Laos faces thorny land issues in Asia's orchard

By Darren Schuettler

VIENTIANE (Reuters) - After decades of isolation, Communist-led Laos is enjoying an economic boom fuelled in part by surging demand for its abundant commodity -- land.

From China to Japan and South Korea to Thailand, agri-business firms are flocking to the landlocked Southeast Asian nation to grow everything from rubber and pulp trees to organic vegetables and "green" crops for alternative fuels.

"Laos will be ASEAN's orchard in a couple of years," Thai embassy commercial officer Chalaempon Pongchabubnapa said of the 10-nation Southeast Asia grouping of which Laos is a member.

One of the poorest countries in Asia, with many of its citizens living on around $1 per day, Laos has gradually opened its tiny economy to foreign investment since the Pathet Lao Communists adopted market reforms in the mid-1980s.

In its 2008 outlook, the Asian Development Bank forecast nearly 8 percent growth led by mining and hydropower, but "an expansion of agriculture remains the key to raising incomes and employment".

However, the rapid investment in agriculture so far -- 39 projects worth $458 million were approved in 2006 compared to six valued at $14 million in 2002, according to the Ministry for Planning and Investment -- has not gone smoothly.

The system for granting concessions "is a mess", said a foreign advisor to the central government, which imposed a halt on new land grants last May that provinces have largely ignored.

Land conflicts are rising as plantations encroach on village fields and nearby forests, taking away traditional livelihoods with little or no compensation, activists say.

"Laos has one of the lowest population densities of any Southeast Asian nation by far," retired professor and Laos expert Martin Stuart-Fox said of its 5.8 million people living in an area half the size of France.

"There is land available and the government can very easily take it off the people and sign deals for plantation agriculture," he told Reuters.

SCRAMBLE FOR LAND

With commodity prices soaring and land scarce at home, plantation firms are going further abroad in search of good soil, favorable weather and investor-friendly policies.

In Africa, South Korea's AFinc has leased 100,000 hectares in the Democratic Republic of Congo to grow soybean and corn. Malaysia's Sime Darby is developing rubber and palm plantations in a relatively stable Liberia.

Rubber, palm oil, tapioca and sugar plantations are sprouting up in nearby Cambodia as it emerges from decades of civil war and the Khmer Rouge "Killing Fields".

In Laos, some 150,000 hectares of land has been ceded to private investors for 30-50 years "at inconceivably low fee rates," according to the environmental group TERRA.