Draft Report on

Economic and Marketing Potential of

Organic Vegetable Production

in Vientiane Capital, Lao PDR

Vongpaphane MANIVONG

Phonepaseuth SOUVANNAVONG

Bounthieng VIRAVONG

Lattsamy SORPHAPMYSAY

Economic Policy Research Unit

Agriculture and Forestry Policy Research Centre

May 2009

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Contents

Background .......................................................................................................................... 2

Objectives ............................................................................................................................ 5

Methodology ........................................................................................................................ 5

Study area and sample selection ....................................................................................... 5

Data collection .................................................................................................................. 6

Data analysis .................................................................................................................... 6

Results .................................................................................................................................. 7

Economic returns to organic and inorganic vegetable production ................................... 7

Constraints of organic vegetable production .................................................................. 12

Marketing potential of organic vegetable ....................................................................... 13

Conclusion ......................................................................................................................... 15

Acknowledgements ............................................................................................................ 16

References .......................................................................................................................... 16

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Background One of the Lao government priority is to produce agriculture production as staple

food and commercial productions. Therefore, there are many introduction and

extensive cultivation of new high yielding crop varieties as well as agricultural inputs

such as fertilizers, pesticides, resulting in spreading of some severe pest and pesticide

residue. Now the Ministry of Agriculture and Forestry of Lao PDR is promoting

Clean Agriculture policy by continuing support and improve Good Agriculture

Practices, Production Free Pesticides, Organic Agriculture, and Conventional

Agriculture, which is potential source in agriculture production of Lao PDR (DOA,

2007).

In some ways, organic agriculture is similar to traditional agriculture, as it does not

synthetic crop protection chemicals or fertilizers. Organic agriculture refers to a

system that manages ecological interactions without the use of chemical fertilizers or

pesticides to promote and enhance soil fertility, plant health and prevent pest and

disease outbreak. Enhancing biological cycles within the farm and limiting inputs

from outside is one of the most important principles of organic agriculture (Roder et

al, 2005). This differs from modern organic systems or non-organic agriculture which

usually more intensive and is focused on managing for increased yields using

chemical fertilizers and pesticides.

About 83% of the population of the Lao PDR is rural and 66% depend on subsistence

agriculture. Traditional production systems are based on low external inputs and many

of the agriculture products are organic by default. Four different systems for organic

production are common (Sipaseuth and Roder, 2004): (1) The upland fallow rotation

(slash-and-burn) system the production is largely used for producing rice for home

consumption, with job’s tear, sesame and maize the most important crops exported.

Although not formally certified, they are often referred to as “organically grown”; (2)

Wild products collected in the forest and fallow lands for home consumption, local

markets and for exports. Important products include bamboo shoot, banana

inflorescence, and wild cardamom; (3) Fruits, mostly produced without any external

inputs, and 4) Market driven organic production. The systems 1-3 are largely “organic

by default” but products are usually not certified as “organic”.

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Lao PDR has a range of conditions which favor organic production for in-country

consumption and export including the good soil quality, the favorable climate

condition, the low external input systems presently used allows for easy conversion to

an organic system, Lao products have a reputation for having low levels of pesticide

residues, and hill environments offer opportunities for “out of season” fruit and

vegetable production. Products with high potential include vegetables, rice, coffee,

and fruits (Chittanavanh et al, 2005).

However, compared to other Asian countries, Lao PDR is still low regarding to the

development of organic agriculture. According to the data from PROFIL, the organic

farmland in 2007 in Lao PDR is close to 15,000 ha, 1,577 farmers and harvest

quantity about 13,420 tons. The main organic production includes coffee, vegetable,

rice, green bean, green tea, cabbage, and etc (Table 1). The main organic farmlands

are in the central part like Vientiane Capital and in the southern part like Champasak

Province. The majority of the growing area of organic vegetable is in Vientaine

Capital (Figure 1), spreading in four districts with the planted area of 20 ha in 2008

(Table 2).

Table 1: The organic production in Lao PDR in 2007

Name of

Producer

Sinouk

Coffee

Green Field

Miller Group

Vientiane

Organic

Vegetable

Coffee

Project

Paksong

Enterprise Jhai Coffee

No.

Farmers 2 570 65 200 230 510

Area (ha) 30 880 26 - 500 -

Products

Coffee,

roasted,

green tea

Rice (black

glutinous and

non glutinous

Vegetables,

rice

Coffee

green bean,

roasted

Cabbage,

Chinese

cabbage

Coffee,

green bean

(washed

Arabica and

Robusta

Quantity

(ton) 36 120 210 18 13,000 36

Source: PROFIL, 2007

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Figure 1: Organic farmland in Vientiane Capital, Lao PDR

Table 2: The organic production in Lao PDR in 2007

No. District Planted area (ha)No. of

Growers

1 Sikhottabong 1.8 15

2 Xaithani 5.1 35

3 Xaisettha 4.6 23

4 Hatxayfong 8.1 29

Total 19.6 102

Source: PROFIL, 2009

One of the promising organic agriculture in Lao PDR is the organic vegetable

production. Currently the demand from foreign market for organic vegetable is

increasing. Some Lao vegetable growers grow their vegetable with free use of

chemical. In response to the increasing demand for organic vegetable and the promote

from the Lao government. However, there is little information currently available on

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the economic returns to organic vegetable growers and the marketing potential for

these organic vegetable.

Objectives The objectives of this study are to:

(1) Evaluate the economic returns of organic vegetable production compared to

inorganic vegetable production in the study area;

(2) Explore the constraint factors of organic vegetable production in the study area;

(3) Assess the marketing potential for organic vegetable in Vientiane Capital.

Methodology

Study area and sample selection The survey was undertaken in the vegetable-growing area in four districts of the

Vientiane Capital, Lao PDR (Figure 2). One village in each district was selected for

the survey including Nongda Village of Sikhottabong District, Nontae Village of

Xaithani District, Nasangphay of Xaisettha District, and Khoksay Village of

Hatxayfong District.

Figure 2: Location map of the study area

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There are four kinds of organic vegetable that popularly cultivated in those four

districts. Therefore, the samples for interviewing are the farmers who grow eggplant,

collard, gourd, and spring onion with organic and inorganic technique. The details of

samples for the survey is presented in Table 3.

Table 3: Samples of the survey

No. District Type of

Vegetable

Number of vegetable growers Total

Organic Inorganic

1 Sikhottabong Eggplant 2 2 4

2 Xaithani Collard 4 4 8

3 Xaisettha Gourd 4 4 8

4 Hatxayfong Spring Onion 4 4 8

Total 14 14 28

Data collection The collection of data includes both secondary and primary data. Secondary data

collection is done through reviewing reports, statistical data, and documents related to

organic production in Lao PDR. The primary data collection is done by interviewing

vegetable growers. The interview of vegetable growers was conducted during April

2009 by using a set of semi-structured techniques.

Data analysis The data was entered using Excel spreadsheet and analyzed using the Excel functions.

The concept of Cost-Benefit Analysis (CBA) is used to evaluate the economic returns

of organic and inorganic vegetable production to vegetable growers.

The formulas used for evaluate the economic returns are as follows:

AV = GP - IC - FCC

AI = AV - Other Cost

GP = Production x price

Other Cost = Hided labor + Land tax + Land rental + Interest rate

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IC = Input x Price x Amount

FCC = Price x Amount/Working life

AV is the Added Value, GP is the Gross Product, IC is the Input Cost, FCC is the

Fixed Capital Cost, and AI is the Added Income.

Results

Economic returns to organic and inorganic vegetable production Organic and inorganic vegetables in the study area are grown by individual farmers in

different size of area, average around 1 Rai ranging from 0.25 Rai to 3 Rai (Figure 3).

Figure 3: The distribution of planted area of organic and inorganic vegetable

Table 4 and 5 present the cost benefit analysis of organic and inorganic vegetable

production based on the actual areas planted while Table 6 and 7 show the

information on the same scale of one Rai.

On the Rai basis, the survey shows that the organic vegetable growers obtain higher

returns than the inorganic vegetable growers for guard with about 5.58 million Kip/ha

for organic gourd and around 5.40 million Kip/ha for inorganic guard. Both organic

and inorganic collard growers receive almost the same, 4.60 million Kip/ha (Table 6

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and 7, Figure 4). In contrast, the organic vegetable growers obtain lower returns than

the inorganic vegetable growers for eggplant and spring onion. Farmers who grow

organic eggplant receive approximately 5.66 million Kip/ha while farmers who grow

inorganic eggplant get around 7.50 million Kip/ha. Farmers growing organic spring

onion obtain about 2.32 million Kip/ha whereas farmers growing inorganic spring

onion get around 5.36 million Kip/ha.

 

Table 4: Cost benefit analysis of organic vegetable production

No. Farmer Vegetable Area (Rai) Labor Other cost

(Kip*) IC (Kip) FCC (Kip) GP (Kip) AV (Kip) AI (Kip) AI/Labor

Sikhotabong D.

1 Mr. Kinnavan Eggplant 0.5 102 127,000 211,280 739,250 4,637,000 3,686,470 3,559,470 34,897

2 Mr. Thongphan Eggplant 3 442 1,028,000 760,000 688,000 16,890,000 15,442,000 14,414,000 32,611

Xaythany D.

1 Mr. Bounyong Collard 0.8 40 12,560 1,779,000 210,396 6,000,000 4,010,604 3,998,044 99,951

2 Mr. Phomma Collard 1 118 30,000 267,000 327,428 5,000,000 4,405,572 4,375,572 37,081

3 Mr. Visay Collard 0.25 39 45,000 143,000 87,460 2,000,000 1,769,540 1,724,540 44,219

4 Mr. Khamphet Collard 1 120 325,000 802,500 691,833 5,600,000 4,105,667 3,780,667 31,506

Saysettha D.

1 Mr. Phanthong Gourd 3 214 375,000 1,687,600 1,399,945 15,199,000 12,111,455 11,736,455 54,843

2 Ms. Thip Gourd 0.8 64 40,000 338,066 528,047 4,216,500 3,350,387 3,310,387 51,725

3 Ms. Bouavan Gourd 0.5 100 60,000 431,997 398,995 6,432,000 5,601,008 5,541,008 55,410

4 Ms. Larkhamphan Gourd 1.5 144 357,000 928,000 1,051,714 9,500,000 7,520,286 7,163,286 49,745

Hatsayfong D.

1 Mr. Ounkeng Spring Onion 1 35 418,632 1,712,000 586,669 4,000,000 1,701,331 1,282,699 36,649

2 Mr. Pheovan Spring Onion 1 43 124,000 1,597,500 385,542 4,000,000 2,016,958 1,892,958 44,022

3 Mr. Souphon Spring Onion 0.5 14 300,596 942,182 119,206 3,500,000 2,438,612 2,138,016 152,715

4 Mr. Lieng Spring Onion 0.25 25 10,800 842,166 298,305 2,500,000 1,359,529 1,348,729 53,949

Note: * 1 US$ = 8,550 Lao Kip, May 1, 2009

 

Table 5: Cost benefit analysis of inorganic vegetable production

No. Farmer Vegetable Area (Rai) Labor Other cost

(Kip) IC (Kip) FCC (Kip) GP (Kip) AV (Kip) AI (Kip) AI/Labor

Sikhotabong D.

1 Mr. Soukhavan Eggplant 1 58 332,000 1,363,000 432,000 13,395,000 11,600,000 11,268,000 194,276

2 Ms. Pha Eggplant 1.5 165 204,800 7,172,500 221,700 13,890,000 6,495,800 6,291,000 38,127

Xaythany D.

1 Ms. Air Collard 0.5 51 275,500 762,500 14,200 3,000,000 2,223,300 1,948,300 38,202

2 Ms. Khamhoo Collard 0.4 48 45,890 643,000 270,176 4,000,000 3,086,824 3,041,024 63,355

3 Mr. Lern Collard 3 197 130,000 862,000 182,500 11,200,000 10,155,500 10,025,500 50,891

4 Mr. Phome Collard 0.5 65 23,200 788,000 235,000 4,000,000 2,977,000 2,953,800 45,443

Saysettha D.

1 Ms. Pany Gourd 1.5 200 107,500 1,110,000 824,646 10,300,000 8,365,354 8,257,854 41,289

2 Ms. Mai Gourd 1 155 81,500 1,200,000 1,096,702 7,763,000 5,466,298 5,384,798 34,741

3 Ms. Bounmy Gourd 1 100 174,500 540,000 548,166 8,960,500 7,872,334 7,697,834 76,978

4 Ms. Theung Gourd 1.5 141 210,000 1,382,000 1,796,432 10,000,000 6,821,568 6,611,568 46,891

Hatsayfong D.

1 Ms. Viengsamai Spring Onion 0.5 50 366,600 2,853,500 573,333 10,000,000 6,573,167 6,206,567 124,131

2 Mr. Teng Spring Onion 1 33 380,000 2,313,500 517,403 10,000,000 7,169,097 6,789,097 205,730

3 Mr. Theo Spring Onion 0.25 25 215,000 1,224,250 473,880 3,000,000 1,301,870 1,086,870 43,475

4 Mr. Nith Spring Onion 2 34 643,280 2,574,500 206,790 13,000,000 10,218,710 9,575,430 281,630

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Table 6: Cost benefit analysis of organic vegetable production per Rai

No. Vegetable IC (Kip) FCC (Kip) GP (Kip) AV (Kip) AI (Kip) Labor AI/Labor

1 Eggplant 337,947 853,917 7,452,000 6,260,137 5,663,470 176 32,240

2 Collard 966,313 408,024 6,525,000 5,150,664 4,599,964 111 41,441

3 Gourd 616,944 656,460 7,383,573 6,110,169 5,577,169 112 49,870

4 Spring

Onion 2,140,632 600,961 6,250,000 3,508,407 2,321,383 52 45,075

Table 7: Cost benefit analysis of inorganic vegetable production per Rai

No. Vegetable IC (Kip) FCC (Kip) GP (Kip) AV (Kip) AI (Kip) Labor AI/Labor

1 Eggplant 3,072,333 289,900 11,327,500 7,965,267 7,496,733 84 89,247

2 Collard 1,248,958 308,668 6,933,333 5,375,707 4,621,473 104 44,260

3 Gourd 850,333 848,063 7,564,208 5,865,812 5,398,145 121 44,767

4 Spring

Onion 3,551,188 915,746 12,125,000 7,658,067 5,363,227 63 85,812

Figure 4: Economic returns of organic and inorganic vegetable production per Rai

Since vegetable growers interviewed use mainly their family labor for cultivating

the crops, it will be useful to elaborate the returns per labor used. The returns to

labor for each vegetable are higher than the off-farm wage of 30,000 Kip/person-

day. In the same manner, the returns to labor for organic collard and guard are

higher than inorganic collard and guard whereas the returns to labor for organic

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eggplant and spring onion are lower than inorganic eggplant and spring onion

(Table 6 and 7, Figure 5).

Figure 5: Returns to labor of organic and inorganic vegetable production per Rai

Constraints of organic vegetable production The organic vegetable production in the study area is limited by farmer’s lack of

technical experience. In most cases, farmers use very simple techniques. This is

because the organic concept is still new for the farmers.

All interviewed farmers reported that the main constraint of vegetable production

is the unavailability of organic inputs such as fertilizers, crop seeds, organic

insecticides, organic fungicide which are not enough for their use due to the

reason of unavailability of raw material and some are difficult to purchase

especially crop seeds. Moreover, some farmers mentioned that some kinds of the

organic inputs are ineffective to kill some kinds of strong insects. Their plants are

still be harmed by those remain insects and also reduce the capacity of the

cultivation.

Some farmers agreed that the organic vegetable growing up slowly and make the

crop cultivation could not follow up to market demand and also lower the price of

vegetable and decrease the farmer’s income. Some claimed that the vegetable

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grown by organically technique could generate production lower than the

vegetable grown by the conventional technique. Some mentioned that organic

vegetables are smaller or look different than conventional vegetables that the

customers get used to when buying at the general market.

Some farmers said about the limitation of financial resources to promote or

advertize their organic vegetable, therefore it is very difficult to build the

customer’s awareness on organic products.

Other constraints for organic vegetable production mentioned are the poor quality

of local roads especially during the rainy season resulting to the difficulty of

transport of products to the market, limited access to water from irrigation for dry

season production, and feeling unsecure of organic market.

Marketing potential of organic vegetable Vegetables are rare in supermarket and mini mart. In Vientiane Capital they are

available only two minimarts named Simuang minimart and M Point minimart.

Because, normally Lao people are not familiar with buying vegetable from super

market or minimart, they prefer to buy in the general market instead. And they

perceive that the products from mini mart and super market are more expensive

than in general market. The other reason is unavailability. People feel that even

they buy the vegetable from the mini mart, they still have to buy some in the

general market, that why do they need to buy in such shop.

For organic vegetables, most of the organic vegetables are sold within Vientiane

Capital and only a small amount sold to other provinces. Almost the organic

vegetables are sold through direct marketing and sold by the farmers at their farms

or in the organic market. Currently, there is only one organic market in Vientiane

Capital which opens every Saturday morning (Figure 3). Most of the products

selling in organic market are mainly from farmers groups from different districts

within Vientiane Capital. The small weekly market sells organic fruits and

vegetables worth of approximately US$ 1,500-2,000 per week. The main

customers who shop in the weekend market are the better educated, more affluent

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urban consumers, particularly those concerned about good health issues and food

'safety', who concern about their health and the environment and are willing and

able to pay the higher prices charged for organic products.

An increasing number of consumers are showing a preference for organically

grown products. Significant domestically demand exists for organic products in

hotels, and restaurants. Tourism is a major economic driver in Lao PDR, with

more than 1 million tourist visit Lao PDR annually. Retail stores are also present

in large urban areas, especially well developed in Vientiane Capital, where small

high-end super markets and chains of mini markets are starting to emerge. In a

recent survey by Chittanavanh et al in 2005, consumers are interested to buy

organic products.

Figure 3: Organic Product market in Vientiane Capital, Lao PDR

So far, there is no official export of organic vegetables to other countries.

However, there is an increasing interest from private companies to export to other

countries. The regional markets in ASEAN and East Asia countries for organic

vegetables are in rapid growth in demand being driven by rising incomes and

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increased concern about health and the environment. Internationally, very large

organic markets exist in developed countries, although the very large distances

involved make it difficult to ship fresh vegetables to Europe or North America. In

some cases this could be overcome through processing (canning or freezing).

Developed countries in the East Asia region (Korea, Japan, Taiwan, Singapore

and China) are a more appropriate target market due to existing trade links and

proximity. Recent food contamination scares in China may also convince more

consumers to buy organic food, helping open the market to more imports.

In terms of policy, the Lao government has set policies to boost organic

production by assigning the Ministry of Agriculture and Forestry together with the

Ministry of Commerce and Industry to develop strategies for the export of organic

products including vegetable.

Conclusion Organic vegetables in Vientiane Capital are planted by individual farmers in

relatively small areas.

The organic vegetable production in Vientiane Capital is constraint by farmer’s

lack of technical experience, the unavailability of organic inputs, the

ineffectiveness of organic inputs in killing some kinds of strong insects, the slow

growth of organic vegetable resulting delay in supplying to market need, and the

low production of organic vegetable.

The economic returns to organic and inorganic vegetable production in the study

area vary among types of vegetable grown. For some types of vegetable, the

returns to organic vegetable growers are higher than inorganic vegetable. In

contrast, in some types of vegetables the returns to organic vegetable production

are lower than inorganic vegetable production. However, the difference in

economic returns is not large.

Even though the market for organic vegetable in Vietiane Capital, Lao PDR is still

in a very early stage of development, but the potential for continued growth is

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high. The weekly marketing system in Vientiane Capital has effectively

introduced organic products in Lao PDR, and can serve as a base for further

expansion. The regional markets in ASEAN and East Asia countries for organic

vegetables are in rapid growth. Moreover, the Lao government has a policy to

support and boost the organic production to supply to domestic needs and to

export to other countries.

Acknowledgements The research team would like to express the financial support for the survey

provided by Thai Research Funds (TRF). The conduct of the survey which forms

the basis of this report would not have been possible without the assistance and

cooperation of officials attached to the District Agriculture and Forestry Offices

(DAFOs) in the districts of Sikhotabong, Xaythany, Saysettha, and Hatsayfong.

The patience and cooperation of the vegetable growers who participated in the

household interviews is also acknowledged.

References Chittanavanh P., Sipaseuth K., and Roder W., 2005. Organic Production in Lao

PDR. The Promoting Organic Farming and Marketing in Laos (PROFIL)

Project.

DOA, 2007. Report on Organic Production. Department of Agriculture (DOA),

Ministry of Agriculture and Forestry, Lao PDR.

PROFIL, 2007. Country Case study of Lao PDR. Presented on Regional

Conference on Organic Agriculture in Asia, Bangkok, December 12-15, 2007.

The Promoting Organic Farming and Marketing in Laos (PROFIL) Project.

PROFIL, 2008. Presentation on Case study of Vientiane Organic Weekend. The

Promoting Organic Farming and Marketing in Laos (PROFIL) Project.

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PROFIL, 2009. Statistics on Planted Area of Organic Vegetable in Vientiane

Capital. The Promoting Organic Farming and Marketing in Laos (PROFIL)

Project.

Roder W., Chittanavanh P., Sipaseuth K., and Fernandez M., 2005. Inputs

Available for Organic Farming. The Promoting Organic Farming and

Marketing in Laos (PROFIL) Project.

Sipaseuth K. and W. Roder, 2004. Organic Agriculture Production and Marketing

in Lao PDR. Paper Presented, Seminar on Organic Farming for Sustainable

Agriculture in Taichung, Taiwan.