Identifying potentials of Lao Food and Handicraft
International Exchange Department
Institute for International Studies and Training (IIST)
In recent years, the IIST has been sending annual missions to the Indochina countries. As the theme of FY2011 was industrial promotion using local resources, we sent a one-week survey mission to the Saravan and Champasak Provinces of the Lao People’s Democratic Republic, as well as the Laotian capital of Vientiane in October 2011. Latent possibilities in Lao’s handicraft and food product industries were explored by mission participants, including experts from both these areas.
The October mission went to Laos via Bangkok, travelling not by plane but rather overland from Ubon Ratchathani in eastern Thailand to enter through Chonmeck on the border into Pakse in the south of Laos. Thanks partly to the 2001 completion of the Pakse Bridge using Japanese grant aid, expectations are high that this route will be improved to serve as a new East-West economic corridor stretching all the way to the port of Danang City in central Vietnam. The first thing I noticed was the good condition of the road surface along almost the entire route.
In Saravan Province, we were able to visit a women’s weaving group in the Katu village of Houayhounthai, which was set up as part of the One District One Product (ODOP) Pilot Project in which the Japan International Cooperation Agency (JICA) is involved. The Katu are an ethnic minority group with Vietnamese roots who employ a traditional weaving technique that incorporates beads. Cotton and other key materials are mostly imported from Vietnam. With support from Tama Art University, the group is working to develop distinctive products that add a new element to traditional weaving practices—the incorporation of locally produced banana fiber. Banana fiber is easier to dye than silk, but at the same time, like all natural fibers, it is difficult to produce an even color, and almost impossible to recreate and produce large quantities of the same item. The women with the traditional skills to create banana fiber are also now all middle-aged or older, so effort is apparently also being put into passing those skills on to younger generations.
We also visited Saravan City’s only bakery, which is also being assisted through the ODOP Pilot Project. At first glance, the building appears to be just another home, but next to the established structure are two Vietnamese-made ovens. This is an old bakery, with the previous generation learning bread-making skills from the French. In addition to traditional baguettes, on the recommendation of Japanese experts, the bakery is also developing and making new products using black rice flour, and these are apparently very popular. This ‘small-scale’ operation produces around 1,500 loaves of bread a day.
We had the opportunity to hear from the Deputy Director-General of the Industry and Commerce Bureau of Saravan Province about the possible prospects for Lao handicraft products. It is difficult to look for stable markets for handicrafts, but assisted by the ODOP Pilot Project, a range of products are being developed through a process of trial and error. We were also introduced to the case of traditional Chinese medicine manufacturer Tsumura & Co. as an example of a Japanese firm which has recently been investing in Laos. Tsumura & Co. chose Laos as its second offshore growing location after China. Factors behind the selection of Laos apparently included moves in China to introduce export regulations for herbal medicines, diversification of production site, and the improvement of distribution functions in Laos, such as the Economic Corridors. Another factor was apparently the local operation’s qualification for a public-private partnership program for accelerating growth, which links ODA with private-sector business to contribute to the expansion of job opportunities and technology transfer, etc. The plan is to lease land from the government in the Lao Ngam District of Saravan Province, where clusters of unexploded ordnance (UXO) from the Vietnam War remain today. Grant cooperation will be extended to a specialist NPO to dispose of the UXO, and Tsumura & Co. will then grow its crops on the cleared land. Around US$6 million will be devoted to the project, which is designed to create jobs and promote the transfer of agricultural technology. Tsumura & Co. is also building schools in local villages, with the company’s participation welcomed as a new model of establishing local operations.
On the Bolaven Plateau, which stretches across the south of Saravan Province, we visited Advanced Agriculture Co., Ltd., a directly-managed plantation, to hear its story. The parent firm is a Japanese affiliate based in Thailand called Taniyama Siam Co., Ltd., which has been awarded by the Thai Ministry of Commerce for its contribution to acquiring foreign funds through the export of agricultural products. Thanks to economic growth as of around 1990, Thai wages stood at around one-tenth of those of Japan, but these have subsequently gradually risen, prompting Taniyama Siam to move into Laos. Recently, Advanced Agriculture has been growing beans and other crops and transporting them all back to Taniyama Siam overland. The company’s frozen beans are flown into Japan from Thailand, and also have a large share in Japanese market. Lying at around 1,000 meters above sea level, the Bolaven Plateau boasts fertile soil which has encouraged coffee cultivation in the area since around a century ago when Laos was under French rule. Combined with other factors such as temperature and distribution to Vietnam, this makes the Bolaven Plateau an ideal location for cultivating and processing crops. In addition to coffee, Thai-backed firms also grow crops such as potatoes and ginger there, and Dao Heuang Coffee, Laos’ biggest coffee producer, exports raw coffee beans from the Bolaven Plateau to Vietnam, where some of the beans are taken on by Marubeni for export to the Japanese market via Ho Chi Minh.
Having visited Laos, experts were of the view that rather than handicrafts, which may be high quality and boast high added value but which are difficult to mass-produce, food products and food processing have greater latent potential in terms of industry development. However, at this point in time, with the exception of a scant handful of products such as coffee and beer, Laos’ food industry has not yet reached the level where it could really be described as an industry. The Lao government too considers organic foods and other value-added products as key export products, but there are many outstanding issues in terms of the logistics environment. Some producers of goods such as processed and perishable foods, for whom maintaining product freshness is absolutely critical, expressed a wish for greater administrative efficiency in relation to, for example, customs procedures at borders. Key issues identified by experts were the creation of distribution systems for keeping raw materials fresh during their trip to processing plants, food preservation and delivery at the distribution stage, and the development of cold chains.
Looking at textile and cloth products, wooden products, bamboo products and other handicrafts, these need to be differentiated from the cheap Chinese goods that have already flooded the market. Higher added value products attract attention, as evidenced by the recent popularity even in Japan of obi belts, kimonos and kimono accessories made from high-quality Lao silk. Sewn products stand next to minerals and electricity (hydropower) as top Lao exports, and the Summary of National Export Strategy 2010, released by the Department of Production and Trade Promotion within the Lao PDR Ministry of Industry and Commerce, identifies Lao silk and cotton products as key products, while also noting that Lao-made thread accounts for less than five percent of the domestic market, with most thread imported from countries such as China, Vietnam and Thailand. The experts suggested that exports of luxury cloth spun from Lao mulberry trees, Lao silkworms and Lao silk cocoons be promoted and actively developed to establish a high-quality brand with the rarity value that attaches to handmade crafts. It is also suggested that it would be critical to research consumer needs and continue working to develop new designs geared to markets.
When considering strategies for establishing business operations in Laos and government measures to promote industry, I feel that rather than focusing on individual Mekong River countries, we need to look at the whole region and the flow of goods. It will be vital to position Bangkok as the hub city of the region and look outward from there to the whole Indochina peninsula, including Kunming and Nanning in southern China, and even the entire ASEAN region, where trade liberalization is progressing, considering which products to invest in and promote from the perspective of the entire distribution network available for use. In terms of support for the offshore activities of Japanese affiliates, in the years ahead Laos may attract more attention not just from the perspective of direct investment and exports to Japan but also, as in the case of Advanced Agriculture Co., Ltd., by companies that have already moved into the Mekong area and are looking for a second investment or to develop new sales channels and markets in the region. Investment capital is already pouring in from Thailand and Vietnam, and Japanese companies too should seize this opportunity to actively expand their business operations commensurate with infrastructure investment.
(original article : Japanese)
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