Over the last three years, northern Laos has been seized by a rubber fever unknown in the agricultural history of the country. Rubber, initially introduced by Lao farmers from China through a well-knit trans-border network of kin and friends, has been promoted by the Lao government as a miraculous antidote that will rescue thousand of farmers from poverty. The introduction of rubber is seen as meeting two long-standing items on the government’s agenda: replacement of opium cultivation and reduction in unregulated swidden agriculture among upland farmers. Until 2002, rubber plantations on the Chinese side demarcated the border between “wild” Laos and “civilized” China, seemingly signalling a clear-cut separation between the two nation-states’ distinct political agendas.
Today, rubber trees have mushroomed along the border on the Lao side as well. Rubber, with its high economic potential, is expected to bridge the gap between “modernizing” China and “underdeveloped” Laos. Yet, it is still too early to celebrate such optimistic predictions.
12 responses so far ↓
1 fall // Nov 28, 2006 at 4:06 pm
With automobile, aside from oil, another perishable consumption is rubber. To me, it is a very high potential natural resource for economic purpose. Personally, I think Thailand should invest more on research for use of rubber. This is a major strength we are overlooking here.
2 James Haughton // Nov 29, 2006 at 1:42 pm
There are a few interesting points about the rubber trade in Laos that I’ve come across in research recently. First, it works well as an upland crop – unlike many other opium substitutes, which require the growers to relocate to the lowlands. Second, it’s being mostly driven by private investors from China, not the aid/ngo opium replacement programs which on balance seem to fail more often than they succeed – perhaps because they start with growing a crop and then try to find a market, whereas the chinese are starting with market demand. Third, they farm on contract: they have prices set in advance so (provided they can grow the amount specified) it’s a much more secure source of income to other crops.
Of course, rubber’s not the only contract cash crop being driven by the Chinese – see Lyttleton’s paper on “Watermelons, bars and trucks”.
On an anthro-theory point, Grant Evans argued that contract farming would be popular with Lao peasants in Lao peasants under socialism, 20 years ago now, based on his reading of Chayanov who recommended it as a way to connect subsistence farmers to the market. Looks like events have born him out.
3 Olivier Evrard // Nov 29, 2006 at 2:37 pm
I got some informations last August in Nalae district, Luang Namtha province about these rubber fields which now extend everywhere on the slopes near the upper part of the Nam Tha river.
Seeds are given by a private Chinese compagny and planted alongside with rice, on some kinds of small terraces (I have pictures for those interested). The trees can start producing some rubber after seven years. The price has been set up (for now) at 13 000 Kips per kilo. During the 30 first years (which means from years 7 to year 37 after planting the tree), the Chinese compagny will take 35% of this price for themselves and give the rest back to the villagers. After that, 100% of the price will go to the villagers. A rubber tree can usually live on up to more or less 50 years.
Most of the contracts were signed with lowland Tai-Lü villages and very few highland Khmu and Lamet people are growing rubber -which means that contrary to what Mr Haughan says, this rubber development does not prevent relocation from highlanders in the lowland, at least in Nalae.
4 Antonella Diana // Nov 29, 2006 at 4:38 pm
Hi James,
nice to hear from you! And thanks for your interesting comments on the rubber issue in Laos.
There are some nuances that I would like to point out in reply to your comments. As it is often the case, I should say that practice and theory do not always match.
It is true that, in theory, rubber could work better than any other opium substitute so far proposed to upland farmers. Yet, there are restrictions in terms of altitude and climate (which opium does not have). Rubber can only be planted at an altitude between 600 and 900 m above sea level (frosts on high elevations have destroyed entire plantations in 2000). This means that highland farmers still need to relocate to lower elevations to be able to plant it if they lack land availability. And there has been a lot of dislocation and relocation driven by rubber over the last couple of years.
Also, I agree that the Chinese have been pushing the crop in Laos relying on a big rubber market demand in China, as they have been doing for other crops such as banana, water melon and pumpkin in Muang Sing. However, until the end of the 90s in China rubber was sold and manufactured within the protectionist State price regime which guaranteed some security to the farmers on price fluctuation. With the liberalization of rubber production and processing, in the last few years a few private firms have been competing with State companies in the manufacturing and therefore in deciding the price on the market. Farmers in China are afraid that with an over production of rubber in Laos in the next few years the latex price will drop. If this is the case, then cultivators on both sides of the border will be affected.
One more thing. A distinction should be made between the different types of contract that Chinese have been signing with local farmers in Laos and between the scope of the investments.
In some cases plantations are established by Lao smallholders with the financial support of relatives from across the border, lowland wealthy Lao investors or small Chinese investors. This form is relatively widespread. The area varies from 3-4 ha up to 20-50 ha. Usually the Lao farmers provide land, while the Chinese investor supplies capital covering all the set-up expenses for the plantation. The agreement between the contracting parties is usually marked by 3 types of contract:
• verbal agreements between the two parties (mainly between cross-border relatives)
• informally written contracts between the two parties not ratified by local authorities
• legally signed contracts ratified by local authorities
The second form of investment is based on larger land concession schemes. Plantations are established through massive investments by Chinese companies. Plantations extend over very large areas, up to hundreds of ha. Chinese companies sign the contracts directly with the Lao central government, arranging the rubber set up with the villagers later on. The terms of the contracts are similar to the ones arranged in case of small-scale investments above, with the risky difference that Chinese investors have a much larger share of plantation area that they plan to manage by employing local labor. So far, wage rates proposed by the companies prefigure dangerous labor exploitation. Yet, this type of plantation is becoming a more widespread model despite its ambiguities in relation to labor and land use rights.
Small-scale investments by Chinese relatives seem to be sounder than big concession-type investments by Chinese investors. The former despite often being based on unofficial contracts, guarantee more security to the farmers in terms of capital and land use rights, as they rely on family or friendship trust; concession type contracts are more ambiguous in terms of labor input and remuneration, marketing of latex, and duration of land lease. Moreover, by virtue of the fact that they involve larger areas of land, the latter model is more risky, for it reduces land availability to the farmers for the whole duration of the contract (30-40 years).
Finally, none of the contracts that I have viewed in Muang Sing area had the price set from the Chinese investors. They usually say that the investor will buy the latex from the farmers at the current price on the market, which means that it won’t guarantee much security for the farmers, if latex price drops.
These nuances make the whole rubber venture very risky for the Lao farmers. Yet, we want to hope that their expectations will be fulfilled by the facts and a bit of luck…
5 New Mandala » Benefits of being in between? // Dec 4, 2006 at 4:13 pm
[...] Last week Antonella Diana’s post on cross border rubber investment provided us with a close-up insight into China-Laos economic integration. Today a useful article in The Nation provides a broader perspective on Laos’ economic relations with its neighbours. The article, by Pavin Chachavalpongpun, provides a useful overview of the role of both China and Vietnam in Lao economic development. Refreshingly the article does not rely on the old clichés of a vulnerable Laos being overrun by expansive neighbours: But in this tug of war [for influence in Laos] between China and Vietnam, Laos is not at all passive. Taking the costs and benefits into consideration, Laos is more than willing to play one power against the other. At the end of the day, Laos is opening up to the outside world. It needs foreign aid and investment to boost the economy, to create jobs and to raise living standards. [...]
6 Olivier EVRARD // Dec 7, 2006 at 5:46 pm
Following the previous comment, I found three days ago an article in the Bangkok Post indicating that rubber prices underwent a dramatic drop these last few months in Thailand from over 100 baht to just 40 baht per kilo. The article indicates that “factors which has caused prices to plummet include unfair prices charged by middlemen, lower demand and excess supply in both domestic and international markets. Key rubber buying sectors in China, Japan and the US have reduced orders due to high stocks with rubber productionup on previous years”.
Maybe this drop will have fewer consequences in Laos due to lower prices and production costs compared to Thailand ?…Or maybe this will be a new example of how highly risky development policy focusing on intensive cash crops development can bring more harm than goods for the local farmers ?…
7 James Haughton // Dec 12, 2006 at 4:22 pm
Thanks for the detailed descriptions of what you’ve seen, Antonella and Oliver.
Oliver do you have a link to the article you mention?
8 Elisabeth Preisig // May 11, 2007 at 4:08 am
Dear interesteded people,
thank you for the comments above and this is also in response to Oliviers first comments.
I have visited the Kmhmu’ people in Mengla County of Sipsong Phanna, Yunnan in late 2005. They plant either rubber or tea or both and still have some rice fields as well but do not bother with vegetables or other things like fish ponds or alcohol production much which they leave up to Chinese newcomers to the area. I remarked that the rubber farmers in the villages there did very well in comparison to their relatives in Laos. They said if the people owned their plantation as a family business and delivered the latex to the company, they could do very well. I saw that their villages were more prosperous than any of the Kmhmu’ villages I had seen in Laos. And the people proudly explained that they had ordered this and that like cemented roads themselves and paid themselves. They also can fit the rubber and tea cultures well into their traditional culture keeping their rituals alive amazingly close to how they had it with the rice fields. This is due to the similarity in the periods of activity with winter being off the farm free for ritual and social activities in families and community.
But it is hard work starting at 3 in the morning for both husband and wife working in the rubber plantation, old people taking care of animals and the young children, with older ones alreadybeing away at boarding school by the third grade. So the families are small and there is no land to expand in any way beyond what they own now. These people nevertheless hope that the Kmhmu in northern Laos could enjoy a comparable economic wealth too by following their example of PRIVATE rubber farms versus big company owned farms, but they were disappointed by the fact that others took up the idea and profited not their own people as they had hoped, as Olivier has confirmed for us in his observation. I believe if done right the upland farmers could indeed experience some comparable wealth by using part of their land for rubber. However the problem would be the dependence on others for services with activities they cannot fit into thier schedule such as vegetable growing since gathering would not result to much, when the feorest was turned into plantations apart from a few protected pieces of ritual forest.
9 Walter // May 11, 2007 at 3:27 pm
Hi, I’m an Australian who has been living in Jinghong for over two years now. I speak fluent Chinese (~5-6 years) and some Lao/Thai (intermittent). If anyone’s doing research in the area, please drop me a line by email (supplied but hidden!)
10 More on the Chinese in northern Laos // Oct 2, 2007 at 11:41 am
[...] development, both in Bokeo and Namtha provinces. The case of the rubber plantations have been already mentioned here in New Mandala. In the two provinces of Luang Namtha and Bokeo, Chinese joint ventures (see [...]
11 Tyres and opium. Discuss. « The Tyre Blog // May 16, 2008 at 2:48 pm
[...] a few debates about whether what is happening in PDR Lao is good for the farmers but interestingly, rubber could be an economically viable alternative to the opium, the main cash crop which used to be grown in these [...]
12 Smallholder rubber profits // Sep 30, 2008 at 9:17 am
[...] One of the most fascinating transformations that has occurred recently in the uplands of southeast Asia is the rapid adoption of rubber in the border districts of north-western Laos. In many upland regions, tree crops are seen as a desirable alternative by state agencies seeking to “stabilise” shifting cultivation systems. In north-western Laos rapidly improving connections to the dynamic Chinese market, and the cross-border proximity of well established rubber plantations in southern Yunnan, has encouraged the southern expansion of “borders of rubber“. [...]
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