April 10, 2008 / 12:15 AM / in 10 years

Laos faces thorny land issues in Asia's orchard

VIENTIANE (Reuters) - After decades of isolation, Communist-led Laos is enjoying an economic boom fuelled in part by surging demand for its abundant commodity -- land.

<p>A Cambodian farmer works on his land near Mekong river bank in Kandal province, outskirts of Phnom Penh April 8, 2008. REUTERS/Chor Sokunthea</p>

From China to Japan and South Korea to Thailand, agri-business firms are flocking to the landlocked Southeast Asian nation to grow everything from rubber and pulp trees to organic vegetables and “green” crops for alternative fuels.

“Laos will be ASEAN’s orchard in a couple of years,” Thai embassy commercial officer Chalaempon Pongchabubnapa said of the 10-nation Southeast Asia grouping of which Laos is a member.

One of the poorest countries in Asia, with many of its citizens living on around $1 per day, Laos has gradually opened its tiny economy to foreign investment since the Pathet Lao Communists adopted market reforms in the mid-1980s.

In its 2008 outlook, the Asian Development Bank forecast nearly 8 percent growth led by mining and hydropower, but “an expansion of agriculture remains the key to raising incomes and employment.”

However, the rapid investment in agriculture so far -- 39 projects worth $458 million were approved in 2006 compared to six valued at $14 million in 2002, according to the Ministry for Planning and Investment -- has not gone smoothly.

The system for granting concessions “is a mess,” said a foreign advisor to the central government, which imposed a halt on new land grants last May that provinces have largely ignored.

Land conflicts are rising as plantations encroach on village fields and nearby forests, taking away traditional livelihoods with little or no compensation, activists say.

“Laos has one of the lowest population densities of any Southeast Asian nation by far,” retired professor and Laos expert Martin Stuart-Fox said of its 5.8 million people living in an area half the size of France.

“There is land available and the government can very easily take it off the people and sign deals for plantation agriculture,” he told Reuters.

SCRAMBLE FOR LAND

With commodity prices soaring and land scarce at home, plantation firms are going further abroad in search of good soil, favorable weather and investor-friendly policies.

In Africa, South Korea’s AFinc has leased 100,000 hectares in the Democratic Republic of Congo to grow soybean and corn. Malaysia’s Sime Darby is developing rubber and palm plantations in a relatively stable Liberia.

Rubber, palm oil, tapioca and sugar plantations are sprouting up in nearby Cambodia as it emerges from decades of civil war and the Khmer Rouge “Killing Fields.”

In Laos, some 150,000 hectares of land has been ceded to private investors for 30-50 years “at inconceivably low fee rates,” according to the environmental group TERRA.

In the north, where a new paved highway to China’s border opened last month, Beijing firms are heavily investing in rubber to feed their country’s surging auto industry.

Yunnan Natural Rubber Industrial Co plans a 66,700 hectare plantation in Laos, aiming to double it to 133,300 hectares by 2010 and to 333,300 hectares by 2015.

Vietnam, one of Asia’s fastest-growing economies, is carving out concessions in Cambodia and southern Laos for rubber trees and other cash crops.

Japanese, Indian and Scandinavian tree farms dot central Laos, while Thai tapioca growers are shifting their operations across the Mekong River into Laos to benefit from lower European import tariffs granted to poor nations.

Some argue the scale of the plantation sector is not really known because Laos has no land inventory, although it is working on one. Another issue is that multiple levels of government can grant concessions, leaving the door open to corruption.

“The national government has a hard time understanding what is going on. Even at the district level, concessions are given that the province does not know about,” said the foreign advisor who would not be identified because he was not authorized to speak.

Other foreign experts and researchers asked for their names to be withheld due to concern the authorities might expel them or hamper their work if they spoke out of turn.

WHERE ARE THE COCONUTS?

Last May, Prime Minister Bouasone Bouphavanh declared an indefinite moratorium on large land concessions for mining and agriculture “to address shortcomings of our previous strategy.”

Some plantations had turned out to be illegal logging camps. In one case, a foreign investor who promised vast swathes of coconuts stripped the concession of its valuable timber and left.

Yet only a month into the moratorium, the governor of Vientiane province granted 705 hectares of land to a South Korean rubber project, according to state media reports.

“Plantations need land and local officials can deliver it. They go to a village and say ‘this land is degraded and can be used for plantation development’,” said a researcher with a foreign NGO.

In northern Laos, once home to swathes of opium-covered hills that formed part of the infamous Golden Triangle, farmers are now planting rubber trees under contract to Chinese firms.

“They are told they will become rich and own lots of Vigo pickup trucks,” said a foreign academic who studied plantations in Oudomxay province. In reality, the farmers will have to tend their trees for seven years before any latex is tapped.

The government says plantations are fighting poverty by employing villagers, including ethnic minorities relocated from upland areas with promises of schools, healthcare and new land.

But critics say the policy has ensured a cheap source of labor for the plantations.

Tamang, 56, is still waiting for the parcel of rice paddy the government promised him two years ago when his family of eight moved to a village in central Laos where a large eucalyptus plantation is being developed.

The plantation owner, Japan’s Oji Paper, has built a new school where some of his children attend.

Tamang works 3-7 days a month, earning 20,000 kip a day clearing fields for the slender trees. A nearby forest where villagers could gather mushrooms, bamboo shoots and other non-timber forest products to eat or sell was cleared.

“Two years ago it was easy to find food, now it’s much harder,” he said outside his family’s ramshackle wooden home.

“We are waiting for the government to give us land but we have heard nothing yet.”

Editing by Megan Goldin

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