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The University of Queensland

The Economic Potential for Smallholder Rubber Production in Northern Laos

A thesis submitted for the degree of Master of Philosophy at the University of Queensland

Vongpaphane MANIVONG
School of Natural and Rural Systems Management

March 2007

The Economic Potential for Smallholder Rubber Production in Northern Laos

Declaration of Originality
This thesis is the original work of the author except as acknowledged in the text and in the Statement of Contribution. It has not been submitted for a degree at this or any other universities.

Vongpaphane MANIVONG

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Statement of Contribution
The work on producing maps in Chapter 7 was assisted by Mr. Thavone INTHAVONG, the National Agriculture and Forestry Research Institute, Vientiane, Laos.

Vongpaphane MANIVONG

Associate Professor Rob CRAMB

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Acknowledgments
I would like to begin by thanking Associate Professor Rob Cramb for giving useful advice during the entire process of writing this thesis. I consider myself fortunate to have had Robs professional and personal support. I also wish to thank Dr. Malcolm Wegener for his involvement in the supervision of my thesis.

Many thanks to Dr. John Raintree for advice regarding to the selection of the course and university and to Dr. John Schiller for advice and personal support during my time in Australia.

My sincere thanks to the National Agriculture and Forestry Research Institute and the Ministry of Agriculture and Forestry of Laos for giving me the opportunity to study at the University of Queensland.

Thank you to the Swedish International Development Agency for providing the financial support during my study at the University of Queensland.

Many thanks to the Soil Survey and Land Classification Centre of the National Agriculture and Forestry Research Institute for providing the data on soil characteristics in Luangnamtha province.

I am grateful to the staff of the GIS Unit and Socio-Economic Unit of the National Agriculture and Forestry Research Institute for providing maps and useful data. Special thanks to Mr. Thavone Inthavong for producing maps.

Thanks to the staff of the Provincial Agriculture and Forestry Office and Provincial Agriculture and Forestry Extension Services of Luangnamtha Province for providing valuable information. Particular thanks go to Mr. Bounthon Sisavan, a research assistant, for his wonderful cooperation and support during the data collection in Luangnamtha Province.

Finally, I would like to give thanks to the authorities and farmers of Hadyao Village who shared their time for the interviews and group discussions. iv

The Economic Potential for Smallholder Rubber Production in Northern Laos

List of Publications
Manivong, V., and Cramb, R.A., 2006. A Case Study of Smallholder Rubber Production in Lungnamtha Province. Poster paper presented at the Workshop on Rubber Development in Laos: Exploring Improved Systems for Smallholder Production. Vientiane, Laos, 9-11 May 2006.

Manivong, V., and Cramb, R.A., 2007. Economics of Smallholder Rubber Production in Northern Laos. Paper presented at the 51st Annual Conference of Australian Agricultural and Resource Economics Society. Queenstown, New Zealand, 13-16 February 2007.

The Economic Potential for Smallholder Rubber Production in Northern Laos

Abstract
Rubber smallholdings are being established by shifting cultivators in Northern Laos, in response to demand from China and encouraged by government land-use policy. This can be seen as part of a general transition from subsistence to commercial agriculture in the uplands in particular, from shifting cultivation to tree crop production. This study examines the economics of smallholder rubber production in an established rubber-growing village in Luangnamtha Province and models the likely expansion of smallholder rubber in the Province. Data were obtained from key informant interviews, group interviews, direct observation, and a farm-household survey. Latex yields were estimated using the Bioeconomic Rubber Agroforestry Support System (BRASS). A discounted cash flow (DCF) model was developed to estimate the net present value for a representative rubber smallholding. This model was then combined with spatial data in a Geographical Information System (GIS) to predict the likely expansion of rubber based on resource quality and accessibility.

The study shows that, given current market conditions and credit support, investment in smallholder rubber production in the uplands of Northern Laos can be profitable. The results from the DCF analysis for the study village show that the expansion of rubber planting in that village is based on good economic returns. The spatial analysis indicates that the potential for rubber in the study village is not an isolated case; there are also other areas in Luangnamtha Province that appear to be economically suitable for rubber. Therefore, rubber can be considered as one of the potential alternatives for poor upland farmers, in line with the government policy of stabilising shifting cultivation and supporting new livelihood options for poverty reduction. However, there are risks associated with rubber production and emerging constraints of land and labour, hence government should move cautiously in promoting rubber where farmers are uncertain about reducing their dependence on shifting cultivation. The role for government, as in other countries where smallholder rubber has played a significant role in rural development, is to ensure the provision of good quality planting material, to assist financially during the long investment period when no income is generated, and to invest in roads and marketing infrastructure. In particular, maintaining secure access to the China market will be crucial for the sustainability of smallholder rubber

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The Economic Potential for Smallholder Rubber Production in Northern Laos in Northern Laos. If carefully managed, the expansion of smallholder rubber in Laos has the potential to contribute to sustainable rural livelihoods.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Table of Contents
Declaration of Originality Statement of Contribution Acknowledgments List of Publications Abstract Table of Contents List of Tables List of Figures Chapter 1: Introduction 1.1 Research problem 1.2 Research objectives, framework, and methods 1.3 Thesis overview Chapter 2: Literature Review 2.1 Introduction 2.2 Transition from shifting cultivation to cash production 2.2.1 General characteristics of shifting cultivation 2.2.2 Principles of transition from shifting cultivation to cash production 2.2.3 The place of tree crops in the transition 2.3 Technological aspects of smallholder rubber production 2.3.1 Introduction 2.3.2 Site selection, land preparation and planting 2.3.3 Fertilizer application, weed and pest control, and intercropping 2.3.4 Tapping, processing and marketing 2.4 Economic aspects of smallholder rubber production 2.5 Overview of world rubber industry 2.5.1 Introduction 2.5.2 Natural and synthetic rubber 2.5.3 Natural rubber 2.5.4 Future trends of natural rubber 16 18 20 21 21 22 25 29 10 11 14 14 14 ii iii iv v vi viii xii xv 1 1 4 5 8 8 8 8

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The Economic Potential for Smallholder Rubber Production in Northern Laos 2.6 Government schemes supporting smallholder rubber production 2.7 Conclusion Chapter 3: The Context of Rubber Development in Laos 3.1 Introduction 3.2 Physical and socio-economic environment 3.2.1 Location 3.2.2 Topography 3.2.3 Climate 3.2.4 Natural resources 3.2.5 Population 3.2.6 Transportation infrastructure 3.2.7 Administration 3.2.8 Tenure system and land/forest allocation 3.3 Farming systems in Laos 3.3.1 Overview 3.3.2 Shifting cultivation 3.3.3 Limitations of upland farming development 3.3.4 Government policies on improved upland farming in Laos 3.4 The development of rubber in Laos 3.4.1 Introduction of rubber into Lao upland farming systems 3.4.2 Government support for the development of rubber 3.5 Conclusion Chapter 4: The Study Area 4.1 Introduction 4.2 Luangnamtha Province 4.3 Hadyao Village 4.4 Rubber production in Hadyao Village 4.5 Conclusion Chapter 5: Resources, Rice and Rubber in the Study Village 5.1 Introduction 5.2 Data collection and analysis 5.3 Household resources 5.3.1 Human resources 5.3.2 Land 31 35 38 38 38 38 39 41 44 46 47 47 48 50 50 52 54 55 56 56 61 62 64 64 64 68 73 77 79 79 79 81 81 83 ix

The Economic Potential for Smallholder Rubber Production in Northern Laos 5.3.3 Livestock 5.4 Rice production 5.5 Rubber production 5.5.1 Rubber planting 5.5.2 Rubber production techniques 5.5.3 Rubber yield, sales, and income 5.6 Conclusion Chapter 6: Bioeconomic Analysis of Smallholder Rubber Production in the Study Village 6.1 Introduction 6.2 Modelling yields using BRASS 6.2.1 Introduction 6.2.2 Climate variables 6.2.3 Topography and soil variables 6.2.4 Rubber management variables 6.2.5 Intercrop management variables 6.2.6 Model indexes 6.2.7 Outputs 6.3 Discounted cash flow analysis of smallholder rubber production in the study village 6.3.1 Introduction 6.3.2 Principles of DCF analysis 6.3.3 Identifying costs and benefits 6.3.4 Quantifying costs and benefits 6.3.5 Discount rates 6.3.6 DCF the base analysis 6.3.7 Risk and uncertainty 6.4 Other investment criteria 6.5 Conclusion Chapter 7: The Scope for Expanded Smallholder Rubber Production in Luangnamtha Province 7.1 Introduction 7.2 Defining the scenarios 7.2.1 Conceptual basis of the scenarios 155 155 155 155 x 131 131 131 133 137 138 140 146 150 154 116 116 116 116 117 120 122 125 127 130 87 89 96 96 100 109 114

The Economic Potential for Smallholder Rubber Production in Northern Laos 7.2.2 Levels of resource quality 7.2.3 Levels of accessibility 7.2.4 Scenarios in terms of resource quality and accessibility 7.3 Economic suitability of each scenario 7.3.1 Introduction 7.3.2 Yield profiles for each level of resource quality 7.3.3 Prices for each level of accessibility 7.3.4 DCF analysis for each scenario 7.4 Conclusion Chapter 8: Conclusion 8.1 Background 8.2 Theoretical framework and methodology 8.3 Key findings 8.4 Policy implications References Appendices Appendix 1 Appendix 2 Appendix 3 Appendix 4 Appendix 5 Appendix 6 156 162 166 166 166 167 168 173 181 182 182 183 185 190 194 207 207 211 218 222 225 228

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List of Tables
Table 2.1: Natural rubber production by region Table 2.2: Natural rubber consumption by region Table 2.3: Synthetic rubber production by region Table 2.4: Synthetic rubber consumption by region Table 2.5: Rubber planted areas by countries (000 ha) Table 3.1: Total area of land use and vegetation types distributing on slope classes (1,000 ha) Table 3.2: Three main farming systems in Laos Table 3.3: Contrasting conditions in the lowlands and uplands Table 3.4: Strategy for the uplands and lowlands Table 3.5: Officially estimated rubber area in Laos, 2005 Table 3.6: Investors in rubber in Laos Table 3.7: Potential rubber areas in Laos Table 4.1: Farming systems in Luangnamtha Province Table 4.2: Number of households in Hadyao Village Table 4.3: Types of land use in Hadyao Village Table 4.4: Area under rubber in Hadyao Village Table 4.5: Loans for rubber production in Hadyao Village Table 4.6: Production and sale of rubber in Hadyao Village Table 4.7: Sale of rubber in 2004 in Hadyao Village by month Table 5.1: Distribution of household size in Hadyao 46 51 52 55 58 60 61 68 71 72 75 76 76 76 81 23 24 24 24 25

Table 5.2: Demographic characteristics of households in Hadyao by wealth status 83 Table 5.3: Distribution of land holdings in Hadyao Table 5.4: Tenure status and location of land cultivated by Hadyao households Table 5.5: Household land resources in Hadyao by wealth status Table 5.6: Ownership of livestock in Hadyao Table 5.7: Data on livestock raising in Hadyao by wealth status Table 5.8: Number of rice growing households by location and type of rice cultivation Table 5.9: Number of rice growing households by rice cropping patterns and location of rice cultivation 91 90 85 86 87 88 89

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The Economic Potential for Smallholder Rubber Production in Northern Laos Table 5.10: Labour requirement for upland rice production Table 5.11: Rice self-sufficiency among Hadyao households Table 5.12: Rice production statistics by wealth status Table 5.13: Variables included in multiple regression analysis of rice area in 2004 (n=82) Table 5.14: Results of multiple regression analysis of factors affecting the area of rice in 2004 Table 5.15: Distribution of rubber plots per household in Hadyao Table 5.16: Location of household rubber plots by planting phase Table 5.17: Land type of household rubber plots by planting phase Table 5.18: Source of households funds for rubber planting by planting phase Table 5.19: Variables included in multiple regression analysis of rubber planting (n=95) Table 5.20: Results of multiple regression analysis of factors affecting the total number of rubber trees planted Table 5.21: Incidence of replacement planting by planting phase Table 5.22: Average yields (kg/ha/year) over three years of tapping in Hadyao Table 5.23: Yields (kg/ha/year) of smallholder rubber in Laos, China, and Thailand Table 5.24: Rubber production data by wealth status of household, 2004 Table 5.25: Variables included in multiple regression analysis of rubber production (n=67) Table 5.26: Results of multiple regression analysis of factors affecting the production of tub-lump rubber in 2004 Table 6.1: Climate variables in the biophysical component of BRASS Table 6.2: Rainfall and temperature data in Luangnamtha Province Table 6.3: Estimated PET and solar radiation in Luangnamtha Province Table 6.4: Assumed rainfall data in Luangnamtha Province Table 6.5: Topography and soil variables in the biophysical component of BRASS Table 6.6: Rubber management variables in the biophysical component of BRASS Table 6.7: Intercrop management variables in the biophysical component of BRASS 127 xiii 125 120 113 118 118 119 120 113 110 111 99 103 109 99 95 96 96 97 97 95 91 93 94

The Economic Potential for Smallholder Rubber Production in Northern Laos Table 6.8: Comparisons of average latex yields from the survey and BRASS (kg/ha) Table 6.9: Materials used for one hectare of rubber production in Hadyao Table 6.10: Annual labour requirements for one hectare of rubber production in Hadyao Table 6.11: Average yields of intercropped rice from BRASS and the survey in Hadyao Table 6.12: Cash flow analysis of one hectare of rubber plantation over 35 years of production Table 6.13: Results of DCF analysis for smallholder rubber in Hadyao (2005 prices and wage rate of 17,000 Kip/person-day) Table 6.14: Results of DCF analysis for smallholder rubber in Hadyao (2005 prices and wage rate of 25,000 Kip/person-day) Table 6.15: Cash flow budget from Year 1-11 (current prices) Table 6.16: Cash flow budget from Year 1-11 (constant 2005 prices) Table 7.1: The number of mapping units in each level of resource quality by topography and soil properties Table 7.2: Criteria for defining levels of accessibility Table 7.3: The levels of accessibility and resource quality in each scenario Table 7.4: Yields of intercropped rice and rubber wood for three levels of resource quality Table 7.5: The cost of transporting tub-lump rubber from the moderate accessibility zone (0.5-3.5 km) to the roadside Table 7.6: The cost of transporting tub-lump rubber from the poor accessibility zone (>3.5 km) to the roadside Table 7.7: Percentage change in prices for each level of accessibility Table 7.8: Prices of inputs and outputs used in DCF analysis for each scenario Table 7.9: Results of DCF analysis for each scenario at 8% discount rate Table 7.10: Ranking of economic suitability for rubber Table 7.11: Areas within each suitability rank in Luangnamtha Province 171 176 176 178 178 179 170 168 162 163 166 148 152 153 148 141 136 136 128 134

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The Economic Potential for Smallholder Rubber Production in Northern Laos

List of Figures
Figure 1.1: The mountainous upland region of Northern Laos Figure 2.1: World natural and synthetic rubber production Figure 2.2: World natural and synthetic rubber consumption Figure 2.3: Natural rubber production by major producing countries Figure 2.4: Natural rubber consumption by major consuming countries Figure 2.5: Price of natural rubber (TSR20) on the Singapore Commodity Exchange in US cents per kg Figure 3.1: Location map of Laos Figure 3.2: Elevation map of Laos Figure 3.3: Temperature map of Laos Figure 3.4: Rainfall map of Laos Figure 3.5: Monthly mean rainfall distribution in Luangprabang Province, Vientiane Municipality, Champasack Province from 1975-2005 Figure 3.6: Forest and land cover map of Laos Figure 3.7: Transportation routes map of Laos Figure 3.8: Potential rubber areas in Laos Figure 4.1: Location map of Luangnamtha Province Figure 4.2: Monthly average rainfall distribution and temperature in Luangnamtha Province from 1994-2004 Figure 4.3: Forest and land use map of Luangnamtha Province Figure 4.4: Location map of Hadyao Village in Namtha District of Luangnamtha Province Figure 4.5: Hadyao Village in Namtha District of Luangnamtha Province Figure 4.6: Resource map of Hadyao Village Figure 4.7: A rubber smallholding in Hadyao Village Figure 4.8: The sale of tub-lump rubber on market day in Hadyao Village Figure 5.1: The distribution of full-time equivalent workers per household in Hadyao Figure 5.2: The distribution of cultivated land per household in Hadyao Figure 5.3: The distribution of rice area per household in Hadyao Figure 5.4: The distribution of rubber trees planted per household in Hadyao 83 85 92 98 69 70 72 74 77 66 67 44 45 48 62 65 29 39 40 42 43 2 22 23 26 28

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The Economic Potential for Smallholder Rubber Production in Northern Laos Figure 5.5: Land prepared for planting with rubber in Hadyao Figure 5.6: Young rubber trees in Hadyao Figure 5.7: The symptoms of yellow-leaf disease (left) and root disease (right) in Hadyao Figure 5.8: Rice (left) and corn (right) intercropped with young rubber trees in Hadyao Figure 5.9: Pineapple intercropped with mature rubber trees in Hadyao Figure 5.10: The practice of tapping (left) and collecting latex (right) in Hadyao Figure 5.11: The use of plastic bag (left) and bucket (right) for processing latex into tub-lump rubber in Hadyao Figure 5.12: Tub-lump rubber is normally kept at the farm in Hadyao Figure 6.1: Variables in the biophysical and economic components of BRASS Figure 6.2: Predicted latex yield in Hadyao over 35 years using BRASS Figure 6.3: Undiscounted annual net returns using a wage rate of 17,000 Kip/person-day Figure 6.4: Discounted annual net returns using 8% discount rate and wage rate of 17,000 Kip/person-day Figure 6.5: Cumulative NPV using 8% discount rate and wage rate of 17,000 Kip/person-day Figure 7.1: Defining levels of resource quality based on the yields estimated from BRASS Figure 7.2: Defining topography and soil variables based on the soil properties in each soil sampling site 159 157 146 145 144 108 108 117 130 106 106 107 105 101 102

Figure 7.3: The distribution of average annual latex yields for each mapping unit 160 Figure 7.4: Resource quality map for smallholder rubber in Luangnamtha Province Figure 7.5: Accessibility map in Luangnamtha Province Figure 7.6: Trucks waiting to collect tub-lump rubber at the roadside Figure 7.7: Transporting rubber by cart Figure 7.8: Transporting agricultural and forest produce using back packs Figure 7.9: Latex yields for three levels of resource quality Figure 7.10: The estimation of cost of transporting the tub-lump rubber to the roadside by distance 172 161 163 164 165 165 167

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The Economic Potential for Smallholder Rubber Production in Northern Laos Figure 7.11: The percentage reduction in farm-gate prices of tub-lump rubber by distance Figure 7.12: Distribution of distance to the main road of villages in the moderate accessibility zone Figure 7.13: Distribution of distance to the main road of villages in the poor accessibility zone Figure 7.14: Economic suitability ranking map for smallholder rubber in Luangnamtha Province Figure 7.15: Simplified economic suitability map for smallholder rubber in Luangnamtha Province 180 179 175 174 172

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Chapter 1 Introduction
1.1 Research problem Lao PDR (hereafter Laos) is a predominantly rural country with approximately 83% of the population living in rural areas, of which 66% relies on subsistence agriculture (Roder, 2001). The national economy is overwhelmingly dependent on agriculture, which accounts for around 47% of GDP and absorbs approximately 80% of the labour force (NSC, 2005a). Based on the total area of 236,800 km2 and the population of 5.6 million, Laos is the least densely populated country in Asia at only 24 persons per km2 (NSC, 2005b), yet with the present annual population growth rate of approximately 2.5%, the agricultural population density will double over the next 25 years (Raintree, 2002). Laos is one of the poorest nations, with a GDP per capita in 2002 of US$330 and a ranking of 135 out of 175 countries in UNDPs Human Development Index (ICEM, 2003; UNDP, 2003). The greatest levels of poverty are in the mountainous uplands of the Northern Region (Fig. 1.1).

There are various factors behind the poverty in the uplands of Northern Laos, of which pressure on resources and remoteness from markets are two of the most significant. The current low ratio of population to land might look like a conducive circumstance for cultivation; however, much of the land in the north is judged as being unsuited to agricultural development. The availability of suitable agricultural land is very unevenly distributed by regions. Most of the land along the flat plains of the Mekong river is found in the Central and Southern regions, while in the mountainous region in the north there is noticeably less suitable arable land for cultivation, with only 6% of the area classified as under 20% slope and 50% categorized as having a slope of 30% or more (Raintree, 2002). This mountainous Northern territory is mainly under shifting cultivation (ICEM, 2003).

Shifting cultivation in Laos involves more than 150,000 households (or around 25% of the rural inhabitants) and may account for up to 80% of the land allocated for agriculture if the entire area of fallow fields is taken into account. Shifting cultivation

The Economic Potential for Smallholder Rubber Production in Northern Laos in the past was recognized as the best land use alternative for the rural inhabitants in the mountainous regions of Laos because of low population densities, low incomes, little opportunity for trade, and limited access to inputs (Roder, 2001). However, this traditional agricultural production has become increasingly unsustainable, reflecting the combined effects of population growth, growing market opportunities, natural resource depreciation, and international awareness of environmental impacts, forcing farmers to shorten their fallow periods. As a result, widespread problems of weed invasion, soil erosion, and declining yields are occurring (De Rouw, 2005).

Figure 1.1: The mountainous upland region of Northern Laos (Source: Authors photo, August, 2005)

The Government of Laos is concerned about this problem and has put reduction of shifting cultivation as one of the priority national programs. As stated in the Governments Strategic Vision for the Agricultural Sector (MAF, 1999), the government aims to transform the existing harmful system of shifting cultivation to more ecologically stable cultivation systems with proper land management by villages and individuals. The government is proceeding with land allocation programs, the

The Economic Potential for Smallholder Rubber Production in Northern Laos promotion of cash crops and livestock production, and the promotion of tree-planting programs with a vision to accomplish effectively the aim of stabilising shifting cultivation by the year 2010. While this policy is controversial and its impacts on rural livelihoods need to be closely monitored, there is no doubt that upland farmers are involved in a significant transformation of their traditional subsistence-oriented farming systems.

To achieve the aim of stabilising shifting cultivation and eradicating poverty in the mountainous region of Northern Laos, it is recognized that more sustainable and income-generating agricultural practices have to be identified and adopted. One of the possible alternative approaches to support this transformation is the introduction of perennial cash crops such as rubber to increase farmers income. Rubber was first introduced into Laos in 1930, with the first rubber plantation established in Southern Laos by French planters during the colonial era. However, smallholder rubber in Northern Laos is a more recent phenomenon. Between 1994 and 1996, the Hmong village of Hadyao in Luangnamtha Province established rubber over 342 hectares in the form of smallholdings, and these smallholders started tapping their rubber trees in 2002 (Manivong et al., 2003). Since then, the rubber area in Laos has increased moderately, but at a more rapid pace since 2003 as many individuals, private sector entities (both domestic and foreign), and state sector entities have responded to high rubber prices and the growth in demand from China. Both local and foreign investors, especially from China, Vietnam, and Thailand, have expressed interest in investing in rubber plantations throughout Laos by seeking land for concessions and other arrangements (Alton et al., 2005; FRC, 2005).

In response to the growth in market demand, especially from neighbouring China, considerable potential is believed to exist for the expansion of rubber. However, only a relatively small area has been planted with rubber and an even smaller area is in production, hence there is little information currently available on the potential economic returns to smallholder producers, and on the technical and market constraints they face, that can be used as a basis for the promotion of the crop by the government. Is smallholder rubber a viable option? What factors contribute to its viability? What are the risks farmers face? Over what areas is smallholder rubber likely to be economically suitable? What are the possible impacts on village land-use 3

The Economic Potential for Smallholder Rubber Production in Northern Laos patterns, household incomes, and the distribution of wealth? What role should the Government play in the development of smallholder rubber?

1.2 Research objectives, framework, and methods The overall aim of this study was to examine the economic potential of smallholder rubber production in Northern Laos. The specific objectives were to appraise the economics of smallholder rubber production in an established rubber-growing village, and to model the economic potential of smallholder rubber production in a variety of spatial settings.

The conceptual framework for the study included the theory of transition from subsistence to commercial production; the concept of discounted cash flow (DCF); and the concept of land use-capacity. The theory of transition from subsistence to commercial production was reviewed, with particular reference to the adoption of plantation tree crops, as a basis for understanding the stages through which upland farmers in Northern Laos are proceeding and the opportunities and constraints at each stage. This theory suggests that, in a commercializing agriculture, economic returns to investment become progressively more important to smallholder farmers. Hence DCF analysis was used to analyse the economic returns from the investment of household resources in smallholder rubber production. The DCF framework expresses the worthwhileness of a long-term investment such as a rubber plantation in terms of its net present value (NPV), while allowing for risk and uncertainty through sensitivity analysis. The concept of land use-capacity links the economic suitability of land for a given use to two major components resource quality and accessibility. Hence the DCF model could be extended to measure the economic suitability for smallholder rubber of different spatial scenarios in the study area.

Within this conceptual framework, the methods used included a review of existing information from previous studies, the collection and analysis of data sets from the study village of Hadyao in Namtha District of Luangnamtha Province, and the extrapolation of that analysis to other settings within the Province. Hadyao Village was selected for in-depth study as Hadyao was the first village in Laos to plant and tap rubber. More importantly rubber in this village was planted by smallholder shifting cultivators who are now well advanced in the transition from subsistence to 4

The Economic Potential for Smallholder Rubber Production in Northern Laos commercial agriculture and therefore facing a number of issues of relevance to the study.

Both qualitative and quantitative, secondary and primary data were collected for this study during fieldwork from June to December 2005. Secondary data were reviewed and collected from different sources. Reports related to rubber, both published and unpublished, were collected from government agencies, non-government

organizations (NGOs), and projects at the national, provincial, district, and village levels. Information about Hadyao Village was obtained from the village authorities during a reconnaissance visit in July 2005, including the general information about the village and specific information on rubber planting. Primary data were collected through key informant interviews, group interviews, direct observation, and a questionnaire survey of 95 farm-households in Hadyao during an extended period of fieldwork in August 2005.

The software programs used for analysing the quantitative data were Microsoft Excel, Statistical Package for Social Scientists (SPSS), the Bioeconomic Rubber Agroforestry Support System (BRASS), and ArcView 3.2a. Microsoft Excel and SPSS were used to enter and analyse the data from the household survey of smallholder rubber farmers in the study village. BRASS was used to estimate the yields throughout the life of a typical rubber plantation. These yield projections were necessary for the DCF analysis of smallholder rubber production in the study village and in other geographical settings as actual yields had only been recorded for three years in one village. ArcView 3.2a was used to develop maps of resource quality, accessibility, and economic suitability for rubber in the study area. These techniques are described in detail in the relevant chapters of the thesis.

1.3 Thesis overview The thesis is organised into eight chapters. The next chapter reviews the literature regarding the stages in the transition from shifting cultivation to cash production, with particular reference to the role of plantation tree crops in this transition; the technical and economic aspects of rubber production; the recent trends in the world rubber industry, indicating the reasons for the growth in interest in rubber production in Laos

The Economic Potential for Smallholder Rubber Production in Northern Laos and the longer-term market prospects; and government support schemes and policies for rubber production in the main rubber producing countries.

Chapter 3 presents the context of rubber development in Laos. It first highlights the physical and socio-economic characteristics of Laos. It then discusses the farming systems practised in Laos, with particular reference to shifting cultivation and the factors that constrain agricultural development in the uplands. This is followed by an account of the introduction of rubber into upland farming systems.

Chapter 4 describes the study area of Luangnamtha Province and Hadyao Village to give an understanding of the context in which rubber planting has occurred. A general account is given of rubber planting in Hadyao.

Chapter 5 investigates the issues of resources, rice and rubber in the study village of Hadyao. An account is given of the farming resources, activities, and outputs of the farm households in the study village, with the main focus on smallholder rubber production. The use of household resources including human resources, land, and livestock to undertake the two main farming activities rice and rubber is analysed, with attention given to a comparison between households of different wealth status.

Chapter 6 presents the bioeconomic analysis of smallholder rubber production in the study village of Hadyao. The aim was to build a realistic discounted cash flow (DCF) model of smallholder rubber production in order to assess the profitability of a hectare of smallholder rubber in the conditions faced by a typical farmer in Hadyao. This required modelling the yield of latex over the life of the rubber enterprise, as well as other outputs, using the Bioeconomic Rubber Agroforestry Support System (BRASS), which was parameterised and calibrated as far as possible to Hadyao conditions. These simulated yields were combined with data on costs and benefits obtained from group discussions with experienced rubber farmers in Hadyao and household survey data, as well as from other relevant sources. Attention was given to the appropriate valuation of household labour and the capital invested in the enterprise, as well as examining a range of investment criteria.

The Economic Potential for Smallholder Rubber Production in Northern Laos Chapter 7 assesses the scope for expanded smallholder rubber production in the study province of Luangnamtha. The approach was first to define representative scenarios in spatial terms, drawing on the concepts of land use-capacity, resource quality, and accessibility, then to use modified versions of the DCF model from Chapter 6 to estimate the economic suitability of those scenarios for smallholder rubber planting. These scenarios were then mapped and the potential spatial extent of smallholder rubber estimated.

The final chapter summarizes the theoretical framework and methodology used for this study, the study findings, and the policy implications.

The Economic Potential for Smallholder Rubber Production in Northern Laos

Chapter 2 Literature Review


2.1 Introduction The growth of smallholder rubber in Northern Laos needs to be seen as part of a general transition from subsistence agriculture based on shifting cultivation to commercial production for the market, which has occurred in many upland regions of Southeast Asia in the past century. This chapter firstly reviews the stages in this transition from shifting cultivation to cash production. Next, the technical and economic aspects of rubber production are examined. Then recent trends in the world rubber industry are reviewed to understand the reasons for the growth in interest in rubber production in Laos and the longer-term market prospects. In other rubberproducing countries various supporting schemes and policies have been put in place and these are reviewed in the final section.

2.2 Transition from shifting cultivation to cash production 2.2.1 General characteristics of shifting cultivation Shifting cultivation comprises various land-use practices that differ with location, altitude, environment, and resources (Vergara, 2001). However, the most common characteristics of shifting cultivation are the use of fire for land preparation and the rotation of cropping from one field to another (Christanty et al., 1986). In other words, fields are cleared from forests, the dried biomass burned, crops planted for one or a few years, and then the field rested while a new field is cleared in another part of the forest (Rambo, 1989). Shifting cultivation is judged to be one of the oldest land-use systems (Roder, 2001). Although shifting cultivation has disappeared in temperate regions for a long time, it is still common and remains a dominant land-use system in many parts of the tropical and subtropical world. It is thought to be practised by at least 250 million inhabitants and covers up to 30% of the worlds exploited land (Warner, 1991).

The Economic Potential for Smallholder Rubber Production in Northern Laos It is widely accepted that shifting cultivation is a sustainable form of agriculture as long as the population density is low and therefore the fallow period is long enough for the soil to re-establish its fertility (Roder, 2001). However, shifting cultivation has been under pressure in recent decades due to increasing population and decreasing forest areas and, as a consequence, it is no longer considered a sustainable technology (Dufour, 1994). The dramatic growth in population has caused an enormous need for more food production, hence the existing cleared forest is overcultivated, the fertility of the soil decreases, and weeds and pests invade the land. This results in low productivity, hence new forest areas have to be exploited.

According to FAO (1984), shifting cultivation can be categorised into pioneer (or abandonment) and rotational (or establishment) shifting cultivation. Pioneering shifting cultivation involves non-permanent villages that move into areas of primary forest and cultivate fields intensively for a longer period of perhaps 10-15 years, lacking the knowledge of sustainable land-use practices. After many years of exploiting the forest and land resources, the fields and village sites are abandoned and a new village is established in another primary forest area. In contrast, rotational shifting cultivation is the practice of cultivating and fallowing fields in a rotation. Cultivation is usually practised in an area of secondary forest for a shorter period of 12 years, then moved to other locations in succession, eventually returning to the first plot. The practice of this type of shifting cultivation involves rotation of plots, but the village site is not necessarily moved.

Shifting cultivation can also be classified into integral and partial cultivation systems (Conklin, 1957, cited in Christanty et al., 1986). Integral shifting cultivation is the essential component of a subsistence farming system. Farmers employ this system as their major occupation and devote all of their resources to it. Partial or supplementary shifting cultivation is only a minor part of the farming system. The main form of farmers production is cash crops or other forms of monetary activity, hence less attention is given to shifting cultivation.

Peters and Neuenschwander (1988) further distinguished shifting cultivation into short fallow periods which are generally one to three years and long fallow periods which sometimes reach up to twenty years or more. This can be related to Boserups 9

The Economic Potential for Smallholder Rubber Production in Northern Laos (1965:15-16) theory of the intensification of subsistence farming systems from more extensive to more intensive cultivation, changing from forest-fallow cultivation to bush-fallow cultivation, to short-fallow cultivation, to annual cropping, and then to multi-cropping. She argued that this evolution occurred due to the growth of population requiring more food to be produced from the same area of land, requiring a greater input per hectare and per worker. The intensification of subsistence farming to multi-cropping proposed by Boserup had occurred in many European countries, but this may not be possible in an environment like Northern Laos. With the growth of population, the expansion of market opportunities, and the improvement of infrastructure, the possible alternative pathway of intensification for Northern Laos is likely to be through incorporating tree crops like rubber, as happened in other Southeast Asian nations, as it is considered to fit well within the shifting cultivation systems practised in Northern Laos.

2.2.2 Principles of transition from shifting cultivation to cash production Shifting cultivators in the uplands of Southeast Asia have progressively taken up cash crops over the past century. Myint (1973:35-36) categorized two stages of the transition from subsistence production to production for the market. The first stage occurs when farmers use the larger proportion of their resources to produce for their own consumption, but use their spare land and labour to produce for markets. The second stage occurs when farmers allocate most of their resources to supplying the markets and rely on purchasing commodities and services, with subsistence farming a spare-time activity. In other words, farmers change from being part-time to fulltime producers for the market. The shift is accelerated by the improvement of infrastructure especially transportations and communications and the availability of markets.

The transition from a subsistence economic system to total production for the market was classified by Fisk (1975:53) into four stages pure subsistence in isolation, subsistence with supplementary cash production, cash orientation with

supplementary subsistence, and complete specialization for the market. The first stage occurs when farmers consumption is entirely reliant on their own production and the final stage occurs when farmers produce entirely for the market and rely on

10

The Economic Potential for Smallholder Rubber Production in Northern Laos the market for all the commodities and services they need. The two stages in between involve a combination of subsistence and commercial production and correspond to Myints two stages. Farmers may produce mainly for their household consumption, but undertake supplementary production to get access to goods and services not available from their own resources. On the other hand, they may mainly produce to supply the markets to earn cash income, but still produce a substantial part of their basic food and other requirements. In reality there is rarely such a situation as pure subsistence or pure monetary production. Farmers normally practise stage two or stage three. For instance, although farmers may only focus on subsistence production, they tend to cultivate cash crops additionally to get more income if they have spare land and labour. On the other hand, despite focusing on cash production, they still produce subsistence output because this will help reduce the risks associated with market demand.

2.2.3 The place of tree crops in the transition For many Southeast Asian upland farmers the transition from subsistence shifting cultivation to cash crop production has involved the planting of tree crops or other perennials. According to Barlow and Jayasurija (1986:635) the development of smallholder tree crop cultivation can be classified into three stages. The first stage is emergence from subsistence when subsistence production is supplemented by a plantation crop, followed by the stage of agricultural transformation when smallholder farming is rapidly commercialized, and finally the stage of extended structural change characterised by the increasing significance of the industry and services sectors. It is noted that the transition from subsistence cultivation varies by countries depending on their resource endowments, socioeconomic elements, and government policies. The appearance of commercial cultivation of tree crops in subsistence communities may take place by the development of estates, as in the case of coffee, rubber, and tea in Southeast Asia and Africa, or by the improvement of infrastructure as in the case of all tree crops in Malaysia, Sri Lanka, and Papua New Guinea. It may be also due to market information from merchants as in the case of oil palm in West Africa. Barlow and Jayasurija (1986) showed that the development of smallholder rubber in Malaysia had experienced all the three stages.

11

The Economic Potential for Smallholder Rubber Production in Northern Laos In a more recent contribution, Barlow (1997) outlined five stages of economic growth in relation to plantation tree crops by taking account of market conditions, technologies, institutional arrangements, and government interventions. The first stage is backward economy when subsistence family-based agriculture is the main sector while services and industry are minor ones. There is little trade and fragmented rural markets. Land is abundant and underutilized, while labour occupied in shifting cultivation has a low marginal product. Capital is very scarce. Technology is simple with traditional tools and planting materials. These are typical original situations in the humid tropics, which form an essential environment for plantation crops. There was minimum government intervention.

The second stage is early agricultural transformation when agriculture remains the main sector with estates and smallholdings both involved in plantation crop cultivation, but now has a commercializing orientation while services and industry sectors are expanding. International trade and rural market development have commenced. Land and labour become scarce and their prices are increasing. Capital becomes mores available. Simple labour-intensive tree crop technologies are rapidly adopted, first by estates and then by smallholdings. Central government starts levying taxes and providing some services. The third stage is late agricultural transformation when agriculture remains one of the larger sectors, but services are growing and manufacturing based on import-substitution overtakes agriculture. Rural market development is progressing, especially with government interventions, but many imperfections persist. Land and labour prices are rising, while capital, management, and transport prices are declining. New land- and labour-saving but more capital- and management-intensive high-yielding tree crop technologies are generated and first adopted by estates and much later by smallholdings. Central government has a steadily broadened supporting role, providing extensive rural infrastructure and services, and promoting import-substituting manufacturing.

The fourth stage is early advanced economy when manufacturing becomes much larger than agriculture and moves to an export orientation and includes downstream plantation crop processing into final goods. Rural markets are much better integrated and competitive, and pockets of imperfection persist. The trends of resource prices in stage 3 continue, but the rise of land and labour prices accelerates and the difference 12

The Economic Potential for Smallholder Rubber Production in Northern Laos between rural and urban wages widens. As a consequence, labour migrates to towns. The generation and adoption of tree crop technologies as in stage 3 continues with concomitant spread to producers in different circumstances. Government support as in stage 3 continues with provision of rural infrastructure and services, while previous trade regulations are slowly removed.

The final stage is late advanced economy when manufacturing prevails and becomes far larger than agriculture and includes major plantation crop processing into final goods. Natural rubber from other countries at lower levels is also imported to supply this goods industry. Rural markets are as in stage 4 but more integrated and competitive. The trends in resource prices as in stage 4 continue. Traditional plantation crop production becomes unprofitable, but existing trees are still being exploited in a sunset situation. The generation and adoption of tree crop technology mainly focuses on quality-improving techniques for the manufactured goods subsector. Government support as in stage 4 is continuing and the support for the remaining plantation crop is mainly as welfare for older generations.

Barlow (1997) reported that only Malaysia and Thailand had reached all these five stages, while other rubber producing nations had only reached up to stage 3. In the case of Laos it can be said that the transition from subsistence shifting cultivation to cash crop production in the Northern uplands, as in the case of rubber, is still in Stage 2 of early agricultural transformation. As discussed in later chapters, rubber has been recently introduced to Lao upland farming systems with simple labour-intensive technology directly imported from China, though this technology is itself a spillover from the more advanced rubber-producing countries, particularly Malaysia. Subsistence Lao upland farmers are becoming commercialized rubber farmers. The transition is occurring as a result of both greater integration with the regional economies of Southeast Asia, particularly China, and the encouragement of government policies. Most of the change has been driven by robust global demand for rubber, especially from China. The government policy of stabilising shifting cultivation and generating income for upland farmers is also driving the change (Thongmanivong and Fujita, 2006). In time, the rubber industry in Laos is likely to move to stage 3 with the continuing development of rural markets, the generation and adoption of new land- and labour-saving but more capital- and management-intensive 13

The Economic Potential for Smallholder Rubber Production in Northern Laos technologies, and support from the government through the improvement of infrastructure.

2.3 Technological aspects of smallholder rubber production 2.3.1 Introduction There are actually many species of rubber tree, but Hevea brasiliensis, a native of the tropical rainforests of the Amazon river basin of South America that grows to a height of around 20 m and a girth of 2 to 3 m, has provided the major source of natural rubber since early in the 20th century (Williams, 1975; Kochhar 1981; RBI, 2005). This section reviews the technological aspects of smallholder rubber production, including site selection, land preparation, planting, fertilizer application, diseases, pests, weeds, intercropping, tapping, processing, and marketing. It should be noted that the practices and technologies mentioned in this section may vary between estates and smallholders as smallholders do not simply adopt the systems of rubber management used by the estates. They often adapted the technologies to suit their circumstances (Dove, 2002).

2.3.2 Site selection, land preparation and planting The most suitable area for rubber planting is in the humid tropical zones; it is not likely to be successful in drier or colder areas (RBI, 2005). The area selected for planting rubber is based on soil quality, rainfall patterns, temperature range, and altitude (Williams, 1975). The most favourable agro-climatic conditions for rubber cultivation include a well-drained, fairly deep loamy soil with a pH value of 4.5-6.0; a high atmospheric humidity; a temperature range of 24-35 C; and a consistently even distribution of rainfall of 1,750-2,500 mm (Kochhar, 1981). Rubber trees are very sensitive to strong winds as their branches are easily broken. Although rubber could perform well in areas subject to episodic desiccating winds, such rubber trees could not provide economic production. The topography is also very important for rubber planting. Agronomists recommend that the land should be flat or gently sloping. Sharply sloping lands or highly dissected lands should be avoided for the cultivation of rubber because they make the operations of production and the transportation of products more difficult and expensive. Rubber thrives best up to an altitude of 300 m

14

The Economic Potential for Smallholder Rubber Production in Northern Laos above sea level (Opeke, 1982). Although rubber trees can do well up to an elevation of 1,000 m, their growth is reduced (Kochhar, 1981).

The common practice of land preparation for planting rubber is clear-felling since the rubber tree does not need shade. After clear-felling, all trash is taken away or burned (Opeke, 1982). In case of burning, a light burn may be carried out to demolish light brushwood and branches of trees but too much burn may cause loss of humus and expose the land to erosion (RBI, 2005). The remaining stumps and roots are removed as this helps to reduce the risk of the outbreak of root diseases later on for the life of the trees (Opeke, 1982).

In the past rubber seeds were planted directly in the field, but it has become common practice to raise rubber seedlings in a nursery either for transplanting into the field as seedlings or for use as root stocks (Opeke, 1982). Rubber seedlings established in a nursery can take up to twelve months to reach maturity compared with buddings made directly in the field (Williams, 1975). There are three types of planting materials unselected seedlings, budded stumps, and clonal seedlings (Polhamus, 1962). The most commonly used planting materials by smallholders in Indonesia are unselected seedlings or wildlings even though they know that they will get higher returns by using clonal varieties. Seedlings are generally transplanted using seeds scattered from nearby trees. Even though these seedlings are normally of poor quality, which is reflected in low yields, their use is common because there is no preliminary cost other than the time required to collect them and they need less inputs and less capital investments (planting materials and maintenance) while the clonal seedlings require high investment costs (Menz et al., 1999).

Planting on flat or slightly rolling lands can be implemented in a square or rectangular pattern. For rectangular planting, lines should be taken east-west to get the utmost benefit of sunlight. In rolling lands, cutting terraces is recommended to help soil conservation. Contour lining is made by marking out the planting points in level lines across the slopes. Continuous terraces along contour planting rows are initially high cost but are economic in the long term as they form the best protection against erosion. For economy, planting in hilly lands may be undertaken on square platforms

15

The Economic Potential for Smallholder Rubber Production in Northern Laos about 120 cm square along contours. These are joined later to make completed terraces or with narrow ledges of 60 cm width to facilitate movement (RBI, 2005).

Whether spaced in a rectangular or a square pattern, the recommended spacing is typically 6 to 7 m. Experience has shown that avenue planting has facilitated the operations of a rubber plantation and the growth of the rubber tree. Avenues can be 2 to 4 rows wide, with a space of 5 to 7 m between avenues (Opeke, 1982). Spacing affects not only the girth increment, but also the thickness and quality of the renewed bark. Spacing also affects the yield of rubber. The cumulative yield over the life of a rubber plantation is higher at the denser spacing, but the yield of individual trees is much higher at the wider spacing (Williams, 1975). Smallholders, however, have often planted their rubber trees at the denser spacing (Dove, 2002). In practice, the recommended density for a rubber plantation is 400-600 trees per hectare to avoid losses due to wind damage, root diseases, and permanent drying up of latex (Purnamasari et al., 1999).

2.3.3 Fertilizer application, weed and pest control, and intercropping During the early years after planting, the rubber trees are a minor part of the plantation and have to compete for soil moisture and nutrients with weeds. Fertilizer applied during this period is intended to encourage the robust growth of rubber trees so as to accelerate the time at which the trees may be large enough to be tapped. The use of complete fertilizer possibly up to five years before replanting is a common practice in order to maintain the general health of the tree and to reimburse for the progressive immobilization of nutrients within the tree and the loss of latex from being tapped (Watson, 1989).

Diseases are likely to be a continual danger in a new rubber plantation and must be controlled as soon as they are detected. The predominant diseases found in rubber are root diseases, stem and branch diseases, panel diseases, and deficiency diseases. There are three major root diseases white root disease, brown root disease, and red root disease. The main stem and branch diseases are stem rot, stinking root rot, and pink disease. The main panel diseases are mouldy rot, black thread or black stripe, and bark bursts or cortical fissures. Farm sanitation, adequate aeration, the use of

16

The Economic Potential for Smallholder Rubber Production in Northern Laos clean tapping tools and materials, the use of resistant clones, and appropriate fungicides are the measures to control these diseases. Deficiencies of the important nutrients for rubber (nitrogen, phosphorus, potassium, magnesium, calcium, sulphur, iron, and manganese) can be solved by the application of appropriate fertilizers (Opeke, 1982).

The main pests associated with rubber are termites, cockchafer grubs, and caterpillars. These pests can be controlled by hand picking and killing, using nets, spraying with insecticides or using soil fungicides, and farm sanitation. The other pests are snails, slugs, rodents, bats and domestic animals (Opeke, 1982).

Weeds are harmful to rubber tree growth as they contend with rubber for light, moisture and nutrients, especially during the initial years of a plantation (RBI, 2005). Therefore, weed control has to be undertaken in rubber plantations. The establishment of leguminous cover crops or intercrops in the initial period of a plantation can help control weed competition. The need for weeding is significantly reduced in mature rubber because of the crowded canopy shading out the weeds (Williams, 1975). Weed control can be done through hand weeding or the use of chemical sprays. In the case of chemical control, herbicides are used depending on the type of weed for effective control (RBI, 2005). The main weed found in rubber plantations in most of Southeast Asia is the grass Imperata cylindrica, which competes vigorously with rubber for moisture and nutrients. In the early phases of rubber tree development it can diminish the growth of the tree by up to 50% (Grist et al., 1998). Yields from the cropping areas infested by Imperata can be decreased by up to 90% (Menz and Grist, 1995).

An alternative option to planting cover crops is to plant a range of crops in the interrow areas when the interspaces receive a lot of sunlight during the initial 2-3 years after planting, before the canopy closes over (RBI, 2005). Intercropping is commonly practised by smallholders in order to obtain additional income while waiting for the rubber to come to the period of tapping. The most common intercrops are rice, maize, cassava, watermelon, banana, tea, coffee, cocoa, pineapple, pepper, and other perennial crops (Watson, 1989). The general characteristics of a good intercrop are that the intercrop should not grow as tall as the rubber, should have a different root system, should be tolerant of shade, should not be more susceptible than rubber to the 17

The Economic Potential for Smallholder Rubber Production in Northern Laos diseases they have in common, and should not be slow to mature or have a longer economic life than rubber (Polhamus, 1962). When intercropping is practised, fertilizer application and weeding are required (Cottrell, 1991).

2.3.4 Tapping, processing and marketing The major economic product from the rubber tree is the latex which is obtained by tapping the trunk of the tree (Opeke, 1982). Tapping is a process of carefully controlled wounding by paring off a small amount of the bark of the rubber tree, just enough to open up the ends of the latex vessels. Tapping is undertaken with the purpose to open the latex vessels in the case of rubber trees tapped for the first time or to remove the coagulum blocking the cut ends of the latex vessels in the case of rubber trees tapped regularly. In order to get highest yield, tapping should be done to a depth of less than one millimetre close to the cambium as more latex vessels are concentrated near the cambium (RBI, 2005). Too much exploitation of the bark should be avoided to conserve it for rubber production in the future (Polhamus, 1962).

The amount of latex obtained is dependent on the time of tapping. Tapping in the early morning provides the highest latex production because the flow of latex is plentiful due to high turgor pressure in the early hours of the morning (Barlow, 1978; Opeke, 1982). Late tapping reduces the exudation of latex (RBI, 2005). The later the time during the day that tapping is undertaken, the lower the latex production that is obtained. Hence, tapping operations should be done in the early morning (Opeke, 1982).

The girth at which tapping commences is a foremost factor affecting the output of a rubber plantation (Grist et al., 1998). The rubber tree is normally first tapped when its girth reaches 45 cm or 7 years after planting. Beginning tapping before a tree reaches 45 cm not only lessens the annual girth increment but also reduces total latex production over the rotation period (Purnamasari et al., 1999). Smallholders, however, often begin tapping at the girths of less than 45 cm (Grist et al., 1998).

The tools and materials used for tapping and collecting are the tapping knife, spout, collecting cup, cup hanger, collecting buckets, churns, collecting tanks, and

18

The Economic Potential for Smallholder Rubber Production in Northern Laos anticoagulants (sodium sulphate, ammonia) (Opeke, 1982). However, smallholders often use local materials instead. For instance, smallholders in Sri Lankha often substitute a half coconut for a cup, a piece of bark for a metal spout, and nails for a hanger (Barlow, 1978). In Indonesia rubber smallholders use plastic bottles as collecting cups (Cottrell, 1991).

Tapping techniques and tapping knives used by smallholders differ among countries. Chinese rubber farmers use a tapping knife requiring the tapper to push the knife upwards along the tapping angle; in contrast rubber farmers in Thailand, Malaysia, and Indonesia use a tapping knife requiring the tapper to pull the knife at an angle downwards towards the spout (Alton et al., 2005).

Latex yield is determined by climatic and soil conditions as well as genotype (Williams, 1975). In general, latex yield will increase over the first few years after tapping, then plateau, and finally begin to decline (Grist et al., 1998). At the first tapping, only a small amount of glutinous latex pours out but the yield rises gradually and reaches full productivity at the age of 12 years (Kochhar, 1981).

Latex can be processed and marketed in several forms and grades. The most common forms are sheet rubber, crumb rubber, crepe rubber, cyclized rubber, superior processing rubber, block rubber, and preserved filed latex and latex concentrates (Opeke, 1982; RBI, 2005). Most rubber smallholders in Malaysia, Thailand and Sri Lanka process their latex into sheets. Some is dried in a smokehouse and sold as ribbed smoked sheet (RSS), but most is purchased from the farm as dry unsmoked sheet and processed to RSS somewhere else. In Malaysia smoking is generally undertaken at the village level. In Sri Lanka, most rubber is smoked before being sold to official government rubber buying centres in the local areas. In Thailand the trading system is different. The market chain starts from travelling traders who may in fact buy at the farm gate price, through small town vendors, to the final stage of the chain where rubber sheets are smoked by the traders with very large smokehouses, and who then grade, pack and export the sheet as RSS (Blencowe, 1989).

In recent years wood from the rubber tree has become an alternative source of timber. Rubber has the texture and feel of pine wood so when treated and processed it can be 19

The Economic Potential for Smallholder Rubber Production in Northern Laos made into a variety of quality applications such as furniture, panelling, table tops, flooring, and household articles (Cheo, 1999; RBI, 2005). Rubber wood is a valuable product and important for the furniture industry in Malaysia. It is clear that nicely patterned rubber wood is in high demand for tables and chairs. Moreover, there is an increased demand in the construction industry as rubber wood is equivalent to other medium hardwoods (MRRDB, 1983). The use of rubber wood would not only decrease the quantity of biomass burnt when replanting but also give additional income to farmers (Gouyon, 1999).

2.4 Economic aspects of smallholder rubber production There are two phases in the growing of rubber the immature or establishment phase and the mature or production phase. The immature phase is when the rubber trees are providing no latex, usually lasting about 6 to 7 years after planting. During this stage expenditure is incurred on planting and maintenance of the rubber tree but there is no return, except the returns from intercrops if intercropping is practised. When the rubber trees are tappable or in the mature period, there are returns of latex production until the end of their productive life, normally up to 35 years or even more.

There are two main costs associated with smallholder rubber production material costs and labour costs. These costs are incurred throughout the life of rubber plantation. In the establishment stage, the major materials used are planting materials, fertilizers, and weedicide. In the mature period, the materials used are tapping materials (mangles, cups, spouts, tapping knife, pails, pan, headlamp, and formic acid) and processing materials including the establishment of a smoke house and its maintenance (DoA, 1985).

The production of smallholder rubber requires intensive labour use, which is the main input apart from land (Barlow and Tomich, 1990). In the immature phase, the labour costs for developing a rubber plantation are for land clearing, lining, terracing, holing, planting, fertilizing, and hand weeding and/or spraying weedicide. The labour used during the tappable period is for fertilizing, hand weeding, tapping, collecting latex and processing (DoA, 1985). It can be seen that from the preparation for planting to the harvesting of the rubber trees by tapping, the production of rubber mainly involves hand labour, although labour-saving equipment has been used whenever possible. 20

The Economic Potential for Smallholder Rubber Production in Northern Laos However, budding and tapping have not been adaptable to automotive equipment (Polhamus, 1962).

The primary output from a rubber plantation is the latex. Hence there is no economic return from rubber trees during the immature period. In the mature or tappable period, the rubber trees can produce latex, the yield of which will increase over the first few years, then plateau, and finally decline (Grist et al., 1998). However, during the unproductive immature stage, intercropping provides an essential way of increasing not only land-use efficiency but income (Rodrigo et al., 2001). In Southern Thailand food crops are intercropped with smallholders young rubber trees during the first few years after planting, whether for their consumption or for the market (Masae and Cramb, 1995). Intercropping also help reduce the risk from fluctuation in the rubber price (Raintree, 2005). Apart from the latex and intercrops, when a rubber tree reaches the end of production, its wood can be a valuable product and provide additional income to rubber smallholders, as noted above.

Access to capital is crucial for smallholders to invest in a rubber plantation since it requires high capital investment. The shortfall of cash is definitely the most severe constraint on rubber smallholders investment (Barlow and Tomich, 1990). Governments, development agencies, and private entrepreneurs play an important role in providing capital to smallholders to develop their rubber plantation. For instance, many smallholder rubber producers in Indonesia are supported by governmentsponsored schemes which grant credit with long payback periods, usually 12 to 15 years, at interest rates of 10 to 15% (Purnamasari et al., 2002). In Malaysia, government schemes for smallholders have included supervised planting grants or subsidies to fill the gap in the private capital market. Likewise in Thailand, replanting of rubber has been subsidised by a government agency. This is discussed further in Section 2.6.

2.5 Overview of world rubber industry 2.5.1 Introduction The world rubber industry, including both natural and synthetic rubber, has grown steadily in the post-war period. Despite early fears that natural rubber would lose out

21

The Economic Potential for Smallholder Rubber Production in Northern Laos to synthetic rubber, both sectors have continued to grow. This section first reviews the production and consumption of both natural and synthetic rubber. Then the focus is shifted to the natural rubber industry, including planted area, production, consumption, price, and future trends.

2.5.2 Natural and synthetic rubber Throughout the period of 43 years from 1960 to 2003, the global production of natural rubber and synthetic rubber increased by an annual rate of 3.5% and 3.8% to be 8.01 and 11.43 million tonnes in 2003, respectively (Jumpasut, 2004; RRIT, 2005; Fig. 2.1).

20,000 18,000 16,000 14,000 '000 tonnes 12,000 10,000 8,000 6,000 4,000 2,000 0 1990 1992 1994 Natural Rubber Production Synthetic Rubber Production

1996

1998

2000

2002

Figure 2.1: World natural and synthetic rubber production (Source: RRIT, 2005)

World rubber consumption has grown at an average rate of 5.9% per year since 1900 (Jumpasut, 2004) to reach 19.31 million tonnes in 2003 (RRIT, 2005). Since 1960, the global consumption of natural rubber and synthetic rubber has been rising at annual growth rates of 3.1% and 3.7% (Jumpasut, 2004) to reach 7.96 and 11.35 million tonnes in 2003 (RRIT, 2005), respectively (Fig. 2.2).

22

The Economic Potential for Smallholder Rubber Production in Northern Laos

20,000 18,000 16,000 14,000 '000 tonnes 12,000 10,000 8,000 6,000 4,000 2,000 0 1990 1992 1994 Natural Rubber Consumption 1996 1998 2000 2002 Synthetic Rubber Consumption

Figure 2.2: World natural and synthetic rubber consumption (Source: RRIT, 2005)

The data on natural rubber production and consumption by region are shown in Tables 2.1 and 2.2. Natural rubber is mainly produced in Asian nations (Bangladesh, Cambodia, China, India, Indonesia, Malaysia, Myanmar, Papua New Guinea, Philippines, Sri Lanka, Thailand, and Vietnam), accounting for around 93% of the total production in 2003 (IRSG, 2005), with a small proportion from Latin America and Africa. Regarding consumption, the countries from Asia/Oceania, European Union, and North America accounted for approximately 90% of the total natural rubber consumption in the same year, of which 58% was consumed by Asia/Oceania (IRSG, 2005). Therefore, it can be said that Asia is the foremost region of natural rubber production and consumption.

Table 2.1: Natural rubber production by region Region 000 tonnes % Latin America 166 2 Africa 373 5 Southeast Asia (a) 6,211 77 Other Asia 1,288 16 Total (b) 8,010 100 Notes: (a) Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Thailand and Vietnam (b) May include balancing adjustments Source: IRSG, 2005

23

The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 2.2: Natural rubber consumption by region Region 000 tonnes % North America 1,225 15 Latin America 465 6 European Union 1,332 17 Other Europe 180 2 Africa 124 2 Asia/Oceania 4,631 58 Total (b) 7,960 100 Note: (b) May include balancing adjustments Source: IRSG, 2005

The data on synthetic rubber production and consumption by region are shown in Tables 2.3 and 2.4. The production of synthetic rubber is predominantly from European Union, North America, and Asia/Oceania with nearly 84% of the total synthetic rubber production in 2003 (IRSG, 2005). These synthetic rubber producing countries are also the main consumers of synthetic rubber, consuming well over 85% of the total synthetic rubber consumption in 2003 (IRSG, 2005).

Table 2.3: Synthetic rubber production by region Region 000 tonnes % North America 2,344 21 Latin America 642 5 European Union 2,767 24 Other Europe 1,166 10 Africa 77 1 Asia/Oceania 4,408 39 Total (b) 11,430 100 Note: (b) May include balancing adjustments Source: IRSG, 2005 Table 2.4: Synthetic rubber consumption by region Region 000 tonnes % North America 2,152 19 Latin America 691 6 European Union 2,652 24 Other Europe 925 8 Africa 117 1 Asia/Oceania 4,709 42 Total (b) 11,350 100 Note: (b) May include balancing adjustments Source: IRSG, 2005

24

The Economic Potential for Smallholder Rubber Production in Northern Laos 2.5.3 Natural rubber The total area planted with rubber in the world was around 9.5 million ha in 2004 (Table 2.5). Most of this area is in smallholdings of only a few hectares. Almost 6.7 million ha or nearly 70% of the worlds total rubber area is in the three major producing countries: Thailand, Indonesia and Malaysia. The other countries with a large area of rubber are China, India, and Vietnam (RRIT, 2005).

Table 2.5: Rubber planted areas by countries (000 ha) Countries Estates Smallholdings Total Brazil 80.0 100.0 180.0 Cambodia 52.3 Cameroon 39.8 2.2 42.0 Central African 1.0 China 618.0 Congo 25.0 10.0 35.0 Cote d' Ivorie 70.0 25.8 95.8 Guatemala 44.5 Gabon 10.0 3.0 13.0 Ghana 16.1 0.8 16.9 Guinea 4.5 1.5 6.0 India 69.0 494.7 563.0 Indonesia 549.0 2,823.0 3,372.0 Liberia 60.4 48.5 108.9 Malaysia 186.0 1,244.5 1,430.7 Mexico 21.0 Myanmar 46.0 58.8 104.8 Nigeria 60.0 90.0 150.0 Papua New 9.5 8.7 18.2 Guinea Philippines 92.0 92.0 Sri Lanka 57.0 101.0 158.0 Thailand 85.0 1,895.1 1,980.1 Vietnam 334.4 83.6 418.0 1,793.7* 6,991.2* Total 9,521.2 Note: * These sums do not include the estate and smallholding areas of Guatemala, Mexico, Central African Republic, Cambodia, and China as their total area can not be separated into estate and smallholding Source: RRIT, 2005

As can be seen in Fig. 2.3, Thailand, Indonesia and Malaysia are the worlds biggest producers of natural rubber (RRIT, 2005). Currently Thailand is the worlds largest producer of natural rubber with about 36% of total production. Rubber production of Thailand has grown significantly since the mid 1980s, surpassing that of Malaysia in 1991, and in 2003 its output was about 2.873 million tonnes (RRIT, 2005). This resulted from the intensive replanting programs funded by the Office of Rubber

25

The Economic Potential for Smallholder Rubber Production in Northern Laos Replanting Aid Fund (ORRAF) over a thirty-year period (Sonluksub and Pruksananont, 2004). It is interesting to note that despite the rapid rise in natural rubber production in Thailand for almost 20 years, its share is not as great as that of Malaysia in the mid-1970s when it accounted for almost half of the worlds natural rubber production (Jumpasut, 2004).

3,000 2,500 '000 tonnes 2,000 1,500 1,000 500 0 1990 1992 1994 1996 1998 2000 2002 Thailand Indonesia Malaysia India China

Figure 2.3: Natural rubber production by major producing countries (Source: RRIT, 2005)

Even though there has been a gradual drop in the area planted with rubber in Indonesia as some smallholders have shifted into oil palm, rubber production has been rising since 1995 due to an increase in the productivity of the existing rubber holdings. Indonesia is currently the second largest producer with 22% of global natural rubber production in 2003 (RRIT, 2005). However, Indonesias share of global rubber output dropped from 30% in 1960 to the current level in 2003 due to more rapid growth in the output of the other producing countries such as Thailand, India, China, and Vietnam (Honggokusumo, 2004).

Interestingly, while production from the other rubber producing nations has grown since 1990, Malaysian rubber production declined. In fact, the drop in natural rubber production in Malaysia began in the mid-1970s because Malaysia has gradually substituted its rubber plantations with oil palm due to a declining world demand for

26

The Economic Potential for Smallholder Rubber Production in Northern Laos natural rubber (Cheo, 1999) and an increasing opportunity cost of growing rubber as the Malaysian economy develops (Barlow, 1997). Higher wages in other sectors attracted workers and made rubber production relatively expensive (Jumpasut, 2004). As a result, approximately one third of the total mature rubber area, or 230,000300,000 ha, is not tapped (Ching, 2004). However, Malaysian natural rubber production started to rise again in 2003 in response to improved prices and Malaysia still ranks third in production, contributing 12% of global natural rubber output in 2003 (RRIT, 2005).

It can be seen that global development has occurred in the natural rubber industry as most producing countries have increased their output levels. However, the share of natural rubber production from the three main producing countries (Thailand, Indonesia and Malaysia) decreased from 80% in the late 1960s (Jumpasut, 2004) to 71% in 2003 (RRIT, 2005) as more new plantations were established in other countries, particularly India and China, whose share of output has increased gradually.

As can be seen in Fig. 2.4, the major natural rubber consuming countries in the world are China, the United States, Japan, and India. With an average growth rate of 8% since 1960 (Jumpasut, 2004), China overtook Japan to become the second largest natural rubber consuming country in the world in 1992 and moved ahead of the US to be the worlds largest consumer in 2001. Chinas consumption of natural rubber in 2003 was 1.485 million tonnes or 19% of global natural rubber usage (RRIT, 2005). The tremendous demand for rubber in China is derived from the robust consumption in the automotive and tyre industries. Chinas economy since the late 1970s has been developing rapidly and the average growth rate of GDP between 1990 and 2003 stood at 9.1% (Junheng, 2004). The growth of GDP and incomes led to an enormous demand for private vehicle ownership and, as a consequence, China has become the fastest growing automotive market and the third largest automotive producer in the world, behind the US and Japan. The production of motor vehicles reached 4.44 million units and it is expected that the growth of automotive production will continue, reaching about 8 million units in 2008 (Lee, 2004). Alongside the rapid growth of the automotive industry, the tyre industry has also dramatically increased to reach 0.14 billion units in 2003 because most of the worlds leading tyre manufacturers had invested in China (Junheng, 2004). A large and rapidly increasing 27

The Economic Potential for Smallholder Rubber Production in Northern Laos quantity of natural rubber is needed to supply the tyre and vehicles industries, which are the major rubber consumers (Jumpasut, 2004).

1,600 1,400 1,200 '000 tonnes 1,000 800 600 400 200 0 1990 1992 1994 1996 1998 2000 2002

China United States Japan India Malaysia Korea France Thailand Germany Indonesia

Figure 2.4: Natural rubber consumption by major consuming countries (Source: RRIT, 2005)

After the price of natural rubber had been dropping for about 20 years, it began to rise again in 2002 (Fig. 2.5). During the early 1990s rubber production increased more than total consumption, resulting in low prices. The price recovered when total consumption grew faster in the mid 1990s, but declined further because of the substantial drop in the exchange rate of Thailand, Indonesia, Malaysia and other countries during the period of the Asian financial crisis. Growth in total rubber consumption rose again in 2000 and 2001; however, large stocks protected prices from rising. The turning point occurred in 2002 when the price of rubber started to rise again due to the tripartite agreement between Thailand, Indonesia and Malaysia to restrict production to push the price up, and the continuing growth in demand for natural rubber from China due to its massive industrialization (Jumpasut, 2004). The price of natural rubber on the Singapore Commodity Market in 2004 was about USD 1.35 per kilogram (SICOM, 2005; IRSG, 2005).

28

The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 2.5: Price of natural rubber (TSR20) on the Singapore Commodity Exchange in US cents per kg (Source: SICOM, 2005)

2.5.4 Future trends of natural rubber Although the market for natural rubber in developed countries is mostly saturated and is not expected to grow in the future, it is expanding in the nations of New Asia (India, ASEAN and especially China). It can be seen that the Asian region has shown a significant increase in natural rubber consumption in comparison to other regions over the past decade (Table 2.2). The growing trend is expected to continue in coming years due to the current low levels of rubber consumption per capita in the Asian region compared to those in developed countries (Jumpasut, 2004).

The growth in natural rubber consumption is being driven by a robust demand from the Asian nations, particularly China where rubber imports increased almost 24% in 2003 (RRIT, 2005). Since 2001 China has become the worlds largest rubber consuming country and will be the key actor driving the growth in natural rubber consumption in the future. The demand for natural rubber from China is expected to keep on increasing due to the recovery of the world economy, the rapid expansion of the Chinese automobile industry, the high investment in the rubber industry, and the growth in exports of rubber products (Rende, 2004).

Natural rubber is expected to be in short supply in the future. As forecast by International Rubber Study Group (IRSG), the global demand for natural rubber will

29

The Economic Potential for Smallholder Rubber Production in Northern Laos be 11.5 million tonnes, compared to only 8-9 million tonnes of production (Ching, 2004). Natural rubber producing countries are consuming more of their production due to the establishment of industries based on rubber. As a result, the quantity left for export to the global market is less. The proportion of world natural rubber production that is exported has dropped significantly from 95% in 1960 to 71% in 2003 (Jumpasut, 2004).

Another factor constraining production and exports is that some natural rubber producing countries are reaching the period when the opportunity costs are higher than the returns from producing natural rubber. Farmers find alternative sources of income more attractive. When they are getting higher incomes from working outside their farms they will reduce or eventually stop producing rubber. Malaysia has already reached that period and other major producing countries, particularly Thailand, are likely to be the next (Jumpasut, 2004).

While the demand for natural rubber in China has rocketed, the growth of Chinese natural rubber production has slowed since the 1990s due to stagnation in the planted area (Jumpasut, 2004); therefore, the gap between production and consumption within China is widening. As a result, China has heavily relied on importing natural rubber to address the imbalance between domestic production and consumption (Lee, 2004). The increasing demand for natural rubber from China has strongly affected the world rubber industry as China is the global largest consumer.

Since there is expected to be an increasing demand for natural rubber while the supply is forecast to rise less rapidly, the price of natural rubber is expected to rise in the future. It has been forecast that the price of rubber will continue to increase for at least 10 years before it starts to plateau, and then it may fluctuate like any other commodity (Burger and Smit, 2004).

It is inevitable, therefore, that there will be interest in expanding the area of plantations to produce natural rubber in response to the increasing demand and the supply shortage. As a result, some of the main rubber producing countries (Thailand, Malaysia, and China) are encouraging new plantations (Ching, 2004). This opens up a huge opportunity to new rubber producing countries such as Laos, with lower costs 30

The Economic Potential for Smallholder Rubber Production in Northern Laos and available land, as the high costs of producing rubber in China and Malaysia are significant obstacles to them competing in the global market (Jumpasut, 2004).

2.6 Government schemes supporting smallholder rubber production In general the rubber industry in the main rubber producing countries can be distinguished into two sectors estates and smallholdings. Over time the relative share of smallholdings has increased so that it is now the dominant sector. The governments in the main rubber producing countries Malaysia, Thailand, and Indonesia have launched various schemes to support the smallholder sector of the rubber industry. Barlow and Jayasuriya (1984) identify two broad approaches to government schemes supporting rubber cultivation the focus and dispersal strategies. The focus strategy involves consolidating resources in large-scale schemes with capital- and management-intensive technology. This approach involves the use of an input package including high-yielding bud grafted clones, fertilizers, pesticides, legume covers, and weedicide, implemented on a large scale with centralised management. The dispersal strategy, on the other hand, involves spreading resources to individual small-scale farmers with less capital-intensive technology. This approach relies on provision of inexpensive or even free improved selected seedling materials and providing technical advice to individual smallholders.

Malaysia has pursued elements of both focus and dispersal strategies in support of rubber smallholders. The reason Malaysia applied both strategies is because one of the government's main policies regarding rubber production was the consolidation of smallholdings in order to improve productivity and product quality (Balsiger et al., 2000). The main agencies established by the Malaysian Government to support rubber smallholdings include the Rubber Industry Smallholders Development Authority (RISDA), the Federal Land Development Authority (FELDA), the Federal Land Consolidation and Rehabilitation Authority (FELCRA), the Rubber Research Institute of Malaysia (RRIM), the Malaysian Rubber Development Corporation (MARDEC), and the Malaysian Rubber Exchange and Licensing Board (MRELB).

The first three agencies FELDA, FELCRA, and RISDA are concerned with rubber production. FELDA had the major goal of promoting and assisting large-scale land development schemes for new settlers (World Bank, 1999). In contrast, FELCRA and 31

The Economic Potential for Smallholder Rubber Production in Northern Laos RISDA schemes were more for smallholders, but these have more recently been consolidated into mini-estates. FELCRA was established as a result of the governments policy for the consolidation and rehabilitation of smallholdings in order to improve productivity and product quality by convincing owners of small plots to allow their land to be centrally managed. However, the effort of consolidating the small, scattered and non-contiguous plots is often filled with difficulties including multiple ownership, truant landlords, the view of land as a speculative asset, and the shortage of political will to solve the problem. Difficulties in replanting are exacerbated by the prevalence of small-scale parcels and affected by the decrease in replanting funds, the distraction of part of these funds for replanting with oil palm, and the removal of government top-up resources (Balsiger et al., 2000). RISDA has broad objectives of providing assistance for replanting, development of mini-estates, extension, provision of smallholder credit, commercial activities (marketing, processing, product factories), and crop diversification. Benefits of all these schemes to participating smallholders were initially quite good, with family incomes above both poverty levels and rural standards; however, their costs were high, for instance as far back as 1986, FELDA schemes cost US$15,000 per participating family (World Bank, 1999).

Apart from the above agencies concerned mainly with production, RRIM was established to invest in research and development. MARDEC was established to assist rubber smallholders with marketing through upgrading the quality of smallholders rubber and participating in foreign joint-ventures in manufacturing rubber products and related items. MRELB was established to assist in licensing the network of private dealers who buy the rubber from the smallholders (MRRDB, 1983; Chamala, 1985). Since 1998 the Malaysian Rubber Board (MRB) was established by merging three separate organizations, namely, the Rubber Research Institute of Malaysia (RRIM), the Malaysian Rubber Research and Development Board (MRRDB), and the Malaysian Rubber Exchange and Licensing Board (MRELB). The main objective of MRB is to support the development and modernisation of the Malaysian rubber industry in all aspects including the cultivation of rubber trees, the extraction and processing of raw rubber, the manufacture of rubber products, and the marketing of rubber and rubber products (MRB, 2006).

32

The Economic Potential for Smallholder Rubber Production in Northern Laos In contrast to Malaysia, where the rubber industry was initially dominated by large estates and then by land development schemes, most rubber plantations in Thailand are smallholdings (Masae and Cramb, 1995). The reasons why rubber estates did not develop in Thailand were that the Thai Government did not promote foreign investment in this industry, there was a shortfall of estate labour, and the Government was unwilling to encourage the required enormous influx of estate workers. Moreover, Western capitalists thought that Thailand was not the most suitable place for rubber plantations (Jumpasut, 1981). Hence the Thai Government has pursued a dispersal strategy.

The major scheme for supporting rubber smallholders in Thailand is the Office of the Rubber Replanting Aid Fund (ORRAF), which was established for supporting rubber smallholders to replant old rubber plantations and establish new plantations with high yielding clonal varieties, as well as encouraging rubber smallholders to take part in the formation of cooperatives with the purpose of having more efficient production costs, higher rubber sheet grades, and group bargaining power (IRRDB, 2006a; Albarracin et al., 2006). Under the ORRAF program, farmers who have old rubber plantations received a grant of about 80% of the total replanting cost, including labour (World Bank, 1999). The extension services provided by ORRAF to rubber smallholders are separated into two main categories the replanting program and the establishment of new rubber plantations. The replanting program focuses on existing rubber plantations in the Southern provinces while the establishment of new rubber plantations program is aimed to set up new rubber plantations in the Northern and North-eastern provinces (Albarracin et al., 2006). The success of ORRAF can be seen in the fast growth of rubber production. Both planted area and yield have increased significantly. As a result, Thailand has become the number one natural rubber exporter (World Bank, 1999).

Various organizations including processing groups, marketing groups, smallholder cooperatives, and provincial smallholder associations have been established with support from the Thai Government to increase rubber smallholders bargaining capability as well as to improve the quality of rubber. The government has also developed the marketing system to help rubber smallholders by introducing auction markets, a central rubber market, and direct trading (IRRDB, 2006a). Recently, the 33

The Economic Potential for Smallholder Rubber Production in Northern Laos Thai Government announced plans to set up a new Rubber Authority of Thailand (RAOT), which will be created by merging and consolidating three separate organizations including the Office of the Rubber Replanting Aid Fund (ORRAF), the Rubber Estates Organization (REO), and the Rubber Research Institute of Thailand (RRIT). The main objectives of RAOT are to increase Thailands share of the international market by continuously replanting existing rubber areas, establishing new rubber plantations, and achieving higher yields through improved farming techniques; to support more research and development into the technology and production of finished rubber products to get better quality and increase Thailands share of the export market in rubber products; and to act as Thailands representative in the International Rubber Conference Organisation (IRCO), which was recently formed by Thailand, Malaysia and Indonesia to get better collaboration in stabilising the price of rubber (IRRDB, 2006b).

In contrast to Thailand, the Indonesian Government has pursued a focus strategy, giving support primarily for large-scale rubber plantations. As a result, most smallholders did not receive much benefit because the focus strategy has limited the dispersion of technologies to the rubber smallholders (Barlow and Jayasuriya, 1984). Since the 1970s the Indonesian Government has attempted to provide some support to rubber smallholders but the model was derived from the estate model, involving a rubber monoculture with high use of labour and purchased inputs. Shifting cultivators were reluctant to adopt the estate model because of the high cost of production, the lack of credit facilities, the shortage of improved planting materials, and the inefficiency of extension services. Moreover, the farmers preferred to practise intercropping for food supply and income generation (Burgers and Boutin, 2001). As a result, average smallholder rubber production is very low (Balsiger et al., 2000).

Two main types of scheme have been developed for supporting the rubber smallholders in Indonesia. The first type of scheme was the Nucleus Estate and Smallholders (NES) scheme. A government-owned or private estate was the nucleus for the development of surrounding rubber smallholdings. Funding support for these estates was provided by the government for clearing the land, building the settler infrastructure and housing, offering employment for settlers, and establishing and maintaining the rubber plantation. The main constraints of this type of scheme were 34

The Economic Potential for Smallholder Rubber Production in Northern Laos the deficiency in provision of extension services, the poor organization, and the lack of financial resources and staff. The second type of scheme was the Project Management Unit (PMU), which focused on the development and replanting of scattered rubber smallholdings. Under these schemes rubber smallholders were provided the long-term credit for planting materials, chemical inputs, labour, and land titling. These schemes also provided extension services, particularly for on-farm processing of latex and group marketing systems. The PMU performed successfully, but was very expensive and as a consequence the dispersion was limited (Cottrell, 1991).

Overall, the experience of the three major rubber producing countries suggests that government assistance through the application of a dispersal strategy is better suited to smallholders resource base and social and economic circumstances. In the case of Laos, the dispersal approach is likely to be more appropriate and is in line with the government policy of increasing income among smallholder farmers.

2.7 Conclusion Shifting cultivation has been the dominant land use in the sloping uplands of Southeast Asia for many centuries. Integral, rotational, long-fallow systems such as practised in Northern Laos are considered to be sustainable. However, the intensification sequence proposed by Boserup, with longer cropping periods and shorter fallows, is not feasible in this environment, hence with population growth and the improvement of infrastructure, shifting cultivators have been motivated to incorporate cash crops, typically tree or shrub crops, in their farming system.

Myints theory of transition from subsistence to commercial production shows how this typically occurs in two stages. In Stage I farmers maintain subsistence output and use spare land and labour for the cash crop, while in Stage II, the expansion of the cash crop involves a reduction in subsistence output and greater reliance on the market. This enables subsistence farmers to enter global markets step by step, thus reducing the risk they face.

Barlows analytical framework for plantation tree crop development takes this analysis further, distinguishing five stages: a backward economy (with no plantation 35

The Economic Potential for Smallholder Rubber Production in Northern Laos crops) through to a late advanced economy (in which plantation crops are no longer profitable). In this framework, Laos is at the early agricultural transformation stage, with rapid adoption of simple labour-intensive tree crop technologies, though with the benefit of previous technology development in other countries. To move into the late agricultural transformation stage will require economic growth, more extensive government support, and the development of improved tree crop technologies.

The technological aspects of smallholder rubber production include site selection, land preparation, planting, fertilizer application, weed and pest control, intercropping, tapping, processing, and marketing. The expansion of smallholder rubber in Northern Laos is based on the simple land and labour intensive technology of rubber growing, imported from China. The technology is easily adopted by upland smallholding farmers as it fits with their current shifting cultivation systems. In the future farmers are likely to adopt higher level of rubber production technology in order to get higher return from their rubber plantations.

The important issues related to the economic aspects of smallholder rubber production are labour utilisation and start-up capital. The production of smallholder rubber requires intensive labour use, especially during the mature period of a rubber plantation when tapping and processing begin. Financial and credit supports are also crucial for smallholders to invest in rubber plantations as considerable capital is required and returns are delayed.

Global rubber production is mainly from Thailand, Indonesia, and Malaysia. The growth in rubber consumption is being driven by a robust demand from China. As a result the price of natural rubber has risen since 2002 after dropping for about 20 years. It has been forecast that the price of rubber will continue to increase in the next ten years. This is helping to drive the expansion of rubber in Laos.

Rubber holdings in the main rubber producing nations include estates and smallholders; however, smallholders dominate the rubber planted area in these countries. Various supporting schemes for rubber development have been implemented in these countries. Government involvement in the development of rubber smallholders in Malaysia is larger than in Indonesia, while in Thailand the 36

The Economic Potential for Smallholder Rubber Production in Northern Laos government had totally supported the development of rubber smallholders. In the case of Laos, the dispersal strategy of government schemes supporting rubber cultivation as identified by Barlow and Jayasuriya (1984) is considered to be more appropriate as the rubber industry in Laos is currently in the early phase of development. ORRAF in Thailand is a successful example of dispersed assistance to rubber smallholders. Some of the Malaysian schemes like those of FELCRA and RISDA are more appropriate in the later stages when the opportunity cost of labour is high and rubber plantations are left untapped.

37

The Economic Potential for Smallholder Rubber Production in Northern Laos

Chapter 3 The Context of Rubber Development in Laos

3.1 Introduction Laos is one of the poorest nations, with a GDP per capita in 2002 of US$330 (ICEM, 2003) and a ranking of 135 out of 175 countries in UNDPs Human Development Index (UNDP, 2003). Laos is a predominantly rural country with approximately 83% of the population living in rural areas, of which 66% relies on subsistence agriculture (Roder, 2001). The national economy is overwhelmingly dependent on agriculture, which accounts for around 47% of GDP and absorbs approximately 80% of the labour force (NSC, 2005a).

This chapter gives an overview of the physical and socio-economic characteristics of Laos. It then discusses the farming systems practised in Laos, with particular reference to shifting cultivation and the factors that constrain agricultural development in the uplands. This is followed by an account of the introduction of rubber into upland farming systems.

3.2 Physical and socio-economic environment 3.2.1 Location Laos is a land-locked country located on the Indochina peninsula at the centre of the Greater Mekong sub-region in Mainland Southeast Asia, between 14 and 23 degrees north and 100 and 108 degrees east (MIC, 2000; Fig. 3.1). The total area of Laos is 236,800 km2, of which 85% lies within the watershed of the Mekong river (Roder, 2001). The distance from the north to the south is 1,700 km, the widest point is 500 km and the narrowest point is 140 km (MIC, 2000). It shares a border of 505 km with China in the north, 1,835 km with Thailand in the west, 2,069 km with Vietnam in the east, 236 km with Myanmar in the northwest and 535 km with Cambodia in the south (NSC, 2005a).

38

The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 3.1: Location map of Laos (Source: GIS Unit of NAFRI, 2005)

3.2.2 Topography Laos is preponderantly highland with around 80% of the land area classified as mountainous or hilly (ICEM, 2003). The topography of Laos can be divided into three distinct regions the mountainous north, the mountainous chains, and the plains region. The north is loomed over by mountains which have an average height of 1,500 m above sea level (Fig. 3.2). The mountainous chains, which range from the southeast of Phuan plateau to the border of Cambodia, comprise three large plateaus: Phuan plateau in Xiengkhuang Province, Nakai plateau in Khammuan Province, and 39

The Economic Potential for Smallholder Rubber Production in Northern Laos Bolaven plateau in the Southern part of Laos. The plains region consists of many small and large plains along the Mekong river. The three large plains are Vientiane plain on the lower territory of Ngum river, Savannakhet plain on the lower territory of Se Bang Fai and Se Bang Hieng rivers, and Champasack plain which is on the Mekong river between the Thai and Cambodian borders. These major plains, which contain fertile soil suited for agricultural cultivation, account for approximately one quarter of the total land area and support more than 50% of the population (MIC, 2000).

Figure 3.2: Elevation map of Laos (Source: GIS Unit of NAFRI, 2005)

40

The Economic Potential for Smallholder Rubber Production in Northern Laos 3.2.3 Climate Laos has a tropical climate which is dominated by the annual monsoon cycle, with the six-month rainy season between May and October delivering around 90% of annual rainfall. Within the six-month dry season from November to April, some months may have no rainfall over much of the country (ICEM, 2003).

Although the weather in Laos is said to be tropical, in the mountainous north and in the hills of the mountainous chains in the east, bordering Vietnam, it is semi-tropical. The average temperature across the country is 25 C and the difference between temperatures in day and night time is 10 C (MIC, 2000; Fig. 3.3). The temperature is predominantly influenced by altitude in which the average temperature reduces at the rate of approximately 0.5 C per 100 m increase of elevation (Roder, 2001). During the rainy season the temperature gets as high as 37 C in Champasack Province and in the dry season the temperature falls to as low as 8 C in Huaphan Province (NSC, 2001).

The humidity in Laos varies according to the distinct seasons. The highest level of humidity is registered in July and the lowest in April (NSC, 2001). The wind in Laos blows from the northeast in the dry season and from the southwest in the rainy season. There are around 2,300-2,400 hours of sunlight per annum in Laos (MIC, 2000).

The average annual precipitation in Laos is 1,600 mm. There is a significant difference in rainfall among regions. Mean annual rainfall extends from less than 1,500 mm in Savannakhet Province and much of the north to more than 3,500 mm in the Bolaven plateau (Fig. 3.4). In the eastern mountainous chains, the wet season can last for up to ten months of the year. An amount of 270,000 million m3 of annual rainfall flows to the Mekong river every year and contributes 35% of the total flow. This implies a surplus of 51,500 m3 of water per capita per annum (based on the population in 2000); the annual prevailing need of 228 m3 of water per person is only a tiny proportion of supply (ICEM, 2003).

41

The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 3.3: Temperature map of Laos (Source: GIS Unit of NAFRI, 2005)

42

The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 3.4: Rainfall map of Laos (Source: GIS Unit of NAFRI, 2005)

The monthly average rainfall distributions for Luangprabang Province, Vientiane Municipality, and Champasack Province are presented in Fig. 3.5. The rainfall pattern is similar with high amount of rainfall concentrated between May and October and less rain from November to April.

43

The Economic Potential for Smallholder Rubber Production in Northern Laos

Luangprabang Province 500 450 400 Precipation (mm) 350 300 250 200 150 100 50 0

Vientiane Municipality

Champasack Province

September

November

June

January

July

October

Month

Figure 3.5: Monthly mean rainfall distribution in Luangprabang Province, Vientiane Municipality, Champasack Province from 1975-2005 (Source: NSC, 2005a)

3.2.4 Natural resources Water, land, and forest are the main natural resources in Laos. There are many small rivers, streams, and creeks throughout Laos, but the Mekong river (the eighth largest in the world in terms of flow) is the main river in Laos draining around 80% of the total land area and flowing through the country for 1,898 km from the north to the south (ICEM, 2003). The waters of the Mekong river and its tributaries have tremendous potential for hydropower development and irrigation capacity (Nilsson and Svensson, 2005) and over half of the power potential in the Lower Mekong Basin is held inside Laos (MIC, 2000). The water level in the Mekong river increases in the rainy season from May to October and falls in the dry season from November to April.

The forest area in Laos has been reduced significantly in recent decades (Fig. 3.6). During the 1940s, the forest cover was estimated to be 17 million hectares or 70% of the total land surface. In the early 1960s, it was reduced to 15 million hectares or 64%. By the late 1980s, based on aerial photos and satellite images, it was estimated that the forest cover had dropped to 11.2 million hectares or 47%. Recently, the GTZ44

December

March

April

February

August

May

The Economic Potential for Smallholder Rubber Production in Northern Laos MRC project estimated that the forest cover in Laos has been reduced to about 41%, but this estimate has not yet been confirmed (Tsechalicha and Gilmour, 2000).

Figure 3.6: Forest and land cover map of Laos (Source: GIS Unit of NAFRI, 2005)

Even though the forest coverage in Laos has been diminished considerably as a consequence of the clearing of lowland forests for permanent agriculture, shifting cultivation, the construction of roads and reservoirs, and the extensive logging in the 1980s (Tsechalicha and Gilmour, 2000; Nilsson and Svensson, 2005), Laos is still one of the most heavily forested nations in Asia and one of the biologically richest 45

The Economic Potential for Smallholder Rubber Production in Northern Laos countries in the region (Raintree, 2002). Currently, there are about 11 million hectares of natural forest in Laos, of which around 3 million hectares have been kept in reserve as National Biodiversity Conservation Areas (NBCAs). These forests harbour very rich biodiversity, providing the habitats of at least 10,000 species of mammals, reptiles, amphibians, birds, fish, and vascular plants (UNDP, 2001).

The reconnaissance survey by the National Office for Forest Inventory and Planning (NOFIP) in 1992 used satellite photo interpretation to determine the land use categories in Laos. The results show that the land area with slopes lower than 5%, and therefore characterized as arable land, is roughly 5.5 million hectares or 23.5% of the total land resources (Table 3.1). However, only about 10% of Laos land area is suited to intensive agriculture (ICEM, 2003).

Table 3.1: Total area of land use and vegetation types distributing on slope classes (1,000 ha) Land use group 0-5% 6-19% 20-30% 31-59% >60% Total area Current forest 2,678.8 651.1 3,795.3 3,072.0 970.8 11,167.0 Potential forest 1,137.5 589.3 3,969.2 2,740.5 512.4 8,949.9 Other wooded areas 515.7 70.4 339.8 323.3 195.0 1,444.2 Permanent agricultural land 825.5 20.2 3.7 0.0 0.0 849.2 Other non-forest land 409.8 51.1 364.4 322.5 121.6 1,269.4 Total 5,567.3 1,382.2 8,472.4 6,458.3 1,799.8 23,679.7 Source: NOFIP, 1992

3.2.5 Population The population of Laos is 5.6 million with an annual growth rate of 2.7%. Based on the total area of 236,800 km2, Laos is the least densely populated in Asia with a density of 24 people per km2. The population density varies from 9 people per km2 in Xaysomboun Special Zone to 177 persons per km2 in Vientiane Municipality (NSC, 2005b). More than 50% of the inhabitants have settled on the plains along the Mekong river (ICEM, 2003), where intensive agriculture is practised (NSC, 1997).

The Lao population is ethnically diverse with 68 ethnic groups (NSC, 1997), but these ethnic groups, based on cultural, linguistic, and geographical characteristics, are normally divided into three broad groups: Lao Loum (Lowland Lao, who traditionally settle in the lowlands and make a living from paddy rice cultivation), Lao Theung (Midland Lao, who usually settle in the uplands and practise shifting cultivation) and 46

The Economic Potential for Smallholder Rubber Production in Northern Laos Lao Soung (Highland Lao, who commonly settle in the highlands and also practise shifting cultivation). This categorization is commonly used when referring to the Lao ethnic groups by government and non-government organizations, and individuals at international, national and regional levels (Roder et al., 2001). Of the total population, the Lao Loum comprise 66%, the Lao Theung 24%, and the Lao Soung 10% (NSC, 2005b). Buddhists account for the majority of the population (65%), the others being Animist (33%), and Christian (1%) (NSC, 1997).

3.2.6 Transportation infrastructure According to the Population and Housing Census in 2005, about 66.4% of the total villages in Laos could be accessed by road (NSC, 2005b). However, the road infrastructure is in poor condition and in the hilly areas in particular there is a lack of road maintenance. In the plains along the Mekong river and within the provincial towns there are paved roads, but in the mountainous areas almost all roads are unpaved. In regions without road access, river transportation is used. There are many rivers for which boat transportation is possible, but due to the small population there are only five rivers where a public transportation service is provided: the Mekong, Tha, Ou, Ngum, and Sekong rivers (Yokoyama, 2003; Fig. 3.7).

3.2.7 Administration Laos is a unitary country. The state administration in Laos is divided into four levels: central, provincial, district, and village. Administratively, Laos is separated into three regions the Northern, Central, and Southern Regions including 16 provinces and two equivalent provinces (one special zone and one municipality), 141 districts, and 10,552 villages. The Northern Region is made up of seven provinces Phongsaly, Luang Namtha, Bokeo, Oudomxay, Luang Prabang, Huanphanh, and Xayaboury. The Central Region comprises five provinces Xiengkhuang, Vientiane, Bolikhamxay, Khammuane, and Savannakhet, and two equivalent provinces of Xaysomboun Special Zone and Vientiane Municipality. The Southern Region covers four provinces of Saravane, Sekong, Champasak, and Attapeu (NSC, 2005a; Fig. 3.1).

47

The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 3.7: Transportation routes map of Laos (Source: GIS Unit of NAFRI, 2005)

3.2.8 Tenure system and land/forest allocation Prior to 1975, the ultimate ownership of land belonged to the King and typically customary rights were applied. After the establishment of the Lao PDR in 1975, land rights were transferred to the people, represented by the State. The State encouraged people to cultivate their land cooperatively (Ducourtieux et al., 2005).

The great changes of land tenure in Laos have occurred since 1991 when the Lao Government adopted a new constitution incorporating the principle that all land 48

The Economic Potential for Smallholder Rubber Production in Northern Laos belongs to the State, but villages, organizations, and individuals have the rights to use land (ICEM, 2003). Thereafter, a more formal system of land tenure was instituted in 1993 through the government program of Land Use Planning and Land Allocation (LUP/LA). This is the basis for the zonation of land and forest and providing farm families with agricultural land use rights and village communities with access to forest products (Helberg, 2003). The LUP/LA program has been developed with the principal objectives of stabilising shifting cultivation and facilitating sustainable use of agricultural land and forest (ICEM, 2003). Under LUP/LA, the size of the allocation is based on each households available labour and resources (Thongphanh, 2004), but the allocation of agricultural land to a household is limited to up to one hectare for rice, three hectares for cash crops, three hectares for orchards, and 15 hectares of deforested land or grass land for pasture (Yokoyama, 2003). In order to retain tenure, the land has to be under cultivation or intensive development within three years or the land will be returned to the state (Thongphanh, 2004). So far, LUP/LA has been undertaken in 6,200 villages (50% of all villages in the country), allocating land to 379,000 households (60% of all agricultural households), and covering over eight million hectares of land (Thomas, 2003). Traditional land tenure systems in shifting cultivation areas are still practised in villages where LUP/LA has not yet been undertaken. Under such systems tenure was conventionally obtained through the cultivation of land which was not already claimed by others. The ownership rights over land remained during the fallow periods between cultivation, but it was possible to hand over cultivation rights to others with the permission of the previous owners (Sodarak, 2005).

Basically there are now two types of formal land tenure in Laos: temporary land use rights and permanent land use rights. The temporary land use rights are in the form of Temporary Land Use Certificates (TLUC) issued by a district authority to individuals or organizations for the use of the land, but these cannot be transferred, leased, or pledged as collateral. The permanent land use rights are evidenced by a Land Title (LT) and can be obtained after the land has been managed and used under three years temporary tenure without breaking the land-use regulations. The land under a Land Title can be transferred, leased, or pledged as collateral (Tsechalicha and Gilmour, 2000). 49

The Economic Potential for Smallholder Rubber Production in Northern Laos 3.3 Farming systems in Laos 3.3.1 Overview Farming in Laos is traditionally subsistence-based, with the practice of rainfed and irrigated cultivation in the flatlands and shifting cultivation on sloping lands. Besides the production of the staple food, vegetables are also grown in small gardens and livestock is raised to fulfil the daily needs. Lao farming is generally considered as involving low use of inputs and extensive use of land, and is relatively susceptible to pests and diseases, as well as adverse weather (Yamada et al., 2004).

The most significant feature of the farming systems in Laos is their diversity. They can be categorised into three major systems of cultivation associated with the lowlands, the sloping uplands, and the plateau environments. Table 3.2 presents three predominant farming systems subcategorized based on crop combinations and the typical livelihood problems related with each of these categories (GoL, 1998). In lowland cultivation, rainfed and irrigated farming systems are practised. In the sloping uplands, people rely heavily on shifting cultivation. In the plateau environment, cash crops and fruit trees are extensively grown, replacing shifting cultivation.

A noticeable characteristic of the farming systems is the way that home gardens exist in nearly all categories only rudimentary in the areas where forests still have the capability to supply the miscellaneous needs of shifting cultivation households and, by contrast, highly developed in the more densely inhabited areas where forests have vanished and home gardens have acted as a replacement for them in the household economy. Livestock raising in different forms is also found in every system of cultivation, as well as paddy rice, which would be practised much more extensively in the uplands if irrigable paddy land was available for cultivation (UNDP, 2001).

50

The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 3.2: Three main farming systems in Laos Farming systems Lowland Lowland rainfed farming system Characteristics Single cropping of traditional glutinous paddy rice varieties (80%), 2-4 varieties of different maturation. Yield 2.5-3 tons/ha (official estimates) to 1.1 tons/ha (Lao-IRRI survey 1989-90). Buffalo and cattle for draft, cash income and occasional meat, free ranging during the dry season, confined in the rainy season. Pigs, poultry, fish and NTFPs important for food and cash income. Double cropping of traditional photo-period sensitive paddy rice varieties, with higher use of improved varieties, fertilizer, etc for the 2nd crop which is mainly for cash. Wet season yields 1-3 tons, dry season 2-4 tons/ha. Dry season vegetables grown in areas near urban centres. Relatively few livestock due to shortage of grazing land, buffalo use for ploughing, smallstock for meat and cash income. Shifting cultivation of rice (intercropped with cucumber, chilli, taro, sesame, etc.) on sloping land with fallow periods of 2-10 years with yields of 1.4-1.5 t/ha. Maize for livestock is 2nd most important crop. Other crops: sweet potato, ginger, cassava, groundnut, soybean, cotton and sugarcane, papaya, coconut, mango tamarind, banana and citrus (more fruit tree species at lower altitudes). Melon & watermelon grown as dry season crop in some areas. Pigs, cattle and poultry are the principal livestock. High dependence on NTFPs for income to purchase rice, etc. Adoption of paddy cultivation is progressing rapidly where possible. Similar to upland rainfed farming system, but with high altitude crops such as opium, sometimes intercropped with lettuce and mustard, and temperate fruit trees such as plum, peach & local apple. Livelihood problems Rice shortages of 1-4 months and low household income.

Lowland irrigated farming system

Better off than unirrigated farms, but lack cash, especially for investment.

Upland Upland rainfed farming system

Rice shortage of 3-4 months, low income, poor health, high infant mortality, low life expectancy, lack of access to roads, communication, education & social services.

Highland farming system

As above.

Plateau Plateau farming system

Coffee, tea and cardamom have largely replaced shifting cultivation, supplemented by fruit trees and vegetables in home gardens. Poor cash crop quality and yields due to poor management, use of poor varieties, no fertilizer, lack of shade, weed problems and poor harvesting and drying technique. Cattle important as savings enterprise, pigs & poultry also kept. Source: GoL, 1998

Households have adopted a commercial strategy and have no problems with food security, but household income still only moderate.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

It has been said that farming in the lowland areas along the Mekong corridor (including plateau areas) is moving into the period of transformation in which market forces are commencing to bring agricultural inputs through commercial channels and some of the farm products are consumed by households and the rest are sold in the markets. In the uplands, on the other hand, farming is more closely connected to the period of subsistence cultivation and farm households are said to be in poverty. The major factors behind this difference are highlighted in Table 3.3 (GoL, 2000).

Table 3.3: Contrasting conditions in the lowlands and uplands Lowland conditions Upland conditions Poor road and non-existent road linkage Good road linkage and access Very limited or non-existent agricultural Adequate agricultural technology flows technology flows from regional markets Limited or non-existent rural savings Rural savings mobilization and agricultural mobilization and credit lending mechanisms beginning to function Little or no domestic and regional markets Domestic and regional markets interaction interaction Market information and price signals No market information mechanisms operate in many areas Basically non-monetized rural economy Monetized rural economy with predominantly subsistence Free access for local and foreign agriculture and barter transactions entrepreneurs Free access for local and foreign Agro-geographic conditions favouring flat entrepreneurs, but little incentive because land farming systems of non-functioning markets in most areas Agro-geography in high relief requires balanced sloping land farming systems and integrated environmental management Source: GoL, 2000

3.3.2 Shifting cultivation Shifting cultivation, known as hai in Lao and as slash-and-burn cultivation or swidden agriculture in English, is the dominant production system in the upland and mountain environment of Laos, involving more than 150,000 households or around 25% of the rural inhabitants. This subsistence cultivation may account for up to 80% of the land allocated for agriculture if the entire area of fallow fields is taken into account (Roder, 2001).

The practice of shifting cultivation in Laos, as in other countries where shifting cultivation is practised, principally involves clearing the fields, leaving the vegetation to dry, and then burning it for temporary cultivation (Gansberghe, 2005a). Practised in 52

The Economic Potential for Smallholder Rubber Production in Northern Laos Laos for centuries, shifting cultivation has been the main source of food production with upland rice being the principal crop grown in the uplands. It is subsistence-based farming which provides food, fibre, medicine and other needs from crops, fallow and forested land (De Rouw, 2005). The Lao shifting cultivation system is not only related to crop production, but animal husbandry, fishing, hunting and collecting non-timber forest products (NTFPs) are also integral components. These activities are closely interrelated with the crop/fallow rotation. For example, fallow land is important for livestock grazing and cultivated plots must be protected from domestic animals by fencing. The fallow area is also a main source of biodiversity and longer fallow periods generally allow the gathering of more NTFPs (Gansberghe, 2005b).

Shifting cultivation systems can be categorised in many ways depending on the criteria used, but rotational and pioneering shifting cultivation are usually distinguished in Laos. In rotational shifting cultivation, the most common type in Laos, shifting cultivators maintain their villages in the same site but rotate their cultivated plots within a crop/fallow cycle. In pioneering shifting cultivation, shifting cultivators move their whole village site after many years of cultivation in the same place, resulting in the gradual depletion of forest. Shifting cultivation in Laos is also sometimes classified into integral and partial cultivation systems. In integral systems shifting cultivation is the main part of the households livelihood, while in partial systems shifting cultivation is practised as one minor component of the households livelihood; for instance, lowland farmers also do some shifting cultivation to supplement their needs (Gansberghe, 2005a).

Shifting cultivation in the past was recognized as the best land use alternative for the rural inhabitants in the mountainous regions of Laos because of low population densities, low incomes, little opportunity for trade, and limited access to inputs (Roder, 2001). However, the combined effects of population growth, growing market opportunities, natural resource depreciation, and international awareness of environmental impacts have forced farmers to shorten the fallow periods. As a result, widespread problems of weed invasion, soil erosion, and declining yields are occurring (De Rouw, 2005). Therefore, the reduction of shifting cultivation has become a policy priority for the Lao Government (Tsechalicha and Gilmour, 2000). 53

The Economic Potential for Smallholder Rubber Production in Northern Laos 3.3.3 Limitations of upland farming development The development of farming in the uplands of Laos is hampered by a number of factors. The current low ratio of population to land might look like a conducive circumstance for cultivation; however, much of the land is judged as being unsuited to agricultural development. The availability of suitable agricultural land is very unevenly distributed by region. Most of the land along the flat plains of the Mekong river is found in the Central and Southern parts, while in the mountainous region in the north there is noticeably less suitable arable land for cultivation, with only 6% of the area classified as under 20% slope and 50% categorized as having a slope of 30% or more (Raintree, 2002). This mountainous Northern territory is mainly under shifting cultivation (ICEM, 2003).

In addition to the limitation of potentially arable land for agriculture, the existence of millions of items of remaining Unexploded Ordnance (UXO) scattered around half of the land surface throughout the country deters the thorough usage of existing agricultural land area and constrains the expansion of new agricultural areas. This UXO left over from the Indochina wars of 1964-1975 still injures or kills more than 200 people annually (UNDP, 2001).

Moreover, the agricultural population density of Laos is continuing to increase with the growth of population. The number of people per thousand hectares of cultivated crop area in Laos is around 3,500, compared to the figure of 2,600 in Thailand and well over 10,000 in Vietnam. However, with Laos present annual population growth rate of approximately 2.5%, the agricultural population density will double over the next 25 years (Raintree, 2002). This will make the current situation of limited arable land for agriculture much worse.

Marketing is one of the most significant elements accelerating the development of upland cultivation; however, the present circumstances of Lao upland production systems are limited by a number of factors. Upland farmers have limited marketing experience and little understanding of markets. Furthermore, the market distribution system has not kept pace with the increased production. The lack of traders and the

54

The Economic Potential for Smallholder Rubber Production in Northern Laos inadequate facilities for warehouses, transportation, and processing are constraining the market function from operating efficiently (Douangsavanh, 2004).

3.3.4 Government policies on improved upland farming in Laos As Laos is distinguished by a sharply contrasting rural economy consisting of the flat land along the Mekong corridor and the sloping land in the upland areas (GoL, 2000), the Government envisages solving the imbalance between the two sectors by transferring resources and expanding the development process in the sloping land areas while maintaining the growth of a market-driven economy in the flat land along the Mekong corridor. The key elements of the strategy for the uplands and lowlands prepared by the Ministry of Agriculture and Forests (MAF) are shown in Table 3.4 (GoL, 2003).

Table 3.4: Strategy for the uplands and lowlands Sloping/Uplands Lowlands/Mekong corridor Improve and diversify farming systems Plan land-use zoning based on biophysical with increased and intensified cash crop, (slope and land capability) and sociolivestock, and fisheries production economic parameters Accelerate participatory land allocation and Expand and intensify value added processing by promoting local and foreign land use occupancy entitlement investment Diversify farming systems and agro Develop market research and information forestry development through adaptive systems and regional market links between research, trials, and demonstrations of producers and wholesale and retail buyers farmers fields throughout the region Promote community management of Develop internationally accepted product natural resources grades and standards Sustainable land-use management with soil Rehabilitate, expand and intensify erosion control, afforestation, plantation irrigation schemes with community based forestry and conservation management management Strengthen demand driven extension Strengthen and expand rural credit programmes facilities through free competition and Expand and intensify small-scale market determined interest rates community managed irrigation schemes Strengthen rural and agribusiness lending Develop and expand rural savings and by State-Owned Commercial Banks credit systems: target credit to support (SOCBs) and private commercial banks technology adaptation by the poor Strengthen the capacity and legal framework of State-Owned Commercial Banks (SOCBs) in commercial banking transactions Open community market access by upgrading and expanding feeder roads and market information Source: GoL, 2003

55

The Economic Potential for Smallholder Rubber Production in Northern Laos In the past two decades, the improvement of upland farming has become the foremost national goal of the Lao Government. The loss of forest due to shifting cultivation in the uplands has been a continuing concern (Pravongviengkham, 1998). Therefore, the Government of Laos has issued the national policy of stabilising shifting cultivation by offering alternative sustainable farming systems for the people living in the upland and mountainous areas. As stated in the Governments Strategic Vision for the Agricultural Sector (MAF, 1999), the government aims to transform the existing harmful system of shifting cultivation to more ecologically stable cultivation systems with proper land management by villages and individuals. The key to this policy is finding suitable alternatives to shifting cultivation. One of the possible alternative approaches to support this transformation is the introduction of perennial cash crops such as rubber to increase farmers income.

3.4 The development of rubber in Laos 3.4.1 Introduction of rubber into Lao upland farming systems Because of geographical constraints, subsistence agriculture based on shifting cultivation is the main faming practice and source of food production in the mountainous upland area of Laos (Yokoyama, 2003). Recently it has been observed that upland agriculture is in transition from traditional to intensified commercialized production in some areas of the country, especially in the case of rubber cultivation (Bouahom, 2005).

Rubber has recently been introduced into upland areas of Laos, with relatively small areas having been planted and some areas already in production. In fact, rubber was first introduced into Laos in 1930, with the first rubber plantation established in Champasack Province by French planters during the colonial era. Then in 1995 rubber was again planted in Bachiangchalernsouk District of Champasack Province over an area of 50 hectares by the Development of Agriculture, Forestry, and Industry (DAFI) state company. Between 1994 and 1996, the Hmong village of Hadyao in Laungnamtha Province established rubber over 342 hectares in the form of smallholdings (Manivong et al., 2003). Since then, the rubber area in Laos has increased moderately, but at a more rapid pace since 2003. 56

The Economic Potential for Smallholder Rubber Production in Northern Laos

The rubber situation in Laos is changing so quickly that the Ministry of Agriculture and Forestry is not confident in estimating the area planted, given the sharp increase in planted area in many parts of the country (Alton et al., 2005). Many individuals, private sector entities (both domestic and foreign), and state sector entities are interested in investment in rubber planting in response to high rubber prices and the perceived demand from China, but the newly planted areas are not yet officially recorded. The available data recorded by the Forestry Research Centre (FRC) of the National Agriculture and Forestry Research Institute (NAFRI) are presented in Table 3.5. It can be observed from the table that in the Northern provinces (Borkeo, Luangnamtha, Oudomxay, and Luangprabang), many areas of rubber are possessed by individual farmers, but there are also planted areas owned by private companies (both local and foreign) and state companies. Rubber is usually planted on sloping land. In contrast, in the Central and Southern provinces (Vientiane Municipality, Khammuan, Saravane, and Champsack), almost all areas of rubber are owned by private companies (both local and foreign) and state companies. Only a few rubber holdings are owned by individual smallholders. Most of the land under rubber in the Central and Southern provinces is lowland, though some is planted on gently sloping land.

Both local and foreign investors, especially from China, Vietnam, and Thailand, have expressed interest in investing in rubber plantations throughout Laos by seeking land for concessions and other arrangements (Alton et al., 2005). Recently the Lao Government signed a contract with Vietnamese investors to plant rubber in the Southern Region of Laos with an expected area of over 10,000 hectares, and in the near future a rubber processing factory is to be established (Pongkeo, 2004). Table 3.6 shows the tentative list of investors in rubber plantations in Laos with the areas to be planted. It is also interesting to note that foreign investors have different target areas based on their location. The Chinese are proposing to invest in the Northern provinces as China shares its border with these provinces. On the other hand, the Vietnamese and Thai are focusing on the Central and Southern provinces for the same reason.

57

The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 3.5: Officially estimated rubber area in Laos, 2005 Year Area Year Locations Investors Seedlings planted (ha) tapped Borkeo Province Huaysai District 2003 120 Private RRIM600, Company GT1 2004 100 State-Private GT1, 772, Company 774 Luangnamtha Province Namtha District 1994342 2002 Individual RRIM600, Hadyao Village 1995 farmers GT1 2003296 Individual RRIM600, 2005 farmers GT1 2004 4 Lao-SINO RRIM600, District town area Company GT1, PR107, 772, 774 Sing District 1999 12 Individual GT1 Phabadnoi Village farmers 2004 21 Individual RRIM600, Kor Village farmers GT1 2005 30 Zenlee GT1 Phabadyai Village Company and individual farmers Long District 2004 2 Individual GT1 District town area farmers GT1 2005 344 Company and individual farmers 2004 7 Individual GT1 Xiangkok area farmers 2005 2 Individual GT1 farmers GT1 Viangphoukha 2005 298 Zenhua District Company, Imp-Exp Company and individual farmers Nalae District 2003 21 Individual RRIM600, Phouviang Village farmers GT1 2005 7 Individual GT1 District town area farmers Source: FRC, 2005

Seedlings sources China China

China China China

China China China

China China

China China China

China China

58

The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 3.5: Officially estimated rubber area in Laos, 2005 (Continue) Year Area Year Seedlings Locations Investors Seedlings planted (ha) tapped sources Oudomxay Province Xay District 2004 2 Lao-SINO GT1, 772, China Company 774 Houn District 2004 879 Chianfong GT1, 772, China Company 774 Namor District 2004 250 Individual GT1, 772, China farmers 774 2004 20 LSUAFRP GT1, 772 Luangnamtha Luangprabang Province Phonexay District 2005 11.14 LSUAFRP GT1, 772 Luangnamtha Nan District 2005 70 Individual GT1, 772 Luangnamtha farmers Chomphet District 2004 30 Individual GT1, 772 Luangnamtha farmers Numbark District 2004 370 Individual GT1, 772 Luangnamtha farmers 2005 25 State GT1, 772 Luangnamtha Company PakOu District 2005 10 Individual GT1, 772 Luangnamtha farmers XiangNgeun District 2005 1 LSUAFRP GT1, 772 Luangnamtha (experiment) GT1, 772 Luangnamtha Pakseuang District 2005 0.2 Kaengben (experiment) Teak Research Station Vientiane Municipality Sungthong District 1996 114 2004 Individual RRIM600 Thailand farmers supported by GTZ projects Sikhottabong District 2003 16.6 Private RRIM600 Thailand Company Khammuan Province Hinboun District 1996 30 2003 Private RRIM600 Thailand Company Thakhaek District 1995 80 2003 Mountainous RRIM600 Thailand and Development Vietnam Company Saravane Province LaoNgam District 2005 1000 Private na Vietnam Company Champasack Province Pakse and 1930 16 French na na Bachiangchalernsouk District Bachiangchalernsouk 1995 50 2003 DAFI RRIM600 Thailand District Company Note: na means data not available Source: FRC, 2005

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The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 3.6: Investors in rubber in Laos Area Amount Investors (ha) 1,000 US$ 0.9 Agricultural million Development Company

Locations Phongsaly Province (Bounneua District, Yo Village)

Comments PPCO signed agreement with Tai Fong Agriculture Development Company to plant 1,000 ha for 400 households in Yo Village Planting of seedling nurseries in both Namtha and Sing Districts Signed with Luangprabang Province Not yet signed; also research station and production facilities Plans 6,300 ha in 200408 Survey in Vientiane and Borikhamxay; 2,000 workers Discussions with the government of Savannakhet Signing contracts Rubber factory will be established (18,000 tons/year) 2,000 ha in 2004, 400 local labourers and 100 Vietnamese workers

Luangnamtha Province

na

Luangprabang Province

na

na Lao-SINO Company, Chinese and others na Chinese

Luangnamtha, Oudomxay, Borkeo Provinces Oudomxay Province (Namor District) Vientiane, Borikhamxay Provinces Savannakhet Province

10,000

1,300 16,000

US$ 3.7 Chinese million government and private sectors US$ 1 China Chiang million Fong company US$ 0.5 Thai rubber million Latex Group na Thai Hua Rubber Company na Vietnamese company US$ 22 Vietnam General million Rubber Corporation (VGRC) US$ 30 Vietnam-Laos million Rubber JointStock Company (subsidiary of VGRC) na Quang Tri Rubber Company (subsidiary of VGRC) na Rubber Company from Ho Chi Minh na Agriculture Company of Dak Lak

11,000

Saravane, Sekong, Attapeua Provinces Saravane, Champasack, Sekong Provinces

na 10,000

Champasack Province

10,000

Champasack Province

10,000

2,000 trees in 2005

Champasack Province (Bachiangchalernsouk and Xaysomboun District) Champasack Province (Bachiangchalernsouk District)

10,000

Signed with the province

3,000

Also produce organic fertilizer in plant at km 46 in Pathoumphon District; produce fertilizer for rubber

Note: na means data not available Source: Alton et al., 2005

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The Economic Potential for Smallholder Rubber Production in Northern Laos

3.4.2 Government support for the development of rubber Government support for rubber research has been essential for the development of the rubber industry in the main rubber producing countries. Regarding the technical and research support for the development of rubber cultivation in Laos, in the near future the Ministry of Agriculture and Forestry plans to set up the Rubber Research Centre in Luangnamtha Province and two rubber research stations, one in Oudomxay Province and another in Borkeo Province (FRC, 2005).

To foresee the possible expansion of rubber in Laos, the GIS Unit of NAFRI, under the Ministry of Agriculture and Forestry, undertook mapping of potential areas for rubber throughout Laos by overlaying the existing data including elevation, slope, temperature, rainfall, and present land use (Table 3.7 and Fig. 3.8). In addition, crop requirements for rubber as presented in the FAO Optimum Crop Requirements (Land Evaluation Part III) were considered. The total area of suitable land for rubber was estimated to be around 240,000 hectares. It should be noted that the findings were based large scale analysis. The results need to be tested with field research at a smaller scale.

Table 3.7: Potential rubber areas in Laos Provinces Areas (ha) Phongsaly 757 Luangnamtha 916 Oudomxay 6,483 Luangprabang 2,933 Huaphanh 476 Bokeo 6,615 Xiengkhuang 1,817 Xayabury 30,288 Vientiane 27,598 Xaysomboun Special Zone 678 Borikhamxay 44,745 Vientiane Municipality 16,374 Khammuane 10,506 Savannakhet 46,046 Saravane 19,724 Sekong 6,386 Champasack 9,505 Attapeu 9,002 Total 240,849 Source: GIS Unit of NAFRI, 2005

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 3.8: Potential rubber areas in Laos (Source: GIS Unit of NAFRI, 2005)

3.5 Conclusion Mountainous landscape, limitations of potentially arable land for agriculture and market opportunity, and increase in population pressure have combined to make poverty widespread in the uplands of Laos. In addition, traditionally subsistencebased shifting cultivation, the main production system practised in the upland areas, faces increasing pressure and is considered no longer sustainable. Therefore, the 62

The Economic Potential for Smallholder Rubber Production in Northern Laos Governments top priorities are poverty alleviation and stabilising shifting cultivation by offering alternative sustainable farming systems for the people living in the upland and mountainous areas. The key to this policy is finding suitable alternatives to shifting cultivation. One of the possible alternative approaches to support this transformation is the introduction of perennial cash crops such as rubber to increase farmers income. However, although rubber has been recently introduced into upland areas of Laos, with relatively small areas having been planted and even less already in production, there is little information currently available on the potential economic returns to smallholder producers as a basis for the promotion of the crop by the Government. The remainder of the thesis focuses on addressing this issue.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Chapter 4 The Study Area


4.1 Introduction As shown in Chapter 3, the earliest and most extensive adoption of rubber planting among smallholders has been in Northern Laos. In order to evaluate the economics of smallholder rubber production, the village of Hadyao in Namtha District of Luangnamtha Province was selected for in-depth study as Hadyao was the first village in Northern Laos to plant and tap rubber. This chapter provides an overview of Luangnamtha Province and Hadyao Village to give an understanding of the context in which rubber planting has occurred. A general account is given of rubber planting in Hadyao. The results of the household survey in the study village are presented in the next chapter.

4.2 Luangnamtha Province The province of Luangnamtha is located in the Northern Region of Laos lying between 2030 and 2130 north and 10030 and 10200 east (Fig. 4.1). It shares a border of 140 km with China in the north, 130 km with Myanmar in the west, 230 km with Oudomxay Province in the east and 100 km with Bokeo Province in the southwest (PPCO, 2005). The province is divided into five administrative districts, namely Namtha, Sing, Long, Viengphoukha, and Nalae (PPCO, 2005). Luangnamtha Province is a centre for commerce between China, Laos, and Thailand.

The province has 380 villages, consisting of 26,113 households and 145,231 inhabitants. The population density is about 16 persons per km2 and the population growth rate is 2.5% per annum (NSC, 2005a). Approximately 90% of the population is involved in agricultural production, mainly rice cultivation; the remainder is engaged in commerce, government officials, or others (PPCO, 2005). The population comprises 39 ethnic minority groups the largest number in the country including Hmong, Akha, Mien, Samtao, Thai Daeng, Thai Lu, Thai Neua, Thai Khao, Thai Kalom, Khamu, Lamet, Lao Loum, Shan and Yunnanese. As mmentioned in Chapter 3, these ethnic groups are commonly classified into three major categories: Lao Loum

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The Economic Potential for Smallholder Rubber Production in Northern Laos (Lowland Lao) who speak Tai-Kadai languages, Lao Theung (Midland Lao) speaking Mon-Khmer languages, and Lao Soung (Highland Lao) who belong to the TibetoBurman and Hmong-Mien language groups (Yamada et al., 2004). Lao Loum usually reside in the plains and along the rivers, cultivating paddy rice. Lao Theung and Lao Soung normally inhabit highlands and practise shifting cultivation of upland rice on less fertile soil (Restorp, 2000). Of the provincial population, 38.1% is Lao Loum, 26.2% is Lao Theung, and 35.7% is Lao Soung (PPCO, 2005). The majority of inhabitants in the province live in poor conditions, especially in the remote mountainous areas with little or no access to public services. According to the Population and Housing Census (2005), about 67.4% of the villages could be accessed by road, but only 20.3% had electricity, only 6.3% had piped water, only 6.6% had their own health centre. Most (88.4%) had a primary school located in the area (NSC, 2005a).

Figure 4.1: Location map of Luangnamtha Province (Source: GIS Unit of NAFRI, 2005)

The climate in Luangnamtha Province is humid tropical with an average temperature of 25 C. The annual precipitation in the province is around 1,500 mm (MSLP, 2005) (Fig. 4.2). The year is classified into two seasons: dry season and rainy season. The dry season runs from November to April, and the wet season from May to October. The dry season includes a cool period from November until February and a hot period starting in March and extending into the wet season. Approximately 90% of the

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The Economic Potential for Smallholder Rubber Production in Northern Laos annual rainfall is accounted for by the rainy season. The rain usually starts in June and ends in November with the peak of rain in July and August. The rainfall is very important for cultivation and is a concern to farmers because recently it has become less predictable and unevenly distributed.

Average Rainfall 350 300 250 Rainfall (mm) 200

Average Temperature 30 25 20 15 Temperature (C)

150 100 50 September November June January July October December March April February August May 10 5 -

Month

Figure 4.2: Monthly average rainfall distribution and temperature in Luangnamtha Province from 1994-2004 (Source: MSLP, 2005)

The total land area of Luangnamtha Province is 932,500 hectares or 9,325 km2, of which 85% is mountainous and only 15% is lowland (PPCO, 2005). The province is rich in forest resources (Fig. 4.3). The Provincial Agriculture and Forestry Office reported that the forest covers 59% of the total area, of which 12.5% was National Biodiversity Conservation Area, 7.3% was Provincial Biodiversity Conservation Area, and 5.6% was District Biodiversity Conservation Area. The remaining forests include upland mixed forest (26.6%) and reed or young forest after slash and burn cultivation (48%). The non-forested land, which constitutes 41% of the land area, includes wood and shrub land, grass land, agricultural land including shifting cultivation, and non-agricultural land (PAFO, 2000).

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 4.3: Forest and land use map of Luangnamtha Province (Source: GIS Unit of NAFRI, 2005)

Land use in Luangnamtha is still rather extensive owing to the relatively low population density. Increasing population, however, leads to more intensive forms of land use. Most of the hill tribes (84% of villages) practise shifting cultivation, which is the principal upland farming system. Apart from shifting cultivation, lowland paddy and highland farming are also practised in Luangnamtha. Table 4.1 shows the major farming systems practised in Luangnamtha. However, it should be noted that these farming systems rarely appear in their pure forms. They are very often found in combination with, for instance, animal raising and home gardens (Helberg, 2003).

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The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 4.1: Farming systems in Luangnamtha Province Farming systems Lowland rainfed system Description Market orientation Rather low. Some fruits, vegetables, animals and NTFPs are sold in local market

Cultivation of glutinous rice varieties during rainy season only. Rice yields usually higher than upland rice. Buffalo and cattle for draught, free ranging of animals during dry season. Home gardens with vegetables and fruit trees are maintained. Pigs, poultry, fish and NTFPs are important sources for food and income. Limited extent of this system in Luangnamtha. Lowland Double cropping of improved rice varieties possible but irrigated not very common. Dry season vegetables grown near system town markets. Use of off-farm inputs such as fertilizer and pesticides during dry season. Few livestock due to shortage of grazing land, buffaloes used for ploughing. Fishponds are common. Limited uses of NTFPs. Farmers are better of than in the other systems. Very limited extent of this system in Luangnamtha. Upland Shifting cultivation of rice, often intercropped with rainfed cucumber, taro, sesame and chilli on sloping land with farming fallow periods of 2-7 years. Farm size 0.5 to 1.5 ha. Other crops include maize, cassava, groundnut, cotton, sugarcane. Cattle, pigs and poultry are principal livestock. Adoption of paddy where possible. Upland households depend heavily on NTFPs for food, construction material and income. Households are very poor. Most common farming system in Luangnamtha. Highland Similar to upland farming, with the exception that high farming altitude crops, especially opium poppy are grown. In some areas temperate fruit trees such as plum, peach and apple can be found. Opium is the most important cash crop but households are poor as well. Very common in Luangnamtha. Source: Helberg, 2003

Medium. More products sold in local market

Medium to high. Livestock and NTFPs sold in local market.

Medium to high with emphasis on opium.

Rubber has been introduced into the farming systems of Luangnamtha Province since 1994. The total planted area of rubber in 2004 was 4,581 hectares, involving 34 villages and 1,559 households. The province has planned to increase the rubber area by 2,000 hectares in the next five years (PAFO, 2005). Local government considers rubber as being a solution to the problems of upland farmers by playing a key role in eliminating shifting cultivation and eradicating poverty.

4.3 Hadyao Village Hadyao Village is situated in Namtha District of Luangnamtha Province (Fig. 4.4). This village is around two km from the district centre and near the main road to the Chinese border via the Boten international checkpoint in Sing District. This road

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The Economic Potential for Smallholder Rubber Production in Northern Laos plays a key role as a commercial route between the Northern Region of Laos, particularly Laungnamtha Province, and China.

Figure 4.4: Location map of Hadyao Village in Namtha District of Luangnamtha Province (Source: GIS Unit of NAFRI, 2005)

The village was established in 1975, the year the Lao Peoples Democratic Republic (Lao PDR) was founded. The first residents were Lao Soung (Hmong) from Paktha District in Oudomxay Province (now under the administration of Bokeo Province), but in the beginning they settled in the mountains above the present Hadyao Village, practising shifting cultivation and opium growing. Two years later they moved down to the present village site in search of lowland paddy areas. In the first year there were 55 households with a population of 587. During the first five years of settlement, from 1975 to 1980, nearly 150 people, mainly children, died of malaria and lack of

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The Economic Potential for Smallholder Rubber Production in Northern Laos adaptation to the lowland environment. Many people returned to live in the mountains, leaving only 17 households. Then, in 1985, with the encouragement of the district authority, people who had returned to live in the mountains started to move down to Hadyao again and reconstruct the village, build a school, cooperative, and a state commercial shop, practising group paddy cultivation, and managing livestock grazing areas (Fig. 4.5).

Figure 4.5: Hadyao Village in Namtha District of Luangnamtha Province (Source: Authors photo, August, 2005)

Later, in 1994, 14 households of Hmong refugees from China migrated to Luangnamtha Province and requested to be allowed to live in Hadyao because they had relatives there. After the resettlement, these people introduced rubber cultivation to the village because they had over 15 years of experience working in a rubber collective in Yunnan Province of China. The village headman and authorities went to Yunnan to explore the possibility of planting rubber and found that rubber seemed the most promising alternative to shifting cultivation. They made a proposal to the provincial authority and asked for loans for rubber cultivation. The province agreed

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The Economic Potential for Smallholder Rubber Production in Northern Laos and supported them with some loans. After a few years of rubber planting many households faced the problem of having to maintain their rubber holding while cultivating rice for their subsistence because there were no returns from rubber yet. In addition, they had to face the difficulty of a heavy frost in 1999 killing numbers of rubber trees. Rubber trees were first tapped in 2002. Twenty three households started to tap, producing 22 tonnes of tub-lump rubber (i.e., coagulated latex) sold to China. Afterwards, many villagers expanded their rubber holdings, planting more rubber in their shifting cultivation areas so the area of shifting cultivation has been substantially reduced. Currently, there are 102 households in the village (Table 4.2), just over the national average figure of 91 households (NSC, 2005a). The total population is 964, consisting of 500 males and 464 females. All the villagers belong to the Hmong ethnic group. According to the wealth ranking made by the village headman and village authorities, around 21% of households are classified as wealthy, 52% as middle, and 27% as poor. The main occupation of Hadyao villagers is agriculture, but there are some who are government officials, teachers, village traders, and non-agricultural labourers. The level of education in Hadyao varies from primary school to technical college, but the majority of the population did not attend school or have only finished the primary school level.

Table 4.2: Number of households in Hadyao Village Wealth ranking Number % Wealthy 21 20.6 Middle 53 52.0 Poor 28 27.4 Total 102 100.0 Source: Hadyao Village, 2005

The Land Use Planning and Land Allocation (LUP/LA) process was undertaken in Hadyao in 1997. The land use zoning defined by the district LUP/LA team is presented in Table 4.3 and Fig. 4.6. The total area of the village is about 4,604 hectares. The land area is classified into six types of land use conservation forest, protection forest, agricultural land (both upland area and lowland area), production forest, grazing area, and residential area.

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The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 4.3: Types of land use in Hadyao Village Land use types Area (ha) % Conservation forest 700 15.2 Protection forest 1,300 28.3 Agricultural land 1,700 36.9 Production (plantation) forest 700 15.2 Grazing area 200 4.3 Residential area 4 0.1 Total 4,604 100.0 Source: Hadyao Village, 2005

Figure 4.6: Resource map of Hadyao Village (Source: Hadyao Village, 2005)

The limited lowland areas are favourable for wet rice cultivation. The upland areas are mainly used for shifting cultivation of rice; some areas are planted with cash crops such as corn, cucumber, cassava, chillies, and other cash crops. The rubber planted since 1994 is located in the area of agricultural land which in the past was used for shifting cultivation, hence it competes with upland rice and other upland crops. Since land allocation, shifting cultivation has been practised with a three-year fallow. This results in a very low yield of upland crops due to poor soil fertility and weed competition.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

The area used for upland rice under shifting cultivation is difficult to determine since the village declares that it will try to reduce the area of shifting cultivation by planting rubber, following the government policy of eradicating shifting cultivation. Therefore, there is no official record of the area of shifting cultivation. Another reason, according to the Provincial Finance Office, is that now if rice is grown within a rubber holding it is not counted as rice area under shifting cultivation but as rubber area. However, it is clear that, since the introduction of rubber into the village, the area of shifting cultivation has decreased because villagers planted rubber in their old shifting cultivation areas. Yet shifting cultivation is still practised within the village area, as well as in other villages, to provide household food security, especially during the immature phase of rubber cultivation.

Apart from crop production, livestock is also an important source of food and income for Hadyao villagers. Most farmers raise poultry for household consumption and as an additional source of cash income. Farmers who have access to lowland areas own buffaloes or cows, mainly for land preparation for rice or cash crop cultivation. Large animals (buffaloes, cows, and goats) are raised in grazing areas in other villages. Hadyao officials asked the province to allocate land outside the village for grazing areas because animals are not allowed to be raised in the village while rubber planting is underway.

Besides agricultural activities, some farmers in Hadyao have other livelihood activities, such as hand weaving, running a retail shop, and petty trading within and outside the village.

4.4 Rubber production in Hadyao Village Hadyao Village became well-known in the Northern Region of Laos as the first village to produce rubber. In fact, Hadyao was not the only village in Luangnamtha Province to establish rubber during the mid-1990s but most of the rubber trees in other villages were killed by the frost in 1999, whereas Hadyao was not affected to the same degree.

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The Economic Potential for Smallholder Rubber Production in Northern Laos During the first period of rubber establishment between 1994 and 1996, a total of 154,000 rubber trees were planted, occupying 342 hectares. Unfortunately, the heavy frost in 1999 killed 34,000 rubber trees or about 75 hectares. The remaining 120,000 rubber trees (266 ha) are the ones that are currently being tapped (Fig. 4.7). Since the success of rubber cultivation and the first tapping in 2002, there has been a considerable increase in the number of trees planted. In 2003 and 2004 76,500 trees or about 170 hectares of rubber were planted, and in 2005 another 56,800 rubber trees or about 126 hectares were established. All of these rubber trees have been planted within the 1,700 hectares of village agricultural land shown in Table 4.3. In the immediate future the village has no plan to expand the area of rubber, just to replant the dead trees. The village leaders are concerned villagers will not be able to take care of many more rubber trees.

Figure 4.7: A rubber smallholding in Hadyao Village (Source: Authors photo, August, 2005)

In summary, from the beginning of the establishment of rubber in 1994 until 2005 around 253,300 rubber trees have been planted on an area of 562 hectares. This represents 12% of village land and 33% of agricultural land. Of these trees, about

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The Economic Potential for Smallholder Rubber Production in Northern Laos 120,000 mature trees on an area of 266 hectares are currently being tapped and about 133,300 immature trees (296 ha) have been recently planted and are expected to commence tapping in 2011 or 2012 (Table 4.4).
Table 4.4: Area under rubber in Hadyao Village Rubber planted Year Households Remarks Tree Ha 1994 53,000 117 60 The area of hectare is calculated based on 450 trees = 1 ha 1995 81,000 180 60 1996 20,000 44 60 1999 -34,000 -75 Died of frost in December 1999 Sub-total 120,000 266 Being tapped 2003+2004 76,500 170 89 Some of these are replanted trees for those killed in 1999 2005 56,800 126 89 Total 253,300 562 Source: Hadyao Village, 2005

Credit support was crucial for the establishment of rubber in Hadyao since it required considerable capital to invest and the villagers had little cash income at that time. As Table 4.5 shows, the first loan of 12.9 million Kip in 1994 was provided from provincial funds, with an interest rate of 2% and a 7-year repayment period. The funds were distributed to the households in the form of rubber seedlings and barbed wire for fencing to the value of 1-3 million Kip for each household. Then in 1995 the amount of 10 million Kip was advanced by the Provincial Agriculture and Forestry Office (PAFO) with the same interest rate and repayment period. In addition, 47 million Kip was provided by the Agricultural Promotion Bank (APB) with the same interest rate and repayment period. Later, in 2003 281 million Kip were again provided by APB at a 7% interest rate for a period of 10 years. It should be noted that the bank increased the rate and repayment period on seeing the possibility for rubber farmers to pay back the loan once they had started tapping. In all cases no interest payments were required until the end of the loan period. It was reported that all loans were in fact repaid. Approximately 266 hectares (or 120,000 trees) of rubber, planted between 1994 and 1996, is currently in the tappable period. The first harvest of rubber began in 2002 with the production of 22 tonnes. The production of rubber has increased from 95 tonnes in 2003 to 150 tonnes in 2004. Rubber from Hadyao is sold to China in the form of tub-lump. The total revenue from rubber for the village was 77,000 Yuan in 75

The Economic Potential for Smallholder Rubber Production in Northern Laos 2002, 427,500 Yuan in 2003, and 825,000 Yuan in 2004 (Table 4.6). Chinese traders come to buy tub-lump rubber at the village usually once a month (Fig. 4.8). In the first two years of selling, rubber was bought using a grading system. In 2004 rubber was bought in one grade only. The Chinese traders told farmers the price of tub-lump rubber because they were the only source of price information. However, the price offered has increased in line with the world price. Table 4.7 presents the amount of rubber sold to China each month in 2004.

Table 4.5: Loans for rubber production in Hadyao Village Rubber Rubber Loan Interest area amount Source Year Household seedlings rate no. ha Kip 1994 60 42,450 94.33 12,873,340 Province 2% 1995 33 15,194 33.76 10,000,000 PAFO 2% 1995 63 97,168 215.93 47,000,000 APB 2% 2003 64 76,711 115.00 281,375,948 APB 7% Source: Hadyao Village, 2005 Table 4.6: Production and sale of rubber in Hadyao Village Households Trees Area Production Price tapping tapped tapped (Sale) Year No. No. Ha Kg Yuan*/Kg 2002 23 120,000 266 22,000 3.5 2003 67 120,000 266 95,000 4.5 2004 67 120,000 266 150,000 5.5 Note: * 1 Yuan = 1,300 Kip, August 2005 Source: Hadyao Village, 2005 Table 4.7: Sale of rubber in 2004 in Hadyao Village by month Date Sale (Kg) April 24, 2004 2,936 May 24, 2004 1,027 June 2, 2004 6,103 June 16, 2004 7,766 July 15, 2004 5,432 September 4, 2004 43,657 October 6, 2004 29,517 November 24, 2004 19,416 December 17, 2004 33,936 Total 149,790 Source: Hadyao Village, 2005

Years to repayment 7 7 7 10

Total revenue Yuan 77,000 427,500 825,000

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 4.8: The sale of tub-lump rubber on market day in Hadyao Village (Source: Authors photo, August, 2005)

4.5 Conclusion The study area for this thesis was Luangnamtha Province of the Northern Region of Laos. The study village of Hadyao in Namtha District of Luangnamtha Province became well-known throughout the country as the first village to tap rubber. Hadyao is a Hmong village located on acid upland soils in mountainous terrain. Shifting cultivation of upland rice for subsistence was the main agricultural practice in the village. Recently, the most extensive and rapid change in the village has been the expansion of smallholder rubber due to strong demand for rubber from China and the introduction of rubber planting skills in the 1990s by Hmong migrants from China. Rubber was planted on sloping land by individual smallholders, taking up around a third of the land available for shifting cultivation, thus reducing the fallow period to around three years. Tapping commenced in 2002, making it the first rubber-producing village in Laos. Since then, rubber production and income have been expanding rapidly in Hadyao. Because of the profitability of rubber with current high prices, farmers are becoming commercial farmers, with upland rice beginning to decline in

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The Economic Potential for Smallholder Rubber Production in Northern Laos importance. This suggests the village is in transition from subsistence to commercial agriculture, conforming to Barlows stage of early agricultural transformation. The next chapter presents the results of a household survey in Hadyao to explore this transformation in more detail.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Chapter 5 Resources, Rice and Rubber in the Study Village


5.1 Introduction In this chapter an account is given of the farming resources, activities, and outputs of the farm households in the study village of Hadyao, with the main focus on smallholder rubber production. The results are based mainly on the questionnaire survey of 95 farm households, but relevant information from other sources is also included. The chapter first presents an overview of how the data were collected and analysed. Then it considers household resources, including human resources, land, and livestock. The use of these resources to undertake the two main farming activities rice and rubber is analysed in the next two sections. A final section summarises the findings.

Throughout the chapter attention is given to a comparison between households of different wealth status. Of the 95 surveyed households, 22 were classified as wealthy, 52 as average, and 21 as poor. This classification was undertaken by the Hadyao Village authorities themselves. Almost every village authority in the country classifies its households into these three categories for the purpose of development planning. Different villages may use different criteria. For Hadyao the classification criteria used were the number of rubber trees tapped, the land area, rice self-sufficiency, livestock, labour force, and permanency of house. In the past, almost all households in Hadyao (as with other villages in the northern part of Laos) were classified in the average or poor status; only a few were categorized as wealthy. After the start of rubber tapping in 2002, nearly one-third of the total households in the village were classified as wealthy and over half of them were categorized as average. This in itself indicates the dramatic change that the adoption of rubber planting has brought about.

5.2 Data collection and analysis Both qualitative and quantitative data were used to understand the general circumstances of the study village and of rubber production in that village. Data were gathered during the two periods of fieldwork in the study village through key

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The Economic Potential for Smallholder Rubber Production in Northern Laos informant interviews, group interviews, direct observation, and a questionnaire survey of farm-households. The software programs used for entering and analysing the quantitative data were Microsoft Excel and the Statistical Package for Social Scientists (SPSS).

For me to be able to carry out the research in the village, an official permission letter from the Ministry of Agriculture and Forestry was issued to the Provincial Agriculture and Forestry Office (PAFO) of Luangnamtha Province. Then PAFO of Luangnamtha Province informed the District Agriculture and Forestry Office (DAFO) of Namtha District. Finally, DAFO of Namtha District informed the village authorities of Hadyao that there would be a research project undertaken in the village and asked the village authorities to facilitate my activities.

The first period of fieldwork occurred over a week from 1-7 July 2005. At this time village information was obtained from the village authorities through a focus group interview in order to understand the general picture of the study village. The set of questions used for the focus group interview is presented in Appendix 1. The first part of the interview was about the general situation of the village. The second part obtained information about rubber plantations. The third part considered the materials used for rubber production. The final part focused on the labour used for rubber production. At the same time field observations were also carried out. Household interviews with three rubber farmers were also undertaken to pre-test the questionnaire to be used in the household survey.

The second period of fieldwork was carried out for the whole month of August 2005. It was decided to interview all farm households registered in the village, given the small total (102). However, seven households were unable to be interviewed. Two newly married couples had just left their parents to live in their own houses but they still cultivated rice and tapped rubber trees with their parents. Two households had just moved into the village from Vientiane Province. The head of another household had left to build a house in Oudomxay Province. His wife was at home with young children and did not know how to answer the questions as most of the work on their new rubber plantation was carried out by the husband. The head of another household with two young children was unable to be interviewed due to illness. Another 80

The Economic Potential for Smallholder Rubber Production in Northern Laos household consisted of one man without any land was said to be mentally ill and survived by getting food from his relatives. Hence 95 households were successfully interviewed. These were all the rubber farmers in Hadyao. A pre-tested and modified questionnaire in the Lao language was used; an English version is reproduced in Appendix 2. The first part of the questionnaire was about general household information including household members, land resources, livestock, rice production, and income sources. The second part sought information about rubber production including plantation areas, sources of capital, technical aspects, problems, marketing, changes in practice of shifting cultivation, future plans, and outputs from rubber production. Interviews were undertaken in the Lao language, in some cases assisted by local language interpreters. Most of the interviewing was conducted by myself; some was done by a district agricultural and forestry official as a research assistant. Most of the interviews were in the respondents house as this also provided a chance to observe living conditions; however, farm visits were also carried out. 5.3 Household resources 5.3.1 Human resources On average one household had 7.5 members, but the size ranged from 2 to 18. Nearly 51% of the households had 5 to 8 members (Table 5.1). Smaller households consisted of young parents (or a single parent) and small children, whereas large households comprised up to four generations living together. This is a general characteristic of residence patterns of the Hmong ethnic group, that a proportion of households are stem families, in which a nuclear family (a husband/wife couple and their children) is joined by elderly parents who cannot take care of themselves or by a young married pair who have not yet built their own house (LSUAFRP, 2003).
Table 5.1: Distribution of household size in Hadyao Households Household members Number % 2 1 1.1 3-4 15 15.8 5-6 18 18.9 7-8 30 31.6 9-10 18 18.9 11-12 7 7.4 >12 6 6.3 Total 95 100.0

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Usually the senior male is classified as the head of household, but in the case of a single female parent, she is the head of household. The mean age of household head in Hadyao was 46 years, but the range was from 18 to 80 years. The education level of household heads averaged 3.4 years of schooling, but ranged from no schooling to 14 years of schooling.

Generally, a household comprises a primary and secondary labour force. The primary labour force is made up of adult, full-time workers. The secondary labour force comprises part-time workers either older children (aged 10 to 15) who go to school and help the family farm during the weekend or elderly members of the family who work a few hours a day or have the responsibility of taking care of their grandchildren. Larger households tend to have a larger labour force, while singleparent households with young children would, in general, have only one worker. To reflect the real situation, the full-time equivalent household labour force was used throughout the analysis and is referred to as the household labour force. This was estimated as the number of full-time workers plus the number of part-time workers, valued as one-third of full-time workers. In the survey households, the size of the labour force varied considerably from 0.7 to 6.7, averaging about 3 full-time equivalent workers (Fig. 5.1). All households had one or more full-time farm worker, but 10 households (11.5%) had one member (in one case, two members) who worked off-farm as a government official or local trader.

Demographic characteristics of the three wealth categories of households are presented in Table 5.2. A One-way ANOVA was conducted for each of these characteristics, indicating that there were statistically significant differences at the p<0.05 level in the mean numbers of household members, full-time equivalent workers, and on-farm workers, but not statistically significant differences in the mean age of household head, education of household age, or number of off-farm workers. Post-hoc comparisons using the Tukey HSD test indicated that the mean number of household members, full-time equivalent workers, and on-farm workers were significantly higher for wealthy households than for poor households, whereas average households did not differ from either group. Hence the size of the household

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The Economic Potential for Smallholder Rubber Production in Northern Laos labour force appears to be an important factor in achieving a higher wealth status in Hadyao.

Figure 5.1: The distribution of full-time equivalent workers per household in Hadyao

Table 5.2: Demographic characteristics of households in Hadyao by wealth status Wealth status Demographic characteristics Wealthy Average Poor (n=22) (n=52) (n=21) Mean age of household head (years) 49.5 45.9 41.9 Mean education of household head (years) 2.8 3.7 3.1 Mean number of household members (persons) 8.9 7.6 5.9 Mean number of full-time equivalent workers (persons) 3.5 2.9 2.6 Mean number of on-farm workers (persons) 4.7 4.1 3.2 Mean number of off-farm workers (persons) 1.3 1.0 1.0

5.3.2 Land Lao farmers who practised shifting cultivation conventionally used their usufruct rights to utilize the forest land nearby their villages. However, as explained in Chapter

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The Economic Potential for Smallholder Rubber Production in Northern Laos 3, this is now subject to the government-sponsored Land Use Planning and Land Allocation (LUP/LA) process, which is being implemented throughout the country (Gansberghe, 2005a). In Hadyao LUP/LA was completed in 1997 and each household was provided with a standard three plots of shifting cultivation land, though households with more members or workers could ask the village for additional plots.

Rubber was introduced to the village in 1994 and farmers mostly planted rubber trees on their shifting cultivation lands. With the increasing interest in expanding rubber planting since 2002, many farmers searched for additional shifting cultivation land in the village to plant rubber or grow upland rice when all their allocated shifting cultivation plots were planted with rubber. However, the remaining lands were likely to be located far from the village settlement, requiring a journey on foot of 1-2 hours. Therefore, some villagers with kinship or other connections to villages that were located nearby and accessible by road (such as Numdeang, Numchang, Numdee, Numhuay, Huaydam, Huaynalee, Huaytongching, Bumphiang, Thongdee, Nadeang, Keovlome, Thongchai, Hongleuay, and Tarvan) obtained land through these connections. Mostly this did not involve cash payment but sharing the product with the land owners. The system of sharing the product with the land owners in the case of growing rice is about one-third of rice production was given to the land owner. In the case of planting rubber trees, there have not been any agreements on how the outputs would be divided as rubber trees planted outside the village were not in the tapping period yet.

The average number of cultivated plots held by a household was 3.5, but the range was from 1 to 8 plots. Over 90% of the households had between 2 and 5 plots (Table 5.3). The total cultivated area averaged 5.1 ha, ranging from 0.4 to 20.9 ha. Most households were clustered around the mean; 85% of households had from 1.9 to 7.7 ha; only 10% of households had farms of more than 10 ha (Fig. 5.2).

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The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 5.3: Distribution of land holdings in Hadyao Households Number of plots Number % 1 2 2.1 2 22 23.2 3 27 28.4 4 21 22.1 5 17 17.9 6 3 3.2 7 2 2.1 8 1 1.1 Total 95 100.0

Figure 5.2: The distribution of cultivated land per household in Hadyao

Two thirds of the households had all their plots of cultivated land within the village, while 28.4% had at least one plot inside the village and one another plot in another village. About 5.6% only had plots outside the village (Table 5.4). This is an indication of the increasing pressure on the available land; some households had to find land outside their village to plant rice or rubber. About 80% of households had

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The Economic Potential for Smallholder Rubber Production in Northern Laos land use rights to all the plots they cultivated, while 20% had borrowed or rented at least one plot of land. Of the former group, 67.1% only had plots inside the village, while 6.6% had land only in another village and 26.3% had land in both locations. The latter group of households had to borrow or rent lands because their lands in the village were already planted with rubber. Almost all of them had obtained permission to access other villages shifting cultivation lands by sharing the product with the landholders. Of the households that borrowed or rented at least one plot of land, 63.2% had land plots only inside the village and 36.8% had land plots both inside and outside the village.

Table 5.4: Tenure status and location of land cultivated by Hadyao households Location of cultivated land Total Land tenure status Only inside Only outside Both village village Land use rights to all plots 51 5 20 76 At least one plot borrowed or 12 0 7 19 rented Total households 63 5 27 95

Household land resources of the three wealth categories of households in Hadyao are presented in Table 5.5. A One-way ANOVA showed statistically significant differences between wealth categories at the p<0.001 level in the mean number of plots of cultivated land and the total area of cultivated land. Post-hoc comparisons using the Tukey HSD test indicated that the mean number of plots of cultivated land for poor households was significantly lower than average and wealthy households, but the latter two categories did not differ significantly. The mean area of cultivated land differed significantly among all three categories. Chi-square tests showed no significant differences at the p<0.05 level in the proportion of households that cultivated land only inside the village, only outside the village, or both inside and outside the village. Neither were there significant differences at the p<0.05 level in the proportion of households that had land use rights to all plots of cultivated land nor that borrowed or rented at least one plot of cultivated land. However, 91% of wealthy households had use rights to all their plots and 41% had access to at least one plot outside the village, whereas only 71% of poor households had rights to all their plots and only 14% could access land outside the village. In general, then, poor households had more limited access to land.

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Table 5.5: Household land resources in Hadyao by wealth status Wealth status Household characteristics related to cultivated land Wealthy Average Poor (n=22) (n=52) (n=21) Mean number of plots of cultivated land (plots) 4.3 3.6 2.7 Mean area of cultivated land (ha) 7.3 5.0 2.8 Households cultivating land only inside village (%) 59.1 61.5 85.7 Households cultivating land only outside village (%) 9.1 5.8 0.0 Households cultivating land both in and outside village (%) 31.8 32.7 14.3 Households with use rights to all cultivated plots (%) 90.9 78.8 71.4 Households borrowing or renting at least one plot (%) 9.1 21.2 28.6

Since the land allocated to a household was mainly based on household labour availability, households with a larger labour force were likely to cultivate more plots and a larger area of land than households with a smaller labour force. The relationship between access to land (the number of plots and the total area of cultivated land) and the full-time equivalent household labour force was investigated using Pearson product-moment correlation coefficients. There was a moderate positive correlation between the number of plots and the household labour force (r=0.36, n=95, p<0.0005). On average, households with 0.7 workers cultivated 1 plot of land and households with 6.7 workers cultivated 5 plots of land. There was also a moderate positive correlation between the area of cultivated land and the household labour force (r=0.30, n=95, p<0.005). The mean area of cultivated land was 1.1 ha for a household with 0.7 workers and 9.3 ha for households with 6.7 workers. This provides confirmation of the basis for land allocation and indicates that wealthy households were better resourced in terms of both labour and land.

5.3.3 Livestock Livestock is an essential element of household livelihoods among Lao upland farmers. Livestock are raised for household consumption, cash income, and saving/investment (Gansberghe, 2005b). Poultry are raised for household consumption and cash income. Goats and pigs are raised for the purpose of household savings; they are rarely consumed except on special occasions or ceremonies but are sold in case of shortage of food or cash. Buffaloes and cattle are raised as draught animals and as household savings; however, not many are raised as large animals require much capital (LSUAFRP, 2003).

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The Economic Potential for Smallholder Rubber Production in Northern Laos In Hadyao, buffaloes and cattle are herded communally and grazed freely in village grazing areas specially allocated to avoid damage to cultivated crops. Goats are left to graze freely in small groups in fallow land and in the forest. The number of goats raised is limited to avoid damage to crops, for which the owner is held responsible. Pigs are allowed to roam freely and search for food around the house, although penning is practised by some households. Chickens, ducks and turkeys search for food around the house during the day and are penned during the night-time. Since rubber has been planted, the village has introduced a rule that large livestock (buffaloes, cattle, and goats) are not allowed near rubber holdings but only in the village grazing area.

About 82% of the households in Hadyao raised at least one type of livestock. The types of animal raised in the village were buffaloes, cattle, goats, pigs, chickens, ducks, and turkeys (Table 5.6). The most common types of livestock raised were pigs and chickens; around 60% of households raised each of these types of livestock, averaging 4 pigs and 14 chickens. About 24% of households raised buffaloes (averaging 2.4 head) and 39%, cattle (averaging 4.5 head). The least common types of livestock were turkeys and goats.

Type of livestock Buffalo Cattle Goat Pig Chicken Duck Turkey

Table 5.6: Ownership of livestock in Hadyao Households Number of livestock Number % Mean Min. Max. 23 24.2 2.4 1 5 37 38.9 4.5 1 22 2 2.1 1.5 1 2 59 62.1 3.9 1 25 56 58.9 13.8 1 80 14 14.7 7.4 1 17 5 5.3 8.8 4 15

Table 5.7 shows livestock ownership by the three wealth categories of households. A One-way ANOVA showed there were statistically significant differences at the p<0.05 level between wealth categories in the mean numbers of buffaloes, cattle, pigs, and chickens, but not statistically significant differences in the mean numbers of goats, ducks, and turkeys. Post-hoc comparisons using the Tukey HSD test indicated that the mean numbers of those types of livestock reaching statistical significance for poor households were significantly different from wealthy households, but average

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The Economic Potential for Smallholder Rubber Production in Northern Laos households did not differ significantly from either wealthy or poor households. Chisquare tests showed significant differences at the p<0.05 level only in the proportion of each wealth category that raised cattle, pigs, and chickens. In contrast, there were not significant differences at the p<0.05 level in the proportion of each wealth category that raised buffaloes, goats, ducks, and turkeys. In general, this indicated that wealthy households were better able to invest in large livestock than poor households.

Table 5.7: Data on livestock raising in Hadyao by wealth status Wealth status Variable Wealthy Average Poor (n=22) (n=52) (n=21) Mean number of buffaloes 3.5 1.8 1.5 Mean number of cattle 7.6 2.6 1.3 Mean number of goats 0 1.5 0 Mean number of pigs 5.9 3.3 1.8 Mean number of chickens 20.9 13.0 2.4 Mean number of ducks 12.0 6.1 6.2 Mean number of turkeys 10.3 6.5 0 Households raising buffaloes (%) 36.4 25.0 9.5 Households raising cattle (%) 68.2 36.5 14.3 Households raising goats (%) 0.0 3.8 0.0 Households raising pigs (%) 81.8 61.5 42.9 Households raising chickens (%) 68.2 65.4 33.3 Households raising ducks (%) 13.6 13.5 19.0 Households raising turkeys (%) 13.6 3.8 0.0

5.4 Rice production Rice cultivation is the main livelihood activity of villagers in Hadyao. Farmers normally grow upland rice for subsistence on sloping land by shifting cultivation; however, some farmers who can access flat land grow rainfed lowland rice as well. Traditionally, land preparation for upland rice occurs between March and May, with planting in June, weeding between July and September, and harvesting in October or November. Weeding is done two or three times. Farmers considered weeding to be one of the most difficult tasks for upland rice production. Lowland rice cultivation generally begins at the start of the wet season (May or June), with land preparation consisting of two passes of ploughing and one harrowing. Land preparation is mostly done using buffalo for draught power. Rice is mainly established by transplanting. The harvesting period is normally between October and November.

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The Economic Potential for Smallholder Rubber Production in Northern Laos In 2004, 86% of the households in Hadyao cultivated upland rice and/or lowland rice. This means about 14% of households did not grow rice at all. About 64% of ricegrowing households grew only upland rice, while 23% grew only lowland rice. Around 13% grew both upland and lowland rice (Table 5.8). Moreover, the land available for upland rice cultivation has been decreasing since it has been used for planting rubber trees. Hence many farmers grew upland rice not only in their village area but in another village as well. Around 44% of rice-growing households grew rice only in their village area, while 45% grew rice only in another village. Around 11% grew rice both in their village area and in another village. Of exclusively lowland rice-growing households, 5% grew rice only in their village while 90% grew rice only in another village and 5% grew rice in both their village and another village. Of exclusively upland rice-growing households, 67% grew rice only in their village while 31% grew rice only in another village and 2% grew rice in both their village and another village. Of households growing both upland and lowland rice, none grew rice only in their village while 36% grew rice only in another village and 64% grew rice in both their village and another village.

Table 5.8: Number of rice growing households by location and type of rice cultivation Location of rice cultivation Type of rice Total Only inside Only outside cultivation Both village village Only upland 35 16 1 52 Only lowland 1 17 1 19 Both 0 4 7 11 Total 36 37 9 82

As well as growing rice in shifting cultivation plots or lowland plots, in 2004 about 39% of rice-growing households intercropped rice in their rubber plantation and in 22% of cases intercropping was the only mode of rice cultivation (Table 5.9). Of households who only practised rice monocropping, 32% grew rice only in their village while 64% grew rice only in another village and 4% grew rice in both their village and another village. Of households who only intercropped rice in their rubber plantation, 89% grew rice only in their village, while 11% grew rice in another village and none grew rice in both their village and another village. Of households practising both rice monocropping and intercropping, 29% grew rice only in their village while

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The Economic Potential for Smallholder Rubber Production in Northern Laos 21% grew rice only in another village and 50% grew rice in both their village and another village.

Table 5.9: Number of rice growing households by rice cropping patterns and location of rice cultivation Location of rice cultivation Rice cropping patterns Total Only inside Only outside Both village village Only rice monocrop 16 32 2 50 Only intercropped with rubber 16 2 0 18 Both 4 3 7 14 Total 36 37 9 82

Most of the labour inputs for upland rice cultivation are provided by the family, but there is also some exchange of labour, especially for planting and harvesting. Land preparation and weeding are usually done by household workers. Data on labour inputs for upland rice cultivation in Hadyao Village were not collected during the survey, but the information on labour requirements for upland rice cultivation collected by the Lao-IRRI Project gives a reasonable guide since the study area was in northern Laos in similar circumstances to Hadyao. The typical labour requirements for upland rice cultivation are almost 300 person-days per ha, with about half of this labour requirement for weeding alone (Table 5.10). The maximum cultivated area per active labour unit is 0.6 to 0.7 ha, with an average of about 0.5 ha (Lao-IRRI, 1992).

Table 5.10: Labour requirement for upland rice production Activities Person-days/ha % Slashing 33 11.2 Burning 2 0.7 Fencing 2 0.7 Re-burning 14 4.7 Weeding before planting 13 4.4 Planting 29 9.9 Weeding 146 49.7 Harvesting/Threshing 33 11.2 Transport 22 7.5 Total 294 100.0 Source: Lao-IRRI, 1992

Among those who grew rice in 2004, 73% cultivated one plot of rice and 27% cultivated two plots. The average area of rice cultivated was 1.0 ha. Though the range was from 0.2 to 5.0 ha, most households (72%) cultivated between 0.5 and 1.5 ha (Fig. 5.3). 91

The Economic Potential for Smallholder Rubber Production in Northern Laos

Figure 5.3: The distribution of rice area per household in Hadyao

Of the households who grew rice in 2004, rice production both from upland (including rice intercropped with rubber) and lowland cultivation averaged 1,730 kg, but varied considerably from 90 to 10,000 kg. The average yield of upland rice was 1.4 t/ha, of intercropped rice, 1.0 t/ha, and of lowland rice, 4.0 t/ha. The figure of 1.4 t/ha corresponds well with the figure of about 1.5 t/ha previously reported for upland rice (Lao-IRRI, 2000). As expected, the mean yield of intercropped rice in Hadyao was lower than in open fields under shifting cultivation.

Rice self-sufficiency in 2004 was dependent on the previous years production. The average period of rice self-sufficiency in Hadyao was 8 months. About 14% of households were short of rice for the whole year, whereas 30% had enough rice for household consumption for the whole year (Table 5.11). Rice-deficit households obtained additional rice by purchasing and borrowing. About 14% purchased all their

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The Economic Potential for Smallholder Rubber Production in Northern Laos rice, 80% bought additional rice to supplement their own rice production, and 6% borrowed rice from other villagers. Among rice self-sufficient households, only 4 households reported selling any rice.
Table 5.11: Rice self-sufficiency among Hadyao households Months of rice Number % self-sufficiency 0 13 13.7 1-3 5 5.3 4-6 16 16.8 7-9 21 22.1 10-11 12 12.6 12 28 29.5 Total 95 100.0

One-way ANOVA was conducted to test the significance of differences in the mean months of rice self-sufficiency among households who grew rice on only upland (8.5 months), only lowland (9.3 months), and both upland and lowland (9.7 months); and among households who grew rice only inside the village (8.4 months), only outside the village (9.1 months), and both inside and outside the village (9.6 months). There were no statistically significant differences at the p<0.10 level among these groups of households.

Since rubber was introduced to Hadyao, the practice of upland rice cultivation had changed significantly. In terms of area, nearly 75% of the households reported that they cultivated a smaller area of upland rice after they had planted rubber trees, about 22% said that their area of upland rice was unchanged, while 3% said that they had increased their rice area. In terms of yield, around 72% reported that the yield of upland rice was lower than the yield they could get before the cultivation of rubber, about 24% said that the yield remained the same, while 4% reported a higher yield. In terms of labour used, about 78% said that the labour used for shifting cultivation had decreased since they started to plant rubber, 22% said that it remained the same, and none reported an increase. The reasons given for the decrease in the cultivation of upland rice were that there was less land available for growing rice in the village so they had to grow rice on the same plot for many years, resulting in lower yields. Moreover, they did not have enough time and labour, especially for those who had started tapping. However, the practice of lowland rice cultivation (for those households that owned paddy land) remained unchanged. 93

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Key statistics relating to rice production for the three wealth categories of households are presented in Table 5.12. One-way ANOVA showed statistically significant differences at the p<0.10 level in the mean rice production and mean number of months of rice self-sufficiency between wealth categories, but no statistically significant differences in the mean number of rice plots and the mean cultivated area between wealth categories. Post-hoc comparisons using the Tukey HSD test indicated that the mean rice production for poor households were significantly different from wealthy households, but average households did not differ significantly from either wealthy or poor households. Similarly, the mean rice self-sufficiency months for poor households were significantly different from wealthy households, but average households did not differ significantly from either wealthy or poor households. The chi-square test showed significant differences at the p<0.05 level between wealth categories in the proportion growing only upland rice, only lowland rice, and both upland and lowland rice. Likewise, there were significant differences at the p<0.05 level in the proportion growing rice only inside the village, only outside the village, and both inside and outside the village. On average, wealthy households produced more rice, were self-sufficient for more months, were less dependent on upland rice, and were less dependent on village land than average or poor households.

Table 5.12: Rice production statistics by wealth status Wealth status Household characteristics related to rice production Wealthy Average Poor (n=22) (n=52) (n=21) Mean number of rice plots (plots) 1.2 1.3 1.3 Mean area of rice (ha) 1.0 1.0 0.9 Mean production of rice (kg) 2,173 1,733 1,194 Mean months of rice self-sufficiency (months) 9.3 7.5 6.3 Households growing only upland rice (%) 38.1 62.8 94.4 Households growing only lowland rice (%) 42.9 23.3 0 Households growing both upland and lowland rice (%) 19.0 14.0 5.6 Households growing rice only inside village (%) 28.6 39.5 72.2 Households growing rice only outside village (%) 47.6 51.2 27.8 Households growing rice both inside and outside village (%) 23.8 9.3 0

To explore the relationship between rice area and rubber planting, total rice area per household in 2004 was regressed on the total number of rubber trees planted, the fulltime equivalent household labour force, the age of the household head, and the education of the household head (Table 5.13). The data were checked to ensure that

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The Economic Potential for Smallholder Rubber Production in Northern Laos there was no violation of the usual assumptions regarding multicollinearity, outliers, normality, linearity, homoscedasticity, and independence of residuals. The results are presented in Table 5.14. Although the model was significant at the 10% level

(p=0.09), the adjusted R Square was 0.05, showing that the model explained only 5% of the variance in the total area of rice in 2004. The coefficients for both the total number of rubber trees planted and the full-time equivalent household labour force were positive and statistically significant at the 10% level, though the coefficients were small. The age and education of the household head were not significant factors. The results suggest that the area of rice cultivated per household was primarily determined by other factors. Given that most households were clustered around the mean of 1.0 ha and that most households were less than 100% self-sufficient, it is likely that there was an overall shortage of rice land and individual households were constrained by the land allocation system. Hence the increase in rubber planting was reducing the total area cultivated, as farmers reported, but this was being spread across all households rather than being an individual trade-off. That rice land was being sought outside the village lends support to this argument. Wealthier households, with more rubber trees and labour force, also appeared to have better access to lowlands and land outside the village, hence the positive relationship between rice area and number of rubber trees and household labour force.

Table 5.13: Variables included in multiple regression analysis of rice area in 2004 (n=82) Symbol Definitions Mean SD Total area of rice in 2004 including the area of both TRIA 1.0 0.7 lowland and upland rice (ha) TRUP Total number of rubber trees planted (trees) 1,930 1,382 HHLF Full-time equivalent household labour force (persons) 3.0 1.1 HHAG Age of household head (years) 46 13 HHED Education of household head (years) 3.4 3.8 Table 5.14: Results of multiple regression analysis of factors affecting the area of rice in 2004 Independent Estimated t value variables coefficients (Constant) 0.42 1.18 TRUP 9.86E-005 1.76* HHLF 0.11 1.61* HHAG 0.00 0.04 HHED 0.01 0.43 - 2 R = 0.05, F = 2.09, p = 0.09 * Significant at 10% level

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The Economic Potential for Smallholder Rubber Production in Northern Laos 5.5 Rubber production 5.5.1 Rubber planting As described in Chapter 4, rubber was introduced to Hadyao in 1994 by Hmong migrants from China and was planted by individual smallholders. All of the surveyed households had planted rubber. On average, one household had planted 2.3 plots of rubber, but the number ranged from 1 to 6 plots. About 88% of the households had from 1 to 3 rubber plots (Table 5.15).

Table 5.15: Distribution of rubber plots per household in Hadyao Households Number of rubber plots Number % 1 23 24.2 2 36 37.9 3 25 26.3 4 10 10.5 5 0 0.0 6 1 1.1 Total 95 100.0

About 6% of the households planted rubber only in the first phase (1994-96), while 29% planted only in the second phase (2003-05). Nearly 65% planted rubber in both phases. Of the households who planted rubber in the first phase, around 91% planted again in the second phase. Around 76% of the households had their rubber plots only inside the village while 6% had their rubber plots only outside the village. Nearly 18% had at least one rubber plot inside the village and another plot outside the village. Almost all the households that planted rubber in the first phase planted inside the village, but some households that planted rubber in the second phase planted in other villages (Table 5.16).

Table 5.16: Location of household rubber plots by planting phase No. of households Total Location of rubber plots Only 2nd Only 1st Both phase phase Only inside village 6 20 46 72 Only outside village 0 5 1 6 Both 0 2 15 17 Total 6 27 62 95

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The Economic Potential for Smallholder Rubber Production in Northern Laos Moreover, almost all of the land planted with rubber in the first phase was located near the village settlement, while many of households that planted in the second phase had their rubber plots far from the village centre. These plots were in the village area but were about 1-2 hours walking distance. Almost all households (93%) had planted rubber exclusively on upland plots used for shifting cultivation. Five of the seven households that had planted rubber on lowland plots had planted in the second phase (Table 5.17). These observations again highlight the emerging shortage of land for both rice and rubber, particularly well-located land for rubber.

Table 5.17: Land type of household rubber plots by planting phase No. of households Land type Total Only 1st Only 2nd Both phase phase Only upland 6 25 57 88 Only lowland 0 0 1 1 Both 0 2 4 6 Total 6 27 62 95

About 27% of households borrowed money from the Agricultural Promotion Bank (APB) for the establishment of their rubber plantation, while 15% used their own money. The remaining 58% used both their own money and a bank loan. Almost all of the households who used their own money for rubber cultivation planted in the second phase (Table 5.18).
Table 5.18: Source of households funds for rubber planting by planting phase No. of households Source of Total Only 1st Only 2nd Funds Both phase phase Only credit 6 9 11 26 Only own fund 0 13 1 14 Both 0 5 50 55 Total 6 27 62 95

The total number of rubber trees planted averaged 1,930 trees per household. Though the number ranged from 200 to 9,200 trees, most households (65%) had planted between 500 and 2,500 trees (Fig. 5.4). On average 426 trees had died, ranging from none to 2,300 trees. Most died due to the heavy frost in 1999, but some died because of poor seedlings, poor planting technique, poor maintenance, and root diseases. Before rubber was tapped, farmers were not sure that they would get a return so they

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The Economic Potential for Smallholder Rubber Production in Northern Laos did not always keep their rubber plots weeded, being busy with rice cultivation. Therefore, the number of surviving trees averaged about 1,510 per household and ranged from 120 to 6,900. However, the number of mature trees averaged around 490 per household, ranging from 100 to 1,400.

Figure 5.4: The distribution of rubber trees planted per household in Hadyao

About 71% of households had already tapped their rubber trees; the remaining households had only immature trees. About 25% of the households who tapped their rubber trees commenced tapping in 2002, while 66% began tapping in 2003. Only 6% and 3% started tapping in 2004 and 2005, reflecting the tail-end of the first phase of planting.

The factors affecting the number of rubber trees planted were investigated through multiple regression analysis. Seven possible factors were included in the model (Table 5.19). The assumptions regarding multicollinearity, outliers, normality, linearity,

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The Economic Potential for Smallholder Rubber Production in Northern Laos homoscedasticity, and independence of residuals were checked to ensure that there was no violation of these assumptions. The results are presented in Table 5.20. The model was significant at the 1% level (p=0.000). The adjusted R Square of 0.24 showed that the model explained 24% of the variance in the total number of rubber trees planted. The coefficients for planting rubber in the first phase and for full-time equivalent household labour force were positive and statistically significant at the 1% and 5% levels, respectively. The age and education of the household head were not significant factors, nor were access to additional land, labour or capital (credit). It may simply be that households with the labour and initiative to plant first had been able to plant more rubber trees and that, because they now had more experience in rubber cultivation and money from selling their rubber, they were also better able to invest in new rubber plots, compounding their initial advantage.

Table 5.19: Variables included in multiple regression analysis of rubber planting (n=95) Symbol Definition Mean SD TRUP Total number of rubber trees planted (trees) 1,930 1,382 HHLF Full-time equivalent household labour force (persons) 3.0 1.1 HHAG Age of household head (years) 46 13 HHED Education of household head (years) 3.4 3.8 RCRS Households who received credit support (yes/no) 0.8 0.3 ERUP Households who planted rubber in the first phase (yes/no) 0.7 0.4 ALOV Households who accessed land outside village for rubber 0.5 0.5 and/or rice (yes/no) HLRU Households who hired labour for rubber cultivation 0.7 0.5 (yes/no) Table 5.20: Results of multiple regression analysis of factors affecting the total number of rubber trees planted Independent Estimated t value variables coefficients (Constant) -496.73 -0.75 HHLF 247.47 2.05** HHAG 11.81 1.09 HHED 13.82 0.35 RCRS -53.36 -0.11 ERUP 1,056.80 2.67*** ALOV 208.23 0.78 HLRU 426.83 1.23 - 2 R = 0.24, F = 5.25, p = 0.000 **, *** Significant at 5%, 1% level

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The Economic Potential for Smallholder Rubber Production in Northern Laos 5.5.2 Rubber production techniques Labour used for rubber cultivation in Hadyao included household labour and hired labour. Around 66% of households hired labour in addition to their family labour, while 34% used only their own household labour. If households could afford to hire labour, they usually did so for terracing, planting of seedlings, and weeding. Family labour was generally used for nursery work, maintenance of rubber trees in the immature phase (weeding), and tapping. Tapping was definitely undertaken by household members since tapping work requires skill and care so that the trees are not damaged by tapping too deep. Hence hired labour for tapping was not common in the village. In the past labour was often hired from within the village, but in 2004, with all households having their own rubber plots, it was usually hired from neighbouring villages.

Rubber production techniques used in Hadyao were derived from China. During the first period of rubber cultivation in the mid-1990s, all rubber seedlings were imported from China. The rubber clonal varieties were GT1 and RRIM600, which were the main varieties found in Yunnan province. Hadyao farmers usually planted both GT1 and RRIM600 in the same plot because they have different characteristics. RRIM600 provides more latex yield but is sensitive to cold and diseases. Farmers said that RRIM600 is not suitable to plant in low terrain, especially near the stream. Conversely, GT1 can resist cold and diseases, but gives lower yield of latex.

Since 2003 over half of the households established nurseries by themselves. The seedling operation was usually done in June, the start of the rainy season. Farmers collected seeds from their mature rubber trees and spread them in a seed bed. After the seedlings were 10-15 centimetres tall, they were planted in a seedling plot with intra-row spacing of 20 centimetres and inter-row spacing of 30 centimetres and 4050 centimetres space between each double set of rows. The budding process was commenced when the seedlings had attained about the diameter of a pencil or pen. Farmers normally obtained the budwood from their rubber trees. Budding was undertaken with a patch bud. Budding requires great care and was usually done by specialists. After the trees were budded for about 15-20 days, the rubber seedlings were ready to be planted.

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Since rubber trees in Hadyao were planted on land used for shifting cultivation, land preparation was the same as for upland rice cultivation. Firstly, fields were slashed and burned, usually in March or April. Then, terracing and lining were prepared before holes were dug (Fig. 5.5). Even though land clearing involved the use of fire, there were only a few cases of fire problems as farmers made a fire break around their plots, which is the common practice for shifting cultivation. The village has a rule that, if fire spreads, the person responsible has to compensate for the killed trees, so farmers were alert to avoid fire problems.

Figure 5.5: Land prepared for planting with rubber in Hadyao (Source: Authors photo, July, 2005)

After the land had been prepared, rubber trees were ready to be planted (Fig. 5.6). June and July were the months for planting rubber. Farmers normally planted their rubber trees with an intra-row spacing of 3 m and an inter-row spacing of 7 m. It should be noted that these planting distances were recommended by the migrants from China and farmers had planted their rubber trees with this spacing during the first

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The Economic Potential for Smallholder Rubber Production in Northern Laos period of rubber establishment in 1994-95. However, in the second phase of rubber planting in 2003-05 the row spaces used varied from 2-3 m for intra-row spacing and 5-7 m for inter-row spacing. Farmers reported that the intra-row spacing of 3 m and inter-row spacing of 7 m were appropriate for gently sloping land, while intra-row spacing of 2-2.5 m and inter-row spacing of 5-6 m were best for steeply sloping land. Over two-thirds of the farmers reported that they planted their rubber with an intrarow spacing of 3 m and an inter-row spacing of 7 m.

Figure 5.6: Young rubber trees in Hadyao (Source: Authors photo, August, 2005)

About 70% of households undertook replacement planting in their rubber plots when seedlings died or were damaged. Of the households who undertook replacement planting, 70% did so in all their rubber plots. This mostly occurred in the first year, though 24% undertook some replacement planting in the second year and 5% in the third year. Of the households who planted rubber only in the first phase, only 11% undertook replacement planting. In contrast, around 62% of those who planted rubber only in the second phase undertook replacement planting and 82% of those who planted rubber in both phases undertook replacement planting (Table 5.21).

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Table 5.21: Incidence of replacement planting by planting phase No. of households Timing of replacement st Total Only 2nd Only 1 planting Both phase phase No replacement planting 8 10 11 29 Year 1 1 13 33 47 Year 2 0 2 4 6 Years 1 and 2 0 1 9 10 Year 3 0 0 3 3 Total 9 26 60 95

Applying inorganic fertilizer was not common in the shifting cultivation system and the same applied to rubber planted in Hadyao, though farmers usually put buffalo or cattle manure into the planting hole. The household interviews indicated that, from the first planting of rubber in 1994 until 2005, only one farmer had applied inorganic fertilizer to his rubber trees. This was on the recommendation of Chinese rubber experts and rubber buyers in order to increase the growth of the trees and start tapping earlier. However, the Chinese fertilizers applied by that farmer were not the full dose, which reflects the common practice of under-fertilizing among smallholders (Cottrell, 1991). Households who never applied fertilizer gave a variety of reasons, not necessarily consistent with each other: (1) the soil was still fertile and their rubber trees still grew well; (2) they could not afford to buy fertilizers because if they applied fertilizers at all they had to apply continuously every year, otherwise the soil would be dry and hard; (3) the rubber trees would be too big and would fall over in a strong wind; (4) rubber farmers in other countries used fertilizers so Chinese traders wanted to buy from Laos because fertilizer was not used; (5) they had never applied before and did not know how to apply; (6) applying fertilizers was not good, causing health problems; and (7) their rubber trees were still young.

It is interesting to note that more than half of the households mentioned that in the future they probably would apply fertilizer when the soil was not fertile any more and the yield of latex was low, when they had money from selling rubber, when they knew how to apply it, when they started tapping for more than three years because tapping for many years would yield less latex, and to increase production as recommend by the Chinese. Those who did not intend to apply fertilizers in the future gave much the same reasons as listed above.

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The Economic Potential for Smallholder Rubber Production in Northern Laos All of the households cleared weeds every year. Weeds were usually cleared by hand but the use of herbicide had become more common. Around 39% of the households reported applying herbicide to control Imperata cylindrica. They had started to use herbicide in 2003, but the number who used herbicide increased from 3 in 2003 to 25 in 2005. Two types of herbicide were used, one from China and one from Thailand. The former was used to kill grass and broadleaf weeds but could not be identified from the bottle; the latter was paraquat. Farmers said that the paraquat was more effective in controlling Imperata cylindrica than the Chinese herbicide. Households who never applied herbicide reported that they had not enough money to buy, they did not know how to apply it because they had never used it before, they were still able to control weeds by hand weeding or hiring labour, they were afraid of being affected by the chemicals, they were afraid that their rubber trees might die like the grass, and it was difficult to carry water for herbicide application because their rubber plots were far from water sources. Nearly two thirds of the households mentioned that they would use herbicide in the future. The reasons were that when they planted many rubber trees they might not have enough family labour to clear weeds by hand, that when they received money from selling rubber they would hire others to spray herbicide, and that it was more convenient to use herbicide and save labour. Households who said that they would not apply herbicide in the future gave the same reasons as above.

Pests were not mentioned by rubber farmers as a serious problem and many of them reported that there was no pest in their rubber plantation. However, diseases were reported as a serious issue by nearly 80% of the households. The diseases found were yellow leaf disease and root disease (Fig. 5.7). Yellow spots appeared on new leaves in April each year. This did not cause the death of trees, hence farmers did nothing but left the leaves to recover by themselves. Root disease could spread to other trees and caused the death of the trees. The only way of preventing its spread was cutting down the affected trees and digging a trench to prevent the infection of surrounding trees.

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Figure 5.7: The symptoms of yellow-leaf disease (left) and root disease (right) in Hadyao (Source: Authors photo, August, 2005)

Almost all households intercropped their rubber plots. Of the intercropping households, 69% intercropped all of their rubber plots while 31% did not. The most predominant intercrop was upland rice, followed by maize and pineapple (Figs. 5.8 and 5.9). Of the households who intercropped, around 58% intercropped only rice, while 29% intercropped rice, maize, and pineapple and about 10% intercropped rice, chilli, cucumber, eggplant, ginger, cassava, bean, and cabbage. Only two households intercropped other crops excluding rice. Intercropping, except pineapple, took place for up to three years, after which there was too much shade. Pineapple was normally intercropped with mature rubber trees. Of the intercropping households, 34% intercropped only in the first year, 48% for two years, and 18% for three years or more.

Livestock raising in rubber plots was not common practice in Hadyao because farmers were afraid the rubber trees would be destroyed, especially by large livestock. However, some households raised chickens in their rubber plots during the mature phase.

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Figure 5.8: Rice (left) and corn (right) intercropped with young rubber trees in Hadyao (Source: Authors photo, August, 2005)

Figure 5.9: Pineapple intercropped with mature rubber trees in Hadyao (Source: Authors photo, August, 2005)

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Rubber farmers in Hadyao normally go to tap their rubber trees very early in the morning, from 3 a.m. to 6 a.m., and then come back to their houses for breakfast. They collect the latex between 9 a.m. and noon (Fig. 5.10). About 71% of households were tapping their rubber trees at the time of the survey. Most the tapping households (91%) tapped their rubber trees on alternate days. Only 9% tapped their trees on two successive days and then let the trees rest for a day. Farmers with many rubber trees tapped half their trees each alternate day. Of the tapping households, around 21% reported that they had previously tapped the trees for two consecutive days followed by one day off. The reason was that they wanted to get more latex and when rain prevented tapping they felt they had to supplement output by tapping on two consecutive days. Tapping on alternate days provided farmers with smaller holdings the opportunity to undertake other livelihood activities when not tapping. Farmers usually tapped in the 8 month period from April to November. If tapping on alternate days, this gives a total of 120 tapping days in a year.

Figure 5.10: The practice of tapping (left) and collecting latex (right) in Hadyao (Source: Authors photo, August, 2005)

Rubber farmers in Hadyao did not process their rubber as in other countries. They just made tub lump rubber and sold it to Chinese traders who came to buy at the village. Two main techniques are used for processing raw latex into tup lump rubber (Fig. 5.11). The first technique involves using plastic buckets. First, latex is poured into a sizeable plastic bucket and left for about 24 hours. The latex liquid solidifies as a bucket-shaped lump and then the tub lump is taken out and kept in a safe place, usually in the rubber plot (Fig. 5.12). The weight of tub lump rubber is about 30-50 kg, depending on the size of bucket. If the raw latex is mixed with formic acid, the liquid solidifies faster, but no rubber farmers used formic acid, to reduce the cost of 107

The Economic Potential for Smallholder Rubber Production in Northern Laos processing. The second technique of making tub lump is by using a plastic bag. First, a hole is dug to the same size as the plastic bag. The plastic bag is placed in the hole and raw latex is poured into the bag. The latex in the bag is left for about 24 hours to solidify. After that the tub lump in the bag is taken out and kept in a safe place. Tub lump rubber in a plastic bag also weighs about 30-50 kg, depending on the size of the bag.

Figure 5.11: The use of plastic bag (left) and bucket (right) for processing latex into tublump rubber in Hadyao (Source: Authors photo, August, 2005)

Figure 5.12: Tub-lump rubber is normally kept at the farm in Hadyao (Source: Authors photo, August, 2005)

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The Economic Potential for Smallholder Rubber Production in Northern Laos 5.5.3 Rubber yield, sales, and income Farmers in Hadyao Village have been tapping their rubber trees since 2002. The average rubber production per tapping household was 655 kg in 2002, 887 kg in 2003, and 1,211 kg in 2004. However, the total production per tapping household varied considerably from 60 to 2,000 kg, 110 to 4,000 kg, and 150 to 4,450 kg in the same years.

Rubber in Hadyao Village has been tapped since 2002; however, not all farmers started tapping in 2002. The number of households who started tapping was 21 in 2002, 42 in 2003, and four in 2004 (Table 5.22). It can be seen that the average rubber yield of households who had tapped for three years was higher than for households who had tapped for one year or two years. The average yield in the first year of tapping was 904 kg/ha, but it increased to 1,380 kg/ha in the second year, and then to 1,999 kg/ha in the third year. This yield pattern is consistent with the normal yield profile of a rubber plantation.

Table 5.22: Average yields (kg/ha/year) over three years of tapping in Hadyao Year of tapping Calendar year Average 1st year 2nd year 3rd year 2002 1,009 (n=21) 1,009 (n=21) 2003 843 (n=42) 1,566 (n=21) 1,045 (n=63) 2004 1,209 (n=4) 1,295 (n=42) 1,999 (n=21) 1,470 (n=67) Average 904 (n=67) 1,380 (n=63) 1,999 (n=21)

Apart from the natural increase in latex flow, one of the reasons for the sharp increase in yield in the second and third years may be that tapping was a new skill for Hadyao farmers. Hence yields were low in the first year of tapping but in the second and third years they were more familiar with tapping and improved their tapping skill so they obtained higher yields. Another reason is that the yield of rubber is affected by weather conditions, particularly rainfall. In 2003 the average rainfall in Luangnamtha Province was only 951 mm compared to an average annual rainfall between 1994 and 2004 of around 1,500 mm (MSLP, 2005). The average rubber yield of farmers who first tapped in 2003 was 843 kg/ha compared to the average yields of 1,009 kg/ha and 1,209 kg/ha obtained by those whose first tapping year was 2002 and 2004, respectively (Table 5.22). It appears that the unusually low rainfall led to a lower yield in 2003 and it contributed to make the average yield in the first year of tapping

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The Economic Potential for Smallholder Rubber Production in Northern Laos quite low, apart from the factor of being unfamiliar with tapping during the first year. It should be noted that in spite of the low amount of rainfall in 2003, the average yield of farmers whose second year of tapping was in 2003 still increased from 1,009 kg/ha in 2002 to 1,566 kg/ha in 2003. This may be because these farmers were more familiar with tapping and if there was no incidence of low rainfall in that year, they might have obtained an even higher yield than 1,566 kg/ha.

The average yields of the initial three years of tapping in Hadyao Village are consistent with the average yields over the life of the plantation of smallholders in North Eastern Thailand and Southern China (Table 5.23), where rubber has been planted in similar upland areas with similar climate to Northern Laos.
Table 5.23: Yields (kg/ha/year) of smallholder rubber in Laos, China, and Thailand Average yield Sources Locations Hadyao Village (Northern Laos) 1,428 Household survey, 2005 Southern China 1,200-1,350 Alton et al., 2005 North East Thailand 1,540

A comparison of the main characteristics related to rubber production between the three wealth categories is presented in Table 5.24. As before, One-way ANOVA showed statistically significant differences at the p<0.05 level in the number of rubber plots, the mean number of rubber trees, the mean number of newly planted rubber trees, and the mean number of tapped trees for the three wealth categories, but no statistically significant differences in the mean tub-lump rubber production, rubber yields, intercropped rice area, intercropped rice production, and intercropped rice yields between the wealth categories. Post-hoc comparisons using the Tukey HSD test indicated that the mean number of rubber plots and rubber trees differed significantly among all three wealth categories of households. The mean number of newly planted rubber trees and tapped trees for wealthy households were significantly different from poor households, but average households did not differ significantly from either wealthy or poor households. Chi-square tests showed significant differences at the p<0.001 level in the proportion of households planting rubber only in the first phase, only in the second phase, and both in the first phase and the second phase, and the proportion of households tapping their rubber trees. Likewise, there were significant differences at the p<0.01 level in the proportion of households that hired additional labour for their rubber plantation. Conversely, there were no significant differences at 110

The Economic Potential for Smallholder Rubber Production in Northern Laos the p<0.05 level in the proportion of households that planted rubber only inside the village, only outside the village, or both inside and outside the village. Neither were there significant differences at the p<0.05 level in the proportion of households that received credit support nor planted rubber only on upland, only on lowland, or both upland and lowland. In sum, wealthy households had more plots, were more likely to hire labour, had planted more trees in both phases, had more trees in production, and hence produced more rubber than average or poor households. An early ability to plant rubber had clearly opened up a significant economic advantage to these households that later planters would find difficult to overhaul, given their locational and financial disadvantage.

Table 5.24: Rubber production data by wealth status of household, 2004 Wealth status Variable Wealthy Average Poor (n=22) (n=52) (n=21) Mean number of rubber plots 3.0 2.3 1.4 Mean number of rubber trees 2,874 1,931 940 Mean number of recently planted rubber trees 1,869 1,299 752 Mean number of trees tapped 595 423 325 Mean production of tub-lump rubber (kg) 1,575 1,225 870 Mean rubber yield (kg/tree) 3.0 3.2 2.4 Mean area of intercropped rice (ha) 0.5 0.9 0.8 Mean production of intercropped rice (kg) 460 875 650 Mean yield of intercropped rice in 2004 (kg/ha) 955 1,175 1,035 Households planting only in first phase (%) 4.5 5.8 9.5 Households planting only in second phase (%) 9.1 23.1 61.9 Households planting in both phases (%) 86.4 71.2 28.6 Households planting only inside village (%) 63.6 75.0 90.5 Households planting only outside village (%) 9.1 5.8 4.8 Households planting both in and outside village (%) 27.3 19.2 4.8 Households planting only on upland (%) 81.8 94.2 100.0 Households planting only on lowland (%) 4.5 0.0 0.0 Households planting on both upland and lowland (%) 13.6 5.8 0.0 Households receiving credit support (%) 90.9 88.5 71.4 Households hiring additional labour (%) 77.3 73.1 38.1 Households tapping rubber (%) 86.4 76.9 38.1

Some of the factors affecting the production of tub-lump rubber were investigated by performing multiple regression analysis. It was hypothesised that production would be positively influenced by the number of rubber trees tapped, the full-time equivalent household labour force, the education level of the household head, and the year of tapping (whether it was the first, second, or third year of tapping), and negatively influenced by the total rice area and the age of the household head (Table 5.25). The

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The Economic Potential for Smallholder Rubber Production in Northern Laos assumptions regarding multicollinearity, outliers, normality, linearity,

homoscedasticity, and independence of residuals were again checked to ensure that there was no violation of these assumptions.

The results are presented in Table 5.26. The model was significant at the 1% level (p=0.000). The adjusted R Square of 0.39 showed that the model explained 39% of the variance in the production of tub-lump rubber in 2004. However, only the coefficient for the number of trees tapped was significantly different from zero. Hence neither the availability and quality of labour nor competition for labour from rice production were affecting rubber output. The possible reason is that, at this stage, the household labour force was still able to handle the tapping work there was no labour shortage for tapping yet since the number of rubber trees tapped was not large. The average labour force of two workers was sufficient for a household to handle the tapping work. Moreover the restricted area for rice production reduced the degree to which rice competed with rubber for household labour. In the future when farmers have more rubber trees to be tapped, their available labour may not be enough to do the tapping, and then labour will become one of the main factors determining the production of rubber. The age and education of the household head were also not significant factors.

For the two dummy variables reflecting years of tapping, the first dummy variable was not significant, but the second one was weakly statistically significant (p=0.20) with a coefficient of about 500. This means that production increased by 500 kg on plots in their third year of tapping compared with plots in their first or second year of tapping. As mentioned above, this may be both because of the normal increase in yields in the first few years of a rubber plantation and because, in the third year of tapping, farmers were more familiar with tapping and had improved their tapping skill.

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Table 5.25: Variables included in multiple regression analysis of rubber production (n=67) Symbol Definition Mean SD PTLR Production of tub-lump rubber in 2004 (kg) 1,282 927 RUTT Number of rubber trees tapped in 2004 (trees) 460 281 HHLF Full-time equivalent household labour force (persons) 3.0 1.1 TRIA Total area of rice cultivated in 2004 (ha) 1.0 0.7 HHAG Age of household head (years) 46 13 HHED Education of household head (years) 3.4 3.8 DMV1 First year of tapping vs. second year of tapping 0.7 0.5 DMV2 First year of tapping vs. third year of tapping 0.2 0.4

Table 5.26: Results of multiple regression analysis of factors affecting the production of tub-lump rubber in 2004 Independent Estimated t value variables coefficients (Constant) 561.97 1.03 RUTT 2.25 5.13*** HHLF 38.09 0.34 TRIA -84.17 -0.61 HHAG -11.48 -1.05 HHED 34.56 1.11 DMV1 -44.18 -0.13 DMV2 503.87 1.29 - 2 R = 0.39, F = 5.61, p = 0.000 *** Significant at 1% level

So far all of the tub-lump rubber produced in Hadyao has been sold to China. Chinese traders come to buy the tub-lump in the village usually once a month. For the first two years of selling, rubber was bought using a grading system but since 2004 only one grade has been used. Chinese traders set the price of tub-lump because they are the only source of price information. In 2004 the Lao-SINO company established a rubber processing factory in Luangnamtha Province, but they offered a lower price than the Chinese traders from Yunnan so farmers sold their rubber to the traders.

There is no marketing contract between the rubber farmers and the Chinese traders. Every month the village authority will contact the buyers in Yunnan and search for those who offer the highest price. So far there is not seen to be a marketing problem because there is strong demand for rubber from China. However, there is a concern among farmers that if they could not sell their rubber to China, they would have few alternatives and might get a lower price than the price in China.

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The Economic Potential for Smallholder Rubber Production in Northern Laos Regarding income sources, about 28% of households reported that their only source of cash income was selling tub-lump rubber; 29% only earned income from other sources including livestock, other cash crops, selling rubber seedlings, working for wages, and receiving money from relatives living in the USA; the remaining 43% received income from both rubber and other sources. About 69% of the households mentioned that their highest ranking income source was rubber, while 31% ranked income from other sources number one.

The main problem related to rubber cultivation mentioned by respondents was the difficulty faced in the period before the rubber was tapped. During the immature phase, farmers had to work harder both growing rice and taking care of their rubber, so they had no time to do other work. Moreover, they faced a rice deficit. Farmers also mentioned their concern about transporting tub-lump rubber from the newer rubber plots to the village when the trees reached maturity because the new plots were located far from the village and there was no road through that area.

About 86% of the households reported that they planned to increase the area under rubber trees, while only 14% had no plan to plant more rubber trees. The reasons given for increasing the rubber area were to have many trees for their children, to have a permanent job as a rubber farmer and stop growing upland rice, to earn more money because rubber provides a good income, and to claim access to land because of a fear that there would be no land left to plant in the future as more and more people became interested in planting. The reasons given for not planting more rubber trees were that there was not enough labour, there was no land left near the village, and there was no money to invest more. Around 92% of the households who planned to increase their rubber area mentioned that they would be able to access the necessary land, while 8% said they would not. The most common way of accessing land was by asking permission from the village authority to cultivate more plots of land. The other way was by seeking permission to cultivate in other villages.

5.6 Conclusion The household survey in Hadyao shows that farmers are in the middle of a major transition from primary dependence on the shifting cultivation of rice for subsistence to dependence on smallholder rubber and the market economy. While rubber has 114

The Economic Potential for Smallholder Rubber Production in Northern Laos helped farmers increase their income, there are some emerging constraints. Land is becoming a constraint due to a growing demand among farmers to expand their rubber holdings, though less-accessible land is still available and some farmers are able to plant rice and rubber in other villages. Labour is also becoming a constraint; though at this stage family labour can handle the tapping, as more trees come into production this will be a constraint, putting more pressure on rice production. Rubber farmers may have to reduce further the area of rice or even stop growing rice altogether if they want to expand their rubber holdings. The land and labour constraints mean that most households do not attain rice self-sufficiency any more. Hence many farmers have now moved into the second and more risky stage in the transition from subsistence to commercial agriculture.

Despite the popularity of rubber and the stated intention of farmers in the study village to stop shifting cultivation and plant only rubber, it is unlikely that upland rice production will be replaced completely. Farmers still need to grow upland rice or intercrop rice in their rubber plots, especially those whose rubber trees are still immature. Farmers also face the risk that the price of rubber will fall or that they cannot sell to China. Hence they may need to expand rice production again. One advantage of rubber is that, given a major market collapse, it is relatively easy to revert to shifting cultivation, as seen among rubber smallholders in Indonesia and Malaysia.

In addition, there has been an increasing inequality between the three wealth categories of households, particularly between wealthy and poor households, in terms of land and labour resources, and rice and rubber production. Wealthy households had a larger labour force, were able to access more land, were better able to invest in large livestock, produced more rice, were self-sufficient for more months, were less dependent on upland rice, were less dependent on village land, were more likely to hire labour, had planted more rubber trees, had more rubber trees in production, and hence produced more rubber than average or poor households. Hence rubber production was accentuating economic differences between households.

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Chapter 6 Bioeconomic Analysis of Smallholder Rubber Production in the Study Village


6.1 Introduction This chapter presents a discounted cash flow (DCF) analysis of smallholder rubber production in Hadyao Village. The aim of this analysis was to assess the profitability of a hectare of smallholder rubber in the conditions faced by a typical farmer in Hadyao. This required modelling the yield of latex over the life of the rubber enterprise, as well as other outputs, using the Bioeconomic Rubber Agroforestry Support System (BRASS), which was parameterised and calibrated as far as possible to Hadyao conditions. These simulated yields were combined with data on costs and benefits obtained from group discussions with experienced rubber farmers in Hadyao, household survey data, and other relevant sources. Attention was given to the appropriate valuation of household labour and the capital invested in the enterprise, as well as examining a range of investment criteria.

6.2 Modelling yields using BRASS 6.2.1 Introduction Since the yield data from the study village were available for only the first three years of tapping (see details in Section 5.5.3 of Chapter 5) and rubber is a long term investment, estimates of the yield of latex over the life of the investment were required. Annual latex yields were estimated using the BRASS model, which is the best available tool for modelling smallholder rubber production (Grist et al., 1998; Cacho, 2001). BRASS is the new generation of the Bioeconomic Agroforestry Models (BEAM): RRYIELD and RRECON which were modified by a project of the Australian Centre for International Agricultural Research (ACIAR). The original BEAM was created by the Bioeconomic Agroforestry Modelling Project at the School of Agricultural and Forestry Sciences, the University of Wales. While BEAM was run in DOS, BRASS was rewritten to be able to run in Visual Basic for Applications (Grist et al., 1998). It is important to note that the development of the original BEAM and BRASS was based on the circumstances of rubber smallholders in Indonesia. 116

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BRASS has two modules a biophysical and an economic component (Fig. 6.1). The biophysical module incorporates many variables in order to estimate the intercrop yields during the intercropping period, the stream of latex yields over the life of the plantation, and the volume of harvestable timber at the end of the production period. These variables are grouped into climate, topography and soil, rubber management, and intercrop management. The biophysical part focuses on the changes in outputs (latex, rubber wood and intercrops) in response to those variables. The economic component is linked with the biophysical component by multiplying the outputs from the biophysical component with prices in order to verify the economic returns from a rubber plantation. Labour costs, and costs for establishment, maintenance, and harvesting of the intercrop and rubber plantation, are used within the model to determine annual costs. Once the costs and returns are known, the net present value of the system is determined by using a discount rate. Since the purpose of using BRASS in this study was to estimate yields, only the biophysical component was used. The economic component was replaced with a separate spreadsheet analysis for the calculation of net present value and other investment criteria.

Figure 6.1: Variables in the biophysical and economic components of BRASS

6.2.2 Climate variables The first group of variables in the biophysical component is climate, including rainfall, potential evapotranspiration, mean temperature, and solar radiation (Table 6.1). The first three are measured as annual averages while solar radiation is measured

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The Economic Potential for Smallholder Rubber Production in Northern Laos as a daily average. Ideally, 35 years of data were needed as this was the life of the plantation used in the model. However, only limited data were available and compromises had to be made.

Table 6.1: Climate variables in the biophysical component of BRASS Variables Unit Rainfall mm per year Potential evapotranspiration mm per year { Mean temperature C Solar radiation MJ/m2

The data on rainfall and temperature between 1994 and 2004 were available from the Meteorology Station of Luangnamtha Province (MSLP) (Table 6.2), but potential evapotranspiration (PET) and solar radiation were not. The temperature in Luangnamtha Province between 1994 and 2004 was generally quite stable at around 24{C. Its coefficient of variation was very low (1.4%). The annual rainfall, on the other hand, varied considerably. Its coefficient of variation was quite high (21.4%). The rainfall between 1994 and 1999 was close to the mean value of nearly 1,600 mm, but between 2000 and 2002 rainfall averaged over 2,000 mm and 2003 was an exceptionally dry year with only 951 mm.

Table 6.2: Rainfall and temperature data in Luangnamtha Province Year Rainfall (mm) Mean temp. ({ C) 1994 1,450 23.8 1995 1,435 23.9 1996 1,356 23.7 1997 1,406 23.8 1998 1,834 24.3 1999 1,536 23.9 2000 2,113 23.8 2001 1,828 23.9 2002 2,080 24.2 2003 951 24.9 2004 1,610 23.8 Average 1,600 24.0 Source: MSLP, 2005

Although the data on PET and solar radiation were not available from the Meteorology Station of Luangnamtha Province (MSLP), derived data were available from a study by Inthavong et al. (2004) on Using GIS technology to develop water availability maps for Lao PDR. One part of this study was an attempt to estimate PET using the Penman-Monteith equation. Based on this method, PET was calculated 118

The Economic Potential for Smallholder Rubber Production in Northern Laos by using other data including temperature, humidity, wind speed, and solar radiation. As solar radiation measurements were not available for most provinces of Laos, including Luangnamtha, sunshine hours were used to estimate solar radiation. However, this study could only provide estimates of PET and solar radiation for Luangnamtha Province during the period 2000-2004 (Table 6.3). The data for 19941999 could not be estimated since there were no records of sunshine hours. It can be seen that the estimated PET and solar radiation from 2000 to 2004 were very stable and the value in each year was close to the mean value of 1,504 mm for PET and 19.0 MJ/m2 for solar radiation. The coefficients of variation for these data were quite low 4.3% for PET and 3.5% for solar radiation.
Table 6.3: Estimated PET and solar radiation in Luangnamtha Province Potential Solar radiation Year evapotranspiration (MJ/m2) (mm) 2000 1,472.7 19.1 2001 1,488.0 18.4 2002 1,489.2 18.8 2003 1,617.5 20.1 2004 1,453.2 18.6 Average 1,504.1 19.0 Source: Inthavong et al., 2004

The issue raised was how to estimate these variables over an assumed 35 year period, starting in 1994 when the first rubber was planted in Hadyao Village. Since the temperature, PET, and solar radiation were quite stable, it was decided to use the average values in each year of the model run (24{C for temperature, 1,504 mm for PET, and 19 MJ/m2 for solar radiation). However, this was not appropriate for rainfall, which varied to a greater extent. It was considered better to capture something of the rainfall variability in the model than simply assume average rainfall in each year. The approach used was simply to repeat the 11-year rainfall data with 1994 as Year 1 as shown in Table 6.4.

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Table 6.4: Assumed rainfall data in Luangnamtha Province Rainfall Rainfall Year Year (mm) (mm) 1 1,450 19 1,828 2 1,435 20 2,080 3 1,356 21 951 4 1,406 22 1,610 5 1,834 23 1,450 6 1,536 24 1,435 7 2,113 25 1,356 8 1,828 26 1,406 9 2,080 27 1,834 10 951 28 1,536 11 1,610 29 2,113 12 1,450 30 1,828 13 1,435 31 2,080 14 1,356 32 951 15 1,406 33 1,610 16 1,834 34 1,450 17 1,536 35 1,435 18 2,113

6.2.3 Topography and soil variables The second group of variables in the biophysical component is topography and soil (Table 6.5). These variables include topography, slope, soil depth, drainage, % rock, soil texture, soil nutrients, soil pH, maximum soil moisture, and wilting point.

Table 6.5: Topography and soil variables in the biophysical component of BRASS Variables Unit/Criteria Selection Topography Terrace/Flat Terrace Slope Good (0-10%)/Moderate (10-20%)/Bad (>20%) Moderate Soil depth Good (>100 cm)/Moderate (45-100 cm)/Bad (<45 cm) Good Drainage Good (medium)/Moderate (fast/slow)/Bad (very fast/very Moderate slow) % rock Good (0-15%)/Moderate (15-40%)/Bad (>40%) Good Soil texture Good (clay loam)/Moderate (50-70% clay)/Bad (>70% Good clay) Soil nutrients Good (high)/Moderate (medium)/Bad (low) Moderate Soil pH Good (4.3-5.0)/Moderate (5.0-6.5)/Bad (>6.5, <4.3) Good Maximum soil (0-400 mm) 300 mm moisture Wilting point (0-300 mm) 125 mm

For the topography variable, two values are available, terrace or flat land. The land planted with rubber in the study village was mostly sloping upland that had been bench terraced. Hence the terraced value was selected for the model.

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The Economic Potential for Smallholder Rubber Production in Northern Laos The physical and chemical characteristics of the soil have an effect on the growth and yield of rubber. The essential physical characteristics of the soil are soil depth, slope, texture and drainage. The important chemical characteristics are soil fertility and pH (Grist et al., 1998). To determine the soil suitability, seven soil variables are used in the model including slope, soil depth, drainage, % rock, soil texture, soil nutrients, and soil pH. These variables are expressed in categorical form with up to three categories (good, moderate, bad) and each of these categories has its range of criteria.

The decisions on which category (good, moderate, bad) best represented these seven soil parameters in the study village were based on the land characteristics or primary land attributes that were recorded by a soil survey in Luangnamtha Province by the Soil Survey and Land Classification Centre (SSLCC) of the National Agriculture and Forestry Research Institute (NAFRI) at the nearest soil sampling site to the village. Approximately 85% of the total land area of the study village is mountainous with elevation from 600 m to 1,100 m above sea level and slopes between 10% and 20%. The soil unit is Haplic Acrisols. The texture of the soil is clay loam with a depth of about 1,100 mm. By interpreting these data, the categories representing the seven soil parameters for the study village were allocated as follows: moderate for slope, good for soil depth, moderate for drainage, good for % rock, good for soil texture, moderate for soil nutrients, and good for soil pH.

The water holding capacity is introduced in the model through the variable maximum soil moisture, having values between 0 and 400 mm, and the variable wilting point, having values between 0 and 300 mm. The maximum soil moisture is the difference between the volume of water in the soil at field capacity (the water content of the soil where all free water has been drained) and the volume of water in the soil at the wilting point (the moisture content of the soil at which the plant will wilt and die) (MAFF, 2002). In Laos soil surveys have been completed for the whole country and the soil textures in different areas defined, but the data on the water holding capacity of each soil texture is not available as there has been no research on this yet. Therefore, the default values for the maximum soil moisture (300 mm) and wilting point (125 mm) in the model were used for this analysis. This was considered reasonable as these values were based on the characteristics of tropical soils in which Indonesian smallholder rubber farmers planted rubber which are similar to those in 121

The Economic Potential for Smallholder Rubber Production in Northern Laos the study village. It should be noted that varying these two values from their default values results in only small differences in the estimated yields.

6.2.4 Rubber management variables The third group of variables in the biophysical component is the management of rubber (Table 6.6). The clone variable allows for two types of rubber seedling GT1 clone and wildling. A wildling or unselected seedling is grown from seed scattered from nearby rubber trees. In spite of the fact that these seedlings are generally of poor quality, their use is popular among Indonesian rubber smallholders as there is no initial cost other than the time used for collecting them (Purnamasari et al., 2002). The GT1 clone is included in the model because it is a relatively common clone used by smallholders in Indonesia. Its growth is assumed to be 30% greater than wildlings (Grist et al., 1998). In the study village two types of clone were planted (GT1 and RRIM600) so GT1 was selected for the model.

The variable tree spacing specifies the space between trees in metres. Rubber farmers in the study village normally planted their rubber trees with an intra-row spacing of 3 m and an inter-row spacing of 7 m. However, from the household survey the row spaces used varied from 2-3 m for intra-row spacing and 5-7 m for inter-row spacing. Farmers reported that the intra-row spacing of 3 m and inter-row spacing of 7 m are appropriate for gently sloping land, while intra-row spacing of 2-2.5 m and inter-row spacing of 5-6 m are best for steeply sloping land. Over two-thirds of the farmers reported that they planted their rubber with an intra-row spacing of 3 m and an inter-row spacing of 7 m, hence this spacing was used in the model, resulting in a tree density of 476 stems per hectare.

The variable rotational calculation method offers three criteria. The first criterion is the rotation ending in a specified year. The second is the rotation ending at a specified tree girth, measured in centimetres. The third is the rotation ending at a specified tree volume, measured in m3. For this study the method used was to end the rotation in a specified year. The related issue was what the length of the rotation should be. The default value of the model is 40 years, based on the circumstances of Indonesian rubber smallholders. The length of rotation in this study was assumed to be 35 years.

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The Economic Potential for Smallholder Rubber Production in Northern Laos No study has yet been undertaken in Laos on the optimal year for farmers to replace their rubber and it will be many years before farmers actual decisions are observable. Given the newness of the crop it was decided to choose a shorter rotation than the default, though this was unlikely to affect the discounted returns greatly.

The variable buttlog length is used to define the difference between log volume and small wood volume, measured in metres. The variable canopy permeability defines the level of light penetration after canopy closure, measured in percentage ranging from 0 to 100%. The default values for buttlog length (2.5 m) and canopy permeability (5%) were used for this analysis as there was no reason to expect any major difference from the growth of rubber trees elsewhere.

The variable tapping offers two options (Yes or No). The former option means that rubber trees are in the tapping period, while the latter means that rubber trees had not yet reached the tapping period. In the study village farmers had already begun tapping their rubber trees so the Yes option was used for this analysis. The variable tapping calculation method offer two options in which the time to start tapping is defined by girth measured in centimetres or by age measured in years. The second option was chosen and it was assumed that tapping begins in Year 9 as that was the practice in the study village. Tapping interval defines the frequency of tapping, measured in days. In the study village, tapping was mostly undertaken on alternate days so the tapping interval was set at two.

The number of dry months defines the period in which rubber trees are not tapped. In the study village, there was a break in the tapping season of four months from December to March. So the number of dry months in this case was four. Tapping days lost are the days that tapping cannot take place. During the tapping period there may be a number of days on which tapping cannot be done due to weather conditions such as heavy rain or other factors. This reduces the number of tapping days from the potential 120 days in a year (based on 8 months of tapping and an alternate day of tapping frequency). For this study it was assumed that the number of days lost was three days per month or 24 days per tapping year.

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The Economic Potential for Smallholder Rubber Production in Northern Laos The variable fertilised determines whether there is an application of fertiliser or not. The application of fertiliser will result in faster growth in the early years of tree establishment (Grist et al., 1998). The variable years fertilised specifies the number of years in which fertiliser is applied after tree planting. The variable fertiliser effect provides the proportional improvement associated with fertiliser, having a value between 0 and 1. The effect of fertiliser on the improvement in tree growth is necessary to be specified as the effect of fertiliser varies relative to the type and quantity used (Grist et al., 1998). In the study village fertiliser was not applied so the value zero was used for years fertilised and fertiliser effect.

The variable years of weed control defines the number of years in which herbicide is applied after tree planting and the variable level of weed control is the proportion of weed control and herbicide used, valued from 0 to 1. Even though rubber farmers in the study village did not use herbicide, they cleared weeds by hand thoroughly every year, normally three times a year. It can be assumed that the hand-weeding in this case was equivalent to herbicide use. Therefore, the number of years of weed control was set at 35 years for this analysis. Also it can be said that the control of weeds by hand in this case was as effective as by using herbicides. However, control is often not completely achieved, so a value of 0.8 was used for the level of weed control.

The risk of fire damage is introduced through the variable probability of fire, having values between 0 and 1. Although clearing a fire break was practised by rubber farmers in the study village, there were a few cases of fire. For this analysis the probability of fire was assumed to be 0.1, or one fire every 10 years. The risk of fire spreading from neighbouring plots is defined by the variable fire probability value, which has values between 0 and 2. For this analysis the fire probability value was assumed to be 0.3. There were cases of fire spreading from one farm to another, but the probability of fire spreading was minimal because of the practice of establishing fire breaks, as mentioned above, and the village regulation that required farmers to pay compensation for burnt trees if fire escaped from their farm, so farmers were alert on the fire problem.

The two final variables for rubber management are related to Imperata cylindrica. The weed Imperata cylindrica was included in the model because large proportions of 124

The Economic Potential for Smallholder Rubber Production in Northern Laos upland areas in Southeast Asia are characterised by invasion of this type of weed. Yields from the cropping areas infested by Imperata can be decreased by up to 90% and costs for controlling are normally high (Menz and Grist, 1995). The variable Imperata density calculation in the model offers two options site weed density or override value. Site weed density is used in the case of the Imperata density on neighbouring farms being the same as on the farm being considered. In other words, the neighbouring farm has rubber trees planted at the same time and with the same management practice. The override value is used if the proportion of Imperata in neighbouring farms is known (Grist et al., 1998). For this study the option of site weed density was selected because rubber trees in the study village were planted at the same time, in the same area, and with the same management.

Table 6.6: Rubber management variables in the biophysical component of BRASS Variables Unit/Criteria Selection Clone GT1/Wildling GT1 Tree spacing n/s m 7m Tree spacing e/w m 3m Rotational calculation method Year/Girth/Volume Year Rotational calculation value Year/cm/m3 35 years Buttlog length m 2.5 m Canopy permeability (0-100%) 5% Tapping Yes/No Yes Tapping calculation method Girth/Age Age Begin tapping cm/Years 9 years Tapping intervals Days 2 days Number of dry months (0-12 months) 4 months Tapping days lost (0-365 days) 24 days Fertilised Yes/No No Years fertilised Years 0 year Fertiliser effect (0-1) 0 Years of weed control Years 35 years Level of weed control (0-1) 0.8 Probability of fire (0-1) 0.1 Fire probability value (0-2) 0.3 Imperata density calculation S (Site weed density)/ S O (Override value) Imperata density override 0

6.2.5 Intercrop management variables The variables related to intercrop management are shown in Table 6.7. The variable ground cover has three options including clear, rice, or Imperata. The first option means that there is no ground cover and the third that the ground is covered by

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The Economic Potential for Smallholder Rubber Production in Northern Laos Imperata. The rice option means that rice is intercropped with the rubber trees. From the household survey, nearly 60% of the households intercropped only rice with their rubber trees, about 38% intercropped rice and other cash crops, and only 2% grew other crops excluding rice. That means that almost all households in the study village intercropped rice in their rubber plantation. Therefore, rice was selected for this variable.

The years cropped variable specifies the number of years of intercropping. For this analysis, a rice intercrop was specified for the first three years because this was the dominant practice of rubber farmers in the study village.

The variables intra-row spacing and inter-row spacing specify the space between rice plants, hence the number of plants per hectare. Farmers in the study village normally planted rice with a spacing of 0.5 m, so this value was applied in the model.

The variables crop row calculation method and value offer three alternatives fixed distance between rows (measured in metres), fixed number of rows, or minimum row productivity (measured in %). If the method is the fixed distance between rows or fixed number of rows, the value provided for the row spacing variable is overridden. For this analysis, the method of minimum row productivity was used and its value was set at 20%. This means that the minimum accepted rice yield was 20% of its initial value, below which the model will not calculate a rice crop.

The yield of the intercrop is introduced through the variable monoculture yield. From the household survey the average yield of rice grown in shifting cultivation plots in the study village was about 1,500 kg/ha and this was consistent with the average yield of upland rice in northern Laos as reported by Lao-IRRI (2000). Hence this was the figure used in the model.

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Table 6.7: Intercrop management variables in the biophysical component of BRASS Variables Unit/Criteria Selection Ground cover Clear/Rice/Imperata Rice Years cropped Years 3 years Intra-row spacing M 0.5 m Inter-row spacing M 0.5 m Crop row calculation method D (Fixed distance between rows) P N (Fixed number of rows) P (Minimum row productivity) Crop row calculation value m/No./% 20% Monoculture yield kg per ha 1,500 kg per ha

6.2.6 Model indexes Apart from the above variables, the biophysical component also comprises a number of indexes to account for the quality of the site, climate, management practices, and genetic material contained in the rubber trees. These indexes are termed site index, latex index, girth clonal index, and yield clonal index and they are based on a synthesis of scientific studies (Grist et al., 1995).

The site index, which has a value between zero and 100, is the result of the values chosen for the component variables. It is calculated by multiplying a climate index and a soil index. The soil index considers the seven soil variables in Table 6.5. The climate index takes account of the effects of climate variables in Table 6.1. Two options for calculating the site index are available applying the static approach using the same soil and climate factors in every year of calculation, or the active approach keeping the soil factors constant in every year but varying the climate factors annually (Grist et al., 1995). The latter approach was applied in this study, but only partly because only rainfall was varied (Table 6.4), while for temperature, potential evapotranspiration, and solar radiation (Table 6.2 and 6.3) their mean values were repeated for each year.

The latex index, having a value between zero and one, is a combination of growing conditions at the site plus the effect of fertiliser (Purnamasari et al., 2002).

The girth clonal index and yield clonal index account for the growth and yield potential of the clonal material planted; however, they may depend on management practices as well. The default girth clonal index was 1.0 for wildings and 1.3 for

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The Economic Potential for Smallholder Rubber Production in Northern Laos clonal material. The default yield clonal index was 0.6. The yield clonal index defaulted to a value of 0.6 to reflect the productivity of Indonesian rubber smallholdings relative to estates, given an index of 2.0 (Purnamasari et al., 2002).

Taking account of the selected values of all variables in the biophysical component of BRASS and the default values of girth clonal index (1.3) and yield clonal index (0.6), the yield of latex was obtained as shown in Table 6.8. However, by comparing the simulated yields during the first three years with the average yields from the household survey, it was found that the yields from BRASS with the yield clonal index set at 0.6 were considerably lower than the yields from the survey. Since the objective of using BRASS in this study was to predict yields of rubber over the life of a typical rubber holding in Hadyao, the predicted yields needed to correspond as closely as possible to the actual yields from the study village over the first three years of tapping.

Table 6.8: Comparisons of average latex yields from the survey and BRASS (kg/ha) Yields Yields from BRASS with different yield clonal indexes Year of tapping from survey 0.6 0.7 0.8 0.9 1.0 1.1 1.2 st 1 year 904 511 596 681 766 851 936 1,021 2nd year 1,380 479 558 638 718 798 878 957 1,999 650 758 867 975 1,084 1,192 1,300 3rd year Average yields 1,428* 657** 799 941 1,083 1,225 1,367 1,510 Peak yield 841 985 1,280 1,280 1,428 1,577 1,729 Note: * First three years average ** 35 years average

It should be noted that the yields from BRASS were not greatly affected by changing the values of any one of the estimated variables. Yet changes in the girth clonal index and the yield clonal index had a greater impact on predicted yields. The default values for girth clonal index of 1.0 for wilding and 1.3 for clonal material were based on scientific research, hence there was no basis for revising them. However, the default value of 0.6 for the yield clonal index was based on the fact that the yield performance of smallholder rubber farmers in Indonesia was less than one-third of the yield from rubber estates (Purnamasari et al., 2002). Hence the yield clonal index could be adjusted to reflect the yield performance of rubber farmers in the study village. Therefore, only the yield clonal index was varied to obtain the closest estimation of yields to the actual yields from the survey.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Table 6.8 also shows the comparisons of yields during the first three years of tapping from the survey and from BRASS using different yield clonal indexes. It was hard to decide which yield clonal index was the most accurate to use for predicting the yields of rubber from the study village, given the different rates of yield increase over the first three years. However, it was decided that the best estimation of the actual yields from the study village was given by a clonal index of 1.1. The average yield over the life of the plantation in this case was about 1,367 kg/ha. Even though the yields predicted by BRASS using a clonal index of 1.1 do not increase as rapidly in the initial years as the yields from the survey, the overall pattern is similar and the yields reach a peak of just under 1,600 kg/ha. It was judged appropriate to use an index of 1.1 because, with indexes less than 1.1, the estimated yields averaged less than 1,300 kg/ha, which was substantially lower than the yields from the survey, except in the first year of tapping. On the other hand, with the index set higher than 1.1, the estimated yields averaged greater than 1,500 kg/ha and reached a peak of over 1,700 kg/ha. Because of the variation in rainfall and the uncertainty about long-term yields given limited data, it was considered unwise to predict that yields would reach a peak of greater than 1,700 kg/ha. This was consistent with the average yields of 1,2001,350 kg/ha reported for smallholder rubber farmers in Southern China (Alton et al., 2005), where rubber has been planted in similar upland areas with similar climate to Northern Laos. Therefore, a yield clonal index of 1.1 was considered to be the most appropriate for simulating rubber yields in the study village.

The household survey shows that smallholder rubber farmers in Hadyao village obtained higher yields than those of Indonesian smallholders at the time when the model was developed, which were less than two-thirds of the yields from rubber estates. Indonesian smallholder rubber farms at that time were not well managed. They were termed jungle rubber because other tree species and grasses were allowed to grow mixed with the rubber trees. So the yields from rubber smallholdings were quite low compared to the yields from rubber estates which were normally much better managed (Gouyon, 1999). The yield performance of Lao rubber farmers in Hadyao village was somewhere between Indonesian smallholders and rubber estates. Even though Lao rubber farmers did not apply fertilisers, the soils were quite fertile, having been fallowed for 5-10 years. Moreover, they used clonal planting material 129

The Economic Potential for Smallholder Rubber Production in Northern Laos and weeded thoroughly three times a year. Hence it is reasonable to suggest that their yields are likely to be above the standard set by Indonesian smallholders.

6.2.7 Outputs After the values of all variables in the biophysical component of BRASS were selected in combination with the default value of girth clonal index (1.3) and the value of 1.1 for the yield clonal index, the estimated latex yields over the productive life of 35 years were obtained, as presented in Fig. 6.2.

1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Year
Figure 6.2: Predicted latex yield in Hadyao over 35 years using BRASS

It can be seen that the yield increased in the initial period, then levelled off, and finally entered a long decreasing phase. The yield reached a peak of just under 1,600 kg/ha in Years 22. Exceptionally, there was a sharp drop in yield in three years 10, 21, and 32. This drop occurred in the years with unusually low rainfall as seen in

Latex Yield (kg/ha)

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The Economic Potential for Smallholder Rubber Production in Northern Laos Table 6.4. It should again be noted that this estimated yield profile represents the predicted yield pattern which rubber farmers in Hadyao village would be expected to achieve, given the current state of knowledge, but the actual yields may vary if management practices, weather conditions, or other factors change.

6.3 Discounted cash flow analysis of smallholder rubber production in the study village 6.3.1 Introduction The economic viability of the rubber enterprise was assessed using discounted cash flow (DCF) analysis. Even though BRASS has an economic component flowing similar principles, it was not used in this study since it was built as an add-on to the biophysical component; the original purpose and most useful function of the model was to estimate the yield over time. In the economic component users have to input data into each pre-specified variable and cannot add or control additional factors which are not included in the model. Therefore, the economic analysis of smallholder production in this study relied on the development of a budgeting spreadsheet carried out in Excel. It should be noted that the inputs assumed in the DCF analysis were entirely consistent with the values of the variables entered in the biophysical model.

6.3.2 Principles of DCF analysis According to Campbell and Brown (2003), DCF analysis is based on the conceptualization of an investment project as a net benefit stream measured by a cash flow (though this does not require that benefits and costs are all literally cash items). Economists define an investment in terms of the decision to engage resources at the present with the expectation of receiving a flow of net benefits over a sensibly long period of time in the future. DCF analysis is used to assess multi-period investment projects which have a net benefit stream happening over many years. When funds are laid out in the beginning as investment outlays, the cash flow is negative. This indicates that there is a net outflow of funds. Once the project commences to operate, and benefits are received, the cash flow becomes positive, demonstrating that there is a net inflow of funds. The net outflow and inflow of funds represent the net cash flow.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

There are many criteria or DCF decision-rules that are used to appraise investment projects. Among these decision-rules the most well-known and commonly used are net present value (NPV), internal rate of return (IRR), and benefit-cost ratio (BCR). The NPV of an investment project is the difference between the discounted present value of future benefits and the discounted present value of future costs. A positive value of NPV for a given project shows that the projects benefits are greater than its costs. Conversely, a negative value of NPV indicates that the benefits from the project are less than its costs and it is not worthwhile to undertake it.

The IRR is the rate of discount which gives an NPV of zero, that is, the cost of capital (the cost of financing the investment or the interest rate) in percentage terms which makes the investment generate neither profit nor loss. When IRR is equal to or greater than the interest rate, the investment is worthwhile. When IRR is less than the interest rate, the investment is worthless to implement. It can be seen that the IRR decisionrule will give precisely the same result as the NPV decision-rule. When the interest rate is less than IRR, NPV will be positive. In contrast, when the interest rate is equal to or larger than IRR, NPV will be negative.

The BCR is another method of comparing the present value of a projects costs with the present value of its benefits. As an alternative to calculating the NPV, the BCR is measured by dividing the present value of benefits by the present value of costs. If the value of BCR is equal to or greater than unity, it is worth undertaking the investment project, and conversely if it is less than unity. It is obvious that when NPV is positive, BCR is equal to or greater than unity, and when NPV is negative, BCR is less than unity.

To conduct the DCF analysis, the costs and benefits of smallholder rubber production had first to be identified and quantified (whether they were cash items or imputed values such as labour). Then the issue of the choice of discount rate had to be addressed. The usual investment criteria of NPV, IRR, and BCR were computed. Then allowance was made for risk and uncertainty through a sensitivity analysis with various rubber prices, discount rates, and wage rates. Other investment criteria were also considered, notably the return to family-owned resources (or farm-family 132

The Economic Potential for Smallholder Rubber Production in Northern Laos income) and the maintenance of a positive short-term cash flow. These various aspects of the analysis are now discussed in turn.

6.3.3 Identifying costs and benefits The costs associated with rubber production in Hadyao were material costs and labour costs. The materials used for the establishment of rubber plots were for land preparation, fencing, planting, and intercropping. Those used for land preparation (slashing, burning, and clearing the field) were an axe and a long knife used only in the first year. Those used for fencing included hammer, nails, barbed wire, and posts. Fencing was erected in the first year of the plantation, and was assumed to be replaced 20 years later. Those used for planting and replanting were a hoe and the rubber seedlings, which again were only required in the first year. Those used for intercropping were rice seed, required for the initial period of three years of the plantation. The materials used during the maintenance phase were for weeding only; no fertilisers or herbicides were used. These materials included a small knife and medium knife, assumed to be replaced every two years.

The materials used during harvesting period were for tapping and collecting the latex, and harvesting the trees at the end of their productive life. Those used for tapping and collecting were bowls, spouts, iron wire, a plastic brush for congregating latex from the bowl, a tapping knife, a knife sharpening stone, a headlamp, small buckets, large buckets, plastic bags, chemical powder applied at the tapping cut of the rubber trees weekly during tapping period to prevent diseases, chemical liquid applied at the end of tapping season to close the tapping cut of the trees, and a small brush which is used for applying those chemical power and liquid. The replacement of these materials was assumed to occur every ten years for bowls, five years for spouts and wire, and three years for plastic brushes. For the tapping knife, sharpening stone, headlamp, small and large buckets, plastic bags, chemicals, and small brush, an annual replacement was assumed. The materials used for tree harvesting were a set of handy saws.

Table 6.9 shows the prices of these materials in 2005 and the quantities used for one hectare of rubber. It should be noted that the prices were as quoted by farmers at the time of the survey and the quantities are based on the assumption of a two-person

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The Economic Potential for Smallholder Rubber Production in Northern Laos labour force and 476 rubber trees per hectare. Almost all of the items of equipment for tapping and collecting were imported from China. However, households that could not afford to buy all imported equipment used local recycled materials instead at lower cost. For example, halved plastic bottles were sometimes used as cups for collecting the latex.

Table 6.9: Materials used for one hectare of rubber production in Hadyao Production phases Materials Unit 2005 prices Quantity (Kip*/unit)

Establishment Land Axe Piece 1 50,000 preparation Long knife Piece 1 50,000 Fencing Hammer Piece 1 15,000 Nails Kg 5 10,000 Barbed wire Roll 22 150,000 Posts Post 264 2,000 Planting Hoe Piece 1 30,000 Rubber seedlings Seedling 476 5,000 Replacement Rubber seedlings Seedling 48 5,000 planting ** Intercropping Rice seed Kg 40 2,000 Maintenance Weeding Small knife Piece 1 6,000 Medium knife Piece 1 20,000 Harvesting Tapping Bowl/cup Piece 476 1,200 Gutter/spout Piece 476 300 Iron wire Roll 2 220,000 Plastic brush Piece 2 5,000 Tapping knife Piece 2 25,000 Knife sharpening stone Set 2 15,000 Headlamp Piece 2 97,000 Collecting Small bucket Piece 2 7,500 Big bucket Piece 2 40,000 Plastic bag Piece 240 1,500 Chemical powder Kg 2.5 64,000 Chemical liquid Kg 1.5 50,000 Small brush Piece 2 4,000 Tree Handy saws Set 1 500,000 harvesting Note: * 1 US$ = 10,500 Kip, August 2005 ** Replacement planting is based on 10% of the initial 476 seedlings of one hectare Source: Group interview with rubber farmers in Hadyao village, 2005

The labour requirements for each production phase (establishment, maintenance, and harvesting) for one hectare of rubber, expressed in person-days and calculated on an annual basis, are presented in Table 6.10. Labour requirements for the establishment

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The Economic Potential for Smallholder Rubber Production in Northern Laos phase included land preparation, fencing, planting, and rice intercropping. The total labour requirement of 80 person-days for land preparation (slashing, burning and clearing the field, lining, terracing and holing), and planting of seedlings (20 persondays) occurred in the first year of the plantation. The labour for fencing of about 30 person-days was assumed to occur every 20 years. The labour for intercropping (rice sowing and harvesting) of 50 person-days occurred during the first three years of the plantation.

The only labour requirement during the maintenance phase was for weeding. From the household survey rubber farmers in the study village thoroughly clean-weeded by hand every year from the establishment of their rubber plantations. They normally weeded three times a year. It was assumed that they would continue to do so until Year 14. After that it was assumed they would clean-weed two times a year until the end of the productive life of the rubber, as weed growth would be reduced under the shade of the rubber canopy. Given that 40 person-days were required each time, the total annual labour requirement for weeding was estimated to be 120 person-days between Years 1 and 14 and 80 person-days between Years 15 and 35.

According to farmers in Hadyao, one person could tap about 300 trees in a day. In order to finish tapping one hectare of 476 trees before the latex stopped flowing, two persons were needed. One person was normally able to tap two trees in a minute and collect latex from four trees in a minute. Based on eight working hours per day and 120 tapping days in a year, the total labour requirements for tapping and collecting latex for one hectare of rubber trees in a year are were around 119 and 60 persondays, respectively. Based on the labour requirement for harvesting a rubber tree of 0.3 person-days per tree, about 143 person-days were estimated for harvesting one hectare of rubber trees (476 trees) at the end of the plantation.

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Table 6.10: Annual labour requirements for one hectare of rubber production in Hadyao Annual labour requirements Production phases Activities (person-days) Establishment Land preparation Slashing 30 Burning and clearing 20 Lining, terracing, and holing 30 Fencing Fencing 30 Planting Rubber planting and replacement planting 20 Intercropping Rice sowing 20 Rice harvesting 30 Maintenance Hand weeding 120 (three times a year from Year 1-14) Hand weeding 80 (two times a year from Year 15-35) Harvesting Tapping 119 Collecting 60 Trees harvesting 143 Source: Group interview with rubber farmers in Hadyao village, 2005

The benefits from the rubber enterprise in Hadyao were from intercropping rice, producing tub-lump rubber, and harvesting rubber wood. Rice was normally intercropped during the initial three years after the establishment of the rubber. From household survey, the average yield of intercropped rice was 1.1, 1.0, and 0.9 ton/ha for the first, second, and third years, respectively. Comparing the yields of intercropped rice from household survey and from BRASS, it can be seen that the yields from BRASS were higher and decreased more sharply than from the survey (Table 6.11). To represent the yields of rice intercropping more accurately, therefore, the average yields from the survey were used to estimate the benefits from intercropping.
Table 6.11: Average yields of intercropped rice from BRASS and the survey in Hadyao Rice yields (kg/ha) Intercropping years BRASS Survey First year 1,687 1,100 Second year 1,360 1,000 Third year 884 900

Tub-lump rubber was the main output from rubber production. The yields of latex from BRASS (Fig. 6.2) were used to estimate the benefits from tub-lump rubber.

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The Economic Potential for Smallholder Rubber Production in Northern Laos However, farmers in the study village processed the raw latex into tub-lump rubber by using plastic bags or buckets. Then the tub-lump was left for a month before selling. There must be some loss in weight from the raw latex compared to the tub-lump rubber due to the loss of moisture content. The extent of the loss is unknown, but for this analysis it was assumed to be 10% loss in weight. Therefore, the tub-lump rubber was calculated from the latex yields from BRASS by taking adjusting downwards by 10%.

At the end of the productive life of the rubber trees, rubber wood was expected to be the final product from the enterprise. As estimated by BRASS, the volumes of rubber wood, including both buttlog and small wood, were 203 m3 per hectare, but only 64 m3 per hectare of this was buttlog. The estimated volumes of rubber wood by BRASS for Hadyao were consistent with the yields of rubber greenwood in other rubber producing countries, with a total volume of 140 to 200 m3 per hectare and a volume of usable logs of 54 to 57 m3 per hectare (Balsiger et al., 2000). The yield of rubber wood varies according to clones, site conditions, and management (smallholdings or estates). The higher ranges are found in countries where plantations are well managed such as Malaysia, Thailand, India, and Sri Lanka. The volume of buttlog of 64 m3 per hectare was used to estimate the benefit from rubber wood in the study village as only buttlog was likely to be commercialized while small wood was likely to be burnt in the field.

6.3.4 Quantifying costs and benefits After all costs and benefits associated with the production of rubber over the life of the plantation were identified, their values were quantified using constant 2005 prices. The material costs were estimated from the prices of the materials and the quantities used for one hectare in each phase of rubber production (Table 6.9). The labour costs were valued by calculating the labour requirements for rubber establishment and production over the life of the plantation (Table 6.10) and estimating the opportunity cost of labour or wage rate. The opportunity cost of labour is the earnings obtained from the next best employment opportunity, that is, the labour income foregone by working on the rubber holding. The current wage rate for agricultural work in Hadyao was 20,000-25,000 Kip/person-day, depending on the type of work (light or heavy),

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The Economic Potential for Smallholder Rubber Production in Northern Laos while the wage rate in Luangnamtha town was 25,000 Kip/person-day. These rates applied to an adult male or female working for eight hours per day. In the study village, rubber production was undertaken by male and female labour, but schoolchildren also helped. In many cases school-children assisted by tapping before they went to school or by collecting latex during the weekend. Also, it cannot be assumed that all adult household members had the alternative of off-farm employment, particularly in town. In any case, family labour tends to be used for farming (including rubber) at times when the opportunity for wage work is less, as these opportunities vary throughout the year. Therefore, it was decided to use some fraction of the market wage rate to estimate the opportunity cost of labour. The problem was deciding what fraction to use as there is no standard way to measure this. Hence it was assumed that the opportunity cost of labour was about two thirds of the maximum market wage rate of 25,000 Kip/person-day, that is, around 17,000 Kip/person-day. Both the market wage rate and the estimated opportunity wage rate were used in the DCF analysis.

The benefits from intercrops for the initial three years of the rubber enterprise were estimated from the average rice yields reported in the survey (Table 6.11), valued at the 2005 price of 3,500 Kip/kg. The benefits from tub-lump rubber from Years 9 to 35 were estimated from the annual latex yields from BRASS after the adjustment of 10% weight loss as discussed above, valued at the 2005 price of tub-lump rubber of 7,800 Kip/kg. Since there is no existing market for rubber wood in Laos and the nearest market for rubber wood from Northern Laos is China, the price of rubber wood in Yunnan Province was used, adjusted to reflect the actual price which is likely to be offered by Chinese traders. The 2005 price of rubber wood in Yunnan was 360 Yuan/m3 (Alton et al., 2005). The farm gate price in Laos was assumed to be about 280 Yuan/m3 or 364,000 Kip/m3 (1 Yuan = 1,300 Kip, August 2005). Hence, the estimated farm gate price of rubber wood of 364,000 Kip/m3 and the volume of buttlog of 64 m3 were used to quantify the benefit from rubber wood.

6.3.5 Discount rates Because the investment in rubber is long term and the costs and benefits occur at different times, the use of discount factors was required to revalue the future costs and

138

The Economic Potential for Smallholder Rubber Production in Northern Laos benefits from the rubber investment in present-day values so that they were comparable and could be added together. The selection of a discount rate is crucial in determining the result of the DCF analysis (Campbell and Brown, 2003). In DCF analysis market prices are used to value project inputs and outputs so that the financial profitability of the investment project can be determined. The market price of capital to the investor is the market interest rate and this represents the cost of capital in the investment project. The right approach to deciding the discount rate used in DCF analysis is therefore to estimate the cost of capital to the investor.

This will vary depending on wether the investor is a borrower or a lender of funds. If the project investor is a net borrower, the interest rate at which the project can borrow is the opportunity cost of the funds. This market borrowing rate should be used as the discount rate for any project appraisal. If the project investor is a net lender, then without the project these funds could be invested in the financial market and earn the market lending rate. The project must earn at least this market lending rate for it to be worth doing, hence the after-tax market lending rate, the opportunity cost of the funds, should be used as the discount rate (Perkins, 1994).

The market borrowing rate or interest rate was adopted for this study as most Lao farmers lack the capital to invest in agricultural production without obtaining credit, particularly in the early stages of transition to commercial agriculture as in the case study area. Consideration was given to the interest rates paid by farmers for different sources of credit in order to determine the appropriate discount rates for use in the DCF analysis. Rubber farmers in the study village received credit support from the Agricultural Promotion Bank (APB). In 1994 they were supported with loans at low interest rates of 2% with a repayment period of 7 years and in 2003 with loans at 7% and a repayment period of 10 years. The interest rates offered by the APB were special cases because they were heavily subsidized and especially arranged for the purpose of demonstrating rubber cultivation, as requested by the provincial authorities. The borrowing interest rate is normally 12% for the APB, 15% for commercial banks, and 20% for money lenders (BOL, 2006a). Since the interest rate varies with different sources of funds, these three rates were used in the analysis 12%, 15% and 20%. (Note that there is no real evidence of moneylenders financing long-term investment such as rubber at 20%. This rate was used to provide an upper 139

The Economic Potential for Smallholder Rubber Production in Northern Laos bound for the discount rate. A higher rate would not have affected the overall results as the investment was clearly unprofitable at 20%.)

In the above discussion the effect of inflation on interest and discount rates was ignored. In reality most countries experience at least some inflation in prices so the discount rates to be used in DCF analysis need to take account of inflation. In Section 6.3.3 constant 2005 prices were used for quantifying costs and benefits. When all costs and benefits are valued in constant or real terms (i.e., net of inflation), then a real discount rate must be used to discount the net cash flow. The real discount rate is calculated by deflating the market interest rate, usually quoted in nominal terms, by the expected rate of inflation in the economy. Laos is one of the nations that were affected by Asian crisis in the late 1990s. The inflation in Laos before the crisis was about 15-20%, then it rose sharply to nearly 90% in 1998, reaching a peak of 134% in 1999. After that it fell considerably to around 23% in the following year. From 20012004 inflation was around 10-15%. In 2005, the year in which field data were collected, it was 7% (BOL, 2006b). Allowing for the 2005 inflation rate, the real discount rates used in the DCF analysis were 5%, 8% and 13%.

6.3.6 DCF the base analysis This section presents the DCF analysis of a typical hectare of rubber in Hadyao using the mid-range real discount rate of 8% and the estimated opportunity wage rate of 17,000 Kip/person-day. The full spreadsheet of this analysis is presented in Table 6.12.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Table 6.12: Cash flow analysis of one hectare of rubber plantation over 35 years of production
Unit Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12

Costs and Returns Material Inputs

100 3,893 2,618 80 26 80 26 26 26 1,438 698 2,162 274 698 972 80 26

Land preparation Fencing Planting and replacement planting Intercropping Weeding Tapping Collecting Tree harvesting 6,747 80 30 20 120 120 120 120 120 120 120 120 80 106 26 26

Total Material Costs Labour Inputs

000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip

26 274 698 998

284 698 982

120 119 60

120 119 60

120 119 60

120 119 60

Land preparation Fencing Planting and replacement planting Weeding Tapping Collecting Intercropping rice sowing Intercropping rice harvesting Trees harvesting 20 30 20 30 20 30 300 17 5,100 11,847 170 17 2,890 2,970 170 17 2,890 2,996 120 17 2,040 2,040 120 17 2,040 2,066 120 17 2,040 2,040 120 17 2,040 2,066 120 17 2,040 2,040

Total Labour Inputs

Wage rate

Total Labour Costs TOTAL COSTS Rubber Returns Kg/ha Kg/ha 000 Kip/kg m3/ha 000 Kip/m3 000 Kip

PDs PDs PDs PDs PDs PDs PDs PDs PDs PDs 000 Kip/PD 000 Kip 000 Kip

299 17 5,075 7,237 936 843 7.8

299 17 5,075 6,047 878 790 7.8

299 17 5,075 6,073 1,192 1,073 7.8

299 17 5,075 6,057 1,247 1,122 7.8

Rubber yield latex Rubber yield tub lump Rubber price Rubber wood yield Rubber wood price

Total Rubber Returns Rice Returns

6,573

6,161

8,367

8,753

Rice yield Rice price

Total Rice Returns TOTAL RETURNS NET RETURNS (NR) DISCOUNTED NR CUMULATIVE NPV

8% discount rate

Kg/ha 000 Kip/kg 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip

1.1 3.5 3,850 3,850 -7,997 -7,405 -7,405

1 3.5 3,500 3,500 530 454 -6,951

0.9 3.5 3,150 3,150 154 122 -6,829

-2,040 -1,499 -8,328

-2,066 -1,406 -9,734

-2,040 -1,286 -11,020

-2,066 -1,205 -12,225

-2,040 -1,102 -13,327

6,573 -664 -332 -13,659

6,161 114 53 -13,606

8,367 2,294 984 -12,622

8,753 2,696 1,071 -11,551

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Table 6.12: Cash flow analysis of one hectare of rubber plantation over 35 years of production (continued)
Unit Year13 Year14 Year15 Year16 Year17 Year18 Year19 Year20 Year21 Year22 Year23 Year24

Costs and Returns Material Inputs 3,893

Land preparation Fencing Planting and replacement planting Intercropping Weeding Tapping Collecting Tree harvesting 26 274 698 857 698 1,555 1.008 972 998 982 2,152 4,865 1,008 274 698 284 698 274 698 998 26 284 698 26 274 698 26 1,428 698 26 284 698 274 698 972

Total Material Costs Labour Inputs 30 120 119 60 120 119 60 80 119 60 80 119 60 80 119 60 80 119 60 80 119 60 80 119 60

000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip

26 274 698 998

867 698 1,565

Land preparation Fencing Planting and replacement planting Weeding Tapping Collecting Intercropping rice sowing Intercropping rice harvesting Trees harvesting 299 17 5,075 6,073 1,302 1,172 7.8 1,331 1,198 7.8 1,395 1,256 7.8 1,468 1,321 7.8 1,511 1,360 7.8 299 17 5,075 6,630 259 17 4,395 5,403 259 17 4,395 5,367 259 17 4,395 5,393 259 17 4,395 5,377 1,542 1,387 7.8 259 17 4,395 6,547 1,562 1,406 7.8 289 17 4,905 9,770 1,575 1,418 7.8

80 119 60

80 119 60

80 119 60

80 119 60

Total Labour Inputs

Wage rate

Total Labour Costs TOTAL COSTS Rubber Returns Kg/ha Kg/ha 000 Kip/kg m3/ha 000 Kip/m3 000 Kip 9,139 9,341 9,796 10,304

PDs PDs PDs PDs PDs PDs PDs PDs PDs PDs 000 Kip/PD 000 Kip 000 Kip

259 17 4,395 5,403 1,237 1,114 7.8

259 17 4,395 5,367 1,577 1,419 7.8

259 17 4,395 5,393 1,557 1,401 7.8

259 17 4,395 5,960 1,543 1,388 7.8

Rubber yield latex Rubber yield tub lump Rubber price Rubber wood yield Rubber wood price

Total Rubber Returns Rice Returns

10,606

10,822

10,966

11,058

8,686

11,068

10,928

10,830

Rice yield Rice price

Total Rice Returns TOTAL RETURNS NET RETURNS (NR) DISCOUNTED NR CUMULATIVE NPV 9,139 3,066 1,127 -10,424 9,341 2,711 923 -9,501

8% discount rate

Kg/ha 000 Kip/kg 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip

9,796 4,393 1,385 -8,116

10,304 4,937 1,441 -6,675

10,606 5,213 1,409 -5,266

10,822 5,445 1,363 -3,903

10,966 4,419 1,024 -2,879

11,058 1,288 276 -2,603

8,686 3,283 652 -1,951

11,068 5,701 1,049 -902

10,928 5,535 943 41

10,830 4,870 768 809

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Table 6.12: Cash flow analysis of one hectare of rubber plantation over 35 years of production (continued)
Unit Year25 Year26 Year27 Year28 Year32 Year34 Year31 Year33 Year30 Year29 Year35

Costs and Returns Material Inputs

Land preparation Fencing Planting and replacement planting Intercropping Weeding Tapping Collecting Tree harvesting 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 26 274 698 274 698 274 698 972 2,152 982 998 972 274 698 972 1,008 26 284 698 284 698 26 274 698 998 26 1,428 698 26 284 698 1,008

274 698 972

Total Material Costs Labour Inputs

274 698 500 1,472

Land preparation Fencing Planting and replacement planting Weeding Tapping Collecting Intercropping rice sowing Intercropping rice harvesting Trees harvesting 80 119 60 80 119 60 80 119 60 80 119 60 80 119 60 80 119 60 80 119 60 PDs PDs PDs PDs PDs PDs PDs PDs PDs PDs 000 Kip/PD 000 Kip 000 Kip 259 17 4,395 5,393 1,499 1,349 7.8 1,502 1,351 7.8 1,514 1,362 7.8 1,490 1,341 7.8 1,463 1,316 7.8 259 17 4,395 5,367 259 17 4,395 5,367 259 17 4,395 5,403 259 17 4,395 6,547 259 17 4,395 5,377 1,432 1,289 7.8 259 17 4,395 5,393 1,399 1,259 7.8

80 119 60

80 119 60

80 119 60

80 119 60

Total Labour Inputs

Wage rate

Total Labour Costs TOTAL COSTS Rubber Returns

259 17 4,395 5,367 974 876 7.8

259 17 4,395 5,403 1,321 1,189 7.8

259 17 4,395 5,367 1,262 1,136 7.8

143 401 17 6,822 8,294

Rubber yield latex Rubber yield tub lump Rubber price Rubber wood yield Rubber wood price Kg/ha Kg/ha 000 Kip/kg m3/ha 000 Kip/m3 000 Kip 10,519 10,541 10,625

Total Rubber Returns Rice Returns

10,457

10,267

10,055

9,822

6,834

9,277

8,861

1,213 1,092 7.8 64 364 31,810

Rice yield Rice price

Total Rice Returns TOTAL RETURNS NET RETURNS (NR) DISCOUNTED NR CUMULATIVE NPV 10,519 5,126 749 1,558

8% discount rate

Kg/ha 000 Kip/kg 000 Kip 000 Kip 000 Kip 000 Kip 000 Kip 10,541 5,174 699 2,257

10,625 5,222 654 2,911

10,457 5,090 590 3,501

10,267 3,720 399 3,900

10,055 4,678 464 4,364

9,822 4,429 408 4,772

6,834 1,467 125 4,897

9,277 3,874 306 5,203

8,861 3,494 255 5,458

31,810 23,516 1,590 7,048

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The Economic Potential for Smallholder Rubber Production in Northern Laos Fig. 6.3 shows the estimated undiscounted annual net returns per hectare. It can be seen that in the immature phase of the plantation net returns are only positive in Years 2 and 3 when development costs are minimal and a crop of upland rice is harvested. Net returns become positive from Year 10 after tapping begins and from that point follow the yield profile as shown in Fig. 6.2. At the end of the productive life of the rubber in Year 35 there is an additional return from rubber wood.

25,000,000 Undiscounted Annual Net Returns (Kip/ha)

20,000,000

15,000,000

10,000,000

5,000,000

0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 -5,000,000

-10,000,000 Year
Figure 6.3: Undiscounted annual net returns using a wage rate of 17,000 Kip/person-day

However, when all costs and benefits are discounted at 8%, the result is as presented in Fig. 6.4. In the initial period between Year 1 and Year 9 the discounted annual net returns are negative in almost every year, except for Years 2 and 3 as before. From Years 10 to 16 the discounted annual net returns are positive with a slight increasing trend. Then, from Year 17 until Year 34 the discounted annual net returns steadily decrease, until in Year 35 there is the additional return from rubber wood, though the

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The Economic Potential for Smallholder Rubber Production in Northern Laos effect of discounting reduces the net return in this year from 24 million Kip to 1.6 million Kip.

2,000,000 Discounted Annual Net Returns (Kip/ha) 1,000,000 0 -1,000,000 -2,000,000 -3,000,000 -4,000,000 -5,000,000 -6,000,000 -7,000,000 -8,000,000 Year
Figure 6.4: Discounted annual net returns using 8% discount rate and wage rate of 17,000 Kip/person-day

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

Fig. 6.5 shows the discounted net returns on a cumulative basis (or cumulative NPV) over the life of the plantation. The cumulative NPV becomes positive from Year 23. In other words, a planning horizon of at least 23 years is needed for this investment to be attractive.

In terms of the three investment criteria applied, the NPV was 7.048 million Kip, the IRR was 10.7% (well above the discount rate of 8%), and the BCR was 1.12. Hence the investment in rubber in this case was clearly profitable, given the yield, price and cost estimates and assumptions. The result is plausible and helps confirm the farmers

145

The Economic Potential for Smallholder Rubber Production in Northern Laos assessment that smallholder rubber is a worthwhile investment, thus helping to explain the expansion of rubber planting in the study village.

10,000,000

5,000,000 Cumulative NPV (Kip/ha)

0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

-5,000,000

-10,000,000

-15,000,000 Year
Figure 6.5: Cumulative NPV using 8% discount rate and wage rate of 17,000 Kip/person-day

6.3.7 Risk and uncertainty The previous section presented the DCF analysis for a typical hectare of rubber in Hadyao using a discount rate of 8%, an estimated wage rate of 17,000 Kip, and the 2005 market price of tub-lump rubber of 7,800 Kip/kg. However, when an investment project involves forecasting future costs and benefits, particularly for a long-term investment like rubber, there is no guarantee that the exact estimate of NPV, IRR, or BCR will be obtained. Risk and uncertainty are always involved in predictions about the future and should be taken into account in DCF analysis. There are various methods to integrate risk and uncertainty into DCF analysis. The most commonly

146

The Economic Potential for Smallholder Rubber Production in Northern Laos used technique is sensitivity analysis. This establishes the degree to which the outcome of the DCF analysis is susceptible to the assumed values used in the analysis. The sensitivity analysis involves, first, identifying key variables which are likely to have the greatest impact on the outcome of an investment project and are most changeable or uncertain and, second, repeating the DCF analysis for high, moderate, and low values for each of the key variables. As a consequence, a set of estimates of NPV, IRR, or BCR will be obtained (Upton, 1996).

The key factors which are likely to profoundly affect the outcomes of the investment in smallholder rubber in Northern Laos are the price of tub-lump rubber, the discount rate, and the wage rate. For this study, the price of rubber was varied from a low of 5,460 Kip/kg to a high of 10,140 Kip/kg, 30% below and above the 2005 market price. The low value for the discount rate was 5% and the high value was 13%, reflecting the different sources of credit as discussed above. The wage rate was only varied between 17,000 Kip/person-day, the estimated average opportunity cost of family labour, and 25,000 Kip/person-day, the market wage rate.

Table 6.13 presents the results of the sensitivity analysis for the three discount rates and three prices of tub-lump rubber at the estimated wage rate of 17,000 Kip/personday. At the low price, the investment in rubber was unprofitable at all discount rates. At the 2005 market price the investment was profitable at the low and middle discount rates, shading into the unprofitable zone at a discount rate of 13%. At the high price, the investment was lucrative at all discount rates. Table 6.14 presents the results of the sensitivity analysis at the market wage rate of 25,000 Kip/person-day. At the low price and 2005 prices, investment in rubber was unprofitable at all discount rates. At the high price, the investment was worthwhile at the low and middle discount rates, but unprofitable at a discount rate of 13%.

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The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 6.13: Results of DCF analysis for smallholder rubber in Hadyao (2005 prices and wage rate of 17,000 Kip/person-day) NPV (Kip/ha) and BCR at selected discount rates Rubber IRR prices (%) 5% 8% 13% (Kip/kg) -4,958,000 -9,361,000 -10,847,000 5,460 3.4 (0.94:1) (0.84:1) (0.71:1) 23,038,000 7,048,000 -3,347,000 7,800 10.7 (1.27:1) (1.12:1) (0.91:1) 51,034,000 23,463,000 4,153,000 10,140 15.4 (1.61:1) (1.40:1) (1.11:1) Table 6.14: Results of DCF analysis for smallholder rubber in Hadyao (2005 prices and wage rate of 25,000 Kip/person-day) NPV (Kip/ha) and BCR at selected discount rates Rubber IRR prices (%) 5% 8% 13% (Kip/kg) -35,135,000 -30,017,000 -23,599,000 5,460 -5.9 (0.69:1) (0.62:1) (0.53:1) -7,139,000 -13,605,000 -16,100,000 7,800 3.4 (0.94:1) (0.83:1) (0.68:1) 20,857,000 2,807,000 -8,600,000 10,140 8.8 (1.18:1) (1.04:1) (0.83:1)

The findings from the sensitivity analysis show that at the low price of tub-lump rubber the investment in smallholder rubber is no longer worthwhile, indicating that the expansion of rubber planting may stop if there is a decline in the price of tub-lump rubber in the future. In fact, at the wage rate of 17,000 Kip/person-day and a discount rate of 8%, when the price of tub-lump rubber decreases more than 13% from the current market price the investment in smallholder rubber becomes unprofitable. This could perhaps be countered by increasing yields (e.g., through use of fertilizer) or obtaining a higher farm-gate price by improving the quality of rubber and reducing transport costs. Nevertheless, the current expansion is clearly vulnerable to a price downturn.

It should be noted that the long-run investment decision (i.e., to establish a new plantation) is different from the short-run decision to go on tapping an existing holding. Once investment has occurred it is a sunk cost, so the decision to go on tapping depends on whether the net returns to the additional labour used at least equals the estimated opportunity cost of 17,000 Kip. The short-run decision whether to continue tapping will vary depending on the yield level in each year. In the year of lowest yield, a price decrease of 17% would be enough to discourage the farmer from

148

The Economic Potential for Smallholder Rubber Production in Northern Laos tapping, but in the year of peak yield, it would take a 60% price decrease for tapping to become unprofitable. Moreover, in the case of the short-run decision, farmers can stop tapping without damaging their investment, i.e., they can return to tapping again when the price increases. This reduces the risk they face.

Similarly, at the high discount rate in fact, at a threshold discount rate of 11% or more the investment is unprofitable, indicating that if farmers had to borrow money at a high interest rate they may have to reconsider their investment. Farmers in Hadyao have benefited from subsidized credit support with a low interest rate and a long repayment period. However, the 8% real interest rate used for the base analysis reflects commercial rates, indicating that all farmers really need is a grace period during establishment, with deferred payments of principal and interest.

Again, when labour costs are valued at the market wage rate, even with the current market price of tub-lump rubber the investment in smallholder rubber is not worthwhile, suggesting that farmers could not afford to hire other people at the market wage rate to carry out all of the labour requirements for rubber production. However, it is not likely that farmers in the uplands of Northern Laos would rely on hiring labour. According to the household survey in Hadyao, poor households normally used only their family labour for rubber production while middle or wealthy households used a combination of family labour and hired labour if they could afford to do so. It is the ability to use family labour at low opportunity cost (as well as minimal supervisory costs) that makes smallholder rubber an economic proposition, even with low yields and quality. This suggests that labour costs may be a serious constraint for estate production in this environment, without relying on imported labour.

There are other risks associated with the investment in smallholder rubber in the uplands of Northern Laos, in particular climate and market uncertainty. The occurrence of heavy frost in 1999, killing many rubber trees in Luangnamtha Province, is the foremost climatic risk that farmers face. There is a justifiable concern that this could happen again in the future as most rubber trees in Luangnamtha Province are planted at an elevation of almost 700 metres above sea level. Another concern is market uncertainty. The sudden but temporary close of border trade with China in late 2006 is one example of market uncertainty that seriously affected Lao 149

The Economic Potential for Smallholder Rubber Production in Northern Laos rubber farmers as their only market is China. There is also the likelihood of competition as other rubber producing countries are also increasing their production in response to the rising global rubber demand. This may lead to a drop in the price of rubber and as a result Lao rubber farmers may have to add value to their rubber through better processing. An improved road network will also help to reduce marketing costs and maintain the farm-gate price of rubber, but the pace and extent of this investment in infrastructure is uncertain.

6.4 Other investment criteria The usual criteria for investment in agriculture are those used above, namely, NPV, IRR, or BCR. However, the conventional investment criteria may not be entirely applicable in the case of semi-commercial smallholder agriculture, in which the markets for land and labour are incomplete. It can be argued that the relevant criterion is the net return to the familys own resources of labour and land, sometimes termed farm family income (Herdt, 1978). This can be computed by removing family labour from the costs included in the DCF analysis (land was not costed in any case given the restricted nature of the land tenure system). Using a discount rate of 8%, this gave a substantially higher NPV of 50.945 million Kip. To put this in perspective, the NPV per person-day was around 29,000 Kip. This is higher than the off-farm wage of 25,000 Kip/person-day, again reflecting the farmers calculation that rubber is a worthwhile use of family resources.

Another criterion which a semi-commercial smallholding farmer would consider is the short-term cash flow, taking borrowings and repayments into account. The cash surplus for any period is defined as net cash flow plus cash loans received minus payments of interest and principal (Dillon and Hardaker, 1993). Farmers could not afford to have a negative cash surplus and would want to ensure they had the capability to service their loans. Hadyao rubber farmers received loans with a 2% interest rate and a 7-year repayment period in 1994-95 and then in 2003 they received loans with a 7% interest rate and a 10-year repayment period. In both cases interest charges were accumulated and paid at the end of the loan period. To check the capacity of farmers to pay back their loans and not suffer a cash flow problem, cash flow budgets were developed for the first eleven years of a one-hectare rubber enterprise (thus including three years of tapping), using both current prices and 150

The Economic Potential for Smallholder Rubber Production in Northern Laos constant 2005 prices. It should be noted that the costs and returns of rice intercropping in the initial three years of the plantation were not considered since rice seed was from the farmers own stock and rice was not sold but only used for household consumption. There were no cash labour costs as most of the labour was supplied by household members.

The cash flow budget using current prices, which are the historical prices actually encountered by farmers, is presented in Table 6.15. The capital required to establish one hectare of rubber was about 0.973 million Kip, including the material costs for land preparation, fencing, and rubber seedlings. Supposing this amount was advanced as credit with an interest rate of 2% and a repayment period of seven years, the total amount which would have to be paid back would be about 1.118 million Kip. Because of the high inflation rate in the past decade, particularly in 1999, the capital requirement for the establishment of one hectare of rubber in 1994 was low compared to the first year revenue of around 2.949 million Kip. When taking account of the amount paid back for the loan, the cumulative cash surplus after 11 years was 9.433 million Kip. However, there was a small negative cash surplus in Years 3 and 5 due to the purchase of weeding tools, and a negative surplus in Year 7 when repayments fell due, prior to the commencement of tapping, though the cumulative shortfall was easily wiped out in the first year of production.

The cash flow budget using constant 2005 prices is shown in Table 6.16. The capital required to establish one hectare of rubber was about 6.667 million Kip, which includes the material costs for land preparation, fencing, and rubber seedlings. Suppose this was supported by credit with an interest rate of 7% and a repayment period of ten years, the total amount which would have to be paid back would be about 13.115 million Kip. When taking account of the amount paid back for the loan, the cumulative cash surplus was 3.776 million Kip. Again, there was a small negative cash surplus in Years 3, 5, and 7 due to the purchase of weeding tools, but the repayment of principal and interest in Year 10 caused the cash surplus to go negative again, until the greater income in Year 11 wiped out the cumulative shortfall.

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Table 6.15: Cash flow budget from Year 1-11 (current prices)
Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11

Payments (Kip) Land preparation

Fencing

Planting and replacement planting 2,000 8,000 2,500 11,000 4,000 14,000

Weeding

10,000 8,000 4,000 15,000 660,000 132,000 7,000 130,900 1,500 5,000

5,500 19,000

Tapping

Collecting

Axe Long knife Hammer Nails Barbed wire Posts Hoe Rubber seedlings Small knife Medium knife Bowl Gutter Iron wire Plastic brush Tapping knife Knife sharpening stone Headlamp Small bucket Big bucket Plastic bag Chemical powder Chemical liquid Small brush 973,400 10,000 13,500 18,000 4,500 17,000 476,000 119,000 400,000 6,000 40,000 20,000 130,000 10,000 40,000 240,000 100,000 54,000 6,000 1,662,500

Total Payments (Kip) Receipts (Kip)

44,000 24,000 150,000 12,000 60,000 288,000 125,000 60,000 6,400 769,400

48,000 28,000 170,000 14,000 70,000 336,000 150,000 67,500 7,000 915,000

Tub-lump rubber -973,400 973,400 0 0 0 -10,000 -10,000 -10,000 -13,500 -18,000

Total Receipts (Kip) Net Cash Flow (Kip) Cash Loans Received (Kip) Interest and Principle Payments (Kip) Cash Surplus (Kip) Cumulative Cash Surplus (Kip) -10,000

2,949,365 2,949,365 1,286,865

3,909,767 3,909,767 3,140,367

7,080,000 7,080,000 6,165,000

-13,500 -23,500

-23,500

1,118,131 -1,136,131 -1,159,631

-1,159,631

1,286,865 127,234

3,140,367 3,267,601

6,165,000 9,432,6001

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Table 6.16: Cash flow budget from Year 1-11 (constant 2005 prices)
Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11

Payments (Kip) Land preparation

Fencing

Planting and replacement planting 6,000 20,000 6,000 20,000 6,000 20,000

Weeding

50,000 50,000 15,000 50,000 3,300,000 528,000 30,000 2,618,000 6,000 20,000

6,000 20,000

Tapping

Collecting

Axe Long knife Hammer Nails Barbed wire Posts Hoe Rubber seedlings Small knife Medium knife Bowl Gutter Iron wire Plastic brush Tapping knife Knife sharpening stone Headlamp Small bucket Big bucket Plastic bag Chemical powder Chemical liquid Small brush 6,667,000 26,000 26,000 26,000 6,000 20,000 571,200 142,800 440,000 10,000 50,000 30,000 194,000 15,000 80,000 360,000 160,000 75,000 8,000 2,162,000

Total Payments (Kip) Receipts (Kip)

50,000 30,000 194,000 15,000 80,000 360,000 160,000 75,000 8,000 972,000

50,000 30,000 194,000 15,000 80,000 360,000 160,000 75,000 8,000 998,000

Tub-lump rubber -6,667,000 6,667,000 0 0 0 -26,000 -26,000 -26,000 -26,000 -26,000

Total Receipts (Kip) Net Cash Flow (Kip) Cash Loans Received (Kip) Interest and Principle Payments (Kip) Cash Surplus (Kip) Cumulative Cash Surplus (Kip)

6,572,871 6,572,871 4,410,871

6,160,845 6,160,845 5,188,845

8,367,273 8,367,273 7,369,273

-26,000

-26,000 -52,000

-52,000

-26,000 -78,000

-78,000

4,410,871 4,332,871

13,114,998 -7,926,153 -3,593,282

7,369,273 3,775,991

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The Economic Potential for Smallholder Rubber Production in Northern Laos In practice farmers had little problem with cash flow and could comfortably pay back the loans. This was, firstly, because they gained the benefit from high inflation in the past decade, making the invested funds considerably cheaper in nominal terms by the time of repayment, and, secondly, because the interest rate was subsidised and both interest and principal payments were deferred. If they had not received the support of such low interest loans, they may have had to finance the investment from their own savings or borrow from other sources of credit with higher interest rates and shorter repayment periods. As a result they may have had difficulty in paying back the loans. This means that in order to invest in smallholder rubber, farmers in the uplands of Northern Laos need credit supports, at least with a grace period during the establishment phase if they are planting for the first time. Similar support (even outright planting grants) has been given to rubber smallholders in the past in the major producing countries, such as Thailand and Malaysia.

6.5 Conclusion The results from the DCF analysis for the study village, given current market conditions and credit support for establishment, show that the investment in smallholder rubber production is profitable and this helps confirm that the expansion of rubber planting in that village is based on good economic returns, even allowing for some variability in price and cost assumptions. Therefore, rubber can be considered as one of the potential alternatives for poor upland farmers in settings such as Hadyao, in line with the government policy of restricting shifting cultivation and supporting new livelihood options for poverty reduction. However, this analysis has focused on rubber as a single farm enterprise. To decide on the optimal extent of rubber planting would require an analysis at the whole-farm and whole-village scale, comparing rubber with other farm enterprises and land uses, including forest conservation, which is beyond the scope of the thesis.

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Chapter 7 The Scope for Expanded Smallholder Rubber Production in Luangnamtha Province
7.1 Introduction The previous chapter presented a DCF analysis for smallholder rubber production in the study village of Hadyao, showing that, under current market conditions and levels of support, investment in rubber is worthwhile, explaining the recent expansion of rubber planting in Hadyao and other villages in the study area. The purpose of this chapter is to assess the scope for further expansion of smallholder rubber within Luangnamtha Province. The approach was first to define representative scenarios in spatial terms, drawing on concepts from land resource economics, then to estimate the economic suitability of those scenarios for rubber planting. It needs emphasising that this analysis is restricted to answering the question whether a given area is economically suitable for rubber; it does not compare rubber with other agricultural or conservation land uses.

7.2 Defining the scenarios 7.2.1 Conceptual basis of the scenarios Different scenarios can be defined in many ways, depending on the criteria used. For this study, the scenarios were based on the concept of land use-capacity, which is a function of two major attributes resource quality and accessibility (Barlowe, 1986). These are in turn derived from the classical determinants of the net returns to land, or land rent, as first theorised by Ricardo (resource quality) and Von Thunen (accessibility).

Resource quality involves the relative ability of the land resource to produce desired products, returns, or satisfactions (Barlowe, 1986). With agricultural lands, quality is usually viewed in terms of native fertility or fertility in combination with the ability to respond to fertilizer inputs. Quality may reflect climate advantage favourable temperature and precipitation, low wind velocity, or infrequency of storms.

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Accessibility involves the convenience, time, and transport cost saving associated with specific locations with respect to markets, transport facilities, and other resources (Barlowe, 1986). Areas near the road, city, or market have more advantage than those located at greater distance. The extent of this advantage corresponds with differences in transportation costs; fields located at greater distances from market naturally have higher transportation costs and thus receive a lower price for products and incur a higher price for inputs.

In discussions of the productivity of farmlands, use-capacity is often equated with differences in fertility, and in discussions of site location advantage, it is frequently associated with transportation costs. However, both these dimensions are relevant. The areas with the highest use-capacity typically have the greatest inherent production potential and most favourable location in terms of transport to markets.

The first task, therefore, was to define levels of resource quality and levels of accessibility within Luangnamtha Province. These were then mapped separately before being combined into scenarios which were also mapped.

7.2.2 Levels of resource quality In general the potential yield is the best summary measure of resource quality because it reflects all the different biophysical dimensions in a given location. Hence resource quality categories were based on the aggregate yield of latex over the life of a rubber plantation for various locations within Luangnamtha Province, estimated through the biophysical component of the Bioeconomic Rubber Agroforestry Support System (BRASS) (Fig. 7.1). As mentioned in Chapter 6, there are four main groups of variables in the biophysical component of BRASS including climate, topography and soil, management of rubber, and management of intercrop to be used for estimating the yield of rubber. The climate and topography and soil groups of variables are consistent with the concept of resource quality.

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Figure 7.1: Defining levels of resource quality based on the yields estimated from BRASS

For estimating the yield potential in various locations within Luangnamtha Province, the climate, rubber management, and intercrop management variables were maintained at the same values as for the case of study village. This is because the climate does not vary greatly within Luangnamtha Province and was unlikely to be a significant driver of differences in resource quality, and there was no reason to expect any major differences in the management practices used as the technology of rubber production in Hadyao and elsewhere in the province was similarly derived from China. The details of these variables and the selected values or criteria are found in Sections 6.2.2, 6.2.4, and 6.2.5 of Chapter 6.

However, the topography and soil variables, with the exception of maximum soil moisture and wilting point, were varied depending on the measured characteristics of soils in Luangnamtha Province. The variables of maximum soil moisture and wilting point were set at the default values, as for the case of study village, because of the lack of data on the water holding capacity of each soil texture in Laos. The details are discussed in Section 6.2.3 of Chapter 6. The variables of topography, slope, soil depth, drainage, % rock, soil texture, soil nutrients, and soil pH were all varied according to the characteristics of soils in the Province. The details of the criteria for these variables are found in Table 6.5 of Chapter 6. The decisions on which category (good, moderate, bad) to use for each of the soil variables and which category (terrace, flat) to use to represent the topography variable were based on land characteristics or primary land attributes that were recorded by a soil survey in

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The Economic Potential for Smallholder Rubber Production in Northern Laos Luangnamtha Province undertaken by the Soil Survey and Land Classification Centre (SSLCC) of the National Agriculture and Forestry Research Institute (NAFRI).

For analysing these land characteristics, the soil map of Luangnamtha Province was rasterized by using the grid spatial function in a GIS program (ArcView 3.2a) to create 116 five km by five km grid cells (or mapping units), which represented both a geo-registered grid map surface and an array of records in a tabular data matrix, with each record representing a grid cell of those land characteristics. Each mapping unit could contain one or more soil sampling sites, but for the purpose of mapping only one site was randomly selected to represent the soil characteristics in each mapping unit. The reason for this procedure was that different sampling sites could have different land characteristics which could not be meaningfully averaged to get a representative set of characteristics. The characteristics of the selected site representing each mapping unit are presented in Appendix 3 and the selected categories (good, moderate, bad) for the eight variables of topography and soil in each mapping unit are presented in Appendix 4.

Fig. 7.2 shows how the soil properties from the survey were used to select the values for topography and soil variables in BRASS. The category of soil nutrients was derived from the percentage of organic matter. The categories of slope and topography were based on the slope percentage. The category of soil depth was defined as such. The categories of soil texture and drainage were derived from soil texture. The pH in water (pH H2O) was used for defining the category of soil pH. The percentage of stone contamination was used to define the category of percentage rock.

As discussed in Chapter 6, apart from the above variables, the biophysical component also contains a number of indexes to account for the quality of the site, climate, management practices, and the quality of genetic material. These indexes are termed site index, latex index, girth clonal index, and yield clonal index. The values of these indexes were kept the same as in the case study village. They are discussed in Section 6.2.6 of Chapter 6.

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Figure 7.2: Defining topography and soil variables based on the soil properties in each soil sampling site

By incorporating the same values for climate, rubber management, intercrop management, and indexes as in Chapter 6 with the selected categories for the eight topography and soil variables in Appendix 4, the yield of latex over the life of the rubber plantation, of rice during the initial three years, and of rubber wood at harvest for each mapping unit were obtained, as shown in Appendix 5.

Resource quality could be defined continuously or categorically into many levels, but for this study it was classified into three levels high, moderate, and low. The decision on which level of resource quality represented each mapping unit was based on average annual latex yields from Years 9 to 35 for each mapping unit (Appendix 5). These average yields then had to be categorized as high, moderate, or low. Fig. 7.3 presents the distribution of these average yields for each mapping unit. It can be seen that the lowest group of yields was concentrated between 400 kg/ha and 1,000 kg/ha making up about 14% of the total mapping units. The middle group was from 1,000 kg/ha to 1,300 kg/ha covering nearly 60% of the total mapping units. The highest group of between 1,300 kg/ha and 1,600 kg/ha constituted around 26%. Therefore, the

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The Economic Potential for Smallholder Rubber Production in Northern Laos low, moderate, and high yield levels were defined as average yields of less than 1,000 kg/ha, between 1,000 and 1,300 kg/ha, and greater than 1,300 kg/ha, respectively.

Figure 7.3: The distribution of average annual latex yields for each mapping unit

By integrating these three levels of yield in a GIS, a resource quality map for smallholder rubber in Luangnamtha Province was produced (Fig. 7.4). It can be seen that the majority of the area in the Province was at the moderate level of resource quality, with only a small proportion at either the low or high level. The significant features in terms of topography and soil properties for these three levels of resource quality are presented in Table 7.1. The main differences were that the areas of low resource quality were predominantly Eutric Cambisols that were shallow, rocky, of poor nutrient status, and steeply sloping topography, while the areas of moderate

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The Economic Potential for Smallholder Rubber Production in Northern Laos resource quality were predominantly Haplic Acrisols and Dystric Cambisols that were limited by moderate levels of soil nutrients, soil pH, drainage, and steeply sloping topography. The areas of high resource quality were predominantly Haplic Acrisols that had good soil depth, texture, and drainage, and relatively flat topography. It is interesting to note that Hadyao is located in a region of moderate resource quality.

Figure 7.4: Resource quality map for smallholder rubber in Luangnamtha Province

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The Economic Potential for Smallholder Rubber Production in Northern Laos


Table 7.1: The number of mapping units in each level of resource quality by topography and soil properties Resource Quality Topography and soil properties Low Moderate High Flat 12 Topography Terrace 15 71 18 Ferric ACRISOLS 4 Haplic ACRISOLS 4 32 13 Dystric CAMBISOLS 3 27 8 Eutric CAMBISOLS 8 Soil Unit Gleyic CAMBISOLS 5 Ferric LUVISOLS 1 Haplic LUVISOLS 5 4 Haplic LUXISOLS 2 Bad 8 Soil Depth Moderate 5 4 Good 2 71 26 Bad Soil Texture Moderate 3 9 Good 12 62 30 Bad 8 12 Soil Nutrient Moderate 6 50 27 Good 1 9 3 Bad Soil pH Moderate 15 38 19 Good 33 11 Bad 3 9 Drainage Moderate 4 54 11 Good 8 8 19 Bad 8 % Rock Moderate Good 7 71 30 Bad 15 59 8 Moderate 12 10 Slope Good 12

7.2.3 Levels of accessibility The accessibility attribute was also divided into three levels good, moderate, and poor accessibility based on the distance from a main road. Areas less than 0.5 km from a main road were defined as good accessibility, from 0.5 to 3.5 km as moderate accessibility, and more than 3.5 km as poor accessibility (Table 7.2). By integrating these three levels of accessibility in a GIS, an accessibility map for Luangnamtha Province was produced (Fig. 7.5). The map also shows the transport infrastructure,

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The Economic Potential for Smallholder Rubber Production in Northern Laos including main roads, cart-tracks, and footpaths, and the location of individual villages.

Table 7.2: Criteria for defining levels of accessibility Levels of accessibility Distance from main road (km) Good < 0.5 Moderate 0.5 - 3.5 Poor >3.5

Figure 7.5: Accessibility map in Luangnamtha Province

Each level of accessibility had its own characteristics in terms of the location of villages and the nature of transportation, including the dominant mode of transport

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The Economic Potential for Smallholder Rubber Production in Northern Laos used and the condition of the road. Villages with good accessibility were located alongside or very close to the main road, which is the main route linking Luangnamtha Province with other northern provinces of Laos and Yunnan Province in China, hence agricultural produce could be collected directly by traders or transported by truck to the market (Fig. 7.6). Most villages with moderate accessibility were located in gently sloping areas and could access the main road by cart-tracks, though some may only have had footpaths. Agricultural produce from this zone was normally transported by human-drawn carts (Fig. 7.7) to the side of the main road and then collected by traders or transported to the market. Most villages with poor accessibility were located in hilly areas reachable only by footpaths. Agricultural produce was normally back-loaded (Fig. 7.8) to the main road and then collected by traders or transported to the market.

Figure 7.6: Trucks waiting to collect tub-lump rubber at the roadside

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Figure 7.7: Transporting rubber by cart

Figure 7.8: Transporting agricultural and forest produce using back packs

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The Economic Potential for Smallholder Rubber Production in Northern Laos

Obviously the time spent in transporting produce to the roadside increases as accessibility declines due to the greater distance, poorer condition of the road, and more difficult mode of transportation, resulting in higher unit cost of transportation. However, it should be noted that these categories were not fixed; according to provincial agricultural officials, some villages in the more accessible parts of the poor accessibility zone had already started planting rubber, with the intention to upgrade their footpaths to cart-tracks when they started tapping.

7.2.4 Scenarios in terms of resource quality and accessibility After the levels of resource quality and accessibility had been defined, these dimensions were combined to form scenarios. Three levels of resource quality and three levels of accessibility gave nine scenarios (Table 7.3). For example, Scenario A combined a high level of resource quality and a good level of accessibility, while Scenario I combined a low level of resource quality and a poor level of accessibility. Each of these scenarios were spatially referenced to the 116 mapping units referred to above.

Table 7.3: The levels of accessibility and resource quality in each scenario Accessibility Resource quality Good Moderate Poor High Scenario A Scenario D Scenario G Moderate Scenario B Scenario E Scenario H Low Scenario C Scenario F Scenario I

7.3 Economic suitability of each scenario 7.3.1 Introduction In order to define the economic suitability of these scenarios, hence of the spatial units they described, a DCF analysis was undertaken for each scenario. The DCF model for a typical hectare of smallholder rubber production in the study village (using the opportunity cost of farm labour and the mid-range discount rate) was modified by developing new yield profiles from the BRASS model for each level of resource quality and adjusting input and output prices based on the estimated unit transport costs for each level of accessibility. However, the values of the other variables in the DCF model for Hadyao, including the quantity of materials and days of labour used in

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The Economic Potential for Smallholder Rubber Production in Northern Laos each phase of production (Section 6.3.2 of Chapter 6), were applied to all scenarios within Luangnamtha Province as the technology and management practices were not expected to differ. As each scenario was the combination of the level of resource quality and accessibility, the first task was to estimate the yield profiles for each level of resource quality, then to estimate the prices and wage rates for each level of accessibility, and finally to undertake the DCF analysis for each scenario.

7.3.2 Yield profiles for each level of resource quality The latex yields for each mapping unit were estimated by BRASS, as discussed in Section 7.2.2 and presented in Appendix 5. These yields were then averaged across all the mapping units in a given category of resource quality, giving the three latex yield profiles shown in Fig. 7.9 and Appendix 6. The same procedure was followed for the annual yield of intercropped rice and the yield of rubber wood (Table 7.4). It should be noted that, as expected, the yield patterns of latex and rubber wood were consistent with the levels of resource quality, i.e., the yields are higher for higher resource quality, but the yield pattern of intercropped rice did not entirely correspond to the level of resource quality, i.e., the rice yield was lower for the higher resource quality. One possible explanation is that, with high resource quality, the rubber trees grow faster, providing more shade and competing for more nutrients with the intercrop, hence the intercropped rice yields less.
Low resource quality 1,800 1,600 1,400 Latex yields (kg/ha) 1,200 1,000 800 600 400 200 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Year Moderate resource quality High resource quality

Figure 7.9: Latex yields for three levels of resource quality

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Table 7.4: Yields of intercropped rice and rubber wood for three levels of resource quality Intercropping rice (kg/ha) Rubber wood at harvest Levels of resource quality (m3/ha) Year 1 Year 2 Year 3 Low 1,724 1,584 1,296 34 Moderate 1,698 1,429 979 55 High 1,681 1,320 839 68

7.3.3 Prices for each level of accessibility The prices in Table 6.9 of Chapter 6 were those that applied to the study village, which was one of the villages with good accessibility. There is no information on the prices in villages with moderate or poor accessibility. Hence those values had to be reestimated. The distance from the main road and the condition of the road or track would determine the price of tub-lump rubber, other outputs, and material inputs for each level of accessibility. For example, it would cost more to transport tub-lump rubber from a farm located far from a main road than from one which was nearby. Also, it would cost more to transport rubber from a farm accessed by a road in very bad condition than from one located the same distance but along a road in good condition. In this section, the percentage reduction in the farm-gate price of tub-lump rubber for moderate and poor accessibility is estimated, and these percentages are used to adjust other prices.

For the good accessibility zone it was assumed that there was no cost of transporting the tub-lump rubber to the market as it was supposed that Chinese traders would bring their trucks to buy the rubber at the roadside every month, as in Hadyao. Farmers could stockpile their rubber at home and sell it directly to the traders. Hence, farmers in this zone were assumed to receive the 2005 market price of 7,800 Kip/kg for their tub-lump rubber.

For the moderate accessibility zone it was also assumed that there was no cost of transporting the tub-lump rubber from the roadside to the market. The costs incurred were the cost of transporting the tub-lump rubber from the rubber plot to the roadside, the cost of building a shelter for storing the rubber, and the cost of guarding the rubber stockpile by sleeping in the shelter overnight (Table 7.5).

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Based on observations during fieldwork, one adult person using a two-wheeled cart was able to transport 40 kg of tub-lump rubber per trip to the roadside. Each trip would require about half an hour per km (including uploading, downloading, rest breaks, and the return trip). Assuming 1,500 kg of tub-lump rubber sold per year (the average in Hadyao), about 38 person-trips per year would be required. So the amount of time spent transporting tub-lump rubber to the roadside in a year would be about 19 hours or 2.3 person-days per km, assuming a working day of 8 hours. If this labour is valued at 17,000 Kip/person-day (the estimated average opportunity cost of family labour), the cost of labour for transporting the tub-lump rubber to the roadside would be about 39,000 Kip per km per year.

The cost of a hut for storing the tub-lump rubber was measured in terms of the labour expended to build the hut, estimated to be 5 person-days. It was assumed that a hut lasted for two years. At 17,000 Kip/person-day, the cost of a hut per year was about 42,500 Kip. The cost of guarding overnight was based on the number of nights needed to look after the tub-lump rubber during the period of waiting for the traders. It was assumed that the person who transported the rubber to the roadside would sleep overnight by him/herself. Otherwise he/she would have to pay for another person to look after the rubber. Within this zone a person could get all his rubber for the month down to his storage hut in one day, requiring him only to stay overnight until the traders came. This would occur once in each of the eight months of the tapping season, making a total of eight nights per year. Using a wage rate of one-third the market wage as this is light work with low opportunity cost, the cost of guarding overnight per year was estimated to be around 67,000 Kip.

Altogether, the total cost of transporting the tub-lump rubber to the roadside from the moderate accessibility zone was about 149,000 Kip per km per year. On a unit weight basis the cost was about 100 Kip per kg-km.

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Table 7.5: The cost of transporting tub-lump rubber from the moderate accessibility zone (0.5-3.5 km) to the roadside Items Unit Amount Quantity of tub-lump rubber sold per household kg/year 1,500 Quantity of tub-lump rubber which one adult labourer can kg/trip 40 transport by cart per trip Time spent per km per trip hr/km/trip 0.5 Time spent per km per year hr/km/year 18.8 Labour used per km per year person2.3 day/km/year Wage rate Kip/person-day 17,000 Cost of labour for transporting the tub-lump rubber to roadside Kip/km/year 39,100 per km per year Labour used for building a hut person-day 5 Cost of building a hut Kip/year 42,500 Cost of guarding overnight Kip/year 66,700 Total cost per km per year Kip/km/year 148,300 Total cost per kg of tub-lump rubber per km Kip/kg-km 99

For the poor accessibility zone it was also assumed that there was no cost of transporting the tub-lump rubber from the roadside to the market as the Chinese traders brought their trucks to buy the rubber at the roadside. The costs incurred were, as before, the cost of transporting the tub-lump rubber from the farm to the roadside, the cost of building a shelter for storing the rubber, and the cost of guarding the rubber overnight (Table 7.6).

Based on observations made during fieldwork, one adult person could transport 20 kg of tub-lump rubber per trip by back-loading to the roadside, requiring about 1 hour per km (including uploading and downloading, breaks, and the return trip). With 1,500 kg sold per household per year, about 75 trips per year would be required. So the time spent transporting rubber to the roadside would be about 75 hours or 9.4 person-days per km. At 17,000 Kip/person-day, the cost of transporting the rubber would be about 160,000 Kip per km per year.

The cost of building a hut for storing the tub-lump rubber would be the same as for the moderate accessibility zone. The cost of guarding overnight was also estimated in the same way as for the moderate accessibility zone. Assuming two people were involved in transporting the rubber, it would take an average household five days to bring down their rubber to the roadside, meaning one person would have to spend five nights per month or 40 nights per year guarding the stockpile. At one-third the market

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The Economic Potential for Smallholder Rubber Production in Northern Laos wage, the cost of guarding would be about 333,000 Kip per year. While this might seem unrealistic it serves to highlight the transportation bottleneck facing farmers in the more remote villages.

Altogether, the cost of transporting the tub-lump rubber to the roadside from the poor accessibility zone was about 536,000 Kip per km per year. On a unit weight basis, it was around 360 Kip per kg-km.

Table 7.6: The cost of transporting tub-lump rubber from the poor accessibility zone (>3.5 km) to the roadside Items Unit Amount Quantity of tub-lump rubber sold per household kg/year 1,500 Quantity of tub-lump rubber which one adult labour can kg/trip 20 transport by back-loading per trip Time spent per km per trip hr/km/trip 1 Time spent per km per year hr/km/year 75 Labour used per km per year person9.4 day/km/year Wage rate Kip/person-day 17,000 Cost of labour for transporting the tub-lump rubber to roadside Kip/km/year 159,800 per km per year Labour used for building a hut person-day 5 Cost of building a hut Kip/year 42,500 Cost of guarding overnight Kip/year 333,300 Total cost per km per year Kip/km/year 535,600 Total cost per kg of tub-lump rubber per km Kip/kg-km 357

The estimated cost of transporting the tub-lump rubber to the roadside per kg and the percentage reduction in the farm-gate price of tub-lump rubber for various distances are presented in Figs. 7.10 and 7.11. For the moderate accessibility zone the cost of transporting the tub-lump rubber was about 100 Kip at 1.5 km, 200 Kip at 2.5 km, and 300 Kip at 3.5 km. For the poor accessibility zone the range was much greater, from around 1,500 Kip at 4.5 km to just under 8,000 Kip at 22.5 km (Fig. 7.10). It can be seen that the transportation cost increased more sharply in the poor accessibility zone than in the moderate accessibility zone due to the smaller maximum loads per trip and slower speed when back-loading as compared with using carts.

The percentage reduction in the farm-gate price of tub-lump rubber was about 1.5% at 1.5 km, 2.5% at 2.5 km, and 4% at 3.5 km for the moderate accessibility zone and ranged from nearly 19% at 4.5 km to just over 100% at 22.5 km for the poor

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The Economic Potential for Smallholder Rubber Production in Northern Laos accessibility zone (Fig. 7.11). In fact, the distance for the poor accessibility zone extends further than the 22.5 km shown in the graphs because the percentage reduction in the farm-gate price of tub-lump rubber for greater distances is over 100%. It is unlikely that farmers who live in these areas would plant rubber as the price for their rubber would not even cover the transportation cost.

8,000 7,000 Transport cost (kip/kg) 6,000 5,000 4,000 3,000 2,000 1,000 0 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5 16.5 17.5 18.5 19.5 20.5 21.5 21.5 22.5 22.5

Distance (km)

Figure 7.10: The estimation of cost of transporting the tub-lump rubber to the roadside by distance

100 Percentage reduction in prices (%) 90 80 70 60 50 40 30 20 10 0 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5 12.5 13.5 14.5 15.5 16.5 17.5 18.5 19.5 20.5

Distance (km)

Figure 7.11: The percentage reduction in farm-gate prices of tub-lump rubber by distance

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The estimation of the percentage reduction in the farm-gate price of tub-lump rubber as presented above is consistent with the change in prices of agricultural produce and purchased material inputs in other upland areas of Laos. A marketing survey by Manivong et al. (2005) in the upland villages in Samet-Saysana Zone in Sayabouly District of Sayabouly Province found that the prices of agricultural produce at the mid-remote villages and the remotest villages were almost 50% and 75% lower than at the market in town. This was because of the greater distance from the town, poorer road condition, and the lack of market information. Therefore, villagers capacity to obtain full value for their produce was very low and they had often been taken advantage of in trading. Farmers in the remotest villages had to back-load their produce to sell to traders who were waiting at the roadside or transport their produce to the market by themselves by paying for transportation costs. Conversely, the prices of imported goods such as salt, flavouring ingredients, clothes, construction materials, and agricultural inputs sold in the mid-remote villages and the remotest villages were nearly 50% and 75% higher than at the market in town. It should be noted that the percentage reduction in prices of agricultural produce reported by that survey was in the range of the percentage reduction in the farm-gate price of tub-lump rubber estimated for the poor accessibility zone in this study, which likely corresponds to the mid-remote and remote classifications used by Manivong et al. (2005).

7.3.4 DCF analysis for each scenario To perform DCF analysis for each scenario, the output of tub-lump rubber was calculated from the latex yield profiles for each level of resource quality (Fig. 7.9 and Appendix 6) by taking account of the estimated 10% loss in weight, as discussed in Section 6.3.2 of Chapter 6. The outputs of intercropped rice and rubber wood for each level of resource quality were calculated by using the yields in Table 7.4.

The prices of outputs and inputs had to be adjusted to reflect the variation in transport costs associated with each accessibility zone. As shown in Fig. 7.11, there was no change in the farm-gate price of tub-lump rubber in the good accessibility zone but the percentage reduction in the farm-gate price varied within the moderate and poor accessibility zones depending on the actual distance from the main road. Hence a

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The Economic Potential for Smallholder Rubber Production in Northern Laos price adjustment had to be made that was representative of the actual location of the majority of the villages within these zones. This was done by using the average distance from main road in each zone. The average distance of the villages located in the moderate accessibility zone was about 2 km, ranging from 0.5 km to 3.5 km (Fig. 7.12). From Fig. 7.11 the percentage reduction in farm-gate price of tub-lump rubber at this distance was around 2%. Therefore this percentage was used to adjust farmgate prices for those scenarios involving moderate accessibility (Scenarios D, E, and F). The average distance to the main road of the villages located in the poor accessibility zone was about 11 km, ranging from 5 km to 35 km (Fig. 7.13). From Fig. 7.11 the percentage reduction in the farm-gate price of tub-lump rubber at this distance was about 50%. Hence this percentage was used to adjust prices for the scenarios involving poor accessibility (Scenarios G, H, and I).

Figure 7.12: Distribution of distance to the main road of villages in the moderate accessibility zone

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Figure 7.13: Distribution of distance to the main road of villages in the poor accessibility zone

Thus the farm-gate price of tub-lump rubber was unchanged for the good accessibility zone and reduced by 2% and 50% for the moderate and poor accessibility zones, respectively. The same percentage deductions were applied to the price of rubber wood. The price of intercropped rice was increased by the relevant percentage as most farmers were net purchasers of rice, hence every kilogram of rice produced substituted for rice purchased from the market. The prices of material inputs were likewise increased (Table 7.7). In principle, the opportunity cost of labour should also have been adjusted to reflect increased distance but this would have introduced some circularity as a figure of 17,000 Kip per person-day was assumed in computing transport costs, labour being the main component of these costs. To the extent that the opportunity cost of labour was in fact lower for the scenarios with poorer accessibility, the estimated returns to investment in smallholder rubber would be underestimated. However, it is unlikely that this would have greatly affected the results reported below. Table 7.8 details the prices used for each scenario.

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Table 7.7: Percentage change in prices for each level of accessibility Level of accessibility Items Good Moderate Poor Tub-lump rubber 0 2 50 Intercropped rice 0 +2 +50 Rubber wood 0 2 50 Material inputs 0 +2 +50 Table 7.8: Prices of inputs and outputs used in DCF analysis for each scenario Scenarios Scenarios Scenarios A, B, C D, E, F G, H, I Items Unit (Kip/unit) (Kip/unit) (Kip/unit) Materials Establishment phase Axe Piece 50,000 51,000 75,000 Long knife Piece 50,000 51,000 75,000 Hammer Piece 15,000 15,300 22,500 Nails Kg 10,000 10,200 15,000 Barbed wire Roll 150,000 153,000 225,000 Posts Post 2,000 2,040 3,000 Hoe Piece 30,000 30,600 45,000 Rubber seedlings Seedling 5,000 5,100 7,500 Rice seed Kg 2,000 2,040 3,000 Maintenance phase Small knife Piece 6,000 6,120 9,000 Medium knife Piece 20,000 20,400 30,000 Harvesting phase Bowl/cup Piece 1,200 1,224 1,800 Gutter/spout Piece 300 306 450 Iron wire Roll 220,000 224,400 330,000 Plastic brush Piece 5,000 5,100 7,500 Tapping knife Piece 25,000 25,500 37,500 Knife sharpening stone Set 15,000 15,300 22,500 Headlamp Piece 97,000 98,940 145,500 Small bucket Piece 7,500 7,650 11,250 Big bucket Piece 40,000 40,800 60,000 Plastic bag Piece 1,500 1,530 2,250 Chemical powder Kg 64,000 65,280 96,000 Chemical liquid Kg 50,000 51,000 75,000 Small brush Piece 4,000 4,080 6,000 Handy saws Set 500,000 510,000 750,000 Outputs Rice Kg 3,500 3,570 5,250 Tub-lump rubber Kg 7,800 7,644 3,900 Rubber wood m3 364,000 356,720 182,000 Costs of labour Wage rates Person-day 17,000 17,000 17,000

The results of the DCF analysis in terms of NPV, IRR, and BCR for each scenario using a discount rate of 8% are shown in Table 7.9. It can be seen that the investment

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The Economic Potential for Smallholder Rubber Production in Northern Laos in rubber is clearly worthwhile in Scenarios A and D (NPV of 12-14 million Kip/ha), and marginally so in Scenarios B and E (NPV of 1.5-3.0 million Kip/ha), but not in scenarios C, F, G, H, and I (NPV < 0). Hence low resource quality and poor accessibility combined to make rubber unattractive.

Given that these scenarios were based on the average distance from the road in each accessibility zone, a threshold analysis was undertaken to see at what distance a scenario might switch from unprofitable to profitable. It was found that the investment in smallholder rubber was worthwhile in Scenarios A, B, D, and E (moderate to high resource quality and moderate to good accessibility) even at the outer margin of the relevant accessibility zone. Conversely, rubber was unprofitable in Scenarios C, F, H, and I (low resource quality and poor to moderate accessibility) even at the inner margin of the accessibility zone. However, for Scenario G, combining poor accessibility and high resource quality, the investment became marginally profitable if the plot was located less than 5 km from the main road, making the change in prices less than 22%.

The nine scenarios were ranked according to NPV per hectare to give a measure of economic suitability (or land-use capacity) for smallholder rubber in Luangnamtha Province (Table 7.10). By integrating these nine categories of economic suitability in a GIS, an economic suitability map for rubber in Luangnamtha Province was produced (Fig. 7.14). Table 7.11 presents the areas in each rank. Given that the categories 1 to 4 were associated with a positive value for NPV per hectare, approximately 239,600 hectares (or 26% of the total provincial area) were considered as economically suitable for smallholder rubber. These economically suitable areas were concentrated along the main road, indicating that road access was a key factor, but moderate to high resource quality was also important. However, only 1% of the total area was highly suitable while 25% was marginally suitable, as defined above. Fig. 7.15 aggregates the rankings in Fig. 7.14 to show the areas of highly and marginally suitable land.

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Table 7.9: Results of DCF analysis for each scenario at 8% discount rate Scenario NPV (Kip/ha) IRR (%) BCR A 13,935,000 13.8 1.24 B 2,730,000 9.5 1.05 C -15,428,000 -23.9 0.74 D 12,662,000 13.4 1.22 E 1,712,000 9.0 1.03 F -16,026,000 -26.5 0.73 G -17,769,000 -12.0 0.73 H -22,600,000 -37.2 0.66 I -30,250,000 NC* 0.54 Note: * Not Computable Table 7.10: Ranking of economic suitability for rubber Ranking Scenario 1 A 2 D 3 B 4 E 5 C 6 F 7 G 8 H 9 I

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Figure 7.14: Economic suitability ranking map for smallholder rubber in Luangnamtha Province

Table 7.11: Areas within each suitability rank in Luangnamtha Province Rank Areas (ha) % 1 454 0.1 2 6,744 0.7 3 49,239 5.2 4 183,132 19.6 5 165,624 17.8 6 121,712 13.1 7 133,484 14.3 8 219,851 23.6 9 52,260 5.6 Total 932,500 100.0

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Figure 7.15: Simplified economic suitability map for smallholder rubber in Luangnamtha Province

It should be noted that these areas designated as economically suitable for smallholder rubber are upper bound estimates, ignoring the requirements for other land uses such as rice cultivation, residential areas, and conservation areas. Ideally, it would be possible to overlay maps of these other uses to indicate the area remaining for rubber. However, such data were not readily available. An indication can be given by using the example of Hadyao. As discussed in Chapter 4, the land allocation process in Hadyao resulted in 15.2% for conservation forest, 28.3% for protection forest, 36.9% for agricultural land, 15.2% for plantation forest, 4.3% for grazing area and 0.1% for

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The Economic Potential for Smallholder Rubber Production in Northern Laos residential area. At the most, only agricultural and plantation land could be used for rubber, accounting for about half of the village lands. If this proportion applied across the Province, then 120,000 hectares or 13% of the total land area would be both suitable and available for smallholder rubber (including marginally suitable land). This still leaves open the question of how much land could or should be retained in subsistence production for a balanced rural economy.

7.4 Conclusion The results from this chapter indicate that the potential for smallholder rubber in the study village is not an isolated case; there are other areas in Luangnamtha Province that appear to be economically suitable for rubber. An upper bound estimate is that 26% of the Province has potential for rubber. However, this is based on analysis of the rubber enterprise only and ignores the requirements of other land uses. If current land use allocations are taken as a guide, perhaps only half of this potentially suitable land is actually available for rubber planting. Nevertheless, given that rubber produces a good financial return to the smallholder, whereas conservation areas generate mainly non-market returns to the wider community, there may be increasing pressure to reallocate land to tree crop production, raising important policy issues that are taken up in the concluding chapter.

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Chapter 8 Conclusion
8.1 Background In the past decade or more there has been major change in the uplands of Southeast Asia due to the economic growth of these countries. One significant change in the upland areas of Northern Laos in recent years has been the transition from subsistence production based on shifting cultivation to smallholder commercial production. Subsistence farmers in the uplands are becoming commercialized. The change in farming systems in Northern Laos is a result of both the integration with the regional economies of Southeast Asia, particularly Southern China, and of government policies directed towards upland development. Most of the change in agriculture has been driven by market forces and foreign investors, particularly from China. The government policy of stabilising shifting cultivation and improving road access has helped drive the change.

The most extensive and rapid change in the uplands of Northern Laos has been the expansion of smallholder rubber, made possible by robust global demand for rubber, especially from China. While rubber provides an attractive investment opportunity for foreign investors from China, Vietnam, and Thailand, the Government of Laos envisages it as a way of stabilising shifting cultivation and generating income for upland farmers. As a result of this rapid growth in market demand for rubber and the support of government land-use policy, rubber is considered to be one of the promising alternatives for upland farmers.

This study has examined the economic potential of smallholder rubber production in the uplands of Northern Laos, particularly Luangnamtha Province. The specific objectives were to appraise the economics of smallholder rubber production in an established rubber-growing village (Hadyao in Namtha District), and to use this as a basis for modelling the economic potential of smallholder rubber production in a variety of settings to indicate the potential for further expansion in Luangnamtha Province.

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8.2 Theoretical framework and methodology The theory of intensification of shifting cultivation and of transition from subsistence to commercial production was reviewed as a basis for understanding the change in cultivation underway in the uplands of Northern Laos. Boserups theory of intensification of food crop production from shifting cultivation to continuous cultivation does not seem to apply to the mountainous terrain of Northern Laos. Hence it may not be possible to stabilise shifting cultivation without a transition from subsistence production to new commercial crops. Myints theory of commercialisation identifies two stages in this transition. In Stage I farmers maintain subsistence output and use spare land and labour for the cash crop, while in Stage II the expansion of the cash crop involves a reduction in subsistence output and greater reliance on the market. This is encouraged by improvement in infrastructure, the activities of market intermediaries, and increased confidence on the part of smallholders in the benefits of producing for the market.

For many Southeast Asian upland farmers the transition from subsistence shifting cultivation to cash crop production has involved the planting of tree crops or other perennials. Barlows theory identifies five stages in tree crop development, starting with subsistence agriculture with no plantation crops (as in Laos until recent decades) and ending in a late advanced economy in which plantation crops have become less profitable due to high costs of land and labour (a stage now reached by Malaysia and Thailand). In the second stage (early agricultural transformation) subsistence agriculture is still dominant and farmers adopt simple labour-intensive tree crop technologies. In the third stage (late agricultural transformation) commercial agriculture is dominant and new land- and labour-saving but more capital- and management-intensive high-yielding tree crop technologies are generated and adopted. In the fourth stage (early advanced economy) manufacturing is dominant and the generation and adoption of tree crop technologies as in the third stage continues and spreads to farmers in different circumstances. Upland farmers in Laos are clearly in the early agricultural transformation stage, but with the opportunity to borrow and adapt tree crop technologies from neighbouring countries.

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The Economic Potential for Smallholder Rubber Production in Northern Laos The theory of transition implies that farmers are increasingly interested in the financial returns they obtain from their investment. The conceptual model of discounted cash flow (DCF) analysis was used for analysing the returns from the investment of household resources in smallholder rubber production. The criteria of DCF analysis used for appraising investment projects were net present value (NPV), the internal rate of return (IRR), and the benefit-cost ratio (BCR). Within this framework, consideration was given to the difficult subjects of the appropriate valuation of unpaid household labour and of the appropriate discount rate to use in calculating present values, given that farmers are only partially engaged in labour and capital markets. In addition, when an investment project involves forecasting future costs and benefits, particularly for a long-term investment like rubber, there is no guarantee that the exact estimate of NPV, IRR, or BCR will be obtained. Therefore, risk and uncertainty are taken into account in the DCF analysis through sensitivity analysis. The conventional investment criteria (NPV, IRR, or BCR) may not be entirely applicable in the case of semi-commercial smallholder agriculture, in which the markets for land and labour are incomplete. It can be argued that the relevant criterion is the net return to the familys own resources of labour and land, sometimes termed farm family income. This measure makes more sense in Stage I of the transition, but in Stage II it makes more sense to value all resources at their opportunity cost, with the exception of land as it is not transferable.

Since rubber is a long term investment, estimates of the yield of latex over the life of the investment were required. Annual latex yields were estimated using the Bioeconomic Rubber Agroforestry Support System (BRASS), which is the best available tool for modelling smallholder rubber production. BRASS has a biophysical and an economic component, of which only the former was used in this study. The biophysical module incorporates many variables in order to estimate the intercrop yields during the intercropping period, the stream of latex yields over the life of the plantation, and the volume of harvestable timber at the end of the production period. These variables are grouped into climate, topography and soil, rubber management, and intercrop management. Though limited by the available data, the model provided plausible estimates of latex yield over time, sufficient to be reasonably confident of the economic appraisals undertaken.

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The Economic Potential for Smallholder Rubber Production in Northern Laos As well as considering economic returns over time, the study considered the spatial potential of rubber. For this the concept of land use-capacity was essential. Land usecapacity has two major components resource quality and accessibility. Resource quality involves the relative ability of the land resource to produce desired products, returns, or satisfactions. Accessibility involves the convenience, time, and transport cost saving associated with specific locations with respect to markets, shipping facilities, and other resources. The areas with the highest land use-capacity ordinarily have the greatest production potential and yield the highest return. In this study resource quality was based primarily on the soil properties affecting latex yield, and accessibility was based on the distance from the main road and the corresponding mode of transporting rubber to the point of sale. These dimensions were mapped using GIS techniques and incorporated in further DCF analysis, resulting in a map of the relative economic suitability of the study area for smallholder rubber.

8.3 Key findings Global rubber production is dominated by Thailand, Indonesia, and Malaysia. The recent growth in rubber consumption is being driven by robust demand from China, which is now the major consumer. As a result the price of natural rubber began to rise again in 2002 after dropping for about 20 years. It has been forecast that the price of rubber will continue to increase in the next ten years. However, this depends on China maintaining its rate of economic growth and on the responses of other rubber producing countries.

The economic structure of the rubber industry in the main rubber producing nations is similar, with both estates and smallholders; however, smallholders have come to dominate the planted area in these countries. Various schemes to support smallholder rubber development have been implemented. Rubber smallholders in Thailand and Malaysia have benefited from well-targeted technical and financial assistance over many decades, conforming to the dispersal strategy advocated by Barlow and Jayasuriya (1984). An agency like the Office of Rubber Replanting Aid Fund (ORRAF) in Thailand is a successful example of the assistance given to rubber smallholders to help them through the establishment phase and to replant with highyielding clones. Some of the Malaysian agencies like the Rubber Industry Smallholder Development Agency (RISDA) are more appropriate in the later stages 185

The Economic Potential for Smallholder Rubber Production in Northern Laos of development when the opportunity cost of labour is higher and rubber holdings are being left untapped. In Indonesia more reliance has been placed on nucleus estate and smallholder schemes, which have been less effective. In the case of Laos, a dispersal strategy with widespread support for smallholders on the Thai model would seem appropriate as the rubber industry is currently in the early phase of development.

Rubber has recently been introduced into upland areas of Laos, with relatively small areas planted and even less under tapping. The rubber area is expanding rapidly in response to growth in market demand from neighbouring China. Both local and foreign investors, especially from China, Vietnam, and Thailand, have been interested to invest in rubber plantations throughout the country by seeking land for concessions and other arrangements. Currently, about 75% of rubber planting in Laos is through concessions by both foreign and local investors, the rest is under smallholding farms. In the study area the main arrangement is the direct financing of smallholders and the roadside purchase of raw latex or tub-lump rubber. The relative success of this investment in smallholder rubber provides an important alternative model to the largescale concessions being sought.

Hadyao Village has become well-known in Laos as the first village to plant and tap rubber. Rubber from Hadyao is sold directly to traders from China in the form of tub lump. Due to the success of the early planters, rubber planting and production is expanding rapidly in the study village, based on low-level technologies imported from China and direct access to the Chinese market. After the first phase of rubber planting in the mid-1990s, and with the recent upturn in price, there has been an increase in rubber planting and rubber has become the main source of income for farmers in the village.

The household survey in Hadyao shows that farmers are in the middle of a major transition from primary dependence on the shifting cultivation of rice for subsistence to dependence on smallholder rubber and the market economy. While rubber has helped farmers increase their income, there are some emerging constraints. Land is becoming a constraint due to a growing demand among farmers to expand their rubber holdings, though less-accessible land is still available and some farmers are able to plant rice and rubber in other villages. Labour is also becoming a constraint; 186

The Economic Potential for Smallholder Rubber Production in Northern Laos though at this stage family labour can handle the tapping, as more trees come into production this will be a constraint, putting more pressure on rice production. Rubber farmers may have to reduce further the area of rice or even stop growing rice altogether if they want to expand their rubber holdings. The land and labour constraints mean that most households do not attain rice self-sufficiency any more. Hence many farmers have now moved into the second and more risky stage in the transition from subsistence to commercial agriculture.

Despite the popularity of rubber and the stated intention of farmers in the study village to stop shifting cultivation and plant only rubber, it is unlikely that upland rice production will be replaced completely. Farmers still need to grow upland rice or intercrop rice in their rubber plots, especially for those whose rubber trees are still immature. Farmers also face the risk that the price of rubber will fall or that they cannot sell to China. Hence they may need to expand rice production again. One advantage of rubber is that, given a major market collapse, it is relatively easy to revert to shifting cultivation, as seen among rubber smallholders in Indonesia and Malaysia.

In addition, there has been an increasing inequality between the three wealth categories of households, particularly between wealthy and poor households, in terms of land and labour resources, and rice and rubber production. Wealthy households had a larger labour force, were able to access more land, were better able to invest in large livestock, produced more rice, were self-sufficient for more months, were less dependent on upland rice, were less dependent on village land, were more likely to hire labour, had planted more rubber trees, had more rubber trees in production, and hence produced more rubber than average or poor households.

Smallholder rubber in Hadyao is based on simple labour-intensive technology imported from China. The technology has been easily adopted by upland farmers as it readily fits with their current shifting cultivation system. However, the technology is not at the lowest level identified by Barlow (1997) as farmers are planting clones such as RRIM600 and GT1, terracing their hillsides, and maintaining their holdings to a reasonable standard. Moreover, their yields are comparable to smallholders elsewhere, e.g. Southern China and North East Thailand. However, they do not fertilise their 187

The Economic Potential for Smallholder Rubber Production in Northern Laos rubber trees and the latex is sold in raw form as tub lump without even processing into sheets. In the future farmers are likely to adopt higher levels of rubber production and processing technology in order to get a higher return from their rubber holdings, but this may depend on appropriate support, as discussed below.

The DCF analysis of a typical hectare of rubber in the study village, using a discount rate of 8% and an estimated opportunity cost of labour of 17,000 Kip/person-day, shows that the investment in rubber is worthwhile, whether using the conventional investment criteria or the net return to the familys own resources of labour and land (farm family income). The analysis also shows that farmers had little problem paying back credit, whether in nominal or real terms, or at subsidised or commercial interest rates, except for the upper bound rate charged by moneylenders. The key was that repayments of interest and principal were deferred until tapping had commenced. The results from this analysis are likely to represent the reality of current investment in rubber in the study village. That is the reason for the expansion of rubber planting in that village and in other areas as it provides good economic returns to farm families. This confirms the view that smallholder rubber is an economic proposition and suggests that smallholders should be at the forefront of any national rubber development policy.

The findings from the sensitivity analysis show that at the low price of tub-lump rubber, e.g., a decrease of more than 13% from the current market price, investment in smallholder rubber in Hadyao is no longer worthwhile, indicating that farmers may have to re-evaluate their investment plans if there is a market downturn in the future. However, for those with established gardens, for whom the investment is a sunk cost, the price would have to fall up to 60% from 2005 levels before it would no longer be worthwhile to tap. Even in that case, the rubber plots could be left untended and opened up again for tapping when prices rose sufficiently, which is the practice of smallholders in other countries. The threat of price falls can also be countered to some degree by adopting practices to improve yields in the future, as well as improving the quality of the rubber to obtain a marketing premium. These would translate directly into improved returns to family labour, hence higher household incomes.

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The Economic Potential for Smallholder Rubber Production in Northern Laos Similarly, at the high discount rate, e.g. a discount rate of 11% or more, the investment is unprofitable, indicating that if farmers had to borrow money at a high interest rate they may have to reconsider their investment. Farmers in Hadyao have benefited from subsidized credit support with a low interest rate and a long repayment period. However, the 8% real interest rate used for the base analysis reflects commercial rates, indicating that all farmers really need is a grace period during establishment, with deferred payments of principal and interest.

Again, when labour costs are valued at the market wage rate, even with the current market price of tub-lump rubber the investment in smallholder rubber is not worthwhile, suggesting that farmers could not afford to hire other people at the market wage rate to carry out all of the labour requirements for rubber production. However, it is not likely that farmers in the uplands of Northern Laos would rely on hiring labour. According to the household survey in Hadyao, poor households normally used only their family labour for rubber production while middle or wealthy households used a combination of family labour and hired labour if they could afford to do so. It is the ability to use family labour at low opportunity cost (as well as minimal supervisory costs) that makes smallholder rubber an economic proposition, even with low yields and quality.

There are other risks associated with the investment in smallholder rubber in the uplands of Northern Laos, in particular climate and market uncertainty. The occurrence of heavy frost in 1999, killing many rubber trees in Luangnamtha Province, is the foremost climatic risk that farmers face. There is a justifiable concern that this could happen again in the future as most rubber trees in Luangnamtha Province are planted at an elevation of almost 700 metres above sea level. Another concern is market uncertainty. The sudden but temporary close of border trade with China in late 2006 is one example of market uncertainty that seriously affected Lao rubber farmers as their only market is China, though this source of risk is likely to decrease in the long term. There is also the likelihood of competition as other rubber producing countries are also increasing their production in response to the rising global rubber demand. An improved road network will help to reduce marketing costs and maintain the farm-gate price of rubber, but the pace and extent of this investment in infrastructure is uncertain. 189

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The spatial analysis of the potential for the expansion of rubber in other areas within Luangnamtha Province shows that the potential for smallholder rubber in the study village is not an isolated case; there are other areas in Luangnamtha Province that appear to be economically suitable for rubber. Approximately 26% of the total provincial area was considered as economically suitable for smallholder rubber, of which only 1% was highly suitable and 25% marginally suitable. These areas were concentrated along the main road, indicating that road access is a key factor, but moderate to high resource quality was also important. It should be noted that these areas designated as economically suitable for smallholder rubber are upper bound estimates, which is based on analysis of the rubber enterprise only and ignores the requirements for other land uses such as rice cultivation, residential areas, and conservation areas. If current land use allocations are taken as a guide, at most only half of this potentially suitable land (up to 13% of the provincial area) is actually available for rubber planting. Nevertheless, given that rubber produces a good financial return to the smallholder, whereas conservation areas generate non-market returns, there may be increasing pressure to reallocate land to tree crop production, raising important policy issues of how much land could or should be retained in subsistence production for a balanced rural economy.

8.4 Policy implications This study shows that, given current market conditions, investment in smallholder rubber production in the uplands of Northern Laos can be profitable. The DCF analysis for the study village shows that the expansion of rubber planting in that village is based on good economic returns. The spatial analysis indicates that the potential for rubber in the study village is not an isolated case; there are also other areas in Luangnamtha Province that appear to be economically suitable for rubber. Rubber can be considered as one of the potential alternatives for poor upland farmers, in line with the government policy of stabilising shifting cultivation and supporting new livelihood options for poverty reduction. However, the following issues need consideration so that smallholder rubber can be a sustainable solution for poverty reduction for Lao upland farmers.

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The Economic Potential for Smallholder Rubber Production in Northern Laos As in the main rubber-producing countries, various support services for rubber development need to be established in Laos, including technical support, extension, credit, and marketing. A rubber research station should be established to provide technical support for rubber cultivation. It will become important to make rubber more productive through the adoption of improved technologies such as high yielding varieties, fertilizer, and especially improved processing techniques. The rubber seedlings should be produced in Laos with quality control to guarantee the high quality of seedlings and their adaptability to local conditions. Apart from selling the rubber in the form of tub-lump, Lao rubber farmers should be encouraged to do the processing of latex into other forms such as raw rubber sheets or smoked rubber sheets in order to increase the quality and value of their rubber. Smallholder rubber groups or associations could be established in order to assist rubber farmers in accessing improved production and processing techniques, and possibly to improve their marketing. In addition, mechanisms to provide market information to rubber smallholders, especially price information, need to be developed in order to protect farmers from unfair trading. So far, rubber smallholders in Northern Laos receive information on rubber prices only from Chinese traders. While Hadyao village authorities have engaged in some prior negotiation with traders, it is essentially a buyers market at present.

Financial support is crucial for smallholders to invest in a crop with a long establishment phase like rubber. The analysis has shown that rubber is profitable at commercial interest rates but farmers need credit to get them through to the tapping period. If farmers had not received institutional credit with no repayments required until after tapping had commenced, they would have had to draw on their own limited savings or borrow from moneylenders at higher rates and on less favourable terms. This would have reduced their ability to invest, even though the crop was profitable. Moreover, better access to credit is usually associated with the possession of land titles. However, as most Lao farmers have only temporary use rights, they have difficulty in getting loans. Land certificates and tenure rights should be issued to smallholders in order to improve access to long-term credit for investment in rubber and other tree crops.

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The Economic Potential for Smallholder Rubber Production in Northern Laos Improving road access should be considered as a high priority for the development of the rubber industry in the uplands of Laos (as well as being part of a general povertyreduction strategy). This is evident from this study, with the economically suitable areas for rubber mostly concentrated in the more accessible areas along the main roads. When National Road No.3 is completed it will open new marketing opportunities for many Lao upland farmers. However, upgrading village cart tracks to all-weather roads is also needed to make marginally suitable land more profitable for tree crop development. At the same time, pressure on land is increasing as more farmers are interested to expand their rubber holdings. This will create inevitable pressure to reallocate village lands for tree crop production. Hence land use policy should discourage farmers from clearing village forests for rubber planting, but instead encourage them to grow rubber on their degraded fallow land. This is consistent with the government goals of reducing deforestation and shifting cultivation.

In addition, research on rubber should be undertaken as part of agroforestry systems and livelihood systems, including other crops, non-timber forest products (NTFPs), and livestock, in order to reduce the risk from the boom-bust cycle of rubber, ensure food security, increase income, and reduce negative environmental impacts from monoculture rubber (loss of biodiversity, increased soil erosion, and reduced watershed functions). Since most Lao farmers conventionally practise diversified farming systems, rubber agroforestry systems could be integrated well into their current farming systems. Instead of monoculture rubber, intercropping should be promoted among smallholder farmers as intercrops provide additional income apart from latex and rubber wood. Experience from other rubber-producing countries shows that many types of cash crop can be intercropped with rubber such as rice, maize, tea, coffee, cardamom, and others. Rubber-based systems with forages and livestock raising can be developed for mature rubber plantations as well. Therefore, research on different models of intercropping with rubber trees, both in the immature and mature phases, should be undertaken to find suitable cropping models for the uplands of Northern Laos. If farmers have a diversified farming system, they can stop tapping when prices are low and concentrate on other crop and livestock activities, while retaining their rubber trees for when the price of rubber rises again.

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The Economic Potential for Smallholder Rubber Production in Northern Laos As mentioned at several points above, the study has highlighted the viability of smallholder production in the uplands. To help reduce poverty among upland farmers, smallholder rubber cultivation should be promoted ahead of large-scale private concessions. Large-scale concessions could perhaps play a role as nucleus estate models for transferring technologies to smallholdings, though this has not been particularly successful in Indonesia. Since rubber offers good employment opportunities, the policy should be to encourage the use of local labour. However, the concern is that the amount of local labour needed for rubber planting and tapping might be not enough to work on the large-scale rubber estates planned by investors and the government, as Laos has low population and a small labour force. To overcome the shortage of labour, foreign investors may seek to bring their own labour and as a consequence there may be social problems. This may be exacerbated if local farmers also feel they have lost their land to foreign concessionaires.

On the whole, the roles for government, as in other countries where smallholder rubber has played a significant role in rural development, are to provide research and technical support, to assist financially during the long investment period when no income is generated, and to invest in roads and marketing infrastructure. In particular, maintaining secure access to the China market will be crucial for the sustainability of smallholder rubber in Northern Laos. More generally, the socioeconomic and environmental impacts of the expansion of rubber planting should be carefully monitored. Land use and livelihoods are undergoing rapid change in the uplands due to the expansion of rubber. If carefully managed, this change has the potential to contribute to sustainable rural livelihoods.

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Appendices Appendix 1: Focus group interview guidelines


Part 1. General information 1. In what year was the village established? 2. Where did the first settlers come from? 3. What were the major events happened in the village? What years did they happen? Note: Ask villagers to provide information into the timeline history. 4. How many ethnic groups are there in the village? 5. How many households/populations were there when the village was established? 6. How many households/populations are there at the present time? 7. What are the occupations of people in the village? 8. What are the education levels of people in the village? 9. What is the socio-economic status of households in the village? Note: The classification of household is undertaken by the villagers themselves. 10. What were the livelihood activities (both agricultural and non-agricultural activities) undertaken in the village? Note: Ask villagers to provide information into livelihood activities calendar. 11. How many households practice lowland cultivation, shifting cultivation and both lowland cultivation and shifting cultivation? 12. What are the main sources of income of the village? How much are the amounts and the rankings of those income sources? 13. Is there any problem of rice shortage in the village? If yes, how many households faced rice shortage? On average how many months did villagers face rice shortage? How did the rice shortage households solve this problem? 14. When was the land allocation taken place? 15. What are the land use types in the village? Note: Ask villagers to draw a village resources map and also ask about the area for each type of land use. 16. What are the changes in land uses? For example, the change of agricultural land and forest area. 17. How many areas (hectares) and productions (tonnes) of crops/fruit trees/tree plantations are there in the village?

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18. What kinds of livestock were raised in the village? How many heads are there in each type of livestock? Part 2. Rubber plantation information 19. When did rubber first introduce to the village? How many households planted rubber during that time? What was the total planted area? 20. When did rubber first harvest? How many areas were first tapped? What was the total production? 21. At the present time how many households own rubber plantations? What is the total planted area and tapped area? What is the total production? 22. What is an average rubber holding plot and area? 23. Why did villagers start to grow rubber? 24. How did villagers know about rubber? 25. From whom did rubber farmers learn the techniques of rubber cultivation (planting, tapping, processing)? 26. Where did rubber farmers get the funds to plant their rubber? If borrow, what is the interest rate? How long is the payback period? 27. What location (type of land, slope, elevation) was rubber planted in the village? 28. Did rubber farmers have enough labour for their rubber plantations? If not, where did they get labour from? Did they hire labour? If yes, what was the wage rate? Was the wage rate the same for all types of work (land preparation, planting, tapping, collecting, processing, etc)? Were there any problems with hiring labour? 29. How was the land for rubber cultivation prepared? Did rubber farmers slash and burn the field before planting? 30. What rubber varieties were used? 31. Where did rubber farmers get the rubber seedlings from? Did they make the seedlings nurseries? 32. How were the seedlings purchased? By cash, credit, or other forms? How much was the price of seedlings? 33. What was the planting space? How many rubber trees were planted in one hectare? 34. Did rubber farmers intercrop their rubber plantations during the first few years after planting? If yes, what crops did they plant with their rubber trees? Did they grow any crops in the mature rubber? 35. Did rubber farmers raise livestock in their rubber plantations? If yes, what types of livestock? Which period (immature or mature) of rubber cultivation did they raise? 36. Did rubber farmers use fertilizers? If yes, how often did they use? What kinds of fertilizers did they use; chemical or organic? What is the application rate? Which

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period (immature or mature) of rubber cultivation did they apply? Did they use fertilizers every year? 37. Did rubber farmers clear weed? If yes, how often did they weed? How did they clear weed? Did they clear weed by hand or use herbicides? If herbicides applied, what herbicides did they use? What is the application rate? Which period (immature or mature) of rubber cultivation did they apply? Did they use herbicides every year? 38. Did rubber farmers have problem of pests in their rubber plantations? If yes, what kinds of pests were they? Which period (immature or mature) of rubber cultivation did the pests interfere? How did they solve the problem? If pesticides used, what pesticides did they use? 39. Did rubber farmers have problem of diseases interfered their rubber trees? If yes, what kinds of diseases were they? Which period (immature or mature) of rubber cultivation did the diseases incur? How did they solve the problem? If chemical substances used, what did they use? 40. Did rubber trees die from cold weather? If yes, how did rubber farmers solve the problem? 41. Did rubber farmers have problem of fire? If yes, did they have a system for controlling fire in their rubber plantations? Did they use fire line? 42. What tapping techniques were used? Which period of time did rubber farmers tap their rubber trees and collect latex? What is tapping frequency? How many days in a month did they tap? How many months in a year did they tap? 43. To whom did rubber farmers sell their rubber? What forms of rubber did they sell? What was the price of rubber? Were there any marketing problems? Where was the marketing information come from? Were there any contracts with companies or traders to buy rubber? What were the marketing arrangements? 44. Did rubber farmers process their rubber latex? If yes, which period of time did they make processing? What forms did they process the latex into? 45. How did the rubber change the practice of rice shifting cultivation in the village? 46. What are the main problems of rubber cultivation in the village? 47. What is the future of rubber cultivation in the village?

209

The Economic Potential for Smallholder Rubber Production in Northern Laos


Part 3. Materials used for one hectare of rubber plantation Production phases Establishment Land preparation Axe Long knife Hammer Nail Barbed wire Post Hoe Rubber seedlings Rice seeds Small knife Medium knife Bowl Gutter Iron wire Plastic brush Tapping knife Knife sharpening stone Headlamp Small bucket Big bucket Plastic bag Chemical powder Chemical liquid Small brush Handy saw Materials Unit Quantity 2005 prices (kip/unit) Working life

Fencing Planting & replacement planting Intercropping Maintenance Weeding Utilization

Tapping

Collecting

Tree harvesting

Part 4. Labour used for one hectare of rubber plantation Production phases Establishment Land preparation Fencing Planting Intercropping Maintenance Hand weeding Utilization Tapping Collecting Tree harvesting Slashing Burning & clearing Lining, terracing & holing Fencing Rubber planting & replacement planting Rice sowing Rice harvesting Activities Persons Annual labour Days Person-days

210

The Economic Potential for Smallholder Rubber Production in Northern Laos

Appendix 2: Household questionnaire


Household no: . Household wealth ranking: . Interviewee: . Date of interview: Interviewer: . Part 1. General information 1. Household members How many people are there in your household (including the head of household)? ... people Name Sex Age Ethnic Years of FullPartWork Work (Male, group schooling time time on-farm off-farm Female) labour labour

2. Land resources How many plots of land do you own or use or let others use? ..... plot(s) Plot Tenure Plot Tenure Area Land type Crops no. name status details (ha or trees) (Codes 2) planted last (Codes 1) Eg. Crop year share

Codes 1: O = Owned, B = Borrowed, R = Rented, OB = Others borrowed, OR = Other rented Codes 2: CP = Crops plantation, FR = Fruit trees plantation, TR = Trees plantation (including rubber), GA = Garden, FP = Fish pond, FA = Fallow land, OT = Other land (specific)

211

The Economic Potential for Smallholder Rubber Production in Northern Laos


3. Livestock What types of livestock do you have? ..... Types of livestock Number (head) Buffalo Cow Goat Horse Pig Duck Chicken Fish Other (specific): . 4. Rice production How many plots of land did you grow rice last year? .......plot(s) Plot Plot Location Distance Elevation Area Production Yield no. name (Code 3) (km/walking (Code 4) (ha) (kg) (kg/ha) time)

Code 3: IN: In the village boundary, OU: Outside the village boundary Code 4: FL = Flat land, GSL = Gently sloping land, SSL = Steeply sloping land How much rice did your household consume, purchase, borrow, or sell last year? Amount (kg) Consumption Purchase Borrow Sale The rice you produced last year is enough for ..... month(s) If you have insufficient rice, How did you get the rice for the rice shortage month(s)? ____ Borrow ____ Buy ____ Eat other foods Why? ... ____ Go without Why? ....... ____ Other (specific): . If buy rice, Where did you buy? ____ Market ____ Neighbour ____ Other (specific): ... If borrow rice, Where did you borrow? ____ Neighbour ____ Rice lender ____ Village rice bank ____ Other (specific): ....... What is the interest rate of rice loan?

212

The Economic Potential for Smallholder Rubber Production in Northern Laos


If you have surplus rice, Did you sell rice? ____ Yes ____ No If yes,

If no,

Where did you sell? ____ Market ____ In the village ____ Other (specific): ... Why? .....

5. Household main income sources and their rankings in terms of income earned and labour used Main income sources Income earned ranking Labour used ranking

Part2. Rubber cultivation information 6. Do you have any rubber plantations? ____ Yes ____ No If no, Only ask these below questions Why did you not plant rubber? ......... Do you have any plan to grow rubber in the future? ____ Yes ____ No If yes, Why? .. If no, Why? .. If yes, Continue to ask the next question until the end of the questionnaire 7. How many plots of rubber do you have? .. plot(s) Area When Trees When Plot Plot Location Distance Elevation Land planted planted died started no. name (Code 3) (km/walking (Code 4) type tapping time) before (trees rubber or ha) (Code 5)

Area tapped (trees or ha)

Code 3: IN: In the village boundary, OU: Outside the village boundary Code 4: FL = Flat land, GSL = Gently sloping land, SSL = Steeply sloping land Code 5: CL = Crops planted land, FA = Fallow land, UN = Unopened land, OT = Other (specific)

213

The Economic Potential for Smallholder Rubber Production in Northern Laos


8. Why did you start to grow rubber? ......... 9. How did you know about rubber? ................... 10. From whom did you learn techniques for rubber cultivation? ____ Chinese people ____ Provincial agricultural and forestry officials ____ Other (specific): ... 11. Where did you get the funds to plant rubber? ____ Your own money ____ Borrow ____ Other (specific): ....... If borrow, Where did you borrow from? ____ Money lender ____ Agricultural Promotion Bank ____ Provincial government ____ Other (specific): ... What is the interest rate? ......... How long is payback period? ...... 12. Did you make replacement planting after the first planting? ____ Yes ____ No If yes, For how many years? .................... If no, Why? ......... 13. What is the planting space? ...m X ..m 14. What rubber clonal seedlings did you use? ____ RRIM600 Why did you use this? ....... ____ GT1 Why did you use this? ... ____ Other (specific): Why did you use this? ... 15. Did you make the seedling nursery? ____ Yes ____ No If no, Where did you buy the seedlings? ........ What was the price of the rubber seedlings? . kip/plant 16. Did you hire labour? ____ Yes ____ No If yes, Which period of rubber plantation did you hire labour? ____ Establishment What for? ... ____ Maintenance What for? ... ____ Tapping What for? ... If no, Why? .........

17. Did you apply fertilizers with your rubber trees? ____ Yes ____ No If yes, What fertilizer did you use? .......... What is the price of fertilizer? ..... kip/kg

214

The Economic Potential for Smallholder Rubber Production in Northern Laos


What is the application rate? .... kg/tree How many years did you apply? ....... How many times in a year did you apply? ........ How many persons apply fertilizers in each time? ....... person How many days spent for applying the fertilizers in each time? day Why? ..... Will you apply fertilizers in the future? ____ Yes Why? ....... ____ No Why? ...........

If no,

18. Did you clear weed in your rubber plantation? ____ Yes ____ No If yes, How many years did you clear weed? ...... How many times in a year did you clear weed? ....... How many persons clear weed in each time? ... person How many days were spent for clearing weed in each time? .... day If no, Why? ..... 19. Did you use herbicide? ____ Yes ____ No If yes, What herbicide did you use? ..... What is the price of herbicide? ...... kip/kg What is the application rate? ........ kg/tree How many years did you use? ...... How many times in a year did you use? ............... How many persons apply herbicide in each time? ........ person How many days were spent for applying in each time? .... day If no, Why? ..... Will you use herbicide in the future? ____ Yes Why? ....... ____ No Why? ............... 20. Did you have problem of pests in your rubber plantation? ____ Yes ____ No If yes, What kinds of pests were they? ........ Which period of rubber cultivation did the pests interfere? ____ Immature period (year1-7) ____ Mature period (tapping period) How did you solve the problems? ____ Used pesticides ____ Did nothing If pesticides used, What did you use? ... If nothing done, Why? ....... 21. Did you have problem of diseases interfered your rubber trees? ____ Yes ____ No If yes, What kinds of diseases were they? ........................... Which period of rubber cultivation did the diseases incur? ____ Immature (year1-7) ____ Mature (tapping period)

215

The Economic Potential for Smallholder Rubber Production in Northern Laos


How did you solve the problems? ____ Used chemical substances ____ Did nothing If chemical substances used, What did you use? If nothing done, Why? ... 22. Did you have problem of fire? ____ Yes ____ No If yes, How did you prevent the fire? ____ Dig a fire line ____ Other (specific): ...... 23. Did your rubber trees die from cold weather? ____ Yes ____ No If yes, When? ........... 24. Did you intercrop your rubber plantation during the first few years after planting? ____ Yes ____ No If yes, Which crops did you intercrop? .... How many years did you intercrop? ......... How many times in a year did you intercrop? ...... If no, Why? ......... 25. Did you raise livestock in your rubber plantation? ____ Yes ____ No If yes, What types of livestock? ... Which period of rubber cultivation did you raise? ____ Immature (year1-7) ____ Mature (tapping period) If no, Why? ..... 26. For how many years after planting did you start to tap your rubber trees? How many months in a year did you tap? . From (month) ... to (month) ... What is tapping frequency? .... Which period of time did you tap your rubber trees? From (time) . to . (time) How many persons did tapping in a tapping day? ...... person 27. Which period of time did you collect latex? From (time) .. to . (time) How many persons collect latex? ..... person 28. To whom did you sell your rubber? ____ Lao traders ____ Chinese traders ____ Other (specific): ....... Do you have any contracts with companies or traders to buy your rubber? ____ Yes ____ No Did you have any marketing problem? ____ Yes ____ No If yes, What kinds of problem? ......

216

The Economic Potential for Smallholder Rubber Production in Northern Laos


How did you solve the problems? .... 29. Did rubber cultivation help increase your household income? ____ Yes ____ No If yes, In what way? ..... If no, Why? ..... 30. How did rubber cultivation change your practice of rice shifting cultivation in terms of area? ____ Increased ____ Decreased ____ Unchanged Why? ....... 31. How did rubber cultivation change your practice of rice shifting cultivation in terms of yield? ____ Increased ____ Decreased ____ Unchanged Why? ....... 32. How did rubber cultivation change your practice of rice shifting cultivation in terms of labour used? ____ Increased ____ Decreased ____ Unchanged Why? ....... 33. Will you increase your rubber plantation in the future? ____ Yes ____ No If yes, Why? ..... Will you be able to access to land for expanding your rubber plantation? ____ Yes ____ No If yes, How will you access to that land? ..... If no, Why? ......... If no, Why? ..... 34. In your opinion, what are the main problems of rubber cultivation? ...... 35. Outputs from rubber plantation Year Crops Harvested area Production (ha or tree) (kg) 1994 Rice 1995 Rice 1996 Rice 2002 Rubber 2003 Rubber 2004 Rubber

Yield (kg/ha)

Price (kip/kg)

Total output (kip)

217

The Economic Potential for Smallholder Rubber Production in Northern Laos

Appendix 3: The characteristics of selected site of soil samplings in each grid

GRID %C %OM %N 2.20 1.12 1.12 1.12 1.40 1.64 1.64 1.07 2.72 1.28 1.28 1.12 1.40 1.32 1.07 1.07 2.00 2.00 2.04 1.56 1.12 1.12 1.60 1.40 1.07 2.00 2.00 3.45 3.45 1.84 2.41 0.12 11.62 0.09 11.60 0.17 11.59 0.17 11.59 0.11 0.11 2.76 0.13 11.59 1.93 0.09 11.61 0.04 0.05 0.06 1.93 0.09 11.61 0.04 2.69 0.13 11.60 0.03 10.75 6.25 6.25 7.50 6.50 1.31 10.00 10.00 1.48 1.48 3.52 0.17 11.59 0.06 13.00 3.45 0.17 11.59 0.11 10.00 1.48 0.55 0.21 0.41 0.41 1.87 0.72 3.45 0.17 11.59 0.11 10.00 1.48 1.84 0.09 11.60 1.31 1.84 0.09 11.60 1.31 8.80 8.80 19.20 19.20 8.40 5.20 18.80 18.80 6.80 7.60 8.80 19.20 19.20 2.28 0.11 11.58 0.09 17.00 0.53 10.40 2.41 0.12 11.62 0.06 6.50 0.72 7.60 4.95 6.42 5.20 5.20 5.29 5.29 4.54 4.43 4.96 4.96 4.47 4.95 5.20 5.29 5.29 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 2.21 0.11 11.58 0.06 10.00 0.58 5.60 5.97 2.21 0.11 11.58 0.06 10.00 0.58 5.60 5.97 3.86 3.86 3.90 3.78 5.89 4.20 4.20 4.25 4.25 3.72 3.81 3.90 3.90 3.75 3.78 4.20 4.25 4.25 4.69 0.23 11.60 0.06 12.50 1.84 9.20 4.47 3.79 1.84 0.09 11.60 1.31 8.80 5.20 4.20 45.00 0.00 0.00 0.00 0.00 0.00 0.00 45.00 45.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 45.00 0.00 0.00 1.60 1.80 0.37 0.16 1.60 1.80 0.37 0.16 1.60 1.80 0.37 0.16 1.60 1.80 0.37 0.16 0.30 1.30 0.19 0.15 0.20 0.20 0.10 0.15 0.80 0.40 0.11 0.15 0.80 0.40 0.11 0.15 1.80 1.80 0.16 0.14 1.40 1.40 0.16 0.16 0.40 0.60 0.20 0.13 1.00 1.00 0.10 0.11 1.00 1.00 0.10 0.11 0.80 0.40 0.11 0.15 1.40 1.40 0.16 0.16 1.60 1.60 0.23 0.15 2.83 0.14 11.59 0.09 12.00 0.64 19.60 5.11 4.11 0.00 2.83 0.14 11.59 0.09 12.00 0.64 19.60 5.11 4.11 0.00 2.41 0.12 11.62 0.06 6.50 0.72 7.60 4.95 3.78 0.00 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 0.80 0.40 0.11 0.15 0.80 0.40 0.11 0.15 0.80 0.40 0.11 0.15 1.40 1.40 0.16 0.16 3.40 2.60 0.30 0.13 3.40 2.60 0.30 0.13 3.79 0.19 11.61 0.08 5.75 0.31 8.00 5.07 3.92 0.00 1.80 1.80 0.17 0.12 C/N TOTP AVAILP TOTK AVAILK PHH2O PHKCL STONE CA MG K 28.56 11.84 11.84 11.84 22.56 29.32 29.32 17.84 30.56 20.56 20.56 11.84 22.56 16.56 17.84 17.84 27.32 27.32 25.84 9.84 11.84 11.84 36.56 22.56 17.84 27.32 27.32 CL CL LL LL CL SL SL SL CL CL CL LL LL LL LL SL LL LL CL LL CL CL LL SL SL SL CL

SOIL HOLE SOIL TEXTURE

SOIL UNIT

SOIL DEPTH

SAND SILT CLAY

NA CECS CECT %BS SLOPE 3.89 1.46 1.46 1.46 3.12 6.43 6.43 13.64 7.16 7.16 7.16 10.92 13.03 13.03 28.52 20.39 20.39 20.39 28.57 49.35 49.35 e e e e e c c

BK.P.317

ACh

34.16

37.28

P.NT.331

ACh

58.88

29.28

P.NT.331

ACh

58.88

29.28

P.NT.331

ACh

58.88

29.28

LT.P.104

ACh

46.16

31.28

UXP. 127

ACf

33.44

37.24

UXP. 127

ACf

33.44

37.24

NT 04

CMe

34.88

47.28

BK.P.328

ACh

26.16

43.28

1.33 2.21 2.21 1.46 3.12 3.58

14.98 11.36 11.36 7.16 10.92 6.13

8.88 19.45 19.45 20.39 28.57 58.40

e d d e e e

10

BK.P.322

ACh

50.16

29.28

11

BK.P.322

ACh

50.16

29.28

12

P.NT.331

ACh

58.88

29.28

13

LT.P.104

ACh

46.16

31.28

14

LT.P.107

ACh

34.16

49.28

15

NT 04

CMe

34.88

47.28

16

NT 04

CMe

34.88

47.28

17

BK.P.209

ACh

35.44

37.24

3.93 3.93 1.94 0.65 1.46 1.46 3.90 3.12

10.98 10.98 12.89 9.95 7.16 7.16 12.00 10.92

35.79 35.79 15.05 6.53 20.39 20.39 32.50 28.57

e e e e e e d e

18

BK.P.209

ACh

35.44

37.24

19

P.NT.304

CMd

46.88

27.28

20

P.NT.305

CMd

70.88

19.28

21

P.NT.331

ACh

58.88

29.28

22

P.NT.331

ACh

58.88

29.28

23

LT.P.105

CMd

30.16

33.28

24

LT.P.104

ACh

46.16

31.28

25

NT 04

CMe

34.88

47.28

26

BK.P.209

ACh

35.44

37.24

3.93 3.93

10.98 10.98

35.79 35.79

e e

27

BK.P.209

ACh

35.44

37.24

218

The Economic Potential for Smallholder Rubber Production in Northern Laos

28 11.84 11.84 11.84 11.84 22.56 18.56 27.32 27.32 17.84 17.84 17.84 17.84 17.84 22.56 24.56 34.56 34.56 34.56 17.84 32.56 32.56 29.84 17.84 18.56 53.84 53.84 17.84 26.56 34.56 22.56 22.56 17.84 LL 1.52 2.62 LL 1.84 3.17 LL 1.84 3.17 CL 1.28 2.21 0.11 11.58 0.15 11.61 0.15 11.61 0.13 11.60 LL 2.68 4.62 0.23 11.60 SL 2.20 3.79 0.19 11.61 0.06 0.14 0.06 0.07 0.07 0.04 HC 1.28 2.21 0.11 11.58 0.06 HC 1.28 2.21 0.11 11.58 0.06 2.00 2.00 11.25 5.50 2.50 5.50 5.50 17.50 SL 2.08 3.59 0.18 11.59 0.14 11.00 LL 1.07 1.84 0.09 11.60 1.31 0.97 0.95 0.95 0.45 1.14 0.89 0.63 0.63 0.60 CL 2.00 3.45 0.17 11.59 0.06 8.00 1.05 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 34.80 34.80 13.20 8.80 8.80 18.80 18.80 42.00 7.60 13.60 12.40 12.40 13.60 LL 1.52 2.62 0.13 11.60 0.04 17.50 0.60 13.60 CL 1.28 2.21 0.11 11.58 0.06 2.50 0.89 13.60 6.20 5.26 5.09 5.09 5.16 5.20 4.95 5.18 5.18 5.77 4.92 6.20 6.02 6.02 5.26 CL 1.28 2.21 0.11 11.58 0.06 2.50 0.89 13.60 6.20 CL 1.28 2.21 0.11 11.58 0.06 2.50 0.89 13.60 6.20 CL 1.68 2.90 0.14 11.59 0.04 5.50 0.48 7.20 5.10 3.94 5.00 5.00 5.00 4.27 3.99 3.99 4.05 4.20 3.83 3.92 3.92 4.74 4.03 5.00 4.79 4.79 4.27 LL 1.52 2.62 0.13 11.60 0.08 20.50 0.87 13.60 5.20 4.05 LL 1.07 1.84 0.09 11.60 1.31 8.80 5.20 4.20 45.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.80 0.60 0.19 0.15 0.60 2.20 0.52 0.18 0.60 2.20 0.52 0.18 2.80 2.00 0.37 0.15 1.20 1.80 0.20 0.17 5.20 4.20 0.30 0.21 1.74 3.50 3.50 5.32 3.37 9.91 8.60 2.60 0.28 0.16 11.64 8.60 2.60 0.28 0.16 11.64 1.80 0.60 0.14 0.16 2.70 10.74 11.73 11.73 10.17 13.27 13.21 16.29 16.29 8.25 16.20 29.84 29.84 52.31 25.40 75.02 71.45 71.45 32.73 2.00 2.00 0.30 0.15 1.40 0.20 0.17 0.15 5.20 4.20 0.30 0.21 5.20 4.20 0.30 0.21 5.20 4.20 0.30 0.21 1.80 0.60 0.14 0.16 1.20 0.80 0.58 0.19 1.20 0.80 0.58 0.19 2.80 1.80 0.34 0.15 4.45 1.92 9.91 9.91 9.91 2.70 2.77 2.77 5.09 11.20 11.07 13.21 13.21 13.21 8.25 11.77 11.77 13.64 39.73 17.34 75.02 75.02 75.02 32.73 23.53 23.53 37.32 LL 1.07 1.84 0.09 11.60 1.31 8.80 5.20 4.20 45.00 LL 1.07 1.84 0.09 11.60 1.31 8.80 5.20 4.20 45.00 LL 1.52 2.62 0.13 11.60 0.04 17.50 0.60 13.60 5.26 4.27 0.00 LL 1.52 2.62 0.13 11.60 0.04 17.50 0.60 13.60 5.26 4.27 0.00 CL 2.00 3.45 0.17 11.59 0.11 10.00 1.48 19.20 5.29 4.25 0.00 CL 2.00 3.45 0.17 11.59 0.11 10.00 1.48 19.20 5.29 4.25 0.00 1.60 1.80 0.37 0.16 1.60 1.80 0.37 0.16 1.80 0.60 0.14 0.16 1.80 0.60 0.14 0.16 LL 1.80 3.10 0.15 11.61 0.06 10.25 1.42 28.80 6.04 5.19 0.00 6.20 1.40 0.58 0.19 LL 1.40 2.41 0.12 11.62 0.06 6.50 0.72 7.60 4.95 3.78 0.00 1.40 1.40 0.16 0.16 3.12 8.37 3.93 3.93 2.70 2.70 SL 1.12 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 0.80 0.40 0.11 0.15 1.46 SL 1.12 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 0.80 0.40 0.11 0.15 1.46 7.16 7.16 10.92 12.72 10.98 10.98 8.25 8.25 SL 1.12 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 0.80 0.40 0.11 0.15 1.46 7.16 SL 1.12 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 0.80 0.40 0.11 0.15 1.46 7.16 20.39 20.39 20.39 20.39 28.57 65.80 35.79 35.79 32.73 32.73

LT.P.207

ACh

44.16

35.28

20.56

LL

1.64

2.83

0.14 11.59

0.06

10.00

0.72

8.00

4.87

3.87

0.00

0.90 0.70 0.19 0.15

1.94

9.89

19.62

e e e e e e d e e b b

29

P.NT.331

ACh

58.88

29.28

30

P.NT.331

ACh

58.88

29.28

31

P.NT.331

ACh

58.88

29.28

32

P.NT.331

ACh

58.88

29.28

33

LT.P.104

ACh

46.16

31.28

34

LT.P.227

ACh

36.16

45.28

35

BK.P.209

ACh

35.44

37.24

36

BK.P.209

ACh

35.44

37.24

37

P.NT.315

CMd

42.88

39.28

38

P.NT.315

CMd

42.88

39.28

39

NT 04

CMe

34.88

47.28

40

NT 04

CMe

34.88

47.28

41

NT 04

CMe

34.88

47.28

42

LT.P.116

CMd

44.16

33.28

e e e e e b e e e

43

LT.P.231

ACh

48.16

27.28

44

LT.P.230

ACh

34.16

31.28

45

LT.P.230

ACh

34.16

31.28

46

LT.P.230

ACh

34.16

31.28

47

P.NT.315

CMd

42.88

39.28

48

LT.P.220

ACh

32.16

35.28

49

LT.P.220

ACh

32.16

35.28

50

P.NT.317

ACh

34.88

35.28

51

NT 04

CMe

34.88

47.28

52

LT.P.125

CMd

52.16

29.28

e e e d e e d d b

53

P.NT.319

CMd

18.88

27.28

54

P.NT.319

CMd

18.88

27.28

55

P.NT.323

CMd

54.88

27.28

56

LT.P.119

ACh

38.16

35.28

57

LT.P.230

ACh

34.16

31.28

58

LT.P.229

LVh

46.16

31.28

59

LT.P.229

LVh

46.16

31.28

60

P.NT.315

CMd

42.88

39.28

219

The Economic Potential for Smallholder Rubber Production in Northern Laos

61 32.56 22.00 24.56 24.56 45.84 45.84 17.00 20.56 32.56 32.56 32.56 32.56 18.56 18.56 20.56 16.56 47.84 39.28 45.84 45.84 17.00 22.56 22.56 32.56 32.56 18.56 18.56 16.56 32.56 17.84 12.56 44.56 HC 1.96 3.38 SL 1.60 2.76 SL 2.20 3.79 CL 1.76 3.03 0.15 11.62 0.19 11.61 0.13 11.59 0.16 11.60 SL 1.88 3.24 0.16 11.60 SL 2.08 3.59 0.18 11.59 0.14 0.05 0.13 0.06 0.06 0.08 SL 2.08 3.59 0.18 11.59 0.14 CL 2.28 3.93 0.19 11.60 0.06 10.00 11.00 11.00 17.50 17.75 11.25 8.50 5.00 CL 2.28 3.93 0.19 11.60 0.06 10.00 LL 1.84 3.17 0.15 11.61 0.07 5.50 0.63 0.23 0.23 0.97 0.97 0.95 1.64 0.45 0.56 1.55 LL 1.84 3.17 0.15 11.61 0.07 5.50 0.63 LL 1.95 3.36 0.16 11.61 0.05 4.50 1.91 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 5.20 12.40 12.40 34.80 34.80 8.80 8.80 11.20 32.00 42.00 10.40 15.60 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 CL 2.72 4.69 0.24 11.60 0.08 6.25 0.67 5.60 4.98 4.98 5.90 6.02 6.02 5.09 5.09 4.95 4.95 4.92 5.66 5.77 5.39 4.95 HC 2.48 4.28 0.21 11.59 0.08 6.75 0.65 7.60 5.40 SL 1.88 3.24 0.16 11.60 0.05 17.50 0.95 11.20 4.92 CL 1.32 2.28 0.11 11.58 0.07 15.50 1.72 10.80 5.57 4.58 3.79 4.41 4.96 3.98 3.98 4.90 4.79 4.79 3.99 3.99 3.83 3.83 3.79 4.63 4.74 4.35 3.87 SL 2.08 3.59 0.18 11.59 0.14 11.00 0.97 8.80 4.95 3.83 SL 2.08 3.59 0.18 11.59 0.14 11.00 0.97 8.80 4.95 3.83 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 34.80 5.09 3.99 0.00 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 34.80 5.09 3.99 0.00 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 34.80 5.09 3.99 0.00 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 34.80 5.09 3.99 0.00 CL 1.32 2.28 0.11 11.58 0.07 15.50 1.72 10.80 5.57 4.58 0.00 LL 1.95 3.36 0.16 11.61 0.05 4.50 1.91 5.20 5.90 4.90 0.00 0.80 0.09 0.23 3.20 1.60 0.30 0.15 1.20 0.80 0.58 0.19 1.20 0.80 0.58 0.19 1.20 0.80 0.58 0.19 1.20 0.80 0.58 0.19 0.80 0.60 0.19 0.15 0.80 0.60 0.19 0.15 3.20 1.60 0.30 0.15 1.40 1.40 0.26 0.15 5.25 2.77 2.77 2.77 2.77 1.74 1.74 5.25 3.21 6.40 3.60 0.43 0.21 10.64 0.19 3.00 1.80 0.20 0.80 2.60 0.30 0.15 0.80 2.60 0.30 0.15 0.80 0.09 0.23 8.60 2.60 0.28 0.16 11.64 8.60 2.60 0.28 0.16 11.64 1.20 0.80 0.58 0.19 1.20 0.80 0.58 0.19 0.80 0.60 0.19 0.15 0.80 0.60 0.19 0.15 1.40 1.40 0.26 0.15 3.60 3.40 0.77 0.15 2.80 2.00 0.37 0.15 3.00 1.40 0.23 0.18 1.40 1.20 0.55 0.08 2.77 2.77 1.74 1.74 3.21 7.92 5.32 4.81 3.23 16.29 16.29 11.77 11.77 10.74 10.74 12.36 13.92 10.17 10.81 14.03 71.45 71.45 23.53 23.53 16.20 16.20 25.97 56.90 52.31 44.50 23.02 5.19 3.85 3.85 9.90 11.77 11.77 11.77 11.77 10.74 10.74 9.90 12.36 19.80 16.94 14.88 14.88 53.03 23.53 23.53 23.53 23.53 16.20 16.20 53.03 25.97 53.74 30.64 25.87 25.87 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 4.98 3.98 0.00 0.80 2.60 0.30 0.15 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 4.98 3.98 0.00 0.80 2.60 0.30 0.15 3.85 3.85 LL 2.16 3.72 0.18 11.61 0.06 9.50 1.10 11.60 4.46 3.75 0.00 0.80 0.20 0.28 0.17 1.45 LL 2.16 3.72 0.18 11.61 0.06 9.50 1.10 11.60 4.46 3.75 0.00 0.80 0.20 0.28 0.17 1.45 12.25 12.25 14.88 14.88 CL 2.56 4.42 0.22 11.58 0.05 3.65 0.69 7.20 4.90 3.90 0.00 0.10 0.12 0.05 11.84 11.84 25.87 25.87 CL 2.28 3.93 0.19 11.60 0.06 10.00 0.23 34.80 5.09 3.99 0.00 1.20 0.80 0.58 0.19 2.77 11.77 23.53

LT.P.125

CMd

52.16

29.28

18.56

SL

2.08

3.59

0.18 11.59

0.14

11.00

0.97

8.80

4.95

3.83

0.00

0.80 0.60 0.19 0.15

1.74

10.74

16.20

e e

62

LT.P.220

ACh

32.16

35.28

63

NT 31

ACh

57.00

21.00

64

LT.P.112

ACh

34.16

41.28

d d c c

65

LT.P.112

ACh

34.16

41.28

66

P.NT.321

CMd

26.88

27.28

67

P.NT.321

CMd

26.88

27.28

68

MS 14

LVh

44.00

39.00

69

LT.P.117

CMd

56.16

23.28

e e e e e e e e e e e c c

70

LT.P.220

ACh

32.16

35.28

71

LT.P.220

ACh

32.16

35.28

72

LT.P.220

ACh

32.16

35.28

73

LT.P.220

ACh

32.16

35.28

74

LT.P.125

CMd

52.16

29.28

75

LT.P.125

CMd

52.16

29.28

76

LT.P.117

CMd

56.16

23.28

77

LT.P.102

ACf

52.16

31.28

78

P.NT.339

CMd

18.88

33.28

79

P.NT.340

CMd

41.84

18.88

80

P.NT.321

CMd

26.88

27.28

81

P.NT.321

CMd

26.88

27.28

82

MS 14

LVh

44.00

39.00

83

LT.P.229

LVh

46.16

31.28

d d e e e e e e d a e

84

LT.P.229

LVh

46.16

31.28

85

LT.P.220

ACh

32.16

35.28

86

LT.P.220

ACh

32.16

35.28

87

LT.P.125

CMd

52.16

29.28

88

LT.P.125

CMd

52.16

29.28

89

LT.P.102

ACf

52.16

31.28

90

LT.P.131

LXh

34.16

33.28

91

P.NT.323

CMd

54.88

27.28

92

LT.P.233

CMd

60.16

27.28

93

P.NT 335

CMd

32.16

23.28

220

The Economic Potential for Smallholder Rubber Production in Northern Laos

94 45.84 17.00 20.56 38.00 11.84 27.00 18.56 18.56 32.56 45.84 17.00 17.00 28.56 28.56 11.84 45.84 20.56 28.56 9.84 28.56 28.56 9.84 SL 1.28 2.21 0.11 11.58 0.05 14.25 0.63 CL 1.44 2.48 0.12 11.61 0.03 23.75 0.41 CL 1.44 2.48 0.12 11.61 0.03 23.75 0.41 5.60 5.60 24.00 SL 1.28 2.21 0.11 11.58 0.05 14.25 0.63 24.00 CL 1.44 2.48 0.12 11.61 0.03 23.75 0.41 5.60 5.02 5.27 5.02 5.02 5.27 CL 1.32 2.28 0.11 11.58 0.07 15.50 1.72 10.80 5.57 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 4.98 SL 1.12 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 3.98 4.58 4.07 3.99 4.07 4.07 3.99 CL 1.44 2.48 0.12 11.61 0.03 23.75 0.41 5.60 5.02 4.07 CL 1.44 2.48 0.12 11.61 0.03 23.75 0.41 5.60 5.02 4.07 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 LL 1.95 3.36 0.16 11.61 0.05 4.50 1.91 5.20 5.90 4.90 0.00 LL 1.95 3.36 0.16 11.61 0.05 4.50 1.91 5.20 5.90 4.90 0.00 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 4.98 3.98 0.00 CL 1.76 3.03 0.15 11.62 0.13 17.75 1.64 32.00 5.66 4.63 0.00 SL 2.08 3.59 0.18 11.59 0.14 11.00 0.97 8.80 4.95 3.83 0.00 SL 2.08 3.59 0.18 11.59 0.14 11.00 0.97 8.80 4.95 3.83 0.00 0.80 0.60 0.19 0.15 0.80 0.60 0.19 0.15 3.60 3.40 0.77 0.15 0.80 2.60 0.30 0.15 0.80 0.09 0.23 0.80 0.09 0.23 0.60 0.10 0.11 0.16 0.60 0.10 0.11 0.16 0.80 0.40 0.11 0.15 0.80 2.60 0.30 0.15 3.20 1.60 0.30 0.15 0.60 0.10 0.11 0.16 0.80 1.00 0.14 0.19 0.60 0.10 0.11 0.16 0.60 0.10 0.11 0.16 0.80 1.00 0.14 0.19 0.97 0.97 1.46 3.85 5.25 0.97 2.13 0.97 0.97 2.13 6.07 6.07 7.16 14.88 9.90 6.07 7.53 6.07 6.07 7.53 15.98 15.98 20.39 25.87 53.03 15.98 28.29 15.98 15.98 28.29 LL 1.43 2.47 0.12 11.58 0.03 3.65 1.67 5.60 5.60 5.50 0.00 0.60 0.10 0.20 1.74 1.74 7.92 3.85 10.74 10.74 13.92 14.88 16.20 16.20 56.90 25.87 SL 1.12 1.93 0.09 11.61 0.04 6.25 0.41 18.80 4.96 3.90 0.00 0.80 0.40 0.11 0.15 1.46 CL 1.95 3.36 0.16 11.61 0.06 5.35 2.06 25.60 5.20 4.20 0.00 1.10 0.52 0.13 7.16 20.39 CL 1.32 2.28 0.11 11.58 0.07 15.50 1.72 10.80 5.57 4.58 0.00 3.20 1.60 0.30 0.15 5.25 9.90 LL 1.95 3.36 0.16 11.61 0.05 4.50 1.91 5.20 5.90 4.90 0.00 0.80 0.09 0.23 53.03 HC 2.68 4.62 0.23 11.60 0.15 3.00 0.18 3.60 4.98 3.98 0.00 0.80 2.60 0.30 0.15 3.85 14.88 25.87

P.NT.321

CMd

26.88

27.28

45.84

HC

2.68

4.62

0.23 11.60

0.15

3.00

0.18

3.60

4.98

3.98

0.00

0.80 2.60 0.30 0.15

3.85

14.88

25.87

c c

95

P.NT.321

CMd

26.88

27.28

96

MS 14

LVh

44.00

39.00

97

LT.P.117

CMd

56.16

23.28

98

MS 32

ACh

28.00

34.00

99

P.NT.331

ACh

58.88

29.28

100

MS 18

LVf

26.00

47.00

101

LT.P.125

CMd

52.16

29.28

e e e c

102

LT.P.125

CMd

52.16

29.28

103

LT.P.131

LXh

34.16

33.28

104

P.NT.321

CMd

26.88

27.28

105

MS 14

LVh

44.00

39.00

106

MS 14

LVh

44.00

39.00

107

LT.P.223

CMg

54.16

17.28

b b e c e b b b b b

108

LT.P.223

CMg

54.16

17.28

109

P.NT.331

ACh

58.88

29.28

110

P.NT.321

CMd

26.88

27.28

111

LT.P.117

CMd

56.16

23.28

112

LT.P.223

CMg

54.16

17.28

113

P.NT.329

CMd

66.88

23.28

114

LT.P.223

CMg

54.16

17.28

115

LT.P.223

CMg

54.16

17.28

116

P.NT.329

CMd

66.88

23.28

Note: SOIL UNIT: ACf = Ferric ACRISOLS, ACh = Haplic ACRISOLS, CMd = Dystric CAMBISOLS, CMe = Eutric CAMBISOLS, CMg = Gleyic CAMBISOLS, LVf = Ferric LUVISOLS, LVh = Haplic LUVISOLS, LXh = Haplic LUXISOLS SOIL DEPTH: R (Rock out crop) = 0-30 cm, S (Shallow soil) = 30-50 cm, T (Thin soil) = 50-75 cm, M (Moderate deep soil) = 75-100 cm, D (Deep soil) = >100 cm SOIL TEXTURE: CL = Clay Loam, SL = Sandy Loam, LL = Light Loam, HC = Heavy Clay %C = % Organic Carbon, %OM = % Organic Matter, %N = % Nitrogen, C/N = Carbon/Nitrogen Ratio, TOTP = Total Phosphorus, AVAILP = Available Phosphorus, TOTK = Total Potassium, AVAILK = Available Potassium, CA = Calcium, MG = Magnesium, K = Potassium, NA = Sodium, CECS = Total Base Content in Soil, CECT = Total Exchangeable Cat ion in Soil, % BS = % Base Saturation SLOPE: a = 0-2% (Flat or almost flat), b = 2-8% (Undulating), c = 8-16% (Rolling), d = 16-30% (Hilly), e = 30-55% (Steeply dissected), f = >55% (Mountainous)

Source: SSLCC, 2005

221

The Economic Potential for Smallholder Rubber Production in Northern Laos

Appendix 4: The selected categories for the topography and soil variables in each grid
Grid 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 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 Soil depth Good Good Good Good Good Good Good Bad Good Good Good Good Good Good Bad Bad Good Good Good Good Good Good Good Good Bad Good Good Good Good Good Good Good Good Good Good Good Moderate Moderate Bad Bad Bad Good Good Moderate Moderate Moderate Moderate Good Soil texture Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Drainage Moderate Moderate Moderate Moderate Good Moderate Moderate Good Moderate Good Good Moderate Good Good Good Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Good Good Moderate Moderate Good Moderate Moderate Moderate Moderate Good Good Moderate Moderate Good Good Good Good Good Good Moderate Moderate Moderate Moderate Good Moderate Soil nutrient Moderate Bad Bad Bad Moderate Moderate Moderate Bad Good Moderate Moderate Bad Moderate Moderate Bad Bad Moderate Moderate Moderate Moderate Bad Bad Moderate Moderate Bad Moderate Moderate Moderate Bad Bad Bad Bad Moderate Moderate Moderate Moderate Moderate Moderate Bad Bad Bad Moderate Moderate Moderate Moderate Moderate Moderate Moderate Soil pH Moderate Good Good Good Good Moderate Moderate Moderate Good Moderate Moderate Good Good Moderate Moderate Moderate Moderate Moderate Good Good Good Good Good Good Moderate Moderate Moderate Good Good Good Good Good Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Topography Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Flat Flat Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Flat Terrace Slope Bad Bad Bad Bad Bad Moderate Moderate Bad Bad Moderate Moderate Bad Bad Bad Bad Bad Bad Bad Bad Bad Bad Bad Moderate Bad Bad Bad Bad Bad Bad Bad Bad Bad Bad Moderate Bad Bad Good Good Bad Bad Bad Bad Bad Bad Bad Bad Good Bad % Rock Good Good Good Good Good Good Good Bad Good Good Good Good Good Good Bad Bad Good Good Good Good Good Good Good Good Bad Good Good Good Good Good Good Good Good Good Good Good Good Good Bad Bad Bad Good Good Good Good Good Good Good

222

The Economic Potential for Smallholder Rubber Production in Northern Laos


49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 Good Good Bad Good Good Good Good Good Moderate Good Good Moderate Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Moderate Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Moderate Moderate Good Good Good Good Good Good Good Good Good Good Good Moderate Moderate Good Good Good Good Good Good Good Good Good Good Moderate Good Moderate Moderate Good Good Good Good Good Good Good Good Good Good Good Moderate Moderate Moderate Good Good Good Good Good Good Good Moderate Moderate Good Moderate Bad Bad Moderate Good Moderate Good Good Good Moderate Moderate Moderate Good Good Bad Bad Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Bad Moderate Bad Bad Good Good Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Bad Bad Bad Good Moderate Moderate Moderate Good Moderate Moderate Moderate Moderate Bad Moderate Moderate Moderate Moderate Good Moderate Moderate Moderate Moderate Moderate Moderate Good Moderate Moderate Good Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Good Good Good Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Moderate Good Good Moderate Moderate Moderate Bad Moderate Moderate Moderate Moderate Moderate Moderate Good Moderate Moderate Moderate Good Moderate Moderate Moderate Moderate Good Moderate Good Good Good Good Good Moderate Moderate Moderate Moderate Moderate Moderate Good Good Moderate Good Moderate Moderate Good Good Moderate Moderate Moderate Moderate Moderate Good Good Good Moderate Moderate Moderate Good Good Good Moderate Moderate Moderate Good Moderate Good Good Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Flat Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Flat Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Terrace Bad Bad Bad Bad Bad Bad Moderate Bad Bad Moderate Moderate Good Bad Bad Bad Moderate Moderate Moderate Moderate Bad Bad Bad Bad Bad Bad Bad Bad Bad Bad Bad Bad Moderate Moderate Bad Moderate Moderate Bad Bad Bad Bad Bad Bad Moderate Good Bad Moderate Moderate Bad Bad Bad Bad Bad Bad Bad Good Good Bad Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good

223

The Economic Potential for Smallholder Rubber Production in Northern Laos


103 104 105 106 107 108 109 110 111 112 113 114 115 116 Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Moderate Good Good Good Good Good Moderate Good Good Good Good Good Good Moderate Bad Good Good Moderate Moderate Moderate Bad Moderate Moderate Moderate Moderate Moderate Moderate Moderate Good Moderate Moderate Moderate Moderate Bad Good Moderate Moderate Moderate Moderate Moderate Moderate Moderate Good Moderate Moderate Moderate Moderate Good Good Moderate Moderate Moderate Moderate Moderate Moderate Terrace Terrace Terrace Terrace Flat Flat Terrace Terrace Terrace Flat Flat Flat Flat Flat Bad Moderate Bad Bad Good Good Bad Moderate Bad Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good Good

224

The Economic Potential for Smallholder Rubber Production in Northern Laos

Appendix 5: The estimated yields of latex over the life of the rubber plantation, intercropping rice during the initial three years of the plantation, and rubber wood at harvest in each grid
Latex yields Rice intercropping yields 1 2 3 1,702 1,453 1,013 1,702 1,453 1,013 1,702 1,453 1,013 1,702 1,453 1,013 1,687 1,359 884 1,692 1,390 923 1,692 1,390 923 1,733 1,639 1,438 1,687 1,359 884 1,681 1,321 839 1,681 1,321 839 1,702 1,453 1,013 1,687 1,359 884 1,692 1,390 923 1,733 1,639 1,438 1,733 1,639 1,438 1,702 1,453 1,013 1,702 1,453 1,013 1,697 1,425 972 1,697 1,425 972 1,702 1,453 1,013 1,702 1,453 1,013 1,687 1,359 884 1,687 1,359 884 1,733 1,639 1,438 1,702 1,453 1,013 1,702 1,453 1,013 1,687 1,359 884 1,702 1,453 1,013 1,702 1,453 1,013 1,702 1,453 1,013 1,702 1,453 1,013 1,687 1,359 884 1,681 1,321 839 1,702 1,453 1,013 1,702 1,453 1,013 1,681 1,321 839

Grid

Rubber wood yields 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 26 27 28 29 30 31 32 33 34 35 Average 35 1 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 2 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 3 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 4 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 5 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 6 884 829 1,126 1,178 1,230 1,257 1,318 1,387 1,428 1,456 1,475 1,486 1,165 1,485 1,464 1,449 1,405 1,406 1,415 1,390 1,362 1,331 1,297 892 1,218 1,159 1,109 1,281 60 7 884 829 1,126 1,178 1,230 1,257 1,318 1,387 1,428 1,456 1,475 1,486 1,165 1,485 1,464 1,449 1,405 1,406 1,415 1,390 1,362 1,331 1,297 892 1,218 1,159 1,109 1,281 60 8 388 364 494 517 541 553 581 612 630 638 638 631 475 601 575 549 509 488 469 434 396 356 314 105 221 164 111 458 26 9 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 10 1,001 939 1,275 1,333 1,392 1,423 1,492 1,569 1,615 1,649 1,671 1,687 1,327 1,692 1,673 1,660 1,615 1,621 1,637 1,615 1,589 1,560 1,528 1,076 1,452 1,392 1,343 1,475 68 11 1,001 939 1,275 1,333 1,392 1,423 1,492 1,569 1,615 1,649 1,671 1,687 1,327 1,692 1,673 1,660 1,615 1,621 1,637 1,615 1,589 1,560 1,528 1,076 1,452 1,392 1,343 1,475 68 12 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 13 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 14 884 829 1,126 1,178 1,230 1,257 1,318 1,387 1,428 1,456 1,475 1,486 1,165 1,485 1,464 1,449 1,405 1,406 1,415 1,390 1,362 1,331 1,297 892 1,218 1,159 1,109 1,281 60 15 388 364 494 517 541 553 581 612 630 638 638 631 475 601 575 549 509 488 469 434 396 356 314 105 221 164 111 458 26 16 388 364 494 517 541 553 581 612 630 638 638 631 475 601 575 549 509 488 469 434 396 356 314 105 221 164 111 458 26 17 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 18 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 19 822 771 1,047 1,096 1,144 1,170 1,227 1,291 1,329 1,355 1,371 1,380 1,080 1,375 1,354 1,338 1,294 1,292 1,298 1,272 1,243 1,210 1,175 794 1,094 1,036 986 1,180 56 20 822 771 1,047 1,096 1,144 1,170 1,227 1,291 1,329 1,355 1,371 1,380 1,080 1,375 1,354 1,338 1,294 1,292 1,298 1,272 1,243 1,210 1,175 794 1,094 1,036 986 1,180 56 21 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 22 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 23 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 24 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 25 388 364 494 517 541 553 581 612 630 638 638 631 475 601 575 549 509 488 469 434 396 356 314 105 221 164 111 458 26 26 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 27 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 28 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 29 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 30 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 31 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 32 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 33 936 878 1,192 1,247 1,302 1,331 1,395 1,468 1,511 1,542 1,562 1,575 1,237 1,577 1,557 1,543 1,499 1,502 1,514 1,490 1,463 1,432 1,399 974 1,321 1,262 1,213 1,367 64 34 1,001 939 1,275 1,333 1,392 1,423 1,492 1,569 1,615 1,649 1,671 1,687 1,327 1,692 1,673 1,660 1,615 1,621 1,637 1,615 1,589 1,560 1,528 1,076 1,452 1,392 1,343 1,475 68 35 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 36 773 725 985 1,031 1,077 1,101 1,155 1,215 1,251 1,275 1,289 1,297 1,013 1,289 1,267 1,250 1,207 1,203 1,206 1,178 1,148 1,115 1,079 718 997 939 888 1,099 53 37 1,001 939 1,275 1,333 1,392 1,423 1,492 1,569 1,615 1,649 1,671 1,687 1,327 1,692 1,673 1,660 1,615 1,621 1,637 1,615 1,589 1,560 1,528 1,076 1,452 1,392 1,343 1,475 68

225

The Economic Potential for Smallholder Rubber Production in Northern Laos

38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85

1,001 388 388 388 884 773 631 631 631 1,001 773 773 773 388 822 626 626 884 1,059 631 1,001 1,001 1,001 822 773 936 1,059 1,059 884 884 884 773 773 773 773 773 822 822 773 822 587 884 884 884 884 1,001 1,001 773

939 364 364 364 829 725 592 592 592 939 725 725 725 364 771 587 587 829 993 592 939 939 939 771 725 878 993 993 829 829 829 725 725 725 725 725 771 771 725 771 551 829 829 829 829 939 939 725

1,275 494 494 494 1,126 985 804 804 804 1,275 985 985 985 494 1,047 798 798 1,126 1,348 804 1,275 1,275 1,275 1,047 985 1,192 1,348 1,348 1,126 1,126 1,126 985 985 985 985 985 1,047 1,047 985 1,047 749 1,126 1,126 1,126 1,126 1,275 1,275 985

1,333 517 517 517 1,178 1,031 842 842 842 1,333 1,031 1,031 1,031 517 1,096 835 835 1,178 1,409 842 1,333 1,333 1,333 1,096 1,031 1,247 1,409 1,409 1,178 1,178 1,178 1,031 1,031 1,031 1,031 1,031 1,096 1,096 1,031 1,096 784 1,178 1,178 1,178 1,178 1,333 1,333 1,031

1,392 541 541 541 1,230 1,077 879 879 879 1,392 1,077 1,077 1,077 541 1,144 873 873 1,230 1,471 879 1,392 1,392 1,392 1,144 1,077 1,302 1,471 1,471 1,230 1,230 1,230 1,077 1,077 1,077 1,077 1,077 1,144 1,144 1,077 1,144 819 1,230 1,230 1,230 1,230 1,392 1,392 1,077

1,423 553 553 553 1,257 1,101 899 899 899 1,423 1,101 1,101 1,101 553 1,170 893 893 1,257 1,503 899 1,423 1,423 1,423 1,170 1,101 1,331 1,503 1,503 1,257 1,257 1,257 1,101 1,101 1,101 1,101 1,101 1,170 1,170 1,101 1,170 838 1,257 1,257 1,257 1,257 1,423 1,423 1,101

1,492 581 581 581 1,318 1,155 944 944 944 1,492 1,155 1,155 1,155 581 1,227 937 937 1,318 1,576 944 1,492 1,492 1,492 1,227 1,155 1,395 1,576 1,576 1,318 1,318 1,318 1,155 1,155 1,155 1,155 1,155 1,227 1,227 1,155 1,227 880 1,318 1,318 1,318 1,318 1,492 1,492 1,155

1,569 612 612 612 1,387 1,215 993 993 993 1,569 1,215 1,215 1,215 612 1,291 986 986 1,387 1,658 993 1,569 1,569 1,569 1,291 1,215 1,468 1,658 1,658 1,387 1,387 1,387 1,215 1,215 1,215 1,215 1,215 1,291 1,291 1,215 1,291 926 1,387 1,387 1,387 1,387 1,569 1,569 1,215

1,615 630 630 630 1,428 1,251 1,023 1,023 1,023 1,615 1,251 1,251 1,251 630 1,329 1,015 1,015 1,428 1,706 1,023 1,615 1,615 1,615 1,329 1,251 1,511 1,706 1,706 1,428 1,428 1,428 1,251 1,251 1,251 1,251 1,251 1,329 1,329 1,251 1,329 953 1,428 1,428 1,428 1,428 1,615 1,615 1,251

1,649 638 638 638 1,456 1,275 1,041 1,041 1,041 1,649 1,275 1,275 1,275 638 1,355 1,033 1,033 1,456 1,742 1,041 1,649 1,649 1,649 1,355 1,275 1,542 1,742 1,742 1,456 1,456 1,456 1,275 1,275 1,275 1,275 1,275 1,355 1,355 1,275 1,355 970 1,456 1,456 1,456 1,456 1,649 1,649 1,275

1,671 638 638 638 1,475 1,289 1,050 1,050 1,050 1,671 1,289 1,289 1,289 638 1,371 1,042 1,042 1,475 1,767 1,050 1,671 1,671 1,671 1,371 1,289 1,562 1,767 1,767 1,475 1,475 1,475 1,289 1,289 1,289 1,289 1,289 1,371 1,371 1,289 1,371 977 1,475 1,475 1,475 1,475 1,671 1,671 1,289

1,687 631 631 631 1,486 1,297 1,052 1,052 1,052 1,687 1,297 1,297 1,297 631 1,380 1,044 1,044 1,486 1,784 1,052 1,687 1,687 1,687 1,380 1,297 1,575 1,784 1,784 1,486 1,486 1,486 1,297 1,297 1,297 1,297 1,297 1,380 1,380 1,297 1,380 978 1,486 1,486 1,486 1,486 1,687 1,687 1,297

1,327 475 475 475 1,165 1,013 815 815 815 1,327 1,013 1,013 1,013 475 1,080 809 809 1,165 1,406 815 1,327 1,327 1,327 1,080 1,013 1,237 1,406 1,406 1,165 1,165 1,165 1,013 1,013 1,013 1,013 1,013 1,080 1,080 1,013 1,080 755 1,165 1,165 1,165 1,165 1,327 1,327 1,013

1,692 601 601 601 1,485 1,289 1,036 1,036 1,036 1,692 1,289 1,289 1,289 601 1,375 1,028 1,028 1,485 1,793 1,036 1,692 1,692 1,692 1,375 1,289 1,577 1,793 1,793 1,485 1,485 1,485 1,289 1,289 1,289 1,289 1,289 1,375 1,375 1,289 1,375 960 1,485 1,485 1,485 1,485 1,692 1,692 1,289

1,673 575 575 575 1,464 1,267 1,013 1,013 1,013 1,673 1,267 1,267 1,267 575 1,354 1,004 1,004 1,464 1,774 1,013 1,673 1,673 1,673 1,354 1,267 1,557 1,774 1,774 1,464 1,464 1,464 1,267 1,267 1,267 1,267 1,267 1,354 1,354 1,267 1,354 936 1,464 1,464 1,464 1,464 1,673 1,673 1,267

1,660 549 549 549 1,449 1,250 992 992 992 1,660 1,250 1,250 1,250 549 1,338 984 984 1,449 1,763 992 1,660 1,660 1,660 1,338 1,250 1,543 1,763 1,763 1,449 1,449 1,449 1,250 1,250 1,250 1,250 1,250 1,338 1,338 1,250 1,338 914 1,449 1,449 1,449 1,449 1,660 1,660 1,250

1,615 509 509 509 1,405 1,207 951 951 951 1,615 1,207 1,207 1,207 509 1,294 942 942 1,405 1,717 951 1,615 1,615 1,615 1,294 1,207 1,499 1,717 1,717 1,405 1,405 1,405 1,207 1,207 1,207 1,207 1,207 1,294 1,294 1,207 1,294 873 1,405 1,405 1,405 1,405 1,615 1,615 1,207

1,621 488 488 488 1,406 1,203 940 940 940 1,621 1,203 1,203 1,203 488 1,292 931 931 1,406 1,726 940 1,621 1,621 1,621 1,292 1,203 1,502 1,726 1,726 1,406 1,406 1,406 1,203 1,203 1,203 1,203 1,203 1,292 1,292 1,203 1,292 861 1,406 1,406 1,406 1,406 1,621 1,621 1,203

1,637 469 469 469 1,415 1,206 935 935 935 1,637 1,206 1,206 1,206 469 1,298 926 926 1,415 1,745 935 1,637 1,637 1,637 1,298 1,206 1,514 1,745 1,745 1,415 1,415 1,415 1,206 1,206 1,206 1,206 1,206 1,298 1,298 1,206 1,298 853 1,415 1,415 1,415 1,415 1,637 1,637 1,206

1,615 434 434 434 1,390 1,178 905 905 905 1,615 1,178 1,178 1,178 434 1,272 896 896 1,390 1,723 905 1,615 1,615 1,615 1,272 1,178 1,490 1,723 1,723 1,390 1,390 1,390 1,178 1,178 1,178 1,178 1,178 1,272 1,272 1,178 1,272 822 1,390 1,390 1,390 1,390 1,615 1,615 1,178

1,589 396 396 396 1,362 1,148 872 872 872 1,589 1,148 1,148 1,148 396 1,243 863 863 1,362 1,698 872 1,589 1,589 1,589 1,243 1,148 1,463 1,698 1,698 1,362 1,362 1,362 1,148 1,148 1,148 1,148 1,148 1,243 1,243 1,148 1,243 788 1,362 1,362 1,362 1,362 1,589 1,589 1,148

1,560 356 356 356 1,331 1,115 836 836 836 1,560 1,115 1,115 1,115 356 1,210 827 827 1,331 1,670 836 1,560 1,560 1,560 1,210 1,115 1,432 1,670 1,670 1,331 1,331 1,331 1,115 1,115 1,115 1,115 1,115 1,210 1,210 1,115 1,210 752 1,331 1,331 1,331 1,331 1,560 1,560 1,115

1,528 314 314 314 1,297 1,079 798 798 798 1,528 1,079 1,079 1,079 314 1,175 788 788 1,297 1,639 798 1,528 1,528 1,528 1,175 1,079 1,399 1,639 1,639 1,297 1,297 1,297 1,079 1,079 1,079 1,079 1,079 1,175 1,175 1,079 1,175 713 1,297 1,297 1,297 1,297 1,528 1,528 1,079

1,076 105 105 105 892 718 493 493 493 1,076 718 718 718 105 794 485 485 892 1,166 493 1,076 1,076 1,076 794 718 974 1,166 1,166 892 892 892 718 718 718 718 718 794 794 718 794 425 892 892 892 892 1,076 1,076 718

1,452 221 221 221 1,218 997 712 712 712 1,452 997 997 997 221 1,094 702 702 1,218 1,565 712 1,452 1,452 1,452 1,094 997 1,321 1,565 1,565 1,218 1,218 1,218 997 997 997 997 997 1,094 1,094 997 1,094 626 1,218 1,218 1,218 1,218 1,452 1,452 997

1,392 164 164 164 1,159 939 654 654 654 1,392 939 939 939 164 1,036 645 645 1,159 1,505 654 1,392 1,392 1,392 1,036 939 1,262 1,505 1,505 1,159 1,159 1,159 939 939 939 939 939 1,036 1,036 939 1,036 568 1,159 1,159 1,159 1,159 1,392 1,392 939

1,343 111 111 111 1,109 888 603 603 603 1,343 888 888 888 111 986 593 593 1,109 1,456 603 1,343 1,343 1,343 986 888 1,213 1,456 1,456 1,109 1,109 1,109 888 888 888 888 888 986 986 888 986 516 1,109 1,109 1,109 1,109 1,343 1,343 888

1,475 458 458 458 1,281 1,099 863 863 863 1,475 1,099 1,099 1,099 458 1,180 855 855 1,281 1,569 863 1,475 1,475 1,475 1,180 1,099 1,367 1,569 1,569 1,281 1,281 1,281 1,099 1,099 1,099 1,099 1,099 1,180 1,180 1,099 1,180 792 1,281 1,281 1,281 1,281 1,475 1,475 1,099

68 26 26 26 60 53 43 43 43 68 53 53 53 26 56 42 42 60 72 43 68 68 68 56 53 64 72 72 60 60 60 53 53 53 53 53 56 56 53 56 40 60 60 60 60 68 68 53

1,681 1,733 1,733 1,733 1,692 1,702 1,714 1,714 1,714 1,681 1,702 1,702 1,702 1,733 1,697 1,714 1,714 1,692 1,676 1,714 1,681 1,681 1,681 1,697 1,702 1,687 1,676 1,676 1,692 1,692 1,692 1,702 1,702 1,702 1,702 1,702 1,697 1,697 1,702 1,697 1,717 1,692 1,692 1,692 1,692 1,681 1,681 1,702

1,321 1,639 1,639 1,639 1,390 1,453 1,529 1,529 1,529 1,321 1,453 1,453 1,453 1,639 1,425 1,531 1,531 1,390 1,289 1,529 1,321 1,321 1,321 1,425 1,453 1,359 1,289 1,289 1,390 1,390 1,390 1,453 1,453 1,453 1,453 1,453 1,425 1,425 1,453 1,425 1,550 1,390 1,390 1,390 1,390 1,321 1,321 1,453

839 1,438 1,438 1,438 923 1,013 1,152 1,152 1,152 839 1,013 1,013 1,013 1,438 972 1,158 1,158 923 803 1,152 839 839 839 972 1,013 884 803 803 923 923 923 1,013 1,013 1,013 1,013 1,013 972 972 1,013 972 1,199 923 923 923 923 839 839 1,013

226

The Economic Potential for Smallholder Rubber Production in Northern Laos

86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116

773 822 822 822 773 884 1,053 670 884 884 884 773 773 773 884 822 822 773 884 884 884 1,053 1,053 773 884 773 1,053 1,053 1,053 1,053 1,053

725 771 771 771 725 829 987 628 829 829 829 725 725 725 829 771 771 725 829 829 829 987 987 725 829 725 987 987 987 987 987

985 1,047 1,047 1,047 985 1,126 1,340 853 1,126 1,126 1,126 985 985 985 1,126 1,047 1,047 985 1,126 1,126 1,126 1,340 1,340 985 1,126 985 1,340 1,340 1,340 1,340 1,340

1,031 1,096 1,096 1,096 1,031 1,178 1,401 893 1,178 1,178 1,178 1,031 1,031 1,031 1,178 1,096 1,096 1,031 1,178 1,178 1,178 1,401 1,401 1,031 1,178 1,031 1,401 1,401 1,401 1,401 1,401

1,077 1,144 1,144 1,144 1,077 1,230 1,462 933 1,230 1,230 1,230 1,077 1,077 1,077 1,230 1,144 1,144 1,077 1,230 1,230 1,230 1,462 1,462 1,077 1,230 1,077 1,462 1,462 1,462 1,462 1,462

1,101 1,170 1,170 1,170 1,101 1,257 1,495 954 1,257 1,257 1,257 1,101 1,101 1,101 1,257 1,170 1,170 1,101 1,257 1,257 1,257 1,495 1,495 1,101 1,257 1,101 1,495 1,495 1,495 1,495 1,495

1,155 1,227 1,227 1,227 1,155 1,318 1,567 1,001 1,318 1,318 1,318 1,155 1,155 1,155 1,318 1,227 1,227 1,155 1,318 1,318 1,318 1,567 1,567 1,155 1,318 1,155 1,567 1,567 1,567 1,567 1,567

1,215 1,291 1,291 1,291 1,215 1,387 1,648 1,054 1,387 1,387 1,387 1,215 1,215 1,215 1,387 1,291 1,291 1,215 1,387 1,387 1,387 1,648 1,648 1,215 1,387 1,215 1,648 1,648 1,648 1,648 1,648

1,251 1,329 1,329 1,329 1,251 1,428 1,696 1,085 1,428 1,428 1,428 1,251 1,251 1,251 1,428 1,329 1,329 1,251 1,428 1,428 1,428 1,696 1,696 1,251 1,428 1,251 1,696 1,696 1,696 1,696 1,696

1,275 1,355 1,355 1,355 1,275 1,456 1,732 1,105 1,456 1,456 1,456 1,275 1,275 1,275 1,456 1,355 1,355 1,275 1,456 1,456 1,456 1,732 1,732 1,275 1,456 1,275 1,732 1,732 1,732 1,732 1,732

1,289 1,371 1,371 1,371 1,289 1,475 1,757 1,115 1,475 1,475 1,475 1,289 1,289 1,289 1,475 1,371 1,371 1,289 1,475 1,475 1,475 1,757 1,757 1,289 1,475 1,289 1,757 1,757 1,757 1,757 1,757

1,297 1,380 1,380 1,380 1,297 1,486 1,774 1,119 1,486 1,486 1,486 1,297 1,297 1,297 1,486 1,380 1,380 1,297 1,486 1,486 1,486 1,774 1,774 1,297 1,486 1,297 1,774 1,774 1,774 1,774 1,774

1,013 1,080 1,080 1,080 1,013 1,165 1,397 869 1,165 1,165 1,165 1,013 1,013 1,013 1,165 1,080 1,080 1,013 1,165 1,165 1,165 1,397 1,397 1,013 1,165 1,013 1,397 1,397 1,397 1,397 1,397

1,289 1,375 1,375 1,375 1,289 1,485 1,782 1,105 1,485 1,485 1,485 1,289 1,289 1,289 1,485 1,375 1,375 1,289 1,485 1,485 1,485 1,782 1,782 1,289 1,485 1,289 1,782 1,782 1,782 1,782 1,782

1,267 1,354 1,354 1,354 1,267 1,464 1,763 1,082 1,464 1,464 1,464 1,267 1,267 1,267 1,464 1,354 1,354 1,267 1,464 1,464 1,464 1,763 1,763 1,267 1,464 1,267 1,763 1,763 1,763 1,763 1,763

1,250 1,338 1,338 1,338 1,250 1,449 1,751 1,063 1,449 1,449 1,449 1,250 1,250 1,250 1,449 1,338 1,338 1,250 1,449 1,449 1,449 1,751 1,751 1,250 1,449 1,250 1,751 1,751 1,751 1,751 1,751

1,207 1,294 1,294 1,294 1,207 1,405 1,706 1,021 1,405 1,405 1,405 1,207 1,207 1,207 1,405 1,294 1,294 1,207 1,405 1,405 1,405 1,706 1,706 1,207 1,405 1,207 1,706 1,706 1,706 1,706 1,706

1,203 1,292 1,292 1,292 1,203 1,406 1,714 1,012 1,406 1,406 1,406 1,203 1,203 1,203 1,406 1,292 1,292 1,203 1,406 1,406 1,406 1,714 1,714 1,203 1,406 1,203 1,714 1,714 1,714 1,714 1,714

1,206 1,298 1,298 1,298 1,206 1,415 1,733 1,009 1,415 1,415 1,415 1,206 1,206 1,206 1,415 1,298 1,298 1,206 1,415 1,415 1,415 1,733 1,733 1,206 1,415 1,206 1,733 1,733 1,733 1,733 1,733

1,178 1,272 1,272 1,272 1,178 1,390 1,711 980 1,390 1,390 1,390 1,178 1,178 1,178 1,390 1,272 1,272 1,178 1,390 1,390 1,390 1,711 1,711 1,178 1,390 1,178 1,711 1,711 1,711 1,711 1,711

1,148 1,243 1,243 1,243 1,148 1,362 1,686 948 1,362 1,362 1,362 1,148 1,148 1,148 1,362 1,243 1,243 1,148 1,362 1,362 1,362 1,686 1,686 1,148 1,362 1,148 1,686 1,686 1,686 1,686 1,686

1,115 1,210 1,210 1,210 1,115 1,331 1,658 913 1,331 1,331 1,331 1,115 1,115 1,115 1,331 1,210 1,210 1,115 1,331 1,331 1,331 1,658 1,658 1,115 1,331 1,115 1,658 1,658 1,658 1,658 1,658

1,079 1,175 1,175 1,175 1,079 1,297 1,627 875 1,297 1,297 1,297 1,079 1,079 1,079 1,297 1,175 1,175 1,079 1,297 1,297 1,297 1,627 1,627 1,079 1,297 1,079 1,627 1,627 1,627 1,627 1,627

718 794 794 794 718 892 1,156 554 892 892 892 718 718 718 892 794 794 718 892 892 892 1,156 1,156 718 892 718 1,156 1,156 1,156 1,156 1,156

997 1,094 1,094 1,094 997 1,218 1,552 790 1,218 1,218 1,218 997 997 997 1,218 1,094 1,094 997 1,218 1,218 1,218 1,552 1,552 997 1,218 997 1,552 1,552 1,552 1,552 1,552

939 1,036 1,036 1,036 939 1,159 1,493 732 1,159 1,159 1,159 939 939 939 1,159 1,036 1,036 939 1,159 1,159 1,159 1,493 1,493 939 1,159 939 1,493 1,493 1,493 1,493 1,493

888 986 986 986 888 1,109 1,444 681 1,109 1,109 1,109 888 888 888 1,109 986 986 888 1,109 1,109 1,109 1,444 1,444 888 1,109 888 1,444 1,444 1,444 1,444 1,444

1,099 1,180 1,180 1,180 1,099 1,281 1,559 928 1,281 1,281 1,281 1,099 1,099 1,099 1,281 1,180 1,180 1,099 1,281 1,281 1,281 1,559 1,559 1,099 1,281 1,099 1,559 1,559 1,559 1,559 1,559

53 56 56 56 53 60 72 45 60 60 60 53 53 53 60 56 56 53 60 60 60 72 72 53 60 53 72 72 72 72 72

1,702 1,697 1,697 1,697 1,702 1,692 1,676 1,710 1,692 1,692 1,692 1,702 1,702 1,702 1,692 1,697 1,697 1,702 1,692 1,692 1,692 1,676 1,676 1,702 1,692 1,702 1,676 1,676 1,676 1,676 1,676

1,453 1,425 1,425 1,425 1,453 1,390 1,293 1,509 1,390 1,390 1,390 1,453 1,453 1,453 1,390 1,425 1,425 1,453 1,390 1,390 1,390 1,293 1,293 1,453 1,390 1,453 1,293 1,293 1,293 1,293 1,293

1,013 972 972 972 1,013 923 806 1,111 923 923 923 1,013 1,013 1,013 923 972 972 1,013 923 923 923 806 806 1,013 923 1,013 806 806 806 806 806

227

The Economic Potential for Smallholder Rubber Production in Northern Laos

Appendix 6: The annual latex yields over the life of the plantation for three levels of resource quality
Year 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 26 27 28 29 30 31 32 33 34 35 Levels of resource quality Low Moderate High 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 509 815 1,004 477 764 941 648 1,038 1,277 678 1,086 1,336 709 1,134 1,395 725 1,160 1,425 761 1,216 1,495 801 1,280 1,572 825 1,317 1,618 838 1,343 1,652 842 1,359 1,675 840 1,368 1,690 644 1,070 1,330 817 1,362 1,695 792 1,341 1,676 769 1,325 1,663 728 1,281 1,619 713 1,279 1,625 700 1,284 1,640 668 1,258 1,618 632 1,228 1,592 594 1,196 1,563 554 1,161 1,531 298 783 1,079 464 1,080 1,455 407 1,021 1,396 355 971 1,347

228

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