Description: 

A $3.3 million FIP grant to provide advisory services for the development of commercially viable Out Grower Schemes that provide sustainable livelihoods and climate mitigation and adaptation benefits.

Background:

Forest covers 40 percent of the land in Lao PDR, the highest percentage of any Southeast Asian country. However, forest cover has been declining at an alarming pace in recent years as deforestation, ecosystem degradation, and habit fragmentation continue to grow in scale and intensity.

The Smallholder Forestry theme of the FIP Lao Investment Plan includes investments in development and direct management of forest landscapes outside state owned territory by farmers and private sector forestry companies. This includes industrial tree plantations and smallholder woodlots following a systematic program of allocating such areas to appropriate local forest management entities.

The program provides $3.3 million in FIP grant funding for advisory services to develop successful Out Grower Schemes (OGS) that are commercially viable and environmentally sustainable. This is carried out in partnership with private sector forestry companies as a means to contribute to net reduction of GHG emissions and improve the livelihoods and incomes of the participating farmers.

Objectives and Outputs:

The program aims to assist private sector partners in building successful OGS partnerships with communities. IFC has identified a lead forestry company as an initial partner that manages two plantation concessions in Lao PDR, which has had experience in developing OGS schemes in Lao and other tropical countries. The company is fully integrated with upstream forestry operations as well as downstream processing and product manufacturing. This integration experience provides important expertise to the OGS program in both plantation operations, as well as wood product marketing and value added.

The program’s intended business model aims to be both sustainable and profitable through the establishment of long-term forestation of degraded lands with tree crops to sequester carbon. Simultaneously, this will contribute to climate change adaptation and improve farmers’ incomes through diversifying the use of trees and annual crops. These practices will also promote the gradual improvement of impoverished soils.

In the expectation that farmers respond positively and that land security issues can be addressed efficiently, work will start to scale up the program to reach as many as 10,000 farmers with the first partner company. These farmers will be supported to sustainably manage an estimated 10,000 hectares of land in areas within an economically viable radius from the first company partner concessions. The scale of operations in each province will be geared to factor in the scale of operations required to meet market requirements and the likely available human resources. Replication of the program with a second company partner has the potential of engaging additional 5,000 farmers in 5,000 hectares.

The expected outcomes of the program are the reduction of approximately 755,400 tCO2 of GHG emissions relative to reference, 15,000 farmers trained in farming and business practices, and 15,000 hectares of sustainably managed land.

This project summary is drawn from draft project proposals [such as the PAD, PID, SAR, and country investment plan] and may not contain the most up-to-date information.

Project Details
Cover Note | Proposed Decision
Approved on June 24, 2013 (Approved Decision)
Approved amount(s):
USD 3.0 million (grant funding)

Comments and Responses:
United Kingdom (June 7, 2013)
United States (June 7, 2013) 
United Kingdom (June 21, 2013)
United States (June 21, 2013)
IFC Response to United States and United Kingdom (June 18, 2013)