Invited papers (Contd.)

Implications of the Asian economic crisis for the livestock industry in the Republic of Korea

Seung-Youll Shin

Korea Rural Economic Institute
Seoul

ECONOMIC CHANGES

Before the crisis

The economic growth rate has shown a downward trend since 1990 (Table 1). It fell to 6.8 percent in 1996 and to 5 percent in 1997. The unemployment rate, which had been kept at 2 percent - near full employment level - in 1994–95, jumped to 2.6 percent in 1997 due to the restructuring of private firms started at the end of 1996. The inflation rate dropped to 4.5 percent in 1995, went up to 4.9 percent in 1996 and was back to 4.5 percent the following year.

Table 1. Main macro indicators

Source: Bank of Korea

As the non-trade deficit and imports increased in 1995 and 1996, the balance of payments recorded a deficit of US$23 billion in 1996. But the weakening of the won to the US dollar discouraged imports and boosted exports, so that the deficit of the balance of payments was reduced to US$8.2. billion in 1997.

The interest rate (three-year private bond return rate) fluctuated between 11 and 13 percent after 1990. It stood at 13 percent at the end of 1997, due to a shortage of foreign exchange and to the increasing financial insecurity. The exchange rate, which had gone beyond 900 won to the US dollar in mid 1997, reached 1,680 won to the dollar at the end of 1997 as the foreign exchange situation and the financial crisis got worse. The average exchange rate for 1997 was estimated at 951 won.

As some large companies went bankrupt during the structural readjustment process started in late 1997, the financial institutions acknowledged their bad bonds, amounting to 32 trillion won, which is equivalent to 5.5 percent of total loans or 7.7 percent of GDP.

The IMF bailout programme

The Korean economy met a foreign-exchange crisis because of its loss of credibility resulting from the domestic financial insecurity and the pressure from retiring short-term foreign loans along with the insecurity of the world financial market (the foreign exchange and currency crisis in Southeast Asia, the problems in the Japanese financial system, etc).

On 3 Dec 1997, the Korean government signed an agreement with the International Monetary Fund to abide by its bailout programme in return for US$ 58.4 billion in loans provided by IMB and 13 developed countries.

The main points of the agreement with the Fund are as follows: For the macro indicators, maintain the economic growth rate at 1–2 percent, the inflation rate at 9 percent and ensure a surplus in the balance of payments, and net foreign exchange holdings of US$ 8.1 billion. For the fiscal policies, cut down value-added tax exemption targets to increase tax collection, increase indirect tax rates and allow for a fiscal deficit. For the financial sector, further open the stock and bond markets to foreign investors, restructure bad financial institutions and maintain high interest rates. For the exchange rate, maintain the variable exchange rate system and restrict foreign-exchange support of financial institutions by the Bank of Korea. For trade, abolish import restrictions and trade-related subsidies.

Impact of the IMF programme

The IMF loans have had the positive effect of providing incentives to strengthen the structure of financial institutions and industrial corporations, and the negative effect of contracting private investment. This is due to high interest rates and to the probability of foreign capital coming back given the rise in the exchange rate and the fall of stock prices.

Table 2. Agreement of economic indicators

Other negative effects of the IMF loans are the instability of the financial market resulting from short-term speculative funds, and the rise in unemployment to a serious level. However, the chances are good that Korea will fulfil her obligations with the IMF, overcome the economic crisis and end up with a stronger economic basis.

Because the rise in the exchange rate and the instability of the financial market contracted the real side of the economy, the Korean economy recorded negative growth in the first quarter of 1998. The balance of payment became positive, and increasingly so since November 1997. The exchange rate reached 1 706.8 won per dollar in January 1998 and has been going down since then. The positive balance of payment helped to increase foreign-exchange holdings. But the unemployment rate has jumped from 2.6 percent in November 1997 to 6.9 percent in May 1998.

Consumer prices increased from December 1997 to February 1998, then stabilised. The price of agricultural, forestry and fishery products stopped growing in May 1997, consumer prices did so too by April 1998 and food prices the following month.

The interest rate, on the basis of the return rate of the 3-year corporate bond, reached its highest level in December 1997, and has been slowly going down since then, as has the stock price index since February 1998.

IMPACT OF THE CRISIS ON AGRICULTURE

The financial situation of farms has worsened because of an increase in expenditure resulting from a rise in operating costs and in interest rates for government loans and loans from mutual banks. Another factor is the slump in the consumption of agricultural, meat and dairy products, which are highly income-elastic. There is little chance that the consumption of agricultural products will pick up soon, because real income, real wealth and expenditure of urban households are all on the downtrend, due to growing unemployment and a consistent decrease in prices of real estate and stocks.

The rise of the exchange rate has increased the price of farm inputs, which are dependent upon imports, and thus increased farm operating costs. The livestock industry has been hit hard by rising feed prices and the contraction of consumption of livestock products resulting from the fall in urban household income. While Hanwoo farms are reducing the size of their operations, hog farms are increasing theirs as exports to the Japanese market are growing. As for greenhouse farms, they are experiencing financial difficulties because of the increase in operating costs, due mainly to a rise in the price of imported energy coupled with the reduced consumption.

There have been some changes in the consumption of agricultural products, including a decrease for highly income-elastic products such as meats, dairy products and fruit, as the real income has fallen due to high unemployment and lowered wealth. The consumption of imported agricultural products has decreased too, as their prices have increased due to the rise in the exchange rate. On the other hand, the consumption of the relatively income-inelastic products shows a relatively small reduction.

The marketing of agricultural products has suffered from reduced consumption and financial woes. It is estimated that the number of transactions in wholesale markets declined by 50 percent. The rise in the exchange rate also lowered the amount of agricultural products imported, which, in some cases, resulted in a fall in prices. The financial situation of those engaged in the marketing of agricultural products keeps getting worse, what with the drop in sales, the increase in the amount of uncollected products and the shortage of working capital along with higher interest rates. Besides, there are new developments such as more direct sale methods and the entry of big discount stores into the marketing of agricultural products.

The farm debt was 13 million won per farm at the end of 1997. Even though the number of farms decreased between 1992 and 1996, total farm debt at the end of 1997 was 18.7 trillion won. After the IMF loans, higher interest rates have resulted in bigger interest payments for indebted farms.

It is expected that agribusiness will come partly under the control of foreign capital as the easier international access to the Korean economy arranged by the IMF is likely to lead to an increase in direct foreign investment. If so, the operations of the domestic firms are likely to shrink. The entry of foreign capital into wholesale, retail and discount stores is underway. It is possible for the foreign marketing capital to organise a fall in the prices of agricultural products in order to expand the market share of industrial products. Then, the movement of foreign capital would put small domestic marketing firms out of business and bring about major changes in the marketing of agricultural products.

As the rise in the exchange rate enhanced Korea's competitive edge in the trade of agricultural products in terms of prices, exports went up and imports went down. This has been especially true for the export of fruit, vegetables, flowers, ginseng and pork. But, in spite of a favourable exchange rate, trade financing proved inadequate, exports began to stumble and the tightness of money increased the financial costs for the exporters. Various changes have begun to occur in agricultural financial institutions. The national federations of agricultural co-operatives and of livestock co-operatives have capitalised the asset re-evaluation reserve and reserved the surplus at the end of 1997.

As the economic depression and the rise in unemployment in the non-agricultural sector have led many people to return to rural areas, the number of employees in the agricultural sector is growing, but this depresses wages, increases the demand for farm land and land on lease, and raises land rent.

Impact on the livestock sector

Situation of the livestock industry

Most livestock farmers raise animals as a small-scale side job. For them as for full-time producers, production costs are high, leaving Korean farmers at a disadvantage in the international market. Besides, the marketing structure from production to consumption is very complicated and slaughterhouses and wholesale markets operate on a very small scale, increasing the possibility of unsanitary handling of some livestock products. With the opening of the domestic market after the Uruguay Round agreement, Korean livestock producers are facing a serious challenge at a time when they are not ready for international competition.

The share of farming and livestock-raising in GNP is in decline, but the share of livestock-raising in total agricultural production grew from 22.3 percent in 1990 to 23.6 percent in 1997 (Table 3). In terms of value, the share of native cattle production in total agricultural production over the period 1990–1997 rose from 5.2 percent to 7.2 percent, and its share in total livestock production from 23.5 percent to 30.5 percent. However, the share of dairy farming dropped because the prices of milk cows and calves plummeted as of 1996.

Table 3. Changes in the value of livestock products, 1990–1997

Unit: 100 million won

Source: MAF. Statistical Yearbook of Agriculture & Forestry 1997

The share of pigs in total agricultural production stayed at 6.6–6.7 percent between 1990 and 1997, while their share in total livestock production slightly dropped, from 29.9 to 28.4 percent. The share of chickens in livestock production dropped from 11.4 percent in 1990 to 11.2 percent in 1997, while that of eggs dropped from 10.4 to 9.2 percent.

During the same period, meat consumption increased by 7.7 percent per year, from 860 000 tonnes in 1990 to 1 384 000 tonnes in 1997. Consumption of meat in 1997 was of 362 000 tonnes of beef, 730 000 tonnes of pork and 279 000 tonnes of chicken. The self-sufficiency rates for meats are 95 percent for pork and chicken, but only 54 percent for beef. The target is to reach 80-percent self-sufficiency for beef and 90-percent for pork and chicken at least by the year 2001 when the import of livestock products will become completely unrestricted.

The size of livestock farms is increasing, and so is the number of full-time farms (Table 4). The average size of livestock farms has increased from 1.4 head to 5.9 head for Hanwoo (Korean native cattle), from 9.4 to 30.6 head for dairy cattle, from 3.5 to 263 head for pigs, and from 58 to 545 for chickens in the seventeen years between 1980 and 1997.

Table 4. Number of full-time livestock farms, 1992–1997

Unit: household

Source: Ministry of Agriculture and Forestry, Statistics of Livestock

The farms with mid- and small-sized livestock and milk cows have a high feed-expenditure share in their production costs (Table 5): 32.2 percent for beef cattle, 62.3 percent for pigs, 71.1 percent for broilers and layers, and 78.3 percent for dairy cattle.

Table 5. Share of feed costs

Source: National Federation of Livestock Co-operatives, Survey Report on Livestock Production Costs

Impact of the economic crisis

The rise of the exchange rate in December 1997 raised the prices of formula feeds by 40.4 percent through two consecutive increases. But after late April, the stability of the exchange rate and of the feed grain supply resulted in a 23 percent decline in formula feed prices through four consecutive decreases.

Table 6. Changes in feed costs

* ( ) Price index from base

In the past, farmers could buy the feeds on 2- to 3-month credit. But since December 1997, they have been required to pay off their previous credit purchases and to purchase the feeds by cash payment in advance. Recently, however, the feed situation has improved and the credit purchase of feeds is growing again. The prices are lower if the feeds are purchased in advance with cash. And because of the increase in formula feed prices, the government supports the conversion of food wastes into feeds, but the system for this has yet to be organised.

The weakening of the won against the US dollar has greatly increased the operating costs of livestock farms other than beef cattle farms. The largest increase is found in chicken and pork farms, which have a higher dependence on formula feeds. The increase in operating costs for beef cattle farms is small because of lowered calf-purchasing expenses. Nonetheless, Hanwoo farms suffer great losses because the cattle price is much less than their operating costs.

There has been a considerable decrease in the consumption of livestock products. The consumption of chicken and milk was down by 12 and 21 percent respectively, and that of imported beef dropped by half. On the other hand, the consumption of domestic beef and pork went up by 10 and 14 percent. Even though the decrease in overall consumption is mainly attributable to a decrease in income, the decrease in the retail price of beef, which is less than the decrease in the price of cattle, blocks the expansion of beef consumption. Moreover, the decrease in the consumption of imported beef is one of the causes of the contraction in the overall consumption of beef. The greater number of pigs slaughtered is due to an increase in exports as well as to the substitution of pork for other meats, especially beef. Besides, the reduction in milk consumption results from lower income and higher milk prices.

Table 7. Changes in operating costs

Source: National Federation of Livestock Co-operatives. Survey Report on Livestock Production Costs, 1988

Table 8. Comparison of livestock product consumption, 1997–98 (Jan-May)

Unit: thousand tons

Source: NLCF Monthly Review

A weak currency tends to boost exports and discourage imports. Between January and May 1997, Korea exported 16 756 tons of pork, but as much as 31 768 tons during the same period of 1998: an increase of 89.1 percent. A comparison of imports of livestock products for the same period year on year shows a decline of 54.4 percent, from 54 773 tons to 24 968 tons; imports of pork dropped by 49.1 percent, from 34 033 tons to 17 317 tons, and chicken imports dropped by 21.3 percent, from 1,152 tons to 906 tons on a monthly average.

Beef

Between December 1997 to May 1998, the price of domestic cattle (Hanwoo) fell by 300 000 won per head for a 500kg steer, from 2.4 to 2.1 million won. Government purchases turned out to have little effect because the middlemen delayed their own purchase of cattle until the government was done. On the other hand, the WTO ‘de-minimise’ rule limited the number of cattle to be purchased by the government in 1998 to 105 600 head. After purchasing 79 447 head, the government announced that it would stop purchasing large cattle at constant prices and purchase instead medium-sized cattle at market prices.

While the small breeding farms can keep going by using forage instead of feed concentrates, some large and medium-sized farms downsize their operations because of reduced income. The recent economic crisis has resulted in a fall in beef consumption despite a decrease in the price of beef. Brand stores especially have experienced a slump in sales. As for the Hanwoo farms, the decrease in the price of calves has lowered their operating costs, but the decrease in the price and consumption of their end-product has been large enough to put them in a financially difficult situation.

Pigs

The price for pigs was 146 000 won per head in November 1997, 136 000 won in December, 201 000 won in March 1998 and 174 000 won in May 1998.

The small, part-time farms and medium-sized full-time farms have downsized their operations due to increases in their operating costs. Yet, the large farms are expanding because of their ability to analyse the market information and make accurate forecasts.

The number of hogs per farm has increased because the price of pigs is higher than operating costs, even if profit margins are shrinking.

Poultry

The prices of broilers and eggs have been going down since February-March 1998. Broilers, which sold for 969 won per head in November 1997, cost 1,662 won in March 1998, but 1,280 won by May 1998.

The price of broilers is sufficient to balance the minimal costs of small farms, which are able to keep up or even expand their production, but it is inferior to the production costs of the bigger farms, which have had to downsize their operations since November 1997. The settlement of support funds for these farms has been delayed because of financial difficulties of integrated companies, whose management is also hard-pressed by the growing cost of production inputs.

For layers too, the farms are under financial difficulties because the price of eggs is too low to cover operating costs. Besides, before November 1997 they had borrowed large amounts of a facility lease fund from abroad as part of a policy to nurture full-time farms and the decline of the won against the US dollar has translated into a substantial loss for them.

Dairy

Since January 1998, not only has the price of milk gone up by 18.4 percent but the prices of dairy products have also risen, by 20 percent. In order to enhance consumption, the price had been lowered by 6.9% by mid June, and various measures to boost consumption are under discussion.

The downward movement of the price of dairy cattle since 1997 resulting from increases in feed prices was very pronounced until February 1999, but has slowed down since March. The price of pregnant cows dropped from 2 million won in January 1997 to 1.8 million won at year end and 1.6 million by April 1998. The price of heifers also fell, from 300 000 won in January 1997 to 210 000 won in December and 130 000 won in April 1998.

A rise in the price of milk and a contraction in demand have resulted in a serious problem: a huge stock of milk powder. The government has announced the introduction of a quota system for milk production, but the dairy farms have yet to reduce their stocks.

An increase in penalty against low sanitary milk standards is expected and this should leave the low-grade farms out. The price of milk may have gone up, but so have operating costs, because of stiff mark-ups in input prices. On the other hand, milk consumption has gone down by 21 percent, owing to the price rise coupled with the general drop in income.

The post-crisis outlook

The economic outlook

The general feeling is that the Korean economy is recovering gradually and that it bottomed out in late 1998-early 1999 or even earlier: a 1 - to 2-percent growth was predicted for 1998, pending definite figures, and as much as 4.6 percent for 1999, depending on the degree of restructuring of the economy and on the implementation of the proper fiscal policies.

The inflation rate should stabilise at about 3 percent per year because of lower consumption and lower wages. Also, inflationary pressures should not be significant due to the stable-to-downward trends of the exchange rate, interest rates, wages and rent. Private consumption shrunk in 1998, but government policies are intent to boost consumption back to its previous apex.

The financial institutions have continued their structural adjustment, and the stability of foreign financial markets should help keep the interest rate at 7 percent. The exchange rate is expected to fluctuate between 1 100 won and 1 200 won to the US dollar.

The outlook of agriculture and product prices

The environment of agriculture production has improved continuously during most of the 1990s. Because the government supported the supply of machinery at half price, real agricultural input prices declined by 4.8 percent annually. But they increased by 24.2 percent in 1998 due to the depreciation of the national currency. However, input prices are expected to fall by 4.6 percent in 1999.

The price of machinery jumped by 35.8 percent because the half-price supply scheme ended in 1998. However, the stable exchange rate and diminishing demand of machinery should see the price of agricultural inputs fall by 2.4 percent in 1999 and by 3 percent a year from the year 2000 through to 2004.

Table 9. Projected agricultural input price

The planting area should decline due to the easing of restrictions on land use for industrial purposes. Agricultural rent declined by 13.7 percent a year during the 1990–1993 period, but gradually rose until 1997. In 1998, it decreased by 1.9 percent. In the year 2000, it is expected to fall by 4.6 percent, but then to decrease by only 0.3 percent a year until 2004.

Employment in the agricultural sector declined by 4.7 percent between 1990 and 1997. In 1998, employment increased by 4.3 percent due to the negative 6 percent growth rate, the rise of unemployment in urban areas and the lack of off-farm employment opportunities. As the economy recovers, the employment rate is increasing by 2.7 percent, but after the year 2000, it is expected to decline by 2.1 percent annually.

Agricultural wages (real price) went up by 5.2 percent a year between 1990 and 1997. The rise in the employment rate and the reduction in production capacity forced a 12.5-percent decline in wages in 1998. Real wages are projected to increase by 2.3 percent in 1999 and 4.4 percent in the year 2000.

Table 10. Predicted agricultural land and employment

(a) predicted value

Agriculture showed a negative growth rate between 1988 and 1993, but a 3-percent annual increase between 1993 and 1997. In 1998, value added in agricultural production declined by 4 percent, due to the reduction in rice and fruit production areas, but in line with a 4-percent decline in value added in crop production and a 1.6-percent decline of value added in livestock production.

It is expected that the value added in agricultural products will increase due to the decline in input prices and rise in agricultural product demand. Value added from agricultural farming should increase by 1.5 percent, thanks in particular to the fruit industry. Value added in livestock products is also seen as increasing, by 2 percent, with the hog industry at the forefront.

Table 11. Predicted agricultural growth rate

(^a) 100 billion won at 1990 constant price

Livestock product prices fell by 15.4 percent in 1998, but increasing demand for domestic meat resulted in a 0.8-percent increase in 1999.

Table 12. Predicted agricultural product price (real price)

Real farm income shrank by 11.8 percent in 1998. The income of vegetable farmers increased, but that of fruit and livestock farmers income decreased significantly. It is expected that real farm income will increase by 7.8 percent in 1999.

References

Bank of Korea. Monthly Statistic Review, various issues

Korea Rural Economic Institute. Agricultural Outlook 1999

NLCF Monthly Review. Various issues

Huh Duck, Shin SY. 1998. The Korean livestock sector under the IMF bailout programme. Korea Rural Economic Review. 1998. Vol21, No3

Animal genetic resources in the Lao PDR: current status and production systems

Bounthong Bouahom

Deputy Director-General
National Agriculture and Forestry Research Institute
Vientiane

Agriculture, which employs more than 85 percent of the labour force, is overwhelmingly important to the economy of the Lao PDR as a source of income and as an essential element of international trade. Most of the Lao population are farmers practising agricultural activities based on rice cultivation integrated with livestock production and fisheries, and more than 94 percent of the agricultural and livestock production comes from smallholders.

Most of the livestock currently kept by the farmers are indigenous. The cows are yellow Asian. The buffaloes are of the swamp type. The swine have been characterised and classified into four types or breeds by phenotypes, but more details on breed identification and genetic analysis are required, and indigenous poultry has yet to be studied.

Per capita consumption for the people in urban areas in 1999 is 35 kg/year, including 10 kg of fish, 8 kg of pork, 5 kg of poultry, 3 kg of beef, 3 kg of buffalo meat and 6 kg of eggs. In rural areas, per capita consumption is estimated to be about 22 kg/year, including 8 kg of fish, 5 kg of pork, 4 kg of poultry, 1.2 kg of beef, 1.8 kg of buffalo meat and 1 kg of eggs. At present, the consumption of fresh milk in the country is very small.

The dairy cattle in the country is poorly developed. In early 1984, 120 heifers of pure Holstein-Friesian cows were introduced in the country from Cuba. The dairy farm was established at Nabong, some 33 km east of Vientiane. At the time, fresh milk was new to the Lao people, and even now the milk market is small and limited. The cows were not properly managed and could not survive the difficult local conditions.

Later, the dairy farm was privatised and leased to the Burapha company in 1992. At present, this company runs the only dairy farm in the country, with about a hundred cows, which produce 800 to 1 000 litres of fresh milk a day supplied to the Vientiane market in small plastic containers. Mere observation shows that demand for fresh milk is slowly increasing, particularly in the Vientiane muncipality. Even now, all milk products (condensed milk, butter, cheese, milk powder, yoghurt, etc) are imported. Therefore, there is potentially a good market for milk and milk products, and there could be a good future for dairy cattle in the long run.

Several studies on animal genetic resources have been carried out in the past decade. For instance, the cattle production systems were studied by the Department of Livestock and Fisheries in collaboration with the International Development Research Centre after a preliminary survey of the cattle in the country. But the study covers only three target provinces (Xiengkhouang, Vientiane and Savannakhet) and a small number of animals, due to limited funds.

Under the Japanese-funded GCP/RAS/144/JPN project, the Department of Livestock and Fisheries carried out a countrywide survey of indigenous pigs with the objective to identify and characterise existing indigenous pigs. The project covered 15 provinces and 30 districts. The analysis of the data gathered will help formulate a breeding policy. A manual on indigenous swine classification and characterisation, written in Lao with an English summary, has been published.

The livestock production systems can be classified (according to types of management, husbandry, input and output level) into two main kinds:

• smallholders' production - low-input and low-output production systems. These systems cover the production of all indigenous animals and represent more than 90 percent of total meat consumption in the country; and

• livestock industry - high-input production system. This system includes broiler and egg production, exotic pig production and dairy cattle.

Animal genetic resources

Buffaloes

Buffaloes kept by farmers are indigenous and of the swamp type. In the past, one of the main roles of the buffalo was draught power. But at present, with mechanisation becoming popular and irrigated rice area expanding, most farmers turn to use hand-tractors to prepare the land for cultivation instead of buffaloes. Therefore the number of buffaloes, males in particular, has significantly decreased.

Cattle

Breeding of local cattle

In the Lao PDR farmers raise cattle predominantly by traditional methods based on low-input, low-output production systems. The cattle are mainly indigenous and kept mostly in a free range; they feed themselves by grazing the natural grassland, in paddy fields after the harvest, on fallow land and in the forest. Feed-stuff is limited, and diseases and parasites are the main constraints on livestock production. Yet local cattle is suitable for most areas. The following activities should be addressed:

Improvement and selection of bulls

Selection of the best bulls for mating will help improve the local cattle. Castration programmes will be an important component in the implementation of local cattle improvement programmes. Farmers keep the cattle in a free range and let them mate freely in the fields. Usually small bulls have more opportunities for mating. In the villages the farmers keep more so-called small bulls, and will not sell them unless they need cash to buy something. In some areas, H'mong farmers know how to keep ‘good’ bulls for mating. Therefore, the cattle kept by them have relatively bigger sizes. If the farmers understand the importance of bull selection and of castration of ‘small’ bulls which are not suitable for mating, the cattle can be improved step by step.

The Northern Cattle Station works on improving the local cattle by selecting the best bulls for mating. The station co-operates with the farmers who have a good indigenous knowledge of cattle raising and encourages them to select the bulls for mating and to keep the smaller bulls separate to avoid unwelcome mating.

Crossbreeding

At the Nam Suang Cattle Breeding Station, a crossbreeding programme was implemented 12 years ago by using Australian Brahman bulls to improve the local cattle. The results showed that the crossbred animals have a better performance than the local cattle. The weight of the adult crossbred animals is almost double that of local cattle. But there are several constraints to expand this activity, namely:

• the station has a limited area and can manage only 50 cows, which limits the number of calves and the selection;

• lack of a breeding programme to work with farmers;

• lack of artificial insemination techniques;

• lack of skilled staff; and

• technical constraints, such as sensitivity to feed shortages and low fertility.

Before embarking on a cattle breeding programme, a comparative study of different crosses needs to be carried out. The Nam Suang station may act as bull breeder and provide both the bulls for natural mating and artificial insemination service for the target areas.

An artificial insemination unit should be established at the station to service the surrounding areas whenever necessary and branches should also be established in the central and southern provinces at some time in the future.

Dairy cattle

The government encourages private farms around urban areas to develop dairy activities in order to answer the demand for fresh milk and reduce dependence on imported milk products. The development of the dairy industry in the region shows that dairy industrial units should involve small farmers and integrate them into the production chain, by providing them with heifers, training them, and purchasing the milk from them and running the milk processing.

Goats

The goat population of the country is relatively small - about 150 000 head. The goats are mainly kept in mountainous areas, where there are more fodder trees, shrubs, bushes and grass. In general, indigenous goats are small and raised for meat. At present, there is no dairy goat in the country. There has never been any attempt to study the goat population.

Pigs

The indigenous poultry and pig population numbered 12 420 000 and 1 432 000, respectively, in 1998, and the broiler production was of about 1 000 tons, or less than three percent of total production, and the exotic pig contribution less than 8 percent of total pork production.

Evaluation reports from a number of integrated development projects in developing countries indicate that scavenging village chickens play a significant role in poverty alleviation and in enhancing gender equity among disadvantaged communities (Saleque, 1996).

After a national survey was carried out, a manual on indigenous pigs was completed and published. The data collected allows the identification of four types of pigs with different phenotypic characterisations. The manual was first published in Lao, together with a summary presentation of the four types of indigenous pigs in English, and it has been distributed to all provinces and districts involved in the study. According to the phenotypes, the four types of pigs could be four different breeds. But we are not able to identify them as breeds because we only have performance data and lack genetic information on the animals. Therefore, there is a need to study the genetic variations of these animals.

Crossbreeding

The Department of Livestock and Fisheries owns a pig breeding station located at Nong Teng, about 12 km out of Vientiane. The role of this station is to maintain pure-breed boars and sows in order to produce crossbred sows for multiplication for pig farms and farmers. The breeds used are Large White, Landrace and Duroc Jersey. The capacity of the station is 150 sows. In the main towns, there are pig farms with about 4 000 sows on average. The demand for pork is high and increasing, particularly in the urban areas, and supply cannot satisfy demand. It is clear that there is a need to increase pig production in order to produce enough pork for the increasing population in and around towns.

To be feasible, particularly in developing countries, breed development strategies generally require parallel improvements in management, nutrition and health care.

Poultry

Poultry plays a significant role in the livelihood of villagers, particularly in remote areas where it serves as the main protein source and source of income for the farmers, who usually keep 10 to 20 chickens and ducks per household. These are allowed to fend for themselves with a supplementary feed of rice bran and broken rice.

Indigenous poultry - chicken, duck, goose and turkey - has yet to be studied. There is a need to carry out a baseline survey to identify and classify the existing indigenous poultry population before a breeding programme can be formulated.

The livestock industry

The livestock industry is now quite developed in urban areas, particularly in the Vientiane municipality and in provincial capital cities where the farmers keep exotic breeds of animals. The industry includes broiler and egg production, exotic pigs and dairy cattle. The pig and poultry breeding stocks are mainly imported from other countries. In 1999 there are approximately 700 000 broilers raised per year and some 250 000 layers.

The farmers in urban areas, particularly in the Vientiane municipality, prefer to raise three crossbred pigs (Landrace, Large White and Duroc Jersey) for meat but these contribute only a small percentage of all the pork consumed. To keep the exotic or the crossbred animals, there is a need for manufactured feed and proper handling. There is one large modern feed mill in Vientiane. It has the potential to produce about 24 000 tons of animal feed per year, and could play a significant role in supplying feed for poultry and pig production. But for the time being, it is running at below capacity, due to the exorbitant cost of imported ingredients such as premix, anti-oxidant, rich protein components and so forth. At present, most of the manufactured feed and concentrates are imported, which makes products expensive.

There are two cattle stations, one at Nam Suang, within the Vientiane municipality, the other in Xiengkhouang province; one pig breeding farm, with the capacity to keep 150 sows; one pig multiplication farm, with a 1 200-sow capacity; one broiler breeding farm, with the capacity to produce one million day-old broiler chicks; and one layer breeding farm, with the capacity to keep 6 000 parent-stock layers.

The poultry industry

In the urban areas where the population grows rapidly and people's income is relatively high, the demand for poultry is also high. The demand for poultry meat and eggs could be met by the broiler and laying industries, which have been historically dependent on the importation of parent stocks, feed and feed ingredients.

There is only one broiler farm, established with aid from the Hungarian government. It produces day-old broiler chicks to be raised by small farms and farmers. It started production in 1988, with the capacity of one to four million broilers a year. The parent stock (Abhor Akhor) is imported from the United States.

The egg output is based on smallholders' production. The size of laying farms ranges from 100 to 500 layers up to 10 000 layers. There are altogether some 300 000 layers kept by these farms, and all layers are imported, because the existing breeding farms are not functioning.

Conclusion

The country has come to appreciate the urgent need to maintain and better use its animal genetic resources for more efficient and sustainable food production and long-term food security. It is crucial that the country first establish precisely what genetic resources are available and then take action to develop the most efficient breeding schemes. Importation of genetic material is not easily controlled and local resources can be destroyed very rapidly, particularly for the species with short generation intervals. The loss of indigenous genetic material could have dire consequences on local food security and nutritional intakes, as exotic material requires greater inputs than those usually available in small farmer holdings, resulting in difficulties in satisfying consumer demand in and around towns.

The pig and poultry industries require manufactured feed, breeding stock, equipment and technology, most of which are imported. Even though local feed mills do produce feed, they need to import some ingredients, which makes the industry still dependent on imports. Since current meat production comes from indigenous animals raised in traditional fashion, and given the need to develop the livestock industry to answer the growing demand for meat in urban areas, more attention should be paid to indigenous animals in terms of research and development. An appropriate breeding policy needs to be formulated and tied up to animal genetic management plans.

Table 1. Livestock population in the Lao PDR (thousand head)

Source: MAF statistics

Table 2. Meat production (1998) in the Lao PDR

Source: MAF statistics