AGRICULTURE IN LAOS
A) Land use: arable land: 5.91 percent; permanent crops: 0.42 percent; other: 93.67 percent (2011). B) Irrigated land: 3,100 square kilometer (2005). C) Agriculture - products: sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton, tea, peanuts, rice; cassava (manioc), water buffalo, pigs, cattle, poultry. D) GDP - composition by sector: agriculture: 26 percent; industry: 34 percent; services: 40 percent (2012 est.). E) Labor force - by occupation: agriculture: 75.1 percent; industry and services: NA (2010 est.) [Source: CIA World Factbook]
Over three quarters of Laos’s population makes a living through agriculture, primarily through production of rice. Rice has traditionally accounted for 90 percent of the permanently cultivated land. Most rice is wet rice grown in paddies but a significant amount is dry rice produced in hills and mountains using slash and burn agricultural methods.
Laos gets lots of rain and has lots of water bit doesn’t have so much arable land because its landscape is so mountainous. In spite of its other problems, Laos has good fertile soil and most people have enough to eat. Some Laotian farmers do contract farming for the Thai food industry using mechanized agriculture. The agreement helped improved the infrastructure and transportation lines where farming is done but has also brought increased use of herbicides and pesticides.
In Lao PDR farmers employ mostly one of two cultivation systems: either the wet-field paddy system, practiced primarily in the plains and valleys, or the swidden cultivation system, practiced primarily in the hills such as in Oudomxay. 45 percent of the rural villages are dependent upon swidden agriculture for their subsistence. However, this form of farming is difficult and area intensive, as the land needs time to recover to sustain its productivity.
At least 5 million hectares of Laos's total land area of 23,680,000 hectares are suitable for cultivation; however, just 17 percent of the land area (between 850,000 and 900,000 hectares) is, in fact, cultivated, less than 4 percent of the total area. Rice accounted for about 80 percent of cultivated land during the 1989- 90 growing season, including 422,000 hectares of lowland wet rice and 223,000 hectares of upland rice, clearly demonstrating that although there is interplanting of upland crops and fish are found in fields, irrigated rice agriculture remains basically a monoculture system despite government efforts to encourage crop diversification. Cultivated land area had increased by about 6 percent from 1975-77 but in 1987 only provided citizens with less than one-fourth of a hectare each, given a population of approximately 3.72 million in 1986. In addition to land under cultivation, about 800,000 hectares are used for pastureland or contain ponds for raising fish. Pastureland is rotated, and its use is not fixed over a long period of time. [Source: Library of Congress, 1994 *]
See Rural Life
Agriculture and the Laos Economy
In the early 1990s, agriculture remains the foundation of the economy. Although a slight downward trend in the sector's contribution to gross domestic product (GDP was evident throughout the 1980s and early 1990s--from about 65 percent of GDP in 1980 to about 61 percent in 1989 and further decreasing to between 53 and 57 percent in 1991--a similar decrease in the percentage of the labor force working in that sector was not readily apparent. Some sources identified such a downward trend-- from 79 percent in 1970 to about 71 percent in 1991--but both the LPDR's State Planning Commission and the World Bank reported that 80 percent of the labor force was employed in agriculture in 1986. Available evidence thus suggests that the percentage of the labor force employed in agriculture in fact remained relatively steady at about 80 percent throughout the 1970s and 1980s. [Source: Library of Congress, 1994 *]
Agricultural production grew at an average annual rate of between 3 and 4 percent between 1980 and 1989, almost double its growth rate in the preceding decade, despite two years of drought-- in 1987 and 1988--when production actually declined. Paddy rice production declined again in 1991 and 1992 also because of drought. By 1990 the World Bank estimated that production was growing at an increasingly faster rate of 6.2 percent. Increased production, long one of the government's goals, is a result in part of greater use of improved agricultural inputs during the 1970s and 1980s. The area of land under irrigation had been expanding at a rate of 12 percent per annum since 1965, so that by the late 1980s, irrigated land constituted between 7 and 13 percent of total agricultural land. Although still a small percentage, any increase helps to facilitate a continued rise in agricultural productivity. Smallscale village irrigation projects rather than large-scale systems predominate. Use of fertilizers increased as well, at an average annual rate of 7.2 percent; given that commercial fertilizer use had been virtually nonexistent in the late 1970s, this, too, is an important, if small, achievement in the government's pursuit of increased productivity. In addition, the number of tractors in use nearly doubled during the decade, from 460 tractors in 1980 to 860 in 1989. *
Agricultural Policy in Laos
Agriculture, the most important sector of the economy, clearly benefited from the introduction of the New Economic Mechanism. The changes positively affected performance by establishing a consistent policy that induced increased agricultural production over a number of years--before the droughts in 1987 and 1988-- particularly in paddy production. [Source: Library of Congress, 1994 *]
In June 1988, in line with the policies described by the New Economic Mechanism, the government passed a resolution to reform the agricultural sector. As announced at the Fourth Party Congress in 1986, the principal goal was to reorient the sector toward a market economy. The abolition of the much hated agricultural tax as well as the socialist restrictions on marketing helped to create necessary incentives for farmers. The major change was in the pricing policy. The practice of setting low producer prices for a wide range of crops was ended, boosting incomes in rural areas. (In 1987 the procurement price of rice was only 30 percent of the market price). Other changes were implemented. Restrictions on internal trade of agricultural products were removed allowing free markets to operate, at least for important crops such as rice. Laws also were enacted to guarantee farmers' rights to private ownership of land, including the right to use, transfer commercially, and bequeath. Tax exemptions for specified periods also were decreed. *
The reforms emphasize the government's belief that further increasing and diversifying agricultural production requires the participation encouragement of the private sector. Food security, as always, remains a key objective, but the focus of the new agricultural policy is on the production of cash crops that can be processed--to increase their value--and then exported. The means for reaching that goal include the popular 1989 measure of abandoning the poorly developed attempts at establishing the socialist infrastructure of agriculture--a cooperative farming system. *
The primary objective of the cooperative farming system, based on the Vietnamese model, had been to help the nation achieve selfsufficiency in food. Reflecting the government's pursuit of this goal, the number of government-assisted cooperative farms nearly tripled between 1978, when the drive to reorganize agriculture began, and the introduction of the New Economic Mechanism in 1986. At that time, cooperative farms numbered about 4,000 and employed about 75 percent of the agricultural labor force although most were cooperatives only on paper, and there was no practical cooperative management. By 1988, however, employment in the cooperatives had decreased and included only 53 percent of all rural families and about half of all rice fields. *
The distribution and sale of collectively managed land to families began in 1989. Most families in the old settled areas had their original land returned, which they still recognized. By mid1990 most state farms and agricultural cooperatives had been disbanded. This move, in conjunction with the removal of many restrictions on food prices and the distribution of agricultural goods, helped to precipitate a modest growth in agricultural output of about 7 percent in 1990. *
At the Fifth Party Congress in March 1991, the government reiterated the basic objective of its agricultural policy: a shift from subsistence production to cash crop production through crop diversification and improved linkages to export markets. Although rural farmers have limited experience in marketing their farm produce and are cautious about participating actively in the market, they are beginning to produce and sell their specialized crops and livestock and buy manufactured goods on a regular basis. At the congress, the government also affirmed its support for the private ownership of land and its intent to protect farmers' rights to long-term use of land, to bequeath land to their children, and to transfer their land rights in exchange for compensation. These assurances, among other improvements in the economic atmosphere, are an attempt to make Laos more attractive to foreign investors. *
Farming and Land Distribution in Laos
Most farmers employ one of two cultivation systems: either the wet-field paddy system, practiced primarily in the plains and valleys, or the swidden cultivation system, practiced primarily in the hills. These systems are not mutually exclusive, especially among the Lao Loum or lowland Lao in areas remote from major river valleys. Swidden cultivation was practiced by approximately 1 million farmers in 1990, who grew mostly rice on about 40 percent of the total land area planted to rice. *
Unlike Thai and Vietnamese farmers, which can grow or three rice crops a years, Laotian farmers usually only get one. This is due more to a lack of irrigation and reservoirs to collect water in the rainy season than climate. Crops are often devastated by natural disasters such as floods and droughts.
The rice growing season coincides roughly with the wet season and extends from June through December. Dry season vegetables are planted in areas close enough to water sources for water to be carried. Villages with irrigation systems can grow a second rice crop during the dry season.
Villagers have traditionally grown food to meet their needs and sold surpluses at markets. Water buffalo are the main plow animals. In some places the farmers don’t even have plow animals and turn over the soil with hoes which reach only five inches (12 centimeters) under the ground surface. Agricultural food supplies are supplemented by livestock, poultry, fishing, and forest gathering.
In the past all land was owned by the monarchy. Now it is owned by the state. On the village level, rights to the land may be bought and sold but as a rule there are few land sales in part because Laos has a small population and there is generally enough land to go around. Paddy land has traditionally been relatively equally distributed. Even before the Communists took over only a few rich families owned more than 20 hectares, Today the average landholding is one hectare of paddy land per family, with few families controlling more than three hectares. Except for urban dwellers almost all Laotians have access to some land. Slash and burn fields are used by families who have no permanent rights to fields.
Approximately 40,000 ha of land is cultivated in Oudomxay with rice as the major crop. The rice is mostly from rain fed upland systems with some rice growing in rain fed lowland systems and a small amount of irrigated systems. The government in cooperation with international organizations is working for improving the production intensity while proposing a sustainable usage of natural resources. Maize and soybeans are other important crops in Oudomxay.
Slash and Burn Agriculture
During the dry season there are so many slash and burn fires in the Laotian hills that weather satellites can easily observes the clouds of smoke produced by the thousands, maybe tens of thousands of fires. Poor peasant farmers farmers that live in the hills usually raise crops on a small patches of land for three or four years until the soil's fertility is depleted. They then move on to another patch of land, which they clear by setting fires. This kind of farming is known as slash and burn agriculture or swidden. [Source: Peter White, National Geographic, June 1987]
On average over 400 square miles of forest are slashed and burned in Laos every year. Conservationists have estimated that the amount of timber lost on each acre is often worth twenty times the value of the rice grown on it. Fires are also set by hunters to flush out game. In an effort to slow deforestation the government is attempting to relocate hill tribe slash and burn agriculturists to lower elevations near water supplies. Many hill tribes are resisting the move.
Swidden agriculture is highly destructive to the forest environment, because it entails shifting from old to new plots of land to allow exhausted soil to rejuvenate, a process that is estimated to require at least four to six years. The extent of destruction, however, depends on the techniques used by the farmers and the overall demographic and environmental circumstances that relate to the length of the fallow period between farming cycles. Further, traditional agricultural practices allowed for forest regeneration and not the stripping of forest cover, which is a current commercial logging practice. Swidden fields are typically cultivated only for a year, and then allowed to lie fallow, although Kammu (alternate spellings include Khamu and Khmu) anthropologist Tayanin Damrong reports that at least through the 1970s some fields were planted two years in a row. An increasing population, encroachment on traditional swidden farming areas by other villages or ethnic groups, and gradual deterioration of the soil as a result of these pressures have led to increasingly frequent shortfalls in the harvests of midland swidden farmers. [Source: Library of Congress, 1994 *]
The swidden farming process begins with clearing the selected fields in January or February, allowing the cut brush and trees to dry for a month, and then burning them. Rice or other crops are seeded by dibble shortly before the rains begin in June, and the growing crops must be weeded two or three times before the harvest in October. Swidden farming households are seldom able to harvest a rice surplus; in fact, the harvest usually falls one to six months short of families' annual rice requirements. *
Erosion from deforestation is a direct and serious result of swidden agriculture. By the 1960s, however, swidden agriculture was not a threat to the forest environment. Moreover, swidden cultivation is less productive than wet-field cultivation because it requires between ten and fifty times as much land per capita--if one includes the fallow fields in the calculation--yet produces just 20 percent of the national rice harvest. Mature fallows or young forests have other benefits such as wild food gathering, animal habitat, and watershed protection. Government policy following the introduction of the New Economic Mechanism discourages the practice of swidden cultivation because it works against the goals of increased agricultural productivity and an improved forest environment. Also, the government wishes to control the population in close clusters. However, farmers have resisted the change, largely because wet-field cultivation often is not feasible in their areas and because no alternative method of subsistence has presented itself, especially given the lack of markets and infrastructure necessary for cash-cropping to be an attractive, or even a possible, venture. Further, government traders' defaults on purchase contracts with farmers in the late 1980s made farmers with better physical access to markets skeptical about cash-crop production. In general, despite government efforts to increase export-oriented agricultural production, the "rice monoculture" persisted in Laos through the early 1990s. *
Crops Grown in Laos
Major crops: Lowland crops: wet rice, corn, wheat, cotton, vegetables, tobacco, soybeans, fruits, cassava, sugarcane, peanuts and fruit foods. Mountain crops: dry rice. corn, tea, vegetables, tobacco, opium, coffee and other foods.
Only about 150,000 hectares were planted with major crops other than rice in 1990, an increase from approximately 80,000 hectares in 1980. Principal nonrice crops include cardamom--sometimes considered a forestry product--coffee, corn, cotton, fruit, mung beans, peanuts, soybeans, sugarcane, sweet potatoes, tobacco, and vegetables. The only crop produced for export in substantial quantities is coffee. Although the total area planted to these crops is small relative to the area planted to rice, it increased from 10 percent of total cropped area in 1980 to about 18 percent in 1990. Although the increase in part reflects the drop in rice production during the drought years, it also demonstrates some success in the government's push to diversify crops. Yields for all the major crops except coffee, vegetables, and cardamom--for which some figures are only available from 1986--increased gradually between 1980 and 1990, most notably corn (by 70 percent), fruit (by 65 percent), peanuts (by 28 percent), and mung beans (by 25 percent). Despite increasing agricultural output, however, Laos is still an importer of food, heavily dependent on food aid. [Source: Library of Congress, 1994 *]
Statistics for agricultural production do not reflect either the nature of the subsistence agricultural economy or the importance of opium to the hill economy. Opium, legal in Laos and once even accepted as a tax payment, is a lucrative cash crop for the Lao Sung--including the Hmong--who have resisted government efforts to replace opium production with the production of other goods, for which the market is much less profitable. Opium production provides the funds necessary to the household when there is a rice deficiency, common among swidden farmers. Crop substitution programs, however, have had some effect, and to some extent tougher laws against drug trafficking and government cooperation on training programs have also contributed to reduced output. In 1994 Laos remained the third largest producer of illicit opium for the world market, according to United States drug enforcement officials. These officials estimate the potential yield of opium declined 47 percent--from 380 tons in 1989 when a memorandum of understanding on narcotics cooperation between the United States and Laos was signed--to an estimated 180 tons in 1993. The 22 percent decline in opium production in 1993 from 1992, however, was largely attributed to adverse weather conditions. *
Rice Agriculture in Laos
Rice is the main crop grown during the rainy season, and under usual conditions, rainfall is adequate for rice production. However, if rain ceases to fall for several weeks to a month at a critical time in the rice growing cycle, yields will be significantly affected. Upland rice varieties, although adapted to a lower moisture requirement, are also affected by intermittent rains because farmers have no means of storing water in their fields. [Source: Library of Congress, 1994 *]
Rice accounted for over 80 percent of agricultural land and between 73 percent and 84 percent of total agricultural output of major crops throughout the 1980s, except in 1988 and into the early 1990s. Rice paddies also yield fish in irrigation ditches in na (lowland rice fields). Production of rice more than doubled between 1974 and 1986, from fewer than 700,000 tons to 1.4 million tons; however, drought in 1987 and 1988 cut annual yields by nearly one-third, to about 1 million tons, forcing the government to rely on food aid for its domestic requirements. In 1988 and 1989, some 140,000 tons of rice were donated or sold to Laos. With improved weather and the gradual decollectivization of agriculture--an important measure under the New Economic Mechanism--rice production surged by 40 percent in 1989. The increase in production reflected the importance of the agricultural sector to the economy and was largely responsible for the economic recovery following the droughts. In 1990 production continued to increase, although at a much slower rate, and the point of self-sufficiency in rice was reached: a record 1.5 million tons. Sufficiency at a national level, however, masks considerable regional differences. The southern Mekong provinces of Khammouan, Savannakhét, and Champasak regularly produce surpluses, as do Vientiane and Oudômxai provinces, but an inadequate transportation system often makes it easier for provinces with shortages to purchase rice from Thailand or Vietnam than to purchase it from other provinces. *
According to some sources, the percentage of the labor force engaged in rice production declined gradually, by over 30 percent between 1986 and 1991, a trend encouraged by the government because it tended to increase export-oriented production. However, some feared this trend would threaten sustained self-sufficiency in food, another key goal of the government. Sustained selfsufficiency however, more likely depends on a continued increase in the use of agricultural inputs such as fertilizers and improved strains of rice, and on the implementation of extension and research services rather than on the actual number of workers involved in planting. *
The overall increase in rice production throughout the 1980s was the result of higher productivity per hectare, rather than of an increase in the land area planted in rice; in fact, the area planted in rice decreased during the 1980s, from 732,000 hectares in 1980 to 657,000 hectares in 1990. Because farmers make little use of fertilizers or irrigation, however, most land still yielded only one annual crop in the early 1990s, despite government efforts to foster the use of double-crop rice. *
Coffee in Laos
Coffee is a major crop for export in Laos. Lao coffee is among the most expensive in the world. The quality is high, plus production is kept low to keep prices high. The Bolaven Plateau is the center of Laos’s coffee production. The French established plantation here, which are now run by Lao, Vietnamese and Chinese and worked by Laven, Alak and Katu farmers.
During the colonial era, some French plantation owners made a healthy income producing coffee. During World War II, their plantations were abandoned and the coffee bushes were overgrown with weeds and killed by blight. In recent years, the plantations have been replanted with saplings brought in from Vietnam.
One Laotian-born French grower told AP, the local robusta "is of good quality and is known in Europe to have better flavor than robusta from Vietnam and Indonesia." Another grower said, "the soil and climate here are perfect for coffee. Come harvest, the coffee trees are so heavy with beans, the branches sometimes snap under the weight." Laotian coffee grown on the Bolaven Plateau is said to be the best in Laos.
Much foreign investment has been directed into coffee. Laos’s goal was to export 20,000 tons of coffee in the year 2000.
Vietnam Rubber Firms Illegally Take Land in Cambodia and Laos
In May 2013, Reuters reported: “Global Witness, a group that campaigns on resource issues, has accused Vietnamese rubber companies of illegally seizing swathes of land in Cambodia and Laos, and committing rights abuses in collusion with those governments. Hoang Anh Gia Lai (HAGL) and state-owned Vietnam Rubber Group (VRG), two of Vietnam’s largest companies, used thuggish tactics to evict people in Cambodia and Laos from forest land they depended on for their livelihoods, the group said in a report. [Source: Reuters, May 13, 2013]
HAGL dismissed the accusations saying it strictly conformed with laws in the countries in which it operated. “I am completely surprised by this,” the chairman of the HAGL Group, Doan Nguyen Duc, told Reuters. “I can affirm that these accusations are all fabrication and vilification ... I am unpleased when they issue the accusations without meeting us and working with us.”
Land grabs have become a flashpoint for tension in all three Southeast Asian countries, where criticism of governments is rare and often stifled. Global Witness said the clearance of land with little or no compensation had impoverished tens of thousands of people who had few avenues for recourse in countries dominated by single political parties and tycoons connected to the establishment. “We’ve known for some time that corrupt politicians in Cambodia and Laos are orchestrating the land-grabbing crisis that is doing so much damage in the region,” Megan MacInnes, in charge of land issues for Global Witness, said in a statement. “Often, the first time people learn of a plantation is when the company bulldozers arrive to clear their farms,” she said.
Vietnam, the third-largest rubber producer, is running out of land for expanding rubber plantations, pushing companies such as HAGL and VRG into neighbouring Laos and Cambodia. HAGL confirmed in a statement that some of its subsidiaries grew rubber and sugar in Cambodia and Laos. “We believe that we conform to the local laws strictly, including forest protection,” it said. HAGL said it had built homes for the poor, schools and a hospital among other contributions to the community and that it had invited Global Witness to visit any of its projects.
Global Witness alleged that HAGL and VRG used shell companies and subsidiaries to acquire leases on huge plots of land, accumulating far more than allowed under the law in each country with the use of political connections. People living in the areas in question told Global Witness that HAGL and VRG employed armed guards or used members of the security forces to protect their interests. In some incidents, these forces shot into crowds of protesters, burnt down homes and beat up opponents of land grabs, they told Global Witness.
Livestock and Fishing in Laos
Livestock grazing is an important component of rural livelihoods, with water buffalo, pigs, cattle and chicken being the principle livestock. Oxen and water buffalo are used to pull the plows. Black-bellied pigs, Brahmin cattle and turkeys are raised for food.
The government encourages animal husbandry through programs for cattle breeding, veterinary services, cultivation of pasture crops, and improvement of fish, poultry, and pig stocks. Between 1976-78 and 1986-88, the stock of all farm animals increased greatly: cattle by 69 percent to 588,000 head; goats by 128 percent to 73,000; pigs by 103 percent to 1.5 million; horses by 59 percent to 42,000; buffaloes by 55 percent to 1 million; and chickens by 101 percent to 8 million. Increases, however, would, have been significantly greater without diseases and a persistent shortage of animal feed. Disease is a serious problem: there is a significant annual mortality of chickens and pigs in most villages, and buffaloes are also frequently subject to epidemics. [Source: Library of Congress, 1994 *]
For many Laotians, freshwater fish are the principal source of protein; per capita consumption averages 5.1 kilograms annually. Fishpond culture had begun in the mid-1960s, and production--mainly carp raised in small home lots--grew an average 30 percent annually thereafter, the highest rate in Asia between 1975 and 1985. The Mekong districts in the south have especially high potential for greater increases in fish production. In the 1982-84 period, the average annual catch was 20,000 tons, all of which was consumed domestically. *
See Mekong River
Experimental fisheries have been set up on reservoirs created by dams.
Timber in Laos
Fifteen types of commercial timber trees are found in Laos, including teak and rosewood. Benzoin, a resin used to make perfume, and cardamom, are obtained from Laotian timber. In the late 1990s timber accounted for up to 40 percent of Laos’s export earnings. The government is aiming to produce more value-added timber products such as furniture, processed wood and plywood. Forests not only contribute wood, but a broad range of fruits, herbals, and meat to the income of families.
Wood removal 2005: Industrial roundwood: 682,000 cubic meters; Wood fuel: 6,742,000 cubic meters; Value of forest products, 2005: Industrial roundwood: $40,931,000; Wood fuel: $20,226,000; Non-wood forest products (NWFPs): n/a; Total Value: $61,157,000. [Source: Mongabay.com \~\]
Despite the dwindling expanse, timber--including ironwood, mahogany, pine, redwood, and teak--and other forestry products-- benzoin (resin), charcoal, and sticklac--constitute a valuable supply of potential export goods. The forest has also been an important source of wild foods, herbal medicines, and timber for house construction and even into the 1990s continues to be a valued reserve of natural products for noncommercial household consumption. Since the mid-1980s, however, widespread commercial harvesting of timber for the export market has disrupted the traditional gathering of forest products in a number of locations and contributed to extremely rapid deforestation throughout the country. [Source: Library of Congress, 1994 *]
Timber resources have been commercially exploited on a small scale since the colonial period and are an important source of foreign exchange. In 1988 wood products accounted for more than one-half of all export earnings. In 1992 timber and wood products were almost one-third of the total principal exports. Following the introduction of the New Economic Mechanism, decentralization of forest management to autonomous forest enterprises at the provincial level encouraged increased exploitation of forests. At the central and provincial levels, autonomous forest enterprises are responsible for forest management. *
The government has had to reconcile its opposing objectives of decentralized forestry management and environmental protection. In January 1989, the government imposed a ban on logging--initially announced in January 1988 as a ban on the export of unprocessed wood--although exemptions are granted on a case-by-case basis. This measure was followed by the imposition of high export taxes on timber and other wood products, included in the June 1989 tax reforms. Toward the end of 1989, logging was again permitted, but only based on quotas extended to individual forestry enterprises. In response to the restrictions, production of unprocessed logs (roundwood or timber) decreased slightly in 1989, but, according to the Asian Development Bank, production more than recovered the following year. The effect of the restrictions is most clearly shown in the export statistics for 1989--exports of timber and wood products had decreased by 30 percent from the previous year. In 1991 a new decree banned all logging until further notice, in hopes of controlling widespread illegal logging and subsequent environmental destruction. However, there was little practical impact, and illegal logging remains widespread. The smuggling of logs to Thailand also is significant. *
Natural Resources in Laos
Natural resources: timber, hydropower, gypsum, tin, gold, gemstones
Laos is fairly rich in natural resources and mineral wealth is largely unexploited. Tin and gypsum for a long time were the only minerals that have been exploited. Other minerals found in Laos include lead, zinc, coal, potash, iron ore, gold, petroleum, and some precious stones.
Laos's main resources are its diminishing forests and potential hydroelectric power. No significant oil or natural gas have been found in Laos but some exploration has been done in southern and northern Laos.
Martin Petty of Reuters wrote: Laos’ boom “is fuelled by mining and hydropower, accounting for 80 percent of foreign direct investment (FDI) and half of gross domestic product (GDP) growth. Export revenue from copper and gold from Laos's two big mines was projected to reach $1.3 billion and $240 million respectively this year, double the 2009 figure, according to the International Monetary Fund (IMF). [Source: Martin Petty, Reuters, December 18, 2011]
The natural resources of Laos—including coal, hydroelectric potential, and mineral deposits—are attracting development interest in the country. According to the Wall Street Journal (September 16, 2004; "Laos Is Looking Like a Gold Mine To Foreigners" by Patrick Barta), foreign investors are looking to capitalize on Laos' underdeveloped mineral resources. With gold prices steady over $400 and few new deposits turning up in the usual places, mining companies are flocking to Laos, which holds the dubious record of being the most bombed country in the world despite never officially being involved in the Vietnam war, may become an important source of revenue for mining companies willing to take on the extra risk associated with operating in a country with large amounts of unexploded ordnance and poor infrastructure. [Source: Mongabay.com]
Assessments of mineral reserves are imprecise, because by 1991 most of the country had not been geologically surveyed in a detailed manner. According to 1991 estimates, deposits of gemstones, gold, gypsum, iron, lead, potash, silver, tin, and zinc have relatively high commercial development potential, but mining activity is on an extremely small scale. In addition, Laos has small deposits of aluminum, antimony, chromium, coal, and manganese, as well as potential for oil and natural gas. In 1989 exploration agreements for oil and gas were signed with British, French, and United States companies. [Source: Library of Congress, 1994 *]
Mining operations are carried out by state mining enterprises, and supervised by the Department of Geology and Mines and small- scale miners. Production of tin--the principal mineral export-- decreased 50 percent between 1975 and 1988, to about 240 tons. Gypsum production increased 167 percent between 1980 and 1988, to about 80,000 tons. Salt production increased 233 percent between 1981 and 1988, to eleven tons. Coal production increased more than 600 percent between 1982 and 1988, to about 800 tons. In addition to commercial enterprises, some individual households pan for alluvial gold on the Mekong as well as on small streams during the dry season to supplement household incomes. *
Environmental Impact of Mining in Laos
With the prospect of expanded mining operations in Laos, there is considerable concern over the environmental impact. Clear-cutting and the use of chemicals, especially mercury and cyanide, can cause severe ecological damage. Mining also exposes previously buried metal sulfides to atmospheric oxygen, causing their conversion to sulfuric acid and metal oxides, which run off into local waterways. Oxides tend to be more soluble in water and contaminate local rivers with heavy metals, affecting human populations and wildlife. In the short term, the financial opportunities presented by mining overwhelm the potential ecological effects. For example, at peak production, a $330-million operation run by Australia-owned Oxiana should yield as much as $15 million in royalties and taxes for Laos—a significant sum in Laos. [Source: Mongabay.com \~\]
Gold Mining and Gold Panning in Laos
Upriver in the Mekong and other rivers in Laos gold is panned during the dry season using an un-environmentally-friendly technique. Sand is first dug up on little islands that emerge from the river when the water is low. The sand is sifted in wooden pans and then mercury is added which wiggles through the sand and forms little blobs. These blobs are then squeezed in pieces of cotton cloth producing dry balls the size of a marble. The mercury bonds with the gold not the materials in the sand. The balls are purchased by merchants who evaporate the gold using a blow torch, leaving 22 karat gold. On a good day a woman—they not men do most of this kind of work not work— made $7 or $8 a day in the 1980s, a good day's pay in Laos at that time. [Source: Peter White, National Geographic, June 1987]
Newmount Mining of Denver leased 2,507 square miles of jungle in Laos to dig for gold. The company signed a deal with the Laos government in the mid 1990s but eventually pulled out of Laos after finding only small quantities of gold. Rio Tinto, the company formed when CRA merged with RTZ of Britain in 1995, discovered copper in 1998. Rich as Sepon was, Rio Tinto decided that it too small to bother with.
In December 2004, SAPA reported: AngloGold Ashanti, a Ghanaian-South African gold mining company, said it would explore for gold in Laos following an exploration alliance with Oxiana Limited of Laos. A statement said the agreement with Oxiana follows AngloGold Ashanti's investment in Trans-Serbian Gold in Russia and a strategic alliance in the Philippines with Red 5 Limited. “This initiative aims to further unlock Laos’ gold potential by combining AngloGold Ashanti’s technical expertise with Oxiana’s in-depth country knowledge and operating experience,” the company said.[Source: SAPA, December 15, 2004]
The alliance is part of a business development strategy to assess opportunities in prospective but underexplored new frontier regions, the company said. AngloGold Ashanti said the alliance would explore for gold throughout the country except for areas held or under application by Oxiana. The first phase would be funded jointly by the two companies. Oxiana would be the initial manager with staff from the two companies. Any resulting projects would be owned equally by the two companies, according to the agreement. The South African company AngloGold merged with the Ghanaian company Ashanti Gold Company Limited in 2004. The strategic exploration alliance in Laos between AngloGold Ashanti and Oxiana Ltd expired in December 2007 and was not extended by mutual agreement.
Mining Gold in Laos Among Unexploded Bombs
Wayne Arnold wrote in the New York Times, “The earth here is suffused with metal millions of ounces of gold, millions of tons of copper and thousands of pounds of very old, very live American bombs left over from the Vietnam War. ''You factor it into everything you do,'' said Michael Wilkes, project manager for Oxiana Resources, a small Australian company that is developing a mine here. ''Before you go anywhere, you have to have it cleared.'' Long before miners ever heard of the Sepon camp, American pilots knew the area as the head of the Ho Chi Minh Trail and a transit point for troops and supplies heading from North Vietnam through Laos and Cambodia to South Vietnam. More American bombs were dropped on this stretch of territory than on Vietnam or on Europe in World War II. [Source: Wayne Arnold, New York Times, March 5, 2002 ~~]
“Now, Oxiana is helping to turn this bomb-riddled patch of jungle into part of Laos's first special economic zone. Oxiana's project, about 250 miles southeast of the capital, Vientiane, is the first significant foreign mining investment in Laos. When the mine is opened later this year, workers will begin to extract what the company projects is roughly $1 billion in gold and almost $2 billion in copper. ~~
“The Laotian government is counting on Oxiana's mine to provide desperately needed tax revenue and to help end a drought in foreign investment that has left Laos, an impoverished Communist backwater, more dependent than ever on aid. ''Investments like Oxiana's could turn things in the opposite direction,'' said Paul V. Turner, the resident representative for the Asian Development Bank in Vientiane. The International Finance Corporation, a private investment arm of the World Bank, has already agreed to lend Oxiana $30 million of the $46 million the company estimates it will cost to build its gold mine. Oxiana then plans to use its profit from the gold to develop a $100 million copper mine. ~~
“Officials in Vientiane say the mine is likely to encourage other development projects in the area. The mine needs power, so there are plans to build a hydroelectric dam nearby. Copper will be trucked out, and construction is already under way on a two-lane highway across Laos from Thailand to Vietnam. ~~
“Oxiana is helping the Laos government eliminate unexploded ordnance, a scourge that kills at least 100 Laotians a year. It is a painstaking process. Crews use powerful metal detectors to search for objects as far as 10 feet below the ground. So far, they have found about 2,000 explosive devices -- from 1,000-pound bombs to fist-size antipersonnel weapons. Oxiana prefers not to dwell on the unexploded weapons. ''It sends the wrong message,'' Mr. Wilkes said, adding, ''It doesn't make the project any riskier or less economical.'' In the 10 years that miners have been exploring the area, he declared, none have been hurt by a bomb. ~~
Oxiana Mining Company’s Quest for Gold and Copper in Laos
Wayne Arnold wrote in the New York Times, “It helps to have a local guide. For Oxiana, that is Saman Aneka, who grew up not far from Sepon. Now 47, he remembers as a teenager watching American bombers drop their payloads. Mr. Saman studied geology in the Soviet Union and after a brief stint in government joined an Australian mining company, CRA, to explore Sepon in 1990. People who live near Sepon have long known the area as Muang Ang Kham, the district of the gold valleys. In the early 80's, Soviet geologists found Laotians panning for gold with chunks of shrapnel and aircraft wreckage. [Source: Wayne Arnold, New York Times, March 5, 2002 ~~]
“CRA saw potential in the area, but winning a deal with the government on taxes and mining rights took more than two years of negotiations, said Robert Maloney, an Australian lawyer who worked for CRA in Laos at the time. Laos had no mining law and officials had little concept of the industry. ''A lot of it was basically education to explain what risk and reward was,'' Mr. Maloney said. And there were numbers of visiting investors, not all of them reliable. ~~
“It helped that CRA was not the only mining company working with the Laotians. Newmont Mining was also negotiating a contract to explore for gold in the northern part of Laos, and in 1993 it clinched a deal. Just weeks later, CRA won a contract giving it the exclusive right to explore a 1,930-square-mile area around Sepon. But when CRA's surveyors arrived, they were slowed by malaria and other diseases, said Antony Manini, who came to Sepon for CRA and also now works for Oxiana. To avoid the unexploded bombs, they carried metal detectors everywhere they walked. The bombs also yielded some happy surprises. While surveying one day in 1995, Mr. Saman and two other geologists stumbled on evidence of gold in rock formations that war created. What he and his colleagues jokingly called ''bomb crater geology'' turned out to be one of Sepon's biggest gold finds. ~~
“Oxiana estimates it is sitting on top of 3.5 million ounces -- at the current commodity price of gold worth more than $1 billion. Yet it is the copper that excites Mr. Wilkes most. ''It's super-high-grade,'' he said. After Rio Tinto decided not to exploit the copper it found in Laos, Owen L. Hegarty, a former Rio Tinto executive who had left that company to help start Oxiana, saw opportunity. In 2000, Mr. Hegarty won a deal for Oxiana to pay Rio Tinto the roughly $22 million it had spent on developing the site in return for an 80 percent interest in the project. ~~
“As incentives, Laos has exempted Oxiana from corporate taxes for two years as well as its employees from having to pay income taxes. It has waived duties on imported equipment and is permitting Oxiana to hire a customs official to be posted on site, eliminating long waits for shipments at the border. In return, Laos is to receive a 2.5 percent royalty on the value of the ore mined, taxes on Oxiana's profits after the two-year exempt period, and an option to buy a 10 percent interest in the mine.” ~~
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Laos-Guide-999.com, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Global Viewpoint (Christian Science Monitor), Foreign Policy, Wikipedia, BBC, CNN, NBC News, Fox News and various books and other publications.
© 2008 Jeffrey Hays
Last updated May 2014