Biotrade in Lao PDR

1. Prepared by
Phetsoulaphonh N. Choulatida
Tuan Le Anh
Andrew Wilson
Regional Biotrade Project in Southeast Asia
(Vietnam, Lao PDR, Myanmar)
Vientiane, Lao PDR
17 March 2017
(Final Draft)

2. Market Systems and Stakeholder Analysis
BioTrade Starts-Up in Lao PDR
Country: LAOS
Name of Project: REGIONAL BIOTRADE PROJECT IN SOUTHEAST ASIA
Funded by SWISS STATE SECRETARIAT FOR ECONOMIC AFFAIRS (SECO)
Implementation: HELVETAS Laos

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Table of content
1.1 Structure of Core Market Systems ..........................................................................................4
1.2 Key Market Functions and Rules.............................................................................................7
1.3 Dynamics and Performance of Core Market System .........................................................15
1.4 Main Interconnected Markets.................................................................................................16
2.1 Market Players and Stakeholders..........................................................................................22
2.2 Stakeholder Capacities, Incentives and Interests ...............................................................23
3.1 Inclusive Sustainability Matrix of Current Situation ..................................................................25
3.2 Inclusive Sustainability Matrix of Future Situation...............................................................26
4.1 Overall Sector Strategy.................................................................................................................29
4.2 Proposed Interventions.................................................................................................................29

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List of Acronyms
ABS : Access to Benefit Sharing
ADB : Asian Development Bank
ADS : Agriculture Development Strategy
AFC : Agro-Forestry Consultant Co.,LTD
AusAid : Australian Agency for International Development
CBD : Convention on Biological Diversity
CITES : Convention on International Trade in Endangered Species of Wild Fauna and Flora
CRED : Centre for Rural and Economic Development
CSO : Civil Society Organization
CSR : Cooperate Social Responsibility
DAFO : District Agriculture and Forestry Office
DFID : Department for International Development
EPA : Export Potential Assessment
EWEC : East West Economic Corridor
GDP : Gross Domestic Product
ODOP : One District One Product
NGO : Non-Government Organization
NTFP : Non-Timber Forest Product
PAFO : Provincial Agriculture and Forestry Office
SDC : Swiss Agency for Development and Cooperation
SECO : State Secretariat for Economic Affairs
SIDA : The Swedish International Development Cooperation Agency
SOP : Standards Operating Procedure
UEBT : Union of Ethical BioTrade
UNCTAD : United Nations Conference on Trade and Development
WTO : World Trade Organization

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1. Market Systems and Constraints
The BioTrade Market System is defined upon on the biodiversity based markets principles, in which
some criteria have been applied for project to scrutinize and select product groups and product for
countries. Key elements from the market system determined under the BioTrade lend have been taking
into the consideration for analysis includes: the core market function & actors; supporting function and
stakeholders all related rule & regulations.
The term of market development, Lao PDR has emerged in the year of 2006 as the preferred approach to
private sector development for most of the donor agencies involved in the funding of enterprise
development projects. The most prominent of these donors are AusAid, DFID, SDC and SECCO
1
, SIDA.
The approach at that time aims at achieving significant and measurable impact on large numbers of
enterprises with the realization of sustainability through systemic change.
This markets systems and stakeholder analysis was done by Lao BioTrade team, due to the limited
research period, analysis for this report was focused on areas identified as having high potential
immediate products for initiate Lao BioTrade growth in the natural ingredient sector. The export potential
assessment started in November 2016 with desk research to do collecting reports and statistics in Laos
and international markets and continued with Field work and verification in December 2016 for Interviews
of companies and stakeholders in Laos and international markets. The Export Potential Assessment
(EPA) report was introduced to all stakeholder during roundtable meeting in January 2017 with
opportunities and threats for exports to high-potential markets. High potential products, strengths,
weaknesses, intervention strategy and actions were validated by workshop participants with mutual
understanding approach about this project.
Initiative results of the export potential assessment, some key BioTrade value chains are identified having
high export potential which we have been considering three categories of products for Lao PDR namely:
 1
st
category: sweet yam (Amorphophalus campanulatus BL.), river weed (Cladophora
glomerata), stick lac (Laccifer lacca), Indian gooseberry or Amla (Phyllanthus emblica Linn),
Benzoin (Styrax tonkinenes P), and Indian prickly ash (Zanthoxylum rhetsa).
 2
nd
category: Noni (Morinda citriofolia), Wide shantea (Camelia sinensis), Little chick rice (Oryza
sativa var. glutinosa), Black sesame (Sesamum Indicum L), Berberine (Coscinium fenestratum),
Cardamom (Amomum Longiligulare, A. Microcarpum, A. Ovoideum, A. villosum), and Paper
mulberry (Broussonetia papyfera).
 3
rd
category: Malva nuts (Scaphium macropodum), Chinese pepper (Zanthoxylem simulans),
Plum (Prunus sp.), Ant plant (Hydnophytum formicarum Jack), Assam (Docynia Indica), Lemon
grass (Cymbopogon flexuosus), and Orchid.
Based on information collected in field surveys and the roundtable meeting workshop, some of other
emerged natural ingredients may propose later if there is high potential and interested companies wish to
take initiative and take risk about those products.
In comparison with neighboring countries, the natural ingredients marketing system in Lao PDR is very
complex. The intricacies are difficult to understand, due to interaction of many factors. Firstly, there is a
marketing chain, along which the product itself travels, passing from hand to hand at each point of
exchange. The system of natural ingredient marketing also must involve interaction from managing
bodies at various levels of government, in the process of issuing quotas, and in the management and
monitoring of trade. These bodies generally do not come into direct contact with the natural ingredients
and so are not part of the chain as such. They are, however, crucial in the marketing system that Lao
BioTrade project could develop a sustainable business model with few natural ingredient products for
implementing as a pilot modality with innovative and pioneering companies involved who want to seize
1
The project “Promotion of Cleaner Industrial Production in the Lao People‟s Democratic Republic” funded by the Swiss State
Secretariat for Economic Affairs (SECO), this project was designed as one of three interlinked stand-alone projects in Lao PDR,
Cambodia and Vietnam.

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opportunities in the international markets, then we will learn from this pilot one, improve and scale up to
numeric natural ingredients products.
1.1 Structure of Core Market Systems
The BioTrade Market System is defined upon on the biodiversity based markets principles, in which
some criteria have been applied for project to scrutinize and select product groups and product for
countries. Key elements from the market system determined under the BioTrade lend have been taking
into the consideration for analysis includes: the core market function and actors; supporting function and
stakeholders all related rule & regulations.
EPA identified key bottlenecks at production and collection, local trading, transport, pre-processing, R&D
product development, packaging, marketing, and export. At the level of supply raw materials, those
bottlenecks were identified as low level of compliance with international buyer requirements, insufficient of
product quality control and management, suppliers lack awareness on sustainable collection practices,
and often lack technological capacities for proper processing. At the export marketing level, few foreign
companies based in Laos remain reliant on EU and USA markets with low quality requirements. Most of
Lao companies do not have a long-term business or export marketing strategy. Weak quality control, and
problems with CSR brings about reputational risks on international markets. Service providers are often
not able to assist farmers and SMEs. There is only limited trade promotion, and not much scientific
research on cultivation and sustainable use of BioTrade ingredients. So far, the financial sector is
generally unfamiliar with the BioTrade sector.
After the Export Potential Assessment, most potential BioTrade species have been identified in Lao DR
for the intervention phase (find previous section). Based on information collected in field surveys and the
round-table meeting, we have been mapping out the BioTrade market system for Lao PDR.
Core market function and actors: At the moment, BioTrade is still new sector in Lao PDR, with small
scale production and low level of complexity of supply chains. Thus, number of actors involved in the
selected supply chains is rather limited comparing to another common commodity agricultural sector.
Different product have different supply chain structure and characteristics, we therefore firstly simplify by
gathering them into four following groups: (i) Farmer/Collector, (ii) local trader, (iii) Processor/Exporter and
(vi) Foreign Importer/Consumer. Value chain analysis shall be conducted to have deeper understanding
later we think it‟s necessary. Biotrade pioneering companies (processor or exporter) are the direct actors
of BioTrade product value chains. Those are the one who have strong influence to market system
performance. BioTrade pioneering companies under our survey are usually playing more than one role in
the value chain; most of the companies are small and medium enterprises, with low level of capacity, in
term of management skills, quality control and knowledge of market access.
Key supporting function and stakeholders: At this early phase of fact finding, we identified some key
supporting functions and classify them into eight following groups: production/collection of raw materials,
trading, transport, pre-processing, R&D (Technology), packaging, marketing, and exporting. Other
indirect actors, not market players, participate into the market system including:
- Government agencies: Both national and local level.
- Private sector: They can be suppliers of production inputs such as fertilizers, pesticides,
packaging … or providers of other supporting services like certifications, technical consulting,
logistic, marketing and distribution. In term of research, they can be universities, research centers
and institutes or independent scientists
- NGO sector: Sector associations, individual trade promotion agents, CSOs …
- Donor: build good synergy with several partners who have same mind-set.
- Training provider: supply chain management, access to finance, leadership, and market
linkages.
- Exporting agencies: local and international consultancy services

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Rule and regulations: in Lao PDR, there are numerous laws and regulations related to BioTrade sector,
include Food and Safety, Access to resources and Access and Benefit Sharing (ABS), traditional
medicine and cosmetics regulatory framework, Forestry and Biodiversity conservation, etc. However, law
implementation and enforcement are ineffective. Conflicts and overlaps continue to exist and some
implementing mechanisms, such as for CITES, are considered complicated by stakeholders.
In starting up the BioTrade for Lao PDR, the structure of core market systems will focus on three areas
such as natural ingredients supply chain, specific BioTrade product, and legal frame work as described in
details below.
Figure 1. Lao BioTrade Market System
1.1.1 Natural ingredients Supply chains
Current situation, there are few actors involved into natural ingredient value chain due to small scale of
production in comparing with agribusiness value chain of rice and vegetables in Lao PDR. The diagram
below show how the Lao BioTrade value chain in market system look like in this project.

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Figure 2. Lao BioTrade supply chain
Many natural ingredients for identifying as intermediate materials have selected based on products
ranking by Profound consultant. In the figure 1 simplified key actors and important role plays for
achieving at the economic and poverty impact levels of the end project phase. At the production part, a
farmer group known as “resource owner” will sustainably manage natural ingredients in the way of
collecting from the wild or cultivating, they will ultimately contribute to maintaining or improving agro-
biodiversity and conserve natural resources. Importantly, local traders also play very crucial role in
between farmer and company in term of raw material gathering and transport from farm to factory gate.
The company known as “resource user” will play the role as processing and export the intermediate
materials as demanded by foreign buyers. Lastly, government and other supporters can play as
Information broker with smart subsidies (if any), support vertical and horizontal links and coordinate
efforts, and provide the appropriate policy and business environment.
At this early phase of our fact finding, we identify some key supporting functions and recommend two
pioneering companies who have already been starting working on natural ingredients (e.g. Benzoin
gums, and oil extract from Sacha Inchi to be our pilot modality. The following diagram shows the market
system approach how two pioneering companies will be applied.
1.1.2 BioTrade Products
During the project period of 2016-2020, the Lao BioTrade products are mainly focusing on natural
ingredients are used in many ways in the pharmaceutical, cosmetic, and food industries. The product
selection is joint effort between Lao team and international experts in the Netherlands and Germany with
combining knowledge on international markets and their requirements with strong knowledge of local
context of Lao PDR. The final selected products relied on being native to Laos, enrich or maintain the
biodiversity in the region, and lastly being wild-collected or cultivated on a small-scale. For the criteria of
product selection consists of six areas such as: (1). Economy and market (trading and marketing
aspects), (2). Environment and biodiversity (ecological aspects), (3). Social and political (socio-economic
aspects), (4). Technological and infrastructure (socio-technological aspects), (5). Export potential

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(international markets for sustainably sourced BioTrade ingredients, mainly USA and EU), and (6). Value
added potential.
1.1.3 Legal framework
In Lao PDR, some key regulations move towards BioTrade
• Terms and conditions of access and use of genetic resources and traditional knowledge
• ABS might apply – due diligence is needed
• Implementation different
- Convention on Biological Diversity – Nagoya protocol on ABS
- Regulation 511/2014
- CITES: Convention on International Trade in Endangered Species of Wild Fauna and Flora
- Regulation 338/97
- Adapted to National Legislation
- Trade in protected species
- Prohibited species
- Cost – benefit analysis when working with listed species
Various international agreements, including CITES, the United Nations Convention on Wetlands of
International Importance, especially as Waterfowl Habitat (RAMSAR Convention, 2009). Lao PDR is the
sixth country to ratify the Nagoya Protocol in 2012 on Access to Genetic Resources and the Fair and
Equitable Sharing of Benefits Arising from Their Utilization to the Convention on Biological Diversity.
Under discussions and negotiations on climate change and Reduced Emissions through Degradation and
Deforestation and the role of conservation, sustainable management of forests and enhancement of
forest carbon stocks in developing countries (REDD+) schemes since 2007, BioTrade may also contribute
with projects and initiatives for Lao PDR during 2016-2020.
BioTrade is well positioned to promote sustainable trade and investment in biodiversity-based products
and services as provided under global goals and policy framework of different institutions involved in
biodiversity use and conservation.
Benefit sharing under BioTrade adds to the concept of ABS under the CBD and Nagoya Protocol.
BioTrade is a voluntary scheme and a process, often reflected in a value chain, respecting a series of
Principles and Criteria developed by UNCTAD, where the sustainable use of native biodiversity and
benefit sharing along that value chain stands out as critically important. Due to its broad scope, BioTrade
activities are subject to a set of complex, albeit supportive, international frameworks (CBD, CITES,
RAMSAR, WTO agreements, etc.) and national regulations. BioTrade is increasingly and explicitly
recognized in international forums as an enabler of sustainable businesses, initiatives and projects.
1.2 Key Market Functions and Rules
Production and Collection:
Lao PDR is rice-based agriculture and women farmers are responsible for over half of all agricultural
activities. Moreover, Lao PDR is a rich natural resource and bio-diverse country. It is estimated that
biological resources contribute 70 percent to GDP. Furthermore, biological resources provide
indispensable benefits for the rural poor as agro-biodiversity is a source of food, nutrition and income. In
the area of forestry, for instance, some non-timber forestry products are sold in local markets and some
are traded internationally. Meanwhile, agriculture production is becoming increasingly commercialized, 30
percent of farmers are producing mainly for sale, use of chemical fertilizers has traditionally been low,
while rural development goals are outlined in the Ministry of Agriculture and Forestry‟s Agricultural
Development Strategy 2011-2020 (ADS) and it promotes agricultural modernization and
commercialization, enhanced food security, improved productivity and quality, optimal use of natural
resources and improved livelihoods for farmers.

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In Lao PDR, 73 producer groups were officially formed to facilitate farmers‟ market linkages with new
initiatives for community based NTFP sustainably harvesting rules and multi-village NTFP conservation
rules. The key factors that drive this process are the importance of NTFPs in the rural economy, the
wealth of „indigenous technical knowledge‟ on NTFPs and forests, increasing market penetration,
innovative and enterprising attitude of local forest users. The market systems could be a very good basis
for sustainable, community based forest management. There is a provision of local adaptability and a
stimulus to social cohesion. Giving strong incentives for biodiversity conservation and they contain
potentials for the development of a strong and sustainable forest-based industrial and trade sector. Local
people can develop solutions. The recently established network of NTFP organizations in Lao PDR may
become a powerful engine to establish this kind of networking support to local traders who link resource
owner to resource user.
Figure 3. Suppliers’ capacity
Suppliers‟ capacity is also a crucial issue for
traceability and supply security. Field surveys
show that there is high demand in international
markets but supply capacity is limited due to
small scale of production. The main reason is the
trade individually in unorganized way. For some
products (benzoin, wild tea, traditional medicine,
etc), the companies establish and strengthen
community-based forest group have been
promoting. BioTrade companies are mostly small
& medium enterprises (SMEs) and therefore
upgrade or scaling production capacity is
necessary in some cases. Internal issues are
required for improving production capacity are:
(i) Develop raw material plantation in
parallel with wild collection from forest.
(ii) Provide sufficient financial support.
(iii) Apply adequate production technologies
and equipment.
(iv) Develop appropriate business model with comfortable contract farming
(v) Upgrade operational and management skills.
As supporting rules are needed to improve supply chain management. Typical issues are land and forest
allocation from local government line agencies and other donors who are working on Participatory Land
Use Planning (PLUP) approach, support for land tenure and ensure marginalized people equally access
to natural resources, quota system and lamp sum tax payment are applicable in nationwide, identify
specific variety for targeted market segments, and build relationship with trust traders.

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Trading:
As same as discussed in other section in this analysis, the trading of natural ingredients or NTFPs is key
role of local traders. The Linkage of the traders who deal the business of raw materials shows below.
Figure 4. Linkage of traders in supply chain
There are five types of forest products traders in Lao PDR such as:
1). Chinese enterprise traders: There are Chinese enterprises operating in the provinces. These traders
are those who have contacts with village administration authorities from whom they buy forest product
from at the village. These traders mainly export the products to China by private vehicles.
2). Large-scale traders: These are large-scale forest products traders who have a large trading network of
villages living within or adjacent to District and other districts in provinces. Forest products collected by
these traders are mainly sold to the local market, restaurants, Chinese Pharmaceutical factory in North
provinces and also sent to across the province, and also to other countries like China and Thailand where
prices offered are much higher.
3). Village traders: Village NTFPs traders are those who have direct contact with local farmers/collectors
of forest products in the villages in the Districts. Most of these traders have trading relationships with the
large-scale forest products traders. In addition, some village traders in village level also create their pawn
trading networks with farmers and farmer traders from other villages. Mostly, biotrade companies in Lao
PDR made subcontract with these traders.
4). Farmer traders: Local or farmer traders are those who harvesting and sell forest products by
themselves. These traders sell mainly medicinal plants directly to the Chinese pharmaceutical factory.
5). Unregistered traders: Unregistered forest products traders are those who buy forest products by
chance from farmers in the countryside to accelerate harvesting of forest products by using simple and
cheap processing techniques, which are often not sustainable.
Lao farmers / collectors are weakness of processing of NTFPs in term of specifications, ignorance of
moisture, do not care about botanical identifying, do not know chemical profiling, lack of traceability of
document record, and others. Most of natural ingredients and NTFPs are exported at the beginning of the
dry season (November to April). In the north, the shipment of goods to Thailand.

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The trading of raw materials of Lao PDR have not been properly improved in term of qualitative such as :
specification of raw materials, packing and shipment which are not responding to international market. the
Lao NTFPs Trading Companies failed exporting to EU market, mostly they do trading with neighbouring
exporters (China, Thailand, and Vietnam) due to these three actors have strong recognized by European
countries and America in order to do easily dealing this kind of business with the international Trading
Sectors. In contrast, European exporting companies based in Lao PDR directly export intermediate
products to international buyers.
Some advanced local traders buy raw materials from farmers and collectors and process to finished
products “One District One Products (ODOP)” since they find potential money making and ensure
sourcing suppliers.
Transport:
The transport will look at two dimensions such as local and oversea transportation. For local
transportation, the local traders who own trucks to buy natural ingredients from farmer groups at the
province, usually companies do not go and buy directly from farmers. But the companies will be directly in
charge of oversea transportation since the Lao PDR has two economic corridors (1. Kunming-Lao PDR-
Bangkok, and 2. Mawlamyine-Phitsanulok-Savannakhet-Danang) were agreed upon by Great Mekong
Sub-region countries in 1998 at the Ministerial Conference of the Greater Mekong Subregion, organized
in Manila, the Philippines. This corridor became operational on December 12, 2006. The GMS countries
agree to start with East West Economic Corridor (EWEC). The EWEC is an economic development
program initiated in order to promote development and integration of four Southeast Asian countries
namely Myanmar, Thailand, Laos, and Vietnam. The economic corridor is created based on a road of
1,450 km with the west end at port city of Mawlamyine (Myanmar), crossing Kayin Division, Thai
provinces of Tak, Sukhothai, Phitsanulok, Phetchabun, Khon Kaen, Kalasin and Mukdahan and Laotian
provinces of Savannakhet, Vietnamese provinces of Quảng Trị, Thừa Thiên–Huế Province and Đà
Nẵng city as the east end. Meanwhile, transport infrastructure is the backbone of connectivity, the trade
structure is emerging from production networks differs from the classic pattern of swapping finished goods
based on inherent comparative advantage. Intermediate production sharing is necessarily for biotrade
partner dependent on natural resources, as it exploits advantages available in local environments, which
includes the policy framework, labor supply and wages, agglomeration opportunities, transport costs, and
organizational skills. Trade costs (transport, logistics, and border crossing) play a very important role in
attracting intermediate production centers. For instance, Benzoin is transported by local traders to the
exporter in Vientiane over land, and then by plane to France or Germany. Cardamom is exported to
China, Vietnam, and South Korea. The cardamom is the agro-forest product with the greatest variety, all
cardamom exported to Vietnam over land passes through a trader/exporter in the Luangprabang
province, and other products exported to China over land pass through a trader/ exporter in the
Phongsaly province. The trader/exporter in the Luangprabang province exports the cardamom to South
Korea in addition to China. This trader/exporter separates the cardamom into two groups according to the
fruit size; large fruits are sent to China and small fruits are sent to South Korea via Vientiane. All Puack
Muack, rattan fruits, and galangal fruits are exported to China from Luangnamtha province over land. As
for tiger grass and paper mulberry, the trader/exporter in the Phongsaly province directly exports them to
Thailand using a combination of land and river routes. On the other hand, the shipments dealt with by the
traders/exporters in the Luangnamtha and Luangprabang province are transported to an exporter in the
Luang Phabang city, who then transports them to a paper mill in Thailand by boat. Much of the tiger grass
is transported to Thailand without being processed, but some of it is processed by the company in the
Luang Phabang city. The company started operating a small-scale paper mill in after obtaining paper-
making machines from Chiang Mai, Thailand. Although the company purchased about tons of paper
mulberry bark, about tons was exported to Thailand without processing because the processing capacity
of the paper mill is only tons a year. Sesame is exported without processing by the same route as tiger

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grass and paper mulberry bark via the Luang Phabang. Some sesame sent to Thailand is transported to
a sesame oil factory in Thailand, and the remainder is exported to Taiwan. So far, the transportation route
was used only by the exporter from Vientiane who transports benzoin and cardamom between Luang
Phabang and Vientiane where the road is paved, and over a short distance to China or Vietnam. All the
other agro-forest products exported to Thailand or by way of Thailand were sent on the Mekong river. In
northern Laos where the roads are underdeveloped, the river played an important role as a distribution
channel of the agro-forest products.
Pre-processing:
Successful in raising incomes and fostering economic growth, supporting employment and technology
transfer. Intermediate products are often assembled in the village level and village cluster will act as
natural ingredient hub to do pre-processing for intermediate products. This production network which also
tend to form industrial clusters are usually organized through processing centers, in which several export
companies are linked through logistics systems to provide competitive goods and services, linked to
international markets. Currently government of Lao PDR bans for exporting of raw materials in order to
foster domestic value adding for rural employment and income generating. Therefore, raw materials and
intermediate components, imported for the purpose of processing and then exported, are exempt from
such import duties with approval from relevant ministries.
R&D Product Development:
to adapt technologies and innovate does not only depend on the quality of laboratories and other physical
infrastructure but perhaps, more fundamentally, on the quality of its human resources as well, especially
scientific and engineering human capital. Basically, R&D product development requires by finished
products, the finished products will sell domestically. Many ODOP products are booming in Lao PDR plus
good design of labelling and packaging. But intermediate products will have a specific requirement as
showed below this.

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Figure 5. The R&D needs to take initiative for Lao biotrade
Packaging:
For the product labelling in Lao PDR, the Lao government has recently stepped up its efforts to raise
public awareness of health issues and the quality of products sold in the market by providing new
regulations that require local language on packaging. The impetus behind the government‟s actions is
largely attributable to one main factor in Laos, most products still do not have labelling in the Lao
language to provide consumers with information about the product, despite this being a requirement. In
the past, the government generally turned a blind eye to this shortcoming in consumer protection, but this
is now set to change.
By regulatory framework, the Department of Internal Trade, Ministry of Industry and Commerce, recently
issued Announcement 1285, restating the requirement to include labels in the Lao language on products.
The Announcement also granted all business operators involved in the manufacturing, importing,
wholesaling, distributing, and retailing of goods an extension, until August 29, 2016, to bring their labelling
in line with the requisite regulations.
Meaning that, under the requirement of finished product, the labels must include the following information
in the Lao language:
 Type of goods
 Trademark registered by the manufacturer and the trademark used in trade by the importer in
Laos
 Location of manufacture, the importer‟s trading address in Laos, and the country of origin
 Price, amount, quality, weight and net weight, components and component percentage, directions
for use, warnings, date of manufacture, and expiration date
One District One Product (ODOP) is a product made from craftsmanship, wisdom, ideas and resources
indigenous to a particular district. They can be either tangible or intangible like services, cultural and
tourist destinations, lifestyles and traditions. There are over 130 ODOP brands representing more than
480 products from 72 districts nationwide. Handicrafts represent more than 70% of ODOP products,
followed by food and beverages at 21.7%, and traditional herbal products representing 7.6%. The ODOP

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entrepreneurs are facing several challenges as most of them lack the knowledge, skills, and experience
with modern technologies to ensure effective production. Today, producers‟ groups produce their
products individually. Design and packaging in Lao PDR is not competitive with international markets.
Some packing and bottling materials are imported from Thailand and Vietnam, the production cost is high
when compared to neighbouring countries.
In term of Biotrade, intermediate product will be promoted. International buyers require bulk packaging
and re-packaging will do by imported wholesalers.
Figure 6. Packaging and labeling add value to finished products for ODOP.
Product marketing for Lao biotrade product is
limited for intermediate product, the finished
product “ODOP” is simply beautiful branding but
it‟s small scale, it needs to establish a unique
selling point (better price and quality, traceability
and supply security, documentation and
certification, and added-value story including
origin, traditional use, and community benefits).
This links to product design and management of
attraction. For market research on customer
trends and preferences is often missing in Lao
PDR and it is still difficult to accurately assess the
flux of consumers as well as their spending and
how this spending impacts the economy. Field
research and interviews highlighted the potential
in the areas where the current products as often
poor or limited in the number or attractions they
include and / or the knowledge of the region they
are located in.
Stakeholder dialogue brought up several reasons why products are not being improved. Insufficient
capacities and market information have already been explained above. A second reason is the lack of
cooperation among businesses. Nevertheless, several businesses stated that they are now aware of the
need to organize and better coordinate with each other. This increased awareness may present
opportunities for businesses to cooperate for new and better joint products / packages. Other reasons
relate to factors that will take longer to change such as the current situation of infrastructure, challenges
with waste management, ongoing land reform, the perceptions on safety from abroad, lack of common
destination marketing at regional and national level, etc.
Marketing:
Rural farmers market wild forest products primarily in the form of dried products for the purpose of pre-
processing locally. Marketing follows immediately after wild collection season. Few biotrade export
companies in Laos has a small plantation of Benzion gums, wild tea, wild amla fruits, mulberry, Noni, etc
estate; these plantings have become gradually scaling up and good prices are now being paid to farmers.
The purpose of this biotrade project is to provide with information on the economic, social and other
factors influencing the production and marketing of non-timber forest products collecting from the forests
plus plantation by pioneering companies to ensure secured supply of raw materials since farmers‟ sales
are sporadic and supplies are often limited. Project could promote the prospects for the biodiversity.

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Optimally designed and managed community-based forestry groups will provide significant income
streams to rural Lao families.
Forest products marketing needs improvement of good productivity and high quality with proper
technology, processing, and stable markets, and better prices as being the make reason for good income.
These will lead to establishment and strengthening community-based forest group to access to market
information resulting in availability of data on product quality, price, and as such usually better prices.
There is incretion of ready buyers as very few companies are ready to invest in product processing.
Enhancement of coordination between stakeholders by providing strong support from local authorities in
improving market accessibility.
Exporting:
Agricultural products and natural resources account for the bulk of Laos‟ exports. Laos' main exports are
wood, clothing, coffee, electricity, metals, corn and rubber. Laos‟ main exports partners are Thailand,
China and Vietnam. It has become known that up to now, 700 varieties of NTFPs have been used in Lao
agricultural villages. 369 types of medicinal forest products identified by Institution of Traditional Medicine
in Lao PDR. There are many different types of NTFPs, and it is clear that biodiversity has been made use
of in agricultural life. There are about 25 varieties of NTFPs that are for commercial use, and NTFPs are
important sources of income for agricultural communities. Edible products are bought and sold in
domestic markets, and medicinal plants and spices are often exported to neighbouring countries like
Thailand, China, and Vietnam. Benzoin is used for perfumes and exported to France, and aromatic trees
are exported to Japan and Arab countries. The cardamom is the second biggest agricultural export from
Lao PDR. Every year 400-500 tons of dried seeds are exported to China, where it is used in as an
ingredient in Chinese medicine. Annually tea production in 2015, Lao PDR reaches 6,295 tons in six
provinces of Phongsaly, Oudomxay, Luangprabang, Houaphanh, Xiengkhouang, and Champasak. Lao
tea is also exported to the nine countries of Thailand, Cambodia, Germany, France, Switzerland,
Singapore, Netherlands, Belgium and China.
The Ministry of Agriculture and Forestry has issued Instruction No. 1503/CO, dated 16 July, 2013
regarding the origin on the import and export of vegetables, vegetable products and food products to EU
countries. This instruction urges the Department of Agriculture and Forestry in the provinces, capital and
all business sectors involved in the import and export of vegetable products to implement the
determinations under the regulation on the strict control of vegetables in order to prevent and eliminate
the import of vegetable products from abroad and claiming origin from Lao PDR to re-export to a third
country. This instrument no.1503/CO is falling ABS‟s terms and conditions of access and use of genetic
resources and traditional knowledge.

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1.3 Dynamics and Performance of Core Market System
This section offers a synthesis of the market system constraints identified. We list briefly below those
main constraints that were prioritized during fieldwork interviews:
 In-transparent policy making processes
 Weak natural resource management framework
 Understanding of private sector development, international markets
 Ban on raw material exports
 No spirit to cooperate
 Limited development of business consulting and certification sector / companies do not see value
of external service providers
 Very weak botanical identification
 Weak supply chain management (quality control, traceability)
 Business case of working with suppliers is not understood – trader mentality
 Wild collection is under pressure
 No compliance to food safety
 No idea of long-term business planning – no financial capacities to make a bankable business
plan
 No branding of Laos
 No concept of value addition opportunities
 No best-case example / business case for sustainable BioTrade
Other constraints of gender participating in the use of natural resources and agriculture work: what we
have learned so far, the agriculture employs about 80 percent of the total workforce of 2.4 million people,
with women making up more than half of workers at 54 percent. Unfortunately, due to the low level of
gender awareness in society their role is often neither visible nor valued. In many reports found that the
Lao women play a critical role in agriculture and the use of natural resources, and are primarily
responsible for maintaining their families‟ food security. And men are described as the heads of the
households representing their families at all official meetings to discuss village development activities.
Because many women especially in ethnic minority villages are illiterate, they are unable to adequately
participate in village development activities. By official statistic outlook of Laos in 2015, men and women
spend similar amounts of time on agricultural work, but men spend more hours on income generating
activities including agricultural work.
In most societies women typically have fewer ownership rights than men. Women frequently have land-
use rights or use rights that are mediated by their relationships with men. Thus, when women are
widowed or divorced, they may lose these rights. Equal participation in community-based decision making
remains a complex and difficult goal to achieve, especially in the contexts of highly unequal gender and
class relations. At the local level, the use of natural resource even when women attend meetings or
events, they may not feel free to voice their opinions, or their opinions and needs may not be taken
seriously. Community participation often favours local elites, usually men, but sometimes elite women‟s
concerns directly conflict with and override poor women‟s access to resources. Gender is rarely a central
issue in policy initiatives. Men tend to dominate in the newly emerging decision-making and policy arenas
of climate change and bioenergy. Women‟s limited participation in decision-making processes at national
and local levels restricts their capacity to engage in political decisions that can impact their specific needs
and vulnerabilities.

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1.4 Main Interconnected Markets
Having identified these key functions whose underperformance prevents natural ingredient value chain
from being more competitive and thus creating employment and income for rural people, we look at the
four interconnected market systems more in detail aiming to identify the causes for their
underperformance.
Financial access with smart business plan
Small and medium-sized enterprises (SMEs) play a very important role in enhancing economic
development in Laos. However, SMEs in Laos are small and lack competitiveness. The inflow of foreign
direct investment (FDI) and trade liberalization in Laos bring opportunities and challenges for SMEs in
Laos. Lao SMEs still face various problems, one of the most important problems is financial constraints
such as collateral, complex application processes as well as a limited economic environment and options
for financial sources. Only a small portion of SMEs can access finance. However, larger domestic firms, in
terms of capital, which are determined to grow their businesses, seem to have a greater possibility of
being able to access financial sources. Although the government of Laos has defined policies and
strategy to support SMEs, it lacks specific programs that could flesh out these policies. SMEs are thus
faced with the problems of high tax collection, high inflation, unstable exchange rate, and inadequate
funding. Moreover, SMEs are confronted with problems of innovativeness, lack of competitiveness, limited
market, and networking.
Over the last decade years, the financial sector in Lao PDR has improved considerably. State-owned
commercial banks like BCEL, Agriculture Promotion Bank, NAYOBAY bank, Lao Development Bank
continuously make their services more customer-friendly, reduce red tape and diversify their financial
products to meet the local customers‟ different needs. The entry into the market of several foreign and
local private banks such as ANZ Vientiane Commercial Bank, ACLEDA bank, ICB bank, Phongsavanh
Bank also opens financial prospects for the private sector. Village saving and credit schemes have also
become quite popular in rural areas and serve as an effective alternative source of credit for small and
micro-companies and for household purposes. In a village of the Vientiane Province, loans are provided
to the producers‟ group under the Poverty Reduction Fund Program and channeled through the District
Industry and Commerce Office and the village authority. In other villages, the Lao Women Union (LWU)
also provides credit scheme to the group with a low monthly interest rate (1 percent compared with 2
percent of commercial banks). The finance and market issues are critical for SMEs‟ development. Despite
the emerging financial sector and availability of more financial products, local processing factories and
exporting companies still face a limited access to credit and lack business planning skills.
Therefore, business plan is very crucial tool to reach financial access because those banks above will
want to look at the business plan before providing capital. The business plan is a document outlining the
intended business operations and management, the number of employees, the intended training for Lao
employees, marketing, and financial management which is the most essential part. Business plan should
demonstrate sustainability, not just being a supportive paper. Approximately 70% of companies
interviewed during field research have very poor business plan at aiming of huge capital with 5% of
interest rate proposed to Lao government fund, our assessment found that their business plans do not
match what they intend to do. Smart business plan is an entry point for biotrade companies to
demonstrate the link between market size and capacity of supply from local processing factories
“resource user” and producer groups “resource owner” and facilities should be invested and utilized
efficiently. Of course, in food chain requirement the GMP standard is compulsory for biotrade companies
to show their customers that they have a food safety management system in place. This will start from
few companies already trade to EU, and USA markets to become certified to ISO 22000. Therefore, smart
business plan will cover business operation including facilities utilization as production scale and market
growth, finance transection, traceability, facilities for GMP standard, certification, and CSR. Importantly
business plan should not do, huge investments if not sure, huge investment may have to be undertaken,
with the investor paying a high risk price, long before the full utilization of the investment comes. Good

19. 17 | P a g e
examples of this include the building of port facilities or food processing or freezing facilities. Moreover,
the equipment may not be able to be used for other processes, so the asset specific equipment, locked
into a specific use, may make the owner very vulnerable to the bargaining power of raw material suppliers
and product buyers who process alternative production or trading options.
Secured supply of raw materials
With consumers‟ increasing concern for health and demand for wild and native products, these natural
products are getting more popular on both domestic and global markets. The diversity of products, which
can be adapted to current people‟s lifestyles, creates competitive advantages among different substitute
products. The phenomenon of decreasing forests in many countries and the increasing market demand
for natural and organic products create great business opportunities for Lao community-based enterprises
and biodiversity-based local economies. Meaning that on supply chain side, farmer groups will be
established and strengthened at aiming of collective sale to ensure regular, safe, and secured supply of
raw materials for processing factories, and export companies. As mentioned earlier, the natural
ingredients marketing system in Lao PDR is very complex due to the quota system is a crucial aspect of
the trade system of natural products, since the new regulation released in 2016 stated that all natural
goods including minerals, water, aquatic animals and plants, and other in the forests are belong to state,
not only “land and forest land”. But Lao people have rights to use and access to food and natural
resources.
When talking about trade agreement with foreign buyers, the raw materials must be available and
complied the national regulation. In the year of 2006, the quota system was applicable in NTFPs sector
under forest law 2005 until today. The message in article 25 translated that any trading of natural
resources must be completed land and forest allocation, land use planning, forest inventory, and
management plan. The process of granting quotas runs as follows a company who is interested in trading
natural ingredient or NTFPs makes a bid to the provincial administration including at least Forestry
section and Commerce section. The bidder requests approval to buy a specific amount, and the model of
trade is lump-sum tax payment.
Not surprising that many companies faced troubles on lack of raw materials feeding to their processing
factories for export markets since two types of traders at locality are activated. Firstly, traders with an
export permit and traders with a quota for domestic trade. Those traders who have quota for domestic
trade which they obtained from local authorities they are operating on behalf of the larger companies or
they are sometimes exempt from quota because of the small volume of their products. The companies do
not buy raw materials directly from farmers but buy from local traders. Secondly, illegal traders are always
offering a slightly higher price as the way how they can persuade farmers to sell their product to them
instead of selling to the trader who holds the official quota. As well known that farmers are price seekers
they prefer to sell to who else by giving them a better price. Consequently, the foreign buyers will stop a
contract with local companies that natural ingredient products cannot meet such amount what they want,
farmers also affect from this market failure.
The regional biotrade project respects private sector is key driven actor by facilitate companies following
the biotrade business model and companies must build stronger partnerships within farmer groups in
order to secure safe and reliable raw material supply to access new markets that offer higher prices for
biotrade products. We still believe that biotrade companies already have working system in place
regarding partnership with local government and community-based natural resources management, quota
system, local trader networking, social responsibility, and traceability of raw materials. According to the
notice of Prime Minister Office no. 2355/Prime Minister Office, dated September 09, 2016 which is
discouraged by the government through a ban of export raw materials. At least intermediate products
process within country to increase employment and income for rural people.

20. 18 | P a g e
To ensure he flow of raw materials, biotrade companies must follow biotrade principles, stronger
partnership with local traders and community-based natural resources management, quota must be
linked to forest inventory to ensure sustainable harvesting approach (GACP will be adopted during the
project period), and involve in policy and institutional change at the any level when there is unexpected
issue occurred during implementation of the project.
Figure 7. Organizing farmer group
Food safety, certification, and standards
Unsafe food is currently a global health and socio-economic concern, the impact of food contamination
associates with serious human disease. To ensure consumer trust in the supply of safe food and drinks,
traceability must be in place for local processors (resource user) and producers (resource owner). Food
Safety System Certification (FSSC 22000) is fully recognized by the global food safety and is based on
existing ISO Standards. It demonstrates company has a robust food safety management system in place
that meets the requirements of customers and consumers. Recently there are already 13,000
organizations over 140 countries achieved FSSC 22000 certification, plus over 100 licensed certification
bodies and over 1,500 auditors worldwide.

21. 19 | P a g e
Lao PDR has taken steps towards regional and global economic integration. As member of the
Association of South East Asian Nations (ASEAN) and the ASEAN Free Trade Area. Several challenges
of which are common across the region, hinder the ability of the food safety systems in Lao PDR to
provide a safe supply of food for domestic consumers and to demonstrate compliance with international
standards under the WTO Sanitary and Phytosanitary (SPS) Agreement.
Food and Drug Department (FDD) of the Ministry of Health is responsible for the day-to-day work of the
commission. The National Food Safety Policy no.020/MoH issued date 13 January 2009. serves as a
reference for implementing the control and management of quality and safety of food in Lao PDR,
throughout the food chain, including the growth cultivation, rearing, processing, service, industrial
production, storage, purchase, transportation, importation-exportation, and distribution to the point of
consumption, and international technical cooperation and scientific research.
Biotrade project aligns food safety standard, the promotion of economic development through increased
trade in food and agricultural products, in which the region has a comparative advantage, and further
integration in the regional and global economy, is a key component of national development and poverty
reduction strategies in Lao PDR. The development of agriculture and diversified cash crops to promote
rural development is a key part of the national framework. The Biotrade project promotes the “Sourcing
with Respect” of ingredients that come from biodiversity and commit to gradually ensuring that their
sourcing practices promote the conservation of biodiversity, respect traditional knowledge and assure the
equitable sharing of benefits all along the supply chain. Union of Ethical BioTrade (UEBT) aims to help
private sector to be more involved in Ethical sourcing of biodiversity following the Ethical Biotrade
standard.
Figure 8. Standards and Certification

22. 20 | P a g e
Export marketing
International trade has played a crucial role in the process of economic development. It is a significant
source of foreign income, stimulates domestic production and generates employment to local people
respectively. The growing Lao economy has become increasingly integrated into the global economy
through regional and global trade pacts. Increased trade links with other countries have translated into
increased access to better or cheaper imports such as intermediate inputs for the manufacturing sector
and increased demand for exports.
Laos is eligible to export to ASEAN markets with a relatively low import tariff of 0-5%. Currently, Laos has
broadened its trade relations with more than 50 countries, and the country has concluded the bilateral
trade agreements with 15 countries, these agreements provide a great opportunity to improve market
access to Lao‟s export products with a low import tariff. In addition, under its status as a least developed
country (LDC), Laos has received the unilateral tariff preference based on the generalized system of
preferences (GSP) from 47 countries. In contrast, exports to the European Union (15)2 and the United
States have sharply declined because of it is unclear if the participation in various types of trade
agreements will improve market access and export performance of Laos to trading partners. The
bottlenecks to exporting more could come in the form of customs formalities and export clearances
needed, cost of transportation, other logistics issues, and lack of trade-related infrastructure, lack of
export products diversification; a shortage of raw materials in compliance with the local content
requirements; complicated documents procedures and high costs to obtain a certificate of origin; and the
insufficient promotion of preferential tariff (TP) utilization to exporters. Optional mechanism of problem
solving, Chinese market is huge market for Lao Agriculture products that requires very simple procedure.
Therefore, Lao PDR and China implemented tariff reduction since in 2006 and all import tariffs were
eliminated in 2010. And Laos has received a zero tariff treatment from China that covers 330 tariff lines
based on the ASEAN-China FTA (ACFTA).
In conclusion, Lao Biotrade products focus in EU and USA markets plus Chinese market as substitute in
case of some natural ingredients and stakeholder already have relationship with China trade and benefit
to Lao farmers. During the project cycle, there are seven areas could be addressed for Lao biotrade
products.
1. Clear and accurate information on rules and regulations concerning the natural ingredients sector is
highly needed.
2. The Government should not require many sets of papers for many truck loads for each cargo shipment.
3. Reconsider the „special export tax‟ to make it into a more export friendly policy.
4. Reduce or eliminate the „royalty fee/forestry tax‟ for non-extractive NTFPs.
5. Simplify the export process.
6. The Provincial government will play more roles in managing contract farming that involve industrial
investing enterprises, intermediaries and farmers so as to avoid unfair intervention and price distortion.
7. A laboratory for testing agricultural products within the national level will be very helpful.
2
EU (15) includes Austria, Belgium, Denmark, Finland, France, Germany, Netherlands, Ireland, Italy, Portugal, Spain,
Sweden, the United Kingdom, Norway and Poland; and America includes the United States of America and Canada.

23. 21 | P a g e
Figure 9. Marketing.

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2. Stakeholders and Their Interests
This section examines key market players and stakeholders with a focus on the function they fulfill and
their interest (or incentives) to improve how the market system functions.
2.1 Market Players and Stakeholders
This section defines the most important actors participating in the market system, both those that perform
a function and those involved in setting rules.
Table 1: Stakeholder Summary
Stakeholder Function In Market
System
Role in Making and
Enforcing Formal and
Informal Rules
Inclusion of Women
and Socially
Disadvantaged
Ministry of Industry
and Commerce
Trade and Product
Promotion Department is a
department under the
Ministry of Industry and
Commerce (MOIC) aiming
to support entrepreneurs
promoting and
development products for
the domestic and export
market.
Facilitate entrepreneurs
producing and
developing products in
compliance with the
various needs of the
domestic and
international market.
Ministry of Health Food and Drug
Department, Institute of
Traditional Medicine
Implement food safety
standards aligning to the
goal of government
Ministry of
Agriculture and
Forestry
Department of Technique
Extension and Agriculture
Processing, Department of
Rural Development and
Cooperatives
Promote sustainable
harvesting approach to
farmer groups, and
facilitate clean
agriculture for export
Ministry of Natural
Resource and
Environment
Registration forest
resources in protected
forests and conservation,
including wildlife species
may valuable rare and
endangered.
Monitor forest use,
NTFPs harvesting and
harvest forest,
biodiversity, the use of
forests across the
country.
Ministry of Science
and Technology
The Biotechnology and
Ecology Institute (BEI) of
Lao‟s Ministry of Science
and Technology now
incorporates ABS
principles in “Material
Transfer Agreements”.
Lao natural ingredients
are aligning with the
Biotrade principles
Research Institute Forestry and Agriculture
Research Institute and
Rural Development,
Identify botanical name
for specific variety for
Laos, chemical profiling
Departments of
Regulation and
Policy
Taking the national
concerns and long-term
scenarios into global
The role of trade policy
in development by
helping the influence of

25. 23 | P a g e
nature of the markets,
including the need for
increasing value addition
and retained value
globalization of biotrade,
and the need for being
competitive in the
national, regional and
international market.
Standardization
Agency
Provide professional
services in the field of
standardization of certain
services.
Act as certification and
standard service
providers to serve
Biotrade companies
Financial institute NAYOBAY bank, and
Agriculture Promotion
Bank are the main formal
credit institutions in the
natural ingredients since
both currently welcome
viable agriculture
proposals, and seem very
interested in the natural
resource products (tea,
Cardamom, other NTFPs
sector).
Improvement of better
access to a variety of
financial resources,
having consideration of
various forms of financial
service to biotrade
companies.
Local service
providers
Provide specific training
required for different types
of activities or certain types
of operations
Provide thematic
trainings in the area of
business plan,
marketing, products,…
Farmer groups Supplying all kinds of raw
materials for all pioneering
biotrade companies in the
natural ingredients value
chain
Manage resources in
sustainable manner and
ensure marginalized
people access to natural
resources as well.
2.2 Stakeholder Capacities, Incentives and Interests
Governmental (public) Sector
In Lao PDR, there are many government organizations responsible for natural resource management.
The Prime Minister‟s Office is the highest in the government administrative hierarchy. The main
responsibilities of the office include coordination of relevant government sectors; development of policy
and legal instruments; and to oversee overall implementation of policy, and legal instruments as well as
the implementation of 8th national socio-economic development plans (8th NSEDP) 2016-2020.
 At the national level:
- Ministry of Science and Technology "MoST" is the technical management of the central, the
social structure regulation of government have a role as an aide to the government in the
development and management issues involved in science and technology, innovation, intellectual
property agreement, a standard measure across the country.
- The Ministry of Industry and Commerce “MoIC” is the government ministry responsible for
governing and developing industrial activity and commercial activity in Laos. It is responsible for
regulating and promoting manufacturing, trade, import and export activity, and for representing
Laos and Laotian interests in the international business community.
- The Ministry of Agriculture and Forestry is comprised of 14 departments, there are departments
related to natural resources management such as Forestry Department, Agriculture Department,
Agriculture Land Management Department, Department of Technique Extension and Agriculture

26. 24 | P a g e
Processing, Department of Rural Development and Cooperatives, Department of Regulation and
Policy, and Forestry and Agriculture Research Institute and Rural Development.
- Ministry of Natural Resources and Environment is abbreviated as “MoNRE” apparatus
government role as an aide and is administered directly about environmental, land, forest, water,
air, biodiversity and minerals. The scope of work known as natural resources and environmental
management, including natural disasters and the change of climate, meteorology and hydrology
in the country.
 At the local level:
- Concerned departments of four key ministries above will implement they owned functions. For
instance, the Forestry and Agriculture Research Institute and Rural Development (FARIRD),
Department of Technique Extension and Agriculture Processing (DTEAP), and Department of
Rural Development and Cooperatives (DRDC) focus on the implementation of government
policies at micro level such as developing, testing, and implementing sustainable forest
management models with PAFO and DAFO, as well as village authorities and village forest units.
- In addition, these three departments are responsible to support capacity building for PAFO,
DAFO and other partners at local levels. Regarding community forestry (especially production
forest and village forest), PAFO is responsible for the implementation of sustainable management
of production forest areas, and monitoring the implementation of forest management. DAFO, on
the other hand, is responsible for the organization of the implementation of forest management
plans together with village authorities and Village Forest units. At this level forest management
activities include forest inventory and planning, harvesting and sale of forest products. Other main
government agencies that provide direct support to community based forest management include
financial banks, especially the NAYOBAY Bank, and Agriculture Promotion Bank which provides
loan services to facilitate the development process. In addition, mass organizations including the
Lao Youth Union, Lao Women Union and the National Reconstruction Front provide significant
support to the implementation. Support was offered in the areas of community organizing, direct
implementation and development fund scheme.
Private sector is active mostly in both domestic and foreign, and including small and medium-sized
enterprises (SMEs), is playing an increasing role in Lao PDR‟s economy, which is one of the fastest
growing in South East Asia year on year. Also, the private sector is mostly involved in transportation,
finance and insurance. This means the private sector is one of the most important sectors, because it
covers most of the existing agriculture products. Therefore, the private sector‟s role is set to grow as the
Government works to achieve its goal of graduating from Least Developed Country status by 2020.
NGO Sector plays particularly important roles in promoting smaller scale development interventions
throughout the country. The formation of interagency groups such as the Sustainable Agriculture Forum,
allow information exchange and coordination of projects to occur. Most NGO projects focus on village or
district development and have strong training components. These are foreign NGOs as the Lao PDR
government does not allow the formation of local NGOs.
Donors many donors have funded projects and program (both bilateral and multilateral) that supported
the forestry sector over the last decade. International donors have provided technical and financial
support for the development of models on forest management. They have also tested, and developed
legal framework, and contributed to human resource development. Furthermore, many projects have
supported research on key issues pertaining to forest management.
Training Providers Training is an essential part of the system required to strengthen the capacities of all
stakeholders in all segments of the natural ingredient sector. Necessary knowledge and skills that cannot
be found in regular education programs must be provided through the provision of quality training. Quality
training is a necessary condition for the development of this sector.
Exporting Agencies One of the important parts of the Lao BioTrade sector involves the promotion of
capacity, facilities and intermediate natural ingredient products from the country of Lao PDR. This
important segment contributes to the creation of an image or brand of Lao BioTrade, which can be
promoted in various international markets. Marketing and exporting agencies should play a role in
creating unique natural ingredient packages in certain markets, promote them at the wider international
level, and thus create certain "brand" specific locations (or the whole country). This process will create the

27. 25 | P a g e
preconditions for attracting markets not only from neighbouring countries, but also from countries around
the world. To do this, we need a marketing and exporting agency to work closely with local pioneering
companies, the private sector and other stakeholders to strengthen existing capacity. At the same time, it
is necessary for stakeholders to work together to create new R&D products and services. While it is
necessary to do a lot more in the area of promotion and marketing.
3. Current and Future Situation
This section brings together the analysis done in functions and market actor, the numerous reasons have
been identified why the market system is preferable for Lao Biotrade. One major requirement is highly
demand for better connection within the value chain in order to have good incentives particularly in the
upstream section of the value chains and need for improved capacities and knowledge. Some of the
knowledge and skills can be provided to value chain actors through embedded services of the lead
company, however, some may have to be provided also by external service providers. The current market
system, the changes we can foresee for a future and sustainable market system in which complex rule.
Consequently appropriate tool will be developed to preserve biodiversity. Below shows scenario for
current and future to understand the picture of Lao biotrade system.
3.1 Inclusive Sustainability Matrix of Current Situation
Function or Rule Who Does Who Pays Who is Socially
Included/Excluded
Core Market Functions
Production and collection Farmers/Collectors Village assembler Women socially
excluded
Local trading Village assembler Company
Transport Company Company
Pre-processing Company company
R&D product development Nothing Nothing
Packaging Nothing Nothing
Marketing Nothing Nothing
Export Company Foreign buyers
Rules
Medicinal plant law Ministry of Health Government
Forest law Department of
Forestry
Government
NTFPs law Department of
Forestry, MAF
Government
Quota system Government company
Export bans for raw materials Ministry of Industry
and Commerce
Government
Lump-sum Tax payment Ministry of Finance Company
Traditional Resource
Management
Communities Few companies
Trade concession Ministry of
Planning and
Investment
Company Grass-root people get for
nothing. Marginalized
people socially excluded
Land tenure NGOs/INGOs Donors/projects
Exporting clearance NGOs/INGOs Donors/Projects

28. 26 | P a g e
Implementing system for
traceability
NGOs/INGOs Donors/Projects
Regulation of laboratory test Nothing Nothing
Implementing Nagoya
protocol
Ministry of Science
and
Technology signed
Donors ABS policy will not
implement accordingly
Biotrade principles Nothing Nothing
Interconnected Market Systems
Cooperated Social
Responsibility
NGOs/INGOs Donors
Implementing food safety
system
Few companies Company Medicine has system of
test based on regulation
law
Laboratory testing Few companies Company ODOP as finished
products also test for
consumer‟s health
Standard Few companies Company
Certification NGOs/INGOs Donors/Projects
Advocacy NGOs/INGOs Donors/Projects Since farmer‟s voice
doesn‟t take in action.
Contract farming NGOs/INGOs Donors/Projects Trader is always holding
the decision power
Finance access Nothing Nothing Mostly mega investment
is affordable, very few for
SMEs
Quality control Nothing Nothing
Consultation Nothing Nothing
Coordination Nothing Nothing
Supply management Nothing Nothing
Public extension NGOs/INGOs Donor/project Due to few number of
female play role as
leader
Research Nothing Nothing
Business plan Nothing Nothing
Natural Resource
Management
NGOs/INGOs Donor/project Marginalized people are
excluded
One stop service Nothing Nothing
3.2 Inclusive Sustainability Matrix of Future Situation
Function or Rule Who Does Who Pays Who is Socially
Included/Excluded
Core Market Functions
Production and collection Farmers and
collectors
Village assembler Women socially
excluded
Local trading Village assembler Company
Transport Company Company

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Pre-processing Company company
R&D product development Company company
Packaging Company company
Marketing Company company
Export Company Foreign buyers
Rules
Medicinal plant law Company company
Forest law Company company
NTFPs law Company company
Quota system Government Company
Export bans for raw materials Ministry of Industry
and Commerce
Government
Lump-sum Tax payment Remove Remove This is unsustainable
model
Traditional Resource
Management
Communities Company
Trade concession Remove Remove This is a monopoly
trading model
Land tenure Ministry of Natural
Resource and
Environment
Donor/project Ensure the marginalized
people are not isolated
Exporting clearance Company Company
Implementing system for
traceability
Company Company
Regulation of laboratory test Trust lab proposed
by foreign importer
Company
Nagoya protocol Ministry of Science
and
Technology signed
Government ABS policy will not
implement accordingly
Biotrade principles Company Company Benefit sharing and
respect people right
need to be carefully
monitored
Interconnected Market Systems
Cooperated Social
Responsibility
Company Company
Implementing food safety
system
Company Company Medicine has system of
test based on regulation
law
Laboratory testing Company Company Required by
Pharmacopeia of EU
and Hongkong
Standard Ministry of Science
and Technology
Company
Certification Certification
Alliance
Company As required by buyers
Advocacy Department of
Regulation and
Policy
Government Create enabling
environment for biotrade
Contract farming Department of Donor/project Trader is always holding

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Rural
Development and
Cooperatives
the decision power
Finance access Financial institute Company NAYOBAY bank, and
Agriculture Promotion
bank are willing to invest
in natural ingredients
e.g. tea sector, and other
NTFPs.
Quality control Company Company
Consultation Consultants Company
Coordination Company Company
Supply management Company Company
Public extension Department of
Technique
Extension and
Agriculture
Processing
Donor/project Few number of female
play role as leader
Research Forestry and
Agriculture
Research Institute
and Rural
Development
Donor/project
Business plan Financial
consultant
Donor/project Later, company will pay
for services
Natural Resource
Management
Forestry
Department
Donor/project Marginalized people are
excluded
One stop service Ministry of
Planning and
Investment
Company

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4. Sector Strategy
4.1 Overall Sector Strategy
The findings in this analysis report provides the Lao Biotrade Project‟s interventions for encouraging
positive changes in the market system. Lao Biotrade Project envisages for a better functioning
market system is one where natural ingredient sector has better promoted. All interventions are
interrelated with each other and with other potential interventions in other sectors, influencing the
improvement in the sector of natural ingredients and bringing tangible results.
4.2 Proposed Interventions
The regional biotrade project‟s documents and the outcome of EPA report recommended four
possible interventions to develop the biotrade sector and its relevant companies and stakeholders in
the Lao PDR:
1. Company interventions
2. Supply chain interventions
3. Market entry interventions
4. Interventions in business enabling environment
The below designing interventions cover activate potential stakeholders and partners through best
cases in the Helvetas programme; include “low-hanging fruit” cases as quick wins in five intervention
areas to show early results, and lastly we slightly develop and transfer tools to ensure options for
uptake and scaling-up.
INTERVENTION 1: Biotrade Supply Chains.
1. The Change: Companies and producer/collector groups participate in supply chains that
meet Biotrade principles and standards.
2. The Partner: Companies to develop supply chains and service providers (AFC plus others)
to support them. For instance, two companies of AgroForex (Benzoin gums), and Mai
Savanh (could explore wild tea, or other products but not SachaInchi) as an entry point to be
the right approach in developing a common understanding of Biotrade principles. Both
companies are the driving force of the value chain and have the capacity and power to
modify and transform the value chain.
3. The Model: Companies interested in implementing Biotrade supply chains organize farmer
groups with the support of specialized service providers. Meaning that each company will
organize minimum one value chain on a GACP-WHO standards (or equivalent) basis or
alternative standard (e.g. organic, fair trade, fair wild, other), including some intra-regional
ethical Biotrade value chains. Collectors or farmer groups have been strengthened by the
companies since the Biotrade project provides support to both companies and several pilot
schemes have been developed.

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4. The Barriers: a). companies do not know about or see benefit of Biotrade. b). current
service providers do not offer specialized services to support companies to develop Biotrade
supply chains. This sector, companies always face unsecured supply of raw materials from
farmer groups, farmers are price seekers they will sell raw materials to whom else and break
the contract. This case will affect directly to foreign market and trust building among actors.
For the international market requirement needs to be complied by Lao companies. Recently,
many companies failed exporting to EU and USA.
5. The Facilitation: a). raise awareness of potential for Biotrade supply chains and what is
required to comply. b). support and connect service providers to help companies sustainably
organize Biotrade supply chains. c). starting with a few export potential products by
emphasizing on Benzoin gums, Cardamom, lemon grass, and Wild tea (extract seed oils?).
6. The Exit Strategy: Companies and service providers see the benefits of continuing to grow
Biotrade supply chains in future.
INTERVENTION 2: Marketing.
1. The Change: Companies are effectively marketing Biotrade products to new buyers in high
value markets.
2. The Partner: a). Companies interested in new marketing of Biotrade products. b). Local
marketing service providers are willing to support Biotrade exporters. FairTrade-Laos and/or
Department of Trade Promotion plus others including individual consultants will be identified
as local service providers for helping selected companies such as AgroForex Co.,LTD, and
Mai Savanh Co.,LTD who promoting the Benzoin gum farmer groups in Luangnamtha,
Luangprabang, Phongsaly, and Houaphanh province, and Wild tea farmer groups in
Paksong district, Champasak province.
The Model: Companies identify what they needed on marketing Biotrade product, and link
proper service providers to offer realistic for promotion of Biotrade marketing. Emphasis is
placed on how to develop sustainable linkages for farm outputs between farmers and private
sector traders, exporters, retailers and agro-processors. Many successful linkages are
developed directly by the private sector without the intervention of third parties and the
private sector is increasingly paying attention to the sustainability of links with its suppliers.
Thus it is hoped that the model raised here will also assist the work of the private sector.
3. The Barriers: Companies do not demand Biotrade marketing need yet and service providers
not yet knowledgeable about Biotrade marketing.
4. The Facilitation: a). Link FairTrade-Laos to external consultants to develop Biotrade
marketing skills and products. b). Support FairTrade-Laos to connect with companies and
provide incentives to encourage use of marketing services. c). Support matchmaking and
similar activities (Department of Trade Promotion) for companies. d). Promote Biotrade
concept.

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5. The Exit Strategy: FairTrade-Laos is promoting and supporting Biotrade marketing and
linked to international Biotrade movement.
INTERVENTION 3: Standards and Certification.
1. The Change: Improved management and certification of product quality and sustainability by
Biotrade exporting companies.
2. The Partner: a). Service providers who provide training and advice about standards and
certification for instance standards and certification division under DoA, MAF, FairTrade-
Laos, and International buying companies. b). Certification bodies such as: ACT, and CertAll
(and associates).
3. The Model: Service providers add Biotrade standards and certification to their service
offering program. Sustainability standards and certifications are voluntary, usually third party-
assessed, norms and standards relating to environmental, social, and ethical and food safety
issues, adopted by companies to demonstrate the performance of their organizations or
products in specific areas. During baseline survey, project team will identify together with
selected companies on specific products to export. Existing standards and certification will
be asset to provide key points for local service providers adopting in their program.
4. The Barriers: Service providers do not yet see the market opportunity and do not have
specialized expertise in Biotrade. Many service providers in Lao PDR are donor-oriented,
companies do not trust.
5. The Facilitation: a). Build up skills of service providers to deal with Biotrade, the
participatory capacity need assessment will be basic tool to identify strengths and weakness
of service providers, the project implementing in this area will support by Profound and UEBT
since both are accredited by worldwide agencies. b). Provide linkages and financial
incentives for companies to use these services.
6. The Exit Strategy: Companies buying services for Biotrade certification from service
providers.
INTERVENTION 4: Ensure Access to Finance.
1. The Change: Companies and their suppliers can access the finance needed to implement
Biotrade on fair terms.
2. The Partner: Financial institutions and companies themselves.
3. The Model: Companies with strong business plans facilitate access to finance in partnership
with finance institutions. Financing arrangements must be considered at an early stage of
project implementation. Financial institutions wish seeking to develop contracts need to

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address how best clients can fund their start-up and ongoing costs. Currently many
INGOs/Projects/Donors in Lao PDR have now moved away from direct provision of credit,
preferring to involve microfinance organizations. There may be a pilot case to provide
(unsubsidized) credit over a short period in order to demonstrate commercial viability to
financial institutions.
4. The Barriers: Financial institutes do not want to risk on a sector they do not know, and
companies and producers/collectors do not have good financial literacy or business plans.
5. The Facilitation: a). Help companies make strong business plans. b). Cooperate with
financial institutions to make appropriate financial mechanisms for Biotrade. c). Provide
partial loan guarantee or similar support to share risk.
6. The Exit Strategy: New financial services grow when they see benefit from Biotrade sector
with guarantee system is in place.
INTERVENTION 5: Improving Supporting Environment
1. The Change: Effective consultation processes exist between business, government and
other stakeholders to discuss Biotrade related issues.
2. The Partner: Relevant central ministries, provincial, and district governments, companies,
producer/collector groups, other stakeholders.
3. The Model: Multi-stakeholder consultative platform regularly discusses issues relevant to
Biotrade. Non-confrontational policy advocacy will be applied by writing down cases, and
other ways could raise hot burning issues to the Biotrade taskforce to make a decision, and
the decision could do different level depends on priority ranking how problems are important.
4. The Barriers: A lack of coordination by relevant stakeholders and a lack of confidence that
issues can be resolved. Today Biotrade sector is missing, it seems difficult to establish new
platform rather using exiting one such as Lao Farmer Network (LFN), NTFP association at
the provincial level, and other form of business membership organizations.
5. The Facilitation: Bring together relevant stakeholders at consultation events, and assist
them to identify issues and solutions. At least one supportive policy per product per year
develops and solves with satisfied by stakeholder.
6. The Exit Strategy: A Biotrade network continues with dialogue on as needed basis. The
stakeholder can relate their efforts to individual.

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