in the rainy season. Pigs, poultry, fish and NTFPs important for food and cash income.
Rice shortages of 1-4 months and low household income.
Lowland irrigated farming system
Double cropping of traditional photo-period sensitive paddy rice varieties, with higher use of improved varieties, fertilizer, etc for the 2nd crop which is mainly for cash. Wet season yields 1-3 tons, dry season 2-4 tons/ha. Dry season vegetables grown in areas near urban centres. Relatively few livestock due to shortage of grazing land, buffalo use for ploughing, smallstock for meat and cash income.
Better off than unirrigated farms, but lack cash, especially for investment.
Upland Upland rainfed farming system
Shifting cultivation of rice (intercropped with cucumber, chilli, taro, sesame, etc.) on sloping land with fallow periods of 2-10 years with yields of 1.4-1.5 t/ha. Maize for livestock is 2nd most important crop. Other crops: sweet potato, ginger, cassava, groundnut, soybean, cotton and sugarcane, papaya, coconut, mango tamarind, banana and citrus (more fruit tree species at lower altitudes). Melon & watermelon grown as dry season crop in some areas. Pigs, cattle and poultry are the principal livestock. High dependence on NTFPs for income to purchase rice, etc. Adoption of paddy cultivation is progressing rapidly where possible.
Rice shortage of 3-4 months, low income, poor health, high infant mortality, low life expectancy, lack of access to roads, communication, education & social services.
Highland farming system
Similar to upland rainfed farming system, but with high altitude crops such as opium, sometimes intercropped with lettuce and mustard, and temperate fruit trees such as plum, peach & local apple.
As above.
Plateau Plateau farming system
Coffee, tea and cardamom have largely replaced shifting cultivation, supplemented by fruit trees and vegetables in home gardens. Poor cash crop quality and yields due to poor management, use of poor varieties, no fertilizer, lack of shade, weed problems and poor harvesting and drying technique. Cattle important as savings enterprise, pigs & poultry also kept.
Households have adopted a commercial strategy and have no problems with food security, but household income still only moderate.
Source: GoL, 1998
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It has been said that farming in the lowland areas along the Mekong corridor
(including plateau areas) is moving into the period of transformation in which market
forces are commencing to bring agricultural inputs through commercial channels and
some of the farm products are consumed by households and the rest are sold in the
markets. In the uplands, on the other hand, farming is more closely connected to the
period of subsistence cultivation and farm households are said to be in poverty. The
major factors behind this difference are highlighted in Table 3.3 (GoL, 2000).
Table 3.3: Contrasting conditions in the lowlands and uplands Lowland conditions Upland conditions Good road linkage and access Adequate agricultural technology flows from regional markets
Rural savings mobilization and agricultural lending mechanisms beginning to function
Domestic and regional markets interaction Market information and price signals operate in many areas
Monetized rural economy Free access for local and foreign entrepreneurs
Agro-geographic conditions favouring flat land farming systems
Poor road and non-existent road linkage Very limited or non-existent agricultural technology flows
Limited or non-existent rural savings mobilization and credit
Little or no domestic and regional markets interaction
No market information mechanisms Basically non-monetized rural economy with predominantly subsistence agriculture and barter transactions
Free access for local and foreign entrepreneurs, but little incentive because of non-functioning markets in most areas
Agro-geography in high relief requires balanced sloping land farming systems and integrated environmental management
Source: GoL, 2000
3.3.2 Shifting cultivation
Shifting cultivation, known as hai in Lao and as ‘slash-and-burn cultivation’ or
‘swidden agriculture’ in English, is the dominant production system in the upland and
mountain environment of Laos, involving more than 150,000 households or around
25% of the rural inhabitants. This subsistence cultivation may account for up to 80%
of the land allocated for agriculture if the entire area of fallow fields is taken into
account (Roder, 2001).
The practice of shifting cultivation in Laos, as in other countries where shifting
cultivation is practised, principally involves clearing the fields, leaving the vegetation
to dry, and then burning it for temporary cultivation (Gansberghe, 2005a). Practised in
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Laos for centuries, shifting cultivation has been the main source of food production
with upland rice being the principal crop grown in the uplands. It is subsistence-based
farming which provides food, fibre, medicine and other needs from crops, fallow and
forested land (De Rouw, 2005). The Lao shifting cultivation system is not only related
to crop production, but animal husbandry, fishing, hunting and collecting non-timber
forest products (NTFPs) are also integral components. These activities are closely
interrelated with the crop/fallow rotation. For example, fallow land is important for
livestock grazing and cultivated plots must be protected from domestic animals by
fencing. The fallow area is also a main source of biodiversity and longer fallow
periods generally allow the gathering of more NTFPs (Gansberghe, 2005b).
Shifting cultivation systems can be categorised in many ways depending on the
criteria used, but ‘rotational’ and ‘pioneering’ shifting cultivation are usually
distinguished in Laos. In rotational shifting cultivation, the most common type in
Laos, shifting cultivators maintain their villages in the same site but rotate their
cultivated plots within a crop/fallow cycle. In pioneering shifting cultivation, shifting
cultivators move their whole village site after many years of cultivation in the same
place, resulting in the gradual depletion of forest. Shifting cultivation in Laos is also
sometimes classified into ‘integral’ and ‘partial’ cultivation systems. In integral
systems shifting cultivation is the main part of the household’s livelihood, while in
partial systems shifting cultivation is practised as one minor component of the
household’s livelihood; for instance, lowland farmers also do some shifting
cultivation to supplement their needs (Gansberghe, 2005a).
Shifting cultivation in the past was recognized as the best land use alternative for the
rural inhabitants in the mountainous regions of Laos because of low population
densities, low incomes, little opportunity for trade, and limited access to inputs
(Roder, 2001). However, the combined effects of population growth, growing market
opportunities, natural resource depreciation, and international awareness of
environmental impacts have forced farmers to shorten the fallow periods. As a result,
widespread problems of weed invasion, soil erosion, and declining yields are
occurring (De Rouw, 2005). Therefore, the ‘reduction’ of shifting cultivation has
become a policy priority for the Lao Government (Tsechalicha and Gilmour, 2000).
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3.3.3 Limitations of upland farming development
The development of farming in the uplands of Laos is hampered by a number of
factors. The current low ratio of population to land might look like a conducive
circumstance for cultivation; however, much of the land is judged as being unsuited to
agricultural development. The availability of suitable agricultural land is very
unevenly distributed by region. Most of the land along the flat plains of the Mekong
river is found in the Central and Southern parts, while in the mountainous region in
the north there is noticeably less suitable arable land for cultivation, with only 6% of
the area classified as under 20% slope and 50% categorized as having a slope of 30%
or more (Raintree, 2002). This mountainous Northern territory is mainly under
shifting cultivation (ICEM, 2003).
In addition to the limitation of potentially arable land for agriculture, the existence of
millions of items of remaining Unexploded Ordnance (UXO) scattered around half of
the land surface throughout the country deters the thorough usage of existing
agricultural land area and constrains the expansion of new agricultural areas. This
UXO left over from the Indochina wars of 1964-1975 still injures or kills more than
200 people annually (UNDP, 2001).
Moreover, the agricultural population density of Laos is continuing to increase with
the growth of population. The number of people per thousand hectares of cultivated
crop area in Laos is around 3,500, compared to the figure of 2,600 in Thailand and
well over 10,000 in Vietnam. However, with Laos’ present annual population growth
rate of approximately 2.5%, the agricultural population density will double over the
next 25 years (Raintree, 2002). This will make the current situation of limited arable
land for agriculture much worse.
Marketing is one of the most significant elements accelerating the development of
upland cultivation; however, the present circumstances of Lao upland production
systems are limited by a number of factors. Upland farmers have limited marketing
experience and little understanding of markets. Furthermore, the market distribution
system has not kept pace with the increased production. The lack of traders and the
The Economic Potential for Smallholder Rubber Production in Northern Laos
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inadequate facilities for warehouses, transportation, and processing are constraining
the market function from operating efficiently (Douangsavanh, 2004).
3.3.4 Government policies on improved upland farming in Laos
As Laos is distinguished by a sharply contrasting rural economy consisting of the flat
land along the Mekong corridor and the sloping land in the upland areas (GoL, 2000),
the Government envisages solving the imbalance between the two sectors by
transferring resources and expanding the development process in the sloping land
areas while maintaining the growth of a market-driven economy in the flat land along
the Mekong corridor. The key elements of the strategy for the uplands and lowlands
prepared by the Ministry of Agriculture and Forests (MAF) are shown in Table 3.4
(GoL, 2003).
Table 3.4: Strategy for the uplands and lowlands Sloping/Uplands Lowlands/Mekong corridor Plan land-use zoning based on biophysical (slope and land capability) and socio-economic parameters
Accelerate participatory land allocation and land use occupancy entitlement
Diversify farming systems and agro-forestry development through adaptive research, trials, and demonstrations of farmers’ fields
Promote community management of natural resources
Sustainable land-use management with soil erosion control, afforestation, plantation forestry and conservation management
Strengthen demand driven extension programmes
Expand and intensify small-scale community managed irrigation schemes
Develop and expand rural savings and credit systems: target credit to support technology adaptation by the poor
Strengthen the capacity and legal framework of State-Owned Commercial Banks (SOCBs) in commercial banking transactions
Open community market access by upgrading and expanding feeder roads and market information
Improve and diversify farming systems with increased and intensified cash crop, livestock, and fisheries production
Expand and intensify value added processing by promoting local and foreign investment
Develop market research and information systems and regional market links between producers and wholesale and retail buyers throughout the region
Develop internationally accepted product grades and standards
Rehabilitate, expand and intensify irrigation schemes with community based management
Strengthen and expand rural credit facilities through free competition and market determined interest rates
Strengthen rural and agribusiness lending by State-Owned Commercial Banks (SOCBs) and private commercial banks
Source: GoL, 2003
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In the past two decades, the improvement of upland farming has become the foremost
national goal of the Lao Government. The loss of forest due to shifting cultivation in
the uplands has been a continuing concern (Pravongviengkham, 1998). Therefore, the
Government of Laos has issued the national policy of stabilising shifting cultivation
by offering alternative sustainable farming systems for the people living in the upland
and mountainous areas. As stated in the Government’s Strategic Vision for the
Agricultural Sector (MAF, 1999), the government aims to transform the existing
harmful system of shifting cultivation to more ecologically stable cultivation systems
with proper land management by villages and individuals. The key to this policy is
finding suitable alternatives to shifting cultivation. One of the possible alternative
approaches to support this transformation is the introduction of perennial cash crops
such as rubber to increase farmers’ income.
3.4 The development of rubber in Laos
3.4.1 Introduction of rubber into Lao upland farming systems
Because of geographical constraints, subsistence agriculture based on shifting
cultivation is the main faming practice and source of food production in the
mountainous upland area of Laos (Yokoyama, 2003). Recently it has been observed
that upland agriculture is in transition from traditional to intensified commercialized
production in some areas of the country, especially in the case of rubber cultivation
(Bouahom, 2005).
Rubber has recently been introduced into upland areas of Laos, with relatively small
areas having been planted and some areas already in production. In fact, rubber was
first introduced into Laos in 1930, with the first rubber plantation established in
Champasack Province by French planters during the colonial era. Then in 1995 rubber
was again planted in Bachiangchalernsouk District of Champasack Province over an
area of 50 hectares by the Development of Agriculture, Forestry, and Industry (DAFI)
state company. Between 1994 and 1996, the Hmong village of Hadyao in
Laungnamtha Province established rubber over 342 hectares in the form of
smallholdings (Manivong et al., 2003). Since then, the rubber area in Laos has
increased moderately, but at a more rapid pace since 2003.
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57
The rubber situation in Laos is changing so quickly that the Ministry of Agriculture
and Forestry is not confident in estimating the area planted, given the sharp increase
in planted area in many parts of the country (Alton et al., 2005). Many individuals,
private sector entities (both domestic and foreign), and state sector entities are
interested in investment in rubber planting in response to high rubber prices and the
perceived demand from China, but the newly planted areas are not yet officially
recorded. The available data recorded by the Forestry Research Centre (FRC) of the
National Agriculture and Forestry Research Institute (NAFRI) are presented in Table
3.5. It can be observed from the table that in the Northern provinces (Borkeo,
Luangnamtha, Oudomxay, and Luangprabang), many areas of rubber are possessed
by individual farmers, but there are also planted areas owned by private companies
(both local and foreign) and state companies. Rubber is usually planted on sloping
land. In contrast, in the Central and Southern provinces (Vientiane Municipality,
Khammuan, Saravane, and Champsack), almost all areas of rubber are owned by
private companies (both local and foreign) and state companies. Only a few rubber
holdings are owned by individual smallholders. Most of the land under rubber in the
Central and Southern provinces is lowland, though some is planted on gently sloping
land.
Both local and foreign investors, especially from China, Vietnam, and Thailand, have
expressed interest in investing in rubber plantations throughout Laos by seeking land
for concessions and other arrangements (Alton et al., 2005). Recently the Lao
Government signed a contract with Vietnamese investors to plant rubber in the
Southern Region of Laos with an expected area of over 10,000 hectares, and in the
near future a rubber processing factory is to be established (Pongkeo, 2004). Table 3.6
shows the tentative list of investors in rubber plantations in Laos with the areas to be
planted. It is also interesting to note that foreign investors have different target areas
based on their location. The Chinese are proposing to invest in the Northern provinces
as China shares its border with these provinces. On the other hand, the Vietnamese
and Thai are focusing on the Central and Southern provinces for the same reason.
The Economic Potential for Smallholder Rubber Production in Northern Laos
58
Table 3.5: Officially estimated rubber area in Laos, 2005
Locations Year planted
Area(ha)
Year tapped Investors Seedlings Seedlings
sources Borkeo Province
2003 120 Private Company
RRIM600, GT1
China Huaysai District
2004 100 State-Private Company
GT1, 772, 774
China
Luangnamtha Province Namtha District
1994-1995
342 2002 Individual farmers
RRIM600, GT1
China Hadyao Village
2003-2005
296 Individual farmers
RRIM600, GT1
China
District town area 2004 4 Lao-SINO Company
RRIM600, GT1, PR107, 772, 774
China
Sing District Phabadnoi Village 1999 12 Individual
farmers GT1 China
Kor Village 2004 21 Individual farmers
RRIM600, GT1
China
Phabadyai Village 2005 30 Zenlee Company and individual farmers
GT1 China
Long District 2004 2 Individual
farmers GT1 China District town area
2005 344 Company and individual farmers
GT1 China
2004 7 Individual farmers
GT1 China Xiangkok area
2005 2 Individual farmers
GT1 China
Viangphoukha District
2005 298 Zenhua Company, Imp-Exp Company and individual farmers
GT1 China
Nalae District Phouviang Village 2003 21 Individual
farmers RRIM600, GT1
China
District town area 2005 7 Individual farmers
GT1 China
Source: FRC, 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
59
Table 3.5: Officially estimated rubber area in Laos, 2005 (Continue)
Locations Year planted
Area(ha)
Year tapped Investors Seedlings Seedlings
sources Oudomxay Province Xay District 2004 2 Lao-SINO
Company GT1, 772, 774
China
Houn District 2004 879 Chianfong Company
GT1, 772, 774
China
2004 250 Individual farmers
GT1, 772, 774
China Namor District
2004 20 LSUAFRP GT1, 772 LuangnamthaLuangprabang Province Phonexay District 2005 11.14 LSUAFRP GT1, 772 LuangnamthaNan District 2005 70 Individual
farmers GT1, 772 Luangnamtha
Chomphet District 2004 30 Individual farmers
GT1, 772 Luangnamtha
2004 370 Individual farmers
GT1, 772 LuangnamthaNumbark District
2005 25 State Company
GT1, 772 Luangnamtha
PakOu District 2005 10 Individual farmers
GT1, 772 Luangnamtha
XiangNgeun District 2005 1 LSUAFRP GT1, 772 Luangnamtha (experiment)
Pakseuang District 2005 0.2 Kaengben Teak Research Station
GT1, 772 Luangnamtha (experiment)
Vientiane Municipality Sungthong District 1996 114 2004 Individual
farmers supported by GTZ projects
RRIM600 Thailand
Sikhottabong District 2003 16.6 Private Company
RRIM600 Thailand
Khammuan Province Hinboun District 1996 30 2003 Private
Company RRIM600 Thailand
Thakhaek District 1995 80 2003 Mountainous Development Company
RRIM600 Thailand and Vietnam
Saravane Province LaoNgam District 2005 1000 Private
Company na Vietnam
Champasack Province Pakse and Bachiangchalernsouk District
1930 16 French na na
Bachiangchalernsouk District
1995 50 2003 DAFI Company
RRIM600 Thailand
Note: na means data not available Source: FRC, 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
60
Table 3.6: Investors in rubber in Laos
Locations Area (ha) Amount Investors Comments
Phongsaly Province (Bounneua District, Yo Village)
1,000 US$ 0.9 million
Agricultural Development Company
PPCO signed agreement with Tai Fong Agriculture Development Company to plant 1,000 ha for 400 households in Yo Village
Luangnamtha Province na na Lao-SINO Company, Chinese and others
Planting of seedling nurseries in both Namtha and Sing Districts
Luangprabang Province na na Chinese Signed with Luangprabang Province
Luangnamtha, Oudomxay, Borkeo Provinces
10,000 US$ 3.7 million
Chinese government and private sectors
Not yet signed; also research station and production facilities
Oudomxay Province (Namor District)
1,300 US$ 1 million
China Chiang Fong company
Plans 6,300 ha in 2004-08
Vientiane, Borikhamxay Provinces
16,000 US$ 0.5 million
Thai rubber Latex Group
Survey in Vientiane and Borikhamxay; 2,000 workers
Savannakhet Province 11,000 na Thai Hua Rubber Company
Discussions with the government of Savannakhet
Saravane, Sekong, Attapeua Provinces
na na Vietnamese company
Signing contracts
Saravane, Champasack, Sekong Provinces
10,000 US$ 22 million
Vietnam General Rubber Corporation (VGRC)
Rubber factory will be established (18,000 tons/year)
Champasack Province 10,000 US$ 30 million
Vietnam-Laos Rubber Joint-Stock Company (subsidiary of VGRC)
2,000 ha in 2004, 400 local labourers and 100 Vietnamese workers
Champasack Province 10,000 na Quang Tri Rubber Company (subsidiary of VGRC)
2,000 trees in 2005
Champasack Province (Bachiangchalernsouk and Xaysomboun District)
10,000 na Rubber Company from Ho Chi Minh
Signed with the province
Champasack Province (Bachiangchalernsouk District)
3,000 na Agriculture Company of Dak Lak
Also produce organic fertilizer in plant at km 46 in Pathoumphon District; produce fertilizer for rubber
Note: na means data not available Source: Alton et al., 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
61
3.4.2 Government support for the development of rubber
Government support for rubber research has been essential for the development of the
rubber industry in the main rubber producing countries. Regarding the technical and
research support for the development of rubber cultivation in Laos, in the near future
the Ministry of Agriculture and Forestry plans to set up the Rubber Research Centre
in Luangnamtha Province and two rubber research stations, one in Oudomxay
Province and another in Borkeo Province (FRC, 2005).
To foresee the possible expansion of rubber in Laos, the GIS Unit of NAFRI, under
the Ministry of Agriculture and Forestry, undertook mapping of potential areas for
rubber throughout Laos by overlaying the existing data including elevation, slope,
temperature, rainfall, and present land use (Table 3.7 and Fig. 3.8). In addition, crop
requirements for rubber as presented in the FAO Optimum Crop Requirements (Land
Evaluation Part III) were considered. The total area of suitable land for rubber was
estimated to be around 240,000 hectares. It should be noted that the findings were
based large scale analysis. The results need to be tested with field research at a
smaller scale.
Table 3.7: Potential rubber areas in Laos Provinces Areas (ha)Phongsaly 757Luangnamtha 916Oudomxay 6,483Luangprabang 2,933Huaphanh 476Bokeo 6,615Xiengkhuang 1,817Xayabury 30,288Vientiane 27,598Xaysomboun Special Zone 678Borikhamxay 44,745Vientiane Municipality 16,374Khammuane 10,506Savannakhet 46,046Saravane 19,724Sekong 6,386Champasack 9,505Attapeu 9,002Total 240,849
Source: GIS Unit of NAFRI, 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
62
Figure 3.8: Potential rubber areas in Laos (Source: GIS Unit of NAFRI, 2005)
3.5 Conclusion
Mountainous landscape, limitations of potentially arable land for agriculture and
market opportunity, and increase in population pressure have combined to make
poverty widespread in the uplands of Laos. In addition, traditionally subsistence-
based shifting cultivation, the main production system practised in the upland areas,
faces increasing pressure and is considered no longer sustainable. Therefore, the
The Economic Potential for Smallholder Rubber Production in Northern Laos
63
Government’s top priorities are poverty alleviation and stabilising shifting cultivation
by offering alternative sustainable farming systems for the people living in the upland
and mountainous areas. The key to this policy is finding suitable alternatives to
shifting cultivation. One of the possible alternative approaches to support this
transformation is the introduction of perennial cash crops such as rubber to increase
farmers’ income. However, although rubber has been recently introduced into upland
areas of Laos, with relatively small areas having been planted and even less already in
production, there is little information currently available on the potential economic
returns to smallholder producers as a basis for the promotion of the crop by the
Government. The remainder of the thesis focuses on addressing this issue.
The Economic Potential for Smallholder Rubber Production in Northern Laos
64
Chapter 4
The Study Area
4.1 Introduction
As shown in Chapter 3, the earliest and most extensive adoption of rubber planting
among smallholders has been in Northern Laos. In order to evaluate the economics of
smallholder rubber production, the village of Hadyao in Namtha District of
Luangnamtha Province was selected for in-depth study as Hadyao was the first village
in Northern Laos to plant and tap rubber. This chapter provides an overview of
Luangnamtha Province and Hadyao Village to give an understanding of the context in
which rubber planting has occurred. A general account is given of rubber planting in
Hadyao. The results of the household survey in the study village are presented in the
next chapter.
4.2 Luangnamtha Province
The province of Luangnamtha is located in the Northern Region of Laos lying
between 20°30’ and 21°30’ north and 100°30’ and 102°00’ east (Fig. 4.1). It shares a
border of 140 km with China in the north, 130 km with Myanmar in the west, 230 km
with Oudomxay Province in the east and 100 km with Bokeo Province in the
southwest (PPCO, 2005). The province is divided into five administrative districts,
namely Namtha, Sing, Long, Viengphoukha, and Nalae (PPCO, 2005). Luangnamtha
Province is a centre for commerce between China, Laos, and Thailand.
The province has 380 villages, consisting of 26,113 households and 145,231
inhabitants. The population density is about 16 persons per km2 and the population
growth rate is 2.5% per annum (NSC, 2005a). Approximately 90% of the population
is involved in agricultural production, mainly rice cultivation; the remainder is
engaged in commerce, government officials, or others (PPCO, 2005). The population
comprises 39 ethnic minority groups – the largest number in the country – including
Hmong, Akha, Mien, Samtao, Thai Daeng, Thai Lu, Thai Neua, Thai Khao, Thai
Kalom, Khamu, Lamet, Lao Loum, Shan and Yunnanese. As mmentioned in Chapter
3, these ethnic groups are commonly classified into three major categories: Lao Loum
The Economic Potential for Smallholder Rubber Production in Northern Laos
65
(Lowland Lao) who speak Tai-Kadai languages, Lao Theung (Midland Lao) speaking
Mon-Khmer languages, and Lao Soung (Highland Lao) who belong to the Tibeto-
Burman and Hmong-Mien language groups (Yamada et al., 2004). Lao Loum usually
reside in the plains and along the rivers, cultivating paddy rice. Lao Theung and Lao
Soung normally inhabit highlands and practise shifting cultivation of upland rice on
less fertile soil (Restorp, 2000). Of the provincial population, 38.1% is Lao Loum,
26.2% is Lao Theung, and 35.7% is Lao Soung (PPCO, 2005). The majority of
inhabitants in the province live in poor conditions, especially in the remote
mountainous areas with little or no access to public services. According to the
Population and Housing Census (2005), about 67.4% of the villages could be accessed
by road, but only 20.3% had electricity, only 6.3% had piped water, only 6.6% had
their own health centre. Most (88.4%) had a primary school located in the area (NSC,
2005a).
Figure 4.1: Location map of Luangnamtha Province (Source: GIS Unit of NAFRI, 2005)
The climate in Luangnamtha Province is humid tropical with an average temperature
of 25 ºC. The annual precipitation in the province is around 1,500 mm (MSLP, 2005)
(Fig. 4.2). The year is classified into two seasons: dry season and rainy season. The
dry season runs from November to April, and the wet season from May to October.
The dry season includes a cool period from November until February and a hot period
starting in March and extending into the wet season. Approximately 90% of the
The Economic Potential for Smallholder Rubber Production in Northern Laos
66
annual rainfall is accounted for by the rainy season. The rain usually starts in June and
ends in November with the peak of rain in July and August. The rainfall is very
important for cultivation and is a concern to farmers because recently it has become
less predictable and unevenly distributed.
-
50
100
150
200
250
300
350
Janu
ary
Febr
uary
Mar
ch
Apr
il
May
June
July
Aug
ust
Sep
tem
ber
Oct
ober
Nov
embe
r
Dec
embe
r
Month
Rain
fall
(mm
)
-
5
10
15
20
25
30
Tem
pera
ture
(C)
Average Rainfall Average Temperature
Figure 4.2: Monthly average rainfall distribution and temperature in Luangnamtha
Province from 1994-2004 (Source: MSLP, 2005)
The total land area of Luangnamtha Province is 932,500 hectares or 9,325 km2, of
which 85% is mountainous and only 15% is lowland (PPCO, 2005). The province is
rich in forest resources (Fig. 4.3). The Provincial Agriculture and Forestry Office
reported that the forest covers 59% of the total area, of which 12.5% was National
Biodiversity Conservation Area, 7.3% was Provincial Biodiversity Conservation
Area, and 5.6% was District Biodiversity Conservation Area. The remaining forests
include upland mixed forest (26.6%) and reed or young forest after slash and burn
cultivation (48%). The non-forested land, which constitutes 41% of the land area,
includes wood and shrub land, grass land, agricultural land including shifting
cultivation, and non-agricultural land (PAFO, 2000).
The Economic Potential for Smallholder Rubber Production in Northern Laos
67
Figure 4.3: Forest and land use map of Luangnamtha Province
(Source: GIS Unit of NAFRI, 2005)
Land use in Luangnamtha is still rather extensive owing to the relatively low
population density. Increasing population, however, leads to more intensive forms of
land use. Most of the hill tribes (84% of villages) practise shifting cultivation, which
is the principal upland farming system. Apart from shifting cultivation, lowland paddy
and highland farming are also practised in Luangnamtha. Table 4.1 shows the major
farming systems practised in Luangnamtha. However, it should be noted that these
farming systems rarely appear in their pure forms. They are very often found in
combination with, for instance, animal raising and home gardens (Helberg, 2003).
The Economic Potential for Smallholder Rubber Production in Northern Laos
68
Table 4.1: Farming systems in Luangnamtha Province Farming systems Description Market orientation
Lowland rainfed system
Cultivation of glutinous rice varieties during rainy season only. Rice yields usually higher than upland rice. Buffalo and cattle for draught, free ranging of animals during dry season. Home gardens with vegetables and fruit trees are maintained. Pigs, poultry, fish and NTFPs are important sources for food and income. Limited extent of this system in Luangnamtha.
Rather low. Some fruits, vegetables, animals and NTFPs are sold in local market
Lowland irrigated system
Double cropping of improved rice varieties possible but not very common. Dry season vegetables grown near town markets. Use of off-farm inputs such as fertilizer and pesticides during dry season. Few livestock due to shortage of grazing land, buffaloes used for ploughing. Fishponds are common. Limited uses of NTFPs. Farmers are better of than in the other systems. Very limited extent of this system in Luangnamtha.
Medium. More products sold in local market
Upland rainfed farming
Shifting cultivation of rice, often intercropped with cucumber, taro, sesame and chilli on sloping land with fallow periods of 2-7 years. Farm size 0.5 to 1.5 ha. Other crops include maize, cassava, groundnut, cotton, sugarcane. Cattle, pigs and poultry are principal livestock. Adoption of paddy where possible. Upland households depend heavily on NTFPs for food, construction material and income. Households are very poor. Most common farming system in Luangnamtha.
Medium to high. Livestock and NTFPs sold in local market.
Highland farming
Similar to upland farming, with the exception that high altitude crops, especially opium poppy are grown. In some areas temperate fruit trees such as plum, peach and apple can be found. Opium is the most important cash crop but households are poor as well. Very common in Luangnamtha.
Medium to high with emphasis on opium.
Source: Helberg, 2003
Rubber has been introduced into the farming systems of Luangnamtha Province since
1994. The total planted area of rubber in 2004 was 4,581 hectares, involving 34
villages and 1,559 households. The province has planned to increase the rubber area
by 2,000 hectares in the next five years (PAFO, 2005). Local government considers
rubber as being a solution to the problems of upland farmers by playing a key role in
eliminating shifting cultivation and eradicating poverty.
4.3 Hadyao Village
Hadyao Village is situated in Namtha District of Luangnamtha Province (Fig. 4.4).
This village is around two km from the district centre and near the main road to the
Chinese border via the Boten international checkpoint in Sing District. This road
The Economic Potential for Smallholder Rubber Production in Northern Laos
69
plays a key role as a commercial route between the Northern Region of Laos,
particularly Laungnamtha Province, and China.
Figure 4.4: Location map of Hadyao Village in Namtha District of Luangnamtha
Province (Source: GIS Unit of NAFRI, 2005)
The village was established in 1975, the year the Lao People’s Democratic Republic
(Lao PDR) was founded. The first residents were Lao Soung (Hmong) from Paktha
District in Oudomxay Province (now under the administration of Bokeo Province),
but in the beginning they settled in the mountains above the present Hadyao Village,
practising shifting cultivation and opium growing. Two years later they moved down
to the present village site in search of lowland paddy areas. In the first year there were
55 households with a population of 587. During the first five years of settlement, from
1975 to 1980, nearly 150 people, mainly children, died of malaria and lack of
The Economic Potential for Smallholder Rubber Production in Northern Laos
70
adaptation to the lowland environment. Many people returned to live in the
mountains, leaving only 17 households. Then, in 1985, with the encouragement of the
district authority, people who had returned to live in the mountains started to move
down to Hadyao again and reconstruct the village, build a school, cooperative, and a
state commercial shop, practising group paddy cultivation, and managing livestock
grazing areas (Fig. 4.5).
Figure 4.5: Hadyao Village in Namtha District of Luangnamtha Province
(Source: Author’s photo, August, 2005)
Later, in 1994, 14 households of Hmong refugees from China migrated to
Luangnamtha Province and requested to be allowed to live in Hadyao because they
had relatives there. After the resettlement, these people introduced rubber cultivation
to the village because they had over 15 years of experience working in a rubber
collective in Yunnan Province of China. The village headman and authorities went to
Yunnan to explore the possibility of planting rubber and found that rubber seemed the
most promising alternative to shifting cultivation. They made a proposal to the
provincial authority and asked for loans for rubber cultivation. The province agreed
The Economic Potential for Smallholder Rubber Production in Northern Laos
71
and supported them with some loans. After a few years of rubber planting many
households faced the problem of having to maintain their rubber holding while
cultivating rice for their subsistence because there were no returns from rubber yet. In
addition, they had to face the difficulty of a heavy frost in 1999 killing numbers of
rubber trees. Rubber trees were first tapped in 2002. Twenty three households started
to tap, producing 22 tonnes of ‘tub-lump’ rubber (i.e., coagulated latex) sold to China.
Afterwards, many villagers expanded their rubber holdings, planting more rubber in
their shifting cultivation areas so the area of shifting cultivation has been substantially
reduced.
Currently, there are 102 households in the village (Table 4.2), just over the national
average figure of 91 households (NSC, 2005a). The total population is 964, consisting
of 500 males and 464 females. All the villagers belong to the Hmong ethnic group.
According to the wealth ranking made by the village headman and village authorities,
around 21% of households are classified as wealthy, 52% as middle, and 27% as poor.
The main occupation of Hadyao villagers is agriculture, but there are some who are
government officials, teachers, village traders, and non-agricultural labourers. The
level of education in Hadyao varies from primary school to technical college, but the
majority of the population did not attend school or have only finished the primary
school level.
Table 4.2: Number of households in Hadyao Village Wealth ranking Number % Wealthy 21 20.6 Middle 53 52.0 Poor 28 27.4 Total 102 100.0 Source: Hadyao Village, 2005
The Land Use Planning and Land Allocation (LUP/LA) process was undertaken in
Hadyao in 1997. The land use zoning defined by the district LUP/LA team is
presented in Table 4.3 and Fig. 4.6. The total area of the village is about 4,604
hectares. The land area is classified into six types of land use – conservation forest,
protection forest, agricultural land (both upland area and lowland area), production
forest, grazing area, and residential area.
The Economic Potential for Smallholder Rubber Production in Northern Laos
72
Table 4.3: Types of land use in Hadyao Village Land use types Area (ha) %Conservation forest 700 15.2Protection forest 1,300 28.3Agricultural land 1,700 36.9Production (plantation) forest 700 15.2Grazing area 200 4.3Residential area 4 0.1Total 4,604 100.0
Source: Hadyao Village, 2005
Figure 4.6: Resource map of Hadyao Village (Source: Hadyao Village, 2005)
The limited lowland areas are favourable for wet rice cultivation. The upland areas are
mainly used for shifting cultivation of rice; some areas are planted with cash crops
such as corn, cucumber, cassava, chillies, and other cash crops. The rubber planted
since 1994 is located in the area of agricultural land which in the past was used for
shifting cultivation, hence it competes with upland rice and other upland crops. Since
land allocation, shifting cultivation has been practised with a three-year fallow. This
results in a very low yield of upland crops due to poor soil fertility and weed
competition.
The Economic Potential for Smallholder Rubber Production in Northern Laos
73
The area used for upland rice under shifting cultivation is difficult to determine since
the village declares that it will try to reduce the area of shifting cultivation by planting
rubber, following the government policy of eradicating shifting cultivation. Therefore,
there is no official record of the area of shifting cultivation. Another reason, according
to the Provincial Finance Office, is that now if rice is grown within a rubber holding it
is not counted as rice area under shifting cultivation but as rubber area. However, it is
clear that, since the introduction of rubber into the village, the area of shifting
cultivation has decreased because villagers planted rubber in their old shifting
cultivation areas. Yet shifting cultivation is still practised within the village area, as
well as in other villages, to provide household food security, especially during the
immature phase of rubber cultivation.
Apart from crop production, livestock is also an important source of food and income
for Hadyao villagers. Most farmers raise poultry for household consumption and as an
additional source of cash income. Farmers who have access to lowland areas own
buffaloes or cows, mainly for land preparation for rice or cash crop cultivation. Large
animals (buffaloes, cows, and goats) are raised in grazing areas in other villages.
Hadyao officials asked the province to allocate land outside the village for grazing
areas because animals are not allowed to be raised in the village while rubber planting
is underway.
Besides agricultural activities, some farmers in Hadyao have other livelihood
activities, such as hand weaving, running a retail shop, and petty trading within and
outside the village.
4.4 Rubber production in Hadyao Village
Hadyao Village became well-known in the Northern Region of Laos as the first
village to produce rubber. In fact, Hadyao was not the only village in Luangnamtha
Province to establish rubber during the mid-1990s but most of the rubber trees in
other villages were killed by the frost in 1999, whereas Hadyao was not affected to
the same degree.
The Economic Potential for Smallholder Rubber Production in Northern Laos
74
During the first period of rubber establishment between 1994 and 1996, a total of
154,000 rubber trees were planted, occupying 342 hectares. Unfortunately, the heavy
frost in 1999 killed 34,000 rubber trees or about 75 hectares. The remaining 120,000
rubber trees (266 ha) are the ones that are currently being tapped (Fig. 4.7). Since the
success of rubber cultivation and the first tapping in 2002, there has been a
considerable increase in the number of trees planted. In 2003 and 2004 76,500 trees or
about 170 hectares of rubber were planted, and in 2005 another 56,800 rubber trees or
about 126 hectares were established. All of these rubber trees have been planted
within the 1,700 hectares of village agricultural land shown in Table 4.3. In the
immediate future the village has no plan to expand the area of rubber, just to replant
the dead trees. The village leaders are concerned villagers will not be able to take care
of many more rubber trees.
Figure 4.7: A rubber smallholding in Hadyao Village (Source: Author’s photo, August,
2005)
In summary, from the beginning of the establishment of rubber in 1994 until 2005
around 253,300 rubber trees have been planted on an area of 562 hectares. This
represents 12% of village land and 33% of agricultural land. Of these trees, about
The Economic Potential for Smallholder Rubber Production in Northern Laos
75
120,000 mature trees on an area of 266 hectares are currently being tapped and about
133,300 immature trees (296 ha) have been recently planted and are expected to
commence tapping in 2011 or 2012 (Table 4.4).
Table 4.4: Area under rubber in Hadyao Village Rubber planted Year Tree Ha
Households Remarks
1994 53,000 117 60 The area of hectare is calculated based on 450 trees = 1 ha
1995 81,000 180 60 1996 20,000 44 60 1999 -34,000 -75 Died of frost in December 1999 Sub-total 120,000 266 Being tapped 2003+2004 76,500 170 89 Some of these are replanted trees for those
killed in 1999 2005 56,800 126 89 Total 253,300 562 Source: Hadyao Village, 2005
Credit support was crucial for the establishment of rubber in Hadyao since it required
considerable capital to invest and the villagers had little cash income at that time. As
Table 4.5 shows, the first loan of 12.9 million Kip in 1994 was provided from
provincial funds, with an interest rate of 2% and a 7-year repayment period. The funds
were distributed to the households in the form of rubber seedlings and barbed wire for
fencing to the value of 1-3 million Kip for each household. Then in 1995 the amount
of 10 million Kip was advanced by the Provincial Agriculture and Forestry Office
(PAFO) with the same interest rate and repayment period. In addition, 47 million Kip
was provided by the Agricultural Promotion Bank (APB) with the same interest rate
and repayment period. Later, in 2003 281 million Kip were again provided by APB at
a 7% interest rate for a period of 10 years. It should be noted that the bank increased
the rate and repayment period on seeing the possibility for rubber farmers to pay back
the loan once they had started tapping. In all cases no interest payments were required
until the end of the loan period. It was reported that all loans were in fact repaid.
Approximately 266 hectares (or 120,000 trees) of rubber, planted between 1994 and
1996, is currently in the tappable period. The first harvest of rubber began in 2002
with the production of 22 tonnes. The production of rubber has increased from 95
tonnes in 2003 to 150 tonnes in 2004. Rubber from Hadyao is sold to China in the
form of tub-lump. The total revenue from rubber for the village was 77,000 Yuan in
The Economic Potential for Smallholder Rubber Production in Northern Laos
76
2002, 427,500 Yuan in 2003, and 825,000 Yuan in 2004 (Table 4.6). Chinese traders
come to buy tub-lump rubber at the village usually once a month (Fig. 4.8). In the first
two years of selling, rubber was bought using a grading system. In 2004 rubber was
bought in one grade only. The Chinese traders told farmers the price of tub-lump
rubber because they were the only source of price information. However, the price
offered has increased in line with the world price. Table 4.7 presents the amount of
rubber sold to China each month in 2004.
Table 4.5: Loans for rubber production in Hadyao Village Rubber
seedlings Rubber
areaLoan
amountYear Household no. ha Kip
Source Interest rate
Years to repayment
1994 60 42,450 94.33 12,873,340 Province 2% 71995 33 15,194 33.76 10,000,000 PAFO 2% 71995 63 97,168 215.93 47,000,000 APB 2% 72003 64 76,711 115.00 281,375,948 APB 7% 10Source: Hadyao Village, 2005
Table 4.6: Production and sale of rubber in Hadyao Village Households
tapping Trees
tappedArea
tappedProduction
(Sale) Price Total revenueYear
No. No. Ha Kg Yuan*/Kg Yuan2002 23 120,000 266 22,000 3.5 77,0002003 67 120,000 266 95,000 4.5 427,5002004 67 120,000 266 150,000 5.5 825,000Note: * 1 Yuan = 1,300 Kip, August 2005 Source: Hadyao Village, 2005
Table 4.7: Sale of rubber in 2004 in Hadyao Village by month Date Sale (Kg)April 24, 2004 2,936 May 24, 2004 1,027 June 2, 2004 6,103 June 16, 2004 7,766 July 15, 2004 5,432 September 4, 2004 43,657 October 6, 2004 29,517 November 24, 2004 19,416 December 17, 2004 33,936 Total 149,790
Source: Hadyao Village, 2005
The Economic Potential for Smallholder Rubber Production in Northern Laos
77
Figure 4.8: The sale of tub-lump rubber on market day in Hadyao Village
(Source: Author’s photo, August, 2005)
4.5 Conclusion
The study area for this thesis was Luangnamtha Province of the Northern Region of
Laos. The study village of Hadyao in Namtha District of Luangnamtha Province
became well-known throughout the country as the first village to tap rubber. Hadyao
is a Hmong village located on acid upland soils in mountainous terrain. Shifting
cultivation of upland rice for subsistence was the main agricultural practice in the
village. Recently, the most extensive and rapid change in the village has been the
expansion of smallholder rubber due to strong demand for rubber from China and the
introduction of rubber planting skills in the 1990s by Hmong migrants from China.
Rubber was planted on sloping land by individual smallholders, taking up around a
third of the land available for shifting cultivation, thus reducing the fallow period to
around three years. Tapping commenced in 2002, making it the first rubber-producing
village in Laos. Since then, rubber production and income have been expanding
rapidly in Hadyao. Because of the profitability of rubber with current high prices,
farmers are becoming commercial farmers, with upland rice beginning to decline in
The Economic Potential for Smallholder Rubber Production in Northern Laos
78
importance. This suggests the village is in transition from subsistence to commercial
agriculture, conforming to Barlow’s stage of ‘early agricultural transformation’. The
next chapter presents the results of a household survey in Hadyao to explore this
transformation in more detail.
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79
Chapter 5
Resources, Rice and Rubber in the Study Village
5.1 Introduction
In this chapter an account is given of the farming resources, activities, and outputs of
the farm households in the study village of Hadyao, with the main focus on
smallholder rubber production. The results are based mainly on the questionnaire
survey of 95 farm households, but relevant information from other sources is also
included. The chapter first presents an overview of how the data were collected and
analysed. Then it considers household resources, including human resources, land,
and livestock. The use of these resources to undertake the two main farming activities
– rice and rubber – is analysed in the next two sections. A final section summarises
the findings.
Throughout the chapter attention is given to a comparison between households of
different wealth status. Of the 95 surveyed households, 22 were classified as wealthy,
52 as average, and 21 as poor. This classification was undertaken by the Hadyao
Village authorities themselves. Almost every village authority in the country classifies
its households into these three categories for the purpose of development planning.
Different villages may use different criteria. For Hadyao the classification criteria
used were the number of rubber trees tapped, the land area, rice self-sufficiency,
livestock, labour force, and permanency of house. In the past, almost all households in
Hadyao (as with other villages in the northern part of Laos) were classified in the
average or poor status; only a few were categorized as wealthy. After the start of
rubber tapping in 2002, nearly one-third of the total households in the village were
classified as wealthy and over half of them were categorized as average. This in itself
indicates the dramatic change that the adoption of rubber planting has brought about.
5.2 Data collection and analysis
Both qualitative and quantitative data were used to understand the general
circumstances of the study village and of rubber production in that village. Data were
gathered during the two periods of fieldwork in the study village through key
The Economic Potential for Smallholder Rubber Production in Northern Laos
80
informant interviews, group interviews, direct observation, and a questionnaire survey
of farm-households. The software programs used for entering and analysing the
quantitative data were Microsoft Excel and the Statistical Package for Social
Scientists (SPSS).
For me to be able to carry out the research in the village, an official permission letter
from the Ministry of Agriculture and Forestry was issued to the Provincial Agriculture
and Forestry Office (PAFO) of Luangnamtha Province. Then PAFO of Luangnamtha
Province informed the District Agriculture and Forestry Office (DAFO) of Namtha
District. Finally, DAFO of Namtha District informed the village authorities of Hadyao
that there would be a research project undertaken in the village and asked the village
authorities to facilitate my activities.
The first period of fieldwork occurred over a week from 1-7 July 2005. At this time
village information was obtained from the village authorities through a focus group
interview in order to understand the general picture of the study village. The set of
questions used for the focus group interview is presented in Appendix 1. The first part
of the interview was about the general situation of the village. The second part
obtained information about rubber plantations. The third part considered the materials
used for rubber production. The final part focused on the labour used for rubber
production. At the same time field observations were also carried out. Household
interviews with three rubber farmers were also undertaken to pre-test the
questionnaire to be used in the household survey.
The second period of fieldwork was carried out for the whole month of August 2005.
It was decided to interview all farm households registered in the village, given the
small total (102). However, seven households were unable to be interviewed. Two
newly married couples had just left their parents to live in their own houses but they
still cultivated rice and tapped rubber trees with their parents. Two households had
just moved into the village from Vientiane Province. The head of another household
had left to build a house in Oudomxay Province. His wife was at home with young
children and did not know how to answer the questions as most of the work on their
new rubber plantation was carried out by the husband. The head of another household
with two young children was unable to be interviewed due to illness. Another
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81
household consisted of one man without any land was said to be mentally ill and
survived by getting food from his relatives. Hence 95 households were successfully
interviewed. These were all the rubber farmers in Hadyao. A pre-tested and modified
questionnaire in the Lao language was used; an English version is reproduced in
Appendix 2. The first part of the questionnaire was about general household
information including household members, land resources, livestock, rice production,
and income sources. The second part sought information about rubber production
including plantation areas, sources of capital, technical aspects, problems, marketing,
changes in practice of shifting cultivation, future plans, and outputs from rubber
production. Interviews were undertaken in the Lao language, in some cases assisted
by local language interpreters. Most of the interviewing was conducted by myself;
some was done by a district agricultural and forestry official as a research assistant.
Most of the interviews were in the respondent’s house as this also provided a chance
to observe living conditions; however, farm visits were also carried out.
5.3 Household resources
5.3.1 Human resources
On average one household had 7.5 members, but the size ranged from 2 to 18. Nearly
51% of the households had 5 to 8 members (Table 5.1). Smaller households consisted
of young parents (or a single parent) and small children, whereas large households
comprised up to four generations living together. This is a general characteristic of
residence patterns of the Hmong ethnic group, that a proportion of households are
stem families, in which a nuclear family (a husband/wife couple and their children) is
joined by elderly parents who cannot take care of themselves or by a young married
pair who have not yet built their own house (LSUAFRP, 2003).
Table 5.1: Distribution of household size in Hadyao
Households Household membersNumber %
2 1 1.13-4 15 15.85-6 18 18.97-8 30 31.69-10 18 18.911-12 7 7.4>12 6 6.3Total 95 100.0
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Usually the senior male is classified as the head of household, but in the case of a
single female parent, she is the head of household. The mean age of household head
in Hadyao was 46 years, but the range was from 18 to 80 years. The education level
of household heads averaged 3.4 years of schooling, but ranged from no schooling to
14 years of schooling.
Generally, a household comprises a primary and secondary labour force. The primary
labour force is made up of adult, full-time workers. The secondary labour force
comprises part-time workers – either older children (aged 10 to 15) who go to school
and help the family farm during the weekend or elderly members of the family who
work a few hours a day or have the responsibility of taking care of their
grandchildren. Larger households tend to have a larger labour force, while single-
parent households with young children would, in general, have only one worker. To
reflect the real situation, the full-time equivalent household labour force was used
throughout the analysis and is referred to as the ‘household labour force’. This was
estimated as the number of full-time workers plus the number of part-time workers,
valued as one-third of full-time workers. In the survey households, the size of the
labour force varied considerably from 0.7 to 6.7, averaging about 3 full-time
equivalent workers (Fig. 5.1). All households had one or more full-time farm worker,
but 10 households (11.5%) had one member (in one case, two members) who worked
off-farm as a government official or local trader.
Demographic characteristics of the three wealth categories of households are
presented in Table 5.2. A One-way ANOVA was conducted for each of these
characteristics, indicating that there were statistically significant differences at the
p<0.05 level in the mean numbers of household members, full-time equivalent
workers, and on-farm workers, but not statistically significant differences in the mean
age of household head, education of household age, or number of off-farm workers.
Post-hoc comparisons using the Tukey HSD test indicated that the mean number of
household members, full-time equivalent workers, and on-farm workers were
significantly higher for wealthy households than for poor households, whereas
average households did not differ from either group. Hence the size of the household
The Economic Potential for Smallholder Rubber Production in Northern Laos
83
labour force appears to be an important factor in achieving a higher wealth status in
Hadyao.
Figure 5.1: The distribution of full-time equivalent workers per household in Hadyao
Table 5.2: Demographic characteristics of households in Hadyao by wealth status Wealth status
Demographic characteristics Wealthy(n=22)
Average (n=52)
Poor(n=21)
Mean age of household head (years) 49.5 45.9 41.9Mean education of household head (years) 2.8 3.7 3.1Mean number of household members (persons) 8.9 7.6 5.9Mean number of full-time equivalent workers (persons) 3.5 2.9 2.6Mean number of on-farm workers (persons) 4.7 4.1 3.2Mean number of off-farm workers (persons) 1.3 1.0 1.0
5.3.2 Land
Lao farmers who practised shifting cultivation conventionally used their usufruct
rights to utilize the forest land nearby their villages. However, as explained in Chapter
The Economic Potential for Smallholder Rubber Production in Northern Laos
84
3, this is now subject to the government-sponsored Land Use Planning and Land
Allocation (LUP/LA) process, which is being implemented throughout the country
(Gansberghe, 2005a). In Hadyao LUP/LA was completed in 1997 and each household
was provided with a standard three plots of shifting cultivation land, though
households with more members or workers could ask the village for additional plots.
Rubber was introduced to the village in 1994 and farmers mostly planted rubber trees
on their shifting cultivation lands. With the increasing interest in expanding rubber
planting since 2002, many farmers searched for additional shifting cultivation land in
the village to plant rubber or grow upland rice when all their allocated shifting
cultivation plots were planted with rubber. However, the remaining lands were likely
to be located far from the village settlement, requiring a journey on foot of 1-2 hours.
Therefore, some villagers with kinship or other connections to villages that were
located nearby and accessible by road (such as Numdeang, Numchang, Numdee,
Numhuay, Huaydam, Huaynalee, Huaytongching, Bumphiang, Thongdee, Nadeang,
Keovlome, Thongchai, Hongleuay, and Tarvan) obtained land through these
connections. Mostly this did not involve cash payment but sharing the product with
the land owners. The system of sharing the product with the land owners in the case
of growing rice is about one-third of rice production was given to the land owner. In
the case of planting rubber trees, there have not been any agreements on how the
outputs would be divided as rubber trees planted outside the village were not in the
tapping period yet.
The average number of cultivated plots held by a household was 3.5, but the range
was from 1 to 8 plots. Over 90% of the households had between 2 and 5 plots (Table
5.3). The total cultivated area averaged 5.1 ha, ranging from 0.4 to 20.9 ha. Most
households were clustered around the mean; 85% of households had from 1.9 to 7.7
ha; only 10% of households had farms of more than 10 ha (Fig. 5.2).
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85
Table 5.3: Distribution of land holdings in Hadyao Households Number of plots
Number %1 2 2.12 22 23.23 27 28.44 21 22.15 17 17.96 3 3.27 2 2.18 1 1.1Total 95 100.0
Figure 5.2: The distribution of cultivated land per household in Hadyao
Two thirds of the households had all their plots of cultivated land within the village,
while 28.4% had at least one plot inside the village and one another plot in another
village. About 5.6% only had plots outside the village (Table 5.4). This is an
indication of the increasing pressure on the available land; some households had to
find land outside their village to plant rice or rubber. About 80% of households had
The Economic Potential for Smallholder Rubber Production in Northern Laos
86
land use rights to all the plots they cultivated, while 20% had borrowed or rented at
least one plot of land. Of the former group, 67.1% only had plots inside the village,
while 6.6% had land only in another village and 26.3% had land in both locations.
The latter group of households had to borrow or rent lands because their lands in the
village were already planted with rubber. Almost all of them had obtained permission
to access other villages’ shifting cultivation lands by sharing the product with the
landholders. Of the households that borrowed or rented at least one plot of land,
63.2% had land plots only inside the village and 36.8% had land plots both inside and
outside the village.
Table 5.4: Tenure status and location of land cultivated by Hadyao households Location of cultivated land
Land tenure status Only inside village
Only outside village Both Total
Land use rights to all plots 51 5 20 76At least one plot borrowed or rented 12 0 7 19
Total households 63 5 27 95
Household land resources of the three wealth categories of households in Hadyao are
presented in Table 5.5. A One-way ANOVA showed statistically significant
differences between wealth categories at the p<0.001 level in the mean number of
plots of cultivated land and the total area of cultivated land. Post-hoc comparisons
using the Tukey HSD test indicated that the mean number of plots of cultivated land
for poor households was significantly lower than average and wealthy households, but
the latter two categories did not differ significantly. The mean area of cultivated land
differed significantly among all three categories. Chi-square tests showed no
significant differences at the p<0.05 level in the proportion of households that
cultivated land only inside the village, only outside the village, or both inside and
outside the village. Neither were there significant differences at the p<0.05 level in
the proportion of households that had land use rights to all plots of cultivated land nor
that borrowed or rented at least one plot of cultivated land. However, 91% of wealthy
households had use rights to all their plots and 41% had access to at least one plot
outside the village, whereas only 71% of poor households had rights to all their plots
and only 14% could access land outside the village. In general, then, poor households
had more limited access to land.
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Table 5.5: Household land resources in Hadyao by wealth status Wealth status
Household characteristics related to cultivated land Wealthy(n=22)
Average (n=52)
Poor(n=21)
Mean number of plots of cultivated land (plots) 4.3 3.6 2.7Mean area of cultivated land (ha) 7.3 5.0 2.8Households cultivating land only inside village (%) 59.1 61.5 85.7Households cultivating land only outside village (%) 9.1 5.8 0.0Households cultivating land both in and outside village (%) 31.8 32.7 14.3Households with use rights to all cultivated plots (%) 90.9 78.8 71.4Households borrowing or renting at least one plot (%) 9.1 21.2 28.6
Since the land allocated to a household was mainly based on household labour
availability, households with a larger labour force were likely to cultivate more plots
and a larger area of land than households with a smaller labour force. The relationship
between access to land (the number of plots and the total area of cultivated land) and
the full-time equivalent household labour force was investigated using Pearson
product-moment correlation coefficients. There was a moderate positive correlation
between the number of plots and the household labour force (r=0.36, n=95,
p<0.0005). On average, households with 0.7 workers cultivated 1 plot of land and
households with 6.7 workers cultivated 5 plots of land. There was also a moderate
positive correlation between the area of cultivated land and the household labour force
(r=0.30, n=95, p<0.005). The mean area of cultivated land was 1.1 ha for a household
with 0.7 workers and 9.3 ha for households with 6.7 workers. This provides
confirmation of the basis for land allocation and indicates that wealthy households
were better resourced in terms of both labour and land.
5.3.3 Livestock
Livestock is an essential element of household livelihoods among Lao upland farmers.
Livestock are raised for household consumption, cash income, and saving/investment
(Gansberghe, 2005b). Poultry are raised for household consumption and cash income.
Goats and pigs are raised for the purpose of household savings; they are rarely
consumed except on special occasions or ceremonies but are sold in case of shortage
of food or cash. Buffaloes and cattle are raised as draught animals and as household
savings; however, not many are raised as large animals require much capital
(LSUAFRP, 2003).
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In Hadyao, buffaloes and cattle are herded communally and grazed freely in village
grazing areas specially allocated to avoid damage to cultivated crops. Goats are left to
graze freely in small groups in fallow land and in the forest. The number of goats
raised is limited to avoid damage to crops, for which the owner is held responsible.
Pigs are allowed to roam freely and search for food around the house, although
penning is practised by some households. Chickens, ducks and turkeys search for food
around the house during the day and are penned during the night-time. Since rubber
has been planted, the village has introduced a rule that large livestock (buffaloes,
cattle, and goats) are not allowed near rubber holdings but only in the village grazing
area.
About 82% of the households in Hadyao raised at least one type of livestock. The
types of animal raised in the village were buffaloes, cattle, goats, pigs, chickens,
ducks, and turkeys (Table 5.6). The most common types of livestock raised were pigs
and chickens; around 60% of households raised each of these types of livestock,
averaging 4 pigs and 14 chickens. About 24% of households raised buffaloes
(averaging 2.4 head) and 39%, cattle (averaging 4.5 head). The least common types of
livestock were turkeys and goats.
Table 5.6: Ownership of livestock in Hadyao Households Number of livestock Type of
livestock Number % Mean Min. Max. Buffalo 23 24.2 2.4 1 5 Cattle 37 38.9 4.5 1 22 Goat 2 2.1 1.5 1 2 Pig 59 62.1 3.9 1 25 Chicken 56 58.9 13.8 1 80 Duck 14 14.7 7.4 1 17 Turkey 5 5.3 8.8 4 15
Table 5.7 shows livestock ownership by the three wealth categories of households. A
One-way ANOVA showed there were statistically significant differences at the
p<0.05 level between wealth categories in the mean numbers of buffaloes, cattle, pigs,
and chickens, but not statistically significant differences in the mean numbers of
goats, ducks, and turkeys. Post-hoc comparisons using the Tukey HSD test indicated
that the mean numbers of those types of livestock reaching statistical significance for
poor households were significantly different from wealthy households, but average
The Economic Potential for Smallholder Rubber Production in Northern Laos
89
households did not differ significantly from either wealthy or poor households. Chi-
square tests showed significant differences at the p<0.05 level only in the proportion
of each wealth category that raised cattle, pigs, and chickens. In contrast, there were
not significant differences at the p<0.05 level in the proportion of each wealth
category that raised buffaloes, goats, ducks, and turkeys. In general, this indicated that
wealthy households were better able to invest in large livestock than poor households.
Table 5.7: Data on livestock raising in Hadyao by wealth status Wealth status
Variable Wealthy(n=22)
Average(n=52)
Poor (n=21)
Mean number of buffaloes 3.5 1.8 1.5 Mean number of cattle 7.6 2.6 1.3 Mean number of goats 0 1.5 0 Mean number of pigs 5.9 3.3 1.8 Mean number of chickens 20.9 13.0 2.4 Mean number of ducks 12.0 6.1 6.2 Mean number of turkeys 10.3 6.5 0 Households raising buffaloes (%) 36.4 25.0 9.5 Households raising cattle (%) 68.2 36.5 14.3 Households raising goats (%) 0.0 3.8 0.0 Households raising pigs (%) 81.8 61.5 42.9 Households raising chickens (%) 68.2 65.4 33.3 Households raising ducks (%) 13.6 13.5 19.0 Households raising turkeys (%) 13.6 3.8 0.0
5.4 Rice production
Rice cultivation is the main livelihood activity of villagers in Hadyao. Farmers
normally grow upland rice for subsistence on sloping land by shifting cultivation;
however, some farmers who can access flat land grow rainfed lowland rice as well.
Traditionally, land preparation for upland rice occurs between March and May, with
planting in June, weeding between July and September, and harvesting in October or
November. Weeding is done two or three times. Farmers considered weeding to be
one of the most difficult tasks for upland rice production. Lowland rice cultivation
generally begins at the start of the wet season (May or June), with land preparation
consisting of two passes of ploughing and one harrowing. Land preparation is mostly
done using buffalo for draught power. Rice is mainly established by transplanting.
The harvesting period is normally between October and November.
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In 2004, 86% of the households in Hadyao cultivated upland rice and/or lowland rice.
This means about 14% of households did not grow rice at all. About 64% of rice-
growing households grew only upland rice, while 23% grew only lowland rice.
Around 13% grew both upland and lowland rice (Table 5.8). Moreover, the land
available for upland rice cultivation has been decreasing since it has been used for
planting rubber trees. Hence many farmers grew upland rice not only in their village
area but in another village as well. Around 44% of rice-growing households grew rice
only in their village area, while 45% grew rice only in another village. Around 11%
grew rice both in their village area and in another village. Of exclusively lowland
rice-growing households, 5% grew rice only in their village while 90% grew rice only
in another village and 5% grew rice in both their village and another village. Of
exclusively upland rice-growing households, 67% grew rice only in their village while
31% grew rice only in another village and 2% grew rice in both their village and
another village. Of households growing both upland and lowland rice, none grew rice
only in their village while 36% grew rice only in another village and 64% grew rice in
both their village and another village.
Table 5.8: Number of rice growing households by location and type of rice cultivation Location of rice cultivation Type of rice
cultivation Only inside village
Only outside village Both
Total
Only upland 35 16 1 52Only lowland 1 17 1 19Both 0 4 7 11Total 36 37 9 82
As well as growing rice in shifting cultivation plots or lowland plots, in 2004 about
39% of rice-growing households intercropped rice in their rubber plantation and in
22% of cases intercropping was the only mode of rice cultivation (Table 5.9). Of
households who only practised rice monocropping, 32% grew rice only in their
village while 64% grew rice only in another village and 4% grew rice in both their
village and another village. Of households who only intercropped rice in their rubber
plantation, 89% grew rice only in their village, while 11% grew rice in another village
and none grew rice in both their village and another village. Of households practising
both rice monocropping and intercropping, 29% grew rice only in their village while
The Economic Potential for Smallholder Rubber Production in Northern Laos
91
21% grew rice only in another village and 50% grew rice in both their village and
another village.
Table 5.9: Number of rice growing households by rice cropping patterns and location of rice cultivation
Location of rice cultivation Rice cropping patterns Only inside
villageOnly outside
village Both Total
Only rice monocrop 16 32 2 50Only intercropped with rubber 16 2 0 18Both 4 3 7 14Total 36 37 9 82
Most of the labour inputs for upland rice cultivation are provided by the family, but
there is also some exchange of labour, especially for planting and harvesting. Land
preparation and weeding are usually done by household workers. Data on labour
inputs for upland rice cultivation in Hadyao Village were not collected during the
survey, but the information on labour requirements for upland rice cultivation
collected by the Lao-IRRI Project gives a reasonable guide since the study area was in
northern Laos in similar circumstances to Hadyao. The typical labour requirements
for upland rice cultivation are almost 300 person-days per ha, with about half of this
labour requirement for weeding alone (Table 5.10). The maximum cultivated area per
active labour unit is 0.6 to 0.7 ha, with an average of about 0.5 ha (Lao-IRRI, 1992).
Table 5.10: Labour requirement for upland rice production Activities Person-days/ha % Slashing 33 11.2 Burning 2 0.7 Fencing 2 0.7 Re-burning 14 4.7 Weeding before planting 13 4.4 Planting 29 9.9 Weeding 146 49.7 Harvesting/Threshing 33 11.2 Transport 22 7.5 Total 294 100.0 Source: Lao-IRRI, 1992
Among those who grew rice in 2004, 73% cultivated one plot of rice and 27%
cultivated two plots. The average area of rice cultivated was 1.0 ha. Though the range
was from 0.2 to 5.0 ha, most households (72%) cultivated between 0.5 and 1.5 ha
(Fig. 5.3).
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92
Figure 5.3: The distribution of rice area per household in Hadyao
Of the households who grew rice in 2004, rice production both from upland
(including rice intercropped with rubber) and lowland cultivation averaged 1,730 kg,
but varied considerably from 90 to 10,000 kg. The average yield of upland rice was
1.4 t/ha, of intercropped rice, 1.0 t/ha, and of lowland rice, 4.0 t/ha. The figure of 1.4
t/ha corresponds well with the figure of about 1.5 t/ha previously reported for upland
rice (Lao-IRRI, 2000). As expected, the mean yield of intercropped rice in Hadyao
was lower than in open fields under shifting cultivation.
Rice self-sufficiency in 2004 was dependent on the previous year’s production. The
average period of rice self-sufficiency in Hadyao was 8 months. About 14% of
households were short of rice for the whole year, whereas 30% had enough rice for
household consumption for the whole year (Table 5.11). Rice-deficit households
obtained additional rice by purchasing and borrowing. About 14% purchased all their
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93
rice, 80% bought additional rice to supplement their own rice production, and 6%
borrowed rice from other villagers. Among rice self-sufficient households, only 4
households reported selling any rice.
Table 5.11: Rice self-sufficiency among Hadyao households
Months of rice self-sufficiency Number %
0 13 13.7 1-3 5 5.3 4-6 16 16.8 7-9 21 22.1 10-11 12 12.6 12 28 29.5 Total 95 100.0
One-way ANOVA was conducted to test the significance of differences in the mean
months of rice self-sufficiency among households who grew rice on only upland (8.5
months), only lowland (9.3 months), and both upland and lowland (9.7 months); and
among households who grew rice only inside the village (8.4 months), only outside
the village (9.1 months), and both inside and outside the village (9.6 months). There
were no statistically significant differences at the p<0.10 level among these groups of
households.
Since rubber was introduced to Hadyao, the practice of upland rice cultivation had
changed significantly. In terms of area, nearly 75% of the households reported that
they cultivated a smaller area of upland rice after they had planted rubber trees, about
22% said that their area of upland rice was unchanged, while 3% said that they had
increased their rice area. In terms of yield, around 72% reported that the yield of
upland rice was lower than the yield they could get before the cultivation of rubber,
about 24% said that the yield remained the same, while 4% reported a higher yield. In
terms of labour used, about 78% said that the labour used for shifting cultivation had
decreased since they started to plant rubber, 22% said that it remained the same, and
none reported an increase. The reasons given for the decrease in the cultivation of
upland rice were that there was less land available for growing rice in the village so
they had to grow rice on the same plot for many years, resulting in lower yields.
Moreover, they did not have enough time and labour, especially for those who had
started tapping. However, the practice of lowland rice cultivation (for those
households that owned paddy land) remained unchanged.
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Key statistics relating to rice production for the three wealth categories of households
are presented in Table 5.12. One-way ANOVA showed statistically significant
differences at the p<0.10 level in the mean rice production and mean number of
months of rice self-sufficiency between wealth categories, but no statistically
significant differences in the mean number of rice plots and the mean cultivated area
between wealth categories. Post-hoc comparisons using the Tukey HSD test indicated
that the mean rice production for poor households were significantly different from
wealthy households, but average households did not differ significantly from either
wealthy or poor households. Similarly, the mean rice self-sufficiency months for poor
households were significantly different from wealthy households, but average
households did not differ significantly from either wealthy or poor households. The
chi-square test showed significant differences at the p<0.05 level between wealth
categories in the proportion growing only upland rice, only lowland rice, and both
upland and lowland rice. Likewise, there were significant differences at the p<0.05
level in the proportion growing rice only inside the village, only outside the village,
and both inside and outside the village. On average, wealthy households produced
more rice, were self-sufficient for more months, were less dependent on upland rice,
and were less dependent on village land than average or poor households.
Table 5.12: Rice production statistics by wealth status Wealth status
Household characteristics related to rice production Wealthy(n=22)
Average (n=52)
Poor(n=21)
Mean number of rice plots (plots) 1.2 1.3 1.3Mean area of rice (ha) 1.0 1.0 0.9Mean production of rice (kg) 2,173 1,733 1,194Mean months of rice self-sufficiency (months) 9.3 7.5 6.3Households growing only upland rice (%) 38.1 62.8 94.4Households growing only lowland rice (%) 42.9 23.3 0Households growing both upland and lowland rice (%) 19.0 14.0 5.6Households growing rice only inside village (%) 28.6 39.5 72.2Households growing rice only outside village (%) 47.6 51.2 27.8Households growing rice both inside and outside village (%) 23.8 9.3 0
To explore the relationship between rice area and rubber planting, total rice area per
household in 2004 was regressed on the total number of rubber trees planted, the full-
time equivalent household labour force, the age of the household head, and the
education of the household head (Table 5.13). The data were checked to ensure that
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there was no violation of the usual assumptions regarding multicollinearity, outliers,
normality, linearity, homoscedasticity, and independence of residuals. The results are
presented in Table 5.14. Although the model was significant at the 10% level
(p=0.09), the adjusted R Square was 0.05, showing that the model explained only 5%
of the variance in the total area of rice in 2004. The coefficients for both the total
number of rubber trees planted and the full-time equivalent household labour force
were positive and statistically significant at the 10% level, though the coefficients
were small. The age and education of the household head were not significant factors.
The results suggest that the area of rice cultivated per household was primarily
determined by other factors. Given that most households were clustered around the
mean of 1.0 ha and that most households were less than 100% self-sufficient, it is
likely that there was an overall shortage of rice land and individual households were
constrained by the land allocation system. Hence the increase in rubber planting was
reducing the total area cultivated, as farmers reported, but this was being spread
across all households rather than being an individual trade-off. That rice land was
being sought outside the village lends support to this argument. Wealthier households,
with more rubber trees and labour force, also appeared to have better access to
lowlands and land outside the village, hence the positive relationship between rice
area and number of rubber trees and household labour force.
Table 5.13: Variables included in multiple regression analysis of rice area in 2004 (n=82) Symbol Definitions Mean SD
TRIA Total area of rice in 2004 including the area of both lowland and upland rice (ha) 1.0 0.7
TRUP Total number of rubber trees planted (trees) 1,930 1,382HHLF Full-time equivalent household labour force (persons) 3.0 1.1HHAG Age of household head (years) 46 13HHED Education of household head (years) 3.4 3.8
Table 5.14: Results of multiple regression analysis of factors affecting the area of rice in 2004
Independent variables
Estimated coefficients t value
(Constant) 0.42 1.18 TRUP 9.86E-005 1.76* HHLF 0.11 1.61* HHAG 0.00 0.04 HHED 0.01 0.43 -R2 = 0.05, F = 2.09, p = 0.09 * Significant at 10% level
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5.5 Rubber production
5.5.1 Rubber planting
As described in Chapter 4, rubber was introduced to Hadyao in 1994 by Hmong
migrants from China and was planted by individual smallholders. All of the surveyed
households had planted rubber. On average, one household had planted 2.3 plots of
rubber, but the number ranged from 1 to 6 plots. About 88% of the households had
from 1 to 3 rubber plots (Table 5.15).
Table 5.15: Distribution of rubber plots per household in Hadyao Households Number of
rubber plots Number %1 23 24.22 36 37.93 25 26.34 10 10.55 0 0.06 1 1.1Total 95 100.0
About 6% of the households planted rubber only in the first phase (1994-96), while
29% planted only in the second phase (2003-05). Nearly 65% planted rubber in both
phases. Of the households who planted rubber in the first phase, around 91% planted
again in the second phase. Around 76% of the households had their rubber plots only
inside the village while 6% had their rubber plots only outside the village. Nearly
18% had at least one rubber plot inside the village and another plot outside the village.
Almost all the households that planted rubber in the first phase planted inside the
village, but some households that planted rubber in the second phase planted in other
villages (Table 5.16).
Table 5.16: Location of household rubber plots by planting phase No. of households
Location of rubber plots Only 1st phase
Only 2nd phase Both
Total
Only inside village 6 20 46 72 Only outside village 0 5 1 6 Both 0 2 15 17 Total 6 27 62 95
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Moreover, almost all of the land planted with rubber in the first phase was located
near the village settlement, while many of households that planted in the second phase
had their rubber plots far from the village centre. These plots were in the village area
but were about 1-2 hours walking distance. Almost all households (93%) had planted
rubber exclusively on upland plots used for shifting cultivation. Five of the seven
households that had planted rubber on lowland plots had planted in the second phase
(Table 5.17). These observations again highlight the emerging shortage of land for
both rice and rubber, particularly well-located land for rubber.
Table 5.17: Land type of household rubber plots by planting phase No. of households
Land type Only 1st phase
Only 2nd phase Both
Total
Only upland 6 25 57 88 Only lowland 0 0 1 1 Both 0 2 4 6 Total 6 27 62 95
About 27% of households borrowed money from the Agricultural Promotion Bank
(APB) for the establishment of their rubber plantation, while 15% used their own
money. The remaining 58% used both their own money and a bank loan. Almost all
of the households who used their own money for rubber cultivation planted in the
second phase (Table 5.18).
Table 5.18: Source of household’s funds for rubber planting by planting phase
No. of households Source of Funds Only 1st
phaseOnly 2nd
phase BothTotal
Only credit 6 9 11 26Only own fund 0 13 1 14Both 0 5 50 55Total 6 27 62 95
The total number of rubber trees planted averaged 1,930 trees per household. Though
the number ranged from 200 to 9,200 trees, most households (65%) had planted
between 500 and 2,500 trees (Fig. 5.4). On average 426 trees had died, ranging from
none to 2,300 trees. Most died due to the heavy frost in 1999, but some died because
of poor seedlings, poor planting technique, poor maintenance, and root diseases.
Before rubber was tapped, farmers were not sure that they would get a return so they
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did not always keep their rubber plots weeded, being busy with rice cultivation.
Therefore, the number of surviving trees averaged about 1,510 per household and
ranged from 120 to 6,900. However, the number of mature trees averaged around 490
per household, ranging from 100 to 1,400.
Figure 5.4: The distribution of rubber trees planted per household in Hadyao
About 71% of households had already tapped their rubber trees; the remaining
households had only immature trees. About 25% of the households who tapped their
rubber trees commenced tapping in 2002, while 66% began tapping in 2003. Only 6%
and 3% started tapping in 2004 and 2005, reflecting the tail-end of the first phase of
planting.
The factors affecting the number of rubber trees planted were investigated through
multiple regression analysis. Seven possible factors were included in the model (Table
5.19). The assumptions regarding multicollinearity, outliers, normality, linearity,
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homoscedasticity, and independence of residuals were checked to ensure that there
was no violation of these assumptions. The results are presented in Table 5.20. The
model was significant at the 1% level (p=0.000). The adjusted R Square of 0.24
showed that the model explained 24% of the variance in the total number of rubber
trees planted. The coefficients for planting rubber in the first phase and for full-time
equivalent household labour force were positive and statistically significant at the 1%
and 5% levels, respectively. The age and education of the household head were not
significant factors, nor were access to additional land, labour or capital (credit). It may
simply be that households with the labour and initiative to plant first had been able to
plant more rubber trees and that, because they now had more experience in rubber
cultivation and money from selling their rubber, they were also better able to invest in
new rubber plots, compounding their initial advantage.
Table 5.19: Variables included in multiple regression analysis of rubber planting (n=95) Symbol Definition Mean SDTRUP Total number of rubber trees planted (trees) 1,930 1,382HHLF Full-time equivalent household labour force (persons) 3.0 1.1HHAG Age of household head (years) 46 13HHED Education of household head (years) 3.4 3.8RCRS Households who received credit support (yes/no) 0.8 0.3ERUP Households who planted rubber in the first phase (yes/no) 0.7 0.4ALOV Households who accessed land outside village for rubber
and/or rice (yes/no) 0.5 0.5
HLRU Households who hired labour for rubber cultivation (yes/no) 0.7 0.5
Table 5.20: Results of multiple regression analysis of factors affecting the total number of rubber trees planted
Independent variables
Estimated coefficients t value
(Constant) -496.73 -0.75HHLF 247.47 2.05**HHAG 11.81 1.09HHED 13.82 0.35RCRS -53.36 -0.11ERUP 1,056.80 2.67***ALOV 208.23 0.78HLRU 426.83 1.23
-R2 = 0.24, F = 5.25, p = 0.000 **, *** Significant at 5%, 1% level
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5.5.2 Rubber production techniques
Labour used for rubber cultivation in Hadyao included household labour and hired
labour. Around 66% of households hired labour in addition to their family labour,
while 34% used only their own household labour. If households could afford to hire
labour, they usually did so for terracing, planting of seedlings, and weeding. Family
labour was generally used for nursery work, maintenance of rubber trees in the
immature phase (weeding), and tapping. Tapping was definitely undertaken by
household members since tapping work requires skill and care so that the trees are not
damaged by tapping too deep. Hence hired labour for tapping was not common in the
village. In the past labour was often hired from within the village, but in 2004, with
all households having their own rubber plots, it was usually hired from neighbouring
villages.
Rubber production techniques used in Hadyao were derived from China. During the
first period of rubber cultivation in the mid-1990s, all rubber seedlings were imported
from China. The rubber clonal varieties were GT1 and RRIM600, which were the
main varieties found in Yunnan province. Hadyao farmers usually planted both GT1
and RRIM600 in the same plot because they have different characteristics. RRIM600
provides more latex yield but is sensitive to cold and diseases. Farmers said that
RRIM600 is not suitable to plant in low terrain, especially near the stream.
Conversely, GT1 can resist cold and diseases, but gives lower yield of latex.
Since 2003 over half of the households established nurseries by themselves. The
seedling operation was usually done in June, the start of the rainy season. Farmers
collected seeds from their mature rubber trees and spread them in a seed bed. After
the seedlings were 10-15 centimetres tall, they were planted in a seedling plot with
intra-row spacing of 20 centimetres and inter-row spacing of 30 centimetres and 40-
50 centimetres space between each double set of rows. The budding process was
commenced when the seedlings had attained about the diameter of a pencil or pen.
Farmers normally obtained the budwood from their rubber trees. Budding was
undertaken with a patch bud. Budding requires great care and was usually done by
specialists. After the trees were budded for about 15-20 days, the rubber seedlings
were ready to be planted.
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Since rubber trees in Hadyao were planted on land used for shifting cultivation, land
preparation was the same as for upland rice cultivation. Firstly, fields were slashed
and burned, usually in March or April. Then, terracing and lining were prepared
before holes were dug (Fig. 5.5). Even though land clearing involved the use of fire,
there were only a few cases of fire problems as farmers made a fire break around their
plots, which is the common practice for shifting cultivation. The village has a rule
that, if fire spreads, the person responsible has to compensate for the killed trees, so
farmers were alert to avoid fire problems.
Figure 5.5: Land prepared for planting with rubber in Hadyao (Source: Author’s photo,
July, 2005)
After the land had been prepared, rubber trees were ready to be planted (Fig. 5.6).
June and July were the months for planting rubber. Farmers normally planted their
rubber trees with an intra-row spacing of 3 m and an inter-row spacing of 7 m. It
should be noted that these planting distances were recommended by the migrants from
China and farmers had planted their rubber trees with this spacing during the first
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period of rubber establishment in 1994-95. However, in the second phase of rubber
planting in 2003-05 the row spaces used varied from 2-3 m for intra-row spacing and
5-7 m for inter-row spacing. Farmers reported that the intra-row spacing of 3 m and
inter-row spacing of 7 m were appropriate for gently sloping land, while intra-row
spacing of 2-2.5 m and inter-row spacing of 5-6 m were best for steeply sloping land.
Over two-thirds of the farmers reported that they planted their rubber with an intra-
row spacing of 3 m and an inter-row spacing of 7 m.
Figure 5.6: Young rubber trees in Hadyao (Source: Author’s photo, August, 2005)
About 70% of households undertook replacement planting in their rubber plots when
seedlings died or were damaged. Of the households who undertook replacement
planting, 70% did so in all their rubber plots. This mostly occurred in the first year,
though 24% undertook some replacement planting in the second year and 5% in the
third year. Of the households who planted rubber only in the first phase, only 11%
undertook replacement planting. In contrast, around 62% of those who planted rubber
only in the second phase undertook replacement planting and 82% of those who
planted rubber in both phases undertook replacement planting (Table 5.21).
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Table 5.21: Incidence of replacement planting by planting phase No. of households Timing of replacement
planting Only 1st phase
Only 2nd phase Both
Total
No replacement planting 8 10 11 29 Year 1 1 13 33 47 Year 2 0 2 4 6 Years 1 and 2 0 1 9 10 Year 3 0 0 3 3 Total 9 26 60 95
Applying inorganic fertilizer was not common in the shifting cultivation system and
the same applied to rubber planted in Hadyao, though farmers usually put buffalo or
cattle manure into the planting hole. The household interviews indicated that, from the
first planting of rubber in 1994 until 2005, only one farmer had applied inorganic
fertilizer to his rubber trees. This was on the recommendation of Chinese rubber
experts and rubber buyers in order to increase the growth of the trees and start tapping
earlier. However, the Chinese fertilizers applied by that farmer were not the full dose,
which reflects the common practice of under-fertilizing among smallholders (Cottrell,
1991). Households who never applied fertilizer gave a variety of reasons, not
necessarily consistent with each other: (1) the soil was still fertile and their rubber
trees still grew well; (2) they could not afford to buy fertilizers because if they applied
fertilizers at all they had to apply continuously every year, otherwise the soil would be
dry and hard; (3) the rubber trees would be too big and would fall over in a strong
wind; (4) rubber farmers in other countries used fertilizers so Chinese traders wanted
to buy from Laos because fertilizer was not used; (5) they had never applied before
and did not know how to apply; (6) applying fertilizers was not good, causing health
problems; and (7) their rubber trees were still young.
It is interesting to note that more than half of the households mentioned that in the
future they probably would apply fertilizer – when the soil was not fertile any more
and the yield of latex was low, when they had money from selling rubber, when they
knew how to apply it, when they started tapping for more than three years because
tapping for many years would yield less latex, and to increase production as
recommend by the Chinese. Those who did not intend to apply fertilizers in the future
gave much the same reasons as listed above.
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All of the households cleared weeds every year. Weeds were usually cleared by hand
but the use of herbicide had become more common. Around 39% of the households
reported applying herbicide to control Imperata cylindrica. They had started to use
herbicide in 2003, but the number who used herbicide increased from 3 in 2003 to 25
in 2005. Two types of herbicide were used, one from China and one from Thailand.
The former was used to kill grass and broadleaf weeds but could not be identified
from the bottle; the latter was paraquat. Farmers said that the paraquat was more
effective in controlling Imperata cylindrica than the Chinese herbicide. Households
who never applied herbicide reported that they had not enough money to buy, they did
not know how to apply it because they had never used it before, they were still able to
control weeds by hand weeding or hiring labour, they were afraid of being affected by
the chemicals, they were afraid that their rubber trees might die like the grass, and it
was difficult to carry water for herbicide application because their rubber plots were
far from water sources. Nearly two thirds of the households mentioned that they
would use herbicide in the future. The reasons were that when they planted many
rubber trees they might not have enough family labour to clear weeds by hand, that
when they received money from selling rubber they would hire others to spray
herbicide, and that it was more convenient to use herbicide and save labour.
Households who said that they would not apply herbicide in the future gave the same
reasons as above.
Pests were not mentioned by rubber farmers as a serious problem and many of them
reported that there was no pest in their rubber plantation. However, diseases were
reported as a serious issue by nearly 80% of the households. The diseases found were
yellow leaf disease and root disease (Fig. 5.7). Yellow spots appeared on new leaves
in April each year. This did not cause the death of trees, hence farmers did nothing but
left the leaves to recover by themselves. Root disease could spread to other trees and
caused the death of the trees. The only way of preventing its spread was cutting down
the affected trees and digging a trench to prevent the infection of surrounding trees.
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Figure 5.7: The symptoms of yellow-leaf disease (left) and root disease (right) in Hadyao
(Source: Author’s photo, August, 2005)
Almost all households intercropped their rubber plots. Of the intercropping
households, 69% intercropped all of their rubber plots while 31% did not. The most
predominant intercrop was upland rice, followed by maize and pineapple (Figs. 5.8
and 5.9). Of the households who intercropped, around 58% intercropped only rice,
while 29% intercropped rice, maize, and pineapple and about 10% intercropped rice,
chilli, cucumber, eggplant, ginger, cassava, bean, and cabbage. Only two households
intercropped other crops excluding rice. Intercropping, except pineapple, took place
for up to three years, after which there was too much shade. Pineapple was normally
intercropped with mature rubber trees. Of the intercropping households, 34%
intercropped only in the first year, 48% for two years, and 18% for three years or
more.
Livestock raising in rubber plots was not common practice in Hadyao because farmers
were afraid the rubber trees would be destroyed, especially by large livestock.
However, some households raised chickens in their rubber plots during the mature
phase.
The Economic Potential for Smallholder Rubber Production in Northern Laos
106
Figure 5.8: Rice (left) and corn (right) intercropped with young rubber trees in Hadyao
(Source: Author’s photo, August, 2005)
Figure 5.9: Pineapple intercropped with mature rubber trees in Hadyao
(Source: Author’s photo, August, 2005)
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107
Rubber farmers in Hadyao normally go to tap their rubber trees very early in the
morning, from 3 a.m. to 6 a.m., and then come back to their houses for breakfast.
They collect the latex between 9 a.m. and noon (Fig. 5.10). About 71% of households
were tapping their rubber trees at the time of the survey. Most the tapping households
(91%) tapped their rubber trees on alternate days. Only 9% tapped their trees on two
successive days and then let the trees rest for a day. Farmers with many rubber trees
tapped half their trees each alternate day. Of the tapping households, around 21%
reported that they had previously tapped the trees for two consecutive days followed
by one day off. The reason was that they wanted to get more latex and when rain
prevented tapping they felt they had to supplement output by tapping on two
consecutive days. Tapping on alternate days provided farmers with smaller holdings
the opportunity to undertake other livelihood activities when not tapping. Farmers
usually tapped in the 8 month period from April to November. If tapping on alternate
days, this gives a total of 120 tapping days in a year.
Figure 5.10: The practice of tapping (left) and collecting latex (right) in Hadyao
(Source: Author’s photo, August, 2005) Rubber farmers in Hadyao did not process their rubber as in other countries. They just
made ‘tub lump’ rubber and sold it to Chinese traders who came to buy at the village.
Two main techniques are used for processing raw latex into tup lump rubber (Fig.
5.11). The first technique involves using plastic buckets. First, latex is poured into a
sizeable plastic bucket and left for about 24 hours. The latex liquid solidifies as a
bucket-shaped lump and then the tub lump is taken out and kept in a safe place,
usually in the rubber plot (Fig. 5.12). The weight of tub lump rubber is about 30-50
kg, depending on the size of bucket. If the raw latex is mixed with formic acid, the
liquid solidifies faster, but no rubber farmers used formic acid, to reduce the cost of
The Economic Potential for Smallholder Rubber Production in Northern Laos
108
processing. The second technique of making tub lump is by using a plastic bag. First,
a hole is dug to the same size as the plastic bag. The plastic bag is placed in the hole
and raw latex is poured into the bag. The latex in the bag is left for about 24 hours to
solidify. After that the tub lump in the bag is taken out and kept in a safe place. Tub
lump rubber in a plastic bag also weighs about 30-50 kg, depending on the size of the
bag.
Figure 5.11: The use of plastic bag (left) and bucket (right) for processing latex into tub-
lump rubber in Hadyao (Source: Author’s photo, August, 2005)
Figure 5.12: Tub-lump rubber is normally kept at the farm in Hadyao
(Source: Author’s photo, August, 2005)
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109
5.5.3 Rubber yield, sales, and income
Farmers in Hadyao Village have been tapping their rubber trees since 2002. The
average rubber production per tapping household was 655 kg in 2002, 887 kg in 2003,
and 1,211 kg in 2004. However, the total production per tapping household varied
considerably from 60 to 2,000 kg, 110 to 4,000 kg, and 150 to 4,450 kg in the same
years.
Rubber in Hadyao Village has been tapped since 2002; however, not all farmers
started tapping in 2002. The number of households who started tapping was 21 in
2002, 42 in 2003, and four in 2004 (Table 5.22). It can be seen that the average rubber
yield of households who had tapped for three years was higher than for households
who had tapped for one year or two years. The average yield in the first year of
tapping was 904 kg/ha, but it increased to 1,380 kg/ha in the second year, and then to
1,999 kg/ha in the third year. This yield pattern is consistent with the normal yield
profile of a rubber plantation.
Table 5.22: Average yields (kg/ha/year) over three years of tapping in Hadyao Year of tapping Calendar year 1st year 2nd year 3rd year Average
2002 1,009 (n=21) 1,009 (n=21) 2003 843 (n=42) 1,566 (n=21) 1,045 (n=63) 2004 1,209 (n=4) 1,295 (n=42) 1,999 (n=21) 1,470 (n=67) Average 904 (n=67) 1,380 (n=63) 1,999 (n=21)
Apart from the natural increase in latex flow, one of the reasons for the sharp increase
in yield in the second and third years may be that tapping was a new skill for Hadyao
farmers. Hence yields were low in the first year of tapping but in the second and third
years they were more familiar with tapping and improved their tapping skill so they
obtained higher yields. Another reason is that the yield of rubber is affected by
weather conditions, particularly rainfall. In 2003 the average rainfall in Luangnamtha
Province was only 951 mm compared to an average annual rainfall between 1994 and
2004 of around 1,500 mm (MSLP, 2005). The average rubber yield of farmers who
first tapped in 2003 was 843 kg/ha compared to the average yields of 1,009 kg/ha and
1,209 kg/ha obtained by those whose first tapping year was 2002 and 2004,
respectively (Table 5.22). It appears that the unusually low rainfall led to a lower
yield in 2003 and it contributed to make the average yield in the first year of tapping
The Economic Potential for Smallholder Rubber Production in Northern Laos
110
quite low, apart from the factor of being unfamiliar with tapping during the first year.
It should be noted that in spite of the low amount of rainfall in 2003, the average yield
of farmers whose second year of tapping was in 2003 still increased from 1,009 kg/ha
in 2002 to 1,566 kg/ha in 2003. This may be because these farmers were more
familiar with tapping and if there was no incidence of low rainfall in that year, they
might have obtained an even higher yield than 1,566 kg/ha.
The average yields of the initial three years of tapping in Hadyao Village are
consistent with the average yields over the life of the plantation of smallholders in
North Eastern Thailand and Southern China (Table 5.23), where rubber has been
planted in similar upland areas with similar climate to Northern Laos.
Table 5.23: Yields (kg/ha/year) of smallholder rubber in Laos, China, and Thailand
Locations Average yield Sources Hadyao Village (Northern Laos) 1,428 Household survey, 2005 Southern China 1,200-1,350North East Thailand 1,540 Alton et al., 2005
A comparison of the main characteristics related to rubber production between the
three wealth categories is presented in Table 5.24. As before, One-way ANOVA
showed statistically significant differences at the p<0.05 level in the number of rubber
plots, the mean number of rubber trees, the mean number of newly planted rubber
trees, and the mean number of tapped trees for the three wealth categories, but no
statistically significant differences in the mean tub-lump rubber production, rubber
yields, intercropped rice area, intercropped rice production, and intercropped rice
yields between the wealth categories. Post-hoc comparisons using the Tukey HSD test
indicated that the mean number of rubber plots and rubber trees differed significantly
among all three wealth categories of households. The mean number of newly planted
rubber trees and tapped trees for wealthy households were significantly different from
poor households, but average households did not differ significantly from either
wealthy or poor households. Chi-square tests showed significant differences at the
p<0.001 level in the proportion of households planting rubber only in the first phase,
only in the second phase, and both in the first phase and the second phase, and the
proportion of households tapping their rubber trees. Likewise, there were significant
differences at the p<0.01 level in the proportion of households that hired additional
labour for their rubber plantation. Conversely, there were no significant differences at
The Economic Potential for Smallholder Rubber Production in Northern Laos
111
the p<0.05 level in the proportion of households that planted rubber only inside the
village, only outside the village, or both inside and outside the village. Neither were
there significant differences at the p<0.05 level in the proportion of households that
received credit support nor planted rubber only on upland, only on lowland, or both
upland and lowland. In sum, wealthy households had more plots, were more likely to
hire labour, had planted more trees in both phases, had more trees in production, and
hence produced more rubber than average or poor households. An early ability to
plant rubber had clearly opened up a significant economic advantage to these
households that later planters would find difficult to overhaul, given their locational
and financial disadvantage.
Table 5.24: Rubber production data by wealth status of household, 2004 Wealth status
Variable Wealthy(n=22)
Average (n=52)
Poor(n=21)
Mean number of rubber plots 3.0 2.3 1.4Mean number of rubber trees 2,874 1,931 940Mean number of recently planted rubber trees 1,869 1,299 752Mean number of trees tapped 595 423 325Mean production of tub-lump rubber (kg) 1,575 1,225 870Mean rubber yield (kg/tree) 3.0 3.2 2.4Mean area of intercropped rice (ha) 0.5 0.9 0.8Mean production of intercropped rice (kg) 460 875 650Mean yield of intercropped rice in 2004 (kg/ha) 955 1,175 1,035Households planting only in first phase (%) 4.5 5.8 9.5Households planting only in second phase (%) 9.1 23.1 61.9Households planting in both phases (%) 86.4 71.2 28.6Households planting only inside village (%) 63.6 75.0 90.5Households planting only outside village (%) 9.1 5.8 4.8Households planting both in and outside village (%) 27.3 19.2 4.8Households planting only on upland (%) 81.8 94.2 100.0Households planting only on lowland (%) 4.5 0.0 0.0Households planting on both upland and lowland (%) 13.6 5.8 0.0Households receiving credit support (%) 90.9 88.5 71.4Households hiring additional labour (%) 77.3 73.1 38.1Households tapping rubber (%) 86.4 76.9 38.1
Some of the factors affecting the production of tub-lump rubber were investigated by
performing multiple regression analysis. It was hypothesised that production would be
positively influenced by the number of rubber trees tapped, the full-time equivalent
household labour force, the education level of the household head, and the year of
tapping (whether it was the first, second, or third year of tapping), and negatively
influenced by the total rice area and the age of the household head (Table 5.25). The
The Economic Potential for Smallholder Rubber Production in Northern Laos
112
assumptions regarding multicollinearity, outliers, normality, linearity,
homoscedasticity, and independence of residuals were again checked to ensure that
there was no violation of these assumptions.
The results are presented in Table 5.26. The model was significant at the 1% level
(p=0.000). The adjusted R Square of 0.39 showed that the model explained 39% of
the variance in the production of tub-lump rubber in 2004. However, only the
coefficient for the number of trees tapped was significantly different from zero. Hence
neither the availability and quality of labour nor competition for labour from rice
production were affecting rubber output. The possible reason is that, at this stage, the
household labour force was still able to handle the tapping work – there was no labour
shortage for tapping yet since the number of rubber trees tapped was not large. The
average labour force of two workers was sufficient for a household to handle the
tapping work. Moreover the restricted area for rice production reduced the degree to
which rice competed with rubber for household labour. In the future when farmers
have more rubber trees to be tapped, their available labour may not be enough to do
the tapping, and then labour will become one of the main factors determining the
production of rubber. The age and education of the household head were also not
significant factors.
For the two dummy variables reflecting years of tapping, the first dummy variable
was not significant, but the second one was weakly statistically significant (p=0.20)
with a coefficient of about 500. This means that production increased by 500 kg on
plots in their third year of tapping compared with plots in their first or second year of
tapping. As mentioned above, this may be both because of the normal increase in
yields in the first few years of a rubber plantation and because, in the third year of
tapping, farmers were more familiar with tapping and had improved their tapping
skill.
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Table 5.25: Variables included in multiple regression analysis of rubber production (n=67)
Symbol Definition Mean SD PTLR Production of tub-lump rubber in 2004 (kg) 1,282 927 RUTT Number of rubber trees tapped in 2004 (trees) 460 281 HHLF Full-time equivalent household labour force (persons) 3.0 1.1 TRIA Total area of rice cultivated in 2004 (ha) 1.0 0.7 HHAG Age of household head (years) 46 13 HHED Education of household head (years) 3.4 3.8 DMV1 First year of tapping vs. second year of tapping 0.7 0.5 DMV2 First year of tapping vs. third year of tapping 0.2 0.4
Table 5.26: Results of multiple regression analysis of factors affecting the production of tub-lump rubber in 2004
Independent variables
Estimated coefficients t value
(Constant) 561.97 1.03RUTT 2.25 5.13***HHLF 38.09 0.34TRIA -84.17 -0.61HHAG -11.48 -1.05HHED 34.56 1.11DMV1 -44.18 -0.13DMV2 503.87 1.29
-R2 = 0.39, F = 5.61, p = 0.000 *** Significant at 1% level
So far all of the tub-lump rubber produced in Hadyao has been sold to China. Chinese
traders come to buy the tub-lump in the village usually once a month. For the first two
years of selling, rubber was bought using a grading system but since 2004 only one
grade has been used. Chinese traders set the price of tub-lump because they are the
only source of price information. In 2004 the Lao-SINO company established a
rubber processing factory in Luangnamtha Province, but they offered a lower price
than the Chinese traders from Yunnan so farmers sold their rubber to the traders.
There is no marketing contract between the rubber farmers and the Chinese traders.
Every month the village authority will contact the buyers in Yunnan and search for
those who offer the highest price. So far there is not seen to be a marketing problem
because there is strong demand for rubber from China. However, there is a concern
among farmers that if they could not sell their rubber to China, they would have few
alternatives and might get a lower price than the price in China.
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Regarding income sources, about 28% of households reported that their only source
of cash income was selling tub-lump rubber; 29% only earned income from other
sources including livestock, other cash crops, selling rubber seedlings, working for
wages, and receiving money from relatives living in the USA; the remaining 43%
received income from both rubber and other sources. About 69% of the households
mentioned that their highest ranking income source was rubber, while 31% ranked
income from other sources number one.
The main problem related to rubber cultivation mentioned by respondents was the
difficulty faced in the period before the rubber was tapped. During the immature
phase, farmers had to work harder both growing rice and taking care of their rubber,
so they had no time to do other work. Moreover, they faced a rice deficit. Farmers
also mentioned their concern about transporting tub-lump rubber from the newer
rubber plots to the village when the trees reached maturity because the new plots were
located far from the village and there was no road through that area.
About 86% of the households reported that they planned to increase the area under
rubber trees, while only 14% had no plan to plant more rubber trees. The reasons
given for increasing the rubber area were to have many trees for their children, to
have a permanent job as a rubber farmer and stop growing upland rice, to earn more
money because rubber provides a good income, and to claim access to land because of
a fear that there would be no land left to plant in the future as more and more people
became interested in planting. The reasons given for not planting more rubber trees
were that there was not enough labour, there was no land left near the village, and
there was no money to invest more. Around 92% of the households who planned to
increase their rubber area mentioned that they would be able to access the necessary
land, while 8% said they would not. The most common way of accessing land was by
asking permission from the village authority to cultivate more plots of land. The other
way was by seeking permission to cultivate in other villages.
5.6 Conclusion
The household survey in Hadyao shows that farmers are in the middle of a major
transition from primary dependence on the shifting cultivation of rice for subsistence
to dependence on smallholder rubber and the market economy. While rubber has
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helped farmers increase their income, there are some emerging constraints. Land is
becoming a constraint due to a growing demand among farmers to expand their
rubber holdings, though less-accessible land is still available and some farmers are
able to plant rice and rubber in other villages. Labour is also becoming a constraint;
though at this stage family labour can handle the tapping, as more trees come into
production this will be a constraint, putting more pressure on rice production. Rubber
farmers may have to reduce further the area of rice or even stop growing rice
altogether if they want to expand their rubber holdings. The land and labour
constraints mean that most households do not attain rice self-sufficiency any more.
Hence many farmers have now moved into the second and more risky stage in the
transition from subsistence to commercial agriculture.
Despite the popularity of rubber and the stated intention of farmers in the study
village to stop shifting cultivation and plant only rubber, it is unlikely that upland rice
production will be replaced completely. Farmers still need to grow upland rice or
intercrop rice in their rubber plots, especially those whose rubber trees are still
immature. Farmers also face the risk that the price of rubber will fall or that they
cannot sell to China. Hence they may need to expand rice production again. One
advantage of rubber is that, given a major market collapse, it is relatively easy to
revert to shifting cultivation, as seen among rubber smallholders in Indonesia and
Malaysia.
In addition, there has been an increasing inequality between the three wealth
categories of households, particularly between wealthy and poor households, in terms
of land and labour resources, and rice and rubber production. Wealthy households had
a larger labour force, were able to access more land, were better able to invest in large
livestock, produced more rice, were self-sufficient for more months, were less
dependent on upland rice, were less dependent on village land, were more likely to
hire labour, had planted more rubber trees, had more rubber trees in production, and
hence produced more rubber than average or poor households. Hence rubber
production was accentuating economic differences between households.
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Chapter 6
Bioeconomic Analysis of Smallholder Rubber Production
in the Study Village
6.1 Introduction
This chapter presents a discounted cash flow (DCF) analysis of smallholder rubber
production in Hadyao Village. The aim of this analysis was to assess the profitability
of a hectare of smallholder rubber in the conditions faced by a typical farmer in
Hadyao. This required modelling the yield of latex over the life of the rubber
enterprise, as well as other outputs, using the Bioeconomic Rubber Agroforestry
Support System (BRASS), which was parameterised and calibrated as far as possible
to Hadyao conditions. These simulated yields were combined with data on costs and
benefits obtained from group discussions with experienced rubber farmers in Hadyao,
household survey data, and other relevant sources. Attention was given to the
appropriate valuation of household labour and the capital invested in the enterprise, as
well as examining a range of investment criteria.
6.2 Modelling yields using BRASS
6.2.1 Introduction
Since the yield data from the study village were available for only the first three years
of tapping (see details in Section 5.5.3 of Chapter 5) and rubber is a long term
investment, estimates of the yield of latex over the life of the investment were
required. Annual latex yields were estimated using the BRASS model, which is the
best available tool for modelling smallholder rubber production (Grist et al., 1998;
Cacho, 2001). BRASS is the new generation of the Bioeconomic Agroforestry Models
(BEAM): RRYIELD and RRECON which were modified by a project of the
Australian Centre for International Agricultural Research (ACIAR). The original
BEAM was created by the Bioeconomic Agroforestry Modelling Project at the School
of Agricultural and Forestry Sciences, the University of Wales. While BEAM was run
in DOS, BRASS was rewritten to be able to run in Visual Basic for Applications
(Grist et al., 1998). It is important to note that the development of the original BEAM
and BRASS was based on the circumstances of rubber smallholders in Indonesia.
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BRASS has two modules – a biophysical and an economic component (Fig. 6.1). The
biophysical module incorporates many variables in order to estimate the intercrop
yields during the intercropping period, the stream of latex yields over the life of the
plantation, and the volume of harvestable timber at the end of the production period.
These variables are grouped into climate, topography and soil, rubber management,
and intercrop management. The biophysical part focuses on the changes in outputs
(latex, rubber wood and intercrops) in response to those variables. The economic
component is linked with the biophysical component by multiplying the outputs from
the biophysical component with prices in order to verify the economic returns from a
rubber plantation. Labour costs, and costs for establishment, maintenance, and
harvesting of the intercrop and rubber plantation, are used within the model to
determine annual costs. Once the costs and returns are known, the net present value of
the system is determined by using a discount rate. Since the purpose of using BRASS
in this study was to estimate yields, only the biophysical component was used. The
economic component was replaced with a separate spreadsheet analysis for the
calculation of net present value and other investment criteria.
Figure 6.1: Variables in the biophysical and economic components of BRASS
6.2.2 Climate variables
The first group of variables in the biophysical component is climate, including
rainfall, potential evapotranspiration, mean temperature, and solar radiation (Table
6.1). The first three are measured as annual averages while solar radiation is measured
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as a daily average. Ideally, 35 years of data were needed as this was the life of the
plantation used in the model. However, only limited data were available and
compromises had to be made.
Table 6.1: Climate variables in the biophysical component of BRASS Variables Unit Rainfall mm per yearPotential evapotranspiration mm per yearMean temperature C Solar radiation MJ/m2
The data on rainfall and temperature between 1994 and 2004 were available from the
Meteorology Station of Luangnamtha Province (MSLP) (Table 6.2), but potential
evapotranspiration (PET) and solar radiation were not. The temperature in
Luangnamtha Province between 1994 and 2004 was generally quite stable at around
24 C. Its coefficient of variation was very low (1.4%). The annual rainfall, on the
other hand, varied considerably. Its coefficient of variation was quite high (21.4%).
The rainfall between 1994 and 1999 was close to the mean value of nearly 1,600 mm,
but between 2000 and 2002 rainfall averaged over 2,000 mm and 2003 was an
exceptionally dry year with only 951 mm.
Table 6.2: Rainfall and temperature data in Luangnamtha Province Year Rainfall (mm) Mean temp. ( C)1994 1,450 23.81995 1,435 23.91996 1,356 23.71997 1,406 23.81998 1,834 24.31999 1,536 23.92000 2,113 23.82001 1,828 23.92002 2,080 24.22003 951 24.92004 1,610 23.8Average 1,600 24.0
Source: MSLP, 2005
Although the data on PET and solar radiation were not available from the
Meteorology Station of Luangnamtha Province (MSLP), derived data were available
from a study by Inthavong et al. (2004) on ‘Using GIS technology to develop water
availability maps for Lao PDR’. One part of this study was an attempt to estimate
PET using the Penman-Monteith equation. Based on this method, PET was calculated
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by using other data including temperature, humidity, wind speed, and solar radiation.
As solar radiation measurements were not available for most provinces of Laos,
including Luangnamtha, sunshine hours were used to estimate solar radiation.
However, this study could only provide estimates of PET and solar radiation for
Luangnamtha Province during the period 2000-2004 (Table 6.3). The data for 1994-
1999 could not be estimated since there were no records of sunshine hours. It can be
seen that the estimated PET and solar radiation from 2000 to 2004 were very stable
and the value in each year was close to the mean value of 1,504 mm for PET and 19.0
MJ/m2 for solar radiation. The coefficients of variation for these data were quite low –
4.3% for PET and 3.5% for solar radiation.
Table 6.3: Estimated PET and solar radiation in Luangnamtha Province
Year Potential
evapotranspiration (mm)
Solar radiation (MJ/m2)
2000 1,472.7 19.1 2001 1,488.0 18.4 2002 1,489.2 18.8 2003 1,617.5 20.1 2004 1,453.2 18.6 Average 1,504.1 19.0
Source: Inthavong et al., 2004
The issue raised was how to estimate these variables over an assumed 35 year period,
starting in 1994 when the first rubber was planted in Hadyao Village. Since the
temperature, PET, and solar radiation were quite stable, it was decided to use the
average values in each year of the model run (24 C for temperature, 1,504 mm for
PET, and 19 MJ/m2 for solar radiation). However, this was not appropriate for
rainfall, which varied to a greater extent. It was considered better to capture
something of the rainfall variability in the model than simply assume average rainfall
in each year. The approach used was simply to repeat the 11-year rainfall data with
1994 as Year 1 as shown in Table 6.4.
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Table 6.4: Assumed rainfall data in Luangnamtha Province
Year Rainfall (mm)
Year Rainfall (mm)
1 1,450 19 1,828 2 1,435 20 2,080 3 1,356 21 951 4 1,406 22 1,610 5 1,834 23 1,450 6 1,536 24 1,435 7 2,113 25 1,356 8 1,828 26 1,406 9 2,080 27 1,834 10 951 28 1,536 11 1,610 29 2,113 12 1,450 30 1,828 13 1,435 31 2,080 14 1,356 32 951 15 1,406 33 1,610 16 1,834 34 1,450 17 1,536 35 1,435 18 2,113
6.2.3 Topography and soil variables
The second group of variables in the biophysical component is topography and soil
(Table 6.5). These variables include topography, slope, soil depth, drainage, % rock,
soil texture, soil nutrients, soil pH, maximum soil moisture, and wilting point.
Table 6.5: Topography and soil variables in the biophysical component of BRASS Variables Unit/Criteria SelectionTopography Terrace/Flat TerraceSlope Good (0-10%)/Moderate (10-20%)/Bad (>20%) ModerateSoil depth Good (>100 cm)/Moderate (45-100 cm)/Bad (<45 cm) Good Drainage Good (medium)/Moderate (fast/slow)/Bad (very fast/very
slow) Moderate
% rock Good (0-15%)/Moderate (15-40%)/Bad (>40%) Good Soil texture Good (clay loam)/Moderate (50-70% clay)/Bad (>70%
clay) Good
Soil nutrients Good (high)/Moderate (medium)/Bad (low) Moderate Soil pH Good (4.3-5.0)/Moderate (5.0-6.5)/Bad (>6.5, <4.3) Good Maximum soil moisture
(0-400 mm) 300 mm
Wilting point (0-300 mm) 125 mm
For the topography variable, two values are available, terrace or flat land. The land
planted with rubber in the study village was mostly sloping upland that had been
bench terraced. Hence the terraced value was selected for the model.
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The physical and chemical characteristics of the soil have an effect on the growth and
yield of rubber. The essential physical characteristics of the soil are soil depth, slope,
texture and drainage. The important chemical characteristics are soil fertility and pH
(Grist et al., 1998). To determine the soil suitability, seven soil variables are used in
the model including slope, soil depth, drainage, % rock, soil texture, soil nutrients,
and soil pH. These variables are expressed in categorical form with up to three
categories (good, moderate, bad) and each of these categories has its range of criteria.
The decisions on which category (good, moderate, bad) best represented these seven
soil parameters in the study village were based on the land characteristics or primary
land attributes that were recorded by a soil survey in Luangnamtha Province by the
Soil Survey and Land Classification Centre (SSLCC) of the National Agriculture and
Forestry Research Institute (NAFRI) at the nearest soil sampling site to the village.
Approximately 85% of the total land area of the study village is mountainous with
elevation from 600 m to 1,100 m above sea level and slopes between 10% and 20%.
The soil unit is Haplic Acrisols. The texture of the soil is clay loam with a depth of
about 1,100 mm. By interpreting these data, the categories representing the seven soil
parameters for the study village were allocated as follows: moderate for slope, good
for soil depth, moderate for drainage, good for % rock, good for soil texture, moderate
for soil nutrients, and good for soil pH.
The water holding capacity is introduced in the model through the variable maximum
soil moisture, having values between 0 and 400 mm, and the variable wilting point,
having values between 0 and 300 mm. The maximum soil moisture is the difference
between the volume of water in the soil at field capacity (the water content of the soil
where all free water has been drained) and the volume of water in the soil at the
wilting point (the moisture content of the soil at which the plant will wilt and die)
(MAFF, 2002). In Laos soil surveys have been completed for the whole country and
the soil textures in different areas defined, but the data on the water holding capacity
of each soil texture is not available as there has been no research on this yet.
Therefore, the default values for the maximum soil moisture (300 mm) and wilting
point (125 mm) in the model were used for this analysis. This was considered
reasonable as these values were based on the characteristics of tropical soils in which
Indonesian smallholder rubber farmers planted rubber which are similar to those in
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the study village. It should be noted that varying these two values from their default
values results in only small differences in the estimated yields.
6.2.4 Rubber management variables
The third group of variables in the biophysical component is the management of
rubber (Table 6.6). The ‘clone’ variable allows for two types of rubber seedling –
GT1 clone and wildling. A wildling or unselected seedling is grown from seed
scattered from nearby rubber trees. In spite of the fact that these seedlings are
generally of poor quality, their use is popular among Indonesian rubber smallholders
as there is no initial cost other than the time used for collecting them (Purnamasari et
al., 2002). The GT1 clone is included in the model because it is a relatively common
clone used by smallholders in Indonesia. Its growth is assumed to be 30% greater than
wildlings (Grist et al., 1998). In the study village two types of clone were planted
(GT1 and RRIM600) so GT1 was selected for the model.
The variable ‘tree spacing’ specifies the space between trees in metres. Rubber
farmers in the study village normally planted their rubber trees with an intra-row
spacing of 3 m and an inter-row spacing of 7 m. However, from the household survey
the row spaces used varied from 2-3 m for intra-row spacing and 5-7 m for inter-row
spacing. Farmers reported that the intra-row spacing of 3 m and inter-row spacing of 7
m are appropriate for gently sloping land, while intra-row spacing of 2-2.5 m and
inter-row spacing of 5-6 m are best for steeply sloping land. Over two-thirds of the
farmers reported that they planted their rubber with an intra-row spacing of 3 m and
an inter-row spacing of 7 m, hence this spacing was used in the model, resulting in a
tree density of 476 stems per hectare.
The variable ‘rotational calculation method’ offers three criteria. The first criterion is
the rotation ending in a specified year. The second is the rotation ending at a specified
tree girth, measured in centimetres. The third is the rotation ending at a specified tree
volume, measured in m3. For this study the method used was to end the rotation in a
specified year. The related issue was what the length of the rotation should be. The
default value of the model is 40 years, based on the circumstances of Indonesian
rubber smallholders. The length of rotation in this study was assumed to be 35 years.
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No study has yet been undertaken in Laos on the optimal year for farmers to replace
their rubber and it will be many years before farmers’ actual decisions are observable.
Given the newness of the crop it was decided to choose a shorter rotation than the
default, though this was unlikely to affect the discounted returns greatly.
The variable ‘buttlog length’ is used to define the difference between log volume and
small wood volume, measured in metres. The variable ‘canopy permeability’ defines
the level of light penetration after canopy closure, measured in percentage ranging
from 0 to 100%. The default values for buttlog length (2.5 m) and canopy
permeability (5%) were used for this analysis as there was no reason to expect any
major difference from the growth of rubber trees elsewhere.
The variable ‘tapping’ offers two options (Yes or No). The former option means that
rubber trees are in the tapping period, while the latter means that rubber trees had not
yet reached the tapping period. In the study village farmers had already begun tapping
their rubber trees so the ‘Yes’ option was used for this analysis. The variable ‘tapping
calculation method’ offer two options in which the time to start tapping is defined by
girth measured in centimetres or by age measured in years. The second option was
chosen and it was assumed that tapping begins in Year 9 as that was the practice in the
study village. ‘Tapping interval’ defines the frequency of tapping, measured in days.
In the study village, tapping was mostly undertaken on alternate days so the tapping
interval was set at two.
The ‘number of dry months’ defines the period in which rubber trees are not tapped.
In the study village, there was a break in the tapping season of four months from
December to March. So the number of dry months in this case was four. ‘Tapping
days lost’ are the days that tapping cannot take place. During the tapping period there
may be a number of days on which tapping cannot be done due to weather conditions
such as heavy rain or other factors. This reduces the number of tapping days from the
potential 120 days in a year (based on 8 months of tapping and an alternate day of
tapping frequency). For this study it was assumed that the number of days lost was
three days per month or 24 days per tapping year.
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The variable ‘fertilised’ determines whether there is an application of fertiliser or not.
The application of fertiliser will result in faster growth in the early years of tree
establishment (Grist et al., 1998). The variable ‘years fertilised’ specifies the number
of years in which fertiliser is applied after tree planting. The variable ‘fertiliser effect’
provides the proportional improvement associated with fertiliser, having a value
between 0 and 1. The effect of fertiliser on the improvement in tree growth is
necessary to be specified as the effect of fertiliser varies relative to the type and
quantity used (Grist et al., 1998). In the study village fertiliser was not applied so the
value ‘zero’ was used for years fertilised and fertiliser effect.
The variable ‘years of weed control’ defines the number of years in which herbicide is
applied after tree planting and the variable ‘level of weed control’ is the proportion of
weed control and herbicide used, valued from 0 to 1. Even though rubber farmers in
the study village did not use herbicide, they cleared weeds by hand thoroughly every
year, normally three times a year. It can be assumed that the hand-weeding in this case
was equivalent to herbicide use. Therefore, the number of years of weed control was
set at 35 years for this analysis. Also it can be said that the control of weeds by hand
in this case was as effective as by using herbicides. However, control is often not
completely achieved, so a value of 0.8 was used for the level of weed control.
The risk of fire damage is introduced through the variable ‘probability of fire’, having
values between 0 and 1. Although clearing a fire break was practised by rubber
farmers in the study village, there were a few cases of fire. For this analysis the
probability of fire was assumed to be 0.1, or one fire every 10 years. The risk of fire
spreading from neighbouring plots is defined by the variable ‘fire probability value’,
which has values between 0 and 2. For this analysis the fire probability value was
assumed to be 0.3. There were cases of fire spreading from one farm to another, but
the probability of fire spreading was minimal because of the practice of establishing
fire breaks, as mentioned above, and the village regulation that required farmers to
pay compensation for burnt trees if fire escaped from their farm, so farmers were alert
on the fire problem.
The two final variables for rubber management are related to Imperata cylindrica. The
weed Imperata cylindrica was included in the model because large proportions of
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125
upland areas in Southeast Asia are characterised by invasion of this type of weed.
Yields from the cropping areas infested by Imperata can be decreased by up to 90%
and costs for controlling are normally high (Menz and Grist, 1995). The variable
‘Imperata density calculation’ in the model offers two options – site weed density or
override value. Site weed density is used in the case of the Imperata density on
neighbouring farms being the same as on the farm being considered. In other words,
the neighbouring farm has rubber trees planted at the same time and with the same
management practice. The override value is used if the proportion of Imperata in
neighbouring farms is known (Grist et al., 1998). For this study the option of site
weed density was selected because rubber trees in the study village were planted at
the same time, in the same area, and with the same management.
Table 6.6: Rubber management variables in the biophysical component of BRASS Variables Unit/Criteria Selection Clone GT1/Wildling GT1 Tree spacing – n/s m 7 m Tree spacing – e/w m 3 m Rotational calculation method Year/Girth/Volume Year Rotational calculation value Year/cm/m3 35 years Buttlog length m 2.5 m Canopy permeability (0-100%) 5% Tapping Yes/No Yes Tapping calculation method Girth/Age Age Begin tapping cm/Years 9 years Tapping intervals Days 2 days Number of dry months (0-12 months) 4 months Tapping days lost (0-365 days) 24 days Fertilised Yes/No No Years fertilised Years 0 year Fertiliser effect (0-1) 0 Years of weed control Years 35 years Level of weed control (0-1) 0.8 Probability of fire (0-1) 0.1 Fire probability value (0-2) 0.3 Imperata density calculation S (Site weed density)/
O (Override value) S
Imperata density override 0
6.2.5 Intercrop management variables
The variables related to intercrop management are shown in Table 6.7. The variable
‘ground cover’ has three options including clear, rice, or Imperata. The first option
means that there is no ground cover and the third that the ground is covered by
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Imperata. The ‘rice’ option means that rice is intercropped with the rubber trees. From
the household survey, nearly 60% of the households intercropped only rice with their
rubber trees, about 38% intercropped rice and other cash crops, and only 2% grew
other crops excluding rice. That means that almost all households in the study village
intercropped rice in their rubber plantation. Therefore, rice was selected for this
variable.
The ‘years cropped’ variable specifies the number of years of intercropping. For this
analysis, a rice intercrop was specified for the first three years because this was the
dominant practice of rubber farmers in the study village.
The variables ‘intra-row spacing’ and ‘inter-row spacing’ specify the space between
rice plants, hence the number of plants per hectare. Farmers in the study village
normally planted rice with a spacing of 0.5 m, so this value was applied in the model.
The variables ‘crop row calculation method and value’ offer three alternatives – fixed
distance between rows (measured in metres), fixed number of rows, or minimum row
productivity (measured in %). If the method is the fixed distance between rows or
fixed number of rows, the value provided for the row spacing variable is overridden.
For this analysis, the method of minimum row productivity was used and its value
was set at 20%. This means that the minimum accepted rice yield was 20% of its
initial value, below which the model will not calculate a rice crop.
The yield of the intercrop is introduced through the variable ‘monoculture yield’.
From the household survey the average yield of rice grown in shifting cultivation
plots in the study village was about 1,500 kg/ha and this was consistent with the
average yield of upland rice in northern Laos as reported by Lao-IRRI (2000). Hence
this was the figure used in the model.
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Table 6.7: Intercrop management variables in the biophysical component of BRASS Variables Unit/Criteria Selection Ground cover Clear/Rice/Imperata Rice Years cropped Years 3 years Intra-row spacing M 0.5 m Inter-row spacing M 0.5 m Crop row calculation method D (Fixed distance between rows)
N (Fixed number of rows) P (Minimum row productivity)
P
Crop row calculation value m/No./% 20% Monoculture yield kg per ha 1,500 kg per ha
6.2.6 Model indexes
Apart from the above variables, the biophysical component also comprises a number
of indexes to account for the quality of the site, climate, management practices, and
genetic material contained in the rubber trees. These indexes are termed site index,
latex index, girth clonal index, and yield clonal index and they are based on a
synthesis of scientific studies (Grist et al., 1995).
The site index, which has a value between zero and 100, is the result of the values
chosen for the component variables. It is calculated by multiplying a climate index
and a soil index. The soil index considers the seven soil variables in Table 6.5. The
climate index takes account of the effects of climate variables in Table 6.1. Two
options for calculating the site index are available – applying the static approach using
the same soil and climate factors in every year of calculation, or the active approach
keeping the soil factors constant in every year but varying the climate factors annually
(Grist et al., 1995). The latter approach was applied in this study, but only partly
because only rainfall was varied (Table 6.4), while for temperature, potential
evapotranspiration, and solar radiation (Table 6.2 and 6.3) their mean values were
repeated for each year.
The latex index, having a value between zero and one, is a combination of growing
conditions at the site plus the effect of fertiliser (Purnamasari et al., 2002).
The girth clonal index and yield clonal index account for the growth and yield
potential of the clonal material planted; however, they may depend on management
practices as well. The default girth clonal index was 1.0 for wildings and 1.3 for
The Economic Potential for Smallholder Rubber Production in Northern Laos
128
clonal material. The default yield clonal index was 0.6. The yield clonal index
defaulted to a value of 0.6 to reflect the productivity of Indonesian rubber
smallholdings relative to estates, given an index of 2.0 (Purnamasari et al., 2002).
Taking account of the selected values of all variables in the biophysical component of
BRASS and the default values of girth clonal index (1.3) and yield clonal index (0.6),
the yield of latex was obtained as shown in Table 6.8. However, by comparing the
simulated yields during the first three years with the average yields from the
household survey, it was found that the yields from BRASS with the yield clonal
index set at 0.6 were considerably lower than the yields from the survey. Since the
objective of using BRASS in this study was to predict yields of rubber over the life of
a typical rubber holding in Hadyao, the predicted yields needed to correspond as
closely as possible to the actual yields from the study village over the first three years
of tapping.
Table 6.8: Comparisons of average latex yields from the survey and BRASS (kg/ha) Yields from BRASS with different yield clonal indexes Year of tapping Yields
from survey 0.6 0.7 0.8 0.9 1.0 1.1 1.21st year 904 511 596 681 766 851 936 1,0212nd year 1,380 479 558 638 718 798 878 9573rd year 1,999 650 758 867 975 1,084 1,192 1,300Average yields 1,428* 657** 799 941 1,083 1,225 1,367 1,510Peak yield - 841 985 1,280 1,280 1,428 1,577 1,729Note: * First three years average ** 35 years average
It should be noted that the yields from BRASS were not greatly affected by changing
the values of any one of the estimated variables. Yet changes in the girth clonal index
and the yield clonal index had a greater impact on predicted yields. The default values
for girth clonal index of 1.0 for wilding and 1.3 for clonal material were based on
scientific research, hence there was no basis for revising them. However, the default
value of 0.6 for the yield clonal index was based on the fact that the yield performance
of smallholder rubber farmers in Indonesia was less than one-third of the yield from
rubber estates (Purnamasari et al., 2002). Hence the yield clonal index could be
adjusted to reflect the yield performance of rubber farmers in the study village.
Therefore, only the yield clonal index was varied to obtain the closest estimation of
yields to the actual yields from the survey.
The Economic Potential for Smallholder Rubber Production in Northern Laos
129
Table 6.8 also shows the comparisons of yields during the first three years of tapping
from the survey and from BRASS using different yield clonal indexes. It was hard to
decide which yield clonal index was the most accurate to use for predicting the yields
of rubber from the study village, given the different rates of yield increase over the
first three years. However, it was decided that the best estimation of the actual yields
from the study village was given by a clonal index of 1.1. The average yield over the
life of the plantation in this case was about 1,367 kg/ha. Even though the yields
predicted by BRASS using a clonal index of 1.1 do not increase as rapidly in the
initial years as the yields from the survey, the overall pattern is similar and the yields
reach a peak of just under 1,600 kg/ha. It was judged appropriate to use an index of
1.1 because, with indexes less than 1.1, the estimated yields averaged less than 1,300
kg/ha, which was substantially lower than the yields from the survey, except in the
first year of tapping. On the other hand, with the index set higher than 1.1, the
estimated yields averaged greater than 1,500 kg/ha and reached a peak of over 1,700
kg/ha. Because of the variation in rainfall and the uncertainty about long-term yields
given limited data, it was considered unwise to predict that yields would reach a peak
of greater than 1,700 kg/ha. This was consistent with the average yields of 1,200-
1,350 kg/ha reported for smallholder rubber farmers in Southern China (Alton et al.,
2005), where rubber has been planted in similar upland areas with similar climate to
Northern Laos. Therefore, a yield clonal index of 1.1 was considered to be the most
appropriate for simulating rubber yields in the study village.
The household survey shows that smallholder rubber farmers in Hadyao village
obtained higher yields than those of Indonesian smallholders at the time when the
model was developed, which were less than two-thirds of the yields from rubber
estates. Indonesian smallholder rubber farms at that time were not well managed.
They were termed ‘jungle rubber’ because other tree species and grasses were allowed
to grow mixed with the rubber trees. So the yields from rubber smallholdings were
quite low compared to the yields from rubber estates which were normally much
better managed (Gouyon, 1999). The yield performance of Lao rubber farmers in
Hadyao village was somewhere between Indonesian smallholders and rubber estates.
Even though Lao rubber farmers did not apply fertilisers, the soils were quite fertile,
having been fallowed for 5-10 years. Moreover, they used clonal planting material
The Economic Potential for Smallholder Rubber Production in Northern Laos
130
and weeded thoroughly three times a year. Hence it is reasonable to suggest that their
yields are likely to be above the standard set by Indonesian smallholders.
6.2.7 Outputs
After the values of all variables in the biophysical component of BRASS were
selected in combination with the default value of girth clonal index (1.3) and the value
of 1.1 for the yield clonal index, the estimated latex yields over the productive life of
35 years were obtained, as presented in Fig. 6.2.
0100200300400500600700800900
1,0001,1001,2001,3001,4001,5001,600
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Year
Late
x Y
ield
(kg/
ha)
Figure 6.2: Predicted latex yield in Hadyao over 35 years using BRASS
It can be seen that the yield increased in the initial period, then levelled off, and
finally entered a long decreasing phase. The yield reached a peak of just under 1,600
kg/ha in Years 22. Exceptionally, there was a sharp drop in yield in three years – 10,
21, and 32. This drop occurred in the years with unusually low rainfall as seen in
The Economic Potential for Smallholder Rubber Production in Northern Laos
131
Table 6.4. It should again be noted that this estimated yield profile represents the
predicted yield pattern which rubber farmers in Hadyao village would be expected to
achieve, given the current state of knowledge, but the actual yields may vary if
management practices, weather conditions, or other factors change.
6.3 Discounted cash flow analysis of smallholder rubber production in the study
village
6.3.1 Introduction
The economic viability of the rubber enterprise was assessed using discounted cash
flow (DCF) analysis. Even though BRASS has an economic component flowing
similar principles, it was not used in this study since it was built as an add-on to the
biophysical component; the original purpose and most useful function of the model
was to estimate the yield over time. In the economic component users have to input
data into each pre-specified variable and cannot add or control additional factors
which are not included in the model. Therefore, the economic analysis of smallholder
production in this study relied on the development of a budgeting spreadsheet carried
out in Excel. It should be noted that the inputs assumed in the DCF analysis were
entirely consistent with the values of the variables entered in the biophysical model.
6.3.2 Principles of DCF analysis According to Campbell and Brown (2003), DCF analysis is based on the
conceptualization of an investment project as a net benefit stream measured by a ‘cash
flow’ (though this does not require that benefits and costs are all literally cash items).
Economists define an investment in terms of the decision to engage resources at the
present with the expectation of receiving a flow of net benefits over a sensibly long
period of time in the future. DCF analysis is used to assess multi-period investment
projects which have a net benefit stream happening over many years. When funds are
laid out in the beginning as investment outlays, the cash flow is negative. This
indicates that there is a net outflow of funds. Once the project commences to operate,
and benefits are received, the cash flow becomes positive, demonstrating that there is
a net inflow of funds. The net outflow and inflow of funds represent the ‘net cash
flow’.
The Economic Potential for Smallholder Rubber Production in Northern Laos
132
There are many criteria or DCF decision-rules that are used to appraise investment
projects. Among these decision-rules the most well-known and commonly used are
net present value (NPV), internal rate of return (IRR), and benefit-cost ratio (BCR).
The NPV of an investment project is the difference between the discounted present
value of future benefits and the discounted present value of future costs. A positive
value of NPV for a given project shows that the project’s benefits are greater than its
costs. Conversely, a negative value of NPV indicates that the benefits from the project
are less than its costs and it is not worthwhile to undertake it.
The IRR is the rate of discount which gives an NPV of zero, that is, the cost of capital
(the cost of financing the investment or the interest rate) in percentage terms which
makes the investment generate neither profit nor loss. When IRR is equal to or greater
than the interest rate, the investment is worthwhile. When IRR is less than the interest
rate, the investment is worthless to implement. It can be seen that the IRR decision-
rule will give precisely the same result as the NPV decision-rule. When the interest
rate is less than IRR, NPV will be positive. In contrast, when the interest rate is equal
to or larger than IRR, NPV will be negative.
The BCR is another method of comparing the present value of a project’s costs with
the present value of its benefits. As an alternative to calculating the NPV, the BCR is
measured by dividing the present value of benefits by the present value of costs. If the
value of BCR is equal to or greater than unity, it is worth undertaking the investment
project, and conversely if it is less than unity. It is obvious that when NPV is positive,
BCR is equal to or greater than unity, and when NPV is negative, BCR is less than
unity.
To conduct the DCF analysis, the costs and benefits of smallholder rubber production
had first to be identified and quantified (whether they were cash items or imputed
values such as labour). Then the issue of the choice of discount rate had to be
addressed. The usual investment criteria of NPV, IRR, and BCR were computed.
Then allowance was made for risk and uncertainty through a sensitivity analysis with
various rubber prices, discount rates, and wage rates. Other investment criteria were
also considered, notably the return to family-owned resources (or farm-family
The Economic Potential for Smallholder Rubber Production in Northern Laos
133
income) and the maintenance of a positive short-term cash flow. These various
aspects of the analysis are now discussed in turn.
6.3.3 Identifying costs and benefits
The costs associated with rubber production in Hadyao were material costs and labour
costs. The materials used for the establishment of rubber plots were for land
preparation, fencing, planting, and intercropping. Those used for land preparation
(slashing, burning, and clearing the field) were an axe and a long knife used only in
the first year. Those used for fencing included hammer, nails, barbed wire, and posts.
Fencing was erected in the first year of the plantation, and was assumed to be replaced
20 years later. Those used for planting and replanting were a hoe and the rubber
seedlings, which again were only required in the first year. Those used for
intercropping were rice seed, required for the initial period of three years of the
plantation. The materials used during the maintenance phase were for weeding only;
no fertilisers or herbicides were used. These materials included a small knife and
medium knife, assumed to be replaced every two years.
The materials used during harvesting period were for tapping and collecting the latex,
and harvesting the trees at the end of their productive life. Those used for tapping and
collecting were bowls, spouts, iron wire, a plastic brush for congregating latex from
the bowl, a tapping knife, a knife sharpening stone, a headlamp, small buckets, large
buckets, plastic bags, chemical powder applied at the tapping cut of the rubber trees
weekly during tapping period to prevent diseases, chemical liquid applied at the end
of tapping season to close the tapping cut of the trees, and a small brush which is used
for applying those chemical power and liquid. The replacement of these materials was
assumed to occur every ten years for bowls, five years for spouts and wire, and three
years for plastic brushes. For the tapping knife, sharpening stone, headlamp, small and
large buckets, plastic bags, chemicals, and small brush, an annual replacement was
assumed. The materials used for tree harvesting were a set of handy saws.
Table 6.9 shows the prices of these materials in 2005 and the quantities used for one
hectare of rubber. It should be noted that the prices were as quoted by farmers at the
time of the survey and the quantities are based on the assumption of a two-person
The Economic Potential for Smallholder Rubber Production in Northern Laos
134
labour force and 476 rubber trees per hectare. Almost all of the items of equipment for
tapping and collecting were imported from China. However, households that could
not afford to buy all imported equipment used local recycled materials instead at
lower cost. For example, halved plastic bottles were sometimes used as cups for
collecting the latex.
Table 6.9: Materials used for one hectare of rubber production in Hadyao
Production phases Materials Unit Quantity
2005 prices
(Kip*/unit)Establishment
Axe Piece 1 50,000Land preparation Long knife Piece 1 50,000
Hammer Piece 1 15,000Nails Kg 5 10,000Barbed wire Roll 22 150,000
Fencing
Posts Post 264 2,000Hoe Piece 1 30,000Planting Rubber seedlings Seedling 476 5,000
Replacement planting **
Rubber seedlings Seedling 48 5,000
Intercropping Rice seed Kg 40 2,000 Maintenance
Small knife Piece 1 6,000Weeding Medium knife Piece 1 20,000
Harvesting Bowl/cup Piece 476 1,200Gutter/spout Piece 476 300Iron wire Roll 2 220,000Plastic brush Piece 2 5,000Tapping knife Piece 2 25,000Knife sharpening stone Set 2 15,000
Tapping
Headlamp Piece 2 97,000Small bucket Piece 2 7,500Big bucket Piece 2 40,000Plastic bag Piece 240 1,500Chemical powder Kg 2.5 64,000Chemical liquid Kg 1.5 50,000
Collecting
Small brush Piece 2 4,000Tree harvesting
Handy saws Set 1 500,000
Note: * 1 US$ = 10,500 Kip, August 2005 ** Replacement planting is based on 10% of the initial 476 seedlings of one hectare Source: Group interview with rubber farmers in Hadyao village, 2005
The labour requirements for each production phase (establishment, maintenance, and
harvesting) for one hectare of rubber, expressed in person-days and calculated on an
annual basis, are presented in Table 6.10. Labour requirements for the establishment
The Economic Potential for Smallholder Rubber Production in Northern Laos
135
phase included land preparation, fencing, planting, and rice intercropping. The total
labour requirement of 80 person-days for land preparation (slashing, burning and
clearing the field, lining, terracing and holing), and planting of seedlings (20 person-
days) occurred in the first year of the plantation. The labour for fencing of about 30
person-days was assumed to occur every 20 years. The labour for intercropping (rice
sowing and harvesting) of 50 person-days occurred during the first three years of the
plantation.
The only labour requirement during the maintenance phase was for weeding. From the
household survey rubber farmers in the study village thoroughly clean-weeded by
hand every year from the establishment of their rubber plantations. They normally
weeded three times a year. It was assumed that they would continue to do so until
Year 14. After that it was assumed they would clean-weed two times a year until the
end of the productive life of the rubber, as weed growth would be reduced under the
shade of the rubber canopy. Given that 40 person-days were required each time, the
total annual labour requirement for weeding was estimated to be 120 person-days
between Years 1 and 14 and 80 person-days between Years 15 and 35.
According to farmers in Hadyao, one person could tap about 300 trees in a day. In
order to finish tapping one hectare of 476 trees before the latex stopped flowing, two
persons were needed. One person was normally able to tap two trees in a minute and
collect latex from four trees in a minute. Based on eight working hours per day and
120 tapping days in a year, the total labour requirements for tapping and collecting
latex for one hectare of rubber trees in a year are were around 119 and 60 person-
days, respectively. Based on the labour requirement for harvesting a rubber tree of 0.3
person-days per tree, about 143 person-days were estimated for harvesting one hectare
of rubber trees (476 trees) at the end of the plantation.
The Economic Potential for Smallholder Rubber Production in Northern Laos
136
Table 6.10: Annual labour requirements for one hectare of rubber production in Hadyao
Production phases Activities Annual labour
requirements (person-days)
Establishment Slashing 30 Burning and clearing 20
Land preparation
Lining, terracing, and holing 30 Fencing Fencing 30 Planting Rubber planting and replacement planting 20
Rice sowing 20 Intercropping Rice harvesting 30
Maintenance Hand weeding (three times a year from Year 1-14)
120
Hand weeding (two times a year from Year 15-35)
80
Harvesting Tapping 119 Collecting 60 Trees harvesting 143
Source: Group interview with rubber farmers in Hadyao village, 2005
The benefits from the rubber enterprise in Hadyao were from intercropping rice,
producing tub-lump rubber, and harvesting rubber wood. Rice was normally
intercropped during the initial three years after the establishment of the rubber. From
household survey, the average yield of intercropped rice was 1.1, 1.0, and 0.9 ton/ha
for the first, second, and third years, respectively. Comparing the yields of
intercropped rice from household survey and from BRASS, it can be seen that the
yields from BRASS were higher and decreased more sharply than from the survey
(Table 6.11). To represent the yields of rice intercropping more accurately, therefore,
the average yields from the survey were used to estimate the benefits from
intercropping.
Table 6.11: Average yields of intercropped rice from BRASS and the survey in Hadyao
Rice yields (kg/ha)Intercropping years BRASS SurveyFirst year 1,687 1,100Second year 1,360 1,000Third year 884 900
Tub-lump rubber was the main output from rubber production. The yields of latex
from BRASS (Fig. 6.2) were used to estimate the benefits from tub-lump rubber.
The Economic Potential for Smallholder Rubber Production in Northern Laos
137
However, farmers in the study village processed the raw latex into tub-lump rubber by
using plastic bags or buckets. Then the tub-lump was left for a month before selling.
There must be some loss in weight from the raw latex compared to the tub-lump
rubber due to the loss of moisture content. The extent of the loss is unknown, but for
this analysis it was assumed to be 10% loss in weight. Therefore, the tub-lump rubber
was calculated from the latex yields from BRASS by taking adjusting downwards by
10%.
At the end of the productive life of the rubber trees, rubber wood was expected to be
the final product from the enterprise. As estimated by BRASS, the volumes of rubber
wood, including both buttlog and small wood, were 203 m3 per hectare, but only 64
m3 per hectare of this was buttlog. The estimated volumes of rubber wood by BRASS
for Hadyao were consistent with the yields of rubber greenwood in other rubber
producing countries, with a total volume of 140 to 200 m3 per hectare and a volume of
usable logs of 54 to 57 m3 per hectare (Balsiger et al., 2000). The yield of rubber
wood varies according to clones, site conditions, and management (smallholdings or
estates). The higher ranges are found in countries where plantations are well managed
such as Malaysia, Thailand, India, and Sri Lanka. The volume of buttlog of 64 m3 per
hectare was used to estimate the benefit from rubber wood in the study village as only
buttlog was likely to be commercialized while small wood was likely to be burnt in
the field.
6.3.4 Quantifying costs and benefits
After all costs and benefits associated with the production of rubber over the life of
the plantation were identified, their values were quantified using constant 2005 prices.
The material costs were estimated from the prices of the materials and the quantities
used for one hectare in each phase of rubber production (Table 6.9). The labour costs
were valued by calculating the labour requirements for rubber establishment and
production over the life of the plantation (Table 6.10) and estimating the opportunity
cost of labour or wage rate. The opportunity cost of labour is the earnings obtained
from the next best employment opportunity, that is, the labour income foregone by
working on the rubber holding. The current wage rate for agricultural work in Hadyao
was 20,000-25,000 Kip/person-day, depending on the type of work (light or heavy),
The Economic Potential for Smallholder Rubber Production in Northern Laos
138
while the wage rate in Luangnamtha town was 25,000 Kip/person-day. These rates
applied to an adult male or female working for eight hours per day. In the study
village, rubber production was undertaken by male and female labour, but school-
children also helped. In many cases school-children assisted by tapping before they
went to school or by collecting latex during the weekend. Also, it cannot be assumed
that all adult household members had the alternative of off-farm employment,
particularly in town. In any case, family labour tends to be used for farming
(including rubber) at times when the opportunity for wage work is less, as these
opportunities vary throughout the year. Therefore, it was decided to use some fraction
of the market wage rate to estimate the opportunity cost of labour. The problem was
deciding what fraction to use as there is no standard way to measure this. Hence it was
assumed that the opportunity cost of labour was about two thirds of the maximum
market wage rate of 25,000 Kip/person-day, that is, around 17,000 Kip/person-day.
Both the market wage rate and the estimated opportunity wage rate were used in the
DCF analysis.
The benefits from intercrops for the initial three years of the rubber enterprise were
estimated from the average rice yields reported in the survey (Table 6.11), valued at
the 2005 price of 3,500 Kip/kg. The benefits from tub-lump rubber from Years 9 to 35
were estimated from the annual latex yields from BRASS after the adjustment of 10%
weight loss as discussed above, valued at the 2005 price of tub-lump rubber of 7,800
Kip/kg. Since there is no existing market for rubber wood in Laos and the nearest
market for rubber wood from Northern Laos is China, the price of rubber wood in
Yunnan Province was used, adjusted to reflect the actual price which is likely to be
offered by Chinese traders. The 2005 price of rubber wood in Yunnan was 360
Yuan/m3 (Alton et al., 2005). The farm gate price in Laos was assumed to be about
280 Yuan/m3 or 364,000 Kip/m3 (1 Yuan = 1,300 Kip, August 2005). Hence, the
estimated farm gate price of rubber wood of 364,000 Kip/m3 and the volume of
buttlog of 64 m3 were used to quantify the benefit from rubber wood.
6.3.5 Discount rates
Because the investment in rubber is long term and the costs and benefits occur at
different times, the use of discount factors was required to revalue the future costs and
The Economic Potential for Smallholder Rubber Production in Northern Laos
139
benefits from the rubber investment in present-day values so that they were
comparable and could be added together. The selection of a discount rate is crucial in
determining the result of the DCF analysis (Campbell and Brown, 2003). In DCF
analysis market prices are used to value project inputs and outputs so that the financial
profitability of the investment project can be determined. The market price of capital
to the investor is the market interest rate and this represents the cost of capital in the
investment project. The right approach to deciding the discount rate used in DCF
analysis is therefore to estimate the cost of capital to the investor.
This will vary depending on wether the investor is a borrower or a lender of funds. If
the project investor is a net borrower, the interest rate at which the project can borrow
is the opportunity cost of the funds. This market borrowing rate should be used as the
discount rate for any project appraisal. If the project investor is a net lender, then
without the project these funds could be invested in the financial market and earn the
market lending rate. The project must earn at least this market lending rate for it to be
worth doing, hence the after-tax market lending rate, the opportunity cost of the funds,
should be used as the discount rate (Perkins, 1994).
The market borrowing rate or interest rate was adopted for this study as most Lao
farmers lack the capital to invest in agricultural production without obtaining credit,
particularly in the early stages of transition to commercial agriculture as in the case
study area. Consideration was given to the interest rates paid by farmers for different
sources of credit in order to determine the appropriate discount rates for use in the
DCF analysis. Rubber farmers in the study village received credit support from the
Agricultural Promotion Bank (APB). In 1994 they were supported with loans at low
interest rates of 2% with a repayment period of 7 years and in 2003 with loans at 7%
and a repayment period of 10 years. The interest rates offered by the APB were
special cases because they were heavily subsidized and especially arranged for the
purpose of demonstrating rubber cultivation, as requested by the provincial
authorities. The borrowing interest rate is normally 12% for the APB, 15% for
commercial banks, and 20% for money lenders (BOL, 2006a). Since the interest rate
varies with different sources of funds, these three rates were used in the analysis –
12%, 15% and 20%. (Note that there is no real evidence of moneylenders financing
long-term investment such as rubber at 20%. This rate was used to provide an upper
The Economic Potential for Smallholder Rubber Production in Northern Laos
140
bound for the discount rate. A higher rate would not have affected the overall results
as the investment was clearly unprofitable at 20%.)
In the above discussion the effect of inflation on interest and discount rates was
ignored. In reality most countries experience at least some inflation in prices so the
discount rates to be used in DCF analysis need to take account of inflation. In Section
6.3.3 constant 2005 prices were used for quantifying costs and benefits. When all
costs and benefits are valued in constant or real terms (i.e., net of inflation), then a
real discount rate must be used to discount the net cash flow. The real discount rate is
calculated by deflating the market interest rate, usually quoted in nominal terms, by
the expected rate of inflation in the economy. Laos is one of the nations that were
affected by Asian crisis in the late 1990s. The inflation in Laos before the crisis was
about 15-20%, then it rose sharply to nearly 90% in 1998, reaching a peak of 134% in
1999. After that it fell considerably to around 23% in the following year. From 2001-
2004 inflation was around 10-15%. In 2005, the year in which field data were
collected, it was 7% (BOL, 2006b). Allowing for the 2005 inflation rate, the real
discount rates used in the DCF analysis were 5%, 8% and 13%.
6.3.6 DCF – the base analysis
This section presents the DCF analysis of a typical hectare of rubber in Hadyao using
the mid-range real discount rate of 8% and the estimated opportunity wage rate of
17,000 Kip/person-day. The full spreadsheet of this analysis is presented in Table
6.12.
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
14
1
Tab
le 6
.12:
Cas
h flo
w a
naly
sis o
f one
hec
tare
of r
ubbe
r pl
anta
tion
over
35
year
s of p
rodu
ctio
n C
osts
and
Ret
urns
Uni
t Y
ear1
Y
ear2
Y
ear3
Y
ear4
Y
ear5
Y
ear6
Y
ear7
Y
ear8
Y
ear9
Y
ear1
0 Y
ear1
1 Y
ear1
2 M
ater
ial I
nput
s
Land
pre
para
tion
‘000
Kip
10
0
Fe
ncin
g
‘000
Kip
3,
893
Plan
ting
and
repl
acem
ent p
lant
ing
‘000
Kip
2,
618
Inte
rcro
ppin
g
‘000
Kip
80
80
80
W
eedi
ng
‘000
Kip
26
26
26
26
26
26
Tapp
ing
‘000
Kip
1,
438
274
274
284
C
olle
ctin
g ‘0
00 K
ip
698
698
698
698
Tr
ee h
arve
stin
g ‘0
00 K
ip
Tot
al M
ater
ial C
osts
‘000
Kip
6,
747
80
106
26
26
2,
162
972
998
982
Lab
our
Inpu
ts
La
nd p
repa
ratio
n PD
s 80
Fe
ncin
g
PDs
30
Plan
ting
and
repl
acem
ent p
lant
ing
PDs
20
Wee
ding
PD
s 12
0 12
0 12
0 12
0 12
0 12
0 12
0 12
0 12
0 12
0 12
0 12
0
Tapp
ing
PD
s
11
9 11
9 11
9 11
9
Col
lect
ing
PD
s
60
60
60
60
Inte
rcro
ppin
g ric
e –
sow
ing
PD
s 20
20
20
In
terc
ropp
ing
rice
– ha
rves
ting
PD
s 30
30
30
Tr
ees h
arve
stin
g PD
s
T
otal
Lab
our
Inpu
ts
PD
s 30
0 17
0 17
0 12
0 12
0 12
0 12
0 12
0 29
9 29
9 29
9 29
9
Wag
e ra
te
‘000
Kip
/PD
17
17
17
17
17
17
17
17
17
17
17
17
T
otal
Lab
our
Cos
ts
‘0
00 K
ip
5,10
0 2,
890
2,89
0 2,
040
2,04
0 2,
040
2,04
0 2,
040
5,07
5 5,
075
5,07
5 5,
075
TO
TA
L C
OST
S
‘000
Kip
11
,847
2,
970
2,99
6 2,
040
2,06
6 2,
040
2,06
6 2,
040
7,23
7 6,
047
6,07
3 6,
057
Rub
ber
Ret
urns
Rub
ber y
ield
– la
tex
K
g/ha
93
6 87
8
1,19
2 1,
247
R
ubbe
r yie
ld –
tub
lum
p K
g/ha
84
3 79
0
1,07
3 1,
122
R
ubbe
r pric
e ‘0
00 K
ip/k
g
7.
8 7.
8 7.
8 7.
8
Rub
ber w
ood
yiel
d m
3 /ha
R
ubbe
r woo
d pr
ice
‘000
Kip
/m3
Tot
al R
ubbe
r R
etur
ns
‘0
00 K
ip
6,57
3 6,
161
8,36
7 8,
753
Ric
e R
etur
ns
R
ice
yiel
d K
g/ha
1.
1 1
0.9
Ric
e pr
ice
‘000
Kip
/kg
3.5
3.5
3.5
T
otal
Ric
e R
etur
ns
‘0
00 K
ip
3,85
0 3,
500
3,15
0
TO
TA
L R
ET
UR
NS
‘0
00 K
ip
3,85
0 3,
500
3,15
0
6,57
3 6,
161
8,36
7 8,
753
NE
T R
ET
UR
NS
(NR
)
‘000
Kip
-7
,997
53
0 15
4 -2
,040
-2
,066
-2
,040
-2
,066
-2
,040
-6
64
114
2,29
4 2,
696
DIS
CO
UN
TE
D N
R
8% d
isco
unt r
ate
‘000
Kip
-7,4
05
454
122
-1,4
99
-1,4
06
-1,2
86
-1,2
05
-1,1
02
-332
53
98
4 1,
071
CU
MU
LA
TIV
E N
PV
‘0
00 K
ip
-7
,405
-6
,951
-6
,829
-8
,328
-9
,734
-1
1,02
0 -1
2,22
5 -1
3,32
7 -1
3,65
9 -1
3,60
6 -1
2,62
2 -1
1,55
1
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
14
2
Tab
le 6
.12:
Cas
h flo
w a
naly
sis o
f one
hec
tare
of r
ubbe
r pl
anta
tion
over
35
year
s of p
rodu
ctio
n (c
ontin
ued)
C
osts
and
Ret
urns
Uni
t Y
ear1
3 Y
ear1
4 Y
ear1
5 Y
ear1
6 Y
ear1
7 Y
ear1
8 Y
ear1
9 Y
ear2
0 Y
ear2
1 Y
ear2
2 Y
ear2
3 Y
ear2
4 M
ater
ial I
nput
s
Land
pre
para
tion
‘000
Kip
Fenc
ing
‘0
00 K
ip
3,
893
Pl
antin
g an
d re
plac
emen
t pla
ntin
g ‘0
00 K
ip
In
terc
ropp
ing
‘0
00 K
ip
W
eedi
ng
‘000
Kip
26
26
26
26
26
26
Tapp
ing
‘000
Kip
27
4 85
7 28
4 27
4 27
4 28
4 1,
428
274
284
274
274
867
C
olle
ctin
g ‘0
00 K
ip
698
698
698
698
698
698
698
698
698
698
698
698
Tr
ee h
arve
stin
g ‘0
00 K
ip
Tot
al M
ater
ial C
osts
‘000
Kip
99
8 1,
555
1.00
8 97
2 99
8 98
2 2,
152
4,86
5 1,
008
972
998
1,56
5 L
abou
r In
puts
Land
pre
para
tion
PDs
Fe
ncin
g
PDs
30
Plan
ting
and
repl
acem
ent p
lant
ing
PDs
W
eedi
ng
PDs
120
120
80
80
80
80
80
80
80
80
80
80
Ta
ppin
g
PDs
119
119
119
119
119
119
119
119
119
119
119
119
C
olle
ctin
g
PDs
60
60
60
60
60
60
60
60
60
60
60
60
In
terc
ropp
ing
rice
– so
win
g
PDs
In
terc
ropp
ing
rice
– ha
rves
ting
PD
s
Tree
s har
vest
ing
PDs
Tot
al L
abou
r In
puts
PDs
299
299
259
259
259
259
259
289
259
259
259
259
W
age
rate
‘0
00 K
ip/P
D
17
17
17
17
17
17
17
17
17
17
17
17
Tot
al L
abou
r C
osts
‘000
Kip
5,
075
5,07
5 4,
395
4,39
5 4,
395
4,39
5 4,
395
4,90
5 4,
395
4,39
5 4,
395
4,39
5 T
OT
AL
CO
STS
‘0
00 K
ip
6,07
3 6,
630
5,40
3 5,
367
5,39
3 5,
377
6,54
7 9,
770
5,40
3 5,
367
5,39
3 5,
960
Rub
ber
Ret
urns
Rub
ber y
ield
– la
tex
K
g/ha
1,
302
1,33
1 1,
395
1,46
8 1,
511
1,54
2 1,
562
1,57
5 1,
237
1,57
7 1,
557
1,54
3
Rub
ber y
ield
– tu
b lu
mp
Kg/
ha
1,17
2 1,
198
1,25
6 1,
321
1,36
0 1,
387
1,40
6 1,
418
1,11
4 1,
419
1,40
1 1,
388
R
ubbe
r pric
e ‘0
00 K
ip/k
g 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8
Rub
ber w
ood
yiel
d m
3 /ha
R
ubbe
r woo
d pr
ice
‘000
Kip
/m3
Tot
al R
ubbe
r R
etur
ns
‘0
00 K
ip
9,13
9 9,
341
9,79
6 10
,304
10
,606
10
,822
10
,966
11
,058
8,
686
11,0
68
10,9
28
10,8
30
Ric
e R
etur
ns
R
ice
yiel
d K
g/ha
Ric
e pr
ice
‘000
Kip
/kg
Tot
al R
ice
Ret
urns
‘000
Kip
T
OT
AL
RE
TU
RN
S
‘000
Kip
9,
139
9,34
1 9,
796
10,3
04
10,6
06
10,8
22
10,9
66
11,0
58
8,68
6 11
,068
10
,928
10
,830
N
ET
RE
TU
RN
S (N
R)
‘0
00 K
ip
3,06
6 2,
711
4,39
3 4,
937
5,21
3 5,
445
4,41
9 1,
288
3,28
3 5,
701
5,53
5 4,
870
DIS
CO
UN
TE
D N
R
8% d
isco
unt r
ate
‘000
Kip
1,
127
923
1,38
5 1,
441
1,40
9 1,
363
1,02
4 27
6 65
2 1,
049
943
768
CU
MU
LA
TIV
E N
PV
‘0
00 K
ip
-10,
424
-9,5
01
-8,1
16
-6,6
75
-5,2
66
-3,9
03
-2,8
79
-2,6
03
-1,9
51
-902
41
80
9
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
14
3
Tab
le 6
.12:
Cas
h flo
w a
naly
sis o
f one
hec
tare
of r
ubbe
r pl
anta
tion
over
35
year
s of p
rodu
ctio
n (c
ontin
ued)
C
osts
and
Ret
urns
Uni
t Y
ear2
5 Y
ear2
6 Y
ear2
7 Y
ear2
8 Y
ear2
9 Y
ear3
0 Y
ear3
1 Y
ear3
2 Y
ear3
3 Y
ear3
4 Y
ear3
5 M
ater
ial I
nput
s
La
nd p
repa
ratio
n ‘0
00 K
ip
Fenc
ing
‘0
00 K
ip
Plan
ting
and
repl
acem
ent p
lant
ing
‘000
Kip
In
terc
ropp
ing
‘0
00 K
ip
Wee
ding
‘0
00 K
ip
26
26
26
26
26
Ta
ppin
g ‘0
00 K
ip
274
274
284
274
1,42
8 28
4 27
4 27
4 28
4 27
4 27
4
Col
lect
ing
‘000
Kip
69
8 69
8 69
8 69
8 69
8 69
8 69
8 69
8 69
8 69
8 69
8
Tree
har
vest
ing
‘000
Kip
50
0 T
otal
Mat
eria
l Cos
ts
‘0
00 K
ip
998
972
1,00
8 97
2 2,
152
982
998
972
1,00
8 97
2 1,
472
Lab
our
Inpu
ts
Land
pre
para
tion
PDs
Fenc
ing
PD
s
Pl
antin
g an
d re
plac
emen
t pla
ntin
g PD
s
W
eedi
ng
PDs
80
80
80
80
80
80
80
80
80
80
80
Ta
ppin
g
PDs
119
119
119
119
119
119
119
119
119
119
119
C
olle
ctin
g
PDs
60
60
60
60
60
60
60
60
60
60
60
In
terc
ropp
ing
rice
– so
win
g
PDs
Inte
rcro
ppin
g ric
e –
harv
estin
g
PDs
Tree
s har
vest
ing
PDs
143
Tot
al L
abou
r In
puts
PDs
259
259
259
259
259
259
259
259
259
259
401
W
age
rate
‘0
00 K
ip/P
D
17
17
17
17
17
17
17
17
17
17
17
Tot
al L
abou
r C
osts
‘000
Kip
4,
395
4,39
5 4,
395
4,39
5 4,
395
4,39
5 4,
395
4,39
5 4,
395
4,39
5 6,
822
TO
TA
L C
OST
S
‘000
Kip
5,
393
5,36
7 5,
403
5,36
7 6,
547
5,37
7 5,
393
5,36
7 5,
403
5,36
7
8,29
4 R
ubbe
r R
etur
ns
Rub
ber y
ield
– la
tex
K
g/ha
1,
499
1,50
2 1,
514
1,49
0 1,
463
1,43
2 1,
399
974
1,32
1 1,
262
1,21
3
Rub
ber y
ield
– tu
b lu
mp
Kg/
ha
1,34
9 1,
351
1,36
2 1,
341
1,31
6 1,
289
1,25
9 87
6 1,
189
1,13
6 1,
092
R
ubbe
r pric
e ‘0
00 K
ip/k
g 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8 7.
8
Rub
ber w
ood
yiel
d m
3 /ha
64
R
ubbe
r woo
d pr
ice
‘000
Kip
/m3
364
Tot
al R
ubbe
r R
etur
ns
‘0
00 K
ip
10,5
19
10,5
41
10,6
25
10,4
57
10,2
67
10,0
55
9,82
2 6,
834
9,27
7 8,
861
31,8
10
Ric
e R
etur
ns
Ric
e yi
eld
Kg/
ha
Ric
e pr
ice
‘000
Kip
/kg
Tot
al R
ice
Ret
urns
‘000
Kip
TO
TA
L R
ET
UR
NS
‘0
00 K
ip
10,5
19
10,5
41
10,6
25
10,4
57
10,2
67
10,0
55
9,82
2 6,
834
9,27
7 8,
861
31,8
10
NE
T R
ET
UR
NS
(NR
)
‘000
Kip
5,
126
5,17
4 5,
222
5,09
0 3,
720
4,67
8 4,
429
1,46
7 3,
874
3,49
4 23
,516
D
ISC
OU
NT
ED
NR
8%
dis
coun
t rat
e ‘0
00 K
ip
749
699
654
590
399
464
408
125
306
255
1,59
0 C
UM
UL
AT
IVE
NPV
‘000
Kip
1,
558
2,25
7 2,
911
3,50
1 3,
900
4,36
4 4,
772
4,89
7 5,
203
5,45
8 7,
048
The Economic Potential for Smallholder Rubber Production in Northern Laos
144
Fig. 6.3 shows the estimated undiscounted annual net returns per hectare. It can be
seen that in the immature phase of the plantation net returns are only positive in Years
2 and 3 when development costs are minimal and a crop of upland rice is harvested.
Net returns become positive from Year 10 after tapping begins and from that point
follow the yield profile as shown in Fig. 6.2. At the end of the productive life of the
rubber in Year 35 there is an additional return from rubber wood.
-10,000,000
-5,000,000
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Year
Undi
scou
nted
Ann
ual N
et R
etur
ns (K
ip/h
a)
Figure 6.3: Undiscounted annual net returns using a wage rate of 17,000 Kip/person-day
However, when all costs and benefits are discounted at 8%, the result is as presented
in Fig. 6.4. In the initial period between Year 1 and Year 9 the discounted annual net
returns are negative in almost every year, except for Years 2 and 3 as before. From
Years 10 to 16 the discounted annual net returns are positive with a slight increasing
trend. Then, from Year 17 until Year 34 the discounted annual net returns steadily
decrease, until in Year 35 there is the additional return from rubber wood, though the
The Economic Potential for Smallholder Rubber Production in Northern Laos
145
effect of discounting reduces the net return in this year from 24 million Kip to 1.6
million Kip.
-8,000,000
-7,000,000
-6,000,000
-5,000,000
-4,000,000
-3,000,000
-2,000,000
-1,000,000
0
1,000,000
2,000,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Year
Dis
coun
ted
Ann
ual N
et R
etur
ns (K
ip/h
a)
Figure 6.4: Discounted annual net returns using 8% discount rate and wage rate of
17,000 Kip/person-day
Fig. 6.5 shows the discounted net returns on a cumulative basis (or cumulative NPV)
over the life of the plantation. The cumulative NPV becomes positive from Year 23.
In other words, a planning horizon of at least 23 years is needed for this investment to
be attractive.
In terms of the three investment criteria applied, the NPV was 7.048 million Kip, the
IRR was 10.7% (well above the discount rate of 8%), and the BCR was 1.12. Hence
the investment in rubber in this case was clearly profitable, given the yield, price and
cost estimates and assumptions. The result is plausible and helps confirm the farmers’
The Economic Potential for Smallholder Rubber Production in Northern Laos
146
assessment that smallholder rubber is a worthwhile investment, thus helping to
explain the expansion of rubber planting in the study village.
-15,000,000
-10,000,000
-5,000,000
0
5,000,000
10,000,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Year
Cum
ulat
ive
NPV
(Kip
/ha)
Figure 6.5: Cumulative NPV using 8% discount rate and wage rate of 17,000
Kip/person-day
6.3.7 Risk and uncertainty
The previous section presented the DCF analysis for a typical hectare of rubber in
Hadyao using a discount rate of 8%, an estimated wage rate of 17,000 Kip, and the
2005 market price of tub-lump rubber of 7,800 Kip/kg. However, when an investment
project involves forecasting future costs and benefits, particularly for a long-term
investment like rubber, there is no guarantee that the exact estimate of NPV, IRR, or
BCR will be obtained. Risk and uncertainty are always involved in predictions about
the future and should be taken into account in DCF analysis. There are various
methods to integrate risk and uncertainty into DCF analysis. The most commonly
The Economic Potential for Smallholder Rubber Production in Northern Laos
147
used technique is sensitivity analysis. This establishes the degree to which the
outcome of the DCF analysis is susceptible to the assumed values used in the analysis.
The sensitivity analysis involves, first, identifying key variables which are likely to
have the greatest impact on the outcome of an investment project and are most
changeable or uncertain and, second, repeating the DCF analysis for high, moderate,
and low values for each of the key variables. As a consequence, a set of estimates of
NPV, IRR, or BCR will be obtained (Upton, 1996).
The key factors which are likely to profoundly affect the outcomes of the investment
in smallholder rubber in Northern Laos are the price of tub-lump rubber, the discount
rate, and the wage rate. For this study, the price of rubber was varied from a low of
5,460 Kip/kg to a high of 10,140 Kip/kg, 30% below and above the 2005 market
price. The low value for the discount rate was 5% and the high value was 13%,
reflecting the different sources of credit as discussed above. The wage rate was only
varied between 17,000 Kip/person-day, the estimated average opportunity cost of
family labour, and 25,000 Kip/person-day, the market wage rate.
Table 6.13 presents the results of the sensitivity analysis for the three discount rates
and three prices of tub-lump rubber at the estimated wage rate of 17,000 Kip/person-
day. At the low price, the investment in rubber was unprofitable at all discount rates.
At the 2005 market price the investment was profitable at the low and middle discount
rates, shading into the unprofitable zone at a discount rate of 13%. At the high price,
the investment was lucrative at all discount rates. Table 6.14 presents the results of the
sensitivity analysis at the market wage rate of 25,000 Kip/person-day. At the low
price and 2005 prices, investment in rubber was unprofitable at all discount rates. At
the high price, the investment was worthwhile at the low and middle discount rates,
but unprofitable at a discount rate of 13%.
The Economic Potential for Smallholder Rubber Production in Northern Laos
148
Table 6.13: Results of DCF analysis for smallholder rubber in Hadyao (2005 prices and wage rate of 17,000 Kip/person-day)
NPV (Kip/ha) and BCR at selected discount rates Rubber prices (Kip/kg) 5% 8% 13%
IRR(%)
5,460 -4,958,000 (0.94:1)
-9,361,000 (0.84:1)
-10,847,000 (0.71:1) 3.4
7,800 23,038,000 (1.27:1)
7,048,000 (1.12:1)
-3,347,000 (0.91:1) 10.7
10,140 51,034,000 (1.61:1)
23,463,000 (1.40:1)
4,153,000 (1.11:1) 15.4
Table 6.14: Results of DCF analysis for smallholder rubber in Hadyao (2005 prices and wage rate of 25,000 Kip/person-day)
NPV (Kip/ha) and BCR at selected discount rates Rubber prices (Kip/kg) 5% 8% 13%
IRR(%)
5,460 -35,135,000 (0.69:1)
-30,017,000 (0.62:1)
-23,599,000 (0.53:1) -5.9
7,800 -7,139,000 (0.94:1)
-13,605,000 (0.83:1)
-16,100,000 (0.68:1) 3.4
10,140 20,857,000 (1.18:1)
2,807,000 (1.04:1)
-8,600,000 (0.83:1) 8.8
The findings from the sensitivity analysis show that at the low price of tub-lump
rubber the investment in smallholder rubber is no longer worthwhile, indicating that
the expansion of rubber planting may stop if there is a decline in the price of tub-lump
rubber in the future. In fact, at the wage rate of 17,000 Kip/person-day and a discount
rate of 8%, when the price of tub-lump rubber decreases more than 13% from the
current market price the investment in smallholder rubber becomes unprofitable. This
could perhaps be countered by increasing yields (e.g., through use of fertilizer) or
obtaining a higher farm-gate price by improving the quality of rubber and reducing
transport costs. Nevertheless, the current expansion is clearly vulnerable to a price
downturn.
It should be noted that the long-run investment decision (i.e., to establish a new
plantation) is different from the short-run decision to go on tapping an existing
holding. Once investment has occurred it is a ‘sunk cost’, so the decision to go on
tapping depends on whether the net returns to the additional labour used at least
equals the estimated opportunity cost of 17,000 Kip. The short-run decision whether
to continue tapping will vary depending on the yield level in each year. In the year of
lowest yield, a price decrease of 17% would be enough to discourage the farmer from
The Economic Potential for Smallholder Rubber Production in Northern Laos
149
tapping, but in the year of peak yield, it would take a 60% price decrease for tapping
to become unprofitable. Moreover, in the case of the short-run decision, farmers can
stop tapping without damaging their investment, i.e., they can return to tapping again
when the price increases. This reduces the risk they face.
Similarly, at the high discount rate – in fact, at a threshold discount rate of 11% or
more – the investment is unprofitable, indicating that if farmers had to borrow money
at a high interest rate they may have to reconsider their investment. Farmers in
Hadyao have benefited from subsidized credit support with a low interest rate and a
long repayment period. However, the 8% real interest rate used for the base analysis
reflects commercial rates, indicating that all farmers really need is a grace period
during establishment, with deferred payments of principal and interest.
Again, when labour costs are valued at the market wage rate, even with the current
market price of tub-lump rubber the investment in smallholder rubber is not
worthwhile, suggesting that farmers could not afford to hire other people at the market
wage rate to carry out all of the labour requirements for rubber production. However,
it is not likely that farmers in the uplands of Northern Laos would rely on hiring
labour. According to the household survey in Hadyao, poor households normally used
only their family labour for rubber production while middle or wealthy households
used a combination of family labour and hired labour if they could afford to do so. It
is the ability to use family labour at low opportunity cost (as well as minimal
supervisory costs) that makes smallholder rubber an economic proposition, even with
low yields and quality. This suggests that labour costs may be a serious constraint for
estate production in this environment, without relying on imported labour.
There are other risks associated with the investment in smallholder rubber in the
uplands of Northern Laos, in particular climate and market uncertainty. The
occurrence of heavy frost in 1999, killing many rubber trees in Luangnamtha
Province, is the foremost climatic risk that farmers face. There is a justifiable concern
that this could happen again in the future as most rubber trees in Luangnamtha
Province are planted at an elevation of almost 700 metres above sea level. Another
concern is market uncertainty. The sudden but temporary close of border trade with
China in late 2006 is one example of market uncertainty that seriously affected Lao
The Economic Potential for Smallholder Rubber Production in Northern Laos
150
rubber farmers as their only market is China. There is also the likelihood of
competition as other rubber producing countries are also increasing their production in
response to the rising global rubber demand. This may lead to a drop in the price of
rubber and as a result Lao rubber farmers may have to add value to their rubber
through better processing. An improved road network will also help to reduce
marketing costs and maintain the farm-gate price of rubber, but the pace and extent of
this investment in infrastructure is uncertain.
6.4 Other investment criteria
The usual criteria for investment in agriculture are those used above, namely, NPV,
IRR, or BCR. However, the conventional investment criteria may not be entirely
applicable in the case of semi-commercial smallholder agriculture, in which the
markets for land and labour are incomplete. It can be argued that the relevant criterion
is the net return to the family’s own resources of labour and land, sometimes termed
farm family income (Herdt, 1978). This can be computed by removing family labour
from the costs included in the DCF analysis (land was not costed in any case given the
restricted nature of the land tenure system). Using a discount rate of 8%, this gave a
substantially higher NPV of 50.945 million Kip. To put this in perspective, the NPV
per person-day was around 29,000 Kip. This is higher than the off-farm wage of
25,000 Kip/person-day, again reflecting the farmers’ calculation that rubber is a
worthwhile use of family resources.
Another criterion which a semi-commercial smallholding farmer would consider is
the short-term cash flow, taking borrowings and repayments into account. The cash
surplus for any period is defined as net cash flow plus cash loans received minus
payments of interest and principal (Dillon and Hardaker, 1993). Farmers could not
afford to have a negative cash surplus and would want to ensure they had the
capability to service their loans. Hadyao rubber farmers received loans with a 2%
interest rate and a 7-year repayment period in 1994-95 and then in 2003 they received
loans with a 7% interest rate and a 10-year repayment period. In both cases interest
charges were accumulated and paid at the end of the loan period. To check the
capacity of farmers to pay back their loans and not suffer a cash flow problem, cash
flow budgets were developed for the first eleven years of a one-hectare rubber
enterprise (thus including three years of tapping), using both current prices and
The Economic Potential for Smallholder Rubber Production in Northern Laos
151
constant 2005 prices. It should be noted that the costs and returns of rice intercropping
in the initial three years of the plantation were not considered since rice seed was from
the farmers’ own stock and rice was not sold but only used for household
consumption. There were no cash labour costs as most of the labour was supplied by
household members.
The cash flow budget using current prices, which are the historical prices actually
encountered by farmers, is presented in Table 6.15. The capital required to establish
one hectare of rubber was about 0.973 million Kip, including the material costs for
land preparation, fencing, and rubber seedlings. Supposing this amount was advanced
as credit with an interest rate of 2% and a repayment period of seven years, the total
amount which would have to be paid back would be about 1.118 million Kip. Because
of the high inflation rate in the past decade, particularly in 1999, the capital
requirement for the establishment of one hectare of rubber in 1994 was low compared
to the first year revenue of around 2.949 million Kip. When taking account of the
amount paid back for the loan, the cumulative cash surplus after 11 years was 9.433
million Kip. However, there was a small negative cash surplus in Years 3 and 5 due to
the purchase of weeding tools, and a negative surplus in Year 7 when repayments fell
due, prior to the commencement of tapping, though the cumulative shortfall was
easily wiped out in the first year of production.
The cash flow budget using constant 2005 prices is shown in Table 6.16. The capital
required to establish one hectare of rubber was about 6.667 million Kip, which
includes the material costs for land preparation, fencing, and rubber seedlings.
Suppose this was supported by credit with an interest rate of 7% and a repayment
period of ten years, the total amount which would have to be paid back would be
about 13.115 million Kip. When taking account of the amount paid back for the loan,
the cumulative cash surplus was 3.776 million Kip. Again, there was a small negative
cash surplus in Years 3, 5, and 7 due to the purchase of weeding tools, but the
repayment of principal and interest in Year 10 caused the cash surplus to go negative
again, until the greater income in Year 11 wiped out the cumulative shortfall.
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
15
2
Tab
le 6
.15:
Cas
h flo
w b
udge
t fro
m Y
ear
1-11
(cur
rent
pri
ces)
Y
ear1
Y
ear2
Y
ear3
Y
ear4
Y
ear5
Y
ear6
Y
ear7
Y
ear8
Y
ear9
Y
ear1
0 Y
ear1
1 Pa
ymen
ts (K
ip)
Land
pre
para
tion
Axe
10
,000
Long
kni
fe
8,00
0
Fe
ncin
g
Ham
mer
4,
000
N
ails
15
,000
Bar
bed
wire
66
0,00
0
Post
s 13
2,00
0
Pl
antin
g an
d re
plac
emen
t pla
ntin
g H
oe
7,00
0
Rub
ber s
eedl
ings
13
0,90
0
W
eedi
ng
Smal
l kni
fe
1,50
0
2,00
0
2,50
0
4,00
0
4,50
0
5,50
0
Med
ium
kni
fe
5,00
0
8,00
0
11,0
00
14
,000
17,0
00
19
,000
Ta
ppin
g
Bow
l
47
6,00
0
Gut
ter
119,
000
Ir
on w
ire
400,
000
Pl
astic
bru
sh
6,00
0
Tapp
ing
knife
40
,000
44
,000
48
,000
Kni
fe sh
arpe
ning
ston
e
20
,000
24
,000
28
,000
Hea
dlam
p
13
0,00
0 15
0,00
0 17
0,00
0 C
olle
ctin
g
Smal
l buc
ket
10,0
00
12,0
00
14,0
00
B
ig b
ucke
t
40
,000
60
,000
70
,000
Plas
tic b
ag
240,
000
288,
000
336,
000
C
hem
ical
pow
der
100,
000
125,
000
150,
000
C
hem
ical
liqu
id
54,0
00
60,0
00
67,5
00
Sm
all b
rush
6,
000
6,40
0 7,
000
Tot
al P
aym
ents
(Kip
)
973,
400
10
,000
13,5
00
18
,000
1,66
2,50
0 76
9,40
0 91
5,00
0 R
ecei
pts (
Kip
)
Tub-
lum
p ru
bber
2,
949,
365
3,90
9,76
7 7,
080,
000
Tot
al R
ecei
pts (
Kip
)
2,94
9,36
5 3,
909,
767
7,08
0,00
0 N
et C
ash
Flow
(Kip
)
-973
,400
-10,
000
-1
3,50
0
-18,
000
1,
286,
865
3,14
0,36
7 6,
165,
000
Cas
h L
oans
Rec
eive
d (K
ip)
97
3,40
0
In
tere
st a
nd P
rinc
iple
Pay
men
ts (K
ip)
1,
118,
131
Cas
h Su
rplu
s (K
ip)
0
-1
0,00
0
-13,
500
-1
,136
,131
1,28
6,86
5 3,
140,
367
6,16
5,00
0 C
umul
ativ
e C
ash
Surp
lus (
Kip
)
0 0
-10,
000
-10,
000
-23,
500
-23,
500
-1,1
59,6
31
-1,1
59,6
31
127,
234
3,26
7,60
1 9,
432,
6001
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
15
3
Tab
le 6
.16:
Cas
h flo
w b
udge
t fro
m Y
ear
1-11
(con
stan
t 200
5 pr
ices
)
Y
ear1
Y
ear2
Y
ear3
Y
ear4
Y
ear5
Y
ear6
Y
ear7
Y
ear8
Y
ear9
Y
ear1
0 Y
ear1
1 Pa
ymen
ts (K
ip)
Land
pre
para
tion
Axe
50
,000
Long
kni
fe
50,0
00
Fenc
ing
H
amm
er
15,0
00
N
ails
50
,000
Bar
bed
wire
3,
300,
000
Po
sts
528,
000
Plan
ting
and
repl
acem
ent p
lant
ing
Hoe
30
,000
Rub
ber s
eedl
ings
2,
618,
000
Wee
ding
Sm
all k
nife
6,
000
6,
000
6,
000
6,
000
6,
000
6,
000
M
ediu
m k
nife
20
,000
20,0
00
20
,000
20,0
00
20
,000
20,0
00
Tapp
ing
B
owl
571,
200
G
utte
r
14
2,80
0
Iron
wire
44
0,00
0
Plas
tic b
rush
10
,000
Tapp
ing
knife
50
,000
50
,000
50
,000
Kni
fe sh
arpe
ning
ston
e
30
,000
30
,000
30
,000
Hea
dlam
p
19
4,00
0 19
4,00
0 19
4,00
0 C
olle
ctin
g
Smal
l buc
ket
15,0
00
15,0
00
15,0
00
B
ig b
ucke
t
80,0
00
80,0
00
80,0
00
Pl
astic
bag
360,
000
360,
000
360,
000
C
hem
ical
pow
der
160,
000
160,
000
160,
000
C
hem
ical
liqu
id
75,0
00
75,0
00
75,0
00
Sm
all b
rush
8,
000
8,00
0 8,
000
Tot
al P
aym
ents
(Kip
)
6,66
7,00
0
26,0
00
26
,000
26,0
00
2,
162,
000
972,
000
998,
000
Rec
eipt
s (K
ip)
Tu
b-lu
mp
rubb
er
6,57
2,87
1 6,
160,
845
8,36
7,27
3 T
otal
Rec
eipt
s (K
ip)
6,
572,
871
6,16
0,84
5 8,
367,
273
Net
Cas
h Fl
ow (K
ip)
-6
,667
,000
-26,
000
-2
6,00
0
-26,
000
4,
410,
871
5,18
8,84
5 7,
369,
273
Cas
h L
oans
Rec
eive
d (K
ip)
6,
667,
000
Inte
rest
and
Pri
ncip
le P
aym
ents
(Kip
)
13
,114
,998
Cas
h Su
rplu
s (K
ip)
0
-2
6,00
0
-26,
000
-2
6,00
0
4,41
0,87
1 -7
,926
,153
7,
369,
273
Cum
ulat
ive
Cas
h Su
rplu
s (K
ip)
0
0 -2
6,00
0 -2
6,00
0 -5
2,00
0 -5
2,00
0 -7
8,00
0 -7
8,00
0 4,
332,
871
-3,5
93,2
82
3,77
5,99
1
The Economic Potential for Smallholder Rubber Production in Northern Laos
154
In practice farmers had little problem with cash flow and could comfortably pay back
the loans. This was, firstly, because they gained the benefit from high inflation in the
past decade, making the invested funds considerably cheaper in nominal terms by the
time of repayment, and, secondly, because the interest rate was subsidised and both
interest and principal payments were deferred. If they had not received the support of
such low interest loans, they may have had to finance the investment from their own
savings or borrow from other sources of credit with higher interest rates and shorter
repayment periods. As a result they may have had difficulty in paying back the loans.
This means that in order to invest in smallholder rubber, farmers in the uplands of
Northern Laos need credit supports, at least with a grace period during the
establishment phase if they are planting for the first time. Similar support (even
outright planting grants) has been given to rubber smallholders in the past in the major
producing countries, such as Thailand and Malaysia.
6.5 Conclusion
The results from the DCF analysis for the study village, given current market
conditions and credit support for establishment, show that the investment in
smallholder rubber production is profitable and this helps confirm that the expansion
of rubber planting in that village is based on good economic returns, even allowing for
some variability in price and cost assumptions. Therefore, rubber can be considered as
one of the potential alternatives for poor upland farmers in settings such as Hadyao, in
line with the government policy of restricting shifting cultivation and supporting new
livelihood options for poverty reduction. However, this analysis has focused on rubber
as a single farm enterprise. To decide on the optimal extent of rubber planting would
require an analysis at the whole-farm and whole-village scale, comparing rubber with
other farm enterprises and land uses, including forest conservation, which is beyond
the scope of the thesis.
The Economic Potential for Smallholder Rubber Production in Northern Laos
155
Chapter 7
The Scope for Expanded Smallholder Rubber Production in
Luangnamtha Province
7.1 Introduction
The previous chapter presented a DCF analysis for smallholder rubber production in
the study village of Hadyao, showing that, under current market conditions and levels
of support, investment in rubber is worthwhile, explaining the recent expansion of
rubber planting in Hadyao and other villages in the study area. The purpose of this
chapter is to assess the scope for further expansion of smallholder rubber within
Luangnamtha Province. The approach was first to define representative scenarios in
spatial terms, drawing on concepts from land resource economics, then to estimate the
economic suitability of those scenarios for rubber planting. It needs emphasising that
this analysis is restricted to answering the question whether a given area is
economically suitable for rubber; it does not compare rubber with other agricultural or
conservation land uses.
7.2 Defining the scenarios
7.2.1 Conceptual basis of the scenarios
Different scenarios can be defined in many ways, depending on the criteria used. For
this study, the scenarios were based on the concept of land use-capacity, which is a
function of two major attributes – resource quality and accessibility (Barlowe, 1986).
These are in turn derived from the classical determinants of the net returns to land, or
‘land rent’, as first theorised by Ricardo (resource quality) and Von Thunen
(accessibility).
Resource quality involves the relative ability of the land resource to produce desired
products, returns, or satisfactions (Barlowe, 1986). With agricultural lands, quality is
usually viewed in terms of native fertility or fertility in combination with the ability to
respond to fertilizer inputs. Quality may reflect climate advantage – favourable
temperature and precipitation, low wind velocity, or infrequency of storms.
The Economic Potential for Smallholder Rubber Production in Northern Laos
156
Accessibility involves the convenience, time, and transport cost saving associated
with specific locations with respect to markets, transport facilities, and other resources
(Barlowe, 1986). Areas near the road, city, or market have more advantage than those
located at greater distance. The extent of this advantage corresponds with differences
in transportation costs; fields located at greater distances from market naturally have
higher transportation costs and thus receive a lower price for products and incur a
higher price for inputs.
In discussions of the productivity of farmlands, use-capacity is often equated with
differences in fertility, and in discussions of site location advantage, it is frequently
associated with transportation costs. However, both these dimensions are relevant.
The areas with the highest use-capacity typically have the greatest inherent production
potential and most favourable location in terms of transport to markets.
The first task, therefore, was to define levels of resource quality and levels of
accessibility within Luangnamtha Province. These were then mapped separately
before being combined into scenarios which were also mapped.
7.2.2 Levels of resource quality
In general the potential yield is the best summary measure of resource quality because
it reflects all the different biophysical dimensions in a given location. Hence resource
quality categories were based on the aggregate yield of latex over the life of a rubber
plantation for various locations within Luangnamtha Province, estimated through the
biophysical component of the Bioeconomic Rubber Agroforestry Support System
(BRASS) (Fig. 7.1). As mentioned in Chapter 6, there are four main groups of
variables in the biophysical component of BRASS including climate, topography and
soil, management of rubber, and management of intercrop to be used for estimating
the yield of rubber. The climate and topography and soil groups of variables are
consistent with the concept of resource quality.
The Economic Potential for Smallholder Rubber Production in Northern Laos
157
Figure 7.1: Defining levels of resource quality based on the yields estimated from
BRASS
For estimating the yield potential in various locations within Luangnamtha Province,
the climate, rubber management, and intercrop management variables were
maintained at the same values as for the case of study village. This is because the
climate does not vary greatly within Luangnamtha Province and was unlikely to be a
significant driver of differences in resource quality, and there was no reason to expect
any major differences in the management practices used as the technology of rubber
production in Hadyao and elsewhere in the province was similarly derived from
China. The details of these variables and the selected values or criteria are found in
Sections 6.2.2, 6.2.4, and 6.2.5 of Chapter 6.
However, the topography and soil variables, with the exception of maximum soil
moisture and wilting point, were varied depending on the measured characteristics of
soils in Luangnamtha Province. The variables of maximum soil moisture and wilting
point were set at the default values, as for the case of study village, because of the
lack of data on the water holding capacity of each soil texture in Laos. The details are
discussed in Section 6.2.3 of Chapter 6. The variables of topography, slope, soil
depth, drainage, % rock, soil texture, soil nutrients, and soil pH were all varied
according to the characteristics of soils in the Province. The details of the criteria for
these variables are found in Table 6.5 of Chapter 6. The decisions on which category
(good, moderate, bad) to use for each of the soil variables and which category
(terrace, flat) to use to represent the topography variable were based on land
characteristics or primary land attributes that were recorded by a soil survey in
The Economic Potential for Smallholder Rubber Production in Northern Laos
158
Luangnamtha Province undertaken by the Soil Survey and Land Classification Centre
(SSLCC) of the National Agriculture and Forestry Research Institute (NAFRI).
For analysing these land characteristics, the soil map of Luangnamtha Province was
rasterized by using the grid spatial function in a GIS program (ArcView 3.2a) to
create 116 five km by five km grid cells (or mapping units), which represented both a
geo-registered grid map surface and an array of records in a tabular data matrix, with
each record representing a grid cell of those land characteristics. Each mapping unit
could contain one or more soil sampling sites, but for the purpose of mapping only
one site was randomly selected to represent the soil characteristics in each mapping
unit. The reason for this procedure was that different sampling sites could have
different land characteristics which could not be meaningfully averaged to get a
representative set of characteristics. The characteristics of the selected site
representing each mapping unit are presented in Appendix 3 and the selected
categories (good, moderate, bad) for the eight variables of topography and soil in each
mapping unit are presented in Appendix 4.
Fig. 7.2 shows how the soil properties from the survey were used to select the values
for topography and soil variables in BRASS. The category of soil nutrients was
derived from the percentage of organic matter. The categories of slope and
topography were based on the slope percentage. The category of soil depth was
defined as such. The categories of soil texture and drainage were derived from soil
texture. The pH in water (pH H2O) was used for defining the category of soil pH. The
percentage of stone contamination was used to define the category of percentage rock.
As discussed in Chapter 6, apart from the above variables, the biophysical component
also contains a number of indexes to account for the quality of the site, climate,
management practices, and the quality of genetic material. These indexes are termed
site index, latex index, girth clonal index, and yield clonal index. The values of these
indexes were kept the same as in the case study village. They are discussed in Section
6.2.6 of Chapter 6.
The Economic Potential for Smallholder Rubber Production in Northern Laos
159
Figure 7.2: Defining topography and soil variables based on the soil properties in each
soil sampling site
By incorporating the same values for climate, rubber management, intercrop
management, and indexes as in Chapter 6 with the selected categories for the eight
topography and soil variables in Appendix 4, the yield of latex over the life of the
rubber plantation, of rice during the initial three years, and of rubber wood at harvest
for each mapping unit were obtained, as shown in Appendix 5.
Resource quality could be defined continuously or categorically into many levels, but
for this study it was classified into three levels – high, moderate, and low. The
decision on which level of resource quality represented each mapping unit was based
on average annual latex yields from Years 9 to 35 for each mapping unit (Appendix
5). These average yields then had to be categorized as high, moderate, or low. Fig. 7.3
presents the distribution of these average yields for each mapping unit. It can be seen
that the lowest group of yields was concentrated between 400 kg/ha and 1,000 kg/ha
making up about 14% of the total mapping units. The middle group was from 1,000
kg/ha to 1,300 kg/ha covering nearly 60% of the total mapping units. The highest
group of between 1,300 kg/ha and 1,600 kg/ha constituted around 26%. Therefore, the
The Economic Potential for Smallholder Rubber Production in Northern Laos
160
low, moderate, and high yield levels were defined as average yields of less than 1,000
kg/ha, between 1,000 and 1,300 kg/ha, and greater than 1,300 kg/ha, respectively.
Figure 7.3: The distribution of average annual latex yields for each mapping unit
By integrating these three levels of yield in a GIS, a resource quality map for
smallholder rubber in Luangnamtha Province was produced (Fig. 7.4). It can be seen
that the majority of the area in the Province was at the moderate level of resource
quality, with only a small proportion at either the low or high level. The significant
features in terms of topography and soil properties for these three levels of resource
quality are presented in Table 7.1. The main differences were that the areas of low
resource quality were predominantly Eutric Cambisols that were shallow, rocky, of
poor nutrient status, and steeply sloping topography, while the areas of moderate
The Economic Potential for Smallholder Rubber Production in Northern Laos
161
resource quality were predominantly Haplic Acrisols and Dystric Cambisols that were
limited by moderate levels of soil nutrients, soil pH, drainage, and steeply sloping
topography. The areas of high resource quality were predominantly Haplic Acrisols
that had good soil depth, texture, and drainage, and relatively flat topography. It is
interesting to note that Hadyao is located in a region of moderate resource quality.
Figure 7.4: Resource quality map for smallholder rubber in Luangnamtha Province
The Economic Potential for Smallholder Rubber Production in Northern Laos
162
Table 7.1: The number of mapping units in each level of resource quality by topography and soil properties
Resource Quality Topography and soil properties Low Moderate High
Flat 12 Topography Terrace 15 71 18 Ferric ACRISOLS 4 Haplic ACRISOLS 4 32 13 Dystric CAMBISOLS 3 27 8 Eutric CAMBISOLS 8 Gleyic CAMBISOLS 5 Ferric LUVISOLS 1 Haplic LUVISOLS 5 4
Soil Unit
Haplic LUXISOLS 2 Bad 8 Moderate 5 4 Soil Depth Good 2 71 26 Bad Moderate 3 9 Soil Texture Good 12 62 30 Bad 8 12 Moderate 6 50 27 Soil Nutrient Good 1 9 3 Bad Moderate 15 38 19 Soil pH Good 33 11 Bad 3 9 Moderate 4 54 11 Drainage Good 8 8 19 Bad 8 Moderate % Rock Good 7 71 30 Bad 15 59 8 Moderate 12 10 Slope Good 12
7.2.3 Levels of accessibility
The accessibility attribute was also divided into three levels – good, moderate, and
poor accessibility – based on the distance from a main road. Areas less than 0.5 km
from a main road were defined as good accessibility, from 0.5 to 3.5 km as moderate
accessibility, and more than 3.5 km as poor accessibility (Table 7.2). By integrating
these three levels of accessibility in a GIS, an accessibility map for Luangnamtha
Province was produced (Fig. 7.5). The map also shows the transport infrastructure,
The Economic Potential for Smallholder Rubber Production in Northern Laos
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including main roads, cart-tracks, and footpaths, and the location of individual
villages.
Table 7.2: Criteria for defining levels of accessibility Levels of accessibility Distance from main road (km) Good < 0.5 Moderate 0.5 - 3.5 Poor >3.5
Figure 7.5: Accessibility map in Luangnamtha Province
Each level of accessibility had its own characteristics in terms of the location of
villages and the nature of transportation, including the dominant mode of transport
The Economic Potential for Smallholder Rubber Production in Northern Laos
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used and the condition of the road. Villages with good accessibility were located
alongside or very close to the main road, which is the main route linking
Luangnamtha Province with other northern provinces of Laos and Yunnan Province in
China, hence agricultural produce could be collected directly by traders or transported
by truck to the market (Fig. 7.6). Most villages with moderate accessibility were
located in gently sloping areas and could access the main road by cart-tracks, though
some may only have had footpaths. Agricultural produce from this zone was normally
transported by human-drawn carts (Fig. 7.7) to the side of the main road and then
collected by traders or transported to the market. Most villages with poor accessibility
were located in hilly areas reachable only by footpaths. Agricultural produce was
normally back-loaded (Fig. 7.8) to the main road and then collected by traders or
transported to the market.
Figure 7.6: Trucks waiting to collect tub-lump rubber at the roadside
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Figure 7.7: Transporting rubber by cart
Figure 7.8: Transporting agricultural and forest produce using back packs
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Obviously the time spent in transporting produce to the roadside increases as
accessibility declines due to the greater distance, poorer condition of the road, and
more difficult mode of transportation, resulting in higher unit cost of transportation.
However, it should be noted that these categories were not fixed; according to
provincial agricultural officials, some villages in the more accessible parts of the poor
accessibility zone had already started planting rubber, with the intention to upgrade
their footpaths to cart-tracks when they started tapping.
7.2.4 Scenarios in terms of resource quality and accessibility
After the levels of resource quality and accessibility had been defined, these
dimensions were combined to form scenarios. Three levels of resource quality and
three levels of accessibility gave nine scenarios (Table 7.3). For example, Scenario A
combined a high level of resource quality and a good level of accessibility, while
Scenario I combined a low level of resource quality and a poor level of accessibility.
Each of these scenarios were spatially referenced to the 116 mapping units referred to
above.
Table 7.3: The levels of accessibility and resource quality in each scenario Accessibility Resource quality Good Moderate Poor
High Scenario A Scenario D Scenario G Moderate Scenario B Scenario E Scenario H Low Scenario C Scenario F Scenario I
7.3 Economic suitability of each scenario
7.3.1 Introduction
In order to define the economic suitability of these scenarios, hence of the spatial units
they described, a DCF analysis was undertaken for each scenario. The DCF model for
a typical hectare of smallholder rubber production in the study village (using the
opportunity cost of farm labour and the mid-range discount rate) was modified by
developing new yield profiles from the BRASS model for each level of resource
quality and adjusting input and output prices based on the estimated unit transport
costs for each level of accessibility. However, the values of the other variables in the
DCF model for Hadyao, including the quantity of materials and days of labour used in
The Economic Potential for Smallholder Rubber Production in Northern Laos
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each phase of production (Section 6.3.2 of Chapter 6), were applied to all scenarios
within Luangnamtha Province as the technology and management practices were not
expected to differ. As each scenario was the combination of the level of resource
quality and accessibility, the first task was to estimate the yield profiles for each level
of resource quality, then to estimate the prices and wage rates for each level of
accessibility, and finally to undertake the DCF analysis for each scenario.
7.3.2 Yield profiles for each level of resource quality
The latex yields for each mapping unit were estimated by BRASS, as discussed in
Section 7.2.2 and presented in Appendix 5. These yields were then averaged across all
the mapping units in a given category of resource quality, giving the three latex yield
profiles shown in Fig. 7.9 and Appendix 6. The same procedure was followed for the
annual yield of intercropped rice and the yield of rubber wood (Table 7.4). It should
be noted that, as expected, the yield patterns of latex and rubber wood were consistent
with the levels of resource quality, i.e., the yields are higher for higher resource
quality, but the yield pattern of intercropped rice did not entirely correspond to the
level of resource quality, i.e., the rice yield was lower for the higher resource quality.
One possible explanation is that, with high resource quality, the rubber trees grow
faster, providing more shade and competing for more nutrients with the intercrop,
hence the intercropped rice yields less.
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35
Year
Late
x yi
elds
(kg/
ha)
Low resource quality Moderate resource quality High resource quality
Figure 7.9: Latex yields for three levels of resource quality
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Table 7.4: Yields of intercropped rice and rubber wood for three levels of resource quality
Intercropping rice (kg/ha)Levels of resource quality Year 1 Year 2 Year 3Rubber wood at harvest
(m3/ha) Low 1,724 1,584 1,296 34 Moderate 1,698 1,429 979 55 High 1,681 1,320 839 68
7.3.3 Prices for each level of accessibility
The prices in Table 6.9 of Chapter 6 were those that applied to the study village,
which was one of the villages with good accessibility. There is no information on the
prices in villages with moderate or poor accessibility. Hence those values had to be re-
estimated. The distance from the main road and the condition of the road or track
would determine the price of tub-lump rubber, other outputs, and material inputs for
each level of accessibility. For example, it would cost more to transport tub-lump
rubber from a farm located far from a main road than from one which was nearby.
Also, it would cost more to transport rubber from a farm accessed by a road in very
bad condition than from one located the same distance but along a road in good
condition. In this section, the percentage reduction in the farm-gate price of tub-lump
rubber for moderate and poor accessibility is estimated, and these percentages are
used to adjust other prices.
For the good accessibility zone it was assumed that there was no cost of transporting
the tub-lump rubber to the market as it was supposed that Chinese traders would bring
their trucks to buy the rubber at the roadside every month, as in Hadyao. Farmers
could stockpile their rubber at home and sell it directly to the traders. Hence, farmers
in this zone were assumed to receive the 2005 market price of 7,800 Kip/kg for their
tub-lump rubber.
For the moderate accessibility zone it was also assumed that there was no cost of
transporting the tub-lump rubber from the roadside to the market. The costs incurred
were the cost of transporting the tub-lump rubber from the rubber plot to the roadside,
the cost of building a shelter for storing the rubber, and the cost of guarding the rubber
stockpile by sleeping in the shelter overnight (Table 7.5).
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Based on observations during fieldwork, one adult person using a two-wheeled cart
was able to transport 40 kg of tub-lump rubber per trip to the roadside. Each trip
would require about half an hour per km (including uploading, downloading, rest
breaks, and the return trip). Assuming 1,500 kg of tub-lump rubber sold per year (the
average in Hadyao), about 38 person-trips per year would be required. So the amount
of time spent transporting tub-lump rubber to the roadside in a year would be about 19
hours or 2.3 person-days per km, assuming a working day of 8 hours. If this labour is
valued at 17,000 Kip/person-day (the estimated average opportunity cost of family
labour), the cost of labour for transporting the tub-lump rubber to the roadside would
be about 39,000 Kip per km per year.
The cost of a hut for storing the tub-lump rubber was measured in terms of the labour
expended to build the hut, estimated to be 5 person-days. It was assumed that a hut
lasted for two years. At 17,000 Kip/person-day, the cost of a hut per year was about
42,500 Kip. The cost of guarding overnight was based on the number of nights needed
to look after the tub-lump rubber during the period of waiting for the traders. It was
assumed that the person who transported the rubber to the roadside would sleep
overnight by him/herself. Otherwise he/she would have to pay for another person to
look after the rubber. Within this zone a person could get all his rubber for the month
down to his storage hut in one day, requiring him only to stay overnight until the
traders came. This would occur once in each of the eight months of the tapping
season, making a total of eight nights per year. Using a wage rate of one-third the
market wage as this is light work with low opportunity cost, the cost of guarding
overnight per year was estimated to be around 67,000 Kip.
Altogether, the total cost of transporting the tub-lump rubber to the roadside from the
moderate accessibility zone was about 149,000 Kip per km per year. On a unit weight
basis the cost was about 100 Kip per kg-km.
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Table 7.5: The cost of transporting tub-lump rubber from the moderate accessibility zone (0.5-3.5 km) to the roadside
Items Unit AmountQuantity of tub-lump rubber sold per household kg/year 1,500Quantity of tub-lump rubber which one adult labourer can transport by cart per trip
kg/trip 40
Time spent per km per trip hr/km/trip 0.5Time spent per km per year hr/km/year 18.8Labour used per km per year person-
day/km/year 2.3
Wage rate Kip/person-day 17,000Cost of labour for transporting the tub-lump rubber to roadside per km per year
Kip/km/year 39,100
Labour used for building a hut person-day 5Cost of building a hut Kip/year 42,500Cost of guarding overnight Kip/year 66,700Total cost per km per year Kip/km/year 148,300Total cost per kg of tub-lump rubber per km Kip/kg-km 99
For the poor accessibility zone it was also assumed that there was no cost of
transporting the tub-lump rubber from the roadside to the market as the Chinese
traders brought their trucks to buy the rubber at the roadside. The costs incurred were,
as before, the cost of transporting the tub-lump rubber from the farm to the roadside,
the cost of building a shelter for storing the rubber, and the cost of guarding the rubber
overnight (Table 7.6).
Based on observations made during fieldwork, one adult person could transport 20 kg
of tub-lump rubber per trip by back-loading to the roadside, requiring about 1 hour per
km (including uploading and downloading, breaks, and the return trip). With 1,500 kg
sold per household per year, about 75 trips per year would be required. So the time
spent transporting rubber to the roadside would be about 75 hours or 9.4 person-days
per km. At 17,000 Kip/person-day, the cost of transporting the rubber would be about
160,000 Kip per km per year.
The cost of building a hut for storing the tub-lump rubber would be the same as for
the moderate accessibility zone. The cost of guarding overnight was also estimated in
the same way as for the moderate accessibility zone. Assuming two people were
involved in transporting the rubber, it would take an average household five days to
bring down their rubber to the roadside, meaning one person would have to spend five
nights per month or 40 nights per year guarding the stockpile. At one-third the market
The Economic Potential for Smallholder Rubber Production in Northern Laos
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wage, the cost of guarding would be about 333,000 Kip per year. While this might
seem unrealistic it serves to highlight the transportation bottleneck facing farmers in
the more remote villages.
Altogether, the cost of transporting the tub-lump rubber to the roadside from the poor
accessibility zone was about 536,000 Kip per km per year. On a unit weight basis, it
was around 360 Kip per kg-km.
Table 7.6: The cost of transporting tub-lump rubber from the poor accessibility zone (>3.5 km) to the roadside
Items Unit AmountQuantity of tub-lump rubber sold per household kg/year 1,500Quantity of tub-lump rubber which one adult labour can transport by back-loading per trip
kg/trip 20
Time spent per km per trip hr/km/trip 1Time spent per km per year hr/km/year 75Labour used per km per year person-
day/km/year 9.4
Wage rate Kip/person-day 17,000Cost of labour for transporting the tub-lump rubber to roadside per km per year
Kip/km/year 159,800
Labour used for building a hut person-day 5Cost of building a hut Kip/year 42,500Cost of guarding overnight Kip/year 333,300Total cost per km per year Kip/km/year 535,600Total cost per kg of tub-lump rubber per km Kip/kg-km 357
The estimated cost of transporting the tub-lump rubber to the roadside per kg and the
percentage reduction in the farm-gate price of tub-lump rubber for various distances
are presented in Figs. 7.10 and 7.11. For the moderate accessibility zone the cost of
transporting the tub-lump rubber was about 100 Kip at 1.5 km, 200 Kip at 2.5 km, and
300 Kip at 3.5 km. For the poor accessibility zone the range was much greater, from
around 1,500 Kip at 4.5 km to just under 8,000 Kip at 22.5 km (Fig. 7.10). It can be
seen that the transportation cost increased more sharply in the poor accessibility zone
than in the moderate accessibility zone due to the smaller maximum loads per trip and
slower speed when back-loading as compared with using carts.
The percentage reduction in the farm-gate price of tub-lump rubber was about 1.5% at
1.5 km, 2.5% at 2.5 km, and 4% at 3.5 km for the moderate accessibility zone and
ranged from nearly 19% at 4.5 km to just over 100% at 22.5 km for the poor
The Economic Potential for Smallholder Rubber Production in Northern Laos
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accessibility zone (Fig. 7.11). In fact, the distance for the poor accessibility zone
extends further than the 22.5 km shown in the graphs because the percentage
reduction in the farm-gate price of tub-lump rubber for greater distances is over
100%. It is unlikely that farmers who live in these areas would plant rubber as the
price for their rubber would not even cover the transportation cost.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0.5
1.5
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
11.5
12.5
13.5
14.5
15.5
16.5
17.5
18.5
19.5
20.5
21.5
22.5
Distance (km)
Tran
spor
t cos
t (ki
p/kg
)
Figure 7.10: The estimation of cost of transporting the tub-lump rubber to the roadside
by distance
0
10
20
30
40
50
60
70
80
90
100
0.5
1.5
2.5
3.5
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9.5
10.5
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15.5
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17.5
18.5
19.5
20.5
21.5
22.5
Distance (km)
Perc
enta
ge re
duct
ion
in p
rice
s (%
)
Figure 7.11: The percentage reduction in farm-gate prices of tub-lump rubber by
distance
The Economic Potential for Smallholder Rubber Production in Northern Laos
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The estimation of the percentage reduction in the farm-gate price of tub-lump rubber
as presented above is consistent with the change in prices of agricultural produce and
purchased material inputs in other upland areas of Laos. A marketing survey by
Manivong et al. (2005) in the upland villages in Samet-Saysana Zone in Sayabouly
District of Sayabouly Province found that the prices of agricultural produce at the
mid-remote villages and the remotest villages were almost 50% and 75% lower than
at the market in town. This was because of the greater distance from the town, poorer
road condition, and the lack of market information. Therefore, villagers’ capacity to
obtain full value for their produce was very low and they had often been taken
advantage of in trading. Farmers in the remotest villages had to back-load their
produce to sell to traders who were waiting at the roadside or transport their produce
to the market by themselves by paying for transportation costs. Conversely, the prices
of imported goods such as salt, flavouring ingredients, clothes, construction materials,
and agricultural inputs sold in the mid-remote villages and the remotest villages were
nearly 50% and 75% higher than at the market in town. It should be noted that the
percentage reduction in prices of agricultural produce reported by that survey was in
the range of the percentage reduction in the farm-gate price of tub-lump rubber
estimated for the poor accessibility zone in this study, which likely corresponds to the
‘mid-remote’ and ‘remote’ classifications used by Manivong et al. (2005).
7.3.4 DCF analysis for each scenario
To perform DCF analysis for each scenario, the output of tub-lump rubber was
calculated from the latex yield profiles for each level of resource quality (Fig. 7.9 and
Appendix 6) by taking account of the estimated 10% loss in weight, as discussed in
Section 6.3.2 of Chapter 6. The outputs of intercropped rice and rubber wood for each
level of resource quality were calculated by using the yields in Table 7.4.
The prices of outputs and inputs had to be adjusted to reflect the variation in transport
costs associated with each accessibility zone. As shown in Fig. 7.11, there was no
change in the farm-gate price of tub-lump rubber in the good accessibility zone but
the percentage reduction in the farm-gate price varied within the moderate and poor
accessibility zones depending on the actual distance from the main road. Hence a
The Economic Potential for Smallholder Rubber Production in Northern Laos
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price adjustment had to be made that was representative of the actual location of the
majority of the villages within these zones. This was done by using the average
distance from main road in each zone. The average distance of the villages located in
the moderate accessibility zone was about 2 km, ranging from 0.5 km to 3.5 km (Fig.
7.12). From Fig. 7.11 the percentage reduction in farm-gate price of tub-lump rubber
at this distance was around 2%. Therefore this percentage was used to adjust farm-
gate prices for those scenarios involving moderate accessibility (Scenarios D, E, and
F). The average distance to the main road of the villages located in the poor
accessibility zone was about 11 km, ranging from 5 km to 35 km (Fig. 7.13). From
Fig. 7.11 the percentage reduction in the farm-gate price of tub-lump rubber at this
distance was about 50%. Hence this percentage was used to adjust prices for the
scenarios involving poor accessibility (Scenarios G, H, and I).
Figure 7.12: Distribution of distance to the main road of villages in the moderate
accessibility zone
The Economic Potential for Smallholder Rubber Production in Northern Laos
175
Figure 7.13: Distribution of distance to the main road of villages in the poor
accessibility zone
Thus the farm-gate price of tub-lump rubber was unchanged for the good accessibility
zone and reduced by 2% and 50% for the moderate and poor accessibility zones,
respectively. The same percentage deductions were applied to the price of rubber
wood. The price of intercropped rice was increased by the relevant percentage as most
farmers were net purchasers of rice, hence every kilogram of rice produced substituted
for rice purchased from the market. The prices of material inputs were likewise
increased (Table 7.7). In principle, the opportunity cost of labour should also have
been adjusted to reflect increased distance but this would have introduced some
circularity as a figure of 17,000 Kip per person-day was assumed in computing
transport costs, labour being the main component of these costs. To the extent that the
opportunity cost of labour was in fact lower for the scenarios with poorer
accessibility, the estimated returns to investment in smallholder rubber would be
underestimated. However, it is unlikely that this would have greatly affected the
results reported below. Table 7.8 details the prices used for each scenario.
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Table 7.7: Percentage change in prices for each level of accessibility Level of accessibility Items Good Moderate Poor
Tub-lump rubber 0 –2 –50 Intercropped rice 0 +2 +50Rubber wood 0 –2 –50 Material inputs 0 +2 +50
Table 7.8: Prices of inputs and outputs used in DCF analysis for each scenario Scenarios A, B, C
Scenarios D, E, F
Scenarios G, H, I Items Unit
(Kip/unit) (Kip/unit) (Kip/unit) Materials Establishment phase Axe Piece 50,000 51,000 75,000 Long knife Piece 50,000 51,000 75,000 Hammer Piece 15,000 15,300 22,500 Nails Kg 10,000 10,200 15,000 Barbed wire Roll 150,000 153,000 225,000 Posts Post 2,000 2,040 3,000 Hoe Piece 30,000 30,600 45,000 Rubber seedlings Seedling 5,000 5,100 7,500 Rice seed Kg 2,000 2,040 3,000 Maintenance phase Small knife Piece 6,000 6,120 9,000 Medium knife Piece 20,000 20,400 30,000 Harvesting phase Bowl/cup Piece 1,200 1,224 1,800 Gutter/spout Piece 300 306 450 Iron wire Roll 220,000 224,400 330,000 Plastic brush Piece 5,000 5,100 7,500 Tapping knife Piece 25,000 25,500 37,500 Knife sharpening stone Set 15,000 15,300 22,500 Headlamp Piece 97,000 98,940 145,500 Small bucket Piece 7,500 7,650 11,250 Big bucket Piece 40,000 40,800 60,000 Plastic bag Piece 1,500 1,530 2,250 Chemical powder Kg 64,000 65,280 96,000 Chemical liquid Kg 50,000 51,000 75,000 Small brush Piece 4,000 4,080 6,000 Handy saws Set 500,000 510,000 750,000 Outputs Rice Kg 3,500 3,570 5,250 Tub-lump rubber Kg 7,800 7,644 3,900 Rubber wood m3 364,000 356,720 182,000 Costs of labour Wage rates Person-day 17,000 17,000 17,000
The results of the DCF analysis in terms of NPV, IRR, and BCR for each scenario
using a discount rate of 8% are shown in Table 7.9. It can be seen that the investment
The Economic Potential for Smallholder Rubber Production in Northern Laos
177
in rubber is clearly worthwhile in Scenarios A and D (NPV of 12-14 million Kip/ha),
and marginally so in Scenarios B and E (NPV of 1.5-3.0 million Kip/ha), but not in
scenarios C, F, G, H, and I (NPV < 0). Hence low resource quality and poor
accessibility combined to make rubber unattractive.
Given that these scenarios were based on the average distance from the road in each
accessibility zone, a threshold analysis was undertaken to see at what distance a
scenario might switch from unprofitable to profitable. It was found that the investment
in smallholder rubber was worthwhile in Scenarios A, B, D, and E (moderate to high
resource quality and moderate to good accessibility) even at the outer margin of the
relevant accessibility zone. Conversely, rubber was unprofitable in Scenarios C, F, H,
and I (low resource quality and poor to moderate accessibility) even at the inner
margin of the accessibility zone. However, for Scenario G, combining poor
accessibility and high resource quality, the investment became marginally profitable if
the plot was located less than 5 km from the main road, making the change in prices
less than 22%.
The nine scenarios were ranked according to NPV per hectare to give a measure of
economic suitability (or land-use capacity) for smallholder rubber in Luangnamtha
Province (Table 7.10). By integrating these nine categories of economic suitability in
a GIS, an economic suitability map for rubber in Luangnamtha Province was
produced (Fig. 7.14). Table 7.11 presents the areas in each rank. Given that the
categories 1 to 4 were associated with a positive value for NPV per hectare,
approximately 239,600 hectares (or 26% of the total provincial area) were considered
as economically suitable for smallholder rubber. These economically suitable areas
were concentrated along the main road, indicating that road access was a key factor,
but moderate to high resource quality was also important. However, only 1% of the
total area was highly suitable while 25% was marginally suitable, as defined above.
Fig. 7.15 aggregates the rankings in Fig. 7.14 to show the areas of highly and
marginally suitable land.
The Economic Potential for Smallholder Rubber Production in Northern Laos
178
Table 7.9: Results of DCF analysis for each scenario at 8% discount rate Scenario NPV (Kip/ha) IRR (%) BCR
A 13,935,000 13.8 1.24 B 2,730,000 9.5 1.05 C -15,428,000 -23.9 0.74 D 12,662,000 13.4 1.22 E 1,712,000 9.0 1.03 F -16,026,000 -26.5 0.73 G -17,769,000 -12.0 0.73 H -22,600,000 -37.2 0.66 I -30,250,000 NC* 0.54
Note: * Not Computable
Table 7.10: Ranking of economic suitability for rubber Ranking Scenario
1 A 2 D 3 B 4 E 5 C 6 F 7 G 8 H 9 I
The Economic Potential for Smallholder Rubber Production in Northern Laos
179
Figure 7.14: Economic suitability ranking map for smallholder rubber in Luangnamtha
Province
Table 7.11: Areas within each suitability rank in Luangnamtha Province Rank Areas (ha) %1 454 0.12 6,744 0.73 49,239 5.24 183,132 19.65 165,624 17.86 121,712 13.17 133,484 14.38 219,851 23.69 52,260 5.6Total 932,500 100.0
The Economic Potential for Smallholder Rubber Production in Northern Laos
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Figure 7.15: Simplified economic suitability map for smallholder rubber in
Luangnamtha Province
It should be noted that these areas designated as economically suitable for smallholder
rubber are upper bound estimates, ignoring the requirements for other land uses such
as rice cultivation, residential areas, and conservation areas. Ideally, it would be
possible to overlay maps of these other uses to indicate the area remaining for rubber.
However, such data were not readily available. An indication can be given by using
the example of Hadyao. As discussed in Chapter 4, the land allocation process in
Hadyao resulted in 15.2% for conservation forest, 28.3% for protection forest, 36.9%
for agricultural land, 15.2% for plantation forest, 4.3% for grazing area and 0.1% for
The Economic Potential for Smallholder Rubber Production in Northern Laos
181
residential area. At the most, only agricultural and plantation land could be used for
rubber, accounting for about half of the village lands. If this proportion applied across
the Province, then 120,000 hectares or 13% of the total land area would be both
suitable and available for smallholder rubber (including marginally suitable land).
This still leaves open the question of how much land could or should be retained in
subsistence production for a balanced rural economy.
7.4 Conclusion
The results from this chapter indicate that the potential for smallholder rubber in the
study village is not an isolated case; there are other areas in Luangnamtha Province
that appear to be economically suitable for rubber. An upper bound estimate is that
26% of the Province has potential for rubber. However, this is based on analysis of the
rubber enterprise only and ignores the requirements of other land uses. If current land
use allocations are taken as a guide, perhaps only half of this potentially suitable land
is actually available for rubber planting. Nevertheless, given that rubber produces a
good financial return to the smallholder, whereas conservation areas generate mainly
non-market returns to the wider community, there may be increasing pressure to
reallocate land to tree crop production, raising important policy issues that are taken
up in the concluding chapter.
The Economic Potential for Smallholder Rubber Production in Northern Laos
182
Chapter 8
Conclusion
8.1 Background
In the past decade or more there has been major change in the uplands of Southeast
Asia due to the economic growth of these countries. One significant change in the
upland areas of Northern Laos in recent years has been the transition from subsistence
production based on shifting cultivation to smallholder commercial production.
Subsistence farmers in the uplands are becoming commercialized. The change in
farming systems in Northern Laos is a result of both the integration with the regional
economies of Southeast Asia, particularly Southern China, and of government policies
directed towards upland development. Most of the change in agriculture has been
driven by market forces and foreign investors, particularly from China. The
government policy of ‘stabilising’ shifting cultivation and improving road access has
helped drive the change.
The most extensive and rapid change in the uplands of Northern Laos has been the
expansion of smallholder rubber, made possible by robust global demand for rubber,
especially from China. While rubber provides an attractive investment opportunity for
foreign investors from China, Vietnam, and Thailand, the Government of Laos
envisages it as a way of stabilising shifting cultivation and generating income for
upland farmers. As a result of this rapid growth in market demand for rubber and the
support of government land-use policy, rubber is considered to be one of the
promising alternatives for upland farmers.
This study has examined the economic potential of smallholder rubber production in
the uplands of Northern Laos, particularly Luangnamtha Province. The specific
objectives were to appraise the economics of smallholder rubber production in an
established rubber-growing village (Hadyao in Namtha District), and to use this as a
basis for modelling the economic potential of smallholder rubber production in a
variety of settings to indicate the potential for further expansion in Luangnamtha
Province.
The Economic Potential for Smallholder Rubber Production in Northern Laos
183
8.2 Theoretical framework and methodology
The theory of intensification of shifting cultivation and of transition from subsistence
to commercial production was reviewed as a basis for understanding the change in
cultivation underway in the uplands of Northern Laos. Boserup’s theory of
intensification of food crop production from shifting cultivation to continuous
cultivation does not seem to apply to the mountainous terrain of Northern Laos.
Hence it may not be possible to ‘stabilise’ shifting cultivation without a transition
from subsistence production to new commercial crops. Myint’s theory of
commercialisation identifies two stages in this transition. In Stage I farmers maintain
subsistence output and use spare land and labour for the cash crop, while in Stage II
the expansion of the cash crop involves a reduction in subsistence output and greater
reliance on the market. This is encouraged by improvement in infrastructure, the
activities of market intermediaries, and increased confidence on the part of
smallholders in the benefits of producing for the market.
For many Southeast Asian upland farmers the transition from subsistence shifting
cultivation to cash crop production has involved the planting of tree crops or other
perennials. Barlow’s theory identifies five stages in tree crop development, starting
with subsistence agriculture with no plantation crops (as in Laos until recent decades)
and ending in a late advanced economy in which plantation crops have become less
profitable due to high costs of land and labour (a stage now reached by Malaysia and
Thailand). In the second stage (early agricultural transformation) subsistence
agriculture is still dominant and farmers adopt simple labour-intensive tree crop
technologies. In the third stage (late agricultural transformation) commercial
agriculture is dominant and new land- and labour-saving but more capital- and
management-intensive high-yielding tree crop technologies are generated and
adopted. In the fourth stage (early advanced economy) manufacturing is dominant and
the generation and adoption of tree crop technologies as in the third stage continues
and spreads to farmers in different circumstances. Upland farmers in Laos are clearly
in the ‘early agricultural transformation’ stage, but with the opportunity to borrow and
adapt tree crop technologies from neighbouring countries.
The Economic Potential for Smallholder Rubber Production in Northern Laos
184
The theory of transition implies that farmers are increasingly interested in the
financial returns they obtain from their investment. The conceptual model of
discounted cash flow (DCF) analysis was used for analysing the returns from the
investment of household resources in smallholder rubber production. The criteria of
DCF analysis used for appraising investment projects were net present value (NPV),
the internal rate of return (IRR), and the benefit-cost ratio (BCR). Within this
framework, consideration was given to the difficult subjects of the appropriate
valuation of unpaid household labour and of the appropriate discount rate to use in
calculating present values, given that farmers are only partially engaged in labour and
capital markets. In addition, when an investment project involves forecasting future
costs and benefits, particularly for a long-term investment like rubber, there is no
guarantee that the exact estimate of NPV, IRR, or BCR will be obtained. Therefore,
risk and uncertainty are taken into account in the DCF analysis through sensitivity
analysis. The conventional investment criteria (NPV, IRR, or BCR) may not be
entirely applicable in the case of semi-commercial smallholder agriculture, in which
the markets for land and labour are incomplete. It can be argued that the relevant
criterion is the net return to the family’s own resources of labour and land, sometimes
termed farm family income. This measure makes more sense in Stage I of the
transition, but in Stage II it makes more sense to value all resources at their
opportunity cost, with the exception of land as it is not transferable.
Since rubber is a long term investment, estimates of the yield of latex over the life of
the investment were required. Annual latex yields were estimated using the
Bioeconomic Rubber Agroforestry Support System (BRASS), which is the best
available tool for modelling smallholder rubber production. BRASS has a biophysical
and an economic component, of which only the former was used in this study. The
biophysical module incorporates many variables in order to estimate the intercrop
yields during the intercropping period, the stream of latex yields over the life of the
plantation, and the volume of harvestable timber at the end of the production period.
These variables are grouped into climate, topography and soil, rubber management,
and intercrop management. Though limited by the available data, the model provided
plausible estimates of latex yield over time, sufficient to be reasonably confident of
the economic appraisals undertaken.
The Economic Potential for Smallholder Rubber Production in Northern Laos
185
As well as considering economic returns over time, the study considered the spatial
potential of rubber. For this the concept of land use-capacity was essential. Land use-
capacity has two major components – resource quality and accessibility. Resource
quality involves the relative ability of the land resource to produce desired products,
returns, or satisfactions. Accessibility involves the convenience, time, and transport
cost saving associated with specific locations with respect to markets, shipping
facilities, and other resources. The areas with the highest land use-capacity ordinarily
have the greatest production potential and yield the highest return. In this study
resource quality was based primarily on the soil properties affecting latex yield, and
accessibility was based on the distance from the main road and the corresponding
mode of transporting rubber to the point of sale. These dimensions were mapped
using GIS techniques and incorporated in further DCF analysis, resulting in a map of
the relative economic suitability of the study area for smallholder rubber.
8.3 Key findings
Global rubber production is dominated by Thailand, Indonesia, and Malaysia. The
recent growth in rubber consumption is being driven by robust demand from China,
which is now the major consumer. As a result the price of natural rubber began to rise
again in 2002 after dropping for about 20 years. It has been forecast that the price of
rubber will continue to increase in the next ten years. However, this depends on China
maintaining its rate of economic growth and on the responses of other rubber
producing countries.
The economic structure of the rubber industry in the main rubber producing nations is
similar, with both estates and smallholders; however, smallholders have come to
dominate the planted area in these countries. Various schemes to support smallholder
rubber development have been implemented. Rubber smallholders in Thailand and
Malaysia have benefited from well-targeted technical and financial assistance over
many decades, conforming to the ‘dispersal strategy’ advocated by Barlow and
Jayasuriya (1984). An agency like the Office of Rubber Replanting Aid Fund
(ORRAF) in Thailand is a successful example of the assistance given to rubber
smallholders to help them through the establishment phase and to replant with high-
yielding clones. Some of the Malaysian agencies like the Rubber Industry
Smallholder Development Agency (RISDA) are more appropriate in the later stages
The Economic Potential for Smallholder Rubber Production in Northern Laos
186
of development when the opportunity cost of labour is higher and rubber holdings are
being left untapped. In Indonesia more reliance has been placed on nucleus estate and
smallholder schemes, which have been less effective. In the case of Laos, a ‘dispersal
strategy’ with widespread support for smallholders on the Thai model would seem
appropriate as the rubber industry is currently in the early phase of development.
Rubber has recently been introduced into upland areas of Laos, with relatively small
areas planted and even less under tapping. The rubber area is expanding rapidly in
response to growth in market demand from neighbouring China. Both local and
foreign investors, especially from China, Vietnam, and Thailand, have been interested
to invest in rubber plantations throughout the country by seeking land for concessions
and other arrangements. Currently, about 75% of rubber planting in Laos is through
concessions by both foreign and local investors, the rest is under smallholding farms.
In the study area the main arrangement is the direct financing of smallholders and the
roadside purchase of raw latex or ‘tub-lump’ rubber. The relative success of this
investment in smallholder rubber provides an important alternative model to the large-
scale concessions being sought.
Hadyao Village has become well-known in Laos as the first village to plant and tap
rubber. Rubber from Hadyao is sold directly to traders from China in the form of tub
lump. Due to the success of the early planters, rubber planting and production is
expanding rapidly in the study village, based on low-level technologies imported from
China and direct access to the Chinese market. After the first phase of rubber planting
in the mid-1990s, and with the recent upturn in price, there has been an increase in
rubber planting and rubber has become the main source of income for farmers in the
village.
The household survey in Hadyao shows that farmers are in the middle of a major
transition from primary dependence on the shifting cultivation of rice for subsistence
to dependence on smallholder rubber and the market economy. While rubber has
helped farmers increase their income, there are some emerging constraints. Land is
becoming a constraint due to a growing demand among farmers to expand their
rubber holdings, though less-accessible land is still available and some farmers are
able to plant rice and rubber in other villages. Labour is also becoming a constraint;
The Economic Potential for Smallholder Rubber Production in Northern Laos
187
though at this stage family labour can handle the tapping, as more trees come into
production this will be a constraint, putting more pressure on rice production. Rubber
farmers may have to reduce further the area of rice or even stop growing rice
altogether if they want to expand their rubber holdings. The land and labour
constraints mean that most households do not attain rice self-sufficiency any more.
Hence many farmers have now moved into the second and more risky stage in the
transition from subsistence to commercial agriculture.
Despite the popularity of rubber and the stated intention of farmers in the study
village to stop shifting cultivation and plant only rubber, it is unlikely that upland rice
production will be replaced completely. Farmers still need to grow upland rice or
intercrop rice in their rubber plots, especially for those whose rubber trees are still
immature. Farmers also face the risk that the price of rubber will fall or that they
cannot sell to China. Hence they may need to expand rice production again. One
advantage of rubber is that, given a major market collapse, it is relatively easy to
revert to shifting cultivation, as seen among rubber smallholders in Indonesia and
Malaysia.
In addition, there has been an increasing inequality between the three wealth
categories of households, particularly between wealthy and poor households, in terms
of land and labour resources, and rice and rubber production. Wealthy households had
a larger labour force, were able to access more land, were better able to invest in large
livestock, produced more rice, were self-sufficient for more months, were less
dependent on upland rice, were less dependent on village land, were more likely to
hire labour, had planted more rubber trees, had more rubber trees in production, and
hence produced more rubber than average or poor households.
Smallholder rubber in Hadyao is based on simple labour-intensive technology
imported from China. The technology has been easily adopted by upland farmers as it
readily fits with their current shifting cultivation system. However, the technology is
not at the lowest level identified by Barlow (1997) as farmers are planting clones such
as RRIM600 and GT1, terracing their hillsides, and maintaining their holdings to a
reasonable standard. Moreover, their yields are comparable to smallholders elsewhere,
e.g. Southern China and North East Thailand. However, they do not fertilise their
The Economic Potential for Smallholder Rubber Production in Northern Laos
188
rubber trees and the latex is sold in raw form as ‘tub lump’ without even processing
into sheets. In the future farmers are likely to adopt higher levels of rubber production
and processing technology in order to get a higher return from their rubber holdings,
but this may depend on appropriate support, as discussed below.
The DCF analysis of a typical hectare of rubber in the study village, using a discount
rate of 8% and an estimated opportunity cost of labour of 17,000 Kip/person-day,
shows that the investment in rubber is worthwhile, whether using the conventional
investment criteria or the net return to the family’s own resources of labour and land
(farm family income). The analysis also shows that farmers had little problem paying
back credit, whether in nominal or real terms, or at subsidised or commercial interest
rates, except for the upper bound rate charged by moneylenders. The key was that
repayments of interest and principal were deferred until tapping had commenced. The
results from this analysis are likely to represent the reality of current investment in
rubber in the study village. That is the reason for the expansion of rubber planting in
that village and in other areas as it provides good economic returns to farm families.
This confirms the view that smallholder rubber is an economic proposition and
suggests that smallholders should be at the forefront of any national rubber
development policy.
The findings from the sensitivity analysis show that at the low price of tub-lump
rubber, e.g., a decrease of more than 13% from the current market price, investment in
smallholder rubber in Hadyao is no longer worthwhile, indicating that farmers may
have to re-evaluate their investment plans if there is a market downturn in the future.
However, for those with established gardens, for whom the investment is a ‘sunk
cost’, the price would have to fall up to 60% from 2005 levels before it would no
longer be worthwhile to tap. Even in that case, the rubber plots could be left untended
and ‘opened up’ again for tapping when prices rose sufficiently, which is the practice
of smallholders in other countries. The threat of price falls can also be countered to
some degree by adopting practices to improve yields in the future, as well as
improving the quality of the rubber to obtain a marketing premium. These would
translate directly into improved returns to family labour, hence higher household
incomes.
The Economic Potential for Smallholder Rubber Production in Northern Laos
189
Similarly, at the high discount rate, e.g. a discount rate of 11% or more, the
investment is unprofitable, indicating that if farmers had to borrow money at a high
interest rate they may have to reconsider their investment. Farmers in Hadyao have
benefited from subsidized credit support with a low interest rate and a long repayment
period. However, the 8% real interest rate used for the base analysis reflects
commercial rates, indicating that all farmers really need is a grace period during
establishment, with deferred payments of principal and interest.
Again, when labour costs are valued at the market wage rate, even with the current
market price of tub-lump rubber the investment in smallholder rubber is not
worthwhile, suggesting that farmers could not afford to hire other people at the market
wage rate to carry out all of the labour requirements for rubber production. However,
it is not likely that farmers in the uplands of Northern Laos would rely on hiring
labour. According to the household survey in Hadyao, poor households normally used
only their family labour for rubber production while middle or wealthy households
used a combination of family labour and hired labour if they could afford to do so. It
is the ability to use family labour at low opportunity cost (as well as minimal
supervisory costs) that makes smallholder rubber an economic proposition, even with
low yields and quality.
There are other risks associated with the investment in smallholder rubber in the
uplands of Northern Laos, in particular climate and market uncertainty. The
occurrence of heavy frost in 1999, killing many rubber trees in Luangnamtha
Province, is the foremost climatic risk that farmers face. There is a justifiable concern
that this could happen again in the future as most rubber trees in Luangnamtha
Province are planted at an elevation of almost 700 metres above sea level. Another
concern is market uncertainty. The sudden but temporary close of border trade with
China in late 2006 is one example of market uncertainty that seriously affected Lao
rubber farmers as their only market is China, though this source of risk is likely to
decrease in the long term. There is also the likelihood of competition as other rubber
producing countries are also increasing their production in response to the rising
global rubber demand. An improved road network will help to reduce marketing costs
and maintain the farm-gate price of rubber, but the pace and extent of this investment
in infrastructure is uncertain.
The Economic Potential for Smallholder Rubber Production in Northern Laos
190
The spatial analysis of the potential for the expansion of rubber in other areas within
Luangnamtha Province shows that the potential for smallholder rubber in the study
village is not an isolated case; there are other areas in Luangnamtha Province that
appear to be economically suitable for rubber. Approximately 26% of the total
provincial area was considered as economically suitable for smallholder rubber, of
which only 1% was highly suitable and 25% marginally suitable. These areas were
concentrated along the main road, indicating that road access is a key factor, but
moderate to high resource quality was also important. It should be noted that these
areas designated as economically suitable for smallholder rubber are upper bound
estimates, which is based on analysis of the rubber enterprise only and ignores the
requirements for other land uses such as rice cultivation, residential areas, and
conservation areas. If current land use allocations are taken as a guide, at most only
half of this potentially suitable land (up to 13% of the provincial area) is actually
available for rubber planting. Nevertheless, given that rubber produces a good
financial return to the smallholder, whereas conservation areas generate non-market
returns, there may be increasing pressure to reallocate land to tree crop production,
raising important policy issues of how much land could or should be retained in
subsistence production for a balanced rural economy.
8.4 Policy implications
This study shows that, given current market conditions, investment in smallholder
rubber production in the uplands of Northern Laos can be profitable. The DCF
analysis for the study village shows that the expansion of rubber planting in that
village is based on good economic returns. The spatial analysis indicates that the
potential for rubber in the study village is not an isolated case; there are also other
areas in Luangnamtha Province that appear to be economically suitable for rubber.
Rubber can be considered as one of the potential alternatives for poor upland farmers,
in line with the government policy of stabilising shifting cultivation and supporting
new livelihood options for poverty reduction. However, the following issues need
consideration so that smallholder rubber can be a sustainable solution for poverty
reduction for Lao upland farmers.
The Economic Potential for Smallholder Rubber Production in Northern Laos
191
As in the main rubber-producing countries, various support services for rubber
development need to be established in Laos, including technical support, extension,
credit, and marketing. A rubber research station should be established to provide
technical support for rubber cultivation. It will become important to make rubber
more productive through the adoption of improved technologies such as high yielding
varieties, fertilizer, and especially improved processing techniques. The rubber
seedlings should be produced in Laos with quality control to guarantee the high
quality of seedlings and their adaptability to local conditions. Apart from selling the
rubber in the form of tub-lump, Lao rubber farmers should be encouraged to do the
processing of latex into other forms such as raw rubber sheets or smoked rubber
sheets in order to increase the quality and value of their rubber. Smallholder rubber
groups or associations could be established in order to assist rubber farmers in
accessing improved production and processing techniques, and possibly to improve
their marketing. In addition, mechanisms to provide market information to rubber
smallholders, especially price information, need to be developed in order to protect
farmers from unfair trading. So far, rubber smallholders in Northern Laos receive
information on rubber prices only from Chinese traders. While Hadyao village
authorities have engaged in some prior negotiation with traders, it is essentially a
buyers’ market at present.
Financial support is crucial for smallholders to invest in a crop with a long
establishment phase like rubber. The analysis has shown that rubber is profitable at
commercial interest rates but farmers need credit to get them through to the tapping
period. If farmers had not received institutional credit with no repayments required
until after tapping had commenced, they would have had to draw on their own limited
savings or borrow from moneylenders at higher rates and on less favourable terms.
This would have reduced their ability to invest, even though the crop was profitable.
Moreover, better access to credit is usually associated with the possession of land
titles. However, as most Lao farmers have only temporary use rights, they have
difficulty in getting loans. Land certificates and tenure rights should be issued to
smallholders in order to improve access to long-term credit for investment in rubber
and other tree crops.
The Economic Potential for Smallholder Rubber Production in Northern Laos
192
Improving road access should be considered as a high priority for the development of
the rubber industry in the uplands of Laos (as well as being part of a general poverty-
reduction strategy). This is evident from this study, with the economically suitable
areas for rubber mostly concentrated in the more accessible areas along the main
roads. When National Road No.3 is completed it will open new marketing
opportunities for many Lao upland farmers. However, upgrading village cart tracks to
all-weather roads is also needed to make marginally suitable land more profitable for
tree crop development. At the same time, pressure on land is increasing as more
farmers are interested to expand their rubber holdings. This will create inevitable
pressure to reallocate village lands for tree crop production. Hence land use policy
should discourage farmers from clearing village forests for rubber planting, but
instead encourage them to grow rubber on their degraded fallow land. This is
consistent with the government goals of reducing deforestation and shifting
cultivation.
In addition, research on rubber should be undertaken as part of agroforestry systems
and livelihood systems, including other crops, non-timber forest products (NTFPs),
and livestock, in order to reduce the risk from the boom-bust cycle of rubber, ensure
food security, increase income, and reduce negative environmental impacts from
monoculture rubber (loss of biodiversity, increased soil erosion, and reduced
watershed functions). Since most Lao farmers conventionally practise diversified
farming systems, rubber agroforestry systems could be integrated well into their
current farming systems. Instead of monoculture rubber, intercropping should be
promoted among smallholder farmers as intercrops provide additional income apart
from latex and rubber wood. Experience from other rubber-producing countries shows
that many types of cash crop can be intercropped with rubber such as rice, maize, tea,
coffee, cardamom, and others. Rubber-based systems with forages and livestock
raising can be developed for mature rubber plantations as well. Therefore, research on
different models of intercropping with rubber trees, both in the immature and mature
phases, should be undertaken to find suitable cropping models for the uplands of
Northern Laos. If farmers have a diversified farming system, they can stop tapping
when prices are low and concentrate on other crop and livestock activities, while
retaining their rubber trees for when the price of rubber rises again.
The Economic Potential for Smallholder Rubber Production in Northern Laos
193
As mentioned at several points above, the study has highlighted the viability of
smallholder production in the uplands. To help reduce poverty among upland farmers,
smallholder rubber cultivation should be promoted ahead of large-scale private
concessions. Large-scale concessions could perhaps play a role as nucleus estate
models for transferring technologies to smallholdings, though this has not been
particularly successful in Indonesia. Since rubber offers good employment
opportunities, the policy should be to encourage the use of local labour. However, the
concern is that the amount of local labour needed for rubber planting and tapping
might be not enough to work on the large-scale rubber estates planned by investors
and the government, as Laos has low population and a small labour force. To
overcome the shortage of labour, foreign investors may seek to bring their own labour
and as a consequence there may be social problems. This may be exacerbated if local
farmers also feel they have lost their land to foreign concessionaires.
On the whole, the roles for government, as in other countries where smallholder
rubber has played a significant role in rural development, are to provide research and
technical support, to assist financially during the long investment period when no
income is generated, and to invest in roads and marketing infrastructure. In particular,
maintaining secure access to the China market will be crucial for the sustainability of
smallholder rubber in Northern Laos. More generally, the socioeconomic and
environmental impacts of the expansion of rubber planting should be carefully
monitored. Land use and livelihoods are undergoing rapid change in the uplands due
to the expansion of rubber. If carefully managed, this change has the potential to
contribute to sustainable rural livelihoods.
The Economic Potential for Smallholder Rubber Production in Northern Laos
194
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Appendices
Appendix 1: Focus group interview guidelines Part 1. General information
1. In what year was the village established? 2. Where did the first settlers come from?
3. What were the major events happened in the village? What years did they happen?
Note: Ask villagers to provide information into the timeline history.
4. How many ethnic groups are there in the village?
5. How many households/populations were there when the village was established?
6. How many households/populations are there at the present time?
7. What are the occupations of people in the village?
8. What are the education levels of people in the village?
9. What is the socio-economic status of households in the village? Note: The classification of household is undertaken by the villagers themselves.
10. What were the livelihood activities (both agricultural and non-agricultural activities)
undertaken in the village? Note: Ask villagers to provide information into livelihood activities calendar.
11. How many households practice lowland cultivation, shifting cultivation and both
lowland cultivation and shifting cultivation? 12. What are the main sources of income of the village? How much are the amounts and
the rankings of those income sources?
13. Is there any problem of rice shortage in the village? If yes, how many households faced rice shortage? On average how many months did villagers face rice shortage? How did the rice shortage households solve this problem?
14. When was the land allocation taken place?
15. What are the land use types in the village?
Note: Ask villagers to draw a village resources map and also ask about the area for each type of land use.
16. What are the changes in land uses? For example, the change of agricultural land and
forest area.
17. How many areas (hectares) and productions (tonnes) of crops/fruit trees/tree plantations are there in the village?
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18. What kinds of livestock were raised in the village? How many heads are there in each type of livestock?
Part 2. Rubber plantation information
19. When did rubber first introduce to the village? How many households planted rubber during that time? What was the total planted area?
20. When did rubber first harvest? How many areas were first tapped? What was the total
production?
21. At the present time how many households own rubber plantations? What is the total planted area and tapped area? What is the total production?
22. What is an average rubber holding plot and area?
23. Why did villagers start to grow rubber?
24. How did villagers know about rubber?
25. From whom did rubber farmers learn the techniques of rubber cultivation (planting,
tapping, processing)?
26. Where did rubber farmers get the funds to plant their rubber? If borrow, what is the interest rate? How long is the payback period?
27. What location (type of land, slope, elevation) was rubber planted in the village?
28. Did rubber farmers have enough labour for their rubber plantations? If not, where did
they get labour from? Did they hire labour? If yes, what was the wage rate? Was the wage rate the same for all types of work (land preparation, planting, tapping, collecting, processing, etc)? Were there any problems with hiring labour?
29. How was the land for rubber cultivation prepared? Did rubber farmers slash and burn
the field before planting?
30. What rubber varieties were used?
31. Where did rubber farmers get the rubber seedlings from? Did they make the seedlings nurseries?
32. How were the seedlings purchased? By cash, credit, or other forms? How much was
the price of seedlings?
33. What was the planting space? How many rubber trees were planted in one hectare?
34. Did rubber farmers intercrop their rubber plantations during the first few years after planting? If yes, what crops did they plant with their rubber trees? Did they grow any crops in the mature rubber?
35. Did rubber farmers raise livestock in their rubber plantations? If yes, what types of
livestock? Which period (immature or mature) of rubber cultivation did they raise?
36. Did rubber farmers use fertilizers? If yes, how often did they use? What kinds of fertilizers did they use; chemical or organic? What is the application rate? Which
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period (immature or mature) of rubber cultivation did they apply? Did they use fertilizers every year?
37. Did rubber farmers clear weed? If yes, how often did they weed? How did they clear
weed? Did they clear weed by hand or use herbicides? If herbicides applied, what herbicides did they use? What is the application rate? Which period (immature or mature) of rubber cultivation did they apply? Did they use herbicides every year?
38. Did rubber farmers have problem of pests in their rubber plantations? If yes, what
kinds of pests were they? Which period (immature or mature) of rubber cultivation did the pests interfere? How did they solve the problem? If pesticides used, what pesticides did they use?
39. Did rubber farmers have problem of diseases interfered their rubber trees? If yes,
what kinds of diseases were they? Which period (immature or mature) of rubber cultivation did the diseases incur? How did they solve the problem? If chemical substances used, what did they use?
40. Did rubber trees die from cold weather? If yes, how did rubber farmers solve the
problem?
41. Did rubber farmers have problem of fire? If yes, did they have a system for controlling fire in their rubber plantations? Did they use fire line?
42. What tapping techniques were used? Which period of time did rubber farmers tap
their rubber trees and collect latex? What is tapping frequency? How many days in a month did they tap? How many months in a year did they tap?
43. To whom did rubber farmers sell their rubber? What forms of rubber did they sell?
What was the price of rubber? Were there any marketing problems? Where was the marketing information come from? Were there any contracts with companies or traders to buy rubber? What were the marketing arrangements?
44. Did rubber farmers process their rubber latex? If yes, which period of time did they
make processing? What forms did they process the latex into?
45. How did the rubber change the practice of rice shifting cultivation in the village?
46. What are the main problems of rubber cultivation in the village?
47. What is the future of rubber cultivation in the village?
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Part 3. Materials used for one hectare of rubber plantation Production phases Materials Unit Quantity 2005 prices
(kip/unit) Working
life Establishment
Axe Land preparation Long knife Hammer Nail Barbed wire Fencing
Post Hoe Planting & replacement
planting Rubber seedlings Intercropping Rice seeds Maintenance
Small knife Weeding Medium knife Utilization
Bowl Gutter Iron wire Plastic brush Tapping knife Knife sharpening stone
Tapping
Headlamp Small bucket Big bucket Plastic bag Chemical powder
Chemical liquid
Collecting
Small brush Tree harvesting Handy saw Part 4. Labour used for one hectare of rubber plantation
Annual labour Production phases Activities Persons Days Person-days
Establishment Slashing Burning & clearing Land preparation Lining, terracing & holing
Fencing Fencing Planting Rubber planting & replacement planting
Rice sowing Intercropping Rice harvesting Maintenance Hand weeding Utilization
Tapping Collecting
Tree harvesting
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Appendix 2: Household questionnaire Household no: ………………………………. Household wealth ranking: …………………. Interviewee: ………………………….……… Date of interview: …………………………… Interviewer: …………………………………. Part 1. General information
1. Household members How many people are there in your household (including the head of household)? ...… people Name Sex
(Male, Female)
Age Ethnic group
Years of schooling
Full-time labour
Part-time labour
Work on-farm
Work off-farm
2. Land resources
How many plots of land do you own or use or let others use? ……...………………..… plot(s) Plot no.
Plot name
Tenure status (Codes 1)
Tenure details Eg. Crop share
Area (ha or trees)
Land type (Codes 2)
Crops planted last year
Codes 1: O = Owned, B = Borrowed, R = Rented, OB = Others borrowed, OR = Other rented Codes 2: CP = Crops plantation, FR = Fruit trees plantation, TR = Trees plantation (including rubber), GA = Garden, FP = Fish pond, FA = Fallow land, OT = Other land (specific)
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3. Livestock What types of livestock do you have? ………………….……………………….……………... Types of livestock Number (head)Buffalo Cow Goat Horse Pig Duck Chicken Fish Other (specific): ……….
4. Rice production
How many plots of land did you grow rice last year? ………………….……...……...…plot(s) Plot no.
Plot name
Location (Code 3)
Distance (km/walking time)
Elevation (Code 4)
Area (ha)
Production (kg)
Yield (kg/ha)
Code 3: IN: In the village boundary, OU: Outside the village boundary Code 4: FL = Flat land, GSL = Gently sloping land, SSL = Steeply sloping land How much rice did your household consume, purchase, borrow, or sell last year? Amount (kg) Consumption Purchase Borrow Sale The rice you produced last year is enough for ………………...…………………….. month(s)
If you have insufficient rice, How did you get the rice for the rice shortage month(s)? ____ Borrow ____ Buy ____ Eat other foods Why? ……………….…….. ____ Go without Why? …………….....…….. ____ Other (specific): …………………….………… If buy rice, Where did you buy? ____ Market ____ Neighbour ____ Other (specific): ………...…… If borrow rice, Where did you borrow? ____ Neighbour ____ Rice lender
____ Village rice bank ____ Other (specific): ……......….… What is the interest rate of rice loan? ………
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If you have surplus rice, Did you sell rice? ____ Yes ____ No If yes, Where did you sell? ____ Market ____ In the village ____ Other (specific): ….……….. If no, Why? …………...………………..
5. Household main income sources and their rankings in terms of income earned and
labour used Main income sources Income earned ranking Labour used ranking Part2. Rubber cultivation information
6. Do you have any rubber plantations? ____ Yes ____ No
If no, Only ask these below questions Why did you not plant rubber? ………………...…...…………...… Do you have any plan to grow rubber in the future?
____ Yes ____ No
If yes, Why? …………………..………………… If no, Why? ………………………..……………
If yes, Continue to ask the next question until the end of the questionnaire
7. How many plots of rubber do you have? …………………………………….. plot(s) Plot no.
Plot name
Location (Code 3)
Distance (km/walking time)
Elevation (Code 4)
Land type before rubber (Code 5)
Area planted (trees or ha)
When planted
Trees died
When started tapping
Area tapped (trees or ha)
Code 3: IN: In the village boundary, OU: Outside the village boundary Code 4: FL = Flat land, GSL = Gently sloping land, SSL = Steeply sloping land Code 5: CL = Crops planted land, FA = Fallow land, UN = Unopened land, OT = Other (specific)
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8. Why did you start to grow rubber? ……………………………...…………….….....… 9. How did you know about rubber? …………………………………..….................…… 10. From whom did you learn techniques for rubber cultivation?
____ Chinese people ____ Provincial agricultural and forestry officials ____ Other (specific): …………………………………………………….…..……
11. Where did you get the funds to plant rubber?
____ Your own money ____ Borrow ____ Other (specific): ……………………………………………………......….…
If borrow, Where did you borrow from? ____ Money lender ____ Agricultural Promotion Bank ____ Provincial government ____ Other (specific): ………………………………...…
What is the interest rate? …...…………………..…….….….. How long is payback period? …………...……………...……
12. Did you make replacement planting after the first planting?
____ Yes ____ No
If yes, For how many years? ……………...............……………...……..…… If no, Why? …………………………………...………………....……..……
13. What is the planting space? …………….……..………m X ………………………..m 14. What rubber clonal seedlings did you use?
____ RRIM600 Why did you use this? ……………....……... ____ GT1 Why did you use this? ………………...…… ____ Other (specific): …………… Why did you use this? ………………..….…
15. Did you make the seedling nursery?
____ Yes ____ No If no, Where did you buy the seedlings? …………………………...…....….
What was the price of the rubber seedlings? ……….……… kip/plant 16. Did you hire labour?
____ Yes ____ No
If yes, Which period of rubber plantation did you hire labour? ____ Establishment What for? ………………………………...… ____ Maintenance What for? ……………………………...…… ____ Tapping What for? ………...…………………………
If no, Why? …………………………...……………………………...….…..
17. Did you apply fertilizers with your rubber trees?
____ Yes ____ No
If yes, What fertilizer did you use? …………………………………...…....... What is the price of fertilizer? …………………………..…... kip/kg
The Economic Potential for Smallholder Rubber Production in Northern Laos
215
What is the application rate? ………………………..…..…… kg/tree How many years did you apply? …………………...…………...…. How many times in a year did you apply? ……………...………..... How many persons apply fertilizers in each time? …….....….. person How many days spent for applying the fertilizers in each time? …day
If no, Why? ………………………………………...…………………..…… Will you apply fertilizers in the future? ____ Yes Why? …………………………………...………..….. ____ No Why? ……………………...………………...…….....
18. Did you clear weed in your rubber plantation?
____ Yes ____ No
If yes, How many years did you clear weed? ………………………...…...… How many times in a year did you clear weed? ……………...…...…. How many persons clear weed in each time? …………...…… person How many days were spent for clearing weed in each time? ....… day
If no, Why? …………………………...…………………………………..… 19. Did you use herbicide?
____ Yes ____ No
If yes, What herbicide did you use? ………………………...……………….. What is the price of herbicide? …………………...…………... kip/kg What is the application rate? ………………………...…....…. kg/tree How many years did you use? ………………………...……...……… How many times in a year did you use? ………...……………............ How many persons apply herbicide in each time? ……...…..... person How many days were spent for applying in each time? ……....… day
If no, Why? …………………………………………...………………..…… Will you use herbicide in the future? ____ Yes Why? ………………………………………...…....… ____ No Why? ………………………...…………............……
20. Did you have problem of pests in your rubber plantation?
____ Yes ____ No
If yes, What kinds of pests were they? …………………...……...………….. Which period of rubber cultivation did the pests interfere?
____ Immature period (year1-7) ____ Mature period (tapping period)
How did you solve the problems? ____ Used pesticides ____ Did nothing
If pesticides used, What did you use? ….…….. If nothing done, Why? ……………...….…...
21. Did you have problem of diseases interfered your rubber trees?
____ Yes ____ No
If yes, What kinds of diseases were they? ……………...……........................ Which period of rubber cultivation did the diseases incur?
____ Immature (year1-7) ____ Mature (tapping period)
The Economic Potential for Smallholder Rubber Production in Northern Laos
216
How did you solve the problems? ____ Used chemical substances ____ Did nothing
If chemical substances used, What did you use?…… If nothing done, Why? ………..…….…
22. Did you have problem of fire?
____ Yes ____ No
If yes, How did you prevent the fire? ____ Dig a fire line ____ Other (specific): …………..…………...……….………
23. Did your rubber trees die from cold weather?
____ Yes ____ No
If yes, When? …………………………...…………………………....…...…. 24. Did you intercrop your rubber plantation during the first few years after planting?
____ Yes ____ No
If yes, Which crops did you intercrop? ………………………………...……. How many years did you intercrop? …………….…………...……..... How many times in a year did you intercrop? …………………...…...
If no, Why? …………………………………...………………………......… 25. Did you raise livestock in your rubber plantation?
____ Yes ____ No
If yes, What types of livestock? …………………………………..…………. Which period of rubber cultivation did you raise?
____ Immature (year1-7) ____ Mature (tapping period)
If no, Why? …………………………………………...…..………………… 26. For how many years after planting did you start to tap your rubber trees? ……………
How many months in a year did you tap? …. From (month) …...… to (month) …...… What is tapping frequency? ………………………………………………...….……… Which period of time did you tap your rubber trees? From (time) …. to …. (time) How many persons did tapping in a tapping day? ……………………......…… person
27. Which period of time did you collect latex? From (time) ….…. to ….…… (time)
How many persons collect latex? …………………………...………..……… person
28. To whom did you sell your rubber? ____ Lao traders ____ Chinese traders ____ Other (specific): ……………………..……...……………………………..…
Do you have any contracts with companies or traders to buy your rubber? ____ Yes ____ No
Did you have any marketing problem? ____ Yes ____ No
If yes, What kinds of problem? …………………………………...………...
The Economic Potential for Smallholder Rubber Production in Northern Laos
217
How did you solve the problems? ………………………..………..… 29. Did rubber cultivation help increase your household income?
____ Yes ____ No If yes, In what way? ………………………………………...……………….. If no, Why? ………………………………………...………………………..
30. How did rubber cultivation change your practice of rice shifting cultivation in terms
of area? ____ Increased ____ Decreased ____ Unchanged Why? ………………………………………………….…...……………….……….….
31. How did rubber cultivation change your practice of rice shifting cultivation in terms
of yield? ____ Increased ____ Decreased ____ Unchanged Why? ………………………………………………….……………...….……….…….
32. How did rubber cultivation change your practice of rice shifting cultivation in terms
of labour used? ____ Increased ____ Decreased ____ Unchanged Why? ……………………………………………………………………….....…….….
33. Will you increase your rubber plantation in the future?
____ Yes ____ No
If yes, Why? ………………………………...………………………….….… Will you be able to access to land for expanding your rubber plantation?
____ Yes ____ No
If yes, How will you access to that land? ....………. If no, Why? …………...……………………...…...
If no, Why? …………………………………...………………………..…… 34. In your opinion, what are the main problems of rubber cultivation? ………...…...…… 35. Outputs from rubber plantation
Year Crops Harvested area (ha or tree)
Production (kg)
Yield (kg/ha)
Price (kip/kg)
Total output (kip)
1994 Rice 1995 Rice 1996 Rice 2002 Rubber 2003 Rubber 2004 Rubber
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0.11
0.15
1.46
7.
16
20.3
9 e
100
MS
18
LVf
D
26.0
0 47
.00
27.0
0 LL
1.
432.
47
0.12
11.5
80.
03
3.65
1.
67
5.60
5.
60
5.50
0.
00
0.
600.
100.
20
101
LT.P
.125
C
Md
D
52.1
6 29
.28
18.5
6 SL
2.
083.
59
0.18
11.5
90.
14
11.0
0 0.
97
8.80
4.
95
3.83
0.
00
0.80
0.60
0.19
0.15
1.74
10
.74
16.2
0 e
102
LT.P
.125
C
Md
D
52.1
6 29
.28
18.5
6 SL
2.
083.
59
0.18
11.5
90.
14
11.0
0 0.
97
8.80
4.
95
3.83
0.
00
0.80
0.60
0.19
0.15
1.74
10
.74
16.2
0 e
103
LT.P
.131
LX
h D
34
.16
33.2
8 32
.56
CL
1.76
3.03
0.
1511
.62
0.13
17
.75
1.64
32
.00
5.66
4.
63
0.00
3.
603.
400.
770.
157.
92
13.9
2 56
.90
e
104
P.N
T.32
1 C
Md
D
26.8
8 27
.28
45.8
4 H
C
2.68
4.62
0.
2311
.60
0.15
3.
00
0.18
3.
60
4.98
3.
98
0.00
0.
802.
600.
300.
153.
85
14.8
8 25
.87
c
105
MS
14
LVh
D
44.0
0 39
.00
17.0
0 LL
1.
953.
36
0.16
11.6
10.
05
4.50
1.
91
5.20
5.
90
4.90
0.
00
0.
800.
090.
23
106
MS
14
LVh
D
44.0
0 39
.00
17.0
0 LL
1.
953.
36
0.16
11.6
10.
05
4.50
1.
91
5.20
5.
90
4.90
0.
00
0.
800.
090.
23
107
LT.P
.223
C
Mg
D
54.1
6 17
.28
28.5
6 C
L 1.
442.
48
0.12
11.6
10.
03
23.7
5 0.
41
5.60
5.
02
4.07
0.
00
0.60
0.10
0.11
0.16
0.97
6.
07
15.9
8 b
108
LT.P
.223
C
Mg
D
54.1
6 17
.28
28.5
6 C
L 1.
442.
48
0.12
11.6
10.
03
23.7
5 0.
41
5.60
5.
02
4.07
0.
00
0.60
0.10
0.11
0.16
0.97
6.
07
15.9
8 b
109
P.N
T.33
1 A
Ch
D
58.8
8 29
.28
11.8
4 SL
1.
121.
93
0.09
11.6
10.
04
6.25
0.
41
18.8
0 4.
96
3.90
0.
00
0.80
0.40
0.11
0.15
1.46
7.
16
20.3
9 e
110
P.N
T.32
1 C
Md
D
26.8
8 27
.28
45.8
4 H
C
2.68
4.62
0.
2311
.60
0.15
3.
00
0.18
3.
60
4.98
3.
98
0.00
0.
802.
600.
300.
153.
85
14.8
8 25
.87
c
111
LT.P
.117
C
Md
D
56.1
6 23
.28
20.5
6 C
L 1.
322.
28
0.11
11.5
80.
07
15.5
0 1.
72
10.8
0 5.
57
4.58
0.
00
3.20
1.60
0.30
0.15
5.25
9.
90
53.0
3 e
112
LT.P
.223
C
Mg
D
54.1
6 17
.28
28.5
6 C
L 1.
442.
48
0.12
11.6
10.
03
23.7
5 0.
41
5.60
5.
02
4.07
0.
00
0.60
0.10
0.11
0.16
0.97
6.
07
15.9
8 b
113
P.N
T.32
9 C
Md
D
66.8
8 23
.28
9.84
SL
1.
282.
21
0.11
11.5
80.
05
14.2
5 0.
63
24.0
0 5.
27
3.99
0.
00
0.80
1.00
0.14
0.19
2.13
7.
53
28.2
9 b
114
LT.P
.223
C
Mg
D
54.1
6 17
.28
28.5
6 C
L 1.
442.
48
0.12
11.6
10.
03
23.7
5 0.
41
5.60
5.
02
4.07
0.
00
0.60
0.10
0.11
0.16
0.97
6.
07
15.9
8 b
115
LT.P
.223
C
Mg
D
54.1
6 17
.28
28.5
6 C
L 1.
442.
48
0.12
11.6
10.
03
23.7
5 0.
41
5.60
5.
02
4.07
0.
00
0.60
0.10
0.11
0.16
0.97
6.
07
15.9
8 b
116
P.N
T.32
9 C
Md
D
66.8
8 23
.28
9.84
SL
1.
282.
21
0.11
11.5
80.
05
14.2
5 0.
63
24.0
0 5.
27
3.99
0.
00
0.80
1.00
0.14
0.19
2.13
7.
53
28.2
9 b
Not
e:
SOIL
UN
IT: A
Cf =
Fer
ric A
CR
ISO
LS, A
Ch
= H
aplic
AC
RIS
OLS
, CM
d =
Dys
tric
CA
MB
ISO
LS, C
Me
= Eu
tric
CA
MB
ISO
LS, C
Mg
= G
leyi
c C
AM
BIS
OLS
, LV
f = F
erric
LU
VIS
OLS
, LV
h =
Hap
lic L
UV
ISO
LS, L
Xh
= H
aplic
LU
XIS
OLS
SO
IL D
EPTH
: R (R
ock
out c
rop)
= 0
-30
cm, S
(Sha
llow
soil)
= 3
0-50
cm
, T (T
hin
soil)
= 5
0-75
cm
, M (M
oder
ate
deep
soil)
= 7
5-10
0 cm
, D (D
eep
soil)
= >
100
cm
SOIL
TEX
TUR
E: C
L =
Cla
y Lo
am, S
L =
Sand
y Lo
am, L
L =
Ligh
t Loa
m, H
C =
Hea
vy C
lay
%C
= %
Org
anic
Car
bon,
%O
M =
% O
rgan
ic M
atte
r, %
N =
% N
itrog
en, C
/N =
Car
bon/
Nitr
ogen
Rat
io, T
OTP
= T
otal
Pho
spho
rus,
AV
AIL
P =
Ava
ilabl
e Ph
osph
orus
, TO
TK =
Tot
al P
otas
sium
, AV
AIL
K =
Ava
ilabl
e Po
tass
ium
, CA
= C
alci
um,
MG
= M
agne
sium
, K =
Pot
assi
um, N
A =
Sod
ium
, CEC
S =
Tota
l Bas
e C
onte
nt in
Soi
l, C
ECT
= To
tal E
xcha
ngea
ble
Cat
ion
in S
oil,
% B
S =
% B
ase
Satu
ratio
n SL
OPE
: a =
0-2
% (F
lat o
r alm
ost f
lat),
b =
2-8
% (U
ndul
atin
g), c
= 8
-16%
(Rol
ling)
, d =
16-
30%
(Hill
y), e
= 3
0-55
% (S
teep
ly d
isse
cted
), f =
>55
% (M
ount
aino
us)
Sour
ce: S
SLC
C, 2
005
The Economic Potential for Smallholder Rubber Production in Northern Laos
222
Appendix 4: The selected categories for the topography and soil variables in each grid
Grid Soil depth Soil texture Drainage Soil nutrient Soil pH Topography Slope % Rock 1 Good Good Moderate Moderate Moderate Terrace Bad Good 2 Good Good Moderate Bad Good Terrace Bad Good 3 Good Good Moderate Bad Good Terrace Bad Good 4 Good Good Moderate Bad Good Terrace Bad Good 5 Good Good Good Moderate Good Terrace Bad Good 6 Good Good Moderate Moderate Moderate Terrace Moderate Good 7 Good Good Moderate Moderate Moderate Terrace Moderate Good 8 Bad Good Good Bad Moderate Terrace Bad Bad 9 Good Good Moderate Good Good Terrace Bad Good 10 Good Good Good Moderate Moderate Terrace Moderate Good 11 Good Good Good Moderate Moderate Terrace Moderate Good 12 Good Good Moderate Bad Good Terrace Bad Good 13 Good Good Good Moderate Good Terrace Bad Good 14 Good Good Good Moderate Moderate Terrace Bad Good 15 Bad Good Good Bad Moderate Terrace Bad Bad 16 Bad Good Good Bad Moderate Terrace Bad Bad 17 Good Good Moderate Moderate Moderate Terrace Bad Good 18 Good Good Moderate Moderate Moderate Terrace Bad Good 19 Good Good Moderate Moderate Good Terrace Bad Good 20 Good Good Moderate Moderate Good Terrace Bad Good 21 Good Good Moderate Bad Good Terrace Bad Good 22 Good Good Moderate Bad Good Terrace Bad Good 23 Good Good Moderate Moderate Good Terrace Moderate Good 24 Good Good Good Moderate Good Terrace Bad Good 25 Bad Good Good Bad Moderate Terrace Bad Bad 26 Good Good Moderate Moderate Moderate Terrace Bad Good 27 Good Good Moderate Moderate Moderate Terrace Bad Good 28 Good Good Good Moderate Good Terrace Bad Good 29 Good Good Moderate Bad Good Terrace Bad Good 30 Good Good Moderate Bad Good Terrace Bad Good 31 Good Good Moderate Bad Good Terrace Bad Good 32 Good Good Moderate Bad Good Terrace Bad Good 33 Good Good Good Moderate Good Terrace Bad Good 34 Good Good Good Moderate Moderate Terrace Moderate Good 35 Good Good Moderate Moderate Moderate Terrace Bad Good 36 Good Good Moderate Moderate Moderate Terrace Bad Good 37 Moderate Good Good Moderate Moderate Flat Good Good 38 Moderate Good Good Moderate Moderate Flat Good Good 39 Bad Good Good Bad Moderate Terrace Bad Bad 40 Bad Good Good Bad Moderate Terrace Bad Bad 41 Bad Good Good Bad Moderate Terrace Bad Bad 42 Good Good Good Moderate Moderate Terrace Bad Good 43 Good Good Moderate Moderate Moderate Terrace Bad Good 44 Moderate Good Moderate Moderate Moderate Terrace Bad Good 45 Moderate Good Moderate Moderate Moderate Terrace Bad Good 46 Moderate Good Moderate Moderate Moderate Terrace Bad Good 47 Moderate Good Good Moderate Moderate Flat Good Good 48 Good Good Moderate Moderate Moderate Terrace Bad Good
The Economic Potential for Smallholder Rubber Production in Northern Laos
223
49 Good Good Moderate Moderate Moderate Terrace Bad Good 50 Good Good Moderate Moderate Moderate Terrace Bad Good 51 Bad Good Good Bad Moderate Terrace Bad Bad 52 Good Good Moderate Moderate Good Terrace Bad Good 53 Good Moderate Bad Moderate Moderate Terrace Bad Good 54 Good Moderate Bad Moderate Moderate Terrace Bad Good 55 Good Good Moderate Moderate Moderate Terrace Moderate Good 56 Good Good Good Good Good Terrace Bad Good 57 Moderate Good Moderate Moderate Moderate Terrace Bad Good 58 Good Good Good Moderate Moderate Terrace Moderate Good 59 Good Good Good Moderate Moderate Terrace Moderate Good 60 Moderate Good Good Moderate Moderate Flat Good Good 61 Good Good Moderate Moderate Good Terrace Bad Good 62 Good Good Moderate Moderate Moderate Terrace Bad Good 63 Good Good Moderate Good Good Terrace Bad Good 64 Good Good Good Moderate Good Terrace Moderate Good 65 Good Good Good Moderate Good Terrace Moderate Good 66 Good Moderate Bad Good Good Terrace Moderate Good 67 Good Moderate Bad Good Good Terrace Moderate Good 68 Good Good Good Moderate Moderate Terrace Bad Good 69 Good Good Moderate Moderate Moderate Terrace Bad Good 70 Good Good Moderate Moderate Moderate Terrace Bad Good 71 Good Good Moderate Moderate Moderate Terrace Bad Good 72 Good Good Moderate Moderate Moderate Terrace Bad Good 73 Good Good Moderate Moderate Moderate Terrace Bad Good 74 Good Good Moderate Moderate Good Terrace Bad Good 75 Good Good Moderate Moderate Good Terrace Bad Good 76 Good Good Moderate Moderate Moderate Terrace Bad Good 77 Good Good Moderate Moderate Good Terrace Bad Good 78 Moderate Moderate Bad Good Moderate Terrace Bad Good 79 Good Good Moderate Good Moderate Terrace Bad Good 80 Good Moderate Bad Good Good Terrace Moderate Good 81 Good Moderate Bad Good Good Terrace Moderate Good 82 Good Good Good Moderate Moderate Terrace Bad Good 83 Good Good Good Moderate Moderate Terrace Moderate Good 84 Good Good Good Moderate Moderate Terrace Moderate Good 85 Good Good Moderate Moderate Moderate Terrace Bad Good 86 Good Good Moderate Moderate Moderate Terrace Bad Good 87 Good Good Moderate Moderate Good Terrace Bad Good 88 Good Good Moderate Moderate Good Terrace Bad Good 89 Good Good Moderate Moderate Good Terrace Bad Good 90 Good Good Moderate Moderate Moderate Terrace Bad Good 91 Good Good Moderate Moderate Moderate Terrace Moderate Good 92 Good Good Moderate Moderate Moderate Flat Good Good 93 Good Moderate Bad Moderate Good Terrace Bad Good 94 Good Moderate Bad Good Good Terrace Moderate Good 95 Good Moderate Bad Good Good Terrace Moderate Good 96 Good Good Good Moderate Moderate Terrace Bad Good 97 Good Good Moderate Moderate Moderate Terrace Bad Good 98 Good Good Moderate Moderate Moderate Terrace Bad Good 99 Good Good Moderate Bad Good Terrace Bad Good 100 Good Good Good Moderate Moderate Terrace Bad Good 101 Good Good Moderate Moderate Good Terrace Bad Good 102 Good Good Moderate Moderate Good Terrace Bad Good
The Economic Potential for Smallholder Rubber Production in Northern Laos
224
103 Good Good Moderate Moderate Moderate Terrace Bad Good 104 Good Moderate Bad Good Good Terrace Moderate Good 105 Good Good Good Moderate Moderate Terrace Bad Good 106 Good Good Good Moderate Moderate Terrace Bad Good 107 Good Good Moderate Moderate Moderate Flat Good Good 108 Good Good Moderate Moderate Moderate Flat Good Good 109 Good Good Moderate Bad Good Terrace Bad Good 110 Good Moderate Bad Good Good Terrace Moderate Good 111 Good Good Moderate Moderate Moderate Terrace Bad Good 112 Good Good Moderate Moderate Moderate Flat Good Good 113 Good Good Moderate Moderate Moderate Flat Good Good 114 Good Good Moderate Moderate Moderate Flat Good Good 115 Good Good Moderate Moderate Moderate Flat Good Good 116 Good Good Moderate Moderate Moderate Flat Good Good
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
22
5
App
endi
x 5:
The
est
imat
ed y
ield
s of l
atex
ove
r th
e lif
e of
the
rubb
er p
lant
atio
n, in
terc
ropp
ing
rice
dur
ing
the
initi
al
thre
e ye
ars o
f the
pla
ntat
ion,
and
rub
ber
woo
d at
har
vest
in e
ach
grid
G
rid
Late
x yi
elds
R
ubbe
r w
ood
yiel
dsR
ice
inte
rcro
ppin
g yi
elds
1 2
3 4
5 6
78
9 10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
Ave
rage
35
1 2
3 1
773
725
985
1,03
1 1,
077
1,10
1 1,
155
1,21
51,
251
1,27
51,
289
1,29
71,
013
1,28
91,
267
1,25
01,
207
1,20
3 1,
206
1,17
81,
148
1,11
51,
079
718
997
939
888
1,09
9 53
1,
702
1,45
3 1,
013
2
77
3 72
598
5 1,
031
1,07
7 1,
101
1,15
51,
215
1,25
11,
275
1,28
91,
297
1,01
31,
289
1,26
71,
250
1,20
71,
203
1,20
6 1,
178
1,14
81,
115
1,07
971
8 99
7 93
9 88
8 1,
099
53
1,70
21,
453
1,01
3 3
773
725
985
1,03
1 1,
077
1,10
1 1,
155
1,21
51,
251
1,27
51,
289
1,29
71,
013
1,28
91,
267
1,25
01,
207
1,20
3 1,
206
1,17
81,
148
1,11
51,
079
718
997
939
888
1,09
9 53
1,
702
1,45
3 1,
013
4
77
3 72
598
5 1,
031
1,07
7 1,
101
1,15
51,
215
1,25
11,
275
1,28
91,
297
1,01
31,
289
1,26
71,
250
1,20
71,
203
1,20
6 1,
178
1,14
81,
115
1,07
971
8 99
7 93
9 88
8 1,
099
53
1,70
21,
453
1,01
3 5
936
878
1,19
2 1,
247
1,30
2 1,
331
1,39
51,
468
1,51
11,
542
1,56
21,
575
1,23
71,
577
1,55
71,
543
1,49
91,
502
1,51
4 1,
490
1,46
31,
432
1,39
997
4 1,
321
1,26
21,
213
1,36
7 64
1,
687
1,35
9 88
4 6
884
829
1,12
6 1,
178
1,23
0 1,
257
1,31
81,
387
1,42
81,
456
1,47
51,
486
1,16
51,
485
1,46
41,
449
1,40
51,
406
1,41
5 1,
390
1,36
21,
331
1,29
789
2 1,
218
1,15
91,
109
1,28
1 60
1,
692
1,39
0 92
3 7
884
829
1,12
6 1,
178
1,23
0 1,
257
1,31
81,
387
1,42
81,
456
1,47
51,
486
1,16
51,
485
1,46
41,
449
1,40
51,
406
1,41
5 1,
390
1,36
21,
331
1,29
789
2 1,
218
1,15
91,
109
1,28
1 60
1,
692
1,39
0 92
3 8
388
364
494
517
541
553
581
612
630
638
638
631
475
601
575
549
509
488
469
434
396
356
314
105
221
164
111
458
26
1,73
31,
639
1,43
8 9
936
878
1,19
2 1,
247
1,30
2 1,
331
1,39
51,
468
1,51
11,
542
1,56
21,
575
1,23
71,
577
1,55
71,
543
1,49
91,
502
1,51
4 1,
490
1,46
31,
432
1,39
997
4 1,
321
1,26
21,
213
1,36
7 64
1,
687
1,35
9 88
4 10
1,
001
939
1,27
5 1,
333
1,39
2 1,
423
1,49
21,
569
1,61
51,
649
1,67
11,
687
1,32
71,
692
1,67
31,
660
1,61
51,
621
1,63
7 1,
615
1,58
91,
560
1,52
81,
076
1,45
21,
392
1,34
31,
475
68
1,68
11,
321
839
11
1,00
193
91,
275
1,33
3 1,
392
1,42
3 1,
492
1,56
91,
615
1,64
91,
671
1,68
71,
327
1,69
21,
673
1,66
01,
615
1,62
1 1,
637
1,61
51,
589
1,56
01,
528
1,07
61,
452
1,39
21,
343
1,47
5 68
1,
681
1,32
1 83
9 12
77
3 72
598
5 1,
031
1,07
7 1,
101
1,15
51,
215
1,25
11,
275
1,28
91,
297
1,01
31,
289
1,26
71,
250
1,20
71,
203
1,20
6 1,
178
1,14
81,
115
1,07
971
8 99
7 93
9 88
8 1,
099
53
1,70
21,
453
1,01
3 13
93
6 87
81,
192
1,24
7 1,
302
1,33
1 1,
395
1,46
81,
511
1,54
21,
562
1,57
51,
237
1,57
71,
557
1,54
31,
499
1,50
2 1,
514
1,49
01,
463
1,43
21,
399
974
1,32
11,
262
1,21
31,
367
64
1,68
71,
359
884
14
884
829
1,12
6 1,
178
1,23
0 1,
257
1,31
81,
387
1,42
81,
456
1,47
51,
486
1,16
51,
485
1,46
41,
449
1,40
51,
406
1,41
5 1,
390
1,36
21,
331
1,29
789
2 1,
218
1,15
91,
109
1,28
1 60
1,
692
1,39
0 92
3 15
38
8 36
449
4 51
7 54
1 55
3 58
1 61
2 63
0 63
8 63
8 63
1 47
5 60
1 57
5 54
9 50
9 48
8 46
9 43
4 39
6 35
6 31
4 10
5 22
1 16
4 11
1 45
8 26
1,
733
1,63
9 1,
438
16
388
364
494
517
541
553
581
612
630
638
638
631
475
601
575
549
509
488
469
434
396
356
314
105
221
164
111
458
26
1,73
31,
639
1,43
8 17
77
3 72
598
5 1,
031
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215
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289
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251
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013
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267
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207
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206
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079
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155
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289
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013
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267
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289
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192
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562
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237
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499
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514
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463
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262
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359
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275
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392
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615
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327
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637
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343
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250
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031
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215
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289
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250
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203
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178
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115
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099
53
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453
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001
939
1,27
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423
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569
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649
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687
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692
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660
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621
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615
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91,
560
1,52
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076
1,45
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392
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31,
475
68
1,68
11,
321
839
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
22
6
38
1,00
193
91,
275
1,33
3 1,
392
1,42
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492
1,56
91,
615
1,64
91,
671
1,68
71,
327
1,69
21,
673
1,66
01,
615
1,62
1 1,
637
1,61
51,
589
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01,
528
1,07
61,
452
1,39
21,
343
1,47
5 68
1,
681
1,32
1 83
9 39
38
8 36
449
4 51
7 54
1 55
3 58
1 61
2 63
0 63
8 63
8 63
1 47
5 60
1 57
5 54
9 50
9 48
8 46
9 43
4 39
6 35
6 31
4 10
5 22
1 16
4 11
1 45
8 26
1,
733
1,63
9 1,
438
40
388
364
494
517
541
553
581
612
630
638
638
631
475
601
575
549
509
488
469
434
396
356
314
105
221
164
111
458
26
1,73
31,
639
1,43
8 41
38
8 36
449
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1 55
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1 61
2 63
0 63
8 63
8 63
1 47
5 60
1 57
5 54
9 50
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8 46
9 43
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6 35
6 31
4 10
5 22
1 16
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1 45
8 26
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733
1,63
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438
42
884
829
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178
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257
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387
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486
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485
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406
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331
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109
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692
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297
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289
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250
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203
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115
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53
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63
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280
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023
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050
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036
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714
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152
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041
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013
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529
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280
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023
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050
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036
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615
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327
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615
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215
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297
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289
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203
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099
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031
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215
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275
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297
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289
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250
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203
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178
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115
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215
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297
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289
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250
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203
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178
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099
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7 54
1 55
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6 31
4 10
5 22
1 16
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8 26
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733
1,63
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438
52
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291
1,32
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355
1,37
11,
380
1,08
01,
375
1,35
41,
338
1,29
41,
292
1,29
8 1,
272
1,24
31,
210
1,17
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4 1,
094
1,03
698
6 1,
180
56
1,69
71,
425
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53
626
587
798
835
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893
937
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1,01
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033
1,04
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044
809
1,02
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004
984
942
931
926
896
863
827
788
485
702
645
593
855
42
1,71
41,
531
1,15
8 54
62
6 58
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8 83
5 87
3 89
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7 98
6 1,
015
1,03
31,
042
1,04
480
9 1,
028
1,00
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4 94
2 93
1 92
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6 86
3 82
7 78
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5 70
2 64
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3 85
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714
1,53
1 1,
158
55
884
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1,12
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178
1,23
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257
1,31
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387
1,42
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456
1,47
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486
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485
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449
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51,
406
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5 1,
390
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21,
331
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2 1,
218
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109
1,28
1 60
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692
1,39
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3 56
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059
993
1,34
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409
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503
1,57
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658
1,70
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742
1,76
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784
1,40
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793
1,77
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763
1,71
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726
1,74
5 1,
723
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670
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166
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569
72
1,67
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289
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57
631
592
804
842
879
899
944
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31,
041
1,05
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052
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1,03
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013
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493
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43
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529
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001
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1,27
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333
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423
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649
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687
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615
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560
1,52
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076
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392
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475
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1,68
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321
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1,00
193
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275
1,33
3 1,
392
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492
1,56
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615
1,64
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671
1,68
71,
327
1,69
21,
673
1,66
01,
615
1,62
1 1,
637
1,61
51,
589
1,56
01,
528
1,07
61,
452
1,39
21,
343
1,47
5 68
1,
681
1,32
1 83
9 60
1,
001
939
1,27
5 1,
333
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2 1,
423
1,49
21,
569
1,61
51,
649
1,67
11,
687
1,32
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692
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660
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621
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615
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560
1,52
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392
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475
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321
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61
822
771
1,04
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096
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170
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291
1,32
91,
355
1,37
11,
380
1,08
01,
375
1,35
41,
338
1,29
41,
292
1,29
8 1,
272
1,24
31,
210
1,17
579
4 1,
094
1,03
698
6 1,
180
56
1,69
71,
425
972
62
773
725
985
1,03
1 1,
077
1,10
1 1,
155
1,21
51,
251
1,27
51,
289
1,29
71,
013
1,28
91,
267
1,25
01,
207
1,20
3 1,
206
1,17
81,
148
1,11
51,
079
718
997
939
888
1,09
9 53
1,
702
1,45
3 1,
013
63
936
878
1,19
2 1,
247
1,30
2 1,
331
1,39
51,
468
1,51
11,
542
1,56
21,
575
1,23
71,
577
1,55
71,
543
1,49
91,
502
1,51
4 1,
490
1,46
31,
432
1,39
997
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3
The
Econ
omic
Pot
entia
l for
Sm
allh
olde
r Rub
ber P
rodu
ctio
n in
Nor
ther
n La
os
22
7
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077
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155
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251
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289
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267
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079
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291
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355
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380
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375
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338
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292
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210
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9 72
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401
1,46
2 1,
495
1,56
71,
648
1,69
61,
732
1,75
71,
774
1,39
71,
782
1,76
31,
751
1,70
61,
714
1,73
3 1,
711
1,68
61,
658
1,62
71,
156
1,55
21,
493
1,44
41,
559
72
1,67
61,
293
806
109
773
725
985
1,03
1 1,
077
1,10
1 1,
155
1,21
51,
251
1,27
51,
289
1,29
71,
013
1,28
91,
267
1,25
01,
207
1,20
3 1,
206
1,17
81,
148
1,11
51,
079
718
997
939
888
1,09
9 53
1,
702
1,45
3 1,
013
110
884
829
1,12
6 1,
178
1,23
0 1,
257
1,31
81,
387
1,42
81,
456
1,47
51,
486
1,16
51,
485
1,46
41,
449
1,40
51,
406
1,41
5 1,
390
1,36
21,
331
1,29
789
2 1,
218
1,15
91,
109
1,28
1 60
1,
692
1,39
0 92
3 11
1
77
3 72
598
5 1,
031
1,07
7 1,
101
1,15
51,
215
1,25
11,
275
1,28
91,
297
1,01
31,
289
1,26
71,
250
1,20
71,
203
1,20
6 1,
178
1,14
81,
115
1,07
971
8 99
7 93
9 88
8 1,
099
53
1,70
21,
453
1,01
3 11
2
1,
053
987
1,34
0 1,
401
1,46
2 1,
495
1,56
71,
648
1,69
61,
732
1,75
71,
774
1,39
71,
782
1,76
31,
751
1,70
61,
714
1,73
3 1,
711
1,68
61,
658
1,62
71,
156
1,55
21,
493
1,44
41,
559
72
1,67
61,
293
806
113
1,05
398
71,
340
1,40
1 1,
462
1,49
5 1,
567
1,64
81,
696
1,73
21,
757
1,77
41,
397
1,78
21,
763
1,75
11,
706
1,71
4 1,
733
1,71
11,
686
1,65
81,
627
1,15
61,
552
1,49
31,
444
1,55
9 72
1,
676
1,29
3 80
6 11
4
1,
053
987
1,34
0 1,
401
1,46
2 1,
495
1,56
71,
648
1,69
61,
732
1,75
71,
774
1,39
71,
782
1,76
31,
751
1,70
61,
714
1,73
3 1,
711
1,68
61,
658
1,62
71,
156
1,55
21,
493
1,44
41,
559
72
1,67
61,
293
806
115
1,05
398
71,
340
1,40
1 1,
462
1,49
5 1,
567
1,64
81,
696
1,73
21,
757
1,77
41,
397
1,78
21,
763
1,75
11,
706
1,71
4 1,
733
1,71
11,
686
1,65
81,
627
1,15
61,
552
1,49
31,
444
1,55
9 72
1,
676
1,29
3 80
6 11
6
1,
053
987
1,34
0 1,
401
1,46
2 1,
495
1,56
71,
648
1,69
61,
732
1,75
71,
774
1,39
71,
782
1,76
31,
751
1,70
61,
714
1,73
3 1,
711
1,68
61,
658
1,62
71,
156
1,55
21,
493
1,44
41,
559
72
1,67
61,
293
806
The Economic Potential for Smallholder Rubber Production in Northern Laos
228
Appendix 6: The annual latex yields over the life of the plantation for three levels of resource quality
Levels of resource quality Year Low Moderate High
1 0 0 0 2 0 0 0 3 0 0 0 4 0 0 0 5 0 0 0 6 0 0 0 7 0 0 0 8 0 0 0 9 509 815 1,004
10 477 764 941 11 648 1,038 1,277 12 678 1,086 1,336 13 709 1,134 1,395 14 725 1,160 1,425 15 761 1,216 1,495 16 801 1,280 1,572 17 825 1,317 1,618 18 838 1,343 1,652 19 842 1,359 1,675 20 840 1,368 1,690 21 644 1,070 1,330 22 817 1,362 1,695 23 792 1,341 1,676 24 769 1,325 1,663 25 728 1,281 1,619 26 713 1,279 1,625 27 700 1,284 1,640 28 668 1,258 1,618 29 632 1,228 1,592 30 594 1,196 1,563 31 554 1,161 1,531 32 298 783 1,079 33 464 1,080 1,455 34 407 1,021 1,396 35 355 971 1,347