VZCZCXRO6392
PP RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHVN #0240/01 1150453
ZNR UUUUU ZZH
P 240453Z APR 08
FM AMEMBASSY VIENTIANE
TO RUEHC/SECSTATE WASHDC PRIORITY 1971
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RUEHBJ/AMEMBASSY BEIJING PRIORITY 2292
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UNCLAS SECTION 01 OF 03 VIENTIANE 000240 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS BESTIC 
STATE FOR EAP/EP 
STATE FOR EEB/TPP/ABT/ATP JANET SPECK 
COMMERCE FOR HP PHO 
TREASURY FOR SUSAN CHUN 
PACOM FOR POLAD 
HANOI FOR WADE 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ETRD ECON PGOV PREL EPET LA
SUBJECT: FOOD PRICES IN LAOS: STICKY RICE PRICES REMAIN 
FAIRLY STICKY 
 
 ¶1.  Summary:  Despite rising world prices for white rice, 
sticky (glutinous) rice, the primary rice variety eaten in 
Laos, has seen only moderate price rises this year.  One 
notable aspect of Lao sticky rice prices has been their 
stability over the past several years despite inflation 
averaging 7.2% in Laos since 2004.  Lao white rice prices, 
however, have gone up significantly versus last year, as Lao 
farmers planting white rice generally use the same Jasmine 
variety as those undergoing large price increases in 
Thailand.  The Lao central government has imposed no controls 
over the export of rice; the power to ban exports is 
delegated to the provinces, only one of which has announced a 
difficult to enforce export ban.  Weak border controls make 
it difficult to keep the determined farmer away from a 
potentially lucrative market in neighboring countries.  While 
few people in Laos enjoy paying more for rice, the Embassy 
does not foresee current price movements leading to social 
unrest or political instability.  End Summary. 
 
¶2.  Despite rising international prices and media headlines, 
the central Government of Laos has not imposed any bans on 
the export of rice.  Econoff met April 9 with Dr. Laohua 
Cheuching, Deputy Director General of the Department of 
Import and Export at the Ministry of Commerce.  Dr. Laohua 
prepares government import-export policies and is a member of 
the Lao WTO negotiating team.  He was eager to discuss the 
role of the central government in regulating rice exports. 
According to Dr. Laohua, the right to impose export bans 
rests at the provincial level.  An April 7 Vientiane Times 
article stated that Champassak province in southern Laos had 
banned export of rice to neighboring countries.  Champassak, 
which shares borders with Thailand and Cambodia, also 
reportedly banned the export of unmilled rice (often called 
"paddy rice" in Laos) to other provinces to "protect farmers 
from receiving low prices." 
 
¶3.  According to Dr. Laohua, rice is deemed by the government 
as a "sensitive" commodity subject to trade regulation. 
However, the provinces do not/not have the right to ban trade 
within Laos, and he noted he would look into the newspaper 
claim of an interprovincial ban.  According to unofficial 
inquires with local Lao, even if price controls exist in 
theory, they do not operate in reality.  Prices at the market 
are determined by market forces, even for "sensitive" goods, 
not government diktat.  However, governmental officials and 
local village chiefs are known to try and use moral suasion 
to try to "talk down" prices during periods of heavy demand. 
(Note: Petroleum prices are a notable exception and are 
regulated.  However, if the government fails to increase the 
price local providers are allowed to charge, as happened 
recently in Vientiane, the providers will simply not import 
additional supplies until they have a guaranteed profit 
margin.  A number of gas stations reportedly ran out of 
diesel fuel April 22 as the government dithered over allowing 
a retail price rise.  Unsurprisingly, the government agreed 
to a price rise the afternoon of April 22.  End note.) 
 
¶4.  An international expert on rice cultivation also 
dismissed the Lao government's ability to regulate rice 
exports.  Laos border controls are weak and subject to easy 
manipulation via bribery and evasion.  According to the 
expert, the only people likely to need (and seek) export 
permits would be large scale exporters using containerized 
shipping.  Even then Lao customs is known for its willingness 
to look the other way for a modest fee. 
 
¶6.  Dr. Gary Jahn of the International Rice Research 
Institute provided a wealth of information on Lao and 
regional rice prices, noting that prices at the farmgate for 
sticky rice in Savannakhet province (a major producer) in 
April are 2,000 kip/kilogram, 200 kip less expensive than in 
March.  (Note:  $1 U.S. is currently worth approximately 
8,700 kip.  End note.)  Dr. Jahn expects prices in May to 
rise, as the price in Thailand for sticky rice has recently 
risen and it is the Thai price driving the Lao price.  For 
white rice, primarily Jasmine, farmgate prices are currently 
2,500 kip/kilogram, about 300 kip higher per kilo than in 
January and about 500 kip per kilogram higher than last year 
 
VIENTIANE 00000240  002 OF 003 
 
 
and representing a 25% increase.  Jahn said that Lao and Thai 
white rice farmers generally grow the same variety of Thai 
Jasmine rice called KDLM 105.  He noted that Lao Jasmine 
tends to be cheaper than Thai as it generally is grown from 
older seeds and the mill quality in Laos is lower than in 
Thailand.  However, he did note that in Laos purchasing white 
rice at a market means purchasing 100% Jasmine, while 
purchasing "Jasmine" rice over the border in Thailand often 
means only 50% Jasmine rice content, with the other 50% a 
mixture of cheaper varieties. 
 
¶7.  Post queried the Lao government for its official Consumer 
Price Index figures on rice prices and econ staff also made a 
number of unofficial market visits (April 10 and April 21) to 
assess the price of rice in Vientiane.  The Lao Ministry of 
Commerce, Department of Domestic Trade provided the following 
information: 
 
Rice price in kip per kilogram ($1=8,700 kip)/Thon Kam Market 
Vientiane (As of April 1) 
 
             2008       2007      2006      2005      2004 
 
Sticky Rice  6,500      6,000     5,000     5,000     5,000 
1st Quality 
 
Sticky Rice  5,500      5,000     4,000     4,000     4,000 
2nd Quality 
 
White Rice   9,000      6,000     5,000     4,500     4,500 
1st Quality 
 
White Rice   7,000      5,000     4,000     4,000     4,000 
2nd Quality 
 
Thai White   11,000     7,000     7,000     6,000     6,000 
Rice 1st 
Quality 
 
¶8.  Lao official government prices tracked closely with 
prices econ staff saw at the market, although a check April 
21 showed Thai white rice had jumped to 14,000 kip/kilo and 
prices Post saw for Lao sticky rice were generally about 1000 
kip/kilo higher for first quality sticky rice than the CPI 
table.  Thus average price increases since 2007 for first 
quality sticky rice in Vientiane are about 8% according to 
the CPI table and about 16% higher than our market visits, 
which indicate a price of 7,500 kip/kilogram.  According to 
local experts, the rise in sticky rice prices at the market 
is primarily a function of higher transport costs (gasoline). 
 In contrast, prices in Savannakhet for milled sticky rice, 
for example, are approximately 5,000 kip/kilo, 1,500-2,500 
kip below Vientiane prices.  As the international market for 
sticky rice is small--estimated at around 300,000 tons a year 
and primarily composed of Thai sticky rice -- price 
variations in Laos barring large crop failures are more 
dependent on overall inflation in Laos than international 
demand.  According to Dr. Jahn, Lao farmgate prices for 
sticky rice this year are actually about 500 kip/kilo lower 
than last year's price, which was inflated because the 
Chinese crop had been largely wiped out by disease and 
flooding. 
 
¶9.  Perhaps the most interesting aspect of rice prices in 
Laos has been their relative stability from 2004-2006, years 
in which domestic inflation averaged about 8.14%.  Current 
inflation figures in Laos are near 8% annualized, with the 
government publicly stating a goal of 6% for 2008.  Inflation 
in Laos is currently being driven primarily by rising 
transport/gasoline costs and the large influx of dollars from 
sales of minerals and tourism.  As additional large mines and 
large hydropower plants begin to come on line in Laos and 
pour money into government budgets, inflation will likely 
continue to be a reality unless the government finds a way 
(such as a trust fund) to actively manage the foreign 
currency influx.  The IMF resident representative recently 
gave the GOL high marks for managing the foreign currency 
influx to date, but also noted the need for future active 
 
VIENTIANE 00000240  003 OF 003 
 
 
management to lower inflation risks. 
 
¶10.  Comment:  The nature of the rice market in Laos, which 
is much smaller than its neighbors with a population of only 
six million people, helps insulate it from international 
price gyrations.  Laos is largely self-sufficient in rice 
production, and its people generally consume sticky rice, a 
variety of rice that is not widely traded or eaten. 
Distribution difficulties, an incomplete road network, and 
poverty do lead to shortages, notably in upland ethnic 
minority areas where it is common for people to face rice 
shortage for 6 months a year.  But these are "normal" food 
security issues in Laos; the current rise in world rice 
prices is not yet having a material effect on Laos, and the 
Embassy does not expect political instability to arise from 
higher rice prices.  Political protest is almost unheard of 
in this Communist country, and quickly quelled when it does 
occur.  The Lao public has weathered worse crisis, such as 
high inflation following the Asian financial crisis, without 
any sign of instability.  Eighty percent of the Lao are 
subsistence farmers.  Many urban residents either have their 
own rice paddies close to the city or relatives who farm 
family land.  The consumption of more expensive white rice 
varieties is largely an urban phenomenon, and sticky rice is 
easily substituted if price rises become an issue. 
HUSO