Conclusion

This report has looked at the options for organic agriculture and biofuels in Cambodia and the Lao People's Democratic Republic (PDR), in the context of the wider developments in these two markets worldwide. The broader context points to strong and growing demand in both areas, especially in developed countries. The benefits of this to developing countries such as Cambodia and the Lao PDR are likely to be significant, although the full extent of that is subject to market access and (particularly for organic foods) the costs of certification. Indeed, one of the main recommendations from the study is to assist these countries in building capacity for certification in both areas—Organic Agriculture (OA) and biofuels—as it will be required for both strategies. In addition to a formal certification system using a third party inspection body, an alternative certification system based upon existing social capital should be used, particularly for domestic market.

In the case of organic foods, one possible concern for the future that could be relevant to Cambodia and the Lao PDR relates to energy costs of transportation, especially by air. This will be relevant to the extent that the market for the products is in the developed countries of Europe and the United States (US), but it could be reduced to the extent that the potential market is in the region, i.e. in Thailand, Malaysia, Singapore and People's Republic of China (PRC), where OA is currently being imported from Australia and Europe. In fact, if “regional” organic products replace those being imported from Australia and Europe, there are environmental benefits generated to the international community as well.

Issues of available organic fertilizer for a major expansion of OA in the developed world appear to be misplaced, as do those of a decline in aggregate food production if all farmers go organic.

In the case of biofuels, the main concern that Cambodia and the Lao PDR should keep in mind is the problem of getting carbon credits for the shift, when the biofuels are processed with considerable fossil energy. One should also note that the local environmental impacts of the shift need careful analysis. The other concern with biofuels—that of an increase in the price of cereals—remains a global issue, but it is unlikely to be affected by the amounts produced in the Lao PDR and Cambodia. It is recommended that international institutions, such as Asia Development Bank (ADB), support the countries in (i) identifying the likely carbon benefits of biofuels produced in these two countries, (ii) promoting the technologies and processes that generate measurable and acceptable benefits, and (iii) preparing the case for them to the Clean Development Mechanism Executive Board of the United National Framework Convention on Climate Change.

Cambodia

The detailed consideration of options in Cambodia indicate that a move to a more organic agriculture is desirable through the System of Rice Intensification (SRI). The program promotes Good Agricultural Practice (GAP) when used along with a program supporting full OA in more exclusive or isolated areas. The analysis indicates that the combination is already yielding considerable benefits. Therefore an expansion of the present program, to convert 20 percent of wet season rice farmers to SRI (i.e. about 300,000 units), would increase their incomes by 40 to 70 percent depending on the region. About 21,000 households could be taken out of poverty even if the program was not particularly targeted at the poor. There is a potential for export sales of up to $180 million, although all this is unlikely to be realized. The program would also increase food security and provide environmental benefits. These have not been quantified but are very real.

Thus while an expanded SRI program is recommended, one should also recognize its market limitations. The amount of chemical-free rice that can be sold at a premium in the local market is limited and demand outside the country may be small. For this reason, promotion of certified OA in Cambodia can proceed alongside the GAP program, with the government supporting initiatives where contract farming is introduced to produce certified OA products for niche markets. The potential for certified OA has not been fully evaluated, but there are good reasons to believe that Cambodia may have a comparative advantage in these markets, given that most land areas presently contain a limited amount of inorganic residues.

On the biofuels side, two options are attractive for Cambodia. One is a Jatropha Program, which has been analyzed for a plausible case where 10,000 ha. are converted to the tree in 2008, with further subsequent increases of 20,000 in 2009, and 40,000 ha. in 2010. The proposed program works partly with smallholders, owning 1.5 ha. of land, of which only 15 percent is allocated to jatropha. The other part is land given under concession to commercial growers and biodiesel processors.

The smallholder program is more attractive than the concessionaire program in terms of benefits to farmers. It could take somewhere between 6,500 and 7,900 households out of poverty, whereas the concessionaire program would take some 1,400 to 1,500 workers out of poverty. On the other hand, the smallholder program produces less biodiesel (27 percent less) and is not viable in financial terms, especially if the lower end of the yield range is realized. Thus some form of subsidy is likely to be needed for a smallholder program. The investment costs of converting 10,000 ha. to jatropha and refining the product to biodiesel are around US$15-20 million, based on 44 percent coming from concessionaries and 56 percent coming from smallholders. Scaling up the program would increase benefits proportionately. Issues to be addressed are: (i) identification and processing of the carbon credits, (ii) reduction of risks of failure in case of oil price falls through a price guarantee program and (iii) a capacity building support program (the costs of which have not been estimated).

Cassava is the other biofuel to be developed in Cambodia, and there is already private sector interest there. The recommendation is to develop a program to increase yields from the current 17.8 tons/ha. to 22.8 tons/ha. by 2012. This will need an extension and advice program of a fair size. The program would have two components, similar to the Jatropha program: a smallholder part and a concession part. The smallholder part would target 20,000 households initially, going up to 30,000 by 2011. It would take about 7,000 households out of poverty and increase the net incomes of farmers by US$3.7 million in 2006, going up to US$14.5 in 2011. The concessionaire component is more effective in terms of yield, but has less of a social impact; it would create about 2000 jobs. The roots would partly go for ethanol production, for export, generating earnings of US$32 million in 2008, up to US$65 in 2011. The rest will continue to be used as animal feed and as an input for starch production. The project needs to be costed in terms of the support program, and analyzed with respect to the possible carbon credits.

There is a trade-off in the biodiesel projects between efficiency, which supports concessions, and equity, which may support smallholders. At present the system of concessions is unsatisfactory and reforms are urgently needed. These should address the concerns of transparency and proper procedures—with respect to consultations, environmental and social assessment. With reforms, it may also be possible to envisage institutional arrangements where farmers can participate on a more equitable basis.

All three of these initiatives can be pursued simultaneously, but if funds are limited the highest priority should go to the rice project, because it generates the greatest increases in poverty reduction for the least outlay. This should be followed in terms of priority by jatropha, and finally cassava.

The Lao PDR

Data for the Lao PDR were not as comprehensive as those for Cambodia, so the analysis is less rigorous and the recommendations more generic.

It is clear from what is known however, that the Lao PDR has much to recommend it as a center for OA. Indeed, present agriculture involves very low external inputs and the agricultural environment is generally regarded as clean. Thus production for a high-value market may be the preferred strategy, rather than to intensify through conventional methods and compete with other more developed countries.

This study has looked at the OA potential for rice alone, although there is a small market for coffee and some other products as well. There is also a major initiative on conservation agriculture (which looks at livestock and mixed farming systems), and which should contribute to a more sustainable agriculture.

For rice, unlike Cambodia, there is not the same evidence in favor of an SRI approach raising yields, and indeed the reviews show a wide divergence of opinions. Having looked at this, we conclude that a shift to OA should not cause a fall in yields as long as it is supported by suitable advice from well-qualified experts. This is even more likely to be the case if the aim is not OA in a formal sense, but GAP, with some permitted external inputs. In fact both GAP and OA can run together in a program, following the regional demarcations laid out by the government.

If yields can be maintained, and if marketing and communication improved as indicated in the surveys, a 15 percent increase in farmer incomes is easily feasible. With a program covering around 100,000 households, half of which are upland and half lowland, an increase in incomes of about US$5.6 million is feasible. This should take about 33,000 households out of poverty. The likely cost of the program would be about $52 million, possibly less, based on data from small-scale ongoing efforts.

On the biofuels side, two options are attractive for the Lao PDR—but both need further investigation and development before they can be realized. The present targets are unrealistic, and the government and the international community need to devote more resources to supporting research on jatropha and cassava. It also needs to improve the framework for concessions of land to private investors, if these are not to cause conflict and even hardship to local communities.

In terms of benefits, the program's economics should be similar to those in Cambodia. Smallholder programs would guarantee that most participating farmers who were poor would be taken out of poverty. With programs involving large concessions, all employees should earn enough to take them out of poverty. Exact estimates of the numbers who would benefit and be taken out of poverty are, however, not possible given the data available. The problems facing any program will be the economics of obtaining a reasonable return on the capital invested. This in turn will depend on the price of biodiesel, with a price of US¢40/liter not being enough to make the smallholder program viable, but probably being enough to make the concessionaire program viable. As in the case of Cambodia, some subsidy or support may be needed for smallholders if the program is to be viable.

For cassava, a program to increase yields from their very low levels of 6.8 tons/ha. (one of the lowest in Asia) is recommended. The potential is surely there, given yields in Cambodia that are in the range of 17.8 tons /ha. If such a program could achieve a 50 percent increase, the surplus production could be exported as root or processed chips. The potential to the growers could be around US$70.7 per hectare, which would make a major change in their livelihoods.

In terms of priority, as with Cambodia, the GAP rice development should take first place, with certified OA programs being developed where market niches can be identified. On biofuels, further investigations are needed before a judgment can be made on which is the more attractive.

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Comment(s)

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1. Chumroen Benchavitvilai
   (posted 16 May 2009 / 05:44:46 PM)
   
   In fact all the LDC government must realize that the cost of Biofuel is /will be much more expensive than the mineral fossil fuel at any time.
   If the LDC like Lao,Cambodia and Myanmar wants to promote the Biofuel utilization as the national agenda .The policy makers in all countries must be able to find the satifatory answers to the following questions.
   
   (1) Do the people in the poorest countries of LDC really need to pay for the expensive / high cost of Biofuel as teh real cost is w/o governemtn interention ?
   
   (2) Will the governments of the LDC provide subsidies for Biofuel to keep the Biofuel not to be too much more expensive that the mineral fossil fuel ?
   The subsidies are both in term of production subsidies for lower production cost and consumer subsidies by waiving all related taxes eg energy tax, exile taxes VAT ,Energy fund etc.
   
   (3) It is doubtfully that the governments in all LDC are able to effort to provide any sbsidies for Biofuel .
   Normally the income from the energy usages is one of the main stream for revenue.
   All government in LDC are haing the deficit budget forever.
   Althrogh they may want to promote Biofuel and cover all the subsidies.
   It is impossible to survive.
   
   LDC countries should be the exporter of the Biofuel not teh teh end user of the Biofuel.