The Economic Potential for Smallholder Rubber Production in Northern Laos

Rubber smallholdings are being established by shifting cultivators in Northern Laos, in response to demand from China and encouraged by government land-use policy. This can be seen as part of a general transition from subsistence to commercial agriculture in the uplands – in particular, from shifting cultivation to tree crop production. This study examines the economics of smallholder rubber production in an established rubber-growing village in Luangnamtha Province and models the likely expansion of smallholder rubber in the Province. Data were obtained from key informant interviews, group interviews, direct observation, and a farm-household survey. Latex yields were estimated using the Bioeconomic Rubber Agroforestry Support System (BRASS). A discounted cash flow (DCF) model was developed to estimate the net present value for a representative rubber smallholding. This model was then combined with spatial data in a Geographical Information System (GIS) to predict the likely expansion of rubber based on resource quality and accessibility. The study shows that, given current market conditions and credit support, investment in smallholder rubber production in the uplands of Northern Laos can be profitable. The results from the DCF analysis for the study village show that the expansion of rubber planting in that village is based on good economic returns. The spatial analysis indicates that the potential for rubber in the study village is not an isolated case; there are also other areas in Luangnamtha Province that appear to be economically suitable for rubber. Therefore, rubber can be considered as one of the potential alternatives for poor upland farmers, in line with the government policy of stabilising shifting cultivation and supporting new livelihood options for poverty reduction. However, there are risks associated with rubber production and emerging constraints of land and labour, hence government should move cautiously in promoting rubber where farmers are uncertain about reducing their dependence on shifting cultivation. The role for government, as in other countries where smallholder rubber has played a significant role in rural development, is to ensure the provision of good quality planting material, to assist financially during the long investment period when no income is generated, and to invest in roads and marketing infrastructure. In particular, maintaining secure access to the China market will be crucial for the sustainability of smallholder rubber in Northern Laos. If carefully managed, the expansion of smallholder rubber in Laos has the potential to contribute to sustainable rural livelihoods.

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