Agriculture Reference
In-Depth Information
The project was designed to operate from 1994-2001, although the field implementa-
tion was not established until 1997, due to initial institutional delays. As a result the
closing date for the project was extended to 2003, in order to provide continued support
to the Lao institutional partners. By its conclusion, the ITPP project involved a total
expenditure of US$15.4 million, including US$10 million in ADB financing. The
ADB provided a soft loan to the Lao government in support of the project, charging
one percent interest per annum, with a 10 year grace period and a 40 year loan matu-
rity (ADB 2005a: ii-iii). The ITP project funding was to generate a 13 percent internal
rate of return, via an average production of 128,000 cubic meters of wood per year,
which would generate $2 million (in 1993 dollars) in exports per year (ADB 1993).
The primary objective of the project was aimed at establishing 9,000 ha of fast
growing tree plantations on unstocked and degraded forest land, and to promote a
national policy and institutional framework supportive of industrial plantations and
forestry investors. ITP project funding was channeled through the newly established,
state-owned Lao Agriculture Promotion Bank (APB). Onward loans in support of
tree planting were then extended to secondary borrowers, organized into three bor-
rowing classes: companies, individual-entrepreneurs, and small farmers. The ITPP
was not conceived of as 'community forestry' - this was intended as a market-based
plantation program aimed at the provision of formal, subsidized credit to the top class
of skilled farmers, entrepreneurs, and companies. The loan conditions for second-
step borrowers included an interest rate of seven percent per year, with the a maturity
date of eight years for farmers and 12 years for companies, including an interest
grace period of 6 years. Extension support and training for smallholder tree planting
was initially provided through the MAF, and then, in 2000, by the newly established
National Agriculture and Forestry Extension Service (NAFES) under the MAF. A
total of 19 ADB missions were sent in support of the project between 1992-2005.
The project's progress was reviewed by ADB missions four times between 1994 and
2003, receiving a 'satisfactory' rating on each occasion (ADB 2005a: v).
While the original design was weighted towards extending credit to companies
and individual entrepreneurs, the project experienced early difficulties in identifying
interested firms in Laos that qualified for the loan facility, as well as with other regu-
latory issues which acted to block the enrollment of larger plantation investors.
3
In an
effort to meet loan disbursement and plantation establishment targets, the strategic
emphasis of the Agriculture Promotion Bank shifted mid-project towards extending
more loans to smallholder peasant farmers. In response to this slow rate of secondary
loan disbursements, in 2000 the ITPP Project Coordination Unit (PCU) made a key
decision. The PCU decided to expand the geographic scope of the project, from the
original design which targeted eight districts in four provinces; up to 32 districts in
seven southern Lao provinces (see Fig. 13.1). This geographic expansion of the
project range proved successful in increasing the rate of loan disbursements, and
3
ADB (2005a: 2) states “… a lack of adequate land classification/allocation systems to identify
suitable plantation sites, and cumbersome customs procedures designed to preserve natural forests
also hindered the participation of foreign investors.”
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