The arrival of the Mitr Pohl sugar manufacturer in Laos represented an opportunity of prosperity to many. Mitr Lao encouraged local people to contract to grow for them on their land and sell to their factory. In exchange it offered to provide technical advice and equipment (seeds, fertilizers, transport) to these contract farmers - at a price.
Mr. Somboun Monthavong tells us how the scheme works. He began “planting sugar in 2008, in a contract with Mitr Lao. They made a huge promotion with strong figures. The yield would be fantastic. The offer was tempting. Everything we needed was provided by the company and noted down as ‘credit’. That amount would be deducted from our revenue when the harvest was sold – the rest was for us.’ However, he went on ‘it soon turned out that it wouldn’t be so easy.”
The Mitr Pohl group is the largest Thai manufacturer and exporter of sugar. It manages seven factories, including the one in Laos. It is also active in Cambodia. Setting up a factory in Laos allowed MItr Pohl to benefit from preferential trade tariffs under the EU ‘Everything but Arms’ opportunity.
How the scheme pulled farmers into debt
Soon after the contract scheme began in Laos it became clear that the farmers were not getting the return on investment that they had been promised. Of the 628 families that subscribed to the contract farming scheme in the area, only 64 remained in credit. The others found themselves heavily indebted.
We have been working with the Lao Federation of Trade Unions (LFTU) who help protect farmers transitioning into the agriculture sector for the first time from factory work.
Mitr Lao exploits the weak negotiating position of farmers like Mr. Somboun Monthavong. It has even been suggested that farmers lease their land to the company in order to pay off their debts. This could put them at risk of losing their land.
Sugar cane farmers raise their hands during a LFTU workshop.
In a pilot project in Xaiburi, LFTU is working to strengthen the position of small, independent farmers coming under the contract farming scheme by encouraging them to work as a group. The farmers make agreements as a group, and learn about the benefits and pitfalls of contract farming together.
“LFTU wants to group together Xaiburi farmers to strengthen them, so that they are in a better position in their negotiations with Mitr Lao. This should allow them to retain more income and to reduce their debts” explains Mrs Chanpeng who works for LFTU.
Mrs. Chanpeng teaching sugar farmers at the Lao Federation of Trade Unions, an Oxfam partner, about contract farming.
Despite the years of struggle and his indignation with Mitr Lao, the work of the LFTU is giving Mr Samboun Monthavong hope for the future.
“Together with 14 other farmers and village leaders, I’m taking part in the LFTU workshop in which we’re really organising ourselves as a group. That way, we’re stronger. Thanks to them, we’ve also now had the chance to visit a well organised farmers’ group elsewhere. That meant a lot: you can really see that it can be different and better.”
Mr. Somboun Monthavong and a colleague at a negotiation skills workshop lead by LFTU.
Photos by: Tineke D’haese/Oxfam