Contract Farming and Regional Cooperation

Initiatives for using contract farming as a key institutional arrangement are under way in the Mekong region. Thailand, for example, has been actively pursuing contract farming as a tool for regional economic cooperation. At the second Summit of the Ayeyawady-Chao Phraya- Mekong Economic Cooperation Strategy (ACMECS)³ held in December 2005, Thailand announced that it would allow tariff-free importation of all approved agricultural products produced under contract farming in ACMECS member countries. As a result, the Summit Declaration included an agreement to “accelerate cooperation on contract farming by setting up as soon as possible joint bilateral working committees to discuss measures to encourage long-term investment, cultivation and cross-border transportation of agricultural products for mutual benefit, including the conclusion of Memorandum of Understanding (MOUs) on contract farming.”

In keeping with this agreement, the Thai government has signed an MOU with the government of Myanmar that would provide Thai agribusiness firms with access to seven million hectares of arable land in Myanmar. The MOU is intended to facilitate investments by selected Thai companies in crops for which there is unmet local demand in Thailand. Thai firms will provide seeds, technology, and equipment for the farmers and will purchase all the products from contract farms.

Table 1 [ PDF 18.3KB | 1 pages ] below summarizes data on contract farming initiatives registered in the pilot locations as of 2005. It is noted by the National Economic Social and Development Board of Thailand that the registered size of contract farms represents about one percent of the total size of the contract farming operation by Thai firms in other GMS countries.

The ACMECS initiative makes it possible to use Thai agribusiness firms with successful previous experiences in contract farming as a mechanism for expanding the scheme in Cambodia, the Lao PDR, and Viet Nam.

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