EU Working Group on Land Issues

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Business Models for Foreign Investment in Agriculture In Laos (paper by the Trade Knowledge Network (TKN) and IISD)

The paper investigates foreign direct investment (FDI) into the agriculture sector of Laos in an attempt to understand the pros and cons of different business models, with a focus on land-based investments. 

The authors found that since 2005, FDI in the agriculture sector has expanded rapidly, with nearly 250 projects approved with a combined value of between US$1.1 billion and US$1.7 billion. By far the dominant sources of investment comes from China, Thailand and Vietnam. Other investors include Japan, South Korea, India and Scandinavian countries, with a recent increase in investment from Gulf States such as Kuwait. 

A major problem in understanding and managing the impacts of FDI in land in Laos is the lack of information. A joint project by GIZ and the Lao Ministry of Natural Resources and Environment (MNRE) estimate that 233, 000 hectares of land has been acquired by foreign investors.  Based on this and other data, the authors estimate it accounts for between 10–14 per cent of the total agricultural land in Laos. The majority of land concessions are for rubber and eucalyptus plantations, with only a small number of projects dedicated to food crops. This is a concern for both local and national food security in Laos. 

Due to these food security concerns, moratoria on land concessions have periodically been proposed, although enforcing them has so far proved difficult. Another promising initiative of the government is the requirement for environmental and social impact assessments for projects. In practice, however, agricultural projects have tended to avoid such assessments. Ongoing work to create a database of agricultural investments is important, as are efforts to improve data available concerning land use titles.

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Marc Nolting
7 November 2012

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