Written by Mekong Institute

This report is an integral part of the project “Capacity Development for a More Inclusive and Equitable Growth, Greater Mekong Subregion (GMS)”. Basically, the report integrates the findings from literature review and desk research coupled with observations and interviews conducted during field visits in March and April 2013 and supplemented by cross-examination with key players in the public and private sectors as well as development projects at various nodes of the rice value chain.  

Guided by the objective of the project paper on “Value Chain Prioritizing and Selection” in Khammouane, Lao PDR, to the authors have orientated this rice value chain analysis towards assessing the current status and requirements for value chain strengthening. Sub-objectives include designing specific strategies to improve productivity, income and growth in the upstream nodes (input providers, farmers and supportive organizations of production units); in the midstream nodes (milling and other processing units); and the downstream nodes (retailers and international traders) and their impacts on commercial rice value chains in Khammouane.

At the end of rice value chain analysis, key recommendations have emerged to target increasing productivity by using good-quality seeds and modern production techniques, improving water supply management and extension services, establish grading and rice quality standards/ certification for global markets, maintaining and upgrading farm to market roads. The main recommendations are targeted on the upstream nodes of the rice value chain. For the midstream nodes expanding financial services to improve access to inputs and encouraging private firms such as miller to increase their participation in international trade and investment. At the downstream nodes, recommendations include enhancing trade facilitation and improving export processing.

Additional summary conclusions from this analysis include the following:

Summary of Key Barriers in Rice Value Chain

Market Constraints

High input costs and limitation of access to inputs, especially for individual smallholder farmers

• Absence of contract farming mechanisms and regulations for enforcement
• High cost of transportation as a result of poor farm-to-market roads
• Rice cross-border trade is done through single exporter; therefore there is a monophony market with insufficient competition.
• Low price of rice, caused mainly by government policies on restricting exports and expanding food security reserves
• Insufficient financial services and high interest rates result in low investment in the value chain
• Low rice milling efficiencies result from insufficient in efficient milling equipment and rice mill management.

Governance

• Uncertain rice standards and certification for global market competitiveness
• Poor physical infrastructure, especially farm-to-market roads and poorly managed irrigation systems
• Weak information sharing and facilitation in grading, classifying and standardizing to differentiate product pricing and to encourage farmers to produce good rice qualities.
• Lack of regulatory framework and enforcement of contracts.
• Weak information sharing and promotion of getting private input suppliers involved in supporting farmers to obtain better access to inputs.
• Ineffective flood management program resulting in production losses, especially during rainy season

Institutional

• Weak extension services, particularly for individual farmers in rural farming communities
• Increasing and inefficient use of chemical fertilizers may have adverse affects on environment and production costs
• Absence of farm level technology, particularly to measure the moisture content of rice

Human Resources

• Little knowledge on post-harvest management resulting low rice prices
• Labor shortage with increasing rural wages