In an effort to recover from recent global economic shocks, as well pay off a serious, longstanding national debt, the Southeast Asian country of Laos is now looking to construct new hydropower dams to generate more energy for international export. However, this will likely cause far more harm than good as dams block the migration routes of economically important fish, climate change reduces river flows (and therefore energy production), and consumer countries increasingly abandon hydropower imports for other renewable energies. Ironically, not only will hydropower expansion likely fail to generate meaningful returns for Laos, but it also risks irreparably damaging natural resources and ecosystem services that could ultimately be more valuable.
Let the Coffee (and the rivers) flow.
As we have outlined in previous articles, increasing the value of Laos’ agricultural produce (which already accounts for 5.7% of its GDP) is a much less environmentally risky means of revenue generation than hydropower. Coffee is a particularly important crop, as it is Laos’ fifth most valuable agricultural export (worth US$51 million) and coffee grown on the Bolaven Plateau in Champasak Province is renowned by international buyers, including in lucrative markets like the European Union.
However, Laos is currently only a minor producer in the global market – ranking 34th amongst coffee exporting nations in 2020– and coffee export values have plateaued in recent years. Moreover, most coffee farmers lack the bargaining power to gain better prices for their produce, particularly in the face of ever-volatile global prices. All of this means that Laos’ current coffee exports (along with agricultural exports in general) are not great enough to offset the need for revenue from hydropower exports.
Brewing a Solution
To increase the selling value of Laos’ coffee exports and reduce its economic dependency on hydropower, whilst assuring sustainable coffee production, Seneca proposes a project to establish and operate an international standard, for-profit, sustainable coffee laboratory.
Such a laboratory is key to achieving Laos’ economic goals, as assessing the quality, and therefore price, of coffee requires rigorous scientific testing of metrics like density, caffeine content and roast colour (among many others). With this information, farmers can tangibly assess the quality of their coffee and use this to negotiate for better, fairer prices. At present, no coffee laboratories currently exist in Laos, and Laotian coffee instead has to be sent to Thailand for testing.
Additionally, coffee in this laboratory would also be graded on a series of sustainability metrics, particularly ones related to climate adaptation. These include farmers identifying risks to their crop’s climate resilience, producing annually renewed climate adaptation plans, and accordingly adopting sustainable practices. Such practices include efficient water use, agroforestry, using more weather resistant hybrid beans, and protecting nearby habitats of conservation/carbon storage importance. More sustainable coffee would be deemed more valuable.
To improve sustainability of the Laotian coffee industry as a whole, the laboratory would utilise training courses and outside expertise to work with farmers and merchants on incorporating sustainability into coffee growing, as well as other aspects like sourcing and transportation of beans. It would also work to ensure that sustainability is taken into account during the certification process. If farmers are made aware of the price premiums they can charge for sustainable coffee, it could encourage more of them to adopt sustainable practices.
The Project
The laboratory would be a for-profit venture that charges fees for its services, including physical laboratory testing of green and roasted coffee, chemical testing, tasting services, and offering training and knowledge sharing to coffee farmers. Such service-based coffee testing ventures have already proven successful all over the world, including in Vietnam, Thailand, Indonesia and India. Having one in Laos would also save money on sending coffee to laboratories in Thailand.
Costs
Construction of the laboratory does not require expensive, complicated technology, which can be funded by a blended finance structure. Consultants are available to help set up a facility, but will need to be paid for this. Physical coffee testing procedures will likewise not require expensive equipment, but chemical tests will require some capital expenditure. However, this can be waived until the project is generating more regular revenue.
Testing the coffee will require skilled labour, which may need to be sourced from outside Laos at first. However, with sufficient training for and knowledge sharing with local people, it should eventually be possible to source staff from within the country at less expense.
A Perk for the Environment
Coffee and other agricultural produce already contribute significantly to Laos’ economy and with the right enabling conditions, could contribute even more, lessening the country’s dependence on revenue from destructive infrastructure projects like hydropower. Linking sustainability with higher agricultural revenue creates a great opportunity to simultaneously protect Laos’ environment and improve livelihoods, but this will require objective information on the quality and sustainability of produce. Private investment in a laboratory to provide such information could therefore be a game changer in making Laotian agricultural exports (particularly coffee) more sustainable and profitable.
Author: Thomas Gomersall, Seneca Impact Advisors
For more information, please contact info@senecaimpact.earth
