Laos – Tied Aid Loan II.

Concept of the development of the agriculture and food production sector in the Lao P.D.R. in the frame of the new Hungarian tied aid loan program and new export credit facility

 

The establishment of the food chain safety system in the Lao P.D.R. is a great challenge but also a great opportunity that can contribute to the better use of the unique green resources of Laos for the benefit of social and economic development. The joint work in the frame of the planned projects financed through the tied aid and commercial credit facilities will further strengthen the traditional cooperation between Hungary and Laos and will generate future joint business opportunities that will be beneficial for both countries.

A Memorandum has been proposed to the Government of the Lao P.D.R. for consideration as per the following:

  • provision of tied aid credit for the Lao People’s Democratic Republic by Hungary on the basis of this agreement in the amount of 30 million USD for the establishment of a food chain safety system;
  • provision of an officially supported export credit facility to the Lao People’s Democratic Republic in the amount of 10-30 million USD for the development of the agricultural sector by upgrading and modernization of existing agricultural facilities, the establishment of new model agricultural facilities and human resources development.

The proposal of the Government of Hungary reflects the request of the Lao P.D.R. for a tied aid loan program for the development of the agriculture and food production sector in Laos that is a vital issue in the socio-economic development of the country. Taking into account the proposal of the Government of Hungary a concept has been elaborated that can serve a basis for the elaboration of details of the tied aid loan program and also for the elaboration of business plans for investments that can be financed through the Hungarian export credit facility.

 

Tied aid credit for the establishment of a food chain safety system

The food chain safety system is a very complex one that should be embedded into the existing institutional and infrastructural system in Laos but using modern concepts and methods during the establishment of the new system. During the preparation and implementation of the program, the findings and recommendations of a World Bank study[1] are followed and the results and experiences of the establishment and operation of the Hungarian Food Chain Safety system are used through expert consultancies and human resources development. Results and experiences of food chain safety and certification schemes in the ASEAN region are also taken into account through expert consultations and study tours. Acknowledged foreign experts may also be invited into the expert team, who are familiar with regional aspects. The establishment of the food chain safety system has three interlinked elements according to the followings:

  • development of the institutional and legal system that also includes the elaboration of relevant methods and procedures, the establishment of databases and IT systems and the development of human resources;
  • development of the diagnostic and SPS management capacity that includes the upgrading of existing laboratories, the establishment of necessary basic laboratories and the modernization and construction of the necessary facilities (e.g. quarantines, inspection stations, communication systems);
  • establishment of a model integrated production system according to the principle of „from field to fork” that can provide high quality and safe certified product (pork and fish) both for local and export markets and serves as a test and demonstration system through the whole value chain.

 

The Hungarian support focusing on the development of diagnostic and SPS management capacity will assist the local marketing of safe food products and will provide good opportunity for such Lao products to be exported to ASEAN countries and other regions in Asia.

 

 

Table 1. Preliminary budget of the tied aid credit for the establishment of a food chain safety system
1. Development of the institutional and legal system 2. Development of the diagnostic and SPS management capacity 3. Establishment of a model integrated production system
Activity USD Activity USD Activity USD
1.1.  Assist the development of the institutional framework 800000 2.1. Upgrading existing laboratories 3000000 3.1. Establishment of an agriculture farm (mainly for soya bean and corn production) 1000000
1.2.  Assist the development of legislation 500000 2.2. Establishment of new laboratories 8000000 3.2. Upgrading of Nongteng feed mill 1800000
1.3. Assist the development of a surveillance system 600000 2.3. Establishment of facilities to improve food chain safety and SPS management 2000000 3.3. Establishment of a pig farm 2000000
1.4.  Assist the development of emergency response 600000 2.4. Provision of field labs and test kits 2000000 3.4. Upgrading Namhoum fishfarm 300000
1.5.  Assist the development of risk analysis 500000 2.5.  Human resources development 1000000 3.5. Establishment of a small fish processing plant 1000000
1.6.  Assist the development of site and border Inspections 1000000 3.6. Upgrading Namxuang slaughter house and complementing with a meat processing plant 2000000
1.7.  Assist the development of certification of exports 200000 3.7. Establishment of shops for healthy and safe meat and fish products 500000
1.8. Human resources development 800000 3.8. Human resources development 400000
Total: 5000000 Total: 16000000 Total: 9000000
GRANDTOTAL: 30 000 000

Figure 1. Diagram of the planned developments in the frame of the new tied aid loan program and the export credit scheme

 

[1] Lao People’s Democratic Republic, Sanitary and Phytosanitary Standards Management, Action Plan for Capacity Building, The World Bank Washington D.C.  East Asia and the Pacific Region, Agriculture and Rural Development Department, December 2006