MOU on contract farming signed

Foreign Minister Surapong Tovichakchaikul inked the document with Laos’s Minister of Industry and Commerce Nam Viyaketh in Vientiane on the sidelines of 5th summit of the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS).

Prime Minister Yingluck Shinawatra and her Lao counterpart Thongsing Thammavong witnessed the signing ceremony. 

The MOU is part of ACMECS’s scheme for agricultural cooperation and aims to accelerate and facilitate contract farming to guarantee food sufficiency in the region.

Under the MOU, Thailand will import Lao farm products with tariff exemption under the Asean Trade in Goods Agreement.

The list of products is to be determined and announced later by concerned authorities in Thailand.

Contract farming is an agricultural scheme under which the buyer and farmers agree on conditions related to production and marketing. The contract farming is a Thai flagship project to promote the supply of farm products from neighbouring countries to Thailand and boost the economy. The Thai private sector has been investing in contract farming in Laos for more than a decade.

However, to the concern of the two countries, the Thai market has on occasion been able to absorb particular farm items due to domestic over production, causing problems for Lao producers.

Under the MOU, a working committee will be established and hold consultations at least once a year on matters relating to the annual operation plan and the review of the list of farm products under the scheme.

The MOU is not a dispute settlement mechanism but any disputes could be settled through consultations within the working committee, according to article 14. The ACMECS Business Council may participate in the coordination for the settlement of disputes.

The MOU will play a crucial role in facilitating agricultural activities in Laos. Both countries would lend assistance to companies in forming partnerships with local partners. Authorities on both sides will facilitate the border crossings of staff working with agricultural companies to carry out contract farming activities. Import of seeds, seedlings, fertilisers, equipment and machinery for the purpose of contract farming will be granted privilege tax incentives.

The MOU remains valid for an initial period of five years but can be renewed as agreed by both sides. It may be terminated by giving the other side six months prior notice.