Research Reports

The economics of industrial trees plantations in Lao PDR: incentives or constraints to land conversion.

The promotion of commercial crops and industrial trees is a key priority of the Lao Government for long term social economic development. An important constraint for the adoption of these new crops by villagers is the lack of information about the different aspects of their production: e.g. capital invested, labor requirements, management techniques, productivity, market outlet, contractfarming, timeframe between plantation, harvest, maturity. Key production parameters are provided in this paper to facilitate decision making on adoption of different commercial crops and industrial trees plantation: i.e. Teak (Tectoma grandis), Rubber tree (Hevea brasiliensis), Eucalyptus  (Eucalyptus camaldulensis), Northern black wattle (Acacia auriculiformis), Jatropha (Jatropha curcas) and Oil palm (Elaeis guineensis). This study was implemented based on documents available at the National Agriculture and Forestry Research Institute and the Department of Forestry of the Ministry of Agriculture and Forestry, at Faculty of Forestry of the National University of Laos and also on Internet websites. This study was conducted from April to July 2009. Its main objective was to propose a large range of options for tree plantation that would be adapted to different natural and human environmental found in the northern uplands of Laos.The study shows the large range of variation in technical and economic requirements associated with each type of tree plantation. Input costs and labor requirements are compared for each year after the plantation as well are the other parameters people usually consider before deciding to plant commercial crops and industrial trees. The average return on investment computed for one hectare plantation over a 25 years period is as follows: Teak 6,250,000 kip/year, Rubber tree 17,290,000 kip/year, Eucalyptus 10,000,000 kip/year, Acacia sp. 10,000,000 kip/year, Jatropha 8,640,000 kip/year and Oil palm 16,005,600 kip/year. Although commercial crops and industrial trees plantation can generate good profit for smallholders, they are also constrained by the financial capital required at the initial stage and delayed returned on investment. In addition tree growth is influences by biophysical characteristics of the plantation location: e.g. soil depth and fertility, temperature, rainfalls, sunshine, wind. Relevant knowledge on technical, economical and ecological conditions of each plantation type is a key element of a policy framework supportive to smallholder plantations.

Chanxay Khambanseuang, Khamla Nanthavong and Jean-Christophe Castella