By David Hutt
Can Laos be self-sufficient? The short answer is yes, it can produce enough rice.
Per capita rice consumption is one of the highest in the world, at 206 kilograms (453 pounds) per person per year. The Lao Ministry of Agriculture and Forestry estimates that the country can produce up to 3.7 million tons of rice per year, which equates to about 510 kilograms (1,222 pounds) of rice per person.
But when it comes to other foods, things get a little more complicated.
A few weeks ago, Prime Minister Sonnexay Siphandon announced a new plan for self-sufficiency, a buzzword in Vientiane and most Southeast Asian capitals. It’s a very optimistic goal, but what else can the Lao government do?
Inflation remains Asia’s highest and the local currency, the kip, has fallen by up to half against the U.S. dollar due to a currency crisis that has plagued Laos since 2021. Much of the crisis is due to Laos’ reliance on imports, mainly fuel, and its near-depleted foreign exchange reserves.
Mr. Sonnexay would like to see Laos become financially and energy self-sufficient, an impossible prospect. His third pillar is food.
A joint report by the Food and Agriculture Organization of the United Nations (FAO) and the World Food Programme (WFP) warned that more than one million of the country’s 7.2 million people could become food insecure by 2022. And the situation could have been much worse.
Geography and Transportation
Since the economic crisis began in 2021, Laotians have responded in two ways: Many have migrated to Thailand, where jobs are plentiful and salaries are good, while others have returned to their family farms.
Deurbanization is not a long-term solution if Laos wants to industrialize and raise its per capita GDP above the current level of $2,600, and the policy proposals currently being debated in Vientiane face structural problems.
First, consider the geography: Most of Laos is mountainous and forested; there’s a reason it’s served as a buffer between Thailand, Burma, and Vietnam for centuries.
Laos has not been able to sustain a large population and remains the most sparsely populated country in Southeast Asia with 33 people per square kilometer (0.38 square miles). The next least densely populated country is Cambodia with about 98 people per square kilometer (0.38 square miles).
Only the southern peninsula and some northern provinces (mainly Xayaburi) are suitable for agriculture. Arable land in Laos is just 0.16 hectares (0.4 acres) per person, below the world average and well below that of Thailand, Cambodia, and Myanmar.
Geography and poor government management create the second problem: transportation. For centuries, farms were small and served only nearby areas because the terrain made travel difficult.
This remains the case today, with four out of five people still working in low-productivity, small-scale rice farming.
This has prevented large-scale farms from forming and has not generated enough capital for privately funded infrastructure like roads and rail. Moreover, because the Mekong runs along the border between Thailand and Laos, it has previously been impossible to transport food by water from inland to populated areas.
Sales to China
The Lao government has invested little in rural infrastructure in recent decades, and only 12 percent of the area under rice cultivation is irrigated, meaning the rest can only be grown once a year during the rainy season rather than the two harvests that would be possible with irrigation.
By 2019, it had become cheaper to import rice than to grow it domestically, mainly due to transportation costs. In 2022, Laos exported US$44 million worth of rice but imported US$29 million worth.
Laos needs more capital to help farmers expand, irrigate and diversify their operations, and it also needs more investment to build road and rail networks in the interior. But Laos is much less self-sufficient in capital than anything else. National debt now stands at about 130 percent of GDP.
The Lao government simply cannot afford to fund these projects on its own. Instead, Vientiane has had to rely on outside capital. Indeed, Laos has seen a huge influx of Chinese investment recently, which has created two big problems.
Chinese companies are investing in agricultural production in Laos to grow crops for export to China, where prices are higher and food insecurity is a more pressing issue.
Why would Chinese companies invest hundreds of millions of dollars in building roads in some of the least accessible provinces, such as Phongsaly, when they can lease some of Laos’ most fertile farmland in provinces such as Xayaburi and Vientiane, which are already well-connected to China?
Currently, the transportation network from Laos to China, including the Vientiane-Kunming Railway, is well developed, making it easier for farmers to sell their agricultural products in China than within Laos.
This export potential has led many farms, including some of the most productive in arable provinces, to switch to cash crops, primarily cassava. In January alone, Laos exported $98 million worth of cassava, making it its second-largest export after energy.
Increase in fertilizer imports
However, Laos’ soil is so poor that large amounts of chemical fertilizers and pesticides are required just to meet minimum production standards.
Until recently, Laos used very little chemical fertilizer. In 2010, Laos used less than one-tenth the amount of fertilizer per hectare of land as Thailand. Today, it is about half that. Laos now uses more fertilizer per hectare than Cambodia, which produces far more food, and produces about two to three times as much rice per year.
Phosphate fertilizer use per hectare of farmland rose from 2.4 kilograms in 2000 to about 3.2 kilograms in 2010. But it jumped to 18.4 kilograms in 2021, exceeding the use in Cambodia and Thailand. Nitrogen fertilizer use nearly doubled between 2017 and 2021.
Apart from potash, which Laos boasts some of the world’s largest reserves, it must import all other major chemical fertilisers.
If Laos wants to expand production of cash crops for export, as the government aims to do, it will have to increase its use of fertilizer.
This is bad for the environment, especially as international fertilizer markets become more disrupted in the future. Moreover, increasing our reliance on imported fertilizer does little to improve self-sufficiency.
Any policy that Vientiane thinks it can implement will run into this big problem: the agricultural sector is currently being encouraged to export, which will result in more cash crops at the expense of staple crops and more and more fertilizer imports.
A major concern about self-sufficiency is how dependent Laos will be on food imports, as the country’s ability to produce food is increasingly dependent on international markets. Without fertilizer, food production will plummet.
David Hutt is a research fellow at the Central European Institute of Asian Studies (CEIAS) and the Southeast Asia columnist for The Diplomat. He writes the newsletter “Watching Europe In Southeast Asia.” The views expressed here are his own and do not necessarily reflect the position of RFA.
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