falling rubber prices in northern laos: local …...falling rubber prices in northern laos: local...
TRANSCRIPT
FallingRubberPricesinNorthernLaos:LocalResponsesandPolicyOptions
Clearedrubbertreesstackedasfirewood,LuangNamtha
ThoumthoneVongvisouk,PhDNationalUniversityofLaos,FacultyofForestry
MichaelDwyer,PhD
UniversityofBern,CentreforDevelopmentandEnvironment
PreparedforHelvetasLURASproject
8February2016
DRAFTFORREVIEW
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ExecutiveSummary
RubberpricesinnorthernLaoshavefallensignificantlyoverthelastfewyears,erodingmuchoftheenthusiasmdevelopedbybothfarmersandgovernmentofficialsinthe1990sandearly2000saboutrubberprovidingawayoutofpovertyforpooruplandfarmers.ThedropinpricespaidtoLaorubbergrowershasbeenprecipitous(Figure1);fromhighsaroundCNY14/kgoflumprubber(yangkorn)in2011,pricesfellbyhalf,thenbyhalfagain,reachingalowaroundCNY3.5/kgin2014;pricesduringourfieldworkwerejustslightlyhigher(~CNY4)andhavesincefallenevenlower(~CNY2.5).
ThisstudyexaminesresponsestothispricedropbyLaorubbergrowersandstateinstitutions.Italsoexaminesthereasonsthatpricesarewhattheyare,giventhatpricevolatilitywasidentifiedasariskduringthemid-2000s,andthatinatleastsomecases,stepsweretakentopreventcontractfarmersfromfallingrubberprices.Drawingon20daysoffieldworkinmid-2015infivedistrictsandsevenvillagesofLuangNamthaandOudomxaiprovinces,thisstudyisoneofthefirstpiecesofresearchtoconnectanearlierbodyofresearchontherubber-plantingboomofthe2000swiththemorerecentfallinprices.Itsfocusisonqualitativechangesthathavetaken–andarecurrentlytaking–placeinnorthernLaos;thesewerecapturedthrough33keyinformantinterviewswith68participantsattheprovincial,districtandvillagelevels,aswellasareviewofavailablescientificliterature,mediareportsandonlinesourcesandconsultationwithasmallgroupofexpertresearchers.
Rubberremainsanimportantsmallholdercropinthenorth,andthefallinpriceshasplacedaseriousstrainonrubber-basedlivelihoods.Thishaspromptedarangeofresponsesbybothstateinstitutionsandrubbergrowersandalike.
Responsesbygovernmentinstitutionsincludeformingprovincial-anddistrict-levelcommitteesonrubber;usingthesecommitteestobrokerrubbersalesatprices(slightly)higherthanthosebeingofferedbyrubber-purchasingcompanies(insomecasesusingthewaivingofcompanies’taxrequirementsasanincentive);andencouragingsmallholderstoworkhardand“stickitout”untilpricesriseagain,bothinformallyandviapolicies(e.g.abanonconversiontobananas)aimedat
Figure1.Globalversus“farm-gate”rubberprices,LuangNamtha,2000–2015
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Averageannualpurchasepriceforrubber,northernLaos(LuangNamthaProvincialInvestmentandCommerceOfficestagsgcs)SingaporeCommodityExchange,No.3SmokedRubberSheets(IndexMundi)
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preventingtheswitchtootherlanduses.Despitetheeffortexpendedbythesecommittees,theirimpactremainslimitedduetolowleverageovercompanies’abilitiestodictaterubberpricestoLaorubbergrowers.
Amongthemostimportantresponsetofallingrubberpricesbygovernmentofficialshasbeenadecisiontonotenforceminimum(“floor”)pricesthatwere,inatleastthreeofthedistrictsthatwestudied,describedtobewrittenintocompanycontracts.Thisisespeciallynotablegiventhelimitedleverageinthebrokeredrubbersalesmentionedabove,andithighlightsthefactthattheextremeexposuretoglobalpriceswingscurrentlybeingfacedbyLaorubbergrowersis,atleastinpart,theresultofapolicydecisionratherthanduetoalackofplanning.
Responsesbygrowersincludewaiting(nottapping)forpricestorise,continuingtotapbutrelyinglargelyoronlyonhouseholdlabor,takingcollectiveactiontoattract(slightly)higherprices,andtransactingtheirplantationsthroughsalesorleases,eithertowealthieractorswhomaintainplantationsasrubberorinvestorswhoconverttocurrentboomcropslikebananas.Thewidelydiscussedphenomenonoflandconversiontobananasisoccurringinmultipledistrictswhereweconductedfieldwork,butmaybelesscommonthanmanypeopleimagine;however,effortstobantheconversiontobananasprobablyselectsforunder-reportingbybothgrowersandstateofficialsalike.
Moreimportant,weargue,isthefactthatmanyrubberplantationsaregoingun-tappedbecausetheyhavebeensoldoutofthesmallholderarrangementsunderwhichtheybegan,andarenowin“large-holder”productionarrangementswhereprevalentwagelabororshare-croppingschemesmaketappingeconomicallyunviable.Insuchacontext,onlysmallholderswhousehouseholdlaborhaveaneconomicincentivetotap.Smallholderswhoarecontinuingtotapwouldliketoseepricesintherangeof50–100percentabovecurrentvalues,andexplaintheirchoicetocontinuetappingbynotingtheneedtorecouptheirearlierinvestmentsevenwhilemarketsarepoor.
WithChinesecompaniesbasicallydictatingpricestoLaogrowers,fallingglobaldemandhasbroughtmorelocalizedissuesofmarketpowerintoview.Manyofthekeyinformantswespoketo–bothrubbergrowersandstateofficials–notedtheimportanceofcontroloverrubberimportsintoChinabyalimitednumberofcompanies(probablyjustthree).ThepricesthatLaogrowersreceivearesubstantiallylowerthanwhatChinesegrowersreceive;whilegooddataisdifficulttoget,LaopricesseemtoberoughlyhalfwhatChinesegrowerscommand(althoughwithsubstantialvariation).Whilesomeofthisdifferencemaybeduetoquality,monopolycontroloverthebordertrade–andinparticularaccesstoquota-basedimportallowances–seemstobethemajorfactor.GrowersandgovernmentstaffinLaosthusnotetheneedtohavemorediscussionswithChineseauthoritiesaboutopeningtheborderrubbertrade,aswellaspursueotheroptionsforthesaleofLaorubber.
AlthoughrubberwaswidelyimaginedasastrategiccropfornorthernLaosduringmuchofthe2000s,effortstoscaleupthesuccessfulexperienceofBanHatNyaodidnotmaterialize.Thiswasdueinparttothedifficultiesoftranslatingthepublic-sector-basedcreditingarrangementBanHatNyaoreceivedintotheprivate-sectorcreditmodelofproduct-split-basedcontractfarming,andinpartduetothedropinrubberpricesthathasoccurredjustaslargeareasofrubberplantationsarecomingtomaturity.BanHatNyao,incontrast,haditsplantationsmaturejustatthebeginningofalongpriceincrease.
RubbercanstillbecomeastrategicsmallholdercropinlinewiththevisionoftheagriculturesectorthatisoftenputforwardbyLaoministerialofficials,buttheconsolidationofrubberholdingsthat
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hasoccurredinthelastfewyearsmustberecognizedandpossiblyaddressed.Moreover,ifrubberistobecomeastrategiccommodity,itneedstobeactivelytreatedassuch;thismeansregulatingthemarketratherthanlettingrubberbehavelikeaclassic“boomcrop”(i.e.followinggloballydictatedcyclesofboomandbust).Experienceintheregionsuggeststhepossibilityofprotectingsmallholdersfromtheswingsofglobalmarketsandtheopportunisticbehavioroftheprivatesector,forexamplethroughregulatingpricesviaamixofcontractingandstate-basedpricesupports(seedetailsbelow),andpursuingamixofdiplomaticandlocalefforts.Suchanapproachwouldneedtorecognizethatcurrentconditionsarenotsimplytheresultofglobalmarketforces,butlocalfactorsaswell,andaddressthelatterthroughcoordinatedinstitutionalandpolicyefforts.
Sucheffortsmightinclude:(1)enforcingcontractedfloorpriceswheretheyalreadyexist,requiringreasonablefloorpricesinnewcontracts,andinvestigatinglegalpossibilitiesforrenegotiatingexistingcontractstoincludereasonablefloorpricesandotherprotections;(2)creatingastatepricesupport(subsidy)mechanismthatwouldpurchaserubberfromfarmersatahigherandmorestableguaranteedprice;(3)providingother(e.g.land-based)subsidiestopoorerand/orsmaller-scalerubbergrowers,soastotargetstatesupporttogrowerswhoneeditmost;(4)changinggovernmentpoliciestofurtherincentivizevalue-addingwithinLaos,soastotakepowerawayfromactorswhocontroltheexportmarket;and(5)undertakingdiplomaticeffortstoplacerubber(bothprocessedandunprocessed)onthelistoffreelyexportablecommodities.
Currentgovernmenteffortsfocuslargelyongettingfarmerstoself-organizeinordertoenhancetheircollectivebargainingpower,andusingnegativepolicyinstrumentslikeconversionbanstoinfluencelandusedecisions.Thetoolssuggestedabovearebasedonamoreactiveapproachtoregulation.Thiswillbemoreexpensivetoimplement–simplyput,regulationcostsmoney–butgiventhelimitstocurrentapproaches,theyarelikelytobemoreeffectiveathelpingfarmersinboththeshortandlongterm.
Ourworkalsoidentifiedanumberofareasforadditionalresearch.Theseinclude(1)quantifyingthedistributionanddynamicsofrubberholdings,giventhesubstantialbutunmeasuredshiftfromsmallholdingto“larger-holding”inrecentyears;(2)studyingthestrategicdimensionsofChineseagribusinesssothatLaofarmersarebetterabletobenefitfromtransnationalcommoditychains(thisincludetheneedformuchbetterdataonrubberpricesthaniscurrentlyavailable);(3)studyingthehousehold-levelandsocialimplicationsofsmallholders’continuingtotaptheirrubberusinghouseholdlaboratverylowprices;and(4)understandingtheroletheindebtedness–includingbutnotlimitedtodebtaccumulatedfromsmallholderplantationestablishment–playsincurrentdecisionsaboutlanduse,landconversionandlandtransactions.
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CONTENTSExecutiveSummary.................................................................................................................................iAbbreviations.........................................................................................................................................vAcknowledgments..................................................................................................................................v1.Introduction.......................................................................................................................................1
1.1.Aftertheboom............................................................................................................................11.2.Background:therubberlandscapeinnorthernLaos..................................................................21.3.Researchquestions.....................................................................................................................7
2.Methodology......................................................................................................................................72.1.Approach:breadthoverdepth....................................................................................................72.2.Methods......................................................................................................................................92.3.Challengesandlimitations........................................................................................................10
3.Results..............................................................................................................................................113.1.Governmentresponses.............................................................................................................123.2.Rubbergrowers’responses.......................................................................................................183.3.Thepriceofrubber....................................................................................................................303.4.Whatshouldtherubberpricebe?............................................................................................34
4.Discussion.........................................................................................................................................344.1.Rubber:Boomcroporstrategiccommodity?...........................................................................344.2.Regulatoryoptions:Beyondthe“on-off”approach.................................................................364.3.Additionalresearchneeds.........................................................................................................40
5.Summaryofrecommendations........................................................................................................42References...........................................................................................................................................43AnnexI.Reportedrubberareas...........................................................................................................45AnnexII.Villagesvisited.......................................................................................................................46AnnexIII.Stakeholdersinterviewed.....................................................................................................47AnnexIV.Discussionquestionsforkeyinformantinterviews.............................................................48AnnexV.Rubberpricesreportedinfieldworkinterviews...................................................................51AnnexVI.Normativestatementsaboutrubberprice..........................................................................52
TABLESTable1.ReportedconversionfromrubbertoothercropsintwoLuangNamthadistricts.................26
FIGURESFigure1.Globalversus“farm-gate”rubberprices,LuangNamtha,2000–2015....................................iFigure2.Studyarea...............................................................................................................................8Figure3.Samplegovernmentinterview,Singdistrict...........................................................................9Figure4.SamplecalculationofCommittee’srecommendedrubberprice.........................................13Figure5.Bananaplantation,Singdistrict............................................................................................15Figure6.Reportedfractionsofun-tappedrubber...............................................................................19Figure7.Pricethresholdsatwhichtappingbehaviorchanges............................................................22Figure8.Rubbersaletointermediarycompany,LuangPrabangProvince.........................................29Figure9.PostedpriceattheYunnanRubberCo.factoryinLuangNamtha,August2015..................32Figure10.Farm-gatepricesinnorthernLaosversusXishuangbanna,Yunnan....................................33
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Abbreviations
CNY ChineseYuan(Renminbi)DAFO DistrictAgricultureandForestryOfficeDICO DistrictIndustryandCommerceOfficeLAK LaoKipMAF MinistryofAgricultureandForestryNAFRI NationalAgricultureandForestryResearchInstitutePAFO ProvincialAgriculturalandForestryOfficePDPI ProvincialDepartmentofPlanningandInvestmentPICO ProvincialIndustryandCommerceOfficeAcknowledgments
Wethankthefollowingindividualsandinstitutionsfortheirgenerousassistanceincreatingtheresearchpresentedbelow:LaoMinistryofAgricultureandForestry,DepartmentofAgriculturalExtensionandCooperatives;
Mr.SomxaySisanonh,DeputyDirectorGeneralHelvetasLaos,LaoUplandRuralAdvisoryService(LURAS)Project;Mr.AndrewBartlett,TeamLeader
andMs.KhamlaInmieugxay,OfficeManagerRepresentativesof:
• ThevillagesofBanHatNyao,KoNoi,Mokpalai,NamNgeun,Oudomsin,PhiyerandSopSim• LuangNamthaPAFO,PICO,PDPI• NamthaDAFO,DICO• SingDAFO,DICO,DDPI,DFO• ViengphoukhaDAFO,DICO,DFO• OudomxaiPAFO,PICO,PDPI,PFO• XaiDAFO,DICO,DDPI• HounDAFO,DICO,DDPI• Sino-LaoRubberCompany• YunnanRubberCompany
NationalUniversityofLaos,FacultyofForestrySciences;Mr.ChimmyBounlom,researchassistantMelanieCanet,WeiyiShi,DietrichSchmidt-VogtPhotocredits(includingcover):ThoumthoneVongvisouk
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1.Introduction
1.1.AftertheboomItseemslikeanotherera.Tenyearsago,passageslikethefollowingappearedregularlyinLaonewspapers:“RubberplantationsinLuangNamthaprovinceareincreasingrapidly,withgrowerskeentogetashareofthelucrativerubberexportmarket.Growingrubbertreesisseenasanexcellentinvestmentbecausethereisapermanentmarketforrubber,especiallyinChina,whichsharesaborderwiththeprovince”(VT2005b).Thisoptimismwastypicalofthemid-2000s,whenmanyingovernmentandtheprivatesectorbelievedthatChina’sdemandforrubberwouldbesustainedindefinitely,andthatLaos’snorthernuplandswerehighlysuitable–notjustecologicallybutalsosocio-economically–tobethenextfrontierfortheexpansionoftheChineserubbersector.ChineserubberintheLaouplands,inshort,waswidelyseenduringtheboomyearsofthemid-2000s(Altonetal.2005;NAFRI2006;Shi2008)asaninvestmentopportunitythatwastoogoodtobemissed,forbothpoorfarmersandwell-offinvestorsalike.
Inthelastfewyears,muchofthisoptimismhasdisappearedasrubberpriceshavefallensteeply,bothgloballyandthroughoutnorthernLaosinparticular(VT2013,2014a,2015a).Thedrophasbeenabigone:fromhighsaroundCNY14/kgin2009-2011,pricespaidtoLaorubbergrowersfellbyhalf,andthenbyhalfagain,toalowin2014aroundCNY3.5/kg;thisyear,pricesroseslightlytoaroundCNY4/kg(atthetimeoffieldwork)andhavesincefallenevenlower(detailsbelow).1Thepricecrashhasputaseriousstrainonrubber-basedlivelihoods,promptingarangeofresponsesbybothgrowersandgovernmentofficials.Theseresponses,examinedbelow,areconsistentwithrubberbeingaclassic“boomcrop”whosepricerisesandfallswiththeunpredictablewhimsofglobalmarkets;thiscontrastssignificantlywiththemoreregulatedapproachtomarketsthatoftenaccompaniescommoditiesof“strategic”importance,andthusraisesimportantpolicyquestions.Butthepricecrashhasalsohighlightedanadditionalfactorwhosecausesareunrelated,yetwhichhasmajorimplicationsforpolicydiscussionsabouthowtoaddressthefallinrubberprices.Thisistheconsolidationofrubberplantationholdingsbywealthiergrowersandtown-basedelites,aprocessthatbeganafewyearsbeforethepricecrash,andthathasactuallyslowedduringthelastfewyears.Butasweexplainbelow,theconsolidationofplantationholdings–clearlyevidentinthedifferenceinresponsestofallingpricesbetweenhousehold-scaleproductionandlargerplantations–meansthatrubberisnotsimplya“smallholder”crop,asisoftenimagined.Thishasimportantimplicationsforpolicyeffortstomakerubberthestrategiccrop,practicallyspeaking,thatitisoftenhopedtobe.
Canthenegativeeffectsoffallingpricesbemitigated,andifso,how?Doallgrowersdemandthesameprotectionfromtheuncertainfutureofthemarket,ordo“true”smallholdersdeservepriorityoverlargergrowers?Canrubberbecomethe“strategic”cropthatwasenvisionedduringtheboomdecadeofthe2000s–alleviatingpoverty,replacingopium,preservingforest–orisitdestinedtofollowtheupsanddownsoftheglobaleconomy?ThisstudyprovidesanimportantcontributiontotheseandrelateddiscussionsbydescribingresponsestofallingrubberpricesbybothgrowersandgovernmentofficialsinnorthernLaos(seespecificresearchquestionsinSection1.3).Indoingso,ourworkhelpsconnectrecentreportsaboutlandsales,landconversion(e.g.tobananas),andlocalgovernmenteffortstomanagetherubberprice(VT2014a–f)withanearliergenerationofresearchontheestablishmentofrubberplantations(Altonetal.2005;Diana2006;Shi2008;Manivongand1Inthisstudy,weusethecurrenciesreportedinourinterviewswheneverpossible.BecausenorthernLaos’srubbermarketiscloselylinkedtoChina’srubbersector,pricesareoftenreportedinYuan/Renminbi(CNY).
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Cramb2008;Cohen2008;Kenney-Lazar2009;Thongmanivongetal.2009;Dwyer2011;Sturgeonetal.2013,amongothers).Examiningmultiplelocations,itexpandsthediscussionbeyondLuangNamtha(theusualfocus),andthusallowstherangeofexperienceswithbothrecentresponsesandearlierplantationestablishmenttobeconsideredtogether.Thisallowsrelationshipbetweenthetimingofrubber’smaturityanditssubsequentbehaviorinthemarkettobebetterunderstood;asexplainedbelow,thishasspecialimportanceinthecontextofpolicyefforts,bothpastandpresent,tomakerubberamorestrategiccropthroughthecreationofamorestablepriceenvironment.
Ourreportisorganizedasfollows.TheremainderoftheSection1providesessentialbackgroundontherubberlandscapeinnorthernLaos(Section1.2),andthenusesthistointroducetheresearchquestionsmoreprecisely(Section1.3).Section2providesadditionaldetailsaboutourresearchmethodsandapproach.Section3thenpresentsourresults,explainingfirsthowgovernmentinstitutionsandrubberproducershaverespondedtotherecentdropinprices,andthenexaminingthequalitativeandquantitativedimensionsofrubberpricesingreaterdetail.InSection4,wediscusstheseresultsintermsofoverallthemeofregulation:wecontrastrubber’scurrent“boomcrop”behaviorwiththeidealofastrategiccommoditythatismoretightlyregulatedandthusmoresuitableforlarge-scalecultivationbyaclassofsmallholderproducers;intheabsenceofsuchregulation,weseethecurrentconcentrationofrubberinthehandsoflargerproducersaslikelytocontinue.WeconcludeinSection5bysummarizingtherecommendationsthatemergeinSection4.
1.2.Background:therubberlandscapeinnorthernLaosRubberisplantedextensivelyinnorthernLaos,andisofficiallyrecognizedasaprioritycommercialcropinbothLuangNamthaandOudomxaiprovinces.2Whileitsreturnsfromexporttaxrevenuesareimpressive(VT2014a),detailsaboutthedistributionofplantationareasarehardertocomeby.
Duringourfieldwork,wecollectedarangeofstatisticsthat,whentakentogether,suggestthat(1)theareaunderrubberisintherangeof60,000hainLuangNamthaandOudomxai,dividedroughlyequallybetweenthetwoprovinces;(2)thattheseplantationsaremostlyindependentlyownedandcontract-farming-basedoperations(asopposedtotheconcessionmodel,whichpredominatesinthesouth);andthat(3)asubstantialbutunknownportionofthisrubber,especiallyinOudomxai,iseitherrecentlymature(possibletotap)orwillbereadyfortappingverysoon.
SomeofthesestatisticsarepresentedinAnnexI,buttheseshouldbetakenwithextremecaution.Asdetailedbelow,inbothLuangNamthaandOudomxai,therehasbeensubstantialmovementbothbetweenandwithincategories.Thismeansthat(amongotherthings)thatfiguresforindependentholdingsvs.contractfarming,aswellasforsmallholdingsvs.larger-holdings,arelargelyunknown;thatdistinctionbetweendifferenttypesofcontractfarming(so-called“2plus3”and“1plus4”)isequallydifficulttoquantifywithoutfurtherinvestigation;that,aselaboratedbelow,independentlyownedrubbershouldnotbeequatedwithsmallholding;andthat,giventheboominrubberplantingin2006-2008(i.e.7yearsago),statisticsarelikelytooverestimatetheamountofimmaturerubber.Despitethisuncertainty,certaincorecharacteristics–rubber’sprevalenceinthelandscapeofnorthernLaos;itsconcentrationinbusinessmodelsotherthanconcessions;andthedynamismbothbetweenandwithinvariousnon-concessionbusinessmodels–arewellestablished.Thesearetheresultofaseriesofprocessessummarizedintheremainderofthissection.
2Interviews,LuangNamthaandOudomxaiprovinces(interviews2and14,respectively)
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Thesmallholder(HatNyao)model
GovernmenteffortstosupportthedevelopmentofarubbersectorhavebeenverydifferentinthenorthofLaosthantheyhavebeenincentralandsouthernpartsofthecountry.Unlikethesouth,whereaconcession-basedmodelhasunderpinnedtheestablishmentand(substantial)growthoftherubbersector(Baird2010,2012;Laungaramsri2012;Schoenwegeretal.2012;Kenney-Lazar2013),northernLaos’srubbersectorhasbeenbasedonasmallholdermodel.Thisisnottosaythatall,orevenmost,oftherubberthathasbeenplantedandcultivatedtherehasbeenbysmallholders;asdescribedbelow,ithasnot,andespeciallytoday,itisnot.ButtheidealofsmallholderproductionhasbeeninstrumentalinshapingthewaythatthenorthernLaorubbersectorhasemerged.
Asothershavenoted(e.g.Altonetal.2005;Shi2008,2015)andourinterviewsconfirmed,thisidealislargelymodeledonthesuccessofBanHatNyao.BanHatNyaoisaHmongvillagelocatedjustnorthoftheprovincialcapitalofLuangNamtha(seeFigure2)thatalmostsingle-handedlyputrubberonthemapasaprioritycropforprovincialpovertyalleviationandshiftingcultivationstabilizationefforts.ThestoryofBanHatNyaoiswidelyknown,andhasbecomeastandardpartofthenarrativeofrubberdevelopmentinnorthernLaos.Weheardmanydifferentversions,butthe“HatNyaostory”istoldsooftenthatithasbecomerelativelystandardized,focusingonthemesofpovertyalleviation,opiumreplacement,shiftingcultivation,proximitytoChina,andlocalinitiative:
Rubberplantingbeganin1994inBanHatNyao.Rubberwasinitiallyplantedtoreplaceopiumcultivation.AstheHmonghavetraditionallycultivatedopiumforhouseholdincome,andsomeofthevillagersinBanHatNyaohadmigratedfromChina,theynoticedthatrubberisalsocultivatedforlatex,whichsimilartoopium.Sinceprovincialanddistrictauthoritiesintroducedthepolicyoneliminationofopiumcultivationandreducingshiftingcultivation,peopleinBanHatNyaodiscussedamongthemselvesanddecidedthatrubberwouldbeagoodpotentialforgrowthinthisarea,asthevillageisclosetoChinaandrubbergrowswellthere.Themainaimsofrubberplantationarethustoimplementthegovernmentpoliciesonopiumelimination,reducingshiftingcultivationandpoverty[alleviation].3
BanHatNyao’sexpansionintoapolicymodelwasduetoitslocationanditsconnections.Whileitwasnotaloneinplantingrubberinthemid-1990s–anumberofvillagesinSingDistrictdidthisaswell(Diana2006;Shi2008;Sturgeon2010)–thevillagewaslocatedintheinterioroftheprovinceandwasclosetotheprovincialcapital.Italsohadanimportantpatronintheformervice-governorofLuangNamthaprovinceinthemid-1990s,andwhohelpedthevillagesecureaninterest-freeloanthathelpedfinancetheestablishmentofthevillage’srubberplantations(Altonetal.2005).Whenthevillagebegantotaptheirrubbertreesin2003,afterafewyearsitssuccesshadbecomewidelyknown,anditdidnottakelongforprovincialauthoritiestotrytoreplicatetheHadNyaomodelelsewhere.
Scalingup,withatwist
ThesuccessofBanHatNyao,incombinationwithanearlynegativeexperiencewiththeconcessionmodel(justsouthoftheLuangNamthaprovincialcapital,inBanSopDuut)helpedestablishcontractfarmingasthepreferredalternativeforcreatingthenecessaryconditionsforrubberdevelopmentinareaswithpreviouslittleexperienceorassets.AlthoughtheBanHatNyaostorytendstoemphasizecommunitycohesionandself-initiative,akeypartofthevillage’ssuccessinestablishingplantations
3Governmentinterview,LuangNamthaprovince
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wasitsabilitytosecureasubstantialamountofcreditatlowinterest;asAltonetal.note,“Allproducinghouseholdsreceivedsubsidizedloansfromtheprovinceforthecostofseedlingsandsomefencing.EachproducinghouseholdreceivedbetweenLAK1-3millionincredit”(2005:51).Scalingupthissubstantialoutlayofcreditisnotastraightforwardprocess,giventheexpensesinvolved,andthedecisiontoembracecontractfarmingasamodelthroughwhichtoup-scalethesmallholderrubbermodelmeantthatquestionofcreditwaspushedtotheforeground.
Mostcontractfarmingprojectsaredistinguishedonthebasisofthepercentagesplitbetweenthecompanyandthegrower–thissplitreferstothepercentageofeitherraw(lump)rubberor,aselaboratedbelow,rubbertreesthatcompaniesreceiveinexchangeforprovidingcreditupfrontintheformofrubberseedlings,toolsandanythingelsethatisneededtoestablishaplantation.Thesubstantialfractionsallocatedtocompanies–evenatthelowend,30percentofarubberharvestovertwotothreedecades–suggestsjusthowmuchcapitalwasrequired(orwasatleastbeingdebated).Duringthe2004-2006,justafterBanHatNyao’sfirstsuccessfulrubberharvesthadledtobilateral(Lao-Chinese)discussionsaboutscalinguprubberdevelopmentcooperation,itisnoaccidentthatproposalsfocusedon(andarguedabout)thevalueofvariousinputsintoarubberplantation(labor,seedlings,tools):thesewererepresentationsofwhatdifferent“sides”broughttothearrangement,andtheyinturnshapedthesplitsthatcompaniesofferedtocontractors(Dwyer2011).Thesesplitsvaried,andinatleastsomelocationschangedovertimeascompaniestriedtoenticemorefarmerstoparticipate.4
AsVongkhamhoretal.(2007)noted,thetermsonofferbyChinesecompaniesinthemid-2000sfailedtoattractthenumberoffarmersoriginallyintended.Manyfarmerswereeithernotinterestedingoingintotherubberbusiness,oriftheywere,theypreferredtoorganizetheirowncreditforinputsratherthangiveupsuchasubstantialpercentageoftheircropinperpetuity.(Companiesweregenerallyofferingfarmersbetween50and70percentoftheproduct,meaningthatfarmerswhojoinedtheseprojectswouldhavebeentrading30to50percentoftheirharvestforinputs.)ShifoundsomethingsimilarinLuangNamtha,andindoingsodocumentedoneofthemostimportantshiftsintheplantationestablishmentprocess:thechangefromrubber-basedsplitstotree-basedsplits(Shi2008).Oneofthemainreasonthatfarmersgaveforrefusingtoparticipateinthenewcontractfarmingprojectswasthattheycouldnotaffordwhatscholarscall“thelongpay”(Mann1980),inthiscasetheseven-yearwaitbetweeninvestment(oflaborandcapital)andharvest.Rubbercompanies,sometimesincollaborationwithprovincialofficials(Dwyer2013),thusmadeanadjustment:theyagreedtopayvillagersdailywagesforplantingandweedingrubber,effectivelytradingthecontractfarmingrelationshipforawagelaborarrangement.Thisextracostwasreflectedinthesplitsonoffer:underthesenewarrangements,companiestookatleast50percent,andinsomecasesupto70percent(Shi2008;Dwyer2013).Buttheyalsochangedtheobjectofvalue:forreasonsthatremainunclear,ratherthansplittingrubberitself(inlumpform)atthetimeofharvest,thisshiftalsobroughtanagreementtosplittheplantationitself.Notingthe“concession-like”natureofthesenewrubberprojects,Shi(2008)implicitlyquestionedtheextenttowhichtheydeservedthelabelofcontractfarming,sinceinlargeparttheydidnotinvolvecompaniesworkingwithfarmersontheirownland,butratherthetransformationoffarmers’landinto(mostly)largerplantations.
Thiswasconductedviaapolicylanguagethat,whileperhapsnotdeliberately,hidthefundamentalshiftfromrubberdivisiontoland(tree)division.The“2plus3”policymodelwasdevelopedinlate
4Interviews,LuangNamthaandOudomxaiprovinces
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2005asawaytoformalizetheagreementbetweenLuangNamtha,OudomxaiandBokeoprovincestopursuerubberdevelopmentcooperationwithChinesecompaniesoutsideofaconcessionmodel(Vongkhamhor2007).Thephrasereferredtofivefactorsofproduction,ofwhichfarmerswouldprovidetwo(landandlabor)andcompaniesthree(capital,inputsandguaranteedaccesstomarkets);“2plus3”wasthusessentiallyaclassiccontractfarmingmodel(LittleandWatts1994).Whentheadjustmentabovetookplace–roughly2006-2008,andinvolvingmultiplecompaniesinLuangNamthaandOudomxai–the“2plus3”terminologywaschangedto“1plus4”(Shi2008).Thisacknowledgedthefactthatfarmerswerenolongerprovidingthelaborinput,sincetheywerebeingpaidwages.Whatithid,however,wasthattheonethingtheywere“providing”–land–wasbeingprovidedinaverydifferentway.
Consolidationofplantations
Underthe“1plus4”model,villagersweresupposedtoreceiveafractionoftheplantationholdings,usuallyaround30percent,andusuallyayearortwoafterplanting,whenitwouldbeclearthatthetreeshadsurvivedthefirstfewgrowingseasons(whenfrostriskishighest),butwhentheircarestilldemandsafewyearsofworkpriortomaturity(Shi2008,Dwyer2011).Fewresearchershavestudiedwhatactuallyhappenedafterthefact–mostoftheresearchon“1plus4”tookplacebeforeplantationswereactuallydivided(e.g.Shi2008;Dwyer2011).Inherrecentrevisit,WeiyiShibecameoneofthefirstresearcherstoreportonwhatactuallytranspired;shefoundthatthepartitionstendedtobeshort-lived:“Afterthesplit,itiscommonforvillagerstoselltheirsharesoftrees…[thisoften]occurredsoonafterthesplitduetovillagersnotbeingabletocarefortheirsharesoftrees.Laborinputwasoneofthebiggestproblemsin2008,andtheshortageisevenmoreobvioustoday”(2015:1-2,emphasisadded).Ourinterviewsdescribedsimilarlaborshortages,asinthisaccountfromLuangNamtha:
Inthisprovince,wehavecontractfarmingforrubberplantations,whichinclude“2plus3”and“1plus4”schemes.However,manyhouseholdsandinvestmentcompanieshaveturnedthe“2plus3”schemesinto“1plus4”becauselocalpeoplecannotaffordtomaintaintheirrubberplantations,andtheyoftenasktherubberinvestortopaythelaborcostwhentheyworkontheirrubberplantation.5
Moreover,ourresearchalsosupportsShi’sfindingthatvillagerstendedtoselltheirrubbertreesevenbeforethepricebegantofall.AsonegovernmentofficialinOudomxaiexplained:
Sellingrubberplantationsisnormalinthisprovince–itdependsonhavingbuyers.Thegrowers[whosell]aremainlypoorhouseholdsinvillages.Buyersaremainlybusinessmenfromtheprovince[capital]aswellasChineseinvestors.Pricesofrubberplantationdependonthelocationandageofrubbertreesintheplantation.However,duringthefallingrubberprices,noonewantstobuyrubberplantations.6
AsweelaboratebelowinSection3.2,theeffectsofthisearliermarketforplantations,coupledwithdecreasingdemandaspriceshavefallen,mayhelpexplaintheproliferationofotherleased-basedlandtransactionsinvolvingrubberplantationsinthelastfewyears.Incontrasttothebelief,heldbyanumberofthegovernmentpeoplethatwespoketo,thatlandleasestooutsideentrepreneursareduetolazinessandgreed,wesuggestadifferentpossibility.Specifically,wesuspectthatthecombinationofearlierplantationconsolidationandthemorerecentfallinpricesmayhavecreated
5Governmentinterview,LuangNamtha(Interview3)6Governmentinterview,Oudomxai(Interview14)
6
alevelofindebtednessamonglargerplantationholdersthathasnecessitatedeithersellingtheirplantationsor,whenthiswasnotpossible,leasingthelandforotherhigh-valuepurposessuchasbananas.Giventhispossibility,itisessentialtoconsidertherecentfallinpricesinthecontextofearlierprocessesofplantationdevelopment,exploitationandconsolidation.
Themodelthatdidn’tscale–atleastnotyet
Today’slandscapeofrubberholdingsishighlyuneven.Yes,therearestillalotofsmallholders,butincreasinglyrubberisownedbylargergrowersaswell.(Thisisdifficulttoquantify,butsomeproxyindicatorsandestimatesarepresentedinPart3.)Partlythisisaresultofhowtheup-scalingeffortdescribedaboveplayedout,aseffortstoreplicatetheHatNyaomodelwithusingcontractfarmingdevolvedintoamixof“concession-like”companyholdingsand(later)economicallyunstablevillageplantations.ButthereisalsoanotherdimensionthatisoftenleftoutofthestandardstoryofwhatworkedforBanHatNyao.Thismissingpieceisthe(relatively)stablepriceenvironmentthatBanHatNyaohadduringitskeyearlyyears;understandingthisissueoftimingisessentialifrubberistobecomeawidespreadsmallholdercropinthefuture.
Putsimply,BanHatNyaogotlucky.Rubberpriceswerelowwhenthevillagebegantappingin2003,buttheywereatthebeginningofalongandsteadyrisethatlasteduntiltheglobalfinancialcrisisof2008(seedetailsinSection3).Duringthisperiod,therewerecertainlyupsanddowns–asoneresidentputitinourinterview,“pricesgoupanddownallthetime”–buttheoveralltrendwasupward.Thecommunitycohesion,hardworktrackingdownbuyers(sometimeseveninChina),andcollectivebargainingpowerthatareoftenemphasizedintheHatNyaosuccessstoryarenodoubtimportantaswell.Butthetimingofitsearlyyears,whenhouseholdscommittedtorubberasabasisoflivelihood,gettingtoknowtherhythmsofthecropbothbiologicallyandeconomically,isalsoakeypieceofitssuccess.Incontrast,manyoftherubberplantationsinLuangNamthaandespeciallyOudomxaihavecomeintomaturityjustastherubberpricehascrashed.Aselaboratedinthenextsection,thiscannotbuthavehadanimpactonthewaynewgrowershaverespondedtofallingprices.
Despitetheeconomicuncertainty,governmentofficialscontinuetoconsiderrubbertobeawayoutofpovertyforindustriousuplandcommunities.Asonelocalofficialweinterviewedputit,“Rubberis[still]thefirstcommercialcropconsideredforsocio-economicdevelopmentin[our]district.Themainreasonsforencouraginglocalpeopletoestablishrubberplantationaretoreplacerubberintotoformeropiumcultivationarea,reduceshiftingcultivationandencouragelocalpeopletopracticepermanentagriculture,andtoreduceruralpeople’spoverty.”Asanotherlocalofficialputit,“Itdoesnotmatterifyouarerichorpoor;whoeverhasrubberplantationsandpatienceinworkingthemwillgetincome.”7
Instatementslikethese,onehearsstrongechoesoftheBanHatNyaomodel–opiumreplacement,shiftingcultivationstabilization,povertyalleviation,andafocusonhardworkandself-initiativeasapathtoabetterlife.Butasexplainedabove,therealityismorecomplex.TheHatNyaomodelhasnotscaledup,andinsteadtheeconomiclandscapeofrubberholdersisaheterogeneousandhard-to-quantifymixofsmallholdersandwhatmightbecalled“larger-holders.”Thefactthatthepricedropofthelastfewyearshasoccurredinthiscontext,ratherthanthemoresimplifiedlandscapeofsmallholdersoftenimagined,makestheresponsesmorecomplex(aselaboratedinSection3)and
7Governmentinterviews,LuangNamtha(Interviews4and3,respectively)
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thepolicyquestionsharder(Section4).Insuchacontext,thequestionoflocalresponsesandpolicyoptionscannowbeposedabitmorespecifically.
1.3.ResearchquestionsThisbackgroundleadsustoaddsomeimportantdetailstotheresearchquestionsposedabove:
1. Weneedtoasknotonlywhattheresponsestofallingrubberpriceshavebeen,butalsowhatistherelationshipbetweenvariousresponses(bybothgrowersandofficials)andtherangeofproductionarrangementsthatmakethenorthernLaorubbersectormorecomplicatedthansimplyalandscapeofsmallholders.
2. Wealsoneedtoaskwhattheimplicationsareoftheanswerstothefirsttwoquestionsformakingrubberastrategiccropforsmallholders?Rubberexemplifiesthechallengeofstatemanagementofstrategiccommoditiesmoregenerally:thesmallholderagriculturesectorisgenerallyacknowledgedasbeingstrategicallyimportant(Phouangparisak2014;Bounthavy2014),butwhatdoesthismeanatthepolicylevelwhenproductionofthecropisdividedamongtrue(poorer,morevulnerable,oftenupland)smallholdersandwealthierindividualsandcompanies(termed“large-holders”here)whomaynotneedthestate’seconomicsupport?
3. Andthird,inordertounderstandthefullscopeofthesecondquestion,weneedtounderstandwherethepricesthatLaorubbergrowersreceiveactuallycomefrom.Itisnowacommon-senseresponsetosaythatrubberpricescomefromtheglobalmarket,andspecificallyfromtheslowdownofglobaldemand.Butevenasweheardthisoverandover,wealsoheardfrustrationswiththis,assome(especiallyproducers)wereinclinedtoblameChinesetradersandmiddle-men–localconditionsratherthanglobalones–forthepricestheywereoffered.How,then,arepricesactuallymade?
Section3thusexaminesnotonlytheresponsestofallingrubberpricesbygrowersandlocalofficials,takingintoaccounttheincreasinglyimportantdistinctionbetweenhouseholdandoutsidelabor.Italsolooksatwherepricescomefrom,andindoingsohelpshighlightawiderrangeofpolicyoptionsthantheonescurrentlybeingpursued(increasedfarmerorganizationsandofficialbansonlandconversion).AsSection4argues,makingrubberworkasasmallholdercropmayrequireamorecompletesetofpolicy“levers”,andwhilethesemaybemoreexpensivetoimplement,theyarelikelytobemoreeffectiveinboththeshortandlongerterms.
2.Methodology
2.1.Approach:breadthoverdepthInordertomakethebestuseoftheresourcesavailable,weoptedforaresearchdesignthatwouldallowusto(1)visitareasthathavebeendiscussedinrecentmediaarticlesandresearchonlocalstareandfarmerresponsestofallingprices(VientianeTimes2015a–f;Shi2015),and(2)alsoallowustolookexplicitlyatarangeofcircumstancesbothclosetoandfarfromtheChineseborder,andacrossarangeofyearsofplantationestablishment.WeselectedsevenvillagesinfivedistrictsofLuangNamthaandOudomxaitofocusourfieldworkon(seeFigure2andAnnexIIfordetails).WechoseLuangNamthaandOudomxaitocoverearlierandlaterplantationestablishment,respectively
8
(althoughthereisclearlyvariationwithineachprovinceaswell),andwechosedistrictsthat(a)coveredthespectrumfromclosetotheChinesebordertofartherawayfromit;(b)thatwereeitherclosetoprovincialcapitals(Namtha,Xai)orfartherafieldwithintheirprovinces(Sing,Viengphoukha,Houn);and(c)thatincludedarangeofgrowingarrangements,includingindependentsmallholdingandformalizedcontractfarming.
Withinthedistrictsthatwechose,weusedbothourownpriorresearchexperienceinthearea(Thongmanivongetal.2009;Dwyer2011)andkeyinformantinterviewswithgovernmentstaffconductedaspartofourfieldworktoselectsitesforourvillage-levelresearch.WechosetwovillagesinthedistrictsclosesttotheChineseborder(SingandNamtha)onthebasisoftheirexperiencewithrubberandtoreflectageographicbalance(onevillageclosetotheborder,theotherfartheraway).Intheotherthreedistricts(Xai,HounandViengphoukha),wewereonlyabletovisitonevillageperdistrict;wenonethelessthoughtitwasimportanttocoverabroadrangeoflocationsratherthandigdeeplyinasingledistrict.
Figure2.Studyarea
Ourresearchdesignthuschosetoprivilegebreadthoverdepth;wefeltthiswasimportantsincethetopicoflocalresponsestofallingrubberpriceswasrelativelyunder-studiedandwaslikelytovarybyanumberoffactors(e.g.socio-economicnetworksofrubbergrowers,thevariousbusinessmodelsinvolved,anddistancefromtheChineseborder).Ourapproachallowedustohearaboutarangeofresponsesandgrowingarrangements,butitalsoprecludeddetailedsurveysinanyonelocation.Ourresultsarethusmorequalitativethanquantitative,althoughtheyincludesomequantitativeanalysisregardingrubberprices.Moreimportantly,ourworkpointstopossibilitiesforfutureresearchonmoretargetedandquantitativeissuessuchasthedistributionofrubberholdings,discussedabove.
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2.2.MethodsThisresearchisbasedlargelyoninterviewsconductedwithrubbergrowersandLaogovernmentstaffinthevariouslocations(provincial,districtandvillagelevel)detailedabove;additionaldetailsareprovidedinAnnexIII,whichliststheinstitutionswespoketo,andAnnexIV,whichcontainstheguidingquestionsusedinourconversations.Overthecourseof20days,wespoketo68participantsvia33interviews;8ofthesewereattheprovinciallevel,15wereatthedistrictlevel,and7wereatthevillagelevel;3interviewswerewithprivatecompanies.Mostinterviewsinvolved2-3people,althoughonevillageinterviewwaslarger.Therepresentativesoftheofficesattheprovinceanddistrictlevelsweremostlyheadand/ordeputyhead,aswellastechnicalstaffworkingonissuesofrubberproductionandtrade(Figure3).Villageinterviewswereconductedwithvillageheadsand/ordeputyheads,aswellasrubbergrowersinthevillage.Weusedthesamesetofthequestions(AnnexIV)forinterviewingallstakeholdersinordertobestassessdifferencesandsimilaritiesinresponses.Attheprovincialanddistrictlevels,wefocusedonrepresentativesfromAgricultureandForestryandIndustryandCommerce;insomecases,weconductedadditionalinterviews(e.g.withofficesofPlanningandInvestment)basedonrecommendationsfromourinitialinterviews.
Figure3.Samplegovernmentinterview,Singdistrict
Wealsoconductedareviewofrelevantliterature,coveringbothrecentworksonresponsestofallingrubberpricesandearlierworkontherubber-plantingboomofthe2000s.Thishelpeduschoosethescopeforourresearch,bothgeographically(LuangNamthaandOudomxai)andtopically,giventhereports,ontheonehand,ofvariousreactionstofallingprices(e.g.landconversionsandtransactions,officialeffortstonegotiateprices)and,ontheotherhand,limitedreferencestothekindsofcomplexityofgrowingarrangementsdocumentedinearlierliterature.Ourliteraturereviewthushelpedwiththeresearchdesignandguidingquestionsinourinterviews,aswellasformingthebasisofSection1.2aboveandnecessarybackgroundforevaluatingandinterpretingourresults.
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Inthefield,wesupplementedourinterviewswithofficialdocumentsandstatisticswherepossible.Giventheambiguitiesofsomepolicytexts,theunreliabilityofmanystatisticsonrubberplanting(seeabove),andthesheertimeitsometimestakestotrackdowndocumentsthataresaidtoexistbutnotimmediatelyavailable,wefocusedourlimitedfieldtimeoninterviewsandcollectedadditionalinformationwherepossible.Oneareawedidemphasizeindocumentcollectionwasdataaboutrubberprices,giventheirprecisenatureandthedifficultiesofrememberingdetailslongintothepast.Asdiscussedbelow,thiswassomewhatsuccessful–ithelpedusevaluatethe(oftenvariable)qualityoftheinterviewdatawecollectedaboutprices–butitalsohighlightedtheneedforbetterrecordkeepingonrubberprices,giventheirvolatilenature.
Dataanalysisfocusedonextractingfivetypesofinformationfromourinterviewsandothersources.Onewasempiricalinformationaboutthehistoryofrubberplantingandrubber-basedlivelihoodswithinaparticulararea(province,districtorvillage,dependingoninterviewcontext);thisformedthebasisforourinterpretationoffourothertypesofinformation:(1)thehistoryofrubberpricesinagivenarea;(2)responsesbyrubbergrowerstothesechangesinprices;(3)responsesbystateofficialstothesame;and(4)otherrelevantinformationabouttherelationshipbetweenrubberpricesanddecisionsbyrubbergrowersorgovernmentinstitutions,suchasnormativestatementsaboutwhatshouldbedone,orstatementsaboutpricethresholdsforbehaviorchange.Wethenusedthisinformationtolookforsimilaritiesordifferencesbetweenvariousdatasources,locationsandperiodsoftime;thisanalysisprovidedthebasisfortheresultspresentedbelow.
2.3.ChallengesandlimitationsIngeneral,ourfieldworkwentwellandwewereabletointerviewmanyoftherelevantstakeholdersatvariouslevels.Authoritiesatbothprovincialanddistrictlevelsprovidedgoodcooperationandfacilitationduringthefieldstudy;afewrelevantstakeholdersatthedistrictlevelwerebusyduringourvisitandwereunabletomeetwithus;theseincludethePlanningandInvestmentofficesinbothViengphoukhaandNamthadistricts.InNamthadistrict,wewereunabletocollectstatisticsonrubberareas;thesewerereportedavailable,buttwoattemptstofollowupontheinitialpromisetodeliverthemfailed,sowegaveup.
WealsoplannedtovisitMomorLoMuevillagesinSingdistrictasrepresentativesofvillagesthatareclosetoLao-ChinaborderandhavegoodnetworkinChinaforagriculturalinvestment(includerubber).Wewereunabletoaccessthesevillages,however,duetoflooding.Thus,districtstaffattheSingDAFOandDICOrecommendedtovisitPhiyervillageinstead.
Weinterviewedrepresentativesoftheprivatesectorwherepossible,butdidnotprioritizethese.Dealingwiththeprivatesectoringeneraltakesmoretime,giventheinterestsinvolved–privatesectoractorsoftenregardinformationasstrategicandarethusunwillingtosharefully–andtheirbusyschedules;inshort,cultivatingrelationshipswithprivatesectoractorsofthesortneededtodelivergooddatatakestime,andweprioritizedourtimeinotherways.Whilethisisnotachallengeperse,thelackofextensiveinterviewdatafromprivatesectoractorsdoesrepresentanimportantlimitationofthisstudy.
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3.ResultsRubberwasselectedasapermanentagriculturalproductioncropforthedistrict.Theideawastoreducelocalpovertyandshiftingcultivation.However,wedidnotanalyzewhattherisksareforsellingtheproduct.8
Inhindsight,theremaybearushtoblamethecurrentsituationonalackofforesight.Statementsliketheabovearecommon;asanothergovernmentofficialwespoketoputit,“WewentonastudytourinChinaandsawthatpeopletheregainalotincomefromrubberplantations,sowethoughtthatlocalpeoplewillgainincomefromrubberand[thereby]reduceshiftingcultivationandlocalpoverty.Ithinkwefollowthefashionoftheinvestor,butweforgottothinkaboutthemarketandpricesinthefuture.”9Thesesentimentsarecommontoday,andechostatementsthatweremadebackinthemid-2000s.In2006,attheheightoftherubber-plantingboom,aworkshopattheLaoNationalAgricultureandForestryResearchInstitute(NAFRI)highlightedpricevolatilityatthebeginningofits“summaryoflessonslearned”section:
Thereisagrowingdemandandmarketfornaturalrubberforthenexttenyears.However,rubberhas“boom&bust”cycles,andfarmersneedtohavecopingmechanismstodealwiththeinevitablepricecrashes.Governmentsupportisvitaltosupportfarmersduringperiodsofrubberpricedeclines.(NAFRI2006:1)
Similarly,intheirfollow-uptoShi’s(2008)reportRubberboominLuangNamtha:atransnationalperspective,Hicksandco-authors(includingShi)describedthepriceofnaturalrubberas“volatileandhighlydependentonconditionsintheglobaleconomy,”andnotedthepotentialfor“rapidandsignificantreductions”inrubberpricestonegativelyimpactproducers’livelihoods,especiallywhenproductionregimesweretightlylinkedtorubberexports(Hicksetal.2009:22).Atthetimetheywerewriting,theglobalfinancialcrisiswasunderway,andpotentialimplicationsforrubbergrowerswereanissueofgrowingconcern.
Itisthereforeworthposingthequestionupfront:didn’tanyoneseethiscoming?Ourresultssuggestasurprisinganswertothisquestion.Aselaboratedbelow,itisnotthecasethatnoprotectionsweretaken,andthatcurrentresponsestofallingpricesareeffortstocopewiththelackofplanning.Rather,someprotectionswereinfacttakentoprotectsmallholdersfromtheriskoffallingprices.Butwheretheyexist–andtheyarecertainlynotaswidespreadastheymighthavebeen–thesehavebeenunenforced.Moreover,andperhapsevenmoreimportantinthecontextoffuturepolicyoptions,currentrubberpricesarenotsimplyduetoglobaleconomicconditions.Aselaboratedbelow,thepricesthatLaorubbergrowersreceiveareduetoamixofglobalandlocalfactors,anddependinmultiplewaysonpublic-andprivate-sectordecisionsinbothChinaandLaos.Justasitwouldbewrongtothinkthatpriceriskwasnotanticipatedandplannedfor,tosaythatcurrentpricesareduesimplytofallingglobaldemandmissesessentialpiecesofthestory.
Thissectiontellsthisstorymorecompletelyasawaytocontributetocurrentpolicydiscussionsanddevelopmentactivities.Sections3.1and3.2firstdiscussresponsestofallingrubberpricesbygovernmentinstitutionsandrubbergrowers,respectively.Sections3.3and3.4thenturntorubberpricesinmoredetail,lookingathowthepricespaidtorubberproducersinnorthernLaosare
8Governmentinterview,Oudomxai(Interview19)9Governmentinterview,Oudomxai(Interview16)
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actuallydetermined(Section3.3),andatwhatourkeyinformantssaidaboutwhatrubberpricesshouldbe,andwhy(Section3.4).
3.1.GovernmentresponsesSincerubberpricesbegantoslipin2011,governmentresponseshavebeenmanyandvaried;rubberwasheavilypromotedasasmallholderlivelihoodoptionbackinthe2000s,andfallingpriceshavecausedconsiderableconcernamongfarmersandofficialsalike.Inourfieldwork,weheardaboutmanytypesofactivitiesthatcouldreasonablyunderstoodasresponses;theserangedfromformalandexplicitresponsessuchasthoseundertakenbyLuangNamtha’sProvincialRubberManagementCommittee,discussedbelowfirst,tolessexplicitlyreactivebutnonethelesssignificantresponsestofallingprices.Belowwediscusstwo.ThefirstfollowscloselyfromtheactionsoftheProvincialRubberManagementCommittee,andentailsdefendingrubber-basedlivelihoodsfromthroughvariousformsofpersuasiverhetoric;thisextendswellbeyondtheCommittee,anddrawsheavilyonwhatwedescribedaboveastheBanHatNyaostory.Thesecondandfinalsateresponseisthedecisionnottoenforcecontractuallyspecifiedminimumrubberprices,alsocalled“floor”prices.Eventhoughthismaynotbeseenexplicitlyasaresponsetofallingrubberprices,weclassifyitassuchgiventhatfloorpriceswereoneofthefewmechanismsanticipatedinadvanceasawaytoprotectfarmersfrompriceinstability.1.“Managingtherubbersector”:theLuangNamthaProvincialRubberManagementCommittee
Asrubberpricesfellinlate2011andinto2012,officialsinLuangNamthareceivedanincreasingnumberofpleasforhelpfromlocalrubbergrowers.Inresponse,provincialofficialsdecidedtocreateaRubberManagementCommitteeinSeptember2012;thiswascomprisedofmembersoftheLuangNamthaPICO,PAFO,provincialtax(Finance)office,PDPI,PoNREandprovincialgovernor’soffice.TheCommittee’sresponsibilitywas“todefinenewrulestomanagetherubbersectorintheprovince,”aswellastopromotethecreationandsupporttheoperationalactivitiesoffarmers’marketinggroups(PAFO2013:8).FiveoftheCommittee’sconcretesetsofactivitiesemergedinourfieldwork:thepromotionofmarketinggroups;thecalculationofrecommendedrubberprices;thedirectbrokeringofrubbersalesfromgrowerstocompanies,aprocesswhichincludesthewaivingoftaxesoncompaniesand,insomecasespossibly,rubbergrowers;andfinally,theattempttobantheconversionofrubberplantationsintoothertypesoflanduse.Theseareeachdiscussedinturn.
Promotingmarketinggroups
OneoftheCommittee’sfirstactivitieswastotrytogetrubberproducerstoorganizethemselvesintomarketinggroupsforthepurposeofcommandingbetterprices(PAFO2013).Ourfieldworksuggestedthattherehadinfactbeensomeprogresshere–rubbersellinggroupswerereportedtoexistin“some”villagesinLuangNamtha–althoughthelackofquantitativedataofferedduringourinterviewssuggestedthatprogresswasnotwhatmighthavebeenhopedfor.Inonevillagewevisited,rubbergrowerssaidtheywereplanningtoformamarketinggroupinthefuturewhenpricesrose,butthatcurrentlyonlyafewhouseholdsweretapping,sotherewasnocollectivebargainingpoweratcurrentprices.Theconsolidationofrubberholdingsdescribedaboveinsection1.2isalsolikelytoselectagainstlocalinterestinmarketinggroups:theseworkbestwhentheaggregationofproductsforsalehasanimpactonsaleprice.Ifandwhenproducersalreadyhavesufficientvolumetocommandhighersaleprices,marketinggroupswillprovidefewerbenefits.
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Moreover,giventhelocalinitiativeinvolvedinbothformingandsustainingproducergroups,theroleofgovernmenteffortswheremarketinggroupsexistwasdifficulttoassess.Inourinterviews,wefoundbothanumberofexamplesofsuccessfullyoperatingmarketinggroupsandafewcaseswheremarketinggroupswerenotseenbylocalresidentsasdesirable.WediscussthesetogetherinSection3.2below.
Calculatingrecommendedprices
AnotheroftheCommittee’sactivitieswastopublishrecommendedrubberpricesontheideathatthesewouldhelpfarmersnegotiatewithbuyers.TheCommitteedidthisbylookingupthepriceforSCR10rubbersheets,astandardrubbercommodity,onthewebsiteofaChineserubbercompany(www.yunken.com).Theywouldthenreducethispricebytwofactorstocontrol,first,forwatercontent,andthenforthreeadditionalfactorstogether:transportation,processingand“other”(unspecified)expenses.AsillustratedinFigure4,thisprovidedamathematicalwaytoconvertfinishedcommoditypricesinChinaintoaraw“farm-gate”priceinLaos;thiscalculationassumed40percentwatercontentand30percentfor“transportation,processingandotherexpenses”(PICO2015).10
Thevaluesusedtoillustratetheconversionfromfinishedcommoditytofarm-gatepriceinFigure4areindicativeonly:wewereunabletocollectreliabledataonrubberpricesinChina(seeSection4),andhavethususedpricesfromtheSingaporeCommodityExchangeinFigure4.OurinterviewsnonethelesssupportedwhattheredportionsofFigure4suggest:therewasoftenasignificantgapbetweentheCommittee’srecommendedpriceandthepricebeingactuallyofferedbycompaniesinLuangNamtha.Asthepricesonofferbyrubber-purchasingcompaniesconsistentlyundercutthepricesrecommendedbytheCommittee,manyrubbergrowersinLuangNamthaprovincedeclinedtoselltheirrubber.Bymid-2014,thisunsoldstockofrubberhadreachedsignificantlevels,andtheCommitteedecidedtoundertakeathirdtypeofactivity:brokeringrubbersales.
Figure4.SamplecalculationofCommittee’srecommendedrubberprice
10TheCommitteealsoincludedacurrencyconversionfactorfromCNYtoLAK,althoughpresumablythiswasonlyusedonoccasion,sincerubberpricesaremoreoftenreferredtoinLuangNamthainChineseYuan.Theconversionfactorpublishedina2015pricerecommendationwasCNY1=LAK1,288(PICO2015).
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Brokeringrubbersales
Inlate2014,theCommitteedecidedtogetinvolvedinbrokeringrubberagreementsdirectly.LaogrowershadbythistimeaccumulatedasignificantsupplyofunsoldrubberduetothelowpricesonofferbyChinesebuyers,possiblycompoundedbythemismatchbetweenthesepricesandtheCommittee’srecommendations.
InNovember2014,theCommitteefacilitatedasaleofmuchofthisunsoldstock;accordingtoourinterviews,theCommittee’sinvolvementraisedthepricefromCNY3.5/kg,whichwasthepreviousofferingprice,toCNY4/kg.Unfortunately,thisdealshowsthelimitsontheCommittee’sabilityto“definenewrulestomanagetherubbersector,”atleastasfaraspriceswereconcerned.ThisincreaseofCNY0.5/kgisonparwiththepriceincreasereportedforaggregationbyfarmergroups:whilenotinsignificant,itisnonethelesslimitedinitsimpactonfarm-gateprices.Moreover,thepriceincreasebythebrokeredsalewasafullCNY1/kglowerthanwhatwasreportedlyagreedtobythecompaniesinvolved,asreportedintheVientianeTimes(2014e),whichdescribedtheagreementtopurchaserubberatCNY5/kg.Finally,despitetheCommittee’snegotiationefforts,aftertheone-timebulksale,thepricedroppedagaintothepreviousofferingpriceofCNY3.5/kg;thiswasthepricepostedduringourfieldworkinmid-2015(seeFigure9insection3.3below).
Waivingtaxes
Perhapsevenmoreimportantly,thebrokeredpriceincreasefromCNY3.5/kgtoCNY4/kgcameatapotentiallyhighprice:waivingtheprofittax(akornkamlai)thatwouldhavenormallybeenimposedonthethreecompaniesthatpurchaserubberinLuangNamthaforexporttoChina.11Ourinterviewsreferredtotwotypesoftaxesimposedoncompaniesthatpurchaseandexportrubber:profittaxesandexporttaxes.Thedetailsofthefirsttwotypeswerenotmadeavailabletous,andwouldberequiredinordertoanalyzecostsandbenefitsofwaivingprofittaxesinexchangeforapriceincreaseofCNY0.5/kg.Calculatingtheprofitabilityofthethreecompaniesinvolvedseemsdifficult,giventhechallengesofgatheringgooddataonChinesegovernmentsubsidiesprovidedundertheopiumpoppyreplacementprogram.Itwouldthusrequirethatcompaniesprovidefinancialstatementstogovernmentauthorities;giventhelikelychallengeswiththisprocess,itmaybethatprofittaxesaredifficulttocollectanyway.Butgiventheavailableevidenceaboutthelowincreaseinpricesandthewaivingofcorporatetaxliabilitythatcamealongwithit,thedealstruckbytheprovincialCommitteeseemstobelessthe“answertolowrubberprices”announcedintheVientianeTimes(2014e)andmoresimplytheresultoflowgovernmentleverageoverpowerfultransnationaltradingcompanies.
Whilenotapparentlyanofficialresponse,provincialauthoritiesinLuangNamthaalsoseemedtobequietlywaiving(atleastinpart)athirdtypeoftax.Backintheboomyearsofthe2000s,theprovincialgovernmenthadannouncedanannualtaxonrubbertrees,graduatedinaccordancewiththesizeofone’sholdings:CNY1/tree/yearforholdersof1–3haofrubber,CNY3/tree/yearforholdersof3–5ha,andCNY6/tree/yearforholdersof5ormoreha.Giventhatrubbertreeholdingstendtonumberabout450trees/ha,thistaxispotentiallysignificant.Sincepriceshavebeenlow,however,atleastoneofourintervieweesreportedthatthistaxhadbeen“difficulttoimplement.”12
11Governmentinterviews(Interviews1,2and11)12Governmentinterview,LuangNamtha(Interview11).
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Figure5.Bananaplantation,Singdistrict
Bansonlandconversion
Lastly,theCommitteehasrecentlyissuedabanontheconversionofrubberplantationstootherlanduses.Themostcommontargetofconversionbansisbananas,aplantationcropwhichhasexpandedsignificantlyinSingandLongdistrictsinthelastfewyears(Figure5),oftenincombinationwithlandtransactionssuchasleasestoprivateentrepreneurs(Friis2015;Satomi2015).Below,wediscussconversiontoothercropsasaproducerresponse(Section3.2);fromtheperspectiveofgovernmentresponses,twopointsareworthmaking.First,attemptstobanconversionfromrubbertoothercropswithoutgovernmentpermissionhaveariseninLuangNamthabutnot,asfarasweobserved,inOudomxai.13InLuangNamtha,thebaneffortarosefromtheactivitiesoftheCommittee,soitisperhapsunderstandablethatnocomparableefforthasariseninOudomxai,giventhelackofacommitteethere(asdiscussedbelow,conversiontobananasistakingplaceinOudomxai).Second,thebaniscompetingwithstrongeconomicincentivesintheformofprivatelandrentalfeesintherangeofLAK15-16millionperhaperyear.14Coupledwiththewidespreadbeliefbybothgrowersandatleastsomeofficialswespoketothatlandusedecisionsaretheresponsibilityofgrowersthemselves,theseincentivesmaymakethebandifficulttoenforce,andmoreover,mayleadtodeliberateunder-reportingoflanduseconversionsbybothfarmersandgovernmentstaff.2.Defendingrubberrhetorically
Asecondsetofresponsesbygovernmentofficialshasattemptedtoprotectrubberasalivelihoodoptionthroughthepracticeofunofficialpersuasion.Theisevidentinthewaythatgovernmentstaff
13Governmentinterviews,LuangNamtha(Interviews1and2);variousinterviews,Oudomxai14Variousinterviews,LuangNamtha
16
talkaboutrubberasalivelihoodoptiondespitethefallinprices,aswellastheirportrayalofalternativessuchasleasinglandforbananasastheresultoflazinessorgreed.15AsoneprovincialofficialinLuangNamthaputit,“evenifpeoplereceiveLAK16millionperhaperyear,itwillnothelppeopletoimprovetheirlivelihoodsbecausemanyfamiliesusethismoneyforpurchasingmotorbike,entertainmenttools,mobilephone,andusefordrinking;thiswillnotsupporttheirlivelihoodcondition.”16Thistypeofunderstandingoffarmerdecision-makingisfairlycommonamongthegovernmentstaffwespoketo,andreflectstheprevalenceofpaternalismasawayofofficialsrelatingtofarmers,aswellthestrengthoftheBanHatNyaosuccessstoryasamotivationforhardworkandpersistence.AsoneofficialinLuangNamthatoldus,“Itdoesnotmatterifoneisrichorpoor;whoeverhasarubberplantationandispatientinworkinginitwillgetincome.”17
Thisideologicalbeliefinthelinkbetweenrubber,hardworkanddevelopmentissignificant,butshouldnotbeover-emphasized.Manygovernmentstaffwespoketogenuinelyseemtobelievethatthepriceofrubberwillrecover,andthatevenatcurrentlylowlevels,rubberispreferabletothevariousalternatives.Thismorepracticalorientationtowardcontinuingtobelieveinrubberseemstoapplynotonlytogovernmentofficials’dealingswiththeirconstituents(seebothquotesbelow),butevenwiththeirrelatives(secondquote):
AlthoughrubberpriceshavefallentoLAK5,000–6.000perkg,itisstillfineforlocalpeopletotaprubber,sincetheygain[more]fromrubberplantationsthanotheragriculturalactivities.18
Iinformedlocalpeoplethatnottofearaboutfallingrubberprices–theywillincreasesometimeinthefuture.…Myfather-in-lawalsoestablishedarubberplantation…inBengdistrict.…WhatIinformed[him]isthatrubberpricesaretemporarilydropped,butwillincreaseinnextfewyears.19
3.Notenforcingcontractedfloorprices
Surprisingly,oneofthefewareaswhereregulatoryleveragedoesexistseemstonotbebeingused.Thisisintheareaofenforcingcontractuallyspecifiedminimum(“floor”)prices.Althoughfloorpricesseemnottohavebeen,asarule,writtenintothecontractsthatwerenegotiatedandsignedintherubberboomperiodofthemid-2000s(Altonetal.2005:93-94;Shi2008:34),20theywerewrittenintoatleastsomeofthepurchasingcontractssignedintheyearsthatfollowed.Whileanumberofdetailsremainedbeyondourreachduetoinformants’inabilitytoprovidethephysicalcontractstheyweredescribing(andinsomecasespromised),inthreeofthedistrictswhereweconductedfieldwork,weheardthatcompanieshadcontractualclausesthatguaranteedminimumpurchasepricestolocalgrowers,butthatthesewerenotbeingenforced.Moreover,theserepresentedtheonlyinstancesoffloorpricesthatweencountered:inotherwords,wedidnothearaboutanyinstancesoffloorpricesthatwereactuallybeingenforced.
Viengphoukha(LuangNamtha)
YunmongXinxingisthenewnameoftheChinesecompanyknownatthetimeofitsestablishmentinViengphoukhaasBolisatSeunHua(orShenWa,etc.).Beginningin2005,thecompanybuiltits
15Governmentinterviews,LuangNamtha16Governmentinterview,LuangNamtha(Interview1)17Governmentinterview,LuangNamtha(Interview3)18Governmentinterview,Oudomxai(Interview14)19Governmentinterview,Oudomxai(Interview13)20MélanieCanet(personalcommunicationwiththesecondauthor,December2015)
17
operationsinandaroundcentralViengphoukhadistrict,includingademonstrationgarden,contractfarmingoperation(Dwyer2013,2014)and,sometimeafter2010,afacilityforprocessingrubberlumpsintothesheetsforwhichthecompanyhasanimportquotaintoChina.Partofthebilateralopiumcropsubstitutionsubsidyprogram(Shi2008;KramerandWoods2011),YunmongXinxingisoneofthreeChinesecompaniesoperatinginLuangNamthathathavesuchquotas(seealsoSection3.3below).
Accordingtoourinterviews,thecontractinquestionwassignedbetweenthecompanyanddistrictauthoritiesintheperiodaftertheprocessingfacilitywasbuilt;presumablythecontractgovernedthefacility’soperations,andbuiltonanearlieronegoverningtheestablishmentofplantationsinvillagesaroundthedistrictthroughamixof“2plus3”and“1plus4”operations(Dwyer2014;alsoseesection1.2above).Thenewcontractreportedlyspecifiedapriceatwhichthecompanywouldpurchaserubberfromlocalgrowers,butafterthemarketforrubberbegantodecline,thecompanychangeditspricetobelowthislevel.(Werequestedacopyofthecontracttobeabletoconfirmthisandalsoseewhatthispricewas,butweretoldthatthecontractwasunavailable.)Accordingtoourinterviews,districtofficialscontractedthecompanytodiscussraisingthepricetoCNY5.3/kg,butweretoldthatthecompanypreferredtofollowthepricessetbythemarket,althoughtheyagreedtoincreasethepricesslightlyinordertohelplocalpeoplewithpovertyreduction.Thisofferedpricewasnonethelessbelowthepricespecifiedinthecontract,buttheargumentwasacceptedbydistrictauthoritiesontheunderstandingthatbecausemarketpricesweresodepressed,itwouldbecleartoeveryonethatthecompanywasnotcheatingproducers.21
XaiandHoun(Oudomxai)
InbothXaiandHoundistricts,intervieweesdescribedsituationswheresometypeofminimumpricehadbeenwrittenintoacontract,butcompanieswerenonethelesssettinglowerpricesbasedonmarketconditions.EvenmoresothaninViengphoukha,however,thedetailsremaineddifficulttopindownduetoalackofavailabledocumentationandvariousofficesreferringustootheroffices.InXaidistrict,forexample,staffattheDAFOdescribedafloorpriceofLAK5,000thatonecompanyhadagreedto,andreferredustotwootherofficestolookforthecontractsincetheythemselvesdidnothaveit.22Oneoftheseotherofficessaidtheyhadnothingtodowithrubberprices;23theotherpointedustotheProvincialIndustryandCommerceOffice,sayingthatwithregardtoanythingtodowithrubbertraders,factoriesorprices,“wehavetowaitfororders”fromabove.24WhenweinquiredatthePICO,seniorstaffwereunavailabletomeetduetoothercommitments;officerepresentativeswhowereavailable(fromtheProvincialTaxManagementOffice)toldusthattheyhadnoinvolvementwiththerubbertrade,25whilestaffatanotherprovincial-levelofficetoldusthatboththeirownofficeandthePICOreliedheavilyoninvestorswhenitcametorubberprices:“Wereceiverubberpricesfrominvestmentcompanies.TheIndustryandCommerceOfficeattheprovincelevelhasnotbeenworkingontherubbermarket–theyalsoheavilyrelyoninvestors.”26
Despitethisdeadend,thetestimonyofourinitialinformantiscompelling:
21Governmentinterview,Viengphoukha(Interview23)22Governmentinterview,Oudomxaiprovince(Interview12)23Governmentinterview,Oudomxaiprovince(Interview16)24Governmentinterview,Oudomxaiprovince(Interview13)25Governmentinterview,Oudomxaiprovince(Interview15)26Governmentinterview,Oudomxaiprovince(Interview14)
18
However,thissetpricehasnotbeenenforcedbecausepricesinOudomxaiprovincearesometimeslowerthanLAK5,000perkg.Iwouldsaythatrubberpricesinourprovinceanddistrictarebasedonwhatbuyersoffer.Weusedtodiscussraisingpriceswiththecompanies,buttheygenerallyprefertobasetheirpricesonmarketprices.Thus,theycouldnotraisepricesforoursmallholders.27
InHoundistrict,wefoundroughlythesamething.OneofourgovernmentinterviewstherenotedafloorpriceofatleastLAK5,000perkg,butsaid“thecompanycouldnotpaythisduetorubbermarketpricesinChina.”Again,theyreferredustoanotheroffice–inthiscasetheDistrictPlanningandInvestmentOffice–foracopyoftherelevantcontract.28Unfortunatelywhenwewenttothatoffice,weweretoldthatpriceswerebasedonmarketconditions,asspecifiedinaninvestmentcontractsignedbytheformerdistrictgovernor.29
GiventheexperiencedescribedaboveinViengphoukha,wheretwodifferentcontractsweresignedatdifferenttimes,itispossiblethatbothoftheseaccountsarecorrect:thefloorpricemaybelistedinasecondcontract,whilethe“investmentcontract”referencedabovelikelyreferstotheinitialcontractsignedbetweenthecompanyandthedistrict.Again,despiteourinabilitytorecoverandexamineanactualcontract,thetestimonyofourinitialinformantsuggestsboththeexistenceofanunenforcedfloorpriceand,moregenerally,amixtureofsympathywithfarmersandfrustrationwithbureaucracy:
WedonotknowthepricesofrubberinChinaandbuyersdonottellushowmuchtheysellforinChina.WeusedtotalktotheProvincialIndustryandCommerceOffice,buttheydonothavepriceinformationforus.ThefloorpricesetinthecontractisLAK5,000perkg,butthecompanystillpayslessthanthefloorprice–thecompanyisnotpayingbasedonthecontract.Wementionedthistheprovinciallevelmanytimes,butwedidnotreceiveanyresponses.Wealsoproposedadistrict-levelmeeting,butagaingotnoresponsesfromthedistrictauthorities.30
Insuchacontext,muchoftheburdenofrespondingtothefallinrubberpriceshasfallenonfarmersthemselves.Weexaminetheseresponsesinthenextsection.
3.2.Rubbergrowers’responsesThissectiondescribesarangeofproducerresponsestofallingrubberprices,includingwaitingforpricestorise,tappingatdepressedpricesusinghouseholdlaboronly,transactingplantationlandthroughsalesorleases(thelatteroftenwithconversiontoanothercrop),andvariousformsofactivitythatattempttogeneratehigherpricesthroughtheaggregationofrubberproducts.Inexaminingproducers’responsestofallingprices,itisimportanttolookbeyondthemostobviousandevensensationalizeddimensions(suchasconversiontobananas,whichhasfiguredcentrallyinLaonewscoverage),andtrytounderstandhowthemarketdynamicsofthelastfewyearshaveinteractedwiththepre-existingsituation.AsnotedinSection1.2,thenorthernLaorubbersectorpriortothepricedropof2012washardlystable;astheHatNyaomodelfailedtoscaleupforavarietyofreasons,rubberholdingsbegantoconcentrateincreasinglyinthehandsoflargerholders.Theresponsesexaminedinthissectionthusareconsideredinthisdoublydynamiccontext.
Asthissectiondescribes,thevarietyofproducerresponseshavecontinuedtheearliertrendawayfromthescalingupoftheHatNyaosmallholdermodelenvisionedintheearlyandmid-2000s.27Governmentinterview,Oudomxaiprovince(Interview12)28Governmentinterview,Oudomxaiprovince(Interview18)29Governmentinterview,Oudomxaiprovince(Interview19)30Governmentinterview,Oudomxaiprovince(Interview18)
19
Nonetheless,asSection4elaborates,thismodelmaystillberecoverable–aswellasbothpoliticallyandeconomicallydesirable–ifthecurrent,minimallyregulated“boomcrop”developmentmodelcanbeshiftedtoamoretightlyregulatedmodelappropriatetomakingrubbera“strategic”commodityinthemeaningfulsenseofthatterm.Response1:Waitingforpricestorise
Withpricesaslowastheycurrentlyare,itisperhapsnotsurprisingthatmanyproducershavechosennottoinvesttheirscarcelaborinrubbertapping,andaresimplywaitingforpricestorise.Butasthisandthenextsub-sectiondescribe,thisresponseisnotassimpleasitmightatfirstseem.
Acrossthesiteswevisited,weheardconsistentlythatwaitingforpricestorisewasthemainwaythatrubberproducerswererespondingtolowprices.Duetothedifficultyinquantifyingthis,ourinformantswereonlyabletoprovideestimates,atleastattheprovincialanddistrictlevels;inonevillage,itwaspossibletoexactlyquantifythefractionofproducerswhohadcontinuedtotapversusthosewhohadstopped.Ingeneral,thefractionofthosewhohadstoppedwashigh,andittendedtobeevenhigherinOudomxai,wheretherubberwasyounger.TheestimatesthatwecollectedareshownbylocationinFigure6.Althoughinsomelocationswevisited,nooneprovidedaquantitativeestimate,thosethatdidusuallyputthefractionofuntappedrubberaround50percentorhigher;theexceptionwasBanOudomsin,wherevillagersinvestedheavilyintheswitchtorubber,andwhereproximitytoChinahaslikelyfacilitatedongoingrubbersales.AlthoughsomeofthenumbersshowninFigure6mayincludeafractionofimmaturerubbertrees(e.g.the90percentestimateforOudomxai),mostreferclearlytomaturerubberonly.31
Figure6.Reportedfractionsofun-tappedrubberforprovinces(largefont),districts(mediumfont)andvillages(smallfont)whereestimateswereprovided(source:fieldinterviews)
Twothingsaregoingonhere.Ontheonehand,thereisanunfortunatetimingproblem:priceshavefallenjustasrubberplantationshavematuredwidely,especiallyinOudomxai.Thishasmaderubber31Interviews,LuangNamthaandOudomxaiprovinces(Interviews3,6,10,14,18,19,21,26)
90%
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plantationownersreluctanttoembracethecropasactualproducers.ThedifferenceintappingratesbetweenLuangNamthaandOudomxaiissuggestiveofthis,andotherpiecesofevidenceconfirmit.
OneofthevillageswevisitedinOudomxaiexemplifiesthefailuretolaunchoftheHatNyaomodelduetocrashinrubberprices.Thevillage’saccountofrubberproductionbeganwiththestandardpiecesoftheHatNyaostory(“toestablishrubberplantationistoreplaceopiumproductionandtoreducetheareaofuplandshiftingcultivation”),andtransitionedintoanaccountofcontractfarming-basedengagementwiththeSino-LaoRubberCompany(cf.Section1.2above).Buttheintendedplanwentawrywiththecrashoftherubberprice:
Inthebeginning,[the]Sino-Lao[company]cametoconsultwiththeprovinceanddistrict,andannouncedthatiflocalpeoplecultivaterubber,wewillbeablegraduatefrompoverty.[We]followedtheadvicefromthegovernmentstaffattheprovinceanddistrict.Inthebeginning(2004–2005)atestplantationwasplantedon100haofvillagecommonland.Landwasstillavailableinthevillage,andtheprovincialanddistrictstaffadvisedthatthispilotplantationwouldallowlocalpeopletolearnhowtoplantandmanagerubbertrees.Butwehavenotlearnedanythingfromthatpilotplantation.…WeknewthepricesofrubberdroppedinJune2014,thenthefactorydidnotbuyrubberandlocalpeopledonottaptheirrubberbecauselowrubberprices.32
Likewise,provincialofficialswespoketonotedthedifficultiesinconvincinguplandfarmersinOudomxaitoenterthemarketasrubberproducersrightatthetimewhenthepriceswasfalling.
Atpresent,onlybusinessmanandgovernmentstaffworkinginthecityarebenefitingfromrubberplantationsinruralareas.Rubberbelongingtolocalpeoplehasnotyetbeenwidelytapped.…Tappingbeganin2012,[but]themaindifficultyisthatlocalpeopledonotwanttolearnhowtotaprubber.…Itisnoteasytochangetheideasoflocalpeoplefromsubsistenceagriculturetocommercialagriculture–localpeoplestilllikedoingshiftingcultivationastheirtraditionalpractice.33
Rubberhasnotreallycontributedtoimprovinglocalpeople’slivelihoodsbecausewejuststartedtappingin2013.Rubberisstillnewforourdistrictandabout70percentofgrowersdidnottaptheirrubberin2014duetolowprices.34
Theotherissueinvolvedwithhighratesofnon-tappingistheconsolidationofplantationholdingsdiscussedinSection1.2;thisappearedwithsurprisingregularityinexplanationsofwhyrubbergrowerswerenottappingtheirholdings,andpointedtothedifferencebetweentappinglargerplantationsandtappingsmallerones(alsoseenextsub-section).Inexplainingthereasonswhysuchahighfractionofrubberplantationswerenotbeingtapped,manyoftheinformantswespoketodescribedlaborscarcityofthekindthatonlyoccurswithoutsidelabor.Whilethisisnotsynonymouswithlargerplantationholdings,itisafairlygoodindicator.AsonevillagerepresentativeinLuangNamthaexplained,thevillagehasafewlandholderswithrubberplantationslargerthan20ha(andoneevenwith40ha).Holdingsofthissizemadetheownersdependentonhiredlabor:
However,wedonothaveenoughmoneyforhiringlaborfortappingourrubber.WhenpricesfalltoCNY4perkg,wehavetotapourrubberbyourselves.Inthecaseofhouseholdsthathavelargerubberplantations,theytaponlyalittlepartoftheirrubberplantationbasedontheirhouseholdlaborforces.35
32Villageinterview,Oudomxaiprovince(Interview17)33Governmentinterview,Oudomxaiprovince(Interview14)34Governmentinterview,Oudomxaiprovince(Interview18)35Villageinterview,LuangNamthaprovince(Interview5)
21
Asaninterviewinanothervillageexplained,lowpriceswerepreventinganumberofgrowersfromtappingatall,onaccountoftheirdependenceonashare-basedformofwagelabor:
[Outof20householdswithmaturerubber,]thereareonlytwohouseholdsthatcontinuetapping–therestarenottappingbecauseoflowrubberpricesandnolaborfortapping.Thereasonisthatwedividetheproduct50-50betweenthetapperandtheplantationowner,butnoonewantstotap.36
WeheardvariationsonthisfromprovincialanddistrictofficialsinbothLuangNamthaandOudomxai,confirmingthatthispatterniswidespread:
[Many]rubbergrowersinthisdistricthavestoppedtappingtheirrubbersincemid-2014duetolowrubberprices.Thisisbecausetheyfinditverydifficulttofindrubbertappers–eveniftheownerofrubberplantationprovides50percentoftheincomefromtherubbertothetapper[insteadof30or40percent,theratepreviouslyoffered],nobodywantstotapbecausetheypreferotherkindsofworkthataremoreprofitable.37
Duringthefallingrubberprices,thereareabout90%ofgrowersdonottaptheirrubberbecauseitisdifficulttofindtappersduringthelowpricesofrubberplantation.[Manyof]thosewhodonottaptheirrubber[duetothisissue]arebusinessmanandgovernmentstaff.38
Myfather-in-lawalsoestablishedrubberplantationforabout30hainBengdistrict.Therubberisreadyfortapping–it’s8-9yearsold–butwehavealackoftappers.39
Astheseaccountsmakeclear,itisnotlowpricespersethathavecausedmanyproducerstopulltheirplantationsoutofproduction,butrathertherelationshipbetweenlowpricesandthelaborregimesnecessarytotapthecurrentconfigurationofplantations–includingmanylargeronesinthetensofhectaresandmultiplethousandsoftreesperowner.Thenextsub-sectionexaminestheothersideofthispattern,whichistherelianceonhouseholdlaborintherubberplantationsthatarecontinuingtobetapped.Response2:TappingwithhouseholdlaborIfweinvertthevaluesinFigure6,theysuggestthatevenwiththelargenumbersofplantationsnotbeingtapped,asignificantnumberofrubberowners–perhapsintherangeofhalfoftheownersinLuangNamthaandbetween10percentandathirdinOudomxai–arecontinuingtotaptheirrubberdespitecurrentlowprices.Ourinterviewssuggestedthatthosewhoarecontinuingtotaparelargelydoingsowithhouseholdlabor.
Thisisnotnecessarilyagoodthing;householdlaboriseffectively“cheaper”thanhiredlabor,butitisnotnecessarilymoreefficient,sinceitcaninvolvedegreesofintra-householddisparitysuchashighdependenceonwomen’sandchildren’slabor(whichareoftenvaluedlowerbyhouseholddecision-makers,oftenmen);therecanalsobesignificantopportunitycostsif,forexample,childrenworkratherthangoingtoschool.Thesetypesofquestionswerebeyondthescopeofourstudy,butthewidespreaddependenceonhouseholdlaborforrubbertappingaspricesdropsuggeststhattheymaybebecomingincreasinglyimportant(seeSection4).
Reflectingdifferencesbetweenwagelaborandhouseholdlabor,anumberofourinterviewsdescribeddifferentpricethresholdsatwhicheachofthesewouldstopbeingeconomic.Asthe
36Villageinterview,Oudomxaiprovince(Interview21)37District-levelgovernmentinterview,LuangNamthaprovince(Interview4)38Provincial-levelgovernmentinterview,Oudomxaiprovince(Interview14)39Governmentinterview,Oudomxaiprovince
22
previoussub-sectiondescribed,overthelastfewyears,wagelaborhasbecomeincreasinglydifficulttorecruittorubbertapping,giventhestandardformofpaymentinrubberratherthanincash.Whiletherearedata-relatedchallengesofbothtimingandprices(whenexactlywagelaborstoppedbeingeconomic,andhowthatrelatedtopricesatthetime),thethresholdforwagelaborseemstobesomewhereintherangeofCNY4-5perkg,andperhapshigher(Figure7,pinkarea).Onevillagerepresentativeputitespeciallyclearly:
InthecaseofrubberpricesatCNY4perkg,localpeoplestillgainbenefitfromtheirplantations.However,wedonothaveenoughmoneyforhiringlaborfortappingourrubber.WithCNY4perkg,wehavetotapourrubberbyourselves.40
Figure7.Pricethresholdsatwhichtappingbehaviorchanges
Whenitcomestothepricethresholdatwhichhouseholdlaborstopsbeingviable(Figure7,redlineandbelow),ourinterviewsgotvague,however–andprobablywithgoodreason.Inoneofourgovernmentinterviews,forinstance,weheardthat“ifthepricegoestoCNY3.2perkg,localpeoplecanstilltapusinghouseholdlabor;it’sonlywhenhiredlaborisinvolvedthatit’snotworthittotapwhenthepricedropsbelowCNY4perkg.”41Butwhenweinterviewed(later)therepresentativeofthevillagerubbergroupthatwasbeingdiscussed,theytoldusthattheywouldnotselltheirrubberunlesstheycouldreceiveapriceofCNY4perkg.42Thepointofagreementherewasthatcurrentpriceshadmadeitsuchthathiredlaborwastooexpensive,andthatonlyhouseholdlaborcouldbeusedunderpresentconditions.Buteventhiswasimplicitlycalledintoquestionbyanotherinterview,whichsaidthatsmallholderswouldonly“tapwidely”(i.e.atlargenumbers)ifthepricereachedCNY5perkg.43Takentogether,thissuggeststhatcurrentpriceshavepushedrubbertappingsquarelyintotherealmofsmallholderproductiononly,andthatthosewhoarecontinuing40Villageinterview,LuangNamthaprovince(Interview5)41Governmentinterview,LuangNamthaprovince(Interview1)42Villageinterview,LuangNamthaprovince(Interview5)43Governmentinterview,LuangNamthaprovince(Interview4)
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totapmaybedoingsonotbecausetheprofitsaregood,butbecausetheyhavealreadyinvestedsignificantcapitalintheirrubberplantationsandareleftwithfewotheroptions.Asonevillagerwespoketoputit,“Sincewehaverubberplantations,wehavetoearnfromthem,notjustkeepthemtherewithoutdoinganything;thisisbecausewealreadyspentalotmoneyandlaboron[establishing]theplantation.”44
BanNamNgeuninViengphoukhaisanillustrativeexception.Accordingtoourinterviewthere,about10householdstherehavebeencultivatingrubbersince2000;thesearemiddle-incomefamilies–neitherthewealthiestnorthepoorest–andtheystartedplantingrubberaftertheysawcommunitiesinSingandNamthadistrictsdoingthesame.Butunlikethe“typical”uplandrubbervillageinthenorth,BanNamNgeunislocatedintheflatlandsaroundViengphoukha’sdistrictcenter,andcontainsalargeamount(58ha)oflowlandricefields.Asrubberpriceshavefallen,rubber-growinghouseholdshaveincreasinglygonebacktotheirearlierlivelihoodasricegrowers,bothforsubsistencepurposesandforsale.Whiletheyhavecontinuedtotaptheirrubberplantations–theysold30tonsatCNY4perkgjustpriortoourvisit–theyincreasinglyseerubberasasecondaryor“additional”livelihoodsource.45Whilevillagerswerenothappyaboutthefallingrubberprice,theirlivelihoodsarefairlydiversifiedand,asaresult,comparativelyresilienttochangesintherubberprice.ThisisinstrongcontrasttotheBanHatNyaomodel,whichemphasizesthereplacementof(upland)riceproductionwithrubber.BanNamNgeunhighlightsthefactthatrubbercanbeasecondarysourceofincomeevenasthepricehasfallen,butonlybecauseadditionallandresourceswerelocallyavailabletohelpoffsettherisk.Response3.Landsales,leasesandconversions46
Salesandleasesofrubberplantationland–thelatterofteninconnectionwithconversiontoothercropssuchasbananas–hasbeenanincreasinglycommonfeatureofthenorthernlandscapeinthelastfewyears.AsnotedinSection1.2andelaboratedhere,rubberplantationssalesarenotnewinthenorth,butthefallinpricessince2012hasinteractedwiththeminafewdifferentways.Landleases,ontheotherhand,seemtobeanewerphenomenon,andpossiblyaresultoftheinteractionbetweenplantationsalesandfallingprices.
Landsales
Asnotedabove,officialswespoketoinOudomxaidescribedasituationthatmirroredwhatWeiyiShifoundinher2015revisittoLuangNamtha:landsalesbypoorerhouseholdswasdescribedas“normal,”andinvolvedbuyerswhoweredescribedasbusinessmenfromtheprovincialcapitalaswellasChineseinvestors.Thissituationwasdescribedasthebackgroundorcontextwithinwhichthefallinrubberpriceshadtakenplace;sincethedropinprices,demandforplantationshadfallen,
44Villageinterview,LuangNamthaprovince(Interview10).Inavariationonthethemeoflimitedoptions,onelocalgovernmentstaffinXaidistrictsaidthatvillagerswerecontinuingtotaptheirrubbertreesbecausethecompanywithwhichtheyhadacontracthadtoldthemthatthiswouldhelpmaintainhighlevelsofproductioninfutureyears(governmentinterview,Xaidistrict[interview12]).Thisseemssuspicious,giventhewidespreadchoicebymanyproducerstotaketheirplantationsoutofproductionwhilepricesarelow,butinanycasehighlightstheneedforgoodagriculturalextensionsothatfarmersunderstandtheiroptions.45BanNamNgeunvillageinterview,LuangNamthaprovince46BananaconversionisalsoreportedlyoccurringonawidescaleinBokeoprovince(StuartLing,posttoLaoFABdiscussionforum,25September2015).
24
andincreasingly“noonewantstobuyrubberplantations.”47Weheardaboutthislackofinterestinbuyingrubberplantationsfromothersaswell;onegovernmentrepresentativeinXaidistrictputitbluntly:“Manypeoplewouldliketoselltheirrubberplantations[now],butnoonewantstobuy.”48
Thisdoesnotseemtobethefullstory,however.Inthelongerterm,manypeoplewespoketobelievethatrubberpriceswillriseagain;fromthisperspective,thecurrentslumpinpricesactuallyrepresentsagoodtimetobuyplantations,assumingtheycanbepurchasedcheaply.ShireportedthatthistypeofstrategiceconomicbehaviorwashappeningbytheYunnanRubberCompanyinLuangNamtha;shedescribedYunnan,astate-ownedenterprise,asdifferentfromotherChinesecompaniesoperatinginnorthernLaosinthattheywereinvestingforthelongerterm,buyingnewrubberplantation(oftenfromotherChinesecompanieswhichweremoreinterestedinshort-termreturns)despitenotbeingabletotaptheplantationsthattheyalreadyhad(Shi2015:6).Ourworklackedthesamefocusonparticularcompanies,butweheardfromgovernmentstaff,whohadthemselves“heardunofficially,”that“somevillagershadsoldtheirrubberplantationstorichpeopleinthecity”in2014.49Ourinformantsdeclinedtodiscussthedetails,butthefactofplantationsalesbyvillagerstowealthierindividualsfromurbancenterssuggeststhatnoteveryoneisuninterestedinbuyingrubberplantationsinthecurrentlowpriceenvironment,andthatitisnotonlytheYunnanRubberCompanythatislookingatrubberasastrategicinvestment.
Whatisclearisthatthealready-difficultsituationfacedbymanyrubbersmallholdershasbecomemoredifficultaspriceshavedropped.Weheardaboutcontinuingsales,bothofindependentlyownedplantationsandthosewithinexistingcontractfarmingrelationships;inthelater,thebuyerwasreportedtotakeoverthecontractualrelationshipwiththecompany.50Inanumberofinstancesdebtseemstobeadrivingfactorforplantationsales,“whenlocalpeopleneedmoney,forexampletopayforaloanorcredittakenfrombank”51(alsoseeVientianeTimes2015a).Insomecases,contractfarmingcompanieshavecrossedoverintothepracticecashlending,incontrasttotheshare-basedmodeofcreditthatunderliestheirbusinessmodel(seeSection1.2).Asthishasledtodebtandplantationsales,localauthoritieshavebeguntoseethesystemas“broken”:
The“2plus3”contractfarmingschemehasbeenbrokenbecauselocalpeopledonothavemoneyfornecessarylivelihoodsandtheyborrowmoneyfromtheinvestmentcompaniesanddonothavemoneytopaybacktothecompany.Thentheysellrubberplantationtotheinvestor.52
Thisdynamismofplantationturnoverandconsolidationbywealthierholdershasmademanyofthegovernmenteffortstokeeptrackofrubberstatisticallyoutofdate.Giventherisksinvolved,thesameindividualcontinued:“Weneedtocheckhowmanycompaniesstillkeepthe‘2plus3’schemeandrequestadvicefromdistrictandprovincialauthoritiesabouthowtodealtwiththesituation.”53
Landleasesandconversions
Inparalleltotheabovementionedsalesofrubberplantations,thelastfewyearshasalsoseenagrowingincidenceoflandleasestoagribusinesscompanies,manyofthemChinese;oftenthese
47Governmentinterview,Oudomxai(Interview14);fullquoteinSection1.2.48Governmentinterview,Oudomxai(Interview16)49Governmentinterview,Oudomxai50Governmentinterview,Oudomxai(Interview18)51Governmentinterview,Oudomxai(Interview18)52Governmentinterview,Oudomxai(Interview16)53Governmentinterview,Oudomxai(Interview16)
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leasesresultintheconversionofthelandinvolvedfromrubbertoother(currentlyhigher-value)cropslikebananas,sugarcaneandothercashcrops.Whiledetaileddatawasbeyondthescopeofourresearch,theselandleasesseemtonotbelimitedtothesmallestandpoorestrubberproducers,whoareoftendescribedasthosemostlikelytoselltheirrubberplantationtowealthierbuyers(seeaboveandVientianeTimes2015a).Incontrast,leasesforbananasandotherhigh-valuecropsseemtobelocatedinlowlandareas(e.g.inSingandLongdistricts),oftenadjacenttowatersources,andinvolvelandownerswhohavelargeramountsofland.Inonetellinginterview,agovernmentstafferdescribedhavingtoomuchrubbertomanageasoneofthereasonsrubber-holdersweredecidingtoleasetheirlandforconversiontobananas.54
Thehighcashrentsbeingofferedbyagriculturalentrepreneursareonereasonwhylandholdersarelikelydecidingtoleasetheirland;ourinterviewsreportedleaseratesintherangeofLAK15-16millionperhaperyear,andinsomeinstancesashighasLAK20million.55Inonecase,Chineseinvestorswerereportedtohavepaidnotjusttoleasetheland,butalsoanadditionalCNY100perrubbertreecleared.56Thisisimportantnotonlybecauseofrubberplantationclearingmaycausethesmallholdertolosetheirinitialinvestment(assumingthewoodisnotbeingsold),butalsobecauseincasesofcontractfarming,smallholdersmaybefinedbycompaniessincethecompaniesownafractionofthetrees.ThiswasbeingdisputedwhileweweredoingoutfieldworkinOudomxai;asrecountedbyagovernmentintervieweeinHoundistrict:
Justthismorningwehadameetingaboutrubberplantationsamongrelatedauthoritiesatthedistrictleveltodiscussthereasonsforlocalpeoplecutrubbertrees;thisisbecausethecompanydoesnotfollowtheagreement.Weagreedtoreviewallcontractsandmakeareporttotheprovinciallevelabouttotheproblemofclearingrubberplantations.InthebeginningthecompaniesplannedtofinelocalpeopleLAK100,000perrubbertree,butwenegotiatedwiththecompanyandtheyagreedtofineatLAK60,000pertree.ThetotalfineamountismorethanLAK1.5billion[sincethecompanyhaslost]2,775trees.SomehouseholdshavetopayaboutLAK40millionperhousehold.57
Theeconomiccostsatstakeherearesubstantial;eventhelowercompensationvalueofLAK60,000pertreeaddsupquickly,sincerubberplantationstypicallycontainmorethan400treesperhectare.Thepotentialfordebt,whetherthroughtheconversionofcontractfarmingarrangementsintocashcompensationorviabankloansthatneedtoberepaiddespitethecrashinrubberprices,isthuslarge.AselaboratedbelowinSection4,questionsofownershipandcontractualobligationarelikelytobesubstantial;theonlyquestionfacingthoseinvolved,includinggovernmentauthorities,ishowbigofanissuethisactuallyis.
Thisisadifficultquestioninitself,giventherapidchangesinthelandscapeandthechallengesofgettingaccuratedataabouttheextentoflandconversion(inpart,butnotonly,duetothebandiscussedinSection3.1).OurresearchreportedvariousnumbersfortwodistrictsinLuangNamtha,includingoneofthedistrictswevisited(Sing);theseareshowninTable1.
54Governmentinterview,LuangNamtha(Interview11)55Governmentinterviews,LuangNamthaandOudomxai(Interviews1,2,7,12)56Governmentinterview,LuangNamtha(Interview11)57Governmentinterview,Oudomxai(Interview20)
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Table1.ReportedconversionfromrubbertoothercropsintwoLuangNamthadistricts
Trees Ha Households Villages Source
Singdistrict131,400 292 712 15 PICO
400
PAFO
Longdistrict25,650 57 46 1 PICO
“Nogooddata” PAFO
Beyondthesequantitativefigures,conversionfromrubbertootherlanduseswasalsoreportedinViengphoukha,Xai,HounandBengdistricts,whereitwaslinkedtosmallholdermaizeproductionaswellaslandleasestoChinesebananagrowers,inoneinstanceafterthe(alsoChinese)rubbercompanyfailedtotapaspromised.WhiletheconversioninXaidistrictwasdescribedasbeinglimitedto“afewhouseholds”(andwasdeniedbyanothersource,whoinsistedthatconversionwasonlytakingplaceinHounandBengdistricts),thelackof“detaileddata”wasacknowledged;weencounteredasimilarreticencetoprovidedetailsinViengphoukha.58InHoun,theextentofconversionfromrubbertobananaswasdescribedasmoresubstantial,involvingmultiplevillages,multipleyearsofclearing,andaquestionofwhetherrubberhadbeencleareddeliberatelyorlosttoshiftingcultivationfiresbyaccident.Buttheconflictwasclearlyrelatedtothefallinprices:
Thereasonlocalpeopleclearisthattheydonothaveanybenefitfromrubberplantation.Evenwhentherubberreachedeightyears[ofage],thecompanydidnottapduetolowrubberprices.59
Response4:Collectiveaction
CollectiveactionamongrubberproducersinordertocreatebargainingpowerandthuscommandhigherpricesisamajorpolicyobjectiveofprovincialauthoritiesinLuangNamtha.60Whilethecreationofmarketingcooperativeswaspromotedevenbeforerubberpricesbegantodrop,theformationofmarketingcooperativeshasbeenamajorpillaroftheofficialresponseofthelastfouryears(seeSection3.1above).Marketingcooperativesarenowwidelyknownamongrubberproducers,butwithsomeimportantexceptionssuchasBanHatNyao,theirestablishmentremainslimited.
BanHatNyao
ThepushformarketingcooperativesisgenerallyacknowledgedtobemodeledonthesuccessfulexperienceofBanHatNyao.RepresentativesofHatNyaowhowespoketonotedthattheircooperativewasnotformedformarketingpurposesperse,butearlierintheplantationprocesstosharetechnicalskillsforgrowingandtapping.Thecooperativewasformedin1994,whilethepowerofcooperativemarketingemergedlater,whenthevillagebegantosellitsrubberin2002.Sincethen,theproducersinBanHatNyao’smarketingcooperativeshaveexpandedtoincludenotonlyresidentsofBanHatNyao,butalsoothervillagesinthearea:
Atthepresent,intotal,wehave15unitsbelongtoourrubbercooperative;ofwhich,6unitscomefromothervillageswhoareourneighbors.TheseincludeunitsofrubbercooperativesfromBan
58InterviewsinOudomxaiandLuangNamtha(Interviews12,13and25)59Governmentinterviews,Oudomxai(Interviews12,16,18[quote])60Weusethetermcollectiveactioninageneralsense,notintendingtoimplythelegaldistinctionbetween“collective”and“cooperative”thatissometimesmadeinLaolaw.
27
Bouamphieng,Viengthong,Viengkham,PhoxaiandNamHouay;theremainingunitiscombinedofindividualsmallholdersfromothervillagesinthearea.61
Thecooperativechargesmembersafeeequivalenttoafewpercentofthepriceofsale,andusesthemoneytorunthecooperativeandsupportthevillagedevelopmentfund.Inreturn,membersgetthebenefitsofcooperativemarketing.Reflectingtheiroriginsinindependent(althoughstate-subsidized;seeAltonetal.2005:51)financingratherthantheshare-basedcontractfarmingdescribedinSection1.2,thegrowersofBanHatNyaodonothaveapreexistingcontractwithanyparticularbuyer:
Wehavetofindbuyerseveryyear.Wediscussamongvillagerswhoshouldbeourbuyers–whowillgiveusthehighestprices.Thisiseasierthanhavingcontractwithaparticularcompany,whichwouldmeanwedon’thavemuchoptiontonegotiaterubberprices.…Ourrubbercooperativeworksduringtheperiodoftimeofsellingrubberproduct.Inordertosellourrubbereachyear,wehavetoholdameetinginordertodiscusswithallvillagersandagreeonprices.62
Thecombinationofindependenceandasubstantialmembershiphashelpedthecooperative’smembersinthefaceoffallingprices:
Therearemanyhouseholdsinourvillagecontinuetappingtheirrubbertree[evennow].Althoughrubberpricesaredropped,we(allvillagersinthisvillage)haven’thavehadtosellourrubberlowerthanCNY4.1perkg.Beforesellingrubberproducteverytime,wediscussandagreeamonglocalpeopleandallpeopleinthevillagesellrubberinthesameprices.We,asacooperativegroup,cansellrubberatahigherpricetotheYunnanFactory[inLuangNamtha]thanwhatispostedatthefactory;forinstance,wethefactorypostsatCNY3.5perkg,wecouldgetatleastCNY4perkg.63
DiscussingplansforatriptoChinatoscoutpotentialbuyers,villagerepresentativesmentionedtheirownversionofafloorprice,althoughinthiscaseenforcedbythepowerofcollectiveaction:
Wediscussedamongvillagershereinourvillage,weshouldnotsellourrubberproductinpriceslowerthanCNY4/kg.ThispricebasedonthepricesofrubberproductinChina(MeuangLa,MeuangMangandXiengHoung).…IncasewhenrubberpricesinLuangNamthadroplowerthanCNY4perkg,wehavetocrossthebordertoChinainordertofindbuyerswhowouldpayatleastCNY4.Infact,therearemanybuyerscometoourvillageanddiscussaboutbuyingrubberfromus.64
Scalingupwithlimitedsuccess
Twooftheothervillageswevisitedhadsuccesswithcooperativemarketing.InBanNamNgeun(discussedabove),residentsdiscussedtheirsuccesssellingtheirrubbertogether,andreportedapriceincreaseofCNY0.5(from3.5to4)perkgintheirlastrubbersale.InBanMokpalai(Oudomxai),wheremanyresidentshadrelativesinBanHatNyao,representativeshadreplicatedtheHatNyaomodel’seffortstodrawmembersfromsurroundingvillages:
Wehavearubber-buyinggroupinthisvillagethathasmorethan100householdsasmembers.Thereare12householdsfromthisvillage;fromBanNathong,15households;BanNongdin,25households;BanNongBuadaeng,10households;BanNafang,9householdsintwovillages;BanMai,10
61Villageinterview,BanHatNyao62Villageinterview,BanHatNyao63Villageinterview,BanHatNyao64Villageinterview,BanHatNyao
28
households;BanNamOun,20households;BanVanglam,1household;BanNaNgeun,1household;BanLangching,7households;andBanPhonsavan,2households.65
UnlikeinBanHayNyao,however,thecooperativeinBanMokpalaireportednotchargingitsmembers,apparentlyrelyingonthebenefitsofincreasedpricestooffsetorganizingcosts.
Beyondtheseexamples,however,governmentrepresentativesnotedthatcooperativemarketinghadyettoscaleupsignificantly,despitetheadvantages.Weheard,forexample,inNamthadistrict:
Atthepresent,acooperativeisonlyformallyestablishedinBanHatNyao,whilepeopleinothervillagesaroundthedistrictstillselltheirrubbertothebuyersinindividually.Insomevillage,peoplealsogrouptogetherandselltheirrubberingroups,butthesegroupsarestillnotcooperativeslikeinBanHatNyao.Thebenefitofcreationofrubbercooperativeorrubbergroupisthatlocalpeoplewillhavemorepowertonegotiatewithmarketorbuyersinordertobuytheirrubberlumpsinahigherpricesthanwhattheysellinindividualhouseholds,whichaboutCNY0.5to1perkghigherthansellinginindividually.66
Threeissuesmayhelpexplainthelackofmarketingcooperativesonawiderscale.Oneisalackofunderstandingabouthowcurrentcooperativesactuallywork,andinparticular,theextenttowhichthecooperativeheadactuallymakesmoney.Inonevillagewevisited,villagerstoldus:
Ifweestablisharubbergrouporassociation,wewouldprobablygainhigherprices.Butlocalpeopledonotwanttobemembersofthegrouporassociationbecausetheydonotwanttopayapercentagetotheheadofthegroup.67
Asecondandmoresubstantialreasonisthatlowpriceshavedrivensomanyproducersoutofproductionthattherearenotenoughofthemtoactcollectively.Residentsinonevillagewhereallbuteighthouseholds(outof50-60)hadstoppedtappingtheirrubberexplainedthat,“Weassumethatwewillbeableestablisharubbercooperativeinourvillageinthenextfewyearswhenrubberpricesaregettingbetterandwhenpeopleinthisvillagewidelytaptheirrubbertrees.”68
Afinalreasonmayconcerntherelationshipbetweengroup-basedaggregationandtheconsolidationofholdingsdiscussedabove.Marketinggroupsworkbestwhentheaggregationofproductsforsalehasanimpactonsaleprice.Ifandwhenproducersalreadyhavesufficientvolumetocommandhighersaleprices,marketinggroupsmayprovidefewerbenefits.Wewerenotabletoinvestigatethispossibilitygiventhelackofdetailedonplantationholdings,buttheevidencewecollectedsuggeststhatthisisnonethelessapossibility.Response5:Mobility
Inadditiontoaggregatingtheirrubberpriortosale,anumberofrubberproducerswespoketodescribedtransportingtheirrubberthemselvesinordertofindmoreattractiveprices.ThiswasdescribedaboveinthecaseofBanHatNyao,butasthissectiondescribes,italsooccurredmorebroadly.
AccordingtotechnicalgovernmentstaffinOudomxai,“Thereisnotastandardpriceforrubberin[this]province.ManygrowersselltheirrubberinLuangNamtha;sometradersalsocometothe
65Villageinterview,BanMokpalai66Governmentinterview,LuangNamthaprovince(Interview4)67Villageinterview,Oudomxaiprovince(Interview17)68Villageinterview,LuangNamthaprovince(Interview6)
29
provinceforcollectingrubberfromlocalpeople.”69AndasvillagersfromOudomxaidescribed,pricesvaryevenwithinLuangNamtha,leadingthemtomakedifferentchoicesaboutwheretotaketheirrubbertosell:
Weknowtherubberpricesfromtradersandfrom[relatives]inBanHatNyao.…WesometimestravelNaTeuay[nearthebordercrossingatBoten,ontheroadfromOudomxaitoLuangNamtha]tosellourrubbertotheTaiChiangfactory,whichgivesLAK500perkgmorethanprices[offeredbytraderswhocometo]thisvillage.Othertimes,wesellourrubbertotheYunnan[RubberCo.]factoryinNamtha,whichoffersLAK500perkgmorethantheTaiChiangandLAK1000perkgmorethanpeoplebuyinthisvillage.70
Intheabsenceofwidespreadcooperativemarketing,intermediarycompanieshavesteppedintothisnicheandbeguntocapitalizeonthepricedifferencethatcomeswithaggregation.WemetonesuchbuyerontheroadfromLuangPrabangtoOudomxai.HepurchasedrubberfromlocalgrowersatthesamepricepostedattheYunnanRubberCo.factoryinLuangNamtha,effectivelysavinggrowersthecostandtimeoftransportingit.71Butpresumablyhewasabletoselltherubberforapricesimilartothecooperativemarketingpricesmentionedabove,makingroughlyCNY0.5to1perkgextra;thiswouldbeoffsetbyhisowntransportationcosts,butithasapparentlyprovensufficientlyreliableasabusinessmodelthatitispersistingdespitethefallinprices(Figure8).
Figure8.Rubbersaletointermediarycompany,LuangPrabangProvince.Rubberarrivesbytruck,bicycleandfoot(A,B),isweighedandmarked(C)andthenloadedintocompany’struck(D)fortransportationtoYunnanRubberCo.factoryinLuangNamtha
69Governmentinterview,Oudomxaiprovince(Interview14)70Villageinterview,Oudomxaiprovince(Interview21)71Interviewwithrubbertrader,LuangPrabangprovince(Interview26)
A
D
B
C
30
3.3.Thepriceofrubber
Allrubbergrowersknowthatrubberpricesarebasedontheglobalrubbermarket.72
Oneofthemostconsistentfindingsacrossourfieldworkwastheunderstandingthatthedropinrubberpricesiscausedbychangesintheglobaleconomy.Weheardthisrepeatedlyinalloftheplaceswevisited.Sometimesitappearedinthecontextoffarmersexplainingtheirchoices–forinstance,theirdecisionsnottotap,ortorelyonhouseholdlaboronly(seeprevioussection).Inotherinstances,itappearedinthecontextoflocalofficialsexplainingtogrowersthattherewasnothingthattheycoulddoaboutthedropinpricesbeingofferedbytraders,exceptwait.Asonedistrictofficertoldus:
Therearesomevillagerswhocametotheofficetoraisetheissueoflowrubberprices,andtheofficerecommendedthemtotalktotheinvestmentcompaniesdirectly.However,issueoffallingrubberpricesisnoteasytodealbecauseitistheissueofglobalrubbermarket.73
Thisexplanationisrepeatedregularlyatmultiplelevels.Asoneinformantputit,theformerMinisterofAgricultureandForestryhadconfirmedthisexplanationonavisittoLuangNamtha,notingthat“theproblemofrubberpricesisnotonlytheissueinLaos,butaroundtheworldbecauseoftheglobalfinancialcrisis.”74Aprovincial-levelofficialreportedlyheardthesamethingfromaLaogovernmentrepresentativeinKunming,afteraskingaboutthepossibilityofinquiringwiththeChinesegovernmentaboutlowrubberprices.“Theresponsefromambassadorwasthatwehavetowaituntiltheworldrubberpricegoesup.”75
Butasourresearchrevealed,asimportantastheglobaleconomyis,itisonlypartofthestory.Lowpricesaretosomeextenttheresultofchangesintheglobaleconomy,buttwoadditionalissuesareimportantonamorelocalscale.ThefirstconcernstherelationshipbetweentheChineseeconomyandtheglobalrubberprice,andthesecondconcernstherelationshipbetweenpricesinChinaandpricesinLaos.Wefocushereonthesecondofthese,butinordertofullyunderstandwhere“farm-gate”pricesinLaoscomefrom,itisimportanttostartwiththefirst.
TheglobaleconomyandtheChineserubberprice
OneofthenotabledetailsabouttherecentfallinglobalrubberpricesisthatitseemsnottohavebeenreflectedinChineserubberpricesforatleastsixmonths,andperhapsmuchlonger.Thisisdifficulttotell,becauseeventhoughmonthlyglobalrubberpricedataiseasilyavailable(seeFigure1),temporally(time-based)detaileddataaboutrubberpricesinChinaorLaosismoredifficulttocollect.Duringourfieldworkanddataanalysisperiods,wewereunabletogetthisinformation,andinfactweheardfromsourceswhohaveworkedinbothChinaandLaosthatregularpurchase-pricedatainChinaisnotreadilyavailable.76ButifinterviewdataaboutpricechangesinLaosiscomparedtotheglobalpricedata,alagofmorethanayear–andpossiblyuptoayearandahalf–occurs.ThisisclearfromcomparingFigure1,whichshowsglobalrubberpricesbeginningtodropinearly
72Governmentinterview,Oudomxai(Interview14)73Governmentinterview,Oudomxai(Interview12)74Governmentinterview,LuangNamtha(Interview3)75Governmentinterview,LuangNamtha(Interview2)76MélanieCanetandanonymoussource(bothpers.comm.withthesecondauthor,December2015)
31
2011(firstinFebruaryandthen,followingabriefriseinMarch,fromAprilonward),tofarmers’recollections.Weheardrepeatedlyinourvillageinterviewsthatrubberpricesbegantofallin2012,firstinNamthadistrict,theninSing,andtheninViengphoukha.Thefirstofthese,inBanHatNyao,wasthemostprecise,datingthefallinpricestolate2012,whereastheothertwojustsaidthatpricesbegantofallin2012.77Despitetheimprecision,thisiswellaftermid-2011.
Inadditiontohighlightingtheneedforbetterdataonlocalrubberprices,thismismatchprovidesareminderthatrubberpricesinChinaarelikelysubsidizedbythegovernment.In2005,Altonetal.wrotethatstatesubsidies,including“nationalpricesupports…atattractivelevels”formedthebasisforthesuccessoftheChineserubbersector,andthatalthoughChina’smembershipintotheWTO“mayhaveimplicationsforChinesepricesupportsforrubber”inthefuture,thesepricesupportswereineffectthen(Altonetal.2005:22,75).Tenyearslater,thelaginpricechangessuggeststhatsomeformofChinesepricesupportmaystillbeineffect;whilenotabadthingassuch,itsuggeststhatChinesegovernmentpolicyplaysanactiveroleinshapingpricesinadditiontoglobaleconomicdemand.Unfortunately,thisprotectivedimensionofChinesepolicydoesnotcarryoverintoLaorubberprices.
RubberpricesinChinaandLaos
LaorubberproducersbenefitfromChinesegovernmentpolicies(sofarastheseexist)whichbufferthepurchasepriceforrubberagainsttheuncertaintiesoftheglobaleconomy.ButthereisanotherwayinwhichChineserubberpolicydoesnothelpLaogrowers,andwhichcounteractsanybeneficialeffectsofChinesepricesupports:theimportquotasystem.Asnotedabove,mostofthebuyersofLaorubber–andalloftheultimatebuyers,afterthemiddle-menlikethoseshowninFigure8havesoldtheirrubber–areasmallnumberofChinesecompanies.(OurinterviewsidentifiedthreesuchcompaniesinLuangNamthaandfourinOudomxai.)ThesecompanieshavebasicrubberprocessingfacilitiesinLaosand,moreimportantly,quotastoimportrubberintoChina.Processingfacilitiesandquotasarerelated:Laorubberproducerssellrubberlumps(yangkohn),butimportquotasareforrubbersheets,madefromrubberthathasbeenalreadydried(yangheng)andpressed;processingfacilitiesarethekeyintermediarystepforrubberbuyersbetweenthefarmgateandthefurtherprocessingstepsthatoccurwithinChina(Shi2008;PAFO2013).
Rubbercompaniesposttheirpurchasepricesattheirprocessingfacilities(Figure9).Thesepricesrefertolumprubbersoldinsmallquantities,andarethebasisforpopularandpolicydiscussionsaboutrubberpricesinnorthernLaos;whenfarmersorofficialsortheVientianeTimesrefertorubberprices,theygenerallymeanthesepostedprices.Unfortunately,theredoesnotseemtobearecordofthesepricesthatisreadilyavailabletoresearchers.WeinquiredatthefactorywherethephotoinFigure9wastaken,aswellaswithprovincialgovernmentofficers;althoughtheprocessingfacilitypostspricesregularlyandprovincialofficialsmonitorpriceseverymonth,neitherwereabletogiveusdetaileddataabouthowpriceschangedovertime;thebestwewereabletocollectweretheannualaveragepricesshowninFigure1.
Giventheselimitations,wenonethelessthoughtitwasimportanttotrytocomparepricedataforLaosandChina.Thiswasbecauseinadditiontothecomments(mentionedabove)thatexplainedcurrentlowpricesonfallingglobaldemand,weheardreferencestothepowerthattradersexerciseoverthecross-bordertrade.Thesewereespeciallyclearinthecaseofgrowerswhohadbeento
77Villageinterviews,LuangNamthaprovince(Interviews5.10and25)
32
ChinatotrytoarrangepurchasingoftheirrubberandwhowerethusawareoftheChinesepricecontextaswellastheLaoone:
[We]trytofindthewaystogethigherrubberpricesaswecan.However,theproblemisChinesemiddlemendohavetoquotatoimportrubberfromLaostoChina.InfacttherearemanypeopleinChinawouldliketobuyourrubberproduct,buttheycannotimportrubberproducttoChinawithoutreceivedprovidedquotafromChinesegovernment.…Inthiscase,wewouldliketorequestthegovernmentofLaostonegotiatewithChinesegovernmentinordertofreelyexportofrubberproductfromLaostoChina.IfwecanfreelyexportourrubberproducttoChina,wewillhavemoreoptionsandmorebuyersandwewillgethigherpricesthanwhatwehavesoldatthepresent.78
Figure9.PostedpriceattheYunnanRubberCo.factoryinLuangNamtha,August2015
Weheardfrustrationsfromgovernmentofficesaswell.Onedistrict-levelofficerwespoketonotedthechallengesofrelyingoncompaniesforpriceinformation,evenwiththerecommendedpricesfromLuangNamtha:“However,theseinformationsourcescannotindicatewhetherthetradersarecheatinglocalpeople.Weshouldhaveofficialsourcesofinformationaboutthepricesofrubber.”Thesamepersonexpressedfrustrationwiththestandardexplanationofwhypricesweresolow:
IthinkthemosteffectivestrategyforrubberpricesisthatthegovernmentofLaosshouldhavecontractwithChinesegovernmenttosetrubberpricestogether.Pleasedonotstatethatrubberpricesarebasedonpricesinthemarketbecausewedonotknowthecertainpricesoftherubbermarket–wherearethemarketsthatpriceshavebeenbasedon,inChina?79
Thelimiteddatathatwewereabletocollectsuggeststhatthesesuspicionsandfrustrationswerewellfounded.Figure10comparespricedataforLaosthatwecollectedinourinterviews,includingtheannualaveragepricestatisticsmentionedaboveandshowninFigure1,withdatathatwefound78Villageinterview,LuangNamtha(Interview5)79Villageinterview,Oudomxai(Interview13)
33
aboutrubberpricesinChinabylookinginpublishedsourcesandonline.InordertomakesomeoftheChinesecomparablewithLao“farm-gate”prices,wehadtoadjustitforwatercontent,sincerubberpricesareoftenreportedinChinafordry(ratherthanlump)rubber.80AsFigure10shows,theyearsforwhichcomparabledataisavailable–2003,2004,2006,2014and201581–implythatLaopricesareroughlyhalfthoseonofferinChina.Whilesomeofthisdifferencemaybeduetothequalityoftherubberbeingsold,andasmallportion(probablybetween5and10percent82)isattributabletotheexporttaxesleviedbyLaocustoms,themajorityofthedifferenceinpriceseemstobeduetothemarketpowerexercisedbyquotaholders.
Figure10.Farm-gatepricesinnorthernLaosversusXishuangbanna,Yunnan.Source:interviews(Laosdata)andsecondaryandonlinesources(Chinadata).83
AlthoughthedatashowninFigure10hasanumberofcaveats(and,asabove,highlightstheneedforbetterstatisticsaboutrubberprices),itissupportedbynotonlythequalitativeevidence(quotes)presentedabove,butalsothismorespecificaccountfromoneofthevillageswevisited,whichputthepriceinChinaalmost80percenthigherthanthepriceinLaos:
WefeelthatrubberpricesinLaosarestilllowcomparedtothepricesinChina,whichtheygetCNY7.5perkg,whileweonlygetCNY4.2perkg.…WetalkedtoourrelativesandfriendsinChina,andweknowthatrubberpricesinLaosarenotfairforusbecausepricesofrubberinChinaaremuchhigherthaninourvillage,whichisnotreallyfairforfarmerslikeus.84
80Weusedaconversionfactorbasedononeofourinterviews,whichtranslatedintoanassumptionthatlumprubberis57percentlatex.Mostconversionsuseafactorof60percent(anon.pers.comm.,December2015).81In2008,ChinesevaluesrepresenthighandlowvaluesandarenotdirectlycomparabletotheLaoaverage.82Villageinterview,LuangNamtha(Interview5)83ChinadatacomesfromTangetal.(2009);http://laoban.xianhuo186.com/dongtai/nonglin/59308.htmlandhttp://www.agri.cn/V20/SC/scjghq/xjhq/sczw/201511/P020151104340014178220.pdf(accessedNov.2015withtranslationassistancefromWeiyiShi).84Villageinterview(Interview25)
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3.4.Whatshouldtherubberpricebe?
Duringthecourseofourinterviews,weheardmanyopinionsaboutwhatthepriceofrubbershouldbe.Thesestatementsoftensimplyreflectedthefactthatpriceswerefarlowerthanproducershadexpected,andthatgoodlivelihoodsbasedonrubberalonewereadifficult,ifnotimpossible,hopeinthecurrentcontext.Althoughourcatalogingofnormativestatementsaboutrubberpricesdonotcarrythevalidityofasurvey,webelievethattheyareworthpresentingnonetheless,iffornootherreasonthantoencouragefollow-up.WepresentafulllistofthenormativestatementsweheardaboutrubberpricesinAnnexVI;herewebrieflydiscussthreeissuesthatstoodout.
First,therewasarelativelyconsistentfindingthata“good”priceforrubberwasintherangeofCNY7-8perkg;thiswasthelevelatwhichpeoplewespoketobelievedthatrubbergrowerscouldmakealivingfromrubber,notdependonothersourcesoflivelihood,andactuallyescapefrompoverty.Inotherwords,thiswastheapproximatepricelevelatwhichtheinitialpolicyrhetoricaboutrubberasaprioritycropforuplanddevelopment,povertyalleviationandtheeliminationofshiftingcultivationwouldactuallybevalid.Itisworthpointingoutthegeographicalbiasinthisfinding,however:priceexpectationsseemedtobe,basedonourinterviews,higherinLuangNamthathaninOudomxai.ThesixhighestpricesdiscussedallcamefromLuangNamtha;theserangedfromCNY10toCNY6perkg,clusteringintherangeofCNY7-8perkg.Incontrast,thehighestnormativepricementionedinOudomxaiwasLAK7,000,orroughlyCNY5.6perkg.
Second,normativestatementsaboutpricesnonethelessreflectedwhatseemstobeasubstantialtoleranceforlowerrubberprices–thoseintherangeofCNY6-5perkg,andinsomecasesevendowntoCNY4.Thisacceptancewasexpressedmoreoftenbygovernmentofficialsthanbygrowersthemselves,butintwocases,itappearedinvillageinterviewsaswell.Atthispricerange,fewpeoplewespoketosawfarmersexitingpovertyordoingwell,buttheysawthemasnonethelessbreakingeven,gettingby,survivingandsoon.While“justgettingby”iscertainlybetterthanthealternative,thisdiscrepancybetweenofficialrhetoricandacceptanceoflowerpricessuggeststhatexpectationsforrubber-basedlivelihoods,whilestillpresent,arelowerthantheywereduringthe2000s.
Third,asoneintervieweefromOudomxaipointedout,thecredit-basedmodelofcontractfarming(seesection1.2)meansthatrubberproducerswhoareinvolvedincontractfarmingrelationshipseffectivelytakeapricecutanyway;thispersonthussuggestedthatpricesbeincreasedbyroughly30percentoverthebaseprice,inordertocompensatecontractfarmersforthefactthattheyhavetoprovidecompanieswithatleastsomeoftheirrubber“forfree”(i.e.asarepaymentfortheinitialloan).Whilethismaynotbearealisticpolicyexpectation,itnonethelesshighlightsthechallengesfacedbycontractfarmerswhohaveeffectivelytradedawayasubstantialfractionoftheirrubberproductionupfrontduetotheircreditingarrangements.Thistypeofstatement,despiteitsdubiouslogic,isnonethelessindicativeofthefrustrationswithlowpricesthatcurrentlyexistthroughoutnorthernLaos.
4.Discussion
4.1.Rubber:Boomcroporstrategiccommodity?RubberiswidelyreferredtoinLaosasastrategiccrop,butwhatdoesitactuallymeantotreatanagriculturalcropstrategically?Generally,theanswertothisquestioninvolvesstateintervention,actingonthepremisethatsomecommoditysectorsaretooimportanttobelefttotheprivate
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sectoralone.Rubberisarguablyonesuchsectorduetobothitssizeand,moreimportantly,itsdistributionamongthesmallholderproducerpopulation.Investmentinplantationestablishmentduringthe2000sisgenerallybelievedtohavebeenapproximately300,000hectaresnationally,andasubstantialfractionofthis–maybeathirdorso–islocatedinthenorthwherethesmallholdermodelwasdominant.EvenasplantationsalesoverthelastdecadeorsohaveerodedtosomedegreethesmallholdernatureoftherubbersectorinnorthernLaos,rubberisstillimportanttomanysmallholderlivelihoodsinthenorththroughbothindependentproductionandcontractfarming.
Undercurrentconditions,however,thismaynotlast–oratleastitmaynotlastatasignificantscaleunderconditionsthataresociallybeneficial.Thelastdecadeorsohasseenrubberbehaveinthemannerofclassic“boom”crops,inwhichproducerslargeandsmallflocktothecommoditywhenpricesaregood,butthenleaveitatvaryingrates(dependingontheirvulnerabilitytomarketshocks)aspricesfluctuateovertime.Pricefluctuationtendstoselectforacombinationofspeculation–buyingwhenpricesarelowsimplyforthepurposeofsellingwhenpricesrise–andlong-termconsolidationbylargeractorswhoareabletomobilizecapitalwhentimesaretouch(i.e.whenpricesarelow).Althoughthisstudydidnotinvestigatetherationalesforplantationpurchasesindetail,thelimitedevidencethatwefoundwasconsistentwithbothofthesepatterns.
Whatisclearisthatsmallerproducerswhohaveremainedintherubbersectorarerapidlybecomingdissatisfiedwiththecrop(alsoseeVT2014e).Asonevillagerepresentativeputit,“Inthebeginning,wethoughtthatwewouldgainhouseholdincomefromrubberplantationforimprovingourlivelihoods;unfortunately,pricesofrubberarenowdropped,andweloseourexpectationthatrubberplantationswillimproveourlivelihoods.”85Anothervillageinterviewhintedatthepotentialforvillagerstointerpretlowpricesasafunctionofgovernmentdecisionsratherthanjusttheglobaleconomicsituation:
Wewouldliketorequesttotheconcernedauthoritiesatbothprovincialanddistrictleveltocheckwhypricesofrubberhasdroppedsomuchthesedays;isitbecausetheconcernedauthoritiescollecthightaxfromrubbertraders/buyersorisitbecausetheworldmarketforrubberproduct?86
Thesetypesofbeliefsamongsmallholderssuggestthatthecurrentapproachhasputauthoritiesinadoublydifficultsituation.AsdiscussedinSection3.1,oneoftheresponsestofallingpricesbystateinstitutionshasbeentodecreasethetaxesthatrubbercompaniespay;thishashurtpublicrevenuecollection,whichhasbeenlessthanexpectedforseveralyears,inpartduetocompaniesthat“havetriedtoavoidpayingtaxestothegovernmentviavariousmeans”(VT2015b).Atthesametime,however,quotesliketheoneabovefromvillagershighlightthefactthatthismaynotbewidelyknown,andthatsomepeoplelinklowpriceswithpoorgovernmentperformance.Inthissense,smallholderdissatisfactionanddiscouragementduetolowpricesisnotonlyaneconomicissue,butpotentiallyapoliticaloneaswell.
Amoreregulated,“strategiccommodity”approachisnonethelessnotentirelyunrealistic.Laoshasalonghistoryofidentifyingcertainsectorsasstrategic,andcreatingorretainingsignificantstatecontrolinordertoinfluencethebehaviorofthemarketmorethanifconditionswerelefttoprivateactorsalone.Amongthemostnotableareaswherethishasoccurredaretheforestryandenergysectors(Walker1999;Wyatt2004;MAF2005).Inbothcases,stateinterventionwasrationalizedasa85Villageinterview,LuangNamtha(Interview25)86Villageinterview
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waytocounterbalancetherisksofleavingthesectorlargelyinthehandsofthemarket,especiallyincontextswherecommodityvalueswerelarge,wheresubstantialpowerwasexercisedbyforeignbuyers,andwherelocalconditionsrequiredastrongregulatoryhand.Forreasonsdescribedabove,therubbersectorisarguablyinasimilarsituationtoday.
4.2.Regulatoryoptions:Beyondthe“on-off”approachStateregulationishardlyabsentfromtheLaorubbersector,butithasbeenunevenand,insomecases,hardtosee.AsSection1.2describes,governmentinterventionplayedasignificantroleineffortstoscaletheHatNyaosmallholdermodelupusingacontract-farmingmodel.Thepromotionofcontractfarming,bothinitsoriginal“2plus3”formand,whenthisreceivedlowuptake,throughthemorecoercive“1plus4”variant,reliedheavilyonstate-ledeffortstoconvinceuplandfarmerstobecomesmallholderrubbergrowers.Butanimportantchangealsoaccompaniedthismodel:unlikethepubliclysubsidizedloanthatmadetheHatNyaomodeleconomicallyviable,thecontractfarmingmodelreliedonacreditmodelcontrolledbytheprivatesector,andthatultimatelyclaimedasignificantportionoftherubber’sfutureeconomicvaluefromproducers.Bothbeforeandduringthelow-priceenvironmentthathasoccurredsince2012,manyoftherubberproducersinnorthernLaoshavefacedstateinterventionthatwasfarlesssupportiveoftheirlivelihoodneedsthanthestateeffortsoriginallyusedtohelpBanHatNyao.
ItisessentialtolearntherightlessonsfromBanHatNyao.Inadditiontothelessonthathardworkandcommunitycohesionarenecessaryforsuccess,theneedforastable,decentpriceenvironmentshouldbynowbeapparent;thisoftengoesunrecognized,buttheevidencepresentedinSection3should,hopefully,begintochangethestory.
Theimportanceofaddressingthemarket(andspecificallytheprice)contextforrubberhighlightsthelimitsofcurrentresponsestofallingrubberprices,whichhavethusfarreplicatedthe“on-off”approachtoregulationtypicalofearlierresponses(e.g.tolandconcessions).Thefindingspresentedabovehighlightboththepossibilitiesof,andtheneedfor,amoregraduatedandmulti-facetedapproachtoregulation–anapproachismoreinlinewiththe“strategiccommodity”goaldescribedabove.Belowwediscussfoursuchoptionsthatcouldbeusedincombinationwithoneanother.
Option1:Floorpricesandotherlawenforcement
Historically,contractfarminghashadmixedresultsforproducers,whosecommitmenttoselltheirproducttoasinglebuyerhasoftenworkedtotheirdisadvantage(LittleandWatts1994).Butoneoftheadvantagesofcontractfarmingistheinvestor’sobligationtopurchasetheproduct,evenintimesofdecreaseddemand.Contractuallyspecifiedfloorpricesareoneclassicapproachtoprotectingfarmersfromtheextremesofboom-and-busteconomies.Butinorderforfloorpricestobeeffective,theyhavetobeenforced,andthatmeanstheyhavetobeunderstoodbyfarmersandstateofficialsalike.Thesituationwehearddescribedinourinterviews,inwhichfloorpricesweredeemedtobeprohibitivelyhighforthecompaniesinvolved,indicatesamisunderstandingoffloorpricesbothintheory–lowpriceswingsarepreciselywhenfloorpricesarerelevant–andinthecurrentsituation,wheremost(ifnotall)oftheChinesecompaniesinvolvedinthecross-borderrubbertradehavereceivedanumberofsubsidies(throughthepoppyreplacementprogram,aswellasthedefactosubsidycreatedbycontrollingascarceandvaluableimportquota);insuchacontext,argumentsthatcompaniescannotaffordtopayfloorpricesarequestionableatbest.
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Oneproblemislikelythatrubberwaspromotedsoheavilyasacropwithhighandsustaineddemand;insuchacontext,regulationonbehalfofstrugglingfarmersislesslikelytobeneeded.Floorprices–andenforcementofthe“fineprint”containedincontractsmoregenerally–aremorelikelytobefollowediftherisksofanuncertainmarketarediscussedexplicitlyinadvance.Thisdidnotoftenhappen,andnowthechallengeistoswitchfromacontextwherepricesarenegotiatedtoonewheretheyfollow(atleastwherepossible)conditionsthatwereagreedwhenproducershadmorepower–i.e.beforetheyagreedtoplant.
Althoughitwasbeyondthescopeofourwork,weheardanumberofreferencesinourinterviewstotheneedformoreorbetterlawenforcementinrelationtorubberprices.Itispossiblethatthisreferredtofloorprices,butothercontractualrequirements–aswellasotherlegalrequirementsmoregenerally–couldalsoberelevant.OneofthesituationsdescribedaboveinSection3.2,inwhichcontractfarmersinHoundistricthadcutdowntheirrubbertreesandplantedsomethingelse,isinstructive:indefendingtheirdecisiontocutdowntherubbertrees,villagersgavethereasonthatthecompanyhadnotfolloweditsendofthecontract;thecompany,incontrast,wasattemptingtofinevillagersforthetrees,andlocalofficialswerecaughtinthemiddle.Whetherthetermsofthecontractofferedadditionalprotectionforfarmersthanthereducedfinesthatdistrictofficialsagreedtoontheirbehalf(seep.25)isthetypeofquestionamorelegallyattunedregulatorycontextmightbeabletopursue.Giventheprotectionsthatsuchanapproachmightgivetosmallholders,itisnotunreasonabletoexpectthataregulatoryapproachbasedmoreoncontractenforcementwouldhavehelpedmaintain–andcouldstillhelprecreate–asmallholder-dominatedrubberlandscapeinnorthernLaos.
Option2:Pricesupportsandothersubsidies
Anevenmoreactiveapproachtoregulatingthepriceenvironmentmaybenecessaryifthegoalofasmallholder-dominatedrubberlandscapeisgoingtoberealized.AsnotedinSection3.3,Altonetal.(2005)named“attractive”nationalpricesupportsasoneofthepillarsofsuccessforChina’srubbersector;theotherpillartheynamedwasstatefarms,whichreceivedsubstantialsubsidiesthroughtheirverybusinessmodel.Inthelastdecade,asChinesecompanieshavegoneabroad,theseearlierdomesticsupportshavebeenreplicatedintheimportquotasandpoppyreplacementsubsidiesdescribedatlengthbyotherresearchers(Shi2008;KramerandWoods2011);theformer(importquotas)appearedaboveinthecontextofrubbertraders’economicpower,whilethelatter(althoughnotdiscussedinourinterviews)underpintheeconomicstabilityofthecompaniesinvolved.Insuchacontext,Laorubbergrowersarecurrentlyfacingnotonlythepressuresoftheglobalmarket,butalsotheeffectsofChineseeconomicprotection.
LaoauthoritiesmightthusconsidertheexampleofThailand,whichannouncedsubsidiestohelpitsrubberproducersinlate2014,largelyinresponsetodemandfromproducersthemselves.Subsidiestargetedboththepriceofrubberandsmallholdersdirectly:
[The]State-runBankofAgricultureandAgriculturalCooperativescouldlendupto30billionbaht($925million)totheRubberEstateOrganization—undertheMinistryofAgriculture—tobuyrubberfromthemarketandsellittothegovernment,said[Thailand’s]DeputyPrimeMinisterPridiyathornDevakula,whoisalsoavicechairmanofthecommittee.Thegovernment,whichalreadyhasadvancedpurchaseorders,willbeablesellthestockslatertoboostprices,Mr.Pridiyathornsaid.…Thecommitteealsoapprovedaonetimepaymentworthatotalof8.5billionbaht($260million)tohelp850,000rubberfarmers.(WallStreetJournal2014)
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SuchanapproachcouldhelpLaofarmersaswell,althoughthebalanceofprice-basedversusland-basedsupportwouldlikelyneedtobeafunctionofthedistributionofplantationholdings.(Pricesupportshelpallgrowers,whileland-basedsupportshelpsmallholdersinparticular.)Assuggestedbyquoteslikethefollowing,subsidiesaimedatincreasingtherubberpricesmightbewelcomedbygovernmentofficials,whoarecurrentlyfacingdissatisfiedsmallholdersononehandandpowerfulbuyersontheother:“TheIndustryandCommerceOfficeandMinistryshouldsetthefloorpriceforrubber.Itshouldnotrely[so]heavilyoninvestors.”87
Althoughpricesupportsrequiresignificantexpenditure,theycanbejustifiedongroundsofaddedproductivity.Thailand’sricesubsidypolicy,whichwasmentionedbymanyrubbergrowersintheirdemandsforstatesupportintherubbersector,wasdefendedinsuchtermsinastatementreleasedbythePheuThaiPartyin2015:
Thegovernment…implementedtheRicePledgePolicybysubsidizingthericepriceandtransferring…870,018MillionBahtdirectlytothefarmers.Thisinturnincreasedfarmers’purchasingpower[and]thusstimulatedtheeconomy.Asaresult,thegovernmentwasabletocollectadditionaltaxformorethan1trillionBahtperyear.(PheuThaiParty2015)
Whilestatementslikethesehaveapoliticalangle–PheuThaiwastryingtodefendformerPrimeMinisterYingluckShinawatraagainstcorruptionchargeslinkedtothericepurchasingpolicy–itisreasonabletoexpectthatrubberpricesubsidieswouldpayforthemselvesifdirectedtowardalargeenoughgroupofsmallholderrubberproducers.Giventherolethathouseholdincomesplayindrivinglocaleconomies,thefeedbackormultipliereffectsofstatefundsspentonrubberpricesupportscouldultimatelyoutweighthecosts.
Option3:Expandothermarkets
Duringourinterviews,weheardanumberofrequestsforLaoauthoritiestoinvestigatetheoptionofdevelopingothermarketsforLaorubber.Thesestatementshighlightedthefactthatmanyofourinformantssuspectedtherewasmoretolowrubberpricesthanlowglobaldemand.EveniflogisticalandmarketconditionsultimatelydrawLaorubbertoChina,theexistenceofothermarketoptionswouldcreatecompetitionand,indoingso,decreasethepowerofcurrentrubberpurchaserstodictatepricestoLaoproducers.Othermarketoptionswould,inotherwords,increasetheleverageofLaoproducersandauthoritiestonegotiatebetterprices.
Thetwobasictypesofothermarketoptionsaredomesticvalue-addingandotherforeignbuyerssuchasThailandorVietnam.Theadvantagesanddisadvantagesofthesevariousapproacheswerebeyondthescopeofourstudy,butwoulddependontherelationshipofcoststoleveragegained.ThedevelopmentofapurelydomesticmarketforLaorubberwouldlikelybeprohibitiveduetovariousreasons,butitmaynonethelessbepossibletoaddatleastonemorestepinthevaluechainpriortoexport.Thiswouldlikelydependon,amongotherthings,supplyreliability,whichwouldinturndependonhowmanynorthernproducersareindependentversusincontractingrelationshipswithChinesecompanies(currentlyunknown),aswellasthepossibilitiesforsubsequentexportofthefinishedrubbersheets.ForeignexportoptionsotherthanChinawouldlikelybeinfluencedbyamixofeconomicgeographyanddiplomaticrelations.Althoughtheplantationboomduringthe2000sseemedtodemarcatenorthern,centralandsouthernLaosasChinese,ThaiandVietnamese
87Governmentinterview,Oudomxai(Interview14)
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focusedrubberzones,thefuturemaynotbesosimple.Itisconceivable,forinstance,thatVietnam’srubberindustry,eventhoughiteventuallysellsmanyfinishedcommoditiestoChina,couldabsorbLaorubberathigherfarm-gatepricesthanviaChinadirectly.Althoughthisiswellbeyondthescopeofourwork,thepresenceofanewVietnameserubberprojectinOudomxai’sBengdistrictwasanotableanomaly.Theproject,aconcessionor“1plus4”project(dependingonsources)whichbeganin2011,suggeststhatfutureexportsfromnorthernLaos’srubbersectormaybemoremulti-nationalthanthesituationtodate.
Option4:Diplomacy
Inourinterviews,anumberofpeoplewhobelievedthatpriceswereduetomorethanjustglobaldemandsuggestedthattheLaogovernmentdiscusspriceswithitsChinesecounterparts.Thesestatementscamefromvillagers,aswellasfromdistrictandprovincial-levelofficials.Oneofourvillageinterviewscontainedthisparticularlyplainappealforcentral-levelassistance:
WeneedthegovernmentofLaostonegotiatewithChinesegovernmentinordertofreelyallowlocalpeopleinLaostoexportrubberproductstoChina;otherwise,theChinesetraderswillbeabletocontroltherubberpriceinLaos.Thus,thecentralgovernmentisnowimportantforrubbertradeinLaos.Withoutanyactionfromthecentralgovernment,rubberpriceswillnotbemuchincreasedcomparedtowhattheyareatthepresent.88
Itisquitepossiblethatdiplomaticdiscussionshavealreadyoccurredaboutrubberprices,andthatcurrentpricesreflectarelativelackofleverageonthepartofLaoauthorities,whomaynotcarryasmuchweightwithChineseauthoritiesasrubberproducersinapartofthecountrywhereeconomicdevelopmenthaslongbeenseenasastrategicpriority.Oneofourgovernmentinterviewshintedatthelackofprogressinsayingthat“provincialauthoritiesproposedtothegovernmenttonegotiatewiththeChinesegovernment,butChinesegovernmenthasnotconsideredifrubberisaddedtotheimportlistofgoodsfromLaos.”89
WhileitispossiblethatLaosmayhaveabitmoreleverageinitscurrentroleaschairofASEAN(especiallywithissuesliketheSouthChinaSeaterritorialdisputesdestinedtoemerge),adifferentanglemayholdmorepromisefordiplomaticdialogue:thethreatofLaofarmersreturningtoopiumcultivation.AsnotedbytheUnitedNationsOfficeonDrugsandCrime(UNODC),opiumcultivationintheso-calledGoldenTrianglearea(whichincludesnorthernLaos)hasgrownsubstantiallyinthelastdecade,andiscurrently“stabilizedathighlevels”duetoacombinationofhighglobalandregionaldemandandrelativelyfeweconomicalternativesforproducers(UNODC2015;VT2015c).Thatthisincreasehastakenplacealongsidetheroll-outofChina’sopiumcropreplacementsubsidiesforChineseagribusinesshighlightsthelimitsoftheseefforts,asChinesebusinesses,includingrubbercompanieswithimportquotas,havetakenadvantageofthesubsidieswithoutpassingthebenefitsontofarmers(Shi2008;KramerandWoods2011;Dwyer2014).Asappealstoequitablebilateralcooperationcomeupshort,ongoingChineseconcernsaboutthatcountry’sdrugtradecouldprovetobeareasonforcompromiseonrubberimportquotas.AsimpliedbythedatashowninFigure10,thiswouldlikelygosomewaytowardaddressingthepresentpriceissues.
88Villageinterview(Interview5)89Governmentinterview(Interview14)
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4.3.AdditionalresearchneedsInadditiontopolicy-leveldiscussionaboutthevariousregulatorydimensionsdiscussedabove,ourresearchidentifiedfiveissuesthatdemandadditionalstudy.Thesearediscussedbelow,andlistedinorderoftimeliness.Allaretimely,butwebelievethefirsttwoareespeciallysoduetoimmediateimpactsonlivelihoods.
Topic1:Householdimpactsoflowprices
Inthecurrentlow-pricecontextwhereasignificantfractionofrubberproducershavetakentheirplantationsoutofproduction,amajorquestionremainsrelevantforthosehouseholdsthathavecontinuedtotap:whataretheeffectsofsustainedlowpricesatthehouseholdlevel?AsdiscussedinSection3.2,continuingtotaprubberplantationsusinglargelyhouseholdlaborisaresponsethatisoccurringonafairlywidescaleintheprovinceswestudied,andlikelyelsewhereaswell(e.g.Bokeo,Phongsaly,LuangPrabang,Vientiane,Bolikhamxai).Whilethislivelihooddecisionmayrepresentthebestavailablechoice,atleastsomehouseholdsseemtobedoingsoatleastinpartbecausetheyhaveinvestedsignificantresourcesinestablishingtheirrubberplantations,andcannotsimplywalkawayfromthisinvestment.Thisdemandsmoreresearch.
Inparticular,theeffectsofhouseholds’decisionstocontinuetappingrubberplantationsatlowpricesislikelytohavedifferentandpotentiallyadverseimpactsamongdifferentmembersofthehousehold,asvariouscompensationmechanismsforlowerpricesareadopted.Studyingspecificmechanismswasoutsidethescopeofourresearch,butthesecouldincludeincreasevolumeofwork(whetherintherubbersectororelsewhere),newformsofwork,additionalworkloadamongvariousmembersofthehousehold,orvariouscombinationsofthese.Theimpacts,especiallyonmorevulnerablehouseholdmembers,shouldbestudied.
Topic2:Indebtedness
Anotherissuethatdemandsfurtherresearchistherolethatindebtednessplaysincausinglandusechange.Inourinterviews,weencounteredafewreferencestodebtthatwastakenonbyrubberproducersaspartofestablishingtheirplantations.AsnotedinSection3.2,wealsoheardofatleastoneinstancewhereacontractfarmingcompanyhadbegunlendingcashtoitsproducers,ineffectcreatingtwotypesofdebt(cashandrubber).RecentresearchonSavanakhet’ssugarsectorhasrevealedsomeimportantparallelstotherubbersectorinnorthernLaos,andsuggeststhatdebt–ratherthanlazinessorgreed,asisoftensuspectedbylocalauthorities–maybeadrivingfactorfortheconversionofrubberplantationstohigh-rentalternativessuchasbananas.AsPhoumanivongetal.describe:
Manyhouseholds[inSavannakhet]whohadexperiencedplantingmorethan10hectares,gotintodebt,[and]consequently,theydecidedtoreducetheirsugarcanefieldsto2-3hectares,andrentedouttherestoftheirlandtothefactoryortootherbusinessmen.…Therentmoneyreceivedfortheirlandwasusedtocuthouseholddebtfromthepreviousseason(fertilizer,sugarcanestalk,herbicide,landpreparation).Somelandhadtoberentedtothesugarcompanyfor10yearsormore,inordertocompensatefortheirdebt.(Phoumanivongetal.2015:25)
Thisisanimportantfindinginitself–itshowshowcontractfarmingcanleadtolandlossviathepathwayofindebtedness–anditmayapplytothenorthernrubbersectoraswell.Inacontextwhereproducershavetakenonsignificantdebtjustaspriceshavecrashed,andwherelandleaserateshaveincreasedsubstantiallyas“available”landhasbecomeincreasinglyscarce,landrentals
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maybearesultofhouseholdstryingtocleartheirdebt,ratherthansimplybeinglazyorgreedy.90Theprevalenceofdebtisunknown,butthesinceindependentproductioniswidespreadinbothLuangNamthaandOudomxai,theunexpectedcrashinpricesmakesitlikelythatindebtednessisfairlycommoninthenorthernrubbersector.Itspotentialtodrivelandusechangeandassociatedshiftsinproduction(laborregimes,chemicalregimes,andsoon)makeitanimportantandtimelytopicforadditionalresearch.
Topic3:Distributionofrubberplantationholdings
Asdiscussedabove,theextenttowhichrubberremainsasmallholderplantationcropversusaconsolidatedplantationcropinthehandsoflargerprivateholders–ofplantationsover10hectares,forexample–remainsanunknownandimportantquestion.Thedistributionofrubberholdingshasbeenchanging,andasdescribedinSections1.2and3.2,hasbeenmovingfromalargelysmallholdermodeltowardamuchmoremixedlandscapeofplantationsizes.Boththelocalandtheoverallquantitativedimensionsofthisareimportant,andanumberofthegovernmentofficialswespoketodiscussedtheneedto“updatethedata”onthedifferentbusinessmodelsineffect.ThisdistributionhasimportantimplicationsfortheregulatorychoicesdiscussedinSection4.1:smallholderstendtowarrantmoreanddifferentprotectionsthanlargerholders,whilelargerholdersmaycauseamixofsocial,environmentalandeveneconomiceffectsduetothewaytheymanagelaborandagriculturaltechnologiessuchasherbicides.AsSection3.1makesclear,largerholderstendtotakerubberoutofproductionmorereadilythan“true”smallholders,whichcanhavewidereffectsontheLaoeconomyif,amongotherthings,taxesarenotcollectedortherearenotenoughrubberproducerstoformmarketinggroups.Acontemporarysurveyofrubberplantationholdingsatthecurrentmomentisthuslikelytobeusefulininformingstateauthoritiesofhowtomoveforwardinthecurrentlow-priceenvironment.
Topic4:Time-specificrubberpricedata
Inadditiontolandholdings,oneofthemajordatagapsthatprovedtoolargeforthisprojecttoaddresswasdetaileddataabouthowrubberpriceshavechangedovertimeinnorthernLaos,aswellasacrosstheborderinChina.AsexplainedinSection3.3,morefinelyresolvedtime-specificdataaboutrubberpriceswouldhelpevaluatejusthowbigthedifferenceinpricesisbetweenLaosandChina,andthushowmuchtheextenttowhichmarketpowerisresponsibleforlowpricescomparedtootherglobalandlocalfactors(rubberquality,exporttaxesandtransportationcosts).
AsnotedinSection3.2(Mobility),priceswithinnorthernLaosvaryaswell,sometimesenoughthatrubberproducersdecidetotaketheirproductfartherthantheclosestbuyer,insomecasestakingitallthewaytocentralLuangNamthafromsouthernOudomxai.Trackingrubberprices’changeovertimewouldentailrecordingitonaday-by-daybasisintheplaceswhereitisposted,eitherbymonitoringitdirectlyorrequiringbuyerstonotifyauthoritieswheneverpriceschange(andkeepingarecordwhenthisoccurs).Inthecurrentpriceenvironment,gooddataaboutrubberprices–overtimeandinmultiplelocations–isespeciallyimportantforprotectingLaogrowersfromunfairmarketpracticeslocally.Andinthelongerterm,whetherpricesarehighorlow,detailedpricedataonbothsidesoftheborderwillhelpensurethatLaogrowersarenotoverchargedforthingsliketransportcostsandborderfeessimplybecausetheydonotfullinformation.90ThelandleaseratesreportedbyPhoumanivongetal.(USD312perraiperyear,orapproximatelyUSD1,950perhaperyear)wereremarkablysimilartothoseweheardreportedinLuangNamtha(seesection3.2).
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Topic5:Chineseagribusiness
Moregenerally,abetterunderstandingofChineseagribusinesscompaniescanhelpLaoproducersandauthoritiessubstantially.Inthelastfewyears,asignificantbodyofresearchonandexperiencewithChinesecompaniesandtheChinesegovernment’s“goingout”policyhasbeenaccumulatedintheborderlandsofnorthernLaos(seeesp.citationsinSections1.1and1.2).Butthereismuchthatremainsunknown.TwosuchissuesthathaveappearedhereincludetheextenttowhichChinesegovernmentpoliciesandsubsidieshavecushionedChineserubbercompaniesagainstthecurrentslowdownandlow-priceenvironment,andwhetherstate-ownedenterprisesarebehavingonlyinaccordancewithmarketconditionsandexpectations,orwhethertheyarealsoshapedbyChinese“cooperative”developmentpoliciesthatseektoimprovelocallivelihoodsevenbeyondstrictlymarketconditions.
Inthecurrentcontextofdecreasedrubberpricesand,moregenerally,anapparentslowdownintheChineseeconomy,itislikelythatthesortofclaimsbeingmadebyrubbercompaniesaboutnotbeingabletoaffordhigherpurchasepricesmaynotbelimitedtotherubbersector.Sometimestheseclaimsmaybetrue;planscanchange,assumptionscanproveunreasonable,andfarmersdonotalwaysholduptheirendofthebargain.Butsometimestheseclaimsmaybejustnegotiationtacticsusedbypowerful,opportunisticentrepreneurs.ThemoreLaoauthoritiesandextensionagentsknowaboutthecompaniestheyareworkingwith,themoretheywillbeabletotellthedifference,andtheeasieritwillbetoworkwiththem,sothatnegotiationsendinproductiveandbeneficialrelationshipsratherthanbadfeelingsandmisunderstanding.
5.Summaryofrecommendations
ThefollowinglistprovidesasummaryoftherecommendationsthatemergedfromthediscussionofresultspresentedinSection4.Forfurtherdetails,pleaseseeabove.
1. Followuponreportsofthenon-enforcementoffloorprices.2. Studytheimpactsofsustainedlowrubberpricesatthehouseholdlevel,especiallyonmore
vulnerablemembersofthehousehold.3. Investigateindebtednesstoassessitsinfluenceoncurrentlandusechanges,especiallythe
conversionofrubbertoother(newer)boomcrops.4. Createaninventoryofrubberholdingsandproductionarrangements(businessmodels)in
ordertoassesstheextenttowhichrubberisstillasmallholdercrop,andhowthisvariesfromdistricttodistrict(andevenmorelocally).
5. CollectbetterdataaboutpastandpresentchangesinrubberpricesinvariouslocationsinnorthernLaosand,totheextentpossible,inChina.
6. Evaluateanddiscusstheextenttowhichrubbershouldbeastrategiccommoditytobepromotedandsupportedamonguplandsmallholders.ExplorevariousregulatoryanddiplomaticpossibilitiestoimprovethepriceenvironmentforLaosmallholders,bothnowandintothefuture.
43
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AnnexI.Reportedrubberareas
Statisticsonrubberareascollectedduringfieldworkinterviews(allnumbersinhectares) Productionarrangement
(“businessmodel”)Total
reportedTotal
calculated Source
ConcessionIndependent
(“smallholder”)production
Contractfarming91
2+3 1+4
LUANGNAMTHAPROVINCE
3,557 16,409 13,298 34,347 33,264 PAFO
10,841
“Largestproportionoftotalrubber
plantationareaintheprovince”
Magnitudeofshiftfrom2+3to1+4“hasnotbeen
assessed” PICO
Sing 472 1,340 9,720 DAFO
Namtha Notavailablewithintimeallotted DAFO
ViengPhouKha 550 “nottappedyet” 3,069
(550mature) DAFO
OUDOMXAIPROVINCE 1,000
About30,00092 PAFO
Xai 0 Yes Yes No 4,172(150mature) DAFO
Houn0 342 5,54893 39094 6,280 DAFO
473395 DPIO0 20% 80% 6,000 DICO
91SeeSection1.2(sub-section“Scalingup,withatwist”)fordiscussionof“2plus3”and“1plus4.”92“Largerthanpaddyricearea,whichisabout14,000anduplandricewhichisabout11,000.”93Ofwhich5,430JianfongCo.94Vietnamesecompany,plantingsince201395Jianfong(“AccordingtothestatisticfromDAFO,rubberplantationbelongtoJianfongis5,400ha(2014).However,datasurveyedbyplanningofficein2013is4,733ha”)
46
AnnexII.Villagesvisited
Province District Village Details
LuangNamtha
Namtha HatNyao • Hmongethnicity• Thefirstsuccessfulvillageinrubberplantationvillagein
LuangNamtha(andinthenorthernLaos)• LocatedclosetocapitalofLuangNamthaprovince• FirstrubbercooperativevillageinLaos
Sobsim • Khmuethnicity• LocatedinNamthadistrict,butdistancefromChineseborder
anditisabout24kmfromprovincialcapitalofLuangNamtha• Newrubberplantationvillage,comparedtoHatNyaoand
othervillagesinthesamedistrict• Informalurbannetwork-basedinvestmentduetoitslocation
Sing Oudomsin • MienethnicityorHmongMien• FirstrubberplantationvillageinSingdistrict• LocatedclosetolocalLao-Chinesebordercheckpoint,where
onlyis3kmtothebordercheckpoint• Allrubberplantationsareself-investmentbylocalpeople
Phiyer • Akha(Ikor)ethnicity• Locatedabout9kmfromcapitalofSingdistrict,butstillhavinggoodconnectiontotheLao-Chineseborder
• FirstAkhavillagethathavesucceedincashcropproduction(initiatedbysugarcane)
• Rubberplantationismainlyinvestedbyvillagers
Viengphoukha NamNgeun
• Lueethnicity• FirstrubberplantationvillageinViengphoukhadistrict• Locatedalongthemainroad(Rte.3)connectionbetweenChinaandThailand
• Rubberplantationinthisvillageiscombinationofself-investmentbylocalpeopleandcontractfarming
Oudomxai Xai KorNoi • Lueethnicity• LocatedalongthemainroadfromOudomxaitoBoteninternationalbordercheckpoint
• Rubberplantationiscombinationofself-investmentbylocalpeople,co-investmentbetweenlocalpeopleandrelativesfromtheprovincialcapitalofOudomxaiandcontractfarmingwithChineseinvestors
Houn MokPhalai
• MixedofHmongandKhmu• LocatedawayfromChineseborder• Rubberplantationinthisvillageisstillyoung,peopleinthisvillagestartedtappingrubbertreesin2014
• Rubberplantationiscombinationofself-investmentbylocalpeopleandcontractfarmingwithChineseinvestmentcompany
47
AnnexIII.Stakeholdersinterviewed
Location NumberofParticipants
LUANGNAMTHA
ProvincialAgricultureandForestryOffice 2ProvincialIndustryandCommerceOffice 1ProvincialPlanningandInvestmentOffice 3ProvincialTaxOffice 1
NamthaDistrictAgricultureandForestryOffice 1
DistrictIndustryandCommerceOffice 1
Sing
DistrictAgricultureandForestryOffice 2DistrictIndustryandCommerceOffice 3DistrictPlanningandInvestmentOffice 1DistrictFinanceOffice 2
ViengphoukhaDistrictAgricultureandForestryOffice 2DistrictIndustryandCommerceOffice 1DistrictFinanceOffice 1
OUDOMXAI
ProvincialAgricultureandForestryOffice 2ProvincialIndustryandCommerceOffice 1ProvincialPlanningandInvestmentOffice 2ProvincialTaxOffice 1
XaiDistrictDistrictAgricultureandForestryOffice 1DistrictIndustryandCommerceOffice 1DistrictPlanningandInvestmentOffice 1
HounDistrictDistrictAgricultureandForestryOffice 1DistrictIndustryandCommerceOffice 2DistrictPlanningandInvestmentOffice 3
VillagesLuangNamtha
HatNyaoVillage,NamthaDistrict 3SobsimVillage,NamthaDistrict 11OudomsinVillage,SingDistrict 2PhiyerVillage,SingDistrict 2NamNgeunVillage,ViengphoukhaDistrict 3
VillagesOudomxai
KorNoiVillage,XaiDistrict 2MokPalaiVillage,HounDistrict 2
PrivatesectorYunnanRubberProcessingFactory 3Sino-Laorubberprocessingfactory 2ARubberTradeUnitinLuangPrabang 2
Total 68
48
AnnexIV.Discussionquestionsforkeyinformantinterviews
1. Canyoustartbyexplaininghowrubberfitsintotherangeoflocallivelihoodsinthis[provinceordistrict]area?
2. Whendidthefallinrubberpricesbegintobecomeanissueofconcern?(Whenwasthisinrelationtothebeginningoftapping?)Where(fromwhoorwhatsource)didyoustarthearingaboutfallingprices?Howdoyouunderstandthereasonforthedropintherubberprice?
3. Howhaverubberholdersrespondedtothefallinrubberprices?
Thefollowingquestionswillalsobeaddressed(ifneeded):a. Aresomerubberholdersclearingtheirlandandplantingothercrops?Ifso,please
providedetails(what,when,whetherornotthenewcropsareproducingreturnsyetand,ifso,howtheycomparetorubber).
b. Aresomepeoplesellingtheirland,andifso,whattypesofgrowersareselling?Whoaretheysellingto?(Whoisbuyingrubberrightnow?Companies?Wealthierfarmers?Peoplefromurbancenters?Etc.)
c. Arepeoplerespondinginotherways?Pleaseprovidedetails.
4. Aresomerubberholderscontinuingtotaptheirtrees?Ifso,whatkindsofpricesaretheygetting?Istherearangebetweendifferentbuyers,ordoeseveryonepaythesame?Howmanybuyersarethereinyourarea[province,district,village]?
Follow-upquestions:a. Areanyofthepricesofferedabovethestandardmarketprice?Ifso,isthisbecause
ofrecentagreements(e.g.betweencompaniesandlocalauthorities)orbecauseofagreementsmadeatthetimecontractsweresigned(e.g.listedinthecontract)?
5. Howarepurchasepricesfromfarmers(“farm-gate”prices)determined?
Follow-upquestions(ifneeded):a. Arefarm-gatepricessetinrelationtoworldmarketprices?Aretheybasedonprices
inChina?Insomewhereelse?Aretheysetbytraders?Ifso,doyouknowhow?(It’spossiblethatrespondentswon’tknow.)
b. Inanyofthecontract-basedproductionarrangementsinthisarea,arepricesdiscussedinthecontracts?Ifso,how?Inanycasesareminimum(“floor”)pricesguaranteed?
i. Ifso,arethesebeingpaidnow?Aretheyadequatetofarmers’livelihoodneeds?
ii. Ifnot,wasthereanydiscussionaboutminimumpricingguaranteesbackinwhenprojectswerestartingup?
6. Whenandhowdidrubberplantingstartinthisarea?
Follow-upquestions:a. Wasrubberplantingstartedinitiallybysmallholdersorbycompanies?Whendid
companiescomein,andwhattypesofarrangementsdidtheyoffer?Whatwerethekeypolicyissuesbackthen?Wasrubberprice/demandanissueofconcernthen?Whyorwhynot?
7. Whatistherangeofrubber-growingarrangementsnow?Follow-upquestions:
a. Arethereindependentsmallholders?
49
b. Arethereinformalshare-croppingagreements?Ifso,betweenwhom?(Onecommonarrangementisbetweenrelativesindifferentplaces,butsometimesthisalsooccurswithwealthy“elites”fromurbancenters.)
c. Arethereformalcontractfarmingschemes?d. Arethereconcessionschemes?e. Doyouhavestatisticsormapsonanyofthese?Canyousharethese?
8. [FORGOVERNMENTSTAFFONLY,INCLUDINGATVILLAGELEVEL]Doyouhavearoleinmanagingrelationsbetweengrowersandbuyers?Ifso,pleasediscussthisingeneralandwhetheritdiffersforthedifferentarrangementslistedinquestion7.
9. [FORGOVERNMENTSTAFFONLY,INCLUDINGATVILLAGELEVEL]Areyouinvolvedinhelpingtomanagethesellingprocess?Ifso,how?Ifnot,havetherebeenanyrequests(e.g.byrubbergrowersorbycompaniesortraders)forstateinvolvement?
10. Dopeopletalkaboutappropriatepricesforrubber?Isfairnessanissueofconcern?Howshouldpricesbedetermined?
11. Issalepriceanissue/problemforanyothercrops?Ifso,howdoesrubbercomparetothese?
12. Oftheresponsesthatarecurrentlyoccurring(seequestion3),doyouconsideranyofthesetobeeffectivestrategiesfordealingwiththeproblem?(Orarethesejustcopingmechanisms?)
13. Whattypesofactiondoyoubelieveareneeded,andfromwhom?
14. DoyouhaveanyideasaboutanythingthatauthoritiesorexpertsinVientianedotohelp?
15. Whatdoyouforeseerubberpricesdoinginthenext5or10years?Increase?Decrease?Why?
16. Thishasbeenveryhelpful–thankyouverymuchforyourtime.Wearealmostfinished.wehaveafewquestionsaboutthewidercontextrelatedtoothercrops.Thiswillhelpusunderstandthesignificanceofourfindings.Howdoesrubbercomparewithothercropsinthisareaintermsof:
a. importancetolocallivelihoods?importancetothelivelihoodsofanyparticularsub-group(e.g.poorpeopleversuswealthierfarmers?peopleinacertainpartofthedistrict/province?peoplewhohavelivedherelongerversuspeoplewhohavecomemorerecently?)
b. areaplanted?Howdoesrubbercomparetoothercropsintermsofaverageholdingsize?Totalareaofrubberplantation(ifavailable)
c. lengthoftimeithasbeencontributingtolivelihoodsinthearea?d. challenges(e.g.tocommunitylandrelations)?96
ADDITIONALQUESTIONSFORGOVERNMENTSTAFFATDISTRICTANDPROVINCIALLEVELONLY:17. Lastly,Ihaveafewquestionsaboutpossiblesolutiontoaddresscurrentsituation:
a. Havelocalpeopleraisedfallingpricesasanissueofconcernwithyourofficeorotherrelevantgovernmentoffices?Havetheymadeanyspecificsuggestionsabout
96Thesemaybeusefulasfollow-upquestions:Whendidrubberplantationstart,howandwhy?Isrubbertheonlyindustrialtreeplantationinthisarea?Whynototherspeciesorcommercialcrops?Howdidrubberexpandinthearea?Howwerecompanytermsset,anddidthischangeovertime?Werelocalfarmersinterestedincooperatingwithcompanies,andifnotatfirst,whatwasdonetomakethemparticipatemore?(Betterterms?moreinvolvementoflocalauthoritiesinlandmanagement/zoning?Etc.)
50
howtoaddresstheissueoffallingprices?Ifso,doyouthinkthesearerealistic?b. Haveyouconsultedwithnationalstakeholders(whoorwhichorganizationsatthe
nationallevel)withregardstothefallofrubberprice?Ifso,whatrecommendationdidyoureceivefromnationallevel?Whatisrequiredinorderforthistoberealistic?
THANKYOUSOMUCHFORYOURTIME.PLEASEPROVIDECONTACTINFORMATIONIFYOUAREINTERESTEDINRECEIVINGACOPYOFOURFINDINGSEARLYNEXTYEAR.
51
AnnexV.Rubberpricesreportedinfieldworkinterviews
RubberpricesinnorthernLaos,2000–2015,reportedbysource.Circles,trianglesandsquaresshowprovincial,districtandvillage-levelsources,respectively.SmallshapesrepresentLuangNamtha,largerepresentOudomxai.
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2000200120022003200420052006200720082009201020112012201320142015
Pricespaidtoru
bberfa
rmers(RM
B/kg)
DistrictinterviewsLNT-NT ProvincialstagsgcsLNT
ProvincialinterviewsLNT DistrictinterviewsLNT-Sing
VillageinterviewsLNT-Sing VillageinterviewsLNT-NT
DistrictinterviewsLNT-VPK VillageinterviewsLNT-VPK
ProvincialinterviewsOUD DistrictinterviewsOUD-Xai
DistrictinterviewsOUD-Houn VillageinterviewsOUD-Xai
VillageinterviewsOUD-Houn PrivatesectorinterviewOUD
52
AnnexVI.Normativestatementsaboutrubberprice
Statementsaboutwhatrubberpricesshouldbe,rankedbyorderofdecreasingprice.Price/kg
CNY LAK Details Source
10
"Aswediscussedamongrubbergrowerinourvillage,weshouldhaveatleast10Yuan/kg(lumpofrubber),orifwesell1kgofrubberlump,weshouldbeabletobuy1kgormilledrice"
Villageinterview,LuangNamtha
8 10,000
Thereisnotsetpricebetweengrowerandbuyer.However,localpeopleoftenmentionedthatthelowestpricesforrubberlumpshouldnotlowerthanLAK10,000/kg.Iflocalpeoplecangetthisprices,rubberplantationwillbeabletofeedtheirlivelihoods.
Governmentinterview,LuangNamtha
7-8
"Localsmallholderswouldliketoproposethatrubberpricesshouldnotbelessthan7-8Yuan/kgofrubberlumps.However,italsodependsonthecapacityofthebuyers."
Governmentinterview,LuangNamtha
7-8
"Themostappropriatepricesofrubbershouldnotbelowerthan7-8Yuan/kg(lump);iflocalpeoplecouldselltheirlumprubberintheseprices,onlybaseonrubberproduction,localpeoplewillbeablegraduatefromtheirpoverty."
Villageinterview,LuangNamtha
7
"Ithardtosayhowmuchshouldbeappropriatepriceforrubber,butwhenItalkedtolocalpeople,theywillbehappyiftheycangetatleast7Yuan/kgoflump."
Governmentinterview,LuangNamtha
6
“We[NamthaDAFO]discussedwiththebuyersincludingYunnanandTaiChiantobuyrubberlumpfromlocalpeopleatleastshouldnotlesserthan6Yuan/kg.However,…"
Governmentinterview,LuangNamtha
5.6-8
7,000-10,000
"Ithink,atleastshouldnotlowerthan7,000k/kg.However,inthecontractfarmingscheme(2+3)thepricesshouldbeatleastLAK10,000/kgbecauselocalpeoplewillgainonly40%ofthebenefit,whiletheinvestorgain60%."
Governmentinterview,Oudomxai
5.6-6.4
7,000-8,000
"In2012–2013,localpeoplereceivedabout7,000–8,000k/kg.Thispriceshouldbesuitablelowestpriceforlocalpeople.Iftheygetthisprice,theywillfocusononlyrubberplantationandtheplantationwillbesurecontributedtotheirlivelihoodimprovement."
Governmentinterview,Oudomxai
5.6 7,000"Accordingtolocalpeople,iftheycangetatleastLAK7,000/kg,rubbercouldprovide[sufficient]benefitandpeoplewouldnothavetoworkforotherjobs--theycouldsurvivejustbasedonrubbertapping."
Governmentinterview,LuangNamtha
5.6 7,000 "ThelowestpriceshouldnotlowerthanLAK7000/kg."Governmentinterview,Oudomxai
4-5.3
"Wediscussedwithlocalpeopleinmanyvillages,theytoldusthatrubberpriceslowerthan4Yuan/kgisnotprofitableforlocalpeople.Localpeoplewouldliketogetatleast5.3Yuan/kg."
Governmentinterview,LuangNamtha
5
"Wediscusswithmanypeoplewithinourvillage,thelowestpricesforrubberproductsinourvillageshouldnotlowerthan5Yuan/kg;ifpricesofrubberlowerthanthis,wecannotrelyonrubberplantationforimprovingourlivelihoods."
Villageinterview,LuangNamtha
53
4.4 5,000-6,000
"AlthoughrubberpricesarefallingatLAK5,000–6,000/kgisOkforlocalpeopletotaprubber,theygainfromrubberplantationmorethanotheragriculturalactivities."
Governmentinterview,Oudomxai
4 5,000"Idiscussedwithlocalpeople,theywouldprefertotaptheirrubberiftheycangetatleastLAK5,000/kgatleast.Otherwise,itisnotprofitablecomparedtotheirlaborspendforrubberplantation."
Governmentinterview,Ooudomxai
4
"Thereareabout50%oftotalrubbergrowersinNamthadistrict(whoserubbercanbetapped)donottaptheirrubbertreeduringthelowprices;theywillwaituntilthepricesgouptoatleastCNY4/kg.Thereisnoanyotheroptionsexceptforwaitingthepricesofrubbergoup."
Governmentinterview,LuangNamtha