FallingRubberPricesinNorthernLaos:LocalResponsesandPolicyOptions

Clearedrubbertreesstackedasfirewood,LuangNamtha

ThoumthoneVongvisouk,PhDNationalUniversityofLaos,FacultyofForestry

MichaelDwyer,PhD

UniversityofBern,CentreforDevelopmentandEnvironment

PreparedforHelvetasLURASproject

8February2016

DRAFTFORREVIEW

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ExecutiveSummary

RubberpricesinnorthernLaoshavefallensignificantlyoverthelastfewyears,erodingmuchoftheenthusiasmdevelopedbybothfarmersandgovernmentofficialsinthe1990sandearly2000saboutrubberprovidingawayoutofpovertyforpooruplandfarmers.ThedropinpricespaidtoLaorubbergrowershasbeenprecipitous(Figure1);fromhighsaroundCNY14/kgoflumprubber(yangkorn)in2011,pricesfellbyhalf,thenbyhalfagain,reachingalowaroundCNY3.5/kgin2014;pricesduringourfieldworkwerejustslightlyhigher(~CNY4)andhavesincefallenevenlower(~CNY2.5).

ThisstudyexaminesresponsestothispricedropbyLaorubbergrowersandstateinstitutions.Italsoexaminesthereasonsthatpricesarewhattheyare,giventhatpricevolatilitywasidentifiedasariskduringthemid-2000s,andthatinatleastsomecases,stepsweretakentopreventcontractfarmersfromfallingrubberprices.Drawingon20daysoffieldworkinmid-2015infivedistrictsandsevenvillagesofLuangNamthaandOudomxaiprovinces,thisstudyisoneofthefirstpiecesofresearchtoconnectanearlierbodyofresearchontherubber-plantingboomofthe2000swiththemorerecentfallinprices.Itsfocusisonqualitativechangesthathavetaken–andarecurrentlytaking–placeinnorthernLaos;thesewerecapturedthrough33keyinformantinterviewswith68participantsattheprovincial,districtandvillagelevels,aswellasareviewofavailablescientificliterature,mediareportsandonlinesourcesandconsultationwithasmallgroupofexpertresearchers.

Rubberremainsanimportantsmallholdercropinthenorth,andthefallinpriceshasplacedaseriousstrainonrubber-basedlivelihoods.Thishaspromptedarangeofresponsesbybothstateinstitutionsandrubbergrowersandalike.

Responsesbygovernmentinstitutionsincludeformingprovincial-anddistrict-levelcommitteesonrubber;usingthesecommitteestobrokerrubbersalesatprices(slightly)higherthanthosebeingofferedbyrubber-purchasingcompanies(insomecasesusingthewaivingofcompanies’taxrequirementsasanincentive);andencouragingsmallholderstoworkhardand“stickitout”untilpricesriseagain,bothinformallyandviapolicies(e.g.abanonconversiontobananas)aimedat

Figure1.Globalversus“farm-gate”rubberprices,LuangNamtha,2000–2015

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Averageannualpurchasepriceforrubber,northernLaos(LuangNamthaProvincialInvestmentandCommerceOfficestagsgcs)SingaporeCommodityExchange,No.3SmokedRubberSheets(IndexMundi)

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preventingtheswitchtootherlanduses.Despitetheeffortexpendedbythesecommittees,theirimpactremainslimitedduetolowleverageovercompanies’abilitiestodictaterubberpricestoLaorubbergrowers.

Amongthemostimportantresponsetofallingrubberpricesbygovernmentofficialshasbeenadecisiontonotenforceminimum(“floor”)pricesthatwere,inatleastthreeofthedistrictsthatwestudied,describedtobewrittenintocompanycontracts.Thisisespeciallynotablegiventhelimitedleverageinthebrokeredrubbersalesmentionedabove,andithighlightsthefactthattheextremeexposuretoglobalpriceswingscurrentlybeingfacedbyLaorubbergrowersis,atleastinpart,theresultofapolicydecisionratherthanduetoalackofplanning.

Responsesbygrowersincludewaiting(nottapping)forpricestorise,continuingtotapbutrelyinglargelyoronlyonhouseholdlabor,takingcollectiveactiontoattract(slightly)higherprices,andtransactingtheirplantationsthroughsalesorleases,eithertowealthieractorswhomaintainplantationsasrubberorinvestorswhoconverttocurrentboomcropslikebananas.Thewidelydiscussedphenomenonoflandconversiontobananasisoccurringinmultipledistrictswhereweconductedfieldwork,butmaybelesscommonthanmanypeopleimagine;however,effortstobantheconversiontobananasprobablyselectsforunder-reportingbybothgrowersandstateofficialsalike.

Moreimportant,weargue,isthefactthatmanyrubberplantationsaregoingun-tappedbecausetheyhavebeensoldoutofthesmallholderarrangementsunderwhichtheybegan,andarenowin“large-holder”productionarrangementswhereprevalentwagelabororshare-croppingschemesmaketappingeconomicallyunviable.Insuchacontext,onlysmallholderswhousehouseholdlaborhaveaneconomicincentivetotap.Smallholderswhoarecontinuingtotapwouldliketoseepricesintherangeof50–100percentabovecurrentvalues,andexplaintheirchoicetocontinuetappingbynotingtheneedtorecouptheirearlierinvestmentsevenwhilemarketsarepoor.

WithChinesecompaniesbasicallydictatingpricestoLaogrowers,fallingglobaldemandhasbroughtmorelocalizedissuesofmarketpowerintoview.Manyofthekeyinformantswespoketo–bothrubbergrowersandstateofficials–notedtheimportanceofcontroloverrubberimportsintoChinabyalimitednumberofcompanies(probablyjustthree).ThepricesthatLaogrowersreceivearesubstantiallylowerthanwhatChinesegrowersreceive;whilegooddataisdifficulttoget,LaopricesseemtoberoughlyhalfwhatChinesegrowerscommand(althoughwithsubstantialvariation).Whilesomeofthisdifferencemaybeduetoquality,monopolycontroloverthebordertrade–andinparticularaccesstoquota-basedimportallowances–seemstobethemajorfactor.GrowersandgovernmentstaffinLaosthusnotetheneedtohavemorediscussionswithChineseauthoritiesaboutopeningtheborderrubbertrade,aswellaspursueotheroptionsforthesaleofLaorubber.

AlthoughrubberwaswidelyimaginedasastrategiccropfornorthernLaosduringmuchofthe2000s,effortstoscaleupthesuccessfulexperienceofBanHatNyaodidnotmaterialize.Thiswasdueinparttothedifficultiesoftranslatingthepublic-sector-basedcreditingarrangementBanHatNyaoreceivedintotheprivate-sectorcreditmodelofproduct-split-basedcontractfarming,andinpartduetothedropinrubberpricesthathasoccurredjustaslargeareasofrubberplantationsarecomingtomaturity.BanHatNyao,incontrast,haditsplantationsmaturejustatthebeginningofalongpriceincrease.

RubbercanstillbecomeastrategicsmallholdercropinlinewiththevisionoftheagriculturesectorthatisoftenputforwardbyLaoministerialofficials,buttheconsolidationofrubberholdingsthat

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hasoccurredinthelastfewyearsmustberecognizedandpossiblyaddressed.Moreover,ifrubberistobecomeastrategiccommodity,itneedstobeactivelytreatedassuch;thismeansregulatingthemarketratherthanlettingrubberbehavelikeaclassic“boomcrop”(i.e.followinggloballydictatedcyclesofboomandbust).Experienceintheregionsuggeststhepossibilityofprotectingsmallholdersfromtheswingsofglobalmarketsandtheopportunisticbehavioroftheprivatesector,forexamplethroughregulatingpricesviaamixofcontractingandstate-basedpricesupports(seedetailsbelow),andpursuingamixofdiplomaticandlocalefforts.Suchanapproachwouldneedtorecognizethatcurrentconditionsarenotsimplytheresultofglobalmarketforces,butlocalfactorsaswell,andaddressthelatterthroughcoordinatedinstitutionalandpolicyefforts.

Sucheffortsmightinclude:(1)enforcingcontractedfloorpriceswheretheyalreadyexist,requiringreasonablefloorpricesinnewcontracts,andinvestigatinglegalpossibilitiesforrenegotiatingexistingcontractstoincludereasonablefloorpricesandotherprotections;(2)creatingastatepricesupport(subsidy)mechanismthatwouldpurchaserubberfromfarmersatahigherandmorestableguaranteedprice;(3)providingother(e.g.land-based)subsidiestopoorerand/orsmaller-scalerubbergrowers,soastotargetstatesupporttogrowerswhoneeditmost;(4)changinggovernmentpoliciestofurtherincentivizevalue-addingwithinLaos,soastotakepowerawayfromactorswhocontroltheexportmarket;and(5)undertakingdiplomaticeffortstoplacerubber(bothprocessedandunprocessed)onthelistoffreelyexportablecommodities.

Currentgovernmenteffortsfocuslargelyongettingfarmerstoself-organizeinordertoenhancetheircollectivebargainingpower,andusingnegativepolicyinstrumentslikeconversionbanstoinfluencelandusedecisions.Thetoolssuggestedabovearebasedonamoreactiveapproachtoregulation.Thiswillbemoreexpensivetoimplement–simplyput,regulationcostsmoney–butgiventhelimitstocurrentapproaches,theyarelikelytobemoreeffectiveathelpingfarmersinboththeshortandlongterm.

Ourworkalsoidentifiedanumberofareasforadditionalresearch.Theseinclude(1)quantifyingthedistributionanddynamicsofrubberholdings,giventhesubstantialbutunmeasuredshiftfromsmallholdingto“larger-holding”inrecentyears;(2)studyingthestrategicdimensionsofChineseagribusinesssothatLaofarmersarebetterabletobenefitfromtransnationalcommoditychains(thisincludetheneedformuchbetterdataonrubberpricesthaniscurrentlyavailable);(3)studyingthehousehold-levelandsocialimplicationsofsmallholders’continuingtotaptheirrubberusinghouseholdlaboratverylowprices;and(4)understandingtheroletheindebtedness–includingbutnotlimitedtodebtaccumulatedfromsmallholderplantationestablishment–playsincurrentdecisionsaboutlanduse,landconversionandlandtransactions.

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CONTENTSExecutiveSummary.................................................................................................................................iAbbreviations.........................................................................................................................................vAcknowledgments..................................................................................................................................v1.Introduction.......................................................................................................................................1

1.1.Aftertheboom............................................................................................................................11.2.Background:therubberlandscapeinnorthernLaos..................................................................21.3.Researchquestions.....................................................................................................................7

2.Methodology......................................................................................................................................72.1.Approach:breadthoverdepth....................................................................................................72.2.Methods......................................................................................................................................92.3.Challengesandlimitations........................................................................................................10

3.Results..............................................................................................................................................113.1.Governmentresponses.............................................................................................................123.2.Rubbergrowers’responses.......................................................................................................183.3.Thepriceofrubber....................................................................................................................303.4.Whatshouldtherubberpricebe?............................................................................................34

4.Discussion.........................................................................................................................................344.1.Rubber:Boomcroporstrategiccommodity?...........................................................................344.2.Regulatoryoptions:Beyondthe“on-off”approach.................................................................364.3.Additionalresearchneeds.........................................................................................................40

5.Summaryofrecommendations........................................................................................................42References...........................................................................................................................................43AnnexI.Reportedrubberareas...........................................................................................................45AnnexII.Villagesvisited.......................................................................................................................46AnnexIII.Stakeholdersinterviewed.....................................................................................................47AnnexIV.Discussionquestionsforkeyinformantinterviews.............................................................48AnnexV.Rubberpricesreportedinfieldworkinterviews...................................................................51AnnexVI.Normativestatementsaboutrubberprice..........................................................................52

TABLESTable1.ReportedconversionfromrubbertoothercropsintwoLuangNamthadistricts.................26

FIGURESFigure1.Globalversus“farm-gate”rubberprices,LuangNamtha,2000–2015....................................iFigure2.Studyarea...............................................................................................................................8Figure3.Samplegovernmentinterview,Singdistrict...........................................................................9Figure4.SamplecalculationofCommittee’srecommendedrubberprice.........................................13Figure5.Bananaplantation,Singdistrict............................................................................................15Figure6.Reportedfractionsofun-tappedrubber...............................................................................19Figure7.Pricethresholdsatwhichtappingbehaviorchanges............................................................22Figure8.Rubbersaletointermediarycompany,LuangPrabangProvince.........................................29Figure9.PostedpriceattheYunnanRubberCo.factoryinLuangNamtha,August2015..................32Figure10.Farm-gatepricesinnorthernLaosversusXishuangbanna,Yunnan....................................33

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Abbreviations

CNY ChineseYuan(Renminbi)DAFO DistrictAgricultureandForestryOfficeDICO DistrictIndustryandCommerceOfficeLAK LaoKipMAF MinistryofAgricultureandForestryNAFRI NationalAgricultureandForestryResearchInstitutePAFO ProvincialAgriculturalandForestryOfficePDPI ProvincialDepartmentofPlanningandInvestmentPICO ProvincialIndustryandCommerceOfficeAcknowledgments

Wethankthefollowingindividualsandinstitutionsfortheirgenerousassistanceincreatingtheresearchpresentedbelow:LaoMinistryofAgricultureandForestry,DepartmentofAgriculturalExtensionandCooperatives;

Mr.SomxaySisanonh,DeputyDirectorGeneralHelvetasLaos,LaoUplandRuralAdvisoryService(LURAS)Project;Mr.AndrewBartlett,TeamLeader

andMs.KhamlaInmieugxay,OfficeManagerRepresentativesof:

• ThevillagesofBanHatNyao,KoNoi,Mokpalai,NamNgeun,Oudomsin,PhiyerandSopSim• LuangNamthaPAFO,PICO,PDPI• NamthaDAFO,DICO• SingDAFO,DICO,DDPI,DFO• ViengphoukhaDAFO,DICO,DFO• OudomxaiPAFO,PICO,PDPI,PFO• XaiDAFO,DICO,DDPI• HounDAFO,DICO,DDPI• Sino-LaoRubberCompany• YunnanRubberCompany

NationalUniversityofLaos,FacultyofForestrySciences;Mr.ChimmyBounlom,researchassistantMelanieCanet,WeiyiShi,DietrichSchmidt-VogtPhotocredits(includingcover):ThoumthoneVongvisouk

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1.Introduction

1.1.AftertheboomItseemslikeanotherera.Tenyearsago,passageslikethefollowingappearedregularlyinLaonewspapers:“RubberplantationsinLuangNamthaprovinceareincreasingrapidly,withgrowerskeentogetashareofthelucrativerubberexportmarket.Growingrubbertreesisseenasanexcellentinvestmentbecausethereisapermanentmarketforrubber,especiallyinChina,whichsharesaborderwiththeprovince”(VT2005b).Thisoptimismwastypicalofthemid-2000s,whenmanyingovernmentandtheprivatesectorbelievedthatChina’sdemandforrubberwouldbesustainedindefinitely,andthatLaos’snorthernuplandswerehighlysuitable–notjustecologicallybutalsosocio-economically–tobethenextfrontierfortheexpansionoftheChineserubbersector.ChineserubberintheLaouplands,inshort,waswidelyseenduringtheboomyearsofthemid-2000s(Altonetal.2005;NAFRI2006;Shi2008)asaninvestmentopportunitythatwastoogoodtobemissed,forbothpoorfarmersandwell-offinvestorsalike.

Inthelastfewyears,muchofthisoptimismhasdisappearedasrubberpriceshavefallensteeply,bothgloballyandthroughoutnorthernLaosinparticular(VT2013,2014a,2015a).Thedrophasbeenabigone:fromhighsaroundCNY14/kgin2009-2011,pricespaidtoLaorubbergrowersfellbyhalf,andthenbyhalfagain,toalowin2014aroundCNY3.5/kg;thisyear,pricesroseslightlytoaroundCNY4/kg(atthetimeoffieldwork)andhavesincefallenevenlower(detailsbelow).1Thepricecrashhasputaseriousstrainonrubber-basedlivelihoods,promptingarangeofresponsesbybothgrowersandgovernmentofficials.Theseresponses,examinedbelow,areconsistentwithrubberbeingaclassic“boomcrop”whosepricerisesandfallswiththeunpredictablewhimsofglobalmarkets;thiscontrastssignificantlywiththemoreregulatedapproachtomarketsthatoftenaccompaniescommoditiesof“strategic”importance,andthusraisesimportantpolicyquestions.Butthepricecrashhasalsohighlightedanadditionalfactorwhosecausesareunrelated,yetwhichhasmajorimplicationsforpolicydiscussionsabouthowtoaddressthefallinrubberprices.Thisistheconsolidationofrubberplantationholdingsbywealthiergrowersandtown-basedelites,aprocessthatbeganafewyearsbeforethepricecrash,andthathasactuallyslowedduringthelastfewyears.Butasweexplainbelow,theconsolidationofplantationholdings–clearlyevidentinthedifferenceinresponsestofallingpricesbetweenhousehold-scaleproductionandlargerplantations–meansthatrubberisnotsimplya“smallholder”crop,asisoftenimagined.Thishasimportantimplicationsforpolicyeffortstomakerubberthestrategiccrop,practicallyspeaking,thatitisoftenhopedtobe.

Canthenegativeeffectsoffallingpricesbemitigated,andifso,how?Doallgrowersdemandthesameprotectionfromtheuncertainfutureofthemarket,ordo“true”smallholdersdeservepriorityoverlargergrowers?Canrubberbecomethe“strategic”cropthatwasenvisionedduringtheboomdecadeofthe2000s–alleviatingpoverty,replacingopium,preservingforest–orisitdestinedtofollowtheupsanddownsoftheglobaleconomy?ThisstudyprovidesanimportantcontributiontotheseandrelateddiscussionsbydescribingresponsestofallingrubberpricesbybothgrowersandgovernmentofficialsinnorthernLaos(seespecificresearchquestionsinSection1.3).Indoingso,ourworkhelpsconnectrecentreportsaboutlandsales,landconversion(e.g.tobananas),andlocalgovernmenteffortstomanagetherubberprice(VT2014a–f)withanearliergenerationofresearchontheestablishmentofrubberplantations(Altonetal.2005;Diana2006;Shi2008;Manivongand1Inthisstudy,weusethecurrenciesreportedinourinterviewswheneverpossible.BecausenorthernLaos’srubbermarketiscloselylinkedtoChina’srubbersector,pricesareoftenreportedinYuan/Renminbi(CNY).

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Cramb2008;Cohen2008;Kenney-Lazar2009;Thongmanivongetal.2009;Dwyer2011;Sturgeonetal.2013,amongothers).Examiningmultiplelocations,itexpandsthediscussionbeyondLuangNamtha(theusualfocus),andthusallowstherangeofexperienceswithbothrecentresponsesandearlierplantationestablishmenttobeconsideredtogether.Thisallowsrelationshipbetweenthetimingofrubber’smaturityanditssubsequentbehaviorinthemarkettobebetterunderstood;asexplainedbelow,thishasspecialimportanceinthecontextofpolicyefforts,bothpastandpresent,tomakerubberamorestrategiccropthroughthecreationofamorestablepriceenvironment.

Ourreportisorganizedasfollows.TheremainderoftheSection1providesessentialbackgroundontherubberlandscapeinnorthernLaos(Section1.2),andthenusesthistointroducetheresearchquestionsmoreprecisely(Section1.3).Section2providesadditionaldetailsaboutourresearchmethodsandapproach.Section3thenpresentsourresults,explainingfirsthowgovernmentinstitutionsandrubberproducershaverespondedtotherecentdropinprices,andthenexaminingthequalitativeandquantitativedimensionsofrubberpricesingreaterdetail.InSection4,wediscusstheseresultsintermsofoverallthemeofregulation:wecontrastrubber’scurrent“boomcrop”behaviorwiththeidealofastrategiccommoditythatismoretightlyregulatedandthusmoresuitableforlarge-scalecultivationbyaclassofsmallholderproducers;intheabsenceofsuchregulation,weseethecurrentconcentrationofrubberinthehandsoflargerproducersaslikelytocontinue.WeconcludeinSection5bysummarizingtherecommendationsthatemergeinSection4.

1.2.Background:therubberlandscapeinnorthernLaosRubberisplantedextensivelyinnorthernLaos,andisofficiallyrecognizedasaprioritycommercialcropinbothLuangNamthaandOudomxaiprovinces.2Whileitsreturnsfromexporttaxrevenuesareimpressive(VT2014a),detailsaboutthedistributionofplantationareasarehardertocomeby.

Duringourfieldwork,wecollectedarangeofstatisticsthat,whentakentogether,suggestthat(1)theareaunderrubberisintherangeof60,000hainLuangNamthaandOudomxai,dividedroughlyequallybetweenthetwoprovinces;(2)thattheseplantationsaremostlyindependentlyownedandcontract-farming-basedoperations(asopposedtotheconcessionmodel,whichpredominatesinthesouth);andthat(3)asubstantialbutunknownportionofthisrubber,especiallyinOudomxai,iseitherrecentlymature(possibletotap)orwillbereadyfortappingverysoon.

SomeofthesestatisticsarepresentedinAnnexI,buttheseshouldbetakenwithextremecaution.Asdetailedbelow,inbothLuangNamthaandOudomxai,therehasbeensubstantialmovementbothbetweenandwithincategories.Thismeansthat(amongotherthings)thatfiguresforindependentholdingsvs.contractfarming,aswellasforsmallholdingsvs.larger-holdings,arelargelyunknown;thatdistinctionbetweendifferenttypesofcontractfarming(so-called“2plus3”and“1plus4”)isequallydifficulttoquantifywithoutfurtherinvestigation;that,aselaboratedbelow,independentlyownedrubbershouldnotbeequatedwithsmallholding;andthat,giventheboominrubberplantingin2006-2008(i.e.7yearsago),statisticsarelikelytooverestimatetheamountofimmaturerubber.Despitethisuncertainty,certaincorecharacteristics–rubber’sprevalenceinthelandscapeofnorthernLaos;itsconcentrationinbusinessmodelsotherthanconcessions;andthedynamismbothbetweenandwithinvariousnon-concessionbusinessmodels–arewellestablished.Thesearetheresultofaseriesofprocessessummarizedintheremainderofthissection.

2Interviews,LuangNamthaandOudomxaiprovinces(interviews2and14,respectively)

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Thesmallholder(HatNyao)model

GovernmenteffortstosupportthedevelopmentofarubbersectorhavebeenverydifferentinthenorthofLaosthantheyhavebeenincentralandsouthernpartsofthecountry.Unlikethesouth,whereaconcession-basedmodelhasunderpinnedtheestablishmentand(substantial)growthoftherubbersector(Baird2010,2012;Laungaramsri2012;Schoenwegeretal.2012;Kenney-Lazar2013),northernLaos’srubbersectorhasbeenbasedonasmallholdermodel.Thisisnottosaythatall,orevenmost,oftherubberthathasbeenplantedandcultivatedtherehasbeenbysmallholders;asdescribedbelow,ithasnot,andespeciallytoday,itisnot.ButtheidealofsmallholderproductionhasbeeninstrumentalinshapingthewaythatthenorthernLaorubbersectorhasemerged.

Asothershavenoted(e.g.Altonetal.2005;Shi2008,2015)andourinterviewsconfirmed,thisidealislargelymodeledonthesuccessofBanHatNyao.BanHatNyaoisaHmongvillagelocatedjustnorthoftheprovincialcapitalofLuangNamtha(seeFigure2)thatalmostsingle-handedlyputrubberonthemapasaprioritycropforprovincialpovertyalleviationandshiftingcultivationstabilizationefforts.ThestoryofBanHatNyaoiswidelyknown,andhasbecomeastandardpartofthenarrativeofrubberdevelopmentinnorthernLaos.Weheardmanydifferentversions,butthe“HatNyaostory”istoldsooftenthatithasbecomerelativelystandardized,focusingonthemesofpovertyalleviation,opiumreplacement,shiftingcultivation,proximitytoChina,andlocalinitiative:

Rubberplantingbeganin1994inBanHatNyao.Rubberwasinitiallyplantedtoreplaceopiumcultivation.AstheHmonghavetraditionallycultivatedopiumforhouseholdincome,andsomeofthevillagersinBanHatNyaohadmigratedfromChina,theynoticedthatrubberisalsocultivatedforlatex,whichsimilartoopium.Sinceprovincialanddistrictauthoritiesintroducedthepolicyoneliminationofopiumcultivationandreducingshiftingcultivation,peopleinBanHatNyaodiscussedamongthemselvesanddecidedthatrubberwouldbeagoodpotentialforgrowthinthisarea,asthevillageisclosetoChinaandrubbergrowswellthere.Themainaimsofrubberplantationarethustoimplementthegovernmentpoliciesonopiumelimination,reducingshiftingcultivationandpoverty[alleviation].3

BanHatNyao’sexpansionintoapolicymodelwasduetoitslocationanditsconnections.Whileitwasnotaloneinplantingrubberinthemid-1990s–anumberofvillagesinSingDistrictdidthisaswell(Diana2006;Shi2008;Sturgeon2010)–thevillagewaslocatedintheinterioroftheprovinceandwasclosetotheprovincialcapital.Italsohadanimportantpatronintheformervice-governorofLuangNamthaprovinceinthemid-1990s,andwhohelpedthevillagesecureaninterest-freeloanthathelpedfinancetheestablishmentofthevillage’srubberplantations(Altonetal.2005).Whenthevillagebegantotaptheirrubbertreesin2003,afterafewyearsitssuccesshadbecomewidelyknown,anditdidnottakelongforprovincialauthoritiestotrytoreplicatetheHadNyaomodelelsewhere.

Scalingup,withatwist

ThesuccessofBanHatNyao,incombinationwithanearlynegativeexperiencewiththeconcessionmodel(justsouthoftheLuangNamthaprovincialcapital,inBanSopDuut)helpedestablishcontractfarmingasthepreferredalternativeforcreatingthenecessaryconditionsforrubberdevelopmentinareaswithpreviouslittleexperienceorassets.AlthoughtheBanHatNyaostorytendstoemphasizecommunitycohesionandself-initiative,akeypartofthevillage’ssuccessinestablishingplantations

3Governmentinterview,LuangNamthaprovince

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wasitsabilitytosecureasubstantialamountofcreditatlowinterest;asAltonetal.note,“Allproducinghouseholdsreceivedsubsidizedloansfromtheprovinceforthecostofseedlingsandsomefencing.EachproducinghouseholdreceivedbetweenLAK1-3millionincredit”(2005:51).Scalingupthissubstantialoutlayofcreditisnotastraightforwardprocess,giventheexpensesinvolved,andthedecisiontoembracecontractfarmingasamodelthroughwhichtoup-scalethesmallholderrubbermodelmeantthatquestionofcreditwaspushedtotheforeground.

Mostcontractfarmingprojectsaredistinguishedonthebasisofthepercentagesplitbetweenthecompanyandthegrower–thissplitreferstothepercentageofeitherraw(lump)rubberor,aselaboratedbelow,rubbertreesthatcompaniesreceiveinexchangeforprovidingcreditupfrontintheformofrubberseedlings,toolsandanythingelsethatisneededtoestablishaplantation.Thesubstantialfractionsallocatedtocompanies–evenatthelowend,30percentofarubberharvestovertwotothreedecades–suggestsjusthowmuchcapitalwasrequired(orwasatleastbeingdebated).Duringthe2004-2006,justafterBanHatNyao’sfirstsuccessfulrubberharvesthadledtobilateral(Lao-Chinese)discussionsaboutscalinguprubberdevelopmentcooperation,itisnoaccidentthatproposalsfocusedon(andarguedabout)thevalueofvariousinputsintoarubberplantation(labor,seedlings,tools):thesewererepresentationsofwhatdifferent“sides”broughttothearrangement,andtheyinturnshapedthesplitsthatcompaniesofferedtocontractors(Dwyer2011).Thesesplitsvaried,andinatleastsomelocationschangedovertimeascompaniestriedtoenticemorefarmerstoparticipate.4

AsVongkhamhoretal.(2007)noted,thetermsonofferbyChinesecompaniesinthemid-2000sfailedtoattractthenumberoffarmersoriginallyintended.Manyfarmerswereeithernotinterestedingoingintotherubberbusiness,oriftheywere,theypreferredtoorganizetheirowncreditforinputsratherthangiveupsuchasubstantialpercentageoftheircropinperpetuity.(Companiesweregenerallyofferingfarmersbetween50and70percentoftheproduct,meaningthatfarmerswhojoinedtheseprojectswouldhavebeentrading30to50percentoftheirharvestforinputs.)ShifoundsomethingsimilarinLuangNamtha,andindoingsodocumentedoneofthemostimportantshiftsintheplantationestablishmentprocess:thechangefromrubber-basedsplitstotree-basedsplits(Shi2008).Oneofthemainreasonthatfarmersgaveforrefusingtoparticipateinthenewcontractfarmingprojectswasthattheycouldnotaffordwhatscholarscall“thelongpay”(Mann1980),inthiscasetheseven-yearwaitbetweeninvestment(oflaborandcapital)andharvest.Rubbercompanies,sometimesincollaborationwithprovincialofficials(Dwyer2013),thusmadeanadjustment:theyagreedtopayvillagersdailywagesforplantingandweedingrubber,effectivelytradingthecontractfarmingrelationshipforawagelaborarrangement.Thisextracostwasreflectedinthesplitsonoffer:underthesenewarrangements,companiestookatleast50percent,andinsomecasesupto70percent(Shi2008;Dwyer2013).Buttheyalsochangedtheobjectofvalue:forreasonsthatremainunclear,ratherthansplittingrubberitself(inlumpform)atthetimeofharvest,thisshiftalsobroughtanagreementtosplittheplantationitself.Notingthe“concession-like”natureofthesenewrubberprojects,Shi(2008)implicitlyquestionedtheextenttowhichtheydeservedthelabelofcontractfarming,sinceinlargeparttheydidnotinvolvecompaniesworkingwithfarmersontheirownland,butratherthetransformationoffarmers’landinto(mostly)largerplantations.

Thiswasconductedviaapolicylanguagethat,whileperhapsnotdeliberately,hidthefundamentalshiftfromrubberdivisiontoland(tree)division.The“2plus3”policymodelwasdevelopedinlate

4Interviews,LuangNamthaandOudomxaiprovinces

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2005asawaytoformalizetheagreementbetweenLuangNamtha,OudomxaiandBokeoprovincestopursuerubberdevelopmentcooperationwithChinesecompaniesoutsideofaconcessionmodel(Vongkhamhor2007).Thephrasereferredtofivefactorsofproduction,ofwhichfarmerswouldprovidetwo(landandlabor)andcompaniesthree(capital,inputsandguaranteedaccesstomarkets);“2plus3”wasthusessentiallyaclassiccontractfarmingmodel(LittleandWatts1994).Whentheadjustmentabovetookplace–roughly2006-2008,andinvolvingmultiplecompaniesinLuangNamthaandOudomxai–the“2plus3”terminologywaschangedto“1plus4”(Shi2008).Thisacknowledgedthefactthatfarmerswerenolongerprovidingthelaborinput,sincetheywerebeingpaidwages.Whatithid,however,wasthattheonethingtheywere“providing”–land–wasbeingprovidedinaverydifferentway.

Consolidationofplantations

Underthe“1plus4”model,villagersweresupposedtoreceiveafractionoftheplantationholdings,usuallyaround30percent,andusuallyayearortwoafterplanting,whenitwouldbeclearthatthetreeshadsurvivedthefirstfewgrowingseasons(whenfrostriskishighest),butwhentheircarestilldemandsafewyearsofworkpriortomaturity(Shi2008,Dwyer2011).Fewresearchershavestudiedwhatactuallyhappenedafterthefact–mostoftheresearchon“1plus4”tookplacebeforeplantationswereactuallydivided(e.g.Shi2008;Dwyer2011).Inherrecentrevisit,WeiyiShibecameoneofthefirstresearcherstoreportonwhatactuallytranspired;shefoundthatthepartitionstendedtobeshort-lived:“Afterthesplit,itiscommonforvillagerstoselltheirsharesoftrees…[thisoften]occurredsoonafterthesplitduetovillagersnotbeingabletocarefortheirsharesoftrees.Laborinputwasoneofthebiggestproblemsin2008,andtheshortageisevenmoreobvioustoday”(2015:1-2,emphasisadded).Ourinterviewsdescribedsimilarlaborshortages,asinthisaccountfromLuangNamtha:

Inthisprovince,wehavecontractfarmingforrubberplantations,whichinclude“2plus3”and“1plus4”schemes.However,manyhouseholdsandinvestmentcompanieshaveturnedthe“2plus3”schemesinto“1plus4”becauselocalpeoplecannotaffordtomaintaintheirrubberplantations,andtheyoftenasktherubberinvestortopaythelaborcostwhentheyworkontheirrubberplantation.5

Moreover,ourresearchalsosupportsShi’sfindingthatvillagerstendedtoselltheirrubbertreesevenbeforethepricebegantofall.AsonegovernmentofficialinOudomxaiexplained:

Sellingrubberplantationsisnormalinthisprovince–itdependsonhavingbuyers.Thegrowers[whosell]aremainlypoorhouseholdsinvillages.Buyersaremainlybusinessmenfromtheprovince[capital]aswellasChineseinvestors.Pricesofrubberplantationdependonthelocationandageofrubbertreesintheplantation.However,duringthefallingrubberprices,noonewantstobuyrubberplantations.6

AsweelaboratebelowinSection3.2,theeffectsofthisearliermarketforplantations,coupledwithdecreasingdemandaspriceshavefallen,mayhelpexplaintheproliferationofotherleased-basedlandtransactionsinvolvingrubberplantationsinthelastfewyears.Incontrasttothebelief,heldbyanumberofthegovernmentpeoplethatwespoketo,thatlandleasestooutsideentrepreneursareduetolazinessandgreed,wesuggestadifferentpossibility.Specifically,wesuspectthatthecombinationofearlierplantationconsolidationandthemorerecentfallinpricesmayhavecreated

5Governmentinterview,LuangNamtha(Interview3)6Governmentinterview,Oudomxai(Interview14)

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alevelofindebtednessamonglargerplantationholdersthathasnecessitatedeithersellingtheirplantationsor,whenthiswasnotpossible,leasingthelandforotherhigh-valuepurposessuchasbananas.Giventhispossibility,itisessentialtoconsidertherecentfallinpricesinthecontextofearlierprocessesofplantationdevelopment,exploitationandconsolidation.

Themodelthatdidn’tscale–atleastnotyet

Today’slandscapeofrubberholdingsishighlyuneven.Yes,therearestillalotofsmallholders,butincreasinglyrubberisownedbylargergrowersaswell.(Thisisdifficulttoquantify,butsomeproxyindicatorsandestimatesarepresentedinPart3.)Partlythisisaresultofhowtheup-scalingeffortdescribedaboveplayedout,aseffortstoreplicatetheHatNyaomodelwithusingcontractfarmingdevolvedintoamixof“concession-like”companyholdingsand(later)economicallyunstablevillageplantations.ButthereisalsoanotherdimensionthatisoftenleftoutofthestandardstoryofwhatworkedforBanHatNyao.Thismissingpieceisthe(relatively)stablepriceenvironmentthatBanHatNyaohadduringitskeyearlyyears;understandingthisissueoftimingisessentialifrubberistobecomeawidespreadsmallholdercropinthefuture.

Putsimply,BanHatNyaogotlucky.Rubberpriceswerelowwhenthevillagebegantappingin2003,buttheywereatthebeginningofalongandsteadyrisethatlasteduntiltheglobalfinancialcrisisof2008(seedetailsinSection3).Duringthisperiod,therewerecertainlyupsanddowns–asoneresidentputitinourinterview,“pricesgoupanddownallthetime”–buttheoveralltrendwasupward.Thecommunitycohesion,hardworktrackingdownbuyers(sometimeseveninChina),andcollectivebargainingpowerthatareoftenemphasizedintheHatNyaosuccessstoryarenodoubtimportantaswell.Butthetimingofitsearlyyears,whenhouseholdscommittedtorubberasabasisoflivelihood,gettingtoknowtherhythmsofthecropbothbiologicallyandeconomically,isalsoakeypieceofitssuccess.Incontrast,manyoftherubberplantationsinLuangNamthaandespeciallyOudomxaihavecomeintomaturityjustastherubberpricehascrashed.Aselaboratedinthenextsection,thiscannotbuthavehadanimpactonthewaynewgrowershaverespondedtofallingprices.

Despitetheeconomicuncertainty,governmentofficialscontinuetoconsiderrubbertobeawayoutofpovertyforindustriousuplandcommunities.Asonelocalofficialweinterviewedputit,“Rubberis[still]thefirstcommercialcropconsideredforsocio-economicdevelopmentin[our]district.Themainreasonsforencouraginglocalpeopletoestablishrubberplantationaretoreplacerubberintotoformeropiumcultivationarea,reduceshiftingcultivationandencouragelocalpeopletopracticepermanentagriculture,andtoreduceruralpeople’spoverty.”Asanotherlocalofficialputit,“Itdoesnotmatterifyouarerichorpoor;whoeverhasrubberplantationsandpatienceinworkingthemwillgetincome.”7

Instatementslikethese,onehearsstrongechoesoftheBanHatNyaomodel–opiumreplacement,shiftingcultivationstabilization,povertyalleviation,andafocusonhardworkandself-initiativeasapathtoabetterlife.Butasexplainedabove,therealityismorecomplex.TheHatNyaomodelhasnotscaledup,andinsteadtheeconomiclandscapeofrubberholdersisaheterogeneousandhard-to-quantifymixofsmallholdersandwhatmightbecalled“larger-holders.”Thefactthatthepricedropofthelastfewyearshasoccurredinthiscontext,ratherthanthemoresimplifiedlandscapeofsmallholdersoftenimagined,makestheresponsesmorecomplex(aselaboratedinSection3)and

7Governmentinterviews,LuangNamtha(Interviews4and3,respectively)

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thepolicyquestionsharder(Section4).Insuchacontext,thequestionoflocalresponsesandpolicyoptionscannowbeposedabitmorespecifically.

1.3.ResearchquestionsThisbackgroundleadsustoaddsomeimportantdetailstotheresearchquestionsposedabove:

1. Weneedtoasknotonlywhattheresponsestofallingrubberpriceshavebeen,butalsowhatistherelationshipbetweenvariousresponses(bybothgrowersandofficials)andtherangeofproductionarrangementsthatmakethenorthernLaorubbersectormorecomplicatedthansimplyalandscapeofsmallholders.

2. Wealsoneedtoaskwhattheimplicationsareoftheanswerstothefirsttwoquestionsformakingrubberastrategiccropforsmallholders?Rubberexemplifiesthechallengeofstatemanagementofstrategiccommoditiesmoregenerally:thesmallholderagriculturesectorisgenerallyacknowledgedasbeingstrategicallyimportant(Phouangparisak2014;Bounthavy2014),butwhatdoesthismeanatthepolicylevelwhenproductionofthecropisdividedamongtrue(poorer,morevulnerable,oftenupland)smallholdersandwealthierindividualsandcompanies(termed“large-holders”here)whomaynotneedthestate’seconomicsupport?

3. Andthird,inordertounderstandthefullscopeofthesecondquestion,weneedtounderstandwherethepricesthatLaorubbergrowersreceiveactuallycomefrom.Itisnowacommon-senseresponsetosaythatrubberpricescomefromtheglobalmarket,andspecificallyfromtheslowdownofglobaldemand.Butevenasweheardthisoverandover,wealsoheardfrustrationswiththis,assome(especiallyproducers)wereinclinedtoblameChinesetradersandmiddle-men–localconditionsratherthanglobalones–forthepricestheywereoffered.How,then,arepricesactuallymade?

Section3thusexaminesnotonlytheresponsestofallingrubberpricesbygrowersandlocalofficials,takingintoaccounttheincreasinglyimportantdistinctionbetweenhouseholdandoutsidelabor.Italsolooksatwherepricescomefrom,andindoingsohelpshighlightawiderrangeofpolicyoptionsthantheonescurrentlybeingpursued(increasedfarmerorganizationsandofficialbansonlandconversion).AsSection4argues,makingrubberworkasasmallholdercropmayrequireamorecompletesetofpolicy“levers”,andwhilethesemaybemoreexpensivetoimplement,theyarelikelytobemoreeffectiveinboththeshortandlongerterms.

2.Methodology

2.1.Approach:breadthoverdepthInordertomakethebestuseoftheresourcesavailable,weoptedforaresearchdesignthatwouldallowusto(1)visitareasthathavebeendiscussedinrecentmediaarticlesandresearchonlocalstareandfarmerresponsestofallingprices(VientianeTimes2015a–f;Shi2015),and(2)alsoallowustolookexplicitlyatarangeofcircumstancesbothclosetoandfarfromtheChineseborder,andacrossarangeofyearsofplantationestablishment.WeselectedsevenvillagesinfivedistrictsofLuangNamthaandOudomxaitofocusourfieldworkon(seeFigure2andAnnexIIfordetails).WechoseLuangNamthaandOudomxaitocoverearlierandlaterplantationestablishment,respectively

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(althoughthereisclearlyvariationwithineachprovinceaswell),andwechosedistrictsthat(a)coveredthespectrumfromclosetotheChinesebordertofartherawayfromit;(b)thatwereeitherclosetoprovincialcapitals(Namtha,Xai)orfartherafieldwithintheirprovinces(Sing,Viengphoukha,Houn);and(c)thatincludedarangeofgrowingarrangements,includingindependentsmallholdingandformalizedcontractfarming.

Withinthedistrictsthatwechose,weusedbothourownpriorresearchexperienceinthearea(Thongmanivongetal.2009;Dwyer2011)andkeyinformantinterviewswithgovernmentstaffconductedaspartofourfieldworktoselectsitesforourvillage-levelresearch.WechosetwovillagesinthedistrictsclosesttotheChineseborder(SingandNamtha)onthebasisoftheirexperiencewithrubberandtoreflectageographicbalance(onevillageclosetotheborder,theotherfartheraway).Intheotherthreedistricts(Xai,HounandViengphoukha),wewereonlyabletovisitonevillageperdistrict;wenonethelessthoughtitwasimportanttocoverabroadrangeoflocationsratherthandigdeeplyinasingledistrict.

Figure2.Studyarea

Ourresearchdesignthuschosetoprivilegebreadthoverdepth;wefeltthiswasimportantsincethetopicoflocalresponsestofallingrubberpriceswasrelativelyunder-studiedandwaslikelytovarybyanumberoffactors(e.g.socio-economicnetworksofrubbergrowers,thevariousbusinessmodelsinvolved,anddistancefromtheChineseborder).Ourapproachallowedustohearaboutarangeofresponsesandgrowingarrangements,butitalsoprecludeddetailedsurveysinanyonelocation.Ourresultsarethusmorequalitativethanquantitative,althoughtheyincludesomequantitativeanalysisregardingrubberprices.Moreimportantly,ourworkpointstopossibilitiesforfutureresearchonmoretargetedandquantitativeissuessuchasthedistributionofrubberholdings,discussedabove.

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2.2.MethodsThisresearchisbasedlargelyoninterviewsconductedwithrubbergrowersandLaogovernmentstaffinthevariouslocations(provincial,districtandvillagelevel)detailedabove;additionaldetailsareprovidedinAnnexIII,whichliststheinstitutionswespoketo,andAnnexIV,whichcontainstheguidingquestionsusedinourconversations.Overthecourseof20days,wespoketo68participantsvia33interviews;8ofthesewereattheprovinciallevel,15wereatthedistrictlevel,and7wereatthevillagelevel;3interviewswerewithprivatecompanies.Mostinterviewsinvolved2-3people,althoughonevillageinterviewwaslarger.Therepresentativesoftheofficesattheprovinceanddistrictlevelsweremostlyheadand/ordeputyhead,aswellastechnicalstaffworkingonissuesofrubberproductionandtrade(Figure3).Villageinterviewswereconductedwithvillageheadsand/ordeputyheads,aswellasrubbergrowersinthevillage.Weusedthesamesetofthequestions(AnnexIV)forinterviewingallstakeholdersinordertobestassessdifferencesandsimilaritiesinresponses.Attheprovincialanddistrictlevels,wefocusedonrepresentativesfromAgricultureandForestryandIndustryandCommerce;insomecases,weconductedadditionalinterviews(e.g.withofficesofPlanningandInvestment)basedonrecommendationsfromourinitialinterviews.

Figure3.Samplegovernmentinterview,Singdistrict

Wealsoconductedareviewofrelevantliterature,coveringbothrecentworksonresponsestofallingrubberpricesandearlierworkontherubber-plantingboomofthe2000s.Thishelpeduschoosethescopeforourresearch,bothgeographically(LuangNamthaandOudomxai)andtopically,giventhereports,ontheonehand,ofvariousreactionstofallingprices(e.g.landconversionsandtransactions,officialeffortstonegotiateprices)and,ontheotherhand,limitedreferencestothekindsofcomplexityofgrowingarrangementsdocumentedinearlierliterature.Ourliteraturereviewthushelpedwiththeresearchdesignandguidingquestionsinourinterviews,aswellasformingthebasisofSection1.2aboveandnecessarybackgroundforevaluatingandinterpretingourresults.

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Inthefield,wesupplementedourinterviewswithofficialdocumentsandstatisticswherepossible.Giventheambiguitiesofsomepolicytexts,theunreliabilityofmanystatisticsonrubberplanting(seeabove),andthesheertimeitsometimestakestotrackdowndocumentsthataresaidtoexistbutnotimmediatelyavailable,wefocusedourlimitedfieldtimeoninterviewsandcollectedadditionalinformationwherepossible.Oneareawedidemphasizeindocumentcollectionwasdataaboutrubberprices,giventheirprecisenatureandthedifficultiesofrememberingdetailslongintothepast.Asdiscussedbelow,thiswassomewhatsuccessful–ithelpedusevaluatethe(oftenvariable)qualityoftheinterviewdatawecollectedaboutprices–butitalsohighlightedtheneedforbetterrecordkeepingonrubberprices,giventheirvolatilenature.

Dataanalysisfocusedonextractingfivetypesofinformationfromourinterviewsandothersources.Onewasempiricalinformationaboutthehistoryofrubberplantingandrubber-basedlivelihoodswithinaparticulararea(province,districtorvillage,dependingoninterviewcontext);thisformedthebasisforourinterpretationoffourothertypesofinformation:(1)thehistoryofrubberpricesinagivenarea;(2)responsesbyrubbergrowerstothesechangesinprices;(3)responsesbystateofficialstothesame;and(4)otherrelevantinformationabouttherelationshipbetweenrubberpricesanddecisionsbyrubbergrowersorgovernmentinstitutions,suchasnormativestatementsaboutwhatshouldbedone,orstatementsaboutpricethresholdsforbehaviorchange.Wethenusedthisinformationtolookforsimilaritiesordifferencesbetweenvariousdatasources,locationsandperiodsoftime;thisanalysisprovidedthebasisfortheresultspresentedbelow.

2.3.ChallengesandlimitationsIngeneral,ourfieldworkwentwellandwewereabletointerviewmanyoftherelevantstakeholdersatvariouslevels.Authoritiesatbothprovincialanddistrictlevelsprovidedgoodcooperationandfacilitationduringthefieldstudy;afewrelevantstakeholdersatthedistrictlevelwerebusyduringourvisitandwereunabletomeetwithus;theseincludethePlanningandInvestmentofficesinbothViengphoukhaandNamthadistricts.InNamthadistrict,wewereunabletocollectstatisticsonrubberareas;thesewerereportedavailable,buttwoattemptstofollowupontheinitialpromisetodeliverthemfailed,sowegaveup.

WealsoplannedtovisitMomorLoMuevillagesinSingdistrictasrepresentativesofvillagesthatareclosetoLao-ChinaborderandhavegoodnetworkinChinaforagriculturalinvestment(includerubber).Wewereunabletoaccessthesevillages,however,duetoflooding.Thus,districtstaffattheSingDAFOandDICOrecommendedtovisitPhiyervillageinstead.

Weinterviewedrepresentativesoftheprivatesectorwherepossible,butdidnotprioritizethese.Dealingwiththeprivatesectoringeneraltakesmoretime,giventheinterestsinvolved–privatesectoractorsoftenregardinformationasstrategicandarethusunwillingtosharefully–andtheirbusyschedules;inshort,cultivatingrelationshipswithprivatesectoractorsofthesortneededtodelivergooddatatakestime,andweprioritizedourtimeinotherways.Whilethisisnotachallengeperse,thelackofextensiveinterviewdatafromprivatesectoractorsdoesrepresentanimportantlimitationofthisstudy.

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3.ResultsRubberwasselectedasapermanentagriculturalproductioncropforthedistrict.Theideawastoreducelocalpovertyandshiftingcultivation.However,wedidnotanalyzewhattherisksareforsellingtheproduct.8

Inhindsight,theremaybearushtoblamethecurrentsituationonalackofforesight.Statementsliketheabovearecommon;asanothergovernmentofficialwespoketoputit,“WewentonastudytourinChinaandsawthatpeopletheregainalotincomefromrubberplantations,sowethoughtthatlocalpeoplewillgainincomefromrubberand[thereby]reduceshiftingcultivationandlocalpoverty.Ithinkwefollowthefashionoftheinvestor,butweforgottothinkaboutthemarketandpricesinthefuture.”9Thesesentimentsarecommontoday,andechostatementsthatweremadebackinthemid-2000s.In2006,attheheightoftherubber-plantingboom,aworkshopattheLaoNationalAgricultureandForestryResearchInstitute(NAFRI)highlightedpricevolatilityatthebeginningofits“summaryoflessonslearned”section:

Thereisagrowingdemandandmarketfornaturalrubberforthenexttenyears.However,rubberhas“boom&bust”cycles,andfarmersneedtohavecopingmechanismstodealwiththeinevitablepricecrashes.Governmentsupportisvitaltosupportfarmersduringperiodsofrubberpricedeclines.(NAFRI2006:1)

Similarly,intheirfollow-uptoShi’s(2008)reportRubberboominLuangNamtha:atransnationalperspective,Hicksandco-authors(includingShi)describedthepriceofnaturalrubberas“volatileandhighlydependentonconditionsintheglobaleconomy,”andnotedthepotentialfor“rapidandsignificantreductions”inrubberpricestonegativelyimpactproducers’livelihoods,especiallywhenproductionregimesweretightlylinkedtorubberexports(Hicksetal.2009:22).Atthetimetheywerewriting,theglobalfinancialcrisiswasunderway,andpotentialimplicationsforrubbergrowerswereanissueofgrowingconcern.

Itisthereforeworthposingthequestionupfront:didn’tanyoneseethiscoming?Ourresultssuggestasurprisinganswertothisquestion.Aselaboratedbelow,itisnotthecasethatnoprotectionsweretaken,andthatcurrentresponsestofallingpricesareeffortstocopewiththelackofplanning.Rather,someprotectionswereinfacttakentoprotectsmallholdersfromtheriskoffallingprices.Butwheretheyexist–andtheyarecertainlynotaswidespreadastheymighthavebeen–thesehavebeenunenforced.Moreover,andperhapsevenmoreimportantinthecontextoffuturepolicyoptions,currentrubberpricesarenotsimplyduetoglobaleconomicconditions.Aselaboratedbelow,thepricesthatLaorubbergrowersreceiveareduetoamixofglobalandlocalfactors,anddependinmultiplewaysonpublic-andprivate-sectordecisionsinbothChinaandLaos.Justasitwouldbewrongtothinkthatpriceriskwasnotanticipatedandplannedfor,tosaythatcurrentpricesareduesimplytofallingglobaldemandmissesessentialpiecesofthestory.

Thissectiontellsthisstorymorecompletelyasawaytocontributetocurrentpolicydiscussionsanddevelopmentactivities.Sections3.1and3.2firstdiscussresponsestofallingrubberpricesbygovernmentinstitutionsandrubbergrowers,respectively.Sections3.3and3.4thenturntorubberpricesinmoredetail,lookingathowthepricespaidtorubberproducersinnorthernLaosare

8Governmentinterview,Oudomxai(Interview19)9Governmentinterview,Oudomxai(Interview16)

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actuallydetermined(Section3.3),andatwhatourkeyinformantssaidaboutwhatrubberpricesshouldbe,andwhy(Section3.4).

3.1.GovernmentresponsesSincerubberpricesbegantoslipin2011,governmentresponseshavebeenmanyandvaried;rubberwasheavilypromotedasasmallholderlivelihoodoptionbackinthe2000s,andfallingpriceshavecausedconsiderableconcernamongfarmersandofficialsalike.Inourfieldwork,weheardaboutmanytypesofactivitiesthatcouldreasonablyunderstoodasresponses;theserangedfromformalandexplicitresponsessuchasthoseundertakenbyLuangNamtha’sProvincialRubberManagementCommittee,discussedbelowfirst,tolessexplicitlyreactivebutnonethelesssignificantresponsestofallingprices.Belowwediscusstwo.ThefirstfollowscloselyfromtheactionsoftheProvincialRubberManagementCommittee,andentailsdefendingrubber-basedlivelihoodsfromthroughvariousformsofpersuasiverhetoric;thisextendswellbeyondtheCommittee,anddrawsheavilyonwhatwedescribedaboveastheBanHatNyaostory.Thesecondandfinalsateresponseisthedecisionnottoenforcecontractuallyspecifiedminimumrubberprices,alsocalled“floor”prices.Eventhoughthismaynotbeseenexplicitlyasaresponsetofallingrubberprices,weclassifyitassuchgiventhatfloorpriceswereoneofthefewmechanismsanticipatedinadvanceasawaytoprotectfarmersfrompriceinstability.1.“Managingtherubbersector”:theLuangNamthaProvincialRubberManagementCommittee

Asrubberpricesfellinlate2011andinto2012,officialsinLuangNamthareceivedanincreasingnumberofpleasforhelpfromlocalrubbergrowers.Inresponse,provincialofficialsdecidedtocreateaRubberManagementCommitteeinSeptember2012;thiswascomprisedofmembersoftheLuangNamthaPICO,PAFO,provincialtax(Finance)office,PDPI,PoNREandprovincialgovernor’soffice.TheCommittee’sresponsibilitywas“todefinenewrulestomanagetherubbersectorintheprovince,”aswellastopromotethecreationandsupporttheoperationalactivitiesoffarmers’marketinggroups(PAFO2013:8).FiveoftheCommittee’sconcretesetsofactivitiesemergedinourfieldwork:thepromotionofmarketinggroups;thecalculationofrecommendedrubberprices;thedirectbrokeringofrubbersalesfromgrowerstocompanies,aprocesswhichincludesthewaivingoftaxesoncompaniesand,insomecasespossibly,rubbergrowers;andfinally,theattempttobantheconversionofrubberplantationsintoothertypesoflanduse.Theseareeachdiscussedinturn.

Promotingmarketinggroups

OneoftheCommittee’sfirstactivitieswastotrytogetrubberproducerstoorganizethemselvesintomarketinggroupsforthepurposeofcommandingbetterprices(PAFO2013).Ourfieldworksuggestedthattherehadinfactbeensomeprogresshere–rubbersellinggroupswerereportedtoexistin“some”villagesinLuangNamtha–althoughthelackofquantitativedataofferedduringourinterviewssuggestedthatprogresswasnotwhatmighthavebeenhopedfor.Inonevillagewevisited,rubbergrowerssaidtheywereplanningtoformamarketinggroupinthefuturewhenpricesrose,butthatcurrentlyonlyafewhouseholdsweretapping,sotherewasnocollectivebargainingpoweratcurrentprices.Theconsolidationofrubberholdingsdescribedaboveinsection1.2isalsolikelytoselectagainstlocalinterestinmarketinggroups:theseworkbestwhentheaggregationofproductsforsalehasanimpactonsaleprice.Ifandwhenproducersalreadyhavesufficientvolumetocommandhighersaleprices,marketinggroupswillprovidefewerbenefits.

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Moreover,giventhelocalinitiativeinvolvedinbothformingandsustainingproducergroups,theroleofgovernmenteffortswheremarketinggroupsexistwasdifficulttoassess.Inourinterviews,wefoundbothanumberofexamplesofsuccessfullyoperatingmarketinggroupsandafewcaseswheremarketinggroupswerenotseenbylocalresidentsasdesirable.WediscussthesetogetherinSection3.2below.

Calculatingrecommendedprices

AnotheroftheCommittee’sactivitieswastopublishrecommendedrubberpricesontheideathatthesewouldhelpfarmersnegotiatewithbuyers.TheCommitteedidthisbylookingupthepriceforSCR10rubbersheets,astandardrubbercommodity,onthewebsiteofaChineserubbercompany(www.yunken.com).Theywouldthenreducethispricebytwofactorstocontrol,first,forwatercontent,andthenforthreeadditionalfactorstogether:transportation,processingand“other”(unspecified)expenses.AsillustratedinFigure4,thisprovidedamathematicalwaytoconvertfinishedcommoditypricesinChinaintoaraw“farm-gate”priceinLaos;thiscalculationassumed40percentwatercontentand30percentfor“transportation,processingandotherexpenses”(PICO2015).10

Thevaluesusedtoillustratetheconversionfromfinishedcommoditytofarm-gatepriceinFigure4areindicativeonly:wewereunabletocollectreliabledataonrubberpricesinChina(seeSection4),andhavethususedpricesfromtheSingaporeCommodityExchangeinFigure4.OurinterviewsnonethelesssupportedwhattheredportionsofFigure4suggest:therewasoftenasignificantgapbetweentheCommittee’srecommendedpriceandthepricebeingactuallyofferedbycompaniesinLuangNamtha.Asthepricesonofferbyrubber-purchasingcompaniesconsistentlyundercutthepricesrecommendedbytheCommittee,manyrubbergrowersinLuangNamthaprovincedeclinedtoselltheirrubber.Bymid-2014,thisunsoldstockofrubberhadreachedsignificantlevels,andtheCommitteedecidedtoundertakeathirdtypeofactivity:brokeringrubbersales.

Figure4.SamplecalculationofCommittee’srecommendedrubberprice

10TheCommitteealsoincludedacurrencyconversionfactorfromCNYtoLAK,althoughpresumablythiswasonlyusedonoccasion,sincerubberpricesaremoreoftenreferredtoinLuangNamthainChineseYuan.Theconversionfactorpublishedina2015pricerecommendationwasCNY1=LAK1,288(PICO2015).

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Brokeringrubbersales

Inlate2014,theCommitteedecidedtogetinvolvedinbrokeringrubberagreementsdirectly.LaogrowershadbythistimeaccumulatedasignificantsupplyofunsoldrubberduetothelowpricesonofferbyChinesebuyers,possiblycompoundedbythemismatchbetweenthesepricesandtheCommittee’srecommendations.

InNovember2014,theCommitteefacilitatedasaleofmuchofthisunsoldstock;accordingtoourinterviews,theCommittee’sinvolvementraisedthepricefromCNY3.5/kg,whichwasthepreviousofferingprice,toCNY4/kg.Unfortunately,thisdealshowsthelimitsontheCommittee’sabilityto“definenewrulestomanagetherubbersector,”atleastasfaraspriceswereconcerned.ThisincreaseofCNY0.5/kgisonparwiththepriceincreasereportedforaggregationbyfarmergroups:whilenotinsignificant,itisnonethelesslimitedinitsimpactonfarm-gateprices.Moreover,thepriceincreasebythebrokeredsalewasafullCNY1/kglowerthanwhatwasreportedlyagreedtobythecompaniesinvolved,asreportedintheVientianeTimes(2014e),whichdescribedtheagreementtopurchaserubberatCNY5/kg.Finally,despitetheCommittee’snegotiationefforts,aftertheone-timebulksale,thepricedroppedagaintothepreviousofferingpriceofCNY3.5/kg;thiswasthepricepostedduringourfieldworkinmid-2015(seeFigure9insection3.3below).

Waivingtaxes

Perhapsevenmoreimportantly,thebrokeredpriceincreasefromCNY3.5/kgtoCNY4/kgcameatapotentiallyhighprice:waivingtheprofittax(akornkamlai)thatwouldhavenormallybeenimposedonthethreecompaniesthatpurchaserubberinLuangNamthaforexporttoChina.11Ourinterviewsreferredtotwotypesoftaxesimposedoncompaniesthatpurchaseandexportrubber:profittaxesandexporttaxes.Thedetailsofthefirsttwotypeswerenotmadeavailabletous,andwouldberequiredinordertoanalyzecostsandbenefitsofwaivingprofittaxesinexchangeforapriceincreaseofCNY0.5/kg.Calculatingtheprofitabilityofthethreecompaniesinvolvedseemsdifficult,giventhechallengesofgatheringgooddataonChinesegovernmentsubsidiesprovidedundertheopiumpoppyreplacementprogram.Itwouldthusrequirethatcompaniesprovidefinancialstatementstogovernmentauthorities;giventhelikelychallengeswiththisprocess,itmaybethatprofittaxesaredifficulttocollectanyway.Butgiventheavailableevidenceaboutthelowincreaseinpricesandthewaivingofcorporatetaxliabilitythatcamealongwithit,thedealstruckbytheprovincialCommitteeseemstobelessthe“answertolowrubberprices”announcedintheVientianeTimes(2014e)andmoresimplytheresultoflowgovernmentleverageoverpowerfultransnationaltradingcompanies.

Whilenotapparentlyanofficialresponse,provincialauthoritiesinLuangNamthaalsoseemedtobequietlywaiving(atleastinpart)athirdtypeoftax.Backintheboomyearsofthe2000s,theprovincialgovernmenthadannouncedanannualtaxonrubbertrees,graduatedinaccordancewiththesizeofone’sholdings:CNY1/tree/yearforholdersof1–3haofrubber,CNY3/tree/yearforholdersof3–5ha,andCNY6/tree/yearforholdersof5ormoreha.Giventhatrubbertreeholdingstendtonumberabout450trees/ha,thistaxispotentiallysignificant.Sincepriceshavebeenlow,however,atleastoneofourintervieweesreportedthatthistaxhadbeen“difficulttoimplement.”12

11Governmentinterviews(Interviews1,2and11)12Governmentinterview,LuangNamtha(Interview11).

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Figure5.Bananaplantation,Singdistrict

Bansonlandconversion

Lastly,theCommitteehasrecentlyissuedabanontheconversionofrubberplantationstootherlanduses.Themostcommontargetofconversionbansisbananas,aplantationcropwhichhasexpandedsignificantlyinSingandLongdistrictsinthelastfewyears(Figure5),oftenincombinationwithlandtransactionssuchasleasestoprivateentrepreneurs(Friis2015;Satomi2015).Below,wediscussconversiontoothercropsasaproducerresponse(Section3.2);fromtheperspectiveofgovernmentresponses,twopointsareworthmaking.First,attemptstobanconversionfromrubbertoothercropswithoutgovernmentpermissionhaveariseninLuangNamthabutnot,asfarasweobserved,inOudomxai.13InLuangNamtha,thebaneffortarosefromtheactivitiesoftheCommittee,soitisperhapsunderstandablethatnocomparableefforthasariseninOudomxai,giventhelackofacommitteethere(asdiscussedbelow,conversiontobananasistakingplaceinOudomxai).Second,thebaniscompetingwithstrongeconomicincentivesintheformofprivatelandrentalfeesintherangeofLAK15-16millionperhaperyear.14Coupledwiththewidespreadbeliefbybothgrowersandatleastsomeofficialswespoketothatlandusedecisionsaretheresponsibilityofgrowersthemselves,theseincentivesmaymakethebandifficulttoenforce,andmoreover,mayleadtodeliberateunder-reportingoflanduseconversionsbybothfarmersandgovernmentstaff.2.Defendingrubberrhetorically

Asecondsetofresponsesbygovernmentofficialshasattemptedtoprotectrubberasalivelihoodoptionthroughthepracticeofunofficialpersuasion.Theisevidentinthewaythatgovernmentstaff

13Governmentinterviews,LuangNamtha(Interviews1and2);variousinterviews,Oudomxai14Variousinterviews,LuangNamtha

16

talkaboutrubberasalivelihoodoptiondespitethefallinprices,aswellastheirportrayalofalternativessuchasleasinglandforbananasastheresultoflazinessorgreed.15AsoneprovincialofficialinLuangNamthaputit,“evenifpeoplereceiveLAK16millionperhaperyear,itwillnothelppeopletoimprovetheirlivelihoodsbecausemanyfamiliesusethismoneyforpurchasingmotorbike,entertainmenttools,mobilephone,andusefordrinking;thiswillnotsupporttheirlivelihoodcondition.”16Thistypeofunderstandingoffarmerdecision-makingisfairlycommonamongthegovernmentstaffwespoketo,andreflectstheprevalenceofpaternalismasawayofofficialsrelatingtofarmers,aswellthestrengthoftheBanHatNyaosuccessstoryasamotivationforhardworkandpersistence.AsoneofficialinLuangNamthatoldus,“Itdoesnotmatterifoneisrichorpoor;whoeverhasarubberplantationandispatientinworkinginitwillgetincome.”17

Thisideologicalbeliefinthelinkbetweenrubber,hardworkanddevelopmentissignificant,butshouldnotbeover-emphasized.Manygovernmentstaffwespoketogenuinelyseemtobelievethatthepriceofrubberwillrecover,andthatevenatcurrentlylowlevels,rubberispreferabletothevariousalternatives.Thismorepracticalorientationtowardcontinuingtobelieveinrubberseemstoapplynotonlytogovernmentofficials’dealingswiththeirconstituents(seebothquotesbelow),butevenwiththeirrelatives(secondquote):

AlthoughrubberpriceshavefallentoLAK5,000–6.000perkg,itisstillfineforlocalpeopletotaprubber,sincetheygain[more]fromrubberplantationsthanotheragriculturalactivities.18

Iinformedlocalpeoplethatnottofearaboutfallingrubberprices–theywillincreasesometimeinthefuture.…Myfather-in-lawalsoestablishedarubberplantation…inBengdistrict.…WhatIinformed[him]isthatrubberpricesaretemporarilydropped,butwillincreaseinnextfewyears.19

3.Notenforcingcontractedfloorprices

Surprisingly,oneofthefewareaswhereregulatoryleveragedoesexistseemstonotbebeingused.Thisisintheareaofenforcingcontractuallyspecifiedminimum(“floor”)prices.Althoughfloorpricesseemnottohavebeen,asarule,writtenintothecontractsthatwerenegotiatedandsignedintherubberboomperiodofthemid-2000s(Altonetal.2005:93-94;Shi2008:34),20theywerewrittenintoatleastsomeofthepurchasingcontractssignedintheyearsthatfollowed.Whileanumberofdetailsremainedbeyondourreachduetoinformants’inabilitytoprovidethephysicalcontractstheyweredescribing(andinsomecasespromised),inthreeofthedistrictswhereweconductedfieldwork,weheardthatcompanieshadcontractualclausesthatguaranteedminimumpurchasepricestolocalgrowers,butthatthesewerenotbeingenforced.Moreover,theserepresentedtheonlyinstancesoffloorpricesthatweencountered:inotherwords,wedidnothearaboutanyinstancesoffloorpricesthatwereactuallybeingenforced.

Viengphoukha(LuangNamtha)

YunmongXinxingisthenewnameoftheChinesecompanyknownatthetimeofitsestablishmentinViengphoukhaasBolisatSeunHua(orShenWa,etc.).Beginningin2005,thecompanybuiltits

15Governmentinterviews,LuangNamtha16Governmentinterview,LuangNamtha(Interview1)17Governmentinterview,LuangNamtha(Interview3)18Governmentinterview,Oudomxai(Interview14)19Governmentinterview,Oudomxai(Interview13)20MélanieCanet(personalcommunicationwiththesecondauthor,December2015)

17

operationsinandaroundcentralViengphoukhadistrict,includingademonstrationgarden,contractfarmingoperation(Dwyer2013,2014)and,sometimeafter2010,afacilityforprocessingrubberlumpsintothesheetsforwhichthecompanyhasanimportquotaintoChina.Partofthebilateralopiumcropsubstitutionsubsidyprogram(Shi2008;KramerandWoods2011),YunmongXinxingisoneofthreeChinesecompaniesoperatinginLuangNamthathathavesuchquotas(seealsoSection3.3below).

Accordingtoourinterviews,thecontractinquestionwassignedbetweenthecompanyanddistrictauthoritiesintheperiodaftertheprocessingfacilitywasbuilt;presumablythecontractgovernedthefacility’soperations,andbuiltonanearlieronegoverningtheestablishmentofplantationsinvillagesaroundthedistrictthroughamixof“2plus3”and“1plus4”operations(Dwyer2014;alsoseesection1.2above).Thenewcontractreportedlyspecifiedapriceatwhichthecompanywouldpurchaserubberfromlocalgrowers,butafterthemarketforrubberbegantodecline,thecompanychangeditspricetobelowthislevel.(Werequestedacopyofthecontracttobeabletoconfirmthisandalsoseewhatthispricewas,butweretoldthatthecontractwasunavailable.)Accordingtoourinterviews,districtofficialscontractedthecompanytodiscussraisingthepricetoCNY5.3/kg,butweretoldthatthecompanypreferredtofollowthepricessetbythemarket,althoughtheyagreedtoincreasethepricesslightlyinordertohelplocalpeoplewithpovertyreduction.Thisofferedpricewasnonethelessbelowthepricespecifiedinthecontract,buttheargumentwasacceptedbydistrictauthoritiesontheunderstandingthatbecausemarketpricesweresodepressed,itwouldbecleartoeveryonethatthecompanywasnotcheatingproducers.21

XaiandHoun(Oudomxai)

InbothXaiandHoundistricts,intervieweesdescribedsituationswheresometypeofminimumpricehadbeenwrittenintoacontract,butcompanieswerenonethelesssettinglowerpricesbasedonmarketconditions.EvenmoresothaninViengphoukha,however,thedetailsremaineddifficulttopindownduetoalackofavailabledocumentationandvariousofficesreferringustootheroffices.InXaidistrict,forexample,staffattheDAFOdescribedafloorpriceofLAK5,000thatonecompanyhadagreedto,andreferredustotwootherofficestolookforthecontractsincetheythemselvesdidnothaveit.22Oneoftheseotherofficessaidtheyhadnothingtodowithrubberprices;23theotherpointedustotheProvincialIndustryandCommerceOffice,sayingthatwithregardtoanythingtodowithrubbertraders,factoriesorprices,“wehavetowaitfororders”fromabove.24WhenweinquiredatthePICO,seniorstaffwereunavailabletomeetduetoothercommitments;officerepresentativeswhowereavailable(fromtheProvincialTaxManagementOffice)toldusthattheyhadnoinvolvementwiththerubbertrade,25whilestaffatanotherprovincial-levelofficetoldusthatboththeirownofficeandthePICOreliedheavilyoninvestorswhenitcametorubberprices:“Wereceiverubberpricesfrominvestmentcompanies.TheIndustryandCommerceOfficeattheprovincelevelhasnotbeenworkingontherubbermarket–theyalsoheavilyrelyoninvestors.”26

Despitethisdeadend,thetestimonyofourinitialinformantiscompelling:

21Governmentinterview,Viengphoukha(Interview23)22Governmentinterview,Oudomxaiprovince(Interview12)23Governmentinterview,Oudomxaiprovince(Interview16)24Governmentinterview,Oudomxaiprovince(Interview13)25Governmentinterview,Oudomxaiprovince(Interview15)26Governmentinterview,Oudomxaiprovince(Interview14)

18

However,thissetpricehasnotbeenenforcedbecausepricesinOudomxaiprovincearesometimeslowerthanLAK5,000perkg.Iwouldsaythatrubberpricesinourprovinceanddistrictarebasedonwhatbuyersoffer.Weusedtodiscussraisingpriceswiththecompanies,buttheygenerallyprefertobasetheirpricesonmarketprices.Thus,theycouldnotraisepricesforoursmallholders.27

InHoundistrict,wefoundroughlythesamething.OneofourgovernmentinterviewstherenotedafloorpriceofatleastLAK5,000perkg,butsaid“thecompanycouldnotpaythisduetorubbermarketpricesinChina.”Again,theyreferredustoanotheroffice–inthiscasetheDistrictPlanningandInvestmentOffice–foracopyoftherelevantcontract.28Unfortunatelywhenwewenttothatoffice,weweretoldthatpriceswerebasedonmarketconditions,asspecifiedinaninvestmentcontractsignedbytheformerdistrictgovernor.29

GiventheexperiencedescribedaboveinViengphoukha,wheretwodifferentcontractsweresignedatdifferenttimes,itispossiblethatbothoftheseaccountsarecorrect:thefloorpricemaybelistedinasecondcontract,whilethe“investmentcontract”referencedabovelikelyreferstotheinitialcontractsignedbetweenthecompanyandthedistrict.Again,despiteourinabilitytorecoverandexamineanactualcontract,thetestimonyofourinitialinformantsuggestsboththeexistenceofanunenforcedfloorpriceand,moregenerally,amixtureofsympathywithfarmersandfrustrationwithbureaucracy:

WedonotknowthepricesofrubberinChinaandbuyersdonottellushowmuchtheysellforinChina.WeusedtotalktotheProvincialIndustryandCommerceOffice,buttheydonothavepriceinformationforus.ThefloorpricesetinthecontractisLAK5,000perkg,butthecompanystillpayslessthanthefloorprice–thecompanyisnotpayingbasedonthecontract.Wementionedthistheprovinciallevelmanytimes,butwedidnotreceiveanyresponses.Wealsoproposedadistrict-levelmeeting,butagaingotnoresponsesfromthedistrictauthorities.30

Insuchacontext,muchoftheburdenofrespondingtothefallinrubberpriceshasfallenonfarmersthemselves.Weexaminetheseresponsesinthenextsection.

3.2.Rubbergrowers’responsesThissectiondescribesarangeofproducerresponsestofallingrubberprices,includingwaitingforpricestorise,tappingatdepressedpricesusinghouseholdlaboronly,transactingplantationlandthroughsalesorleases(thelatteroftenwithconversiontoanothercrop),andvariousformsofactivitythatattempttogeneratehigherpricesthroughtheaggregationofrubberproducts.Inexaminingproducers’responsestofallingprices,itisimportanttolookbeyondthemostobviousandevensensationalizeddimensions(suchasconversiontobananas,whichhasfiguredcentrallyinLaonewscoverage),andtrytounderstandhowthemarketdynamicsofthelastfewyearshaveinteractedwiththepre-existingsituation.AsnotedinSection1.2,thenorthernLaorubbersectorpriortothepricedropof2012washardlystable;astheHatNyaomodelfailedtoscaleupforavarietyofreasons,rubberholdingsbegantoconcentrateincreasinglyinthehandsoflargerholders.Theresponsesexaminedinthissectionthusareconsideredinthisdoublydynamiccontext.

Asthissectiondescribes,thevarietyofproducerresponseshavecontinuedtheearliertrendawayfromthescalingupoftheHatNyaosmallholdermodelenvisionedintheearlyandmid-2000s.27Governmentinterview,Oudomxaiprovince(Interview12)28Governmentinterview,Oudomxaiprovince(Interview18)29Governmentinterview,Oudomxaiprovince(Interview19)30Governmentinterview,Oudomxaiprovince(Interview18)

19

Nonetheless,asSection4elaborates,thismodelmaystillberecoverable–aswellasbothpoliticallyandeconomicallydesirable–ifthecurrent,minimallyregulated“boomcrop”developmentmodelcanbeshiftedtoamoretightlyregulatedmodelappropriatetomakingrubbera“strategic”commodityinthemeaningfulsenseofthatterm.Response1:Waitingforpricestorise

Withpricesaslowastheycurrentlyare,itisperhapsnotsurprisingthatmanyproducershavechosennottoinvesttheirscarcelaborinrubbertapping,andaresimplywaitingforpricestorise.Butasthisandthenextsub-sectiondescribe,thisresponseisnotassimpleasitmightatfirstseem.

Acrossthesiteswevisited,weheardconsistentlythatwaitingforpricestorisewasthemainwaythatrubberproducerswererespondingtolowprices.Duetothedifficultyinquantifyingthis,ourinformantswereonlyabletoprovideestimates,atleastattheprovincialanddistrictlevels;inonevillage,itwaspossibletoexactlyquantifythefractionofproducerswhohadcontinuedtotapversusthosewhohadstopped.Ingeneral,thefractionofthosewhohadstoppedwashigh,andittendedtobeevenhigherinOudomxai,wheretherubberwasyounger.TheestimatesthatwecollectedareshownbylocationinFigure6.Althoughinsomelocationswevisited,nooneprovidedaquantitativeestimate,thosethatdidusuallyputthefractionofuntappedrubberaround50percentorhigher;theexceptionwasBanOudomsin,wherevillagersinvestedheavilyintheswitchtorubber,andwhereproximitytoChinahaslikelyfacilitatedongoingrubbersales.AlthoughsomeofthenumbersshowninFigure6mayincludeafractionofimmaturerubbertrees(e.g.the90percentestimateforOudomxai),mostreferclearlytomaturerubberonly.31

Figure6.Reportedfractionsofun-tappedrubberforprovinces(largefont),districts(mediumfont)andvillages(smallfont)whereestimateswereprovided(source:fieldinterviews)

Twothingsaregoingonhere.Ontheonehand,thereisanunfortunatetimingproblem:priceshavefallenjustasrubberplantationshavematuredwidely,especiallyinOudomxai.Thishasmaderubber31Interviews,LuangNamthaandOudomxaiprovinces(Interviews3,6,10,14,18,19,21,26)

90%

50%

70%

90%

80%

50%

10%

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plantationownersreluctanttoembracethecropasactualproducers.ThedifferenceintappingratesbetweenLuangNamthaandOudomxaiissuggestiveofthis,andotherpiecesofevidenceconfirmit.

OneofthevillageswevisitedinOudomxaiexemplifiesthefailuretolaunchoftheHatNyaomodelduetocrashinrubberprices.Thevillage’saccountofrubberproductionbeganwiththestandardpiecesoftheHatNyaostory(“toestablishrubberplantationistoreplaceopiumproductionandtoreducetheareaofuplandshiftingcultivation”),andtransitionedintoanaccountofcontractfarming-basedengagementwiththeSino-LaoRubberCompany(cf.Section1.2above).Buttheintendedplanwentawrywiththecrashoftherubberprice:

Inthebeginning,[the]Sino-Lao[company]cametoconsultwiththeprovinceanddistrict,andannouncedthatiflocalpeoplecultivaterubber,wewillbeablegraduatefrompoverty.[We]followedtheadvicefromthegovernmentstaffattheprovinceanddistrict.Inthebeginning(2004–2005)atestplantationwasplantedon100haofvillagecommonland.Landwasstillavailableinthevillage,andtheprovincialanddistrictstaffadvisedthatthispilotplantationwouldallowlocalpeopletolearnhowtoplantandmanagerubbertrees.Butwehavenotlearnedanythingfromthatpilotplantation.…WeknewthepricesofrubberdroppedinJune2014,thenthefactorydidnotbuyrubberandlocalpeopledonottaptheirrubberbecauselowrubberprices.32

Likewise,provincialofficialswespoketonotedthedifficultiesinconvincinguplandfarmersinOudomxaitoenterthemarketasrubberproducersrightatthetimewhenthepriceswasfalling.

Atpresent,onlybusinessmanandgovernmentstaffworkinginthecityarebenefitingfromrubberplantationsinruralareas.Rubberbelongingtolocalpeoplehasnotyetbeenwidelytapped.…Tappingbeganin2012,[but]themaindifficultyisthatlocalpeopledonotwanttolearnhowtotaprubber.…Itisnoteasytochangetheideasoflocalpeoplefromsubsistenceagriculturetocommercialagriculture–localpeoplestilllikedoingshiftingcultivationastheirtraditionalpractice.33

Rubberhasnotreallycontributedtoimprovinglocalpeople’slivelihoodsbecausewejuststartedtappingin2013.Rubberisstillnewforourdistrictandabout70percentofgrowersdidnottaptheirrubberin2014duetolowprices.34

Theotherissueinvolvedwithhighratesofnon-tappingistheconsolidationofplantationholdingsdiscussedinSection1.2;thisappearedwithsurprisingregularityinexplanationsofwhyrubbergrowerswerenottappingtheirholdings,andpointedtothedifferencebetweentappinglargerplantationsandtappingsmallerones(alsoseenextsub-section).Inexplainingthereasonswhysuchahighfractionofrubberplantationswerenotbeingtapped,manyoftheinformantswespoketodescribedlaborscarcityofthekindthatonlyoccurswithoutsidelabor.Whilethisisnotsynonymouswithlargerplantationholdings,itisafairlygoodindicator.AsonevillagerepresentativeinLuangNamthaexplained,thevillagehasafewlandholderswithrubberplantationslargerthan20ha(andoneevenwith40ha).Holdingsofthissizemadetheownersdependentonhiredlabor:

However,wedonothaveenoughmoneyforhiringlaborfortappingourrubber.WhenpricesfalltoCNY4perkg,wehavetotapourrubberbyourselves.Inthecaseofhouseholdsthathavelargerubberplantations,theytaponlyalittlepartoftheirrubberplantationbasedontheirhouseholdlaborforces.35

32Villageinterview,Oudomxaiprovince(Interview17)33Governmentinterview,Oudomxaiprovince(Interview14)34Governmentinterview,Oudomxaiprovince(Interview18)35Villageinterview,LuangNamthaprovince(Interview5)

21

Asaninterviewinanothervillageexplained,lowpriceswerepreventinganumberofgrowersfromtappingatall,onaccountoftheirdependenceonashare-basedformofwagelabor:

[Outof20householdswithmaturerubber,]thereareonlytwohouseholdsthatcontinuetapping–therestarenottappingbecauseoflowrubberpricesandnolaborfortapping.Thereasonisthatwedividetheproduct50-50betweenthetapperandtheplantationowner,butnoonewantstotap.36

WeheardvariationsonthisfromprovincialanddistrictofficialsinbothLuangNamthaandOudomxai,confirmingthatthispatterniswidespread:

[Many]rubbergrowersinthisdistricthavestoppedtappingtheirrubbersincemid-2014duetolowrubberprices.Thisisbecausetheyfinditverydifficulttofindrubbertappers–eveniftheownerofrubberplantationprovides50percentoftheincomefromtherubbertothetapper[insteadof30or40percent,theratepreviouslyoffered],nobodywantstotapbecausetheypreferotherkindsofworkthataremoreprofitable.37

Duringthefallingrubberprices,thereareabout90%ofgrowersdonottaptheirrubberbecauseitisdifficulttofindtappersduringthelowpricesofrubberplantation.[Manyof]thosewhodonottaptheirrubber[duetothisissue]arebusinessmanandgovernmentstaff.38

Myfather-in-lawalsoestablishedrubberplantationforabout30hainBengdistrict.Therubberisreadyfortapping–it’s8-9yearsold–butwehavealackoftappers.39

Astheseaccountsmakeclear,itisnotlowpricespersethathavecausedmanyproducerstopulltheirplantationsoutofproduction,butrathertherelationshipbetweenlowpricesandthelaborregimesnecessarytotapthecurrentconfigurationofplantations–includingmanylargeronesinthetensofhectaresandmultiplethousandsoftreesperowner.Thenextsub-sectionexaminestheothersideofthispattern,whichistherelianceonhouseholdlaborintherubberplantationsthatarecontinuingtobetapped.Response2:TappingwithhouseholdlaborIfweinvertthevaluesinFigure6,theysuggestthatevenwiththelargenumbersofplantationsnotbeingtapped,asignificantnumberofrubberowners–perhapsintherangeofhalfoftheownersinLuangNamthaandbetween10percentandathirdinOudomxai–arecontinuingtotaptheirrubberdespitecurrentlowprices.Ourinterviewssuggestedthatthosewhoarecontinuingtotaparelargelydoingsowithhouseholdlabor.

Thisisnotnecessarilyagoodthing;householdlaboriseffectively“cheaper”thanhiredlabor,butitisnotnecessarilymoreefficient,sinceitcaninvolvedegreesofintra-householddisparitysuchashighdependenceonwomen’sandchildren’slabor(whichareoftenvaluedlowerbyhouseholddecision-makers,oftenmen);therecanalsobesignificantopportunitycostsif,forexample,childrenworkratherthangoingtoschool.Thesetypesofquestionswerebeyondthescopeofourstudy,butthewidespreaddependenceonhouseholdlaborforrubbertappingaspricesdropsuggeststhattheymaybebecomingincreasinglyimportant(seeSection4).

Reflectingdifferencesbetweenwagelaborandhouseholdlabor,anumberofourinterviewsdescribeddifferentpricethresholdsatwhicheachofthesewouldstopbeingeconomic.Asthe

36Villageinterview,Oudomxaiprovince(Interview21)37District-levelgovernmentinterview,LuangNamthaprovince(Interview4)38Provincial-levelgovernmentinterview,Oudomxaiprovince(Interview14)39Governmentinterview,Oudomxaiprovince

22

previoussub-sectiondescribed,overthelastfewyears,wagelaborhasbecomeincreasinglydifficulttorecruittorubbertapping,giventhestandardformofpaymentinrubberratherthanincash.Whiletherearedata-relatedchallengesofbothtimingandprices(whenexactlywagelaborstoppedbeingeconomic,andhowthatrelatedtopricesatthetime),thethresholdforwagelaborseemstobesomewhereintherangeofCNY4-5perkg,andperhapshigher(Figure7,pinkarea).Onevillagerepresentativeputitespeciallyclearly:

InthecaseofrubberpricesatCNY4perkg,localpeoplestillgainbenefitfromtheirplantations.However,wedonothaveenoughmoneyforhiringlaborfortappingourrubber.WithCNY4perkg,wehavetotapourrubberbyourselves.40

Figure7.Pricethresholdsatwhichtappingbehaviorchanges

Whenitcomestothepricethresholdatwhichhouseholdlaborstopsbeingviable(Figure7,redlineandbelow),ourinterviewsgotvague,however–andprobablywithgoodreason.Inoneofourgovernmentinterviews,forinstance,weheardthat“ifthepricegoestoCNY3.2perkg,localpeoplecanstilltapusinghouseholdlabor;it’sonlywhenhiredlaborisinvolvedthatit’snotworthittotapwhenthepricedropsbelowCNY4perkg.”41Butwhenweinterviewed(later)therepresentativeofthevillagerubbergroupthatwasbeingdiscussed,theytoldusthattheywouldnotselltheirrubberunlesstheycouldreceiveapriceofCNY4perkg.42Thepointofagreementherewasthatcurrentpriceshadmadeitsuchthathiredlaborwastooexpensive,andthatonlyhouseholdlaborcouldbeusedunderpresentconditions.Buteventhiswasimplicitlycalledintoquestionbyanotherinterview,whichsaidthatsmallholderswouldonly“tapwidely”(i.e.atlargenumbers)ifthepricereachedCNY5perkg.43Takentogether,thissuggeststhatcurrentpriceshavepushedrubbertappingsquarelyintotherealmofsmallholderproductiononly,andthatthosewhoarecontinuing40Villageinterview,LuangNamthaprovince(Interview5)41Governmentinterview,LuangNamthaprovince(Interview1)42Villageinterview,LuangNamthaprovince(Interview5)43Governmentinterview,LuangNamthaprovince(Interview4)

Wagelaborthreshold

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2015 2010 2014 2013 2012 2011

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totapmaybedoingsonotbecausetheprofitsaregood,butbecausetheyhavealreadyinvestedsignificantcapitalintheirrubberplantationsandareleftwithfewotheroptions.Asonevillagerwespoketoputit,“Sincewehaverubberplantations,wehavetoearnfromthem,notjustkeepthemtherewithoutdoinganything;thisisbecausewealreadyspentalotmoneyandlaboron[establishing]theplantation.”44

BanNamNgeuninViengphoukhaisanillustrativeexception.Accordingtoourinterviewthere,about10householdstherehavebeencultivatingrubbersince2000;thesearemiddle-incomefamilies–neitherthewealthiestnorthepoorest–andtheystartedplantingrubberaftertheysawcommunitiesinSingandNamthadistrictsdoingthesame.Butunlikethe“typical”uplandrubbervillageinthenorth,BanNamNgeunislocatedintheflatlandsaroundViengphoukha’sdistrictcenter,andcontainsalargeamount(58ha)oflowlandricefields.Asrubberpriceshavefallen,rubber-growinghouseholdshaveincreasinglygonebacktotheirearlierlivelihoodasricegrowers,bothforsubsistencepurposesandforsale.Whiletheyhavecontinuedtotaptheirrubberplantations–theysold30tonsatCNY4perkgjustpriortoourvisit–theyincreasinglyseerubberasasecondaryor“additional”livelihoodsource.45Whilevillagerswerenothappyaboutthefallingrubberprice,theirlivelihoodsarefairlydiversifiedand,asaresult,comparativelyresilienttochangesintherubberprice.ThisisinstrongcontrasttotheBanHatNyaomodel,whichemphasizesthereplacementof(upland)riceproductionwithrubber.BanNamNgeunhighlightsthefactthatrubbercanbeasecondarysourceofincomeevenasthepricehasfallen,butonlybecauseadditionallandresourceswerelocallyavailabletohelpoffsettherisk.Response3.Landsales,leasesandconversions46

Salesandleasesofrubberplantationland–thelatterofteninconnectionwithconversiontoothercropssuchasbananas–hasbeenanincreasinglycommonfeatureofthenorthernlandscapeinthelastfewyears.AsnotedinSection1.2andelaboratedhere,rubberplantationssalesarenotnewinthenorth,butthefallinpricessince2012hasinteractedwiththeminafewdifferentways.Landleases,ontheotherhand,seemtobeanewerphenomenon,andpossiblyaresultoftheinteractionbetweenplantationsalesandfallingprices.

Landsales

Asnotedabove,officialswespoketoinOudomxaidescribedasituationthatmirroredwhatWeiyiShifoundinher2015revisittoLuangNamtha:landsalesbypoorerhouseholdswasdescribedas“normal,”andinvolvedbuyerswhoweredescribedasbusinessmenfromtheprovincialcapitalaswellasChineseinvestors.Thissituationwasdescribedasthebackgroundorcontextwithinwhichthefallinrubberpriceshadtakenplace;sincethedropinprices,demandforplantationshadfallen,

44Villageinterview,LuangNamthaprovince(Interview10).Inavariationonthethemeoflimitedoptions,onelocalgovernmentstaffinXaidistrictsaidthatvillagerswerecontinuingtotaptheirrubbertreesbecausethecompanywithwhichtheyhadacontracthadtoldthemthatthiswouldhelpmaintainhighlevelsofproductioninfutureyears(governmentinterview,Xaidistrict[interview12]).Thisseemssuspicious,giventhewidespreadchoicebymanyproducerstotaketheirplantationsoutofproductionwhilepricesarelow,butinanycasehighlightstheneedforgoodagriculturalextensionsothatfarmersunderstandtheiroptions.45BanNamNgeunvillageinterview,LuangNamthaprovince46BananaconversionisalsoreportedlyoccurringonawidescaleinBokeoprovince(StuartLing,posttoLaoFABdiscussionforum,25September2015).

24

andincreasingly“noonewantstobuyrubberplantations.”47Weheardaboutthislackofinterestinbuyingrubberplantationsfromothersaswell;onegovernmentrepresentativeinXaidistrictputitbluntly:“Manypeoplewouldliketoselltheirrubberplantations[now],butnoonewantstobuy.”48

Thisdoesnotseemtobethefullstory,however.Inthelongerterm,manypeoplewespoketobelievethatrubberpriceswillriseagain;fromthisperspective,thecurrentslumpinpricesactuallyrepresentsagoodtimetobuyplantations,assumingtheycanbepurchasedcheaply.ShireportedthatthistypeofstrategiceconomicbehaviorwashappeningbytheYunnanRubberCompanyinLuangNamtha;shedescribedYunnan,astate-ownedenterprise,asdifferentfromotherChinesecompaniesoperatinginnorthernLaosinthattheywereinvestingforthelongerterm,buyingnewrubberplantation(oftenfromotherChinesecompanieswhichweremoreinterestedinshort-termreturns)despitenotbeingabletotaptheplantationsthattheyalreadyhad(Shi2015:6).Ourworklackedthesamefocusonparticularcompanies,butweheardfromgovernmentstaff,whohadthemselves“heardunofficially,”that“somevillagershadsoldtheirrubberplantationstorichpeopleinthecity”in2014.49Ourinformantsdeclinedtodiscussthedetails,butthefactofplantationsalesbyvillagerstowealthierindividualsfromurbancenterssuggeststhatnoteveryoneisuninterestedinbuyingrubberplantationsinthecurrentlowpriceenvironment,andthatitisnotonlytheYunnanRubberCompanythatislookingatrubberasastrategicinvestment.

Whatisclearisthatthealready-difficultsituationfacedbymanyrubbersmallholdershasbecomemoredifficultaspriceshavedropped.Weheardaboutcontinuingsales,bothofindependentlyownedplantationsandthosewithinexistingcontractfarmingrelationships;inthelater,thebuyerwasreportedtotakeoverthecontractualrelationshipwiththecompany.50Inanumberofinstancesdebtseemstobeadrivingfactorforplantationsales,“whenlocalpeopleneedmoney,forexampletopayforaloanorcredittakenfrombank”51(alsoseeVientianeTimes2015a).Insomecases,contractfarmingcompanieshavecrossedoverintothepracticecashlending,incontrasttotheshare-basedmodeofcreditthatunderliestheirbusinessmodel(seeSection1.2).Asthishasledtodebtandplantationsales,localauthoritieshavebeguntoseethesystemas“broken”:

The“2plus3”contractfarmingschemehasbeenbrokenbecauselocalpeopledonothavemoneyfornecessarylivelihoodsandtheyborrowmoneyfromtheinvestmentcompaniesanddonothavemoneytopaybacktothecompany.Thentheysellrubberplantationtotheinvestor.52

Thisdynamismofplantationturnoverandconsolidationbywealthierholdershasmademanyofthegovernmenteffortstokeeptrackofrubberstatisticallyoutofdate.Giventherisksinvolved,thesameindividualcontinued:“Weneedtocheckhowmanycompaniesstillkeepthe‘2plus3’schemeandrequestadvicefromdistrictandprovincialauthoritiesabouthowtodealtwiththesituation.”53

Landleasesandconversions

Inparalleltotheabovementionedsalesofrubberplantations,thelastfewyearshasalsoseenagrowingincidenceoflandleasestoagribusinesscompanies,manyofthemChinese;oftenthese

47Governmentinterview,Oudomxai(Interview14);fullquoteinSection1.2.48Governmentinterview,Oudomxai(Interview16)49Governmentinterview,Oudomxai50Governmentinterview,Oudomxai(Interview18)51Governmentinterview,Oudomxai(Interview18)52Governmentinterview,Oudomxai(Interview16)53Governmentinterview,Oudomxai(Interview16)

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leasesresultintheconversionofthelandinvolvedfromrubbertoother(currentlyhigher-value)cropslikebananas,sugarcaneandothercashcrops.Whiledetaileddatawasbeyondthescopeofourresearch,theselandleasesseemtonotbelimitedtothesmallestandpoorestrubberproducers,whoareoftendescribedasthosemostlikelytoselltheirrubberplantationtowealthierbuyers(seeaboveandVientianeTimes2015a).Incontrast,leasesforbananasandotherhigh-valuecropsseemtobelocatedinlowlandareas(e.g.inSingandLongdistricts),oftenadjacenttowatersources,andinvolvelandownerswhohavelargeramountsofland.Inonetellinginterview,agovernmentstafferdescribedhavingtoomuchrubbertomanageasoneofthereasonsrubber-holdersweredecidingtoleasetheirlandforconversiontobananas.54

Thehighcashrentsbeingofferedbyagriculturalentrepreneursareonereasonwhylandholdersarelikelydecidingtoleasetheirland;ourinterviewsreportedleaseratesintherangeofLAK15-16millionperhaperyear,andinsomeinstancesashighasLAK20million.55Inonecase,Chineseinvestorswerereportedtohavepaidnotjusttoleasetheland,butalsoanadditionalCNY100perrubbertreecleared.56Thisisimportantnotonlybecauseofrubberplantationclearingmaycausethesmallholdertolosetheirinitialinvestment(assumingthewoodisnotbeingsold),butalsobecauseincasesofcontractfarming,smallholdersmaybefinedbycompaniessincethecompaniesownafractionofthetrees.ThiswasbeingdisputedwhileweweredoingoutfieldworkinOudomxai;asrecountedbyagovernmentintervieweeinHoundistrict:

Justthismorningwehadameetingaboutrubberplantationsamongrelatedauthoritiesatthedistrictleveltodiscussthereasonsforlocalpeoplecutrubbertrees;thisisbecausethecompanydoesnotfollowtheagreement.Weagreedtoreviewallcontractsandmakeareporttotheprovinciallevelabouttotheproblemofclearingrubberplantations.InthebeginningthecompaniesplannedtofinelocalpeopleLAK100,000perrubbertree,butwenegotiatedwiththecompanyandtheyagreedtofineatLAK60,000pertree.ThetotalfineamountismorethanLAK1.5billion[sincethecompanyhaslost]2,775trees.SomehouseholdshavetopayaboutLAK40millionperhousehold.57

Theeconomiccostsatstakeherearesubstantial;eventhelowercompensationvalueofLAK60,000pertreeaddsupquickly,sincerubberplantationstypicallycontainmorethan400treesperhectare.Thepotentialfordebt,whetherthroughtheconversionofcontractfarmingarrangementsintocashcompensationorviabankloansthatneedtoberepaiddespitethecrashinrubberprices,isthuslarge.AselaboratedbelowinSection4,questionsofownershipandcontractualobligationarelikelytobesubstantial;theonlyquestionfacingthoseinvolved,includinggovernmentauthorities,ishowbigofanissuethisactuallyis.

Thisisadifficultquestioninitself,giventherapidchangesinthelandscapeandthechallengesofgettingaccuratedataabouttheextentoflandconversion(inpart,butnotonly,duetothebandiscussedinSection3.1).OurresearchreportedvariousnumbersfortwodistrictsinLuangNamtha,includingoneofthedistrictswevisited(Sing);theseareshowninTable1.

54Governmentinterview,LuangNamtha(Interview11)55Governmentinterviews,LuangNamthaandOudomxai(Interviews1,2,7,12)56Governmentinterview,LuangNamtha(Interview11)57Governmentinterview,Oudomxai(Interview20)

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Table1.ReportedconversionfromrubbertoothercropsintwoLuangNamthadistricts

Trees Ha Households Villages Source

Singdistrict131,400 292 712 15 PICO

400

PAFO

Longdistrict25,650 57 46 1 PICO

“Nogooddata” PAFO

Beyondthesequantitativefigures,conversionfromrubbertootherlanduseswasalsoreportedinViengphoukha,Xai,HounandBengdistricts,whereitwaslinkedtosmallholdermaizeproductionaswellaslandleasestoChinesebananagrowers,inoneinstanceafterthe(alsoChinese)rubbercompanyfailedtotapaspromised.WhiletheconversioninXaidistrictwasdescribedasbeinglimitedto“afewhouseholds”(andwasdeniedbyanothersource,whoinsistedthatconversionwasonlytakingplaceinHounandBengdistricts),thelackof“detaileddata”wasacknowledged;weencounteredasimilarreticencetoprovidedetailsinViengphoukha.58InHoun,theextentofconversionfromrubbertobananaswasdescribedasmoresubstantial,involvingmultiplevillages,multipleyearsofclearing,andaquestionofwhetherrubberhadbeencleareddeliberatelyorlosttoshiftingcultivationfiresbyaccident.Buttheconflictwasclearlyrelatedtothefallinprices:

Thereasonlocalpeopleclearisthattheydonothaveanybenefitfromrubberplantation.Evenwhentherubberreachedeightyears[ofage],thecompanydidnottapduetolowrubberprices.59

Response4:Collectiveaction

CollectiveactionamongrubberproducersinordertocreatebargainingpowerandthuscommandhigherpricesisamajorpolicyobjectiveofprovincialauthoritiesinLuangNamtha.60Whilethecreationofmarketingcooperativeswaspromotedevenbeforerubberpricesbegantodrop,theformationofmarketingcooperativeshasbeenamajorpillaroftheofficialresponseofthelastfouryears(seeSection3.1above).Marketingcooperativesarenowwidelyknownamongrubberproducers,butwithsomeimportantexceptionssuchasBanHatNyao,theirestablishmentremainslimited.

BanHatNyao

ThepushformarketingcooperativesisgenerallyacknowledgedtobemodeledonthesuccessfulexperienceofBanHatNyao.RepresentativesofHatNyaowhowespoketonotedthattheircooperativewasnotformedformarketingpurposesperse,butearlierintheplantationprocesstosharetechnicalskillsforgrowingandtapping.Thecooperativewasformedin1994,whilethepowerofcooperativemarketingemergedlater,whenthevillagebegantosellitsrubberin2002.Sincethen,theproducersinBanHatNyao’smarketingcooperativeshaveexpandedtoincludenotonlyresidentsofBanHatNyao,butalsoothervillagesinthearea:

Atthepresent,intotal,wehave15unitsbelongtoourrubbercooperative;ofwhich,6unitscomefromothervillageswhoareourneighbors.TheseincludeunitsofrubbercooperativesfromBan

58InterviewsinOudomxaiandLuangNamtha(Interviews12,13and25)59Governmentinterviews,Oudomxai(Interviews12,16,18[quote])60Weusethetermcollectiveactioninageneralsense,notintendingtoimplythelegaldistinctionbetween“collective”and“cooperative”thatissometimesmadeinLaolaw.

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Bouamphieng,Viengthong,Viengkham,PhoxaiandNamHouay;theremainingunitiscombinedofindividualsmallholdersfromothervillagesinthearea.61

Thecooperativechargesmembersafeeequivalenttoafewpercentofthepriceofsale,andusesthemoneytorunthecooperativeandsupportthevillagedevelopmentfund.Inreturn,membersgetthebenefitsofcooperativemarketing.Reflectingtheiroriginsinindependent(althoughstate-subsidized;seeAltonetal.2005:51)financingratherthantheshare-basedcontractfarmingdescribedinSection1.2,thegrowersofBanHatNyaodonothaveapreexistingcontractwithanyparticularbuyer:

Wehavetofindbuyerseveryyear.Wediscussamongvillagerswhoshouldbeourbuyers–whowillgiveusthehighestprices.Thisiseasierthanhavingcontractwithaparticularcompany,whichwouldmeanwedon’thavemuchoptiontonegotiaterubberprices.…Ourrubbercooperativeworksduringtheperiodoftimeofsellingrubberproduct.Inordertosellourrubbereachyear,wehavetoholdameetinginordertodiscusswithallvillagersandagreeonprices.62

Thecombinationofindependenceandasubstantialmembershiphashelpedthecooperative’smembersinthefaceoffallingprices:

Therearemanyhouseholdsinourvillagecontinuetappingtheirrubbertree[evennow].Althoughrubberpricesaredropped,we(allvillagersinthisvillage)haven’thavehadtosellourrubberlowerthanCNY4.1perkg.Beforesellingrubberproducteverytime,wediscussandagreeamonglocalpeopleandallpeopleinthevillagesellrubberinthesameprices.We,asacooperativegroup,cansellrubberatahigherpricetotheYunnanFactory[inLuangNamtha]thanwhatispostedatthefactory;forinstance,wethefactorypostsatCNY3.5perkg,wecouldgetatleastCNY4perkg.63

DiscussingplansforatriptoChinatoscoutpotentialbuyers,villagerepresentativesmentionedtheirownversionofafloorprice,althoughinthiscaseenforcedbythepowerofcollectiveaction:

Wediscussedamongvillagershereinourvillage,weshouldnotsellourrubberproductinpriceslowerthanCNY4/kg.ThispricebasedonthepricesofrubberproductinChina(MeuangLa,MeuangMangandXiengHoung).…IncasewhenrubberpricesinLuangNamthadroplowerthanCNY4perkg,wehavetocrossthebordertoChinainordertofindbuyerswhowouldpayatleastCNY4.Infact,therearemanybuyerscometoourvillageanddiscussaboutbuyingrubberfromus.64

Scalingupwithlimitedsuccess

Twooftheothervillageswevisitedhadsuccesswithcooperativemarketing.InBanNamNgeun(discussedabove),residentsdiscussedtheirsuccesssellingtheirrubbertogether,andreportedapriceincreaseofCNY0.5(from3.5to4)perkgintheirlastrubbersale.InBanMokpalai(Oudomxai),wheremanyresidentshadrelativesinBanHatNyao,representativeshadreplicatedtheHatNyaomodel’seffortstodrawmembersfromsurroundingvillages:

Wehavearubber-buyinggroupinthisvillagethathasmorethan100householdsasmembers.Thereare12householdsfromthisvillage;fromBanNathong,15households;BanNongdin,25households;BanNongBuadaeng,10households;BanNafang,9householdsintwovillages;BanMai,10

61Villageinterview,BanHatNyao62Villageinterview,BanHatNyao63Villageinterview,BanHatNyao64Villageinterview,BanHatNyao

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households;BanNamOun,20households;BanVanglam,1household;BanNaNgeun,1household;BanLangching,7households;andBanPhonsavan,2households.65

UnlikeinBanHayNyao,however,thecooperativeinBanMokpalaireportednotchargingitsmembers,apparentlyrelyingonthebenefitsofincreasedpricestooffsetorganizingcosts.

Beyondtheseexamples,however,governmentrepresentativesnotedthatcooperativemarketinghadyettoscaleupsignificantly,despitetheadvantages.Weheard,forexample,inNamthadistrict:

Atthepresent,acooperativeisonlyformallyestablishedinBanHatNyao,whilepeopleinothervillagesaroundthedistrictstillselltheirrubbertothebuyersinindividually.Insomevillage,peoplealsogrouptogetherandselltheirrubberingroups,butthesegroupsarestillnotcooperativeslikeinBanHatNyao.Thebenefitofcreationofrubbercooperativeorrubbergroupisthatlocalpeoplewillhavemorepowertonegotiatewithmarketorbuyersinordertobuytheirrubberlumpsinahigherpricesthanwhattheysellinindividualhouseholds,whichaboutCNY0.5to1perkghigherthansellinginindividually.66

Threeissuesmayhelpexplainthelackofmarketingcooperativesonawiderscale.Oneisalackofunderstandingabouthowcurrentcooperativesactuallywork,andinparticular,theextenttowhichthecooperativeheadactuallymakesmoney.Inonevillagewevisited,villagerstoldus:

Ifweestablisharubbergrouporassociation,wewouldprobablygainhigherprices.Butlocalpeopledonotwanttobemembersofthegrouporassociationbecausetheydonotwanttopayapercentagetotheheadofthegroup.67

Asecondandmoresubstantialreasonisthatlowpriceshavedrivensomanyproducersoutofproductionthattherearenotenoughofthemtoactcollectively.Residentsinonevillagewhereallbuteighthouseholds(outof50-60)hadstoppedtappingtheirrubberexplainedthat,“Weassumethatwewillbeableestablisharubbercooperativeinourvillageinthenextfewyearswhenrubberpricesaregettingbetterandwhenpeopleinthisvillagewidelytaptheirrubbertrees.”68

Afinalreasonmayconcerntherelationshipbetweengroup-basedaggregationandtheconsolidationofholdingsdiscussedabove.Marketinggroupsworkbestwhentheaggregationofproductsforsalehasanimpactonsaleprice.Ifandwhenproducersalreadyhavesufficientvolumetocommandhighersaleprices,marketinggroupsmayprovidefewerbenefits.Wewerenotabletoinvestigatethispossibilitygiventhelackofdetailedonplantationholdings,buttheevidencewecollectedsuggeststhatthisisnonethelessapossibility.Response5:Mobility

Inadditiontoaggregatingtheirrubberpriortosale,anumberofrubberproducerswespoketodescribedtransportingtheirrubberthemselvesinordertofindmoreattractiveprices.ThiswasdescribedaboveinthecaseofBanHatNyao,butasthissectiondescribes,italsooccurredmorebroadly.

AccordingtotechnicalgovernmentstaffinOudomxai,“Thereisnotastandardpriceforrubberin[this]province.ManygrowersselltheirrubberinLuangNamtha;sometradersalsocometothe

65Villageinterview,BanMokpalai66Governmentinterview,LuangNamthaprovince(Interview4)67Villageinterview,Oudomxaiprovince(Interview17)68Villageinterview,LuangNamthaprovince(Interview6)

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provinceforcollectingrubberfromlocalpeople.”69AndasvillagersfromOudomxaidescribed,pricesvaryevenwithinLuangNamtha,leadingthemtomakedifferentchoicesaboutwheretotaketheirrubbertosell:

Weknowtherubberpricesfromtradersandfrom[relatives]inBanHatNyao.…WesometimestravelNaTeuay[nearthebordercrossingatBoten,ontheroadfromOudomxaitoLuangNamtha]tosellourrubbertotheTaiChiangfactory,whichgivesLAK500perkgmorethanprices[offeredbytraderswhocometo]thisvillage.Othertimes,wesellourrubbertotheYunnan[RubberCo.]factoryinNamtha,whichoffersLAK500perkgmorethantheTaiChiangandLAK1000perkgmorethanpeoplebuyinthisvillage.70

Intheabsenceofwidespreadcooperativemarketing,intermediarycompanieshavesteppedintothisnicheandbeguntocapitalizeonthepricedifferencethatcomeswithaggregation.WemetonesuchbuyerontheroadfromLuangPrabangtoOudomxai.HepurchasedrubberfromlocalgrowersatthesamepricepostedattheYunnanRubberCo.factoryinLuangNamtha,effectivelysavinggrowersthecostandtimeoftransportingit.71Butpresumablyhewasabletoselltherubberforapricesimilartothecooperativemarketingpricesmentionedabove,makingroughlyCNY0.5to1perkgextra;thiswouldbeoffsetbyhisowntransportationcosts,butithasapparentlyprovensufficientlyreliableasabusinessmodelthatitispersistingdespitethefallinprices(Figure8).

Figure8.Rubbersaletointermediarycompany,LuangPrabangProvince.Rubberarrivesbytruck,bicycleandfoot(A,B),isweighedandmarked(C)andthenloadedintocompany’struck(D)fortransportationtoYunnanRubberCo.factoryinLuangNamtha

69Governmentinterview,Oudomxaiprovince(Interview14)70Villageinterview,Oudomxaiprovince(Interview21)71Interviewwithrubbertrader,LuangPrabangprovince(Interview26)

A

D

B

C

30

3.3.Thepriceofrubber

Allrubbergrowersknowthatrubberpricesarebasedontheglobalrubbermarket.72

Oneofthemostconsistentfindingsacrossourfieldworkwastheunderstandingthatthedropinrubberpricesiscausedbychangesintheglobaleconomy.Weheardthisrepeatedlyinalloftheplaceswevisited.Sometimesitappearedinthecontextoffarmersexplainingtheirchoices–forinstance,theirdecisionsnottotap,ortorelyonhouseholdlaboronly(seeprevioussection).Inotherinstances,itappearedinthecontextoflocalofficialsexplainingtogrowersthattherewasnothingthattheycoulddoaboutthedropinpricesbeingofferedbytraders,exceptwait.Asonedistrictofficertoldus:

Therearesomevillagerswhocametotheofficetoraisetheissueoflowrubberprices,andtheofficerecommendedthemtotalktotheinvestmentcompaniesdirectly.However,issueoffallingrubberpricesisnoteasytodealbecauseitistheissueofglobalrubbermarket.73

Thisexplanationisrepeatedregularlyatmultiplelevels.Asoneinformantputit,theformerMinisterofAgricultureandForestryhadconfirmedthisexplanationonavisittoLuangNamtha,notingthat“theproblemofrubberpricesisnotonlytheissueinLaos,butaroundtheworldbecauseoftheglobalfinancialcrisis.”74Aprovincial-levelofficialreportedlyheardthesamethingfromaLaogovernmentrepresentativeinKunming,afteraskingaboutthepossibilityofinquiringwiththeChinesegovernmentaboutlowrubberprices.“Theresponsefromambassadorwasthatwehavetowaituntiltheworldrubberpricegoesup.”75

Butasourresearchrevealed,asimportantastheglobaleconomyis,itisonlypartofthestory.Lowpricesaretosomeextenttheresultofchangesintheglobaleconomy,buttwoadditionalissuesareimportantonamorelocalscale.ThefirstconcernstherelationshipbetweentheChineseeconomyandtheglobalrubberprice,andthesecondconcernstherelationshipbetweenpricesinChinaandpricesinLaos.Wefocushereonthesecondofthese,butinordertofullyunderstandwhere“farm-gate”pricesinLaoscomefrom,itisimportanttostartwiththefirst.

TheglobaleconomyandtheChineserubberprice

OneofthenotabledetailsabouttherecentfallinglobalrubberpricesisthatitseemsnottohavebeenreflectedinChineserubberpricesforatleastsixmonths,andperhapsmuchlonger.Thisisdifficulttotell,becauseeventhoughmonthlyglobalrubberpricedataiseasilyavailable(seeFigure1),temporally(time-based)detaileddataaboutrubberpricesinChinaorLaosismoredifficulttocollect.Duringourfieldworkanddataanalysisperiods,wewereunabletogetthisinformation,andinfactweheardfromsourceswhohaveworkedinbothChinaandLaosthatregularpurchase-pricedatainChinaisnotreadilyavailable.76ButifinterviewdataaboutpricechangesinLaosiscomparedtotheglobalpricedata,alagofmorethanayear–andpossiblyuptoayearandahalf–occurs.ThisisclearfromcomparingFigure1,whichshowsglobalrubberpricesbeginningtodropinearly

72Governmentinterview,Oudomxai(Interview14)73Governmentinterview,Oudomxai(Interview12)74Governmentinterview,LuangNamtha(Interview3)75Governmentinterview,LuangNamtha(Interview2)76MélanieCanetandanonymoussource(bothpers.comm.withthesecondauthor,December2015)

31

2011(firstinFebruaryandthen,followingabriefriseinMarch,fromAprilonward),tofarmers’recollections.Weheardrepeatedlyinourvillageinterviewsthatrubberpricesbegantofallin2012,firstinNamthadistrict,theninSing,andtheninViengphoukha.Thefirstofthese,inBanHatNyao,wasthemostprecise,datingthefallinpricestolate2012,whereastheothertwojustsaidthatpricesbegantofallin2012.77Despitetheimprecision,thisiswellaftermid-2011.

Inadditiontohighlightingtheneedforbetterdataonlocalrubberprices,thismismatchprovidesareminderthatrubberpricesinChinaarelikelysubsidizedbythegovernment.In2005,Altonetal.wrotethatstatesubsidies,including“nationalpricesupports…atattractivelevels”formedthebasisforthesuccessoftheChineserubbersector,andthatalthoughChina’smembershipintotheWTO“mayhaveimplicationsforChinesepricesupportsforrubber”inthefuture,thesepricesupportswereineffectthen(Altonetal.2005:22,75).Tenyearslater,thelaginpricechangessuggeststhatsomeformofChinesepricesupportmaystillbeineffect;whilenotabadthingassuch,itsuggeststhatChinesegovernmentpolicyplaysanactiveroleinshapingpricesinadditiontoglobaleconomicdemand.Unfortunately,thisprotectivedimensionofChinesepolicydoesnotcarryoverintoLaorubberprices.

RubberpricesinChinaandLaos

LaorubberproducersbenefitfromChinesegovernmentpolicies(sofarastheseexist)whichbufferthepurchasepriceforrubberagainsttheuncertaintiesoftheglobaleconomy.ButthereisanotherwayinwhichChineserubberpolicydoesnothelpLaogrowers,andwhichcounteractsanybeneficialeffectsofChinesepricesupports:theimportquotasystem.Asnotedabove,mostofthebuyersofLaorubber–andalloftheultimatebuyers,afterthemiddle-menlikethoseshowninFigure8havesoldtheirrubber–areasmallnumberofChinesecompanies.(OurinterviewsidentifiedthreesuchcompaniesinLuangNamthaandfourinOudomxai.)ThesecompanieshavebasicrubberprocessingfacilitiesinLaosand,moreimportantly,quotastoimportrubberintoChina.Processingfacilitiesandquotasarerelated:Laorubberproducerssellrubberlumps(yangkohn),butimportquotasareforrubbersheets,madefromrubberthathasbeenalreadydried(yangheng)andpressed;processingfacilitiesarethekeyintermediarystepforrubberbuyersbetweenthefarmgateandthefurtherprocessingstepsthatoccurwithinChina(Shi2008;PAFO2013).

Rubbercompaniesposttheirpurchasepricesattheirprocessingfacilities(Figure9).Thesepricesrefertolumprubbersoldinsmallquantities,andarethebasisforpopularandpolicydiscussionsaboutrubberpricesinnorthernLaos;whenfarmersorofficialsortheVientianeTimesrefertorubberprices,theygenerallymeanthesepostedprices.Unfortunately,theredoesnotseemtobearecordofthesepricesthatisreadilyavailabletoresearchers.WeinquiredatthefactorywherethephotoinFigure9wastaken,aswellaswithprovincialgovernmentofficers;althoughtheprocessingfacilitypostspricesregularlyandprovincialofficialsmonitorpriceseverymonth,neitherwereabletogiveusdetaileddataabouthowpriceschangedovertime;thebestwewereabletocollectweretheannualaveragepricesshowninFigure1.

Giventheselimitations,wenonethelessthoughtitwasimportanttotrytocomparepricedataforLaosandChina.Thiswasbecauseinadditiontothecomments(mentionedabove)thatexplainedcurrentlowpricesonfallingglobaldemand,weheardreferencestothepowerthattradersexerciseoverthecross-bordertrade.Thesewereespeciallyclearinthecaseofgrowerswhohadbeento

77Villageinterviews,LuangNamthaprovince(Interviews5.10and25)

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ChinatotrytoarrangepurchasingoftheirrubberandwhowerethusawareoftheChinesepricecontextaswellastheLaoone:

[We]trytofindthewaystogethigherrubberpricesaswecan.However,theproblemisChinesemiddlemendohavetoquotatoimportrubberfromLaostoChina.InfacttherearemanypeopleinChinawouldliketobuyourrubberproduct,buttheycannotimportrubberproducttoChinawithoutreceivedprovidedquotafromChinesegovernment.…Inthiscase,wewouldliketorequestthegovernmentofLaostonegotiatewithChinesegovernmentinordertofreelyexportofrubberproductfromLaostoChina.IfwecanfreelyexportourrubberproducttoChina,wewillhavemoreoptionsandmorebuyersandwewillgethigherpricesthanwhatwehavesoldatthepresent.78

Figure9.PostedpriceattheYunnanRubberCo.factoryinLuangNamtha,August2015

Weheardfrustrationsfromgovernmentofficesaswell.Onedistrict-levelofficerwespoketonotedthechallengesofrelyingoncompaniesforpriceinformation,evenwiththerecommendedpricesfromLuangNamtha:“However,theseinformationsourcescannotindicatewhetherthetradersarecheatinglocalpeople.Weshouldhaveofficialsourcesofinformationaboutthepricesofrubber.”Thesamepersonexpressedfrustrationwiththestandardexplanationofwhypricesweresolow:

IthinkthemosteffectivestrategyforrubberpricesisthatthegovernmentofLaosshouldhavecontractwithChinesegovernmenttosetrubberpricestogether.Pleasedonotstatethatrubberpricesarebasedonpricesinthemarketbecausewedonotknowthecertainpricesoftherubbermarket–wherearethemarketsthatpriceshavebeenbasedon,inChina?79

Thelimiteddatathatwewereabletocollectsuggeststhatthesesuspicionsandfrustrationswerewellfounded.Figure10comparespricedataforLaosthatwecollectedinourinterviews,includingtheannualaveragepricestatisticsmentionedaboveandshowninFigure1,withdatathatwefound78Villageinterview,LuangNamtha(Interview5)79Villageinterview,Oudomxai(Interview13)

33

aboutrubberpricesinChinabylookinginpublishedsourcesandonline.InordertomakesomeoftheChinesecomparablewithLao“farm-gate”prices,wehadtoadjustitforwatercontent,sincerubberpricesareoftenreportedinChinafordry(ratherthanlump)rubber.80AsFigure10shows,theyearsforwhichcomparabledataisavailable–2003,2004,2006,2014and201581–implythatLaopricesareroughlyhalfthoseonofferinChina.Whilesomeofthisdifferencemaybeduetothequalityoftherubberbeingsold,andasmallportion(probablybetween5and10percent82)isattributabletotheexporttaxesleviedbyLaocustoms,themajorityofthedifferenceinpriceseemstobeduetothemarketpowerexercisedbyquotaholders.

Figure10.Farm-gatepricesinnorthernLaosversusXishuangbanna,Yunnan.Source:interviews(Laosdata)andsecondaryandonlinesources(Chinadata).83

AlthoughthedatashowninFigure10hasanumberofcaveats(and,asabove,highlightstheneedforbetterstatisticsaboutrubberprices),itissupportedbynotonlythequalitativeevidence(quotes)presentedabove,butalsothismorespecificaccountfromoneofthevillageswevisited,whichputthepriceinChinaalmost80percenthigherthanthepriceinLaos:

WefeelthatrubberpricesinLaosarestilllowcomparedtothepricesinChina,whichtheygetCNY7.5perkg,whileweonlygetCNY4.2perkg.…WetalkedtoourrelativesandfriendsinChina,andweknowthatrubberpricesinLaosarenotfairforusbecausepricesofrubberinChinaaremuchhigherthaninourvillage,whichisnotreallyfairforfarmerslikeus.84

80Weusedaconversionfactorbasedononeofourinterviews,whichtranslatedintoanassumptionthatlumprubberis57percentlatex.Mostconversionsuseafactorof60percent(anon.pers.comm.,December2015).81In2008,ChinesevaluesrepresenthighandlowvaluesandarenotdirectlycomparabletotheLaoaverage.82Villageinterview,LuangNamtha(Interview5)83ChinadatacomesfromTangetal.(2009);http://laoban.xianhuo186.com/dongtai/nonglin/59308.htmlandhttp://www.agri.cn/V20/SC/scjghq/xjhq/sczw/201511/P020151104340014178220.pdf(accessedNov.2015withtranslationassistancefromWeiyiShi).84Villageinterview(Interview25)

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3.4.Whatshouldtherubberpricebe?

Duringthecourseofourinterviews,weheardmanyopinionsaboutwhatthepriceofrubbershouldbe.Thesestatementsoftensimplyreflectedthefactthatpriceswerefarlowerthanproducershadexpected,andthatgoodlivelihoodsbasedonrubberalonewereadifficult,ifnotimpossible,hopeinthecurrentcontext.Althoughourcatalogingofnormativestatementsaboutrubberpricesdonotcarrythevalidityofasurvey,webelievethattheyareworthpresentingnonetheless,iffornootherreasonthantoencouragefollow-up.WepresentafulllistofthenormativestatementsweheardaboutrubberpricesinAnnexVI;herewebrieflydiscussthreeissuesthatstoodout.

First,therewasarelativelyconsistentfindingthata“good”priceforrubberwasintherangeofCNY7-8perkg;thiswasthelevelatwhichpeoplewespoketobelievedthatrubbergrowerscouldmakealivingfromrubber,notdependonothersourcesoflivelihood,andactuallyescapefrompoverty.Inotherwords,thiswastheapproximatepricelevelatwhichtheinitialpolicyrhetoricaboutrubberasaprioritycropforuplanddevelopment,povertyalleviationandtheeliminationofshiftingcultivationwouldactuallybevalid.Itisworthpointingoutthegeographicalbiasinthisfinding,however:priceexpectationsseemedtobe,basedonourinterviews,higherinLuangNamthathaninOudomxai.ThesixhighestpricesdiscussedallcamefromLuangNamtha;theserangedfromCNY10toCNY6perkg,clusteringintherangeofCNY7-8perkg.Incontrast,thehighestnormativepricementionedinOudomxaiwasLAK7,000,orroughlyCNY5.6perkg.

Second,normativestatementsaboutpricesnonethelessreflectedwhatseemstobeasubstantialtoleranceforlowerrubberprices–thoseintherangeofCNY6-5perkg,andinsomecasesevendowntoCNY4.Thisacceptancewasexpressedmoreoftenbygovernmentofficialsthanbygrowersthemselves,butintwocases,itappearedinvillageinterviewsaswell.Atthispricerange,fewpeoplewespoketosawfarmersexitingpovertyordoingwell,buttheysawthemasnonethelessbreakingeven,gettingby,survivingandsoon.While“justgettingby”iscertainlybetterthanthealternative,thisdiscrepancybetweenofficialrhetoricandacceptanceoflowerpricessuggeststhatexpectationsforrubber-basedlivelihoods,whilestillpresent,arelowerthantheywereduringthe2000s.

Third,asoneintervieweefromOudomxaipointedout,thecredit-basedmodelofcontractfarming(seesection1.2)meansthatrubberproducerswhoareinvolvedincontractfarmingrelationshipseffectivelytakeapricecutanyway;thispersonthussuggestedthatpricesbeincreasedbyroughly30percentoverthebaseprice,inordertocompensatecontractfarmersforthefactthattheyhavetoprovidecompanieswithatleastsomeoftheirrubber“forfree”(i.e.asarepaymentfortheinitialloan).Whilethismaynotbearealisticpolicyexpectation,itnonethelesshighlightsthechallengesfacedbycontractfarmerswhohaveeffectivelytradedawayasubstantialfractionoftheirrubberproductionupfrontduetotheircreditingarrangements.Thistypeofstatement,despiteitsdubiouslogic,isnonethelessindicativeofthefrustrationswithlowpricesthatcurrentlyexistthroughoutnorthernLaos.

4.Discussion

4.1.Rubber:Boomcroporstrategiccommodity?RubberiswidelyreferredtoinLaosasastrategiccrop,butwhatdoesitactuallymeantotreatanagriculturalcropstrategically?Generally,theanswertothisquestioninvolvesstateintervention,actingonthepremisethatsomecommoditysectorsaretooimportanttobelefttotheprivate

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sectoralone.Rubberisarguablyonesuchsectorduetobothitssizeand,moreimportantly,itsdistributionamongthesmallholderproducerpopulation.Investmentinplantationestablishmentduringthe2000sisgenerallybelievedtohavebeenapproximately300,000hectaresnationally,andasubstantialfractionofthis–maybeathirdorso–islocatedinthenorthwherethesmallholdermodelwasdominant.EvenasplantationsalesoverthelastdecadeorsohaveerodedtosomedegreethesmallholdernatureoftherubbersectorinnorthernLaos,rubberisstillimportanttomanysmallholderlivelihoodsinthenorththroughbothindependentproductionandcontractfarming.

Undercurrentconditions,however,thismaynotlast–oratleastitmaynotlastatasignificantscaleunderconditionsthataresociallybeneficial.Thelastdecadeorsohasseenrubberbehaveinthemannerofclassic“boom”crops,inwhichproducerslargeandsmallflocktothecommoditywhenpricesaregood,butthenleaveitatvaryingrates(dependingontheirvulnerabilitytomarketshocks)aspricesfluctuateovertime.Pricefluctuationtendstoselectforacombinationofspeculation–buyingwhenpricesarelowsimplyforthepurposeofsellingwhenpricesrise–andlong-termconsolidationbylargeractorswhoareabletomobilizecapitalwhentimesaretouch(i.e.whenpricesarelow).Althoughthisstudydidnotinvestigatetherationalesforplantationpurchasesindetail,thelimitedevidencethatwefoundwasconsistentwithbothofthesepatterns.

Whatisclearisthatsmallerproducerswhohaveremainedintherubbersectorarerapidlybecomingdissatisfiedwiththecrop(alsoseeVT2014e).Asonevillagerepresentativeputit,“Inthebeginning,wethoughtthatwewouldgainhouseholdincomefromrubberplantationforimprovingourlivelihoods;unfortunately,pricesofrubberarenowdropped,andweloseourexpectationthatrubberplantationswillimproveourlivelihoods.”85Anothervillageinterviewhintedatthepotentialforvillagerstointerpretlowpricesasafunctionofgovernmentdecisionsratherthanjusttheglobaleconomicsituation:

Wewouldliketorequesttotheconcernedauthoritiesatbothprovincialanddistrictleveltocheckwhypricesofrubberhasdroppedsomuchthesedays;isitbecausetheconcernedauthoritiescollecthightaxfromrubbertraders/buyersorisitbecausetheworldmarketforrubberproduct?86

Thesetypesofbeliefsamongsmallholderssuggestthatthecurrentapproachhasputauthoritiesinadoublydifficultsituation.AsdiscussedinSection3.1,oneoftheresponsestofallingpricesbystateinstitutionshasbeentodecreasethetaxesthatrubbercompaniespay;thishashurtpublicrevenuecollection,whichhasbeenlessthanexpectedforseveralyears,inpartduetocompaniesthat“havetriedtoavoidpayingtaxestothegovernmentviavariousmeans”(VT2015b).Atthesametime,however,quotesliketheoneabovefromvillagershighlightthefactthatthismaynotbewidelyknown,andthatsomepeoplelinklowpriceswithpoorgovernmentperformance.Inthissense,smallholderdissatisfactionanddiscouragementduetolowpricesisnotonlyaneconomicissue,butpotentiallyapoliticaloneaswell.

Amoreregulated,“strategiccommodity”approachisnonethelessnotentirelyunrealistic.Laoshasalonghistoryofidentifyingcertainsectorsasstrategic,andcreatingorretainingsignificantstatecontrolinordertoinfluencethebehaviorofthemarketmorethanifconditionswerelefttoprivateactorsalone.Amongthemostnotableareaswherethishasoccurredaretheforestryandenergysectors(Walker1999;Wyatt2004;MAF2005).Inbothcases,stateinterventionwasrationalizedasa85Villageinterview,LuangNamtha(Interview25)86Villageinterview

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waytocounterbalancetherisksofleavingthesectorlargelyinthehandsofthemarket,especiallyincontextswherecommodityvalueswerelarge,wheresubstantialpowerwasexercisedbyforeignbuyers,andwherelocalconditionsrequiredastrongregulatoryhand.Forreasonsdescribedabove,therubbersectorisarguablyinasimilarsituationtoday.

4.2.Regulatoryoptions:Beyondthe“on-off”approachStateregulationishardlyabsentfromtheLaorubbersector,butithasbeenunevenand,insomecases,hardtosee.AsSection1.2describes,governmentinterventionplayedasignificantroleineffortstoscaletheHatNyaosmallholdermodelupusingacontract-farmingmodel.Thepromotionofcontractfarming,bothinitsoriginal“2plus3”formand,whenthisreceivedlowuptake,throughthemorecoercive“1plus4”variant,reliedheavilyonstate-ledeffortstoconvinceuplandfarmerstobecomesmallholderrubbergrowers.Butanimportantchangealsoaccompaniedthismodel:unlikethepubliclysubsidizedloanthatmadetheHatNyaomodeleconomicallyviable,thecontractfarmingmodelreliedonacreditmodelcontrolledbytheprivatesector,andthatultimatelyclaimedasignificantportionoftherubber’sfutureeconomicvaluefromproducers.Bothbeforeandduringthelow-priceenvironmentthathasoccurredsince2012,manyoftherubberproducersinnorthernLaoshavefacedstateinterventionthatwasfarlesssupportiveoftheirlivelihoodneedsthanthestateeffortsoriginallyusedtohelpBanHatNyao.

ItisessentialtolearntherightlessonsfromBanHatNyao.Inadditiontothelessonthathardworkandcommunitycohesionarenecessaryforsuccess,theneedforastable,decentpriceenvironmentshouldbynowbeapparent;thisoftengoesunrecognized,buttheevidencepresentedinSection3should,hopefully,begintochangethestory.

Theimportanceofaddressingthemarket(andspecificallytheprice)contextforrubberhighlightsthelimitsofcurrentresponsestofallingrubberprices,whichhavethusfarreplicatedthe“on-off”approachtoregulationtypicalofearlierresponses(e.g.tolandconcessions).Thefindingspresentedabovehighlightboththepossibilitiesof,andtheneedfor,amoregraduatedandmulti-facetedapproachtoregulation–anapproachismoreinlinewiththe“strategiccommodity”goaldescribedabove.Belowwediscussfoursuchoptionsthatcouldbeusedincombinationwithoneanother.

Option1:Floorpricesandotherlawenforcement

Historically,contractfarminghashadmixedresultsforproducers,whosecommitmenttoselltheirproducttoasinglebuyerhasoftenworkedtotheirdisadvantage(LittleandWatts1994).Butoneoftheadvantagesofcontractfarmingistheinvestor’sobligationtopurchasetheproduct,evenintimesofdecreaseddemand.Contractuallyspecifiedfloorpricesareoneclassicapproachtoprotectingfarmersfromtheextremesofboom-and-busteconomies.Butinorderforfloorpricestobeeffective,theyhavetobeenforced,andthatmeanstheyhavetobeunderstoodbyfarmersandstateofficialsalike.Thesituationwehearddescribedinourinterviews,inwhichfloorpricesweredeemedtobeprohibitivelyhighforthecompaniesinvolved,indicatesamisunderstandingoffloorpricesbothintheory–lowpriceswingsarepreciselywhenfloorpricesarerelevant–andinthecurrentsituation,wheremost(ifnotall)oftheChinesecompaniesinvolvedinthecross-borderrubbertradehavereceivedanumberofsubsidies(throughthepoppyreplacementprogram,aswellasthedefactosubsidycreatedbycontrollingascarceandvaluableimportquota);insuchacontext,argumentsthatcompaniescannotaffordtopayfloorpricesarequestionableatbest.

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Oneproblemislikelythatrubberwaspromotedsoheavilyasacropwithhighandsustaineddemand;insuchacontext,regulationonbehalfofstrugglingfarmersislesslikelytobeneeded.Floorprices–andenforcementofthe“fineprint”containedincontractsmoregenerally–aremorelikelytobefollowediftherisksofanuncertainmarketarediscussedexplicitlyinadvance.Thisdidnotoftenhappen,andnowthechallengeistoswitchfromacontextwherepricesarenegotiatedtoonewheretheyfollow(atleastwherepossible)conditionsthatwereagreedwhenproducershadmorepower–i.e.beforetheyagreedtoplant.

Althoughitwasbeyondthescopeofourwork,weheardanumberofreferencesinourinterviewstotheneedformoreorbetterlawenforcementinrelationtorubberprices.Itispossiblethatthisreferredtofloorprices,butothercontractualrequirements–aswellasotherlegalrequirementsmoregenerally–couldalsoberelevant.OneofthesituationsdescribedaboveinSection3.2,inwhichcontractfarmersinHoundistricthadcutdowntheirrubbertreesandplantedsomethingelse,isinstructive:indefendingtheirdecisiontocutdowntherubbertrees,villagersgavethereasonthatthecompanyhadnotfolloweditsendofthecontract;thecompany,incontrast,wasattemptingtofinevillagersforthetrees,andlocalofficialswerecaughtinthemiddle.Whetherthetermsofthecontractofferedadditionalprotectionforfarmersthanthereducedfinesthatdistrictofficialsagreedtoontheirbehalf(seep.25)isthetypeofquestionamorelegallyattunedregulatorycontextmightbeabletopursue.Giventheprotectionsthatsuchanapproachmightgivetosmallholders,itisnotunreasonabletoexpectthataregulatoryapproachbasedmoreoncontractenforcementwouldhavehelpedmaintain–andcouldstillhelprecreate–asmallholder-dominatedrubberlandscapeinnorthernLaos.

Option2:Pricesupportsandothersubsidies

Anevenmoreactiveapproachtoregulatingthepriceenvironmentmaybenecessaryifthegoalofasmallholder-dominatedrubberlandscapeisgoingtoberealized.AsnotedinSection3.3,Altonetal.(2005)named“attractive”nationalpricesupportsasoneofthepillarsofsuccessforChina’srubbersector;theotherpillartheynamedwasstatefarms,whichreceivedsubstantialsubsidiesthroughtheirverybusinessmodel.Inthelastdecade,asChinesecompanieshavegoneabroad,theseearlierdomesticsupportshavebeenreplicatedintheimportquotasandpoppyreplacementsubsidiesdescribedatlengthbyotherresearchers(Shi2008;KramerandWoods2011);theformer(importquotas)appearedaboveinthecontextofrubbertraders’economicpower,whilethelatter(althoughnotdiscussedinourinterviews)underpintheeconomicstabilityofthecompaniesinvolved.Insuchacontext,Laorubbergrowersarecurrentlyfacingnotonlythepressuresoftheglobalmarket,butalsotheeffectsofChineseeconomicprotection.

LaoauthoritiesmightthusconsidertheexampleofThailand,whichannouncedsubsidiestohelpitsrubberproducersinlate2014,largelyinresponsetodemandfromproducersthemselves.Subsidiestargetedboththepriceofrubberandsmallholdersdirectly:

[The]State-runBankofAgricultureandAgriculturalCooperativescouldlendupto30billionbaht($925million)totheRubberEstateOrganization—undertheMinistryofAgriculture—tobuyrubberfromthemarketandsellittothegovernment,said[Thailand’s]DeputyPrimeMinisterPridiyathornDevakula,whoisalsoavicechairmanofthecommittee.Thegovernment,whichalreadyhasadvancedpurchaseorders,willbeablesellthestockslatertoboostprices,Mr.Pridiyathornsaid.…Thecommitteealsoapprovedaonetimepaymentworthatotalof8.5billionbaht($260million)tohelp850,000rubberfarmers.(WallStreetJournal2014)

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SuchanapproachcouldhelpLaofarmersaswell,althoughthebalanceofprice-basedversusland-basedsupportwouldlikelyneedtobeafunctionofthedistributionofplantationholdings.(Pricesupportshelpallgrowers,whileland-basedsupportshelpsmallholdersinparticular.)Assuggestedbyquoteslikethefollowing,subsidiesaimedatincreasingtherubberpricesmightbewelcomedbygovernmentofficials,whoarecurrentlyfacingdissatisfiedsmallholdersononehandandpowerfulbuyersontheother:“TheIndustryandCommerceOfficeandMinistryshouldsetthefloorpriceforrubber.Itshouldnotrely[so]heavilyoninvestors.”87

Althoughpricesupportsrequiresignificantexpenditure,theycanbejustifiedongroundsofaddedproductivity.Thailand’sricesubsidypolicy,whichwasmentionedbymanyrubbergrowersintheirdemandsforstatesupportintherubbersector,wasdefendedinsuchtermsinastatementreleasedbythePheuThaiPartyin2015:

Thegovernment…implementedtheRicePledgePolicybysubsidizingthericepriceandtransferring…870,018MillionBahtdirectlytothefarmers.Thisinturnincreasedfarmers’purchasingpower[and]thusstimulatedtheeconomy.Asaresult,thegovernmentwasabletocollectadditionaltaxformorethan1trillionBahtperyear.(PheuThaiParty2015)

Whilestatementslikethesehaveapoliticalangle–PheuThaiwastryingtodefendformerPrimeMinisterYingluckShinawatraagainstcorruptionchargeslinkedtothericepurchasingpolicy–itisreasonabletoexpectthatrubberpricesubsidieswouldpayforthemselvesifdirectedtowardalargeenoughgroupofsmallholderrubberproducers.Giventherolethathouseholdincomesplayindrivinglocaleconomies,thefeedbackormultipliereffectsofstatefundsspentonrubberpricesupportscouldultimatelyoutweighthecosts.

Option3:Expandothermarkets

Duringourinterviews,weheardanumberofrequestsforLaoauthoritiestoinvestigatetheoptionofdevelopingothermarketsforLaorubber.Thesestatementshighlightedthefactthatmanyofourinformantssuspectedtherewasmoretolowrubberpricesthanlowglobaldemand.EveniflogisticalandmarketconditionsultimatelydrawLaorubbertoChina,theexistenceofothermarketoptionswouldcreatecompetitionand,indoingso,decreasethepowerofcurrentrubberpurchaserstodictatepricestoLaoproducers.Othermarketoptionswould,inotherwords,increasetheleverageofLaoproducersandauthoritiestonegotiatebetterprices.

Thetwobasictypesofothermarketoptionsaredomesticvalue-addingandotherforeignbuyerssuchasThailandorVietnam.Theadvantagesanddisadvantagesofthesevariousapproacheswerebeyondthescopeofourstudy,butwoulddependontherelationshipofcoststoleveragegained.ThedevelopmentofapurelydomesticmarketforLaorubberwouldlikelybeprohibitiveduetovariousreasons,butitmaynonethelessbepossibletoaddatleastonemorestepinthevaluechainpriortoexport.Thiswouldlikelydependon,amongotherthings,supplyreliability,whichwouldinturndependonhowmanynorthernproducersareindependentversusincontractingrelationshipswithChinesecompanies(currentlyunknown),aswellasthepossibilitiesforsubsequentexportofthefinishedrubbersheets.ForeignexportoptionsotherthanChinawouldlikelybeinfluencedbyamixofeconomicgeographyanddiplomaticrelations.Althoughtheplantationboomduringthe2000sseemedtodemarcatenorthern,centralandsouthernLaosasChinese,ThaiandVietnamese

87Governmentinterview,Oudomxai(Interview14)

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focusedrubberzones,thefuturemaynotbesosimple.Itisconceivable,forinstance,thatVietnam’srubberindustry,eventhoughiteventuallysellsmanyfinishedcommoditiestoChina,couldabsorbLaorubberathigherfarm-gatepricesthanviaChinadirectly.Althoughthisiswellbeyondthescopeofourwork,thepresenceofanewVietnameserubberprojectinOudomxai’sBengdistrictwasanotableanomaly.Theproject,aconcessionor“1plus4”project(dependingonsources)whichbeganin2011,suggeststhatfutureexportsfromnorthernLaos’srubbersectormaybemoremulti-nationalthanthesituationtodate.

Option4:Diplomacy

Inourinterviews,anumberofpeoplewhobelievedthatpriceswereduetomorethanjustglobaldemandsuggestedthattheLaogovernmentdiscusspriceswithitsChinesecounterparts.Thesestatementscamefromvillagers,aswellasfromdistrictandprovincial-levelofficials.Oneofourvillageinterviewscontainedthisparticularlyplainappealforcentral-levelassistance:

WeneedthegovernmentofLaostonegotiatewithChinesegovernmentinordertofreelyallowlocalpeopleinLaostoexportrubberproductstoChina;otherwise,theChinesetraderswillbeabletocontroltherubberpriceinLaos.Thus,thecentralgovernmentisnowimportantforrubbertradeinLaos.Withoutanyactionfromthecentralgovernment,rubberpriceswillnotbemuchincreasedcomparedtowhattheyareatthepresent.88

Itisquitepossiblethatdiplomaticdiscussionshavealreadyoccurredaboutrubberprices,andthatcurrentpricesreflectarelativelackofleverageonthepartofLaoauthorities,whomaynotcarryasmuchweightwithChineseauthoritiesasrubberproducersinapartofthecountrywhereeconomicdevelopmenthaslongbeenseenasastrategicpriority.Oneofourgovernmentinterviewshintedatthelackofprogressinsayingthat“provincialauthoritiesproposedtothegovernmenttonegotiatewiththeChinesegovernment,butChinesegovernmenthasnotconsideredifrubberisaddedtotheimportlistofgoodsfromLaos.”89

WhileitispossiblethatLaosmayhaveabitmoreleverageinitscurrentroleaschairofASEAN(especiallywithissuesliketheSouthChinaSeaterritorialdisputesdestinedtoemerge),adifferentanglemayholdmorepromisefordiplomaticdialogue:thethreatofLaofarmersreturningtoopiumcultivation.AsnotedbytheUnitedNationsOfficeonDrugsandCrime(UNODC),opiumcultivationintheso-calledGoldenTrianglearea(whichincludesnorthernLaos)hasgrownsubstantiallyinthelastdecade,andiscurrently“stabilizedathighlevels”duetoacombinationofhighglobalandregionaldemandandrelativelyfeweconomicalternativesforproducers(UNODC2015;VT2015c).Thatthisincreasehastakenplacealongsidetheroll-outofChina’sopiumcropreplacementsubsidiesforChineseagribusinesshighlightsthelimitsoftheseefforts,asChinesebusinesses,includingrubbercompanieswithimportquotas,havetakenadvantageofthesubsidieswithoutpassingthebenefitsontofarmers(Shi2008;KramerandWoods2011;Dwyer2014).Asappealstoequitablebilateralcooperationcomeupshort,ongoingChineseconcernsaboutthatcountry’sdrugtradecouldprovetobeareasonforcompromiseonrubberimportquotas.AsimpliedbythedatashowninFigure10,thiswouldlikelygosomewaytowardaddressingthepresentpriceissues.

88Villageinterview(Interview5)89Governmentinterview(Interview14)

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4.3.AdditionalresearchneedsInadditiontopolicy-leveldiscussionaboutthevariousregulatorydimensionsdiscussedabove,ourresearchidentifiedfiveissuesthatdemandadditionalstudy.Thesearediscussedbelow,andlistedinorderoftimeliness.Allaretimely,butwebelievethefirsttwoareespeciallysoduetoimmediateimpactsonlivelihoods.

Topic1:Householdimpactsoflowprices

Inthecurrentlow-pricecontextwhereasignificantfractionofrubberproducershavetakentheirplantationsoutofproduction,amajorquestionremainsrelevantforthosehouseholdsthathavecontinuedtotap:whataretheeffectsofsustainedlowpricesatthehouseholdlevel?AsdiscussedinSection3.2,continuingtotaprubberplantationsusinglargelyhouseholdlaborisaresponsethatisoccurringonafairlywidescaleintheprovinceswestudied,andlikelyelsewhereaswell(e.g.Bokeo,Phongsaly,LuangPrabang,Vientiane,Bolikhamxai).Whilethislivelihooddecisionmayrepresentthebestavailablechoice,atleastsomehouseholdsseemtobedoingsoatleastinpartbecausetheyhaveinvestedsignificantresourcesinestablishingtheirrubberplantations,andcannotsimplywalkawayfromthisinvestment.Thisdemandsmoreresearch.

Inparticular,theeffectsofhouseholds’decisionstocontinuetappingrubberplantationsatlowpricesislikelytohavedifferentandpotentiallyadverseimpactsamongdifferentmembersofthehousehold,asvariouscompensationmechanismsforlowerpricesareadopted.Studyingspecificmechanismswasoutsidethescopeofourresearch,butthesecouldincludeincreasevolumeofwork(whetherintherubbersectororelsewhere),newformsofwork,additionalworkloadamongvariousmembersofthehousehold,orvariouscombinationsofthese.Theimpacts,especiallyonmorevulnerablehouseholdmembers,shouldbestudied.

Topic2:Indebtedness

Anotherissuethatdemandsfurtherresearchistherolethatindebtednessplaysincausinglandusechange.Inourinterviews,weencounteredafewreferencestodebtthatwastakenonbyrubberproducersaspartofestablishingtheirplantations.AsnotedinSection3.2,wealsoheardofatleastoneinstancewhereacontractfarmingcompanyhadbegunlendingcashtoitsproducers,ineffectcreatingtwotypesofdebt(cashandrubber).RecentresearchonSavanakhet’ssugarsectorhasrevealedsomeimportantparallelstotherubbersectorinnorthernLaos,andsuggeststhatdebt–ratherthanlazinessorgreed,asisoftensuspectedbylocalauthorities–maybeadrivingfactorfortheconversionofrubberplantationstohigh-rentalternativessuchasbananas.AsPhoumanivongetal.describe:

Manyhouseholds[inSavannakhet]whohadexperiencedplantingmorethan10hectares,gotintodebt,[and]consequently,theydecidedtoreducetheirsugarcanefieldsto2-3hectares,andrentedouttherestoftheirlandtothefactoryortootherbusinessmen.…Therentmoneyreceivedfortheirlandwasusedtocuthouseholddebtfromthepreviousseason(fertilizer,sugarcanestalk,herbicide,landpreparation).Somelandhadtoberentedtothesugarcompanyfor10yearsormore,inordertocompensatefortheirdebt.(Phoumanivongetal.2015:25)

Thisisanimportantfindinginitself–itshowshowcontractfarmingcanleadtolandlossviathepathwayofindebtedness–anditmayapplytothenorthernrubbersectoraswell.Inacontextwhereproducershavetakenonsignificantdebtjustaspriceshavecrashed,andwherelandleaserateshaveincreasedsubstantiallyas“available”landhasbecomeincreasinglyscarce,landrentals

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maybearesultofhouseholdstryingtocleartheirdebt,ratherthansimplybeinglazyorgreedy.90Theprevalenceofdebtisunknown,butthesinceindependentproductioniswidespreadinbothLuangNamthaandOudomxai,theunexpectedcrashinpricesmakesitlikelythatindebtednessisfairlycommoninthenorthernrubbersector.Itspotentialtodrivelandusechangeandassociatedshiftsinproduction(laborregimes,chemicalregimes,andsoon)makeitanimportantandtimelytopicforadditionalresearch.

Topic3:Distributionofrubberplantationholdings

Asdiscussedabove,theextenttowhichrubberremainsasmallholderplantationcropversusaconsolidatedplantationcropinthehandsoflargerprivateholders–ofplantationsover10hectares,forexample–remainsanunknownandimportantquestion.Thedistributionofrubberholdingshasbeenchanging,andasdescribedinSections1.2and3.2,hasbeenmovingfromalargelysmallholdermodeltowardamuchmoremixedlandscapeofplantationsizes.Boththelocalandtheoverallquantitativedimensionsofthisareimportant,andanumberofthegovernmentofficialswespoketodiscussedtheneedto“updatethedata”onthedifferentbusinessmodelsineffect.ThisdistributionhasimportantimplicationsfortheregulatorychoicesdiscussedinSection4.1:smallholderstendtowarrantmoreanddifferentprotectionsthanlargerholders,whilelargerholdersmaycauseamixofsocial,environmentalandeveneconomiceffectsduetothewaytheymanagelaborandagriculturaltechnologiessuchasherbicides.AsSection3.1makesclear,largerholderstendtotakerubberoutofproductionmorereadilythan“true”smallholders,whichcanhavewidereffectsontheLaoeconomyif,amongotherthings,taxesarenotcollectedortherearenotenoughrubberproducerstoformmarketinggroups.Acontemporarysurveyofrubberplantationholdingsatthecurrentmomentisthuslikelytobeusefulininformingstateauthoritiesofhowtomoveforwardinthecurrentlow-priceenvironment.

Topic4:Time-specificrubberpricedata

Inadditiontolandholdings,oneofthemajordatagapsthatprovedtoolargeforthisprojecttoaddresswasdetaileddataabouthowrubberpriceshavechangedovertimeinnorthernLaos,aswellasacrosstheborderinChina.AsexplainedinSection3.3,morefinelyresolvedtime-specificdataaboutrubberpriceswouldhelpevaluatejusthowbigthedifferenceinpricesisbetweenLaosandChina,andthushowmuchtheextenttowhichmarketpowerisresponsibleforlowpricescomparedtootherglobalandlocalfactors(rubberquality,exporttaxesandtransportationcosts).

AsnotedinSection3.2(Mobility),priceswithinnorthernLaosvaryaswell,sometimesenoughthatrubberproducersdecidetotaketheirproductfartherthantheclosestbuyer,insomecasestakingitallthewaytocentralLuangNamthafromsouthernOudomxai.Trackingrubberprices’changeovertimewouldentailrecordingitonaday-by-daybasisintheplaceswhereitisposted,eitherbymonitoringitdirectlyorrequiringbuyerstonotifyauthoritieswheneverpriceschange(andkeepingarecordwhenthisoccurs).Inthecurrentpriceenvironment,gooddataaboutrubberprices–overtimeandinmultiplelocations–isespeciallyimportantforprotectingLaogrowersfromunfairmarketpracticeslocally.Andinthelongerterm,whetherpricesarehighorlow,detailedpricedataonbothsidesoftheborderwillhelpensurethatLaogrowersarenotoverchargedforthingsliketransportcostsandborderfeessimplybecausetheydonotfullinformation.90ThelandleaseratesreportedbyPhoumanivongetal.(USD312perraiperyear,orapproximatelyUSD1,950perhaperyear)wereremarkablysimilartothoseweheardreportedinLuangNamtha(seesection3.2).

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Topic5:Chineseagribusiness

Moregenerally,abetterunderstandingofChineseagribusinesscompaniescanhelpLaoproducersandauthoritiessubstantially.Inthelastfewyears,asignificantbodyofresearchonandexperiencewithChinesecompaniesandtheChinesegovernment’s“goingout”policyhasbeenaccumulatedintheborderlandsofnorthernLaos(seeesp.citationsinSections1.1and1.2).Butthereismuchthatremainsunknown.TwosuchissuesthathaveappearedhereincludetheextenttowhichChinesegovernmentpoliciesandsubsidieshavecushionedChineserubbercompaniesagainstthecurrentslowdownandlow-priceenvironment,andwhetherstate-ownedenterprisesarebehavingonlyinaccordancewithmarketconditionsandexpectations,orwhethertheyarealsoshapedbyChinese“cooperative”developmentpoliciesthatseektoimprovelocallivelihoodsevenbeyondstrictlymarketconditions.

Inthecurrentcontextofdecreasedrubberpricesand,moregenerally,anapparentslowdownintheChineseeconomy,itislikelythatthesortofclaimsbeingmadebyrubbercompaniesaboutnotbeingabletoaffordhigherpurchasepricesmaynotbelimitedtotherubbersector.Sometimestheseclaimsmaybetrue;planscanchange,assumptionscanproveunreasonable,andfarmersdonotalwaysholduptheirendofthebargain.Butsometimestheseclaimsmaybejustnegotiationtacticsusedbypowerful,opportunisticentrepreneurs.ThemoreLaoauthoritiesandextensionagentsknowaboutthecompaniestheyareworkingwith,themoretheywillbeabletotellthedifference,andtheeasieritwillbetoworkwiththem,sothatnegotiationsendinproductiveandbeneficialrelationshipsratherthanbadfeelingsandmisunderstanding.

5.Summaryofrecommendations

ThefollowinglistprovidesasummaryoftherecommendationsthatemergedfromthediscussionofresultspresentedinSection4.Forfurtherdetails,pleaseseeabove.

1. Followuponreportsofthenon-enforcementoffloorprices.2. Studytheimpactsofsustainedlowrubberpricesatthehouseholdlevel,especiallyonmore

vulnerablemembersofthehousehold.3. Investigateindebtednesstoassessitsinfluenceoncurrentlandusechanges,especiallythe

conversionofrubbertoother(newer)boomcrops.4. Createaninventoryofrubberholdingsandproductionarrangements(businessmodels)in

ordertoassesstheextenttowhichrubberisstillasmallholdercrop,andhowthisvariesfromdistricttodistrict(andevenmorelocally).

5. CollectbetterdataaboutpastandpresentchangesinrubberpricesinvariouslocationsinnorthernLaosand,totheextentpossible,inChina.

6. Evaluateanddiscusstheextenttowhichrubbershouldbeastrategiccommoditytobepromotedandsupportedamonguplandsmallholders.ExplorevariousregulatoryanddiplomaticpossibilitiestoimprovethepriceenvironmentforLaosmallholders,bothnowandintothefuture.

43

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collectiveactionandriskintransitionaldevelopingeconomies.Doctoraldissertation,UniversityofSydney.

45

AnnexI.Reportedrubberareas

Statisticsonrubberareascollectedduringfieldworkinterviews(allnumbersinhectares) Productionarrangement

(“businessmodel”)Total

reportedTotal

calculated Source

ConcessionIndependent

(“smallholder”)production

Contractfarming91

2+3 1+4

LUANGNAMTHAPROVINCE

3,557 16,409 13,298 34,347 33,264 PAFO

10,841

“Largestproportionoftotalrubber

plantationareaintheprovince”

Magnitudeofshiftfrom2+3to1+4“hasnotbeen

assessed” PICO

Sing 472 1,340 9,720 DAFO

Namtha Notavailablewithintimeallotted DAFO

ViengPhouKha 550 “nottappedyet” 3,069

(550mature) DAFO

OUDOMXAIPROVINCE 1,000

About30,00092 PAFO

Xai 0 Yes Yes No 4,172(150mature) DAFO

Houn0 342 5,54893 39094 6,280 DAFO

473395 DPIO0 20% 80% 6,000 DICO

91SeeSection1.2(sub-section“Scalingup,withatwist”)fordiscussionof“2plus3”and“1plus4.”92“Largerthanpaddyricearea,whichisabout14,000anduplandricewhichisabout11,000.”93Ofwhich5,430JianfongCo.94Vietnamesecompany,plantingsince201395Jianfong(“AccordingtothestatisticfromDAFO,rubberplantationbelongtoJianfongis5,400ha(2014).However,datasurveyedbyplanningofficein2013is4,733ha”)

46

AnnexII.Villagesvisited

Province District Village Details

LuangNamtha

Namtha HatNyao • Hmongethnicity• Thefirstsuccessfulvillageinrubberplantationvillagein

LuangNamtha(andinthenorthernLaos)• LocatedclosetocapitalofLuangNamthaprovince• FirstrubbercooperativevillageinLaos

Sobsim • Khmuethnicity• LocatedinNamthadistrict,butdistancefromChineseborder

anditisabout24kmfromprovincialcapitalofLuangNamtha• Newrubberplantationvillage,comparedtoHatNyaoand

othervillagesinthesamedistrict• Informalurbannetwork-basedinvestmentduetoitslocation

Sing Oudomsin • MienethnicityorHmongMien• FirstrubberplantationvillageinSingdistrict• LocatedclosetolocalLao-Chinesebordercheckpoint,where

onlyis3kmtothebordercheckpoint• Allrubberplantationsareself-investmentbylocalpeople

Phiyer • Akha(Ikor)ethnicity• Locatedabout9kmfromcapitalofSingdistrict,butstillhavinggoodconnectiontotheLao-Chineseborder

• FirstAkhavillagethathavesucceedincashcropproduction(initiatedbysugarcane)

• Rubberplantationismainlyinvestedbyvillagers

Viengphoukha NamNgeun

• Lueethnicity• FirstrubberplantationvillageinViengphoukhadistrict• Locatedalongthemainroad(Rte.3)connectionbetweenChinaandThailand

• Rubberplantationinthisvillageiscombinationofself-investmentbylocalpeopleandcontractfarming

Oudomxai Xai KorNoi • Lueethnicity• LocatedalongthemainroadfromOudomxaitoBoteninternationalbordercheckpoint

• Rubberplantationiscombinationofself-investmentbylocalpeople,co-investmentbetweenlocalpeopleandrelativesfromtheprovincialcapitalofOudomxaiandcontractfarmingwithChineseinvestors

Houn MokPhalai

• MixedofHmongandKhmu• LocatedawayfromChineseborder• Rubberplantationinthisvillageisstillyoung,peopleinthisvillagestartedtappingrubbertreesin2014

• Rubberplantationiscombinationofself-investmentbylocalpeopleandcontractfarmingwithChineseinvestmentcompany

47

AnnexIII.Stakeholdersinterviewed

Location NumberofParticipants

LUANGNAMTHA

ProvincialAgricultureandForestryOffice 2ProvincialIndustryandCommerceOffice 1ProvincialPlanningandInvestmentOffice 3ProvincialTaxOffice 1

NamthaDistrictAgricultureandForestryOffice 1

DistrictIndustryandCommerceOffice 1

Sing

DistrictAgricultureandForestryOffice 2DistrictIndustryandCommerceOffice 3DistrictPlanningandInvestmentOffice 1DistrictFinanceOffice 2

ViengphoukhaDistrictAgricultureandForestryOffice 2DistrictIndustryandCommerceOffice 1DistrictFinanceOffice 1

OUDOMXAI

ProvincialAgricultureandForestryOffice 2ProvincialIndustryandCommerceOffice 1ProvincialPlanningandInvestmentOffice 2ProvincialTaxOffice 1

XaiDistrictDistrictAgricultureandForestryOffice 1DistrictIndustryandCommerceOffice 1DistrictPlanningandInvestmentOffice 1

HounDistrictDistrictAgricultureandForestryOffice 1DistrictIndustryandCommerceOffice 2DistrictPlanningandInvestmentOffice 3

VillagesLuangNamtha

HatNyaoVillage,NamthaDistrict 3SobsimVillage,NamthaDistrict 11OudomsinVillage,SingDistrict 2PhiyerVillage,SingDistrict 2NamNgeunVillage,ViengphoukhaDistrict 3

VillagesOudomxai

KorNoiVillage,XaiDistrict 2MokPalaiVillage,HounDistrict 2

PrivatesectorYunnanRubberProcessingFactory 3Sino-Laorubberprocessingfactory 2ARubberTradeUnitinLuangPrabang 2

Total 68

48

AnnexIV.Discussionquestionsforkeyinformantinterviews

1. Canyoustartbyexplaininghowrubberfitsintotherangeoflocallivelihoodsinthis[provinceordistrict]area?

2. Whendidthefallinrubberpricesbegintobecomeanissueofconcern?(Whenwasthisinrelationtothebeginningoftapping?)Where(fromwhoorwhatsource)didyoustarthearingaboutfallingprices?Howdoyouunderstandthereasonforthedropintherubberprice?

3. Howhaverubberholdersrespondedtothefallinrubberprices?

Thefollowingquestionswillalsobeaddressed(ifneeded):a. Aresomerubberholdersclearingtheirlandandplantingothercrops?Ifso,please

providedetails(what,when,whetherornotthenewcropsareproducingreturnsyetand,ifso,howtheycomparetorubber).

b. Aresomepeoplesellingtheirland,andifso,whattypesofgrowersareselling?Whoaretheysellingto?(Whoisbuyingrubberrightnow?Companies?Wealthierfarmers?Peoplefromurbancenters?Etc.)

c. Arepeoplerespondinginotherways?Pleaseprovidedetails.

4. Aresomerubberholderscontinuingtotaptheirtrees?Ifso,whatkindsofpricesaretheygetting?Istherearangebetweendifferentbuyers,ordoeseveryonepaythesame?Howmanybuyersarethereinyourarea[province,district,village]?

Follow-upquestions:a. Areanyofthepricesofferedabovethestandardmarketprice?Ifso,isthisbecause

ofrecentagreements(e.g.betweencompaniesandlocalauthorities)orbecauseofagreementsmadeatthetimecontractsweresigned(e.g.listedinthecontract)?

5. Howarepurchasepricesfromfarmers(“farm-gate”prices)determined?

Follow-upquestions(ifneeded):a. Arefarm-gatepricessetinrelationtoworldmarketprices?Aretheybasedonprices

inChina?Insomewhereelse?Aretheysetbytraders?Ifso,doyouknowhow?(It’spossiblethatrespondentswon’tknow.)

b. Inanyofthecontract-basedproductionarrangementsinthisarea,arepricesdiscussedinthecontracts?Ifso,how?Inanycasesareminimum(“floor”)pricesguaranteed?

i. Ifso,arethesebeingpaidnow?Aretheyadequatetofarmers’livelihoodneeds?

ii. Ifnot,wasthereanydiscussionaboutminimumpricingguaranteesbackinwhenprojectswerestartingup?

6. Whenandhowdidrubberplantingstartinthisarea?

Follow-upquestions:a. Wasrubberplantingstartedinitiallybysmallholdersorbycompanies?Whendid

companiescomein,andwhattypesofarrangementsdidtheyoffer?Whatwerethekeypolicyissuesbackthen?Wasrubberprice/demandanissueofconcernthen?Whyorwhynot?

7. Whatistherangeofrubber-growingarrangementsnow?Follow-upquestions:

a. Arethereindependentsmallholders?

49

b. Arethereinformalshare-croppingagreements?Ifso,betweenwhom?(Onecommonarrangementisbetweenrelativesindifferentplaces,butsometimesthisalsooccurswithwealthy“elites”fromurbancenters.)

c. Arethereformalcontractfarmingschemes?d. Arethereconcessionschemes?e. Doyouhavestatisticsormapsonanyofthese?Canyousharethese?

8. [FORGOVERNMENTSTAFFONLY,INCLUDINGATVILLAGELEVEL]Doyouhavearoleinmanagingrelationsbetweengrowersandbuyers?Ifso,pleasediscussthisingeneralandwhetheritdiffersforthedifferentarrangementslistedinquestion7.

9. [FORGOVERNMENTSTAFFONLY,INCLUDINGATVILLAGELEVEL]Areyouinvolvedinhelpingtomanagethesellingprocess?Ifso,how?Ifnot,havetherebeenanyrequests(e.g.byrubbergrowersorbycompaniesortraders)forstateinvolvement?

10. Dopeopletalkaboutappropriatepricesforrubber?Isfairnessanissueofconcern?Howshouldpricesbedetermined?

11. Issalepriceanissue/problemforanyothercrops?Ifso,howdoesrubbercomparetothese?

12. Oftheresponsesthatarecurrentlyoccurring(seequestion3),doyouconsideranyofthesetobeeffectivestrategiesfordealingwiththeproblem?(Orarethesejustcopingmechanisms?)

13. Whattypesofactiondoyoubelieveareneeded,andfromwhom?

14. DoyouhaveanyideasaboutanythingthatauthoritiesorexpertsinVientianedotohelp?

15. Whatdoyouforeseerubberpricesdoinginthenext5or10years?Increase?Decrease?Why?

16. Thishasbeenveryhelpful–thankyouverymuchforyourtime.Wearealmostfinished.wehaveafewquestionsaboutthewidercontextrelatedtoothercrops.Thiswillhelpusunderstandthesignificanceofourfindings.Howdoesrubbercomparewithothercropsinthisareaintermsof:

a. importancetolocallivelihoods?importancetothelivelihoodsofanyparticularsub-group(e.g.poorpeopleversuswealthierfarmers?peopleinacertainpartofthedistrict/province?peoplewhohavelivedherelongerversuspeoplewhohavecomemorerecently?)

b. areaplanted?Howdoesrubbercomparetoothercropsintermsofaverageholdingsize?Totalareaofrubberplantation(ifavailable)

c. lengthoftimeithasbeencontributingtolivelihoodsinthearea?d. challenges(e.g.tocommunitylandrelations)?96

ADDITIONALQUESTIONSFORGOVERNMENTSTAFFATDISTRICTANDPROVINCIALLEVELONLY:17. Lastly,Ihaveafewquestionsaboutpossiblesolutiontoaddresscurrentsituation:

a. Havelocalpeopleraisedfallingpricesasanissueofconcernwithyourofficeorotherrelevantgovernmentoffices?Havetheymadeanyspecificsuggestionsabout

96Thesemaybeusefulasfollow-upquestions:Whendidrubberplantationstart,howandwhy?Isrubbertheonlyindustrialtreeplantationinthisarea?Whynototherspeciesorcommercialcrops?Howdidrubberexpandinthearea?Howwerecompanytermsset,anddidthischangeovertime?Werelocalfarmersinterestedincooperatingwithcompanies,andifnotatfirst,whatwasdonetomakethemparticipatemore?(Betterterms?moreinvolvementoflocalauthoritiesinlandmanagement/zoning?Etc.)

50

howtoaddresstheissueoffallingprices?Ifso,doyouthinkthesearerealistic?b. Haveyouconsultedwithnationalstakeholders(whoorwhichorganizationsatthe

nationallevel)withregardstothefallofrubberprice?Ifso,whatrecommendationdidyoureceivefromnationallevel?Whatisrequiredinorderforthistoberealistic?

THANKYOUSOMUCHFORYOURTIME.PLEASEPROVIDECONTACTINFORMATIONIFYOUAREINTERESTEDINRECEIVINGACOPYOFOURFINDINGSEARLYNEXTYEAR.

51

AnnexV.Rubberpricesreportedinfieldworkinterviews

RubberpricesinnorthernLaos,2000–2015,reportedbysource.Circles,trianglesandsquaresshowprovincial,districtandvillage-levelsources,respectively.SmallshapesrepresentLuangNamtha,largerepresentOudomxai.

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

2000200120022003200420052006200720082009201020112012201320142015

Pricespaidtoru

bberfa

rmers(RM

B/kg)

DistrictinterviewsLNT-NT ProvincialstagsgcsLNT

ProvincialinterviewsLNT DistrictinterviewsLNT-Sing

VillageinterviewsLNT-Sing VillageinterviewsLNT-NT

DistrictinterviewsLNT-VPK VillageinterviewsLNT-VPK

ProvincialinterviewsOUD DistrictinterviewsOUD-Xai

DistrictinterviewsOUD-Houn VillageinterviewsOUD-Xai

VillageinterviewsOUD-Houn PrivatesectorinterviewOUD

52

AnnexVI.Normativestatementsaboutrubberprice

Statementsaboutwhatrubberpricesshouldbe,rankedbyorderofdecreasingprice.Price/kg

CNY LAK Details Source

10

"Aswediscussedamongrubbergrowerinourvillage,weshouldhaveatleast10Yuan/kg(lumpofrubber),orifwesell1kgofrubberlump,weshouldbeabletobuy1kgormilledrice"

Villageinterview,LuangNamtha

8 10,000

Thereisnotsetpricebetweengrowerandbuyer.However,localpeopleoftenmentionedthatthelowestpricesforrubberlumpshouldnotlowerthanLAK10,000/kg.Iflocalpeoplecangetthisprices,rubberplantationwillbeabletofeedtheirlivelihoods.

Governmentinterview,LuangNamtha

7-8

"Localsmallholderswouldliketoproposethatrubberpricesshouldnotbelessthan7-8Yuan/kgofrubberlumps.However,italsodependsonthecapacityofthebuyers."

Governmentinterview,LuangNamtha

7-8

"Themostappropriatepricesofrubbershouldnotbelowerthan7-8Yuan/kg(lump);iflocalpeoplecouldselltheirlumprubberintheseprices,onlybaseonrubberproduction,localpeoplewillbeablegraduatefromtheirpoverty."

Villageinterview,LuangNamtha

7

"Ithardtosayhowmuchshouldbeappropriatepriceforrubber,butwhenItalkedtolocalpeople,theywillbehappyiftheycangetatleast7Yuan/kgoflump."

Governmentinterview,LuangNamtha

6

“We[NamthaDAFO]discussedwiththebuyersincludingYunnanandTaiChiantobuyrubberlumpfromlocalpeopleatleastshouldnotlesserthan6Yuan/kg.However,…"

Governmentinterview,LuangNamtha

5.6-8

7,000-10,000

"Ithink,atleastshouldnotlowerthan7,000k/kg.However,inthecontractfarmingscheme(2+3)thepricesshouldbeatleastLAK10,000/kgbecauselocalpeoplewillgainonly40%ofthebenefit,whiletheinvestorgain60%."

Governmentinterview,Oudomxai

5.6-6.4

7,000-8,000

"In2012–2013,localpeoplereceivedabout7,000–8,000k/kg.Thispriceshouldbesuitablelowestpriceforlocalpeople.Iftheygetthisprice,theywillfocusononlyrubberplantationandtheplantationwillbesurecontributedtotheirlivelihoodimprovement."

Governmentinterview,Oudomxai

5.6 7,000"Accordingtolocalpeople,iftheycangetatleastLAK7,000/kg,rubbercouldprovide[sufficient]benefitandpeoplewouldnothavetoworkforotherjobs--theycouldsurvivejustbasedonrubbertapping."

Governmentinterview,LuangNamtha

5.6 7,000 "ThelowestpriceshouldnotlowerthanLAK7000/kg."Governmentinterview,Oudomxai

4-5.3

"Wediscussedwithlocalpeopleinmanyvillages,theytoldusthatrubberpriceslowerthan4Yuan/kgisnotprofitableforlocalpeople.Localpeoplewouldliketogetatleast5.3Yuan/kg."

Governmentinterview,LuangNamtha

5

"Wediscusswithmanypeoplewithinourvillage,thelowestpricesforrubberproductsinourvillageshouldnotlowerthan5Yuan/kg;ifpricesofrubberlowerthanthis,wecannotrelyonrubberplantationforimprovingourlivelihoods."

Villageinterview,LuangNamtha

53

4.4 5,000-6,000

"AlthoughrubberpricesarefallingatLAK5,000–6,000/kgisOkforlocalpeopletotaprubber,theygainfromrubberplantationmorethanotheragriculturalactivities."

Governmentinterview,Oudomxai

4 5,000"Idiscussedwithlocalpeople,theywouldprefertotaptheirrubberiftheycangetatleastLAK5,000/kgatleast.Otherwise,itisnotprofitablecomparedtotheirlaborspendforrubberplantation."

Governmentinterview,Ooudomxai

4

"Thereareabout50%oftotalrubbergrowersinNamthadistrict(whoserubbercanbetapped)donottaptheirrubbertreeduringthelowprices;theywillwaituntilthepricesgouptoatleastCNY4/kg.Thereisnoanyotheroptionsexceptforwaitingthepricesofrubbergoup."

Governmentinterview,LuangNamtha