Business models for foreign investment in agriculture in Laos

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

This paper investigates foreign direct investment (FDI) into the agriculture sector of Laos in an attempt to understand the pros and cons of various business models, focusing on the model of land acquisition used by foreign investors and the extent to which various business models are contributing to economic development.

The research has shown that Laos is meeting its stated macroeconomic growth targets for agriculture, although these can mask negative impacts on local populations. This highlights the important distinction between economic growth and economic development. The link between FDI and broader economic and agricultural development goals also remains unclear. To improve this, business models should be encouraged that more clearly align with both development and growth objectives.

Laos is making steps to improve in all of these areas but will need to ensure that initiatives at a central level are carried through and enforced at a provincial and district level. A lack of clear land rights, frequently changing investment laws and poor transparency are potential barriers to some investors. Similarly, a lack of reliable socioeconomic data makes it difficult to assess the likely impacts of large-scale projects.