Implications of middlemen in smallholder teak production systems in Northern Lao People's Democratic Republic (Lao PDR)

The government of Lao PDR has promoted teak planting for over 40 years, resulting in a significant increase in the area of plantation teak. Most of the plantations are managed by individual farmers and play an important role as a kind of financial insurance system, and a ready source of quick income generation. By cultivating a teak plot it may be determined whether a farmer has land tenure to the plot and through cultivation whether they can afford to send children to school. In Northern Lao PDR the primary sales channel for teak in a complex environment are middlemen. The common association with middlemen is rather negative and they are perceived as rent-seeking actors in the value chain. However in the current teak market system in Lao PDR middlemen take responsibility for many time-consuming steps of performing teak sales in compliance with laws and regulations. In addition, unofficial fees in connection with felling and transporting strongly influence teak wood flows by increasing costs and making the process vulnerable to adversity. In general, middlemen save farmers the trouble of having to deal with unofficial costs and marketing, and therefore they represent a convenient sales channel for farmers. These extra costs are difficult for the society to tackle down as long as Lao PDR possess low effectiveness in the national formal and social control systems. This study focuses on the existing practices of teak middlemen and their implications for teak smallholders. Farmers’ perceptions of the various actors and issues with sales to be addressed are presented and discussed. In this study 120 semi-structured interviews with smallholder teak farmers and 11 with Lao authorities and non-governmental organizations throughout the forestry sector were conducted in four small villages and in Vientiane (the capital) in Northern Lao PDR. A middleman case study was included in the study to demonstrate current actions taken by middlemen. According to the results of this study farmers are lacking the time and motivation to participate in the highly regulated formalities of marketing teak, and prefer middlemen as their selling channel for their wood. Farmers do understand and, based on previous support, report of the importance of external development projects providing training and information related to teak markets, yet consider them challenging without more guidance and structural change in official governing practices.