Business Models for Foreign Investment in Agriculture in Laos

This report analyzes foreign direct investment (FDI) in the agriculture sector of the Lao People's Democratic Republic (Laos), examining the business models used by investors and their impact on economic development. It identifies a tension between macroeconomic growth and local economic development, noting that while FDI has increased agricultural output, it often fails to align with broader development goals and can negatively impact food security and local livelihoods.

• Between 2005 and 2011, foreign direct investment (FDI) in the agriculture sector of Laos expanded rapidly, with nearly 250 projects approved and a combined value estimated between US$1.1 billion and US$1.7 billion.
• Foreign investors in Laos primarily use two business models to acquire land: land concessions and contract farming. Land concessions, common for perennial tree crops and pulp wood, grant use of state-owned land for 30 to 35 years. Contract farming, more common for annual crops, involves agreements where companies provide inputs and technical advice in exchange for a guaranteed supply of commodities at a fixed price.
• Land concessions are associated with significant risks of 'land grabs,' where investors and corrupt officials may force landholders to cede rights for minimal compensation. Concessions have often been granted at low rates, between US$2 and US$6 per hectare, providing little revenue to the government.
• Foreign concessions are estimated to account for between 9% and 14% of the total agricultural land area in Laos. The majority of this land is dedicated to rubber and eucalyptus, which raises concerns regarding national and local food security.
• While Laos has met macroeconomic growth targets for agriculture, this growth often masks negative local impacts. There is a noted distinction between economic growth and economic development, as FDI has not consistently aligned with development objectives such as improving rural livelihoods and food security.
• The regulatory environment in Laos is characterized by poor transparency, frequently changing laws, and widespread corruption. Laos ranks 165th out of 183 countries in the World Bank's 'Ease of doing business' rankings, with particularly low scores for contract enforcement and investor protection.
• Environmental and Social Impact Assessments (ESIAs) are officially required for projects with significant impacts, but in practice, agricultural projects often avoid them. This lack of assessment can lead to negative outcomes, as seen in the Mitr Lao Sugar project, where benefits were found to be insufficient to cover the social and environmental costs.
• The report recommends that the Lao government improve data collection on trade and production, clarify land tenure, and encourage greater collaboration between FDI and Official Development Assistance (ODA) to better align investments with economic development goals.

APA

Campbell, R., Knowles, T., & Sayasenh, A. (2012). Business Models for Foreign Investment in Agriculture in Laos. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/business_models_ag_investment_laos.pdf

Chicago

Campbell, Roderick, Tristan Knowles, and Amphaphone Sayasenh. Business Models for Foreign Investment in Agriculture in Laos. International Institute for Sustainable Development, 2012. https://www.iisd.org/system/files/publications/business_models_ag_investment_laos.pdf.

Wikipedia

{{cite report |last1=Campbell |first1=Roderick |last2=Knowles |first2=Tristan |last3=Sayasenh |first3=Amphaphone |title=Business Models for Foreign Investment in Agriculture in Laos |publisher=International Institute for Sustainable Development |date=July 2012 |url=https://www.iisd.org/system/files/publications/business_models_ag_investment_laos.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{campbell2012business, author = {Campbell, Roderick and Knowles, Tristan and Sayasenh, Amphaphone}, title = {{Business Models for Foreign Investment in Agriculture in Laos}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = jul, url = {https://www.iisd.org/system/files/publications/business_models_ag_investment_laos.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }