The economy of Lao PDR continues to be largely agrarian, with over 70% of its 7.2 million population employed in the agriculture sector. In 2021, Lao PDR earned USD 1.2 billion from agricultural export, over 80% of which from China. Its main commercial crops are cassava, rubber, banana, sugarcane and coffee.
Despite in an influx of foreign investment in these sectors, as a smallholder-dominant economy with an underdeveloped service sector, low-input farming practices are the norm. With smallholders often producing insufficient agricultural surplus to meet consumptive and market demands, food insecurity is prevalent, especially in the country’s remote north. Since resilience to shocks is consequently weak, the increasing prevalence of floods, landslides and droughts are further exacerbating existing vulnerabilities. Due to rising fuel prices, inflation and currency depreciation, agricultural productivity and output remain significantly below pre-pandemic levels despite high external demand for agricultural products.
In spite of the challenges facing smallholders today, Lao PDR has experienced remarkable economic growth in recent years. Effectively leveraging its natural resources and improved connectivity to China, Lao PDR has managed to attract considerable land-based investments to its southern and northern provinces, especially from neighbouring China, Viet Nam and Thailand. This facilitated development of many large-scale plantations for particularly rubber, and to a lesser extent coffee, timber and banana.
The rising demand for Lao PDR’s arable land is, however, resulting in considerable land conflict, with smallholders and small businesses increasingly losing their land to larger investors. This is further marginalizing smallholders and driving deforestation, as well as stretching state capacity to effectively resolve land conflicts and adverse impacts.
Key initiatives and commitments
Lao PDR issued a concession moratorium for rubber and eucalyptus farming in 2012 and revised its Forest Law and Land Law in 2019, laying an important foundation for better governing land acquisition practices. Various platforms, working groups and donor initiatives to further integrate principles enshrined in the Committee on World Food Security’s into public policy and procedures have also been established in recent years.
While demonstrating Lao PDR’s commitment to promoting more socially and environmentally responsible investment, enforcement challenges, interministerial coordination problems and capacity constraints within particularly lower-level government currently stand in the way of meaningful progress.