Country Report Laos June 2009

The domestic economy: The north experiences a shortage of rice

A plague of rats and mice in the north of the country has led to serious food shortages in many villages, with the UN World Food Programme estimating that 85,000-140,000 people are food insecure as a result. The rodents have attacked rice, maize and other cash crops, with farmers reporting losses of 50-100% of their potential harvest. The plague is thought to be associated with the flowering of local bamboo species, an event that occurs only once every 30-40 years.

The Ministry of Industry and Commerce has proposed state stockpiling of rice in a bid to buy up excess crops and stabilise prices. The ministry has called on the central bank to provide K50bn to fund the project and to set the price of rice bought from the farmers. Proposals for a consortium of private traders to buy 400,000 tonnes of unsold rice from farmers in southern provinces last year have yet to be implemented, perhaps because farmers are holding out for prices that are significantly higher than the market rate. Low prices caused by falling demand persuaded many farmers to not bother with dry-season cropping this year. In addition, the lack of a certification system for Lao rice makes exporting difficult for traders.

Illegal exports of timber continue, with the Ministry of Agriculture and Forestry struggling to keep up with smugglers. Given that civil-service salaries are low, enforcement remains weak, although the authorities have been able to bring cases to court. A regional shortage of unprocessed timber has led to a rise in timber prices, increasing the attraction of wood smuggling. Official logging quotas allow for only 150,000 cubic metres of timber a year to be felled for construction purposes nationwide. In Vietnam it has been reported that a local company, Hoang Anh Gia Lai, has secured a quota for 300,000 cubic metres of wood (worth US$15m) from Laos over a three-year period, plus a large land concession for rubber plantations, in return for developing the athletes' village for the Southeast Asian Games, which are to be held in Laos in December.

© 2009 The Economist lntelligence Unit Ltd. All rights reserved
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