Rice Contract Farming in Lao PDR: Moving from Subsistence to Commercial Agriculture
Poverty is prevalent among small farms in transition economies such as the Lao PDR, where market failures prevail and subsistence production is the norm. Contract farming is emerging as a promising tool to facilitate market linkages and provide the necessary supports that enable small farms to transition to commercial production. Using data from a household survey of 332 contract farmers and 253 non-contract farmers, this study attempts to empirically assess the potential of contract farming as a development tool to increase small farm incomes and reduce rural poverty.
The findings suggest that contract farming can be an effective private-sector-led mechanism to facilitate the transition to commercial agriculture. In addition to bringing foreign direct investment into the rural sector, contract farming can be an effective tool to improve the profitability and raise the incomes of small farmers, thereby reducing poverty in rural areas with limited market development.
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The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
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