Rice Landscape Analysis | September 2017

RICE LANDSCAPE ANALYSIS Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

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September 2017

All Rights ReservedŠ WFP 2017.

World Food Programme (WFP) Lao PDR country office Don Nokhoum Road, Don Nokhoum village, House No:414, Unit 8, Sisattanak District, Vientiane Capital, Lao PDR, PO Box 3150.

Telephone:+85621330300, Fax:+85621486039 Cover photo: A woman working in a rice field in Lao PDR, 2017. Photo: Rik Delnoye

Suggested citation: World Food Programme LAO PDR and Ministry of Health - Department of Hygiene and Health Promotion (2017). Rice Landscape Analysis: Feasibility of and Opportunities for Rice Fortification in the Lao People’s Democratic Republic. Vientiane; World Food Programme LAO PDR. The designations employed in WFP publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the World Food Programme concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers.

The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the World Food Programme of the opinions expressed in them.

RICE LANDSCAPE ANALYSIS Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

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Table of Contents Acknowledgements ..................................................................................................................... 7 Abbreviations ............................................................................................................................. 8 Map of Lao People’s Democratic Republic ................................................................................... 9 Executive summary ................................................................................................................... 10 1 Objectives of the landscape analysis and suggested use of its results ................................... 11 1.1 Background ...................................................................................................................... 11 1.2 Objectives ......................................................................................................................... 11 1.3 Suggested use of results of the landscape analysis ................................................................. 11 2 Methodology ........................................................................................................................... 12 3 Nutrition situation analysis ..................................................................................................... 12 3.1 Micronutrient deficiencies in Lao PDR .................................................................................... 12 3.2 Consumption of staple foods ................................................................................................ 13 3.3 National Nutrition Policy, National Nutrition Strategy, and National Plan of Action ........................ 14 4 Rice landscape analysis .......................................................................................................... 15 4.1 Production ......................................................................................................................... 15 4.2 Consumption and consumer preferences ................................................................................ 18 4.3 Rice supply chain ............................................................................................................... 18 4.3.1 Rice milling ............................................................................................................... 19 4.3.2 Imports .................................................................................................................... 22 4.3.3 Exports .................................................................................................................... 22 4.4 Price, seasonal variability .................................................................................................... 22 4.5 Key policies affecting the rice value chain in Laos ................................................................... 24 5 Rice fortification in Lao PDR ................................................................................................... 26 5.1 Potential delivery options for rice fortification ......................................................................... 28 5.2 Fortified kernels supply ....................................................................................................... 29 5.3 Consumer awareness & acceptance ...................................................................................... 29 6 Recommendations for rice fortification ................................................................................... 30

List of Tables Table 1: Lao PDR Nutrition Indicators, 2000-2015 .......................................................................... 12 Table 2: Coverage and availability of typical staple foods ................................................................ 13 Table 3: National targets for the reduction in prevalence of anaemia, and VAD .................................. 15 Table 4: Rice production, trade, availability and consumption .......................................................... 16 Table 5: Number of rice mills, locations and their production capacities ............................................ 20 Table 6: Milled rice production capacities of known large mills ......................................................... 21 Table 7: Summary of policies affecting the rice value chain (after farm gate)

and responsible agencies ............................................................................................... 25 Table 8: Relative nutrient content of raw brown, white and glutinous Rice per 100 mg ........................ 26 Table 9: Proposed fortification levels for rice in Lao PDR ................................................................. 27

List of Figures Figure 1: Economic growth and child nutrition in Lao PDR ................................................................ 14 Figure 2: Rice surplus and rice deficit areas in Lao PDR ................................................................... 17 Figure 3: Depiction of overall rice supply chain in Laos (2011) ......................................................... 19 Figure 4: Costs and margins along the rice supply chain ................................................................. 23

Acknowledgements Fieldwork and data collection conducted by Martin Albani with funding from the World Food Programme (WFP), Regional Bureau for Asia and Pacific (RBB) between 7-18 December 2015 and 18-20 July 2016.

Report by WFP RBB and Food Fortification Initiative (FFI). Special thanks to Ministry of Health, Department of Hygiene and Health Promotion and National Nutrition Committee Secretariat.

The design of this document was coordinated by Cecilia De Bustos (RBB) and carried out by ScandMedia.

Shati Rahman (RBB), Khizar Ashraf (WFP Laos) and Khangneun Oudomphone (WFP Laos) contributed to the selection of pictures.

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Abbreviations

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CU5:

Children under five years of age

DHS:

Demographic Health Survey

EMRIP:

Enhancing Milled Rice Production in Lao PDR.

FAO:

The United Nations Food and Agriculture Organization

G/c/d:

Grams per capita per day

Ha:

Hectare

IDD:

Iodine Deficiency Disorders

LAK:

The national currency of Lao, the Lao Kip

Lao PDR:

Lao People’s Democratic Republic

LCASS:

Laos Child Anthropometry Assessment Survey

MAF:

Ministry of Agriculture and Forestry

MOES:

Ministry of Education and Sport

MICS:

Multiple Indicator Cluster Survey

MT:

Metric ton

MT/a:

Metric tons per annum

MMT:

Million metric tons

MoIC:

Ministry of Industry and Commerce

NHS:

National Health Survey

NNC:

National Nutrition Committee

NNP:

National Nutrition Policy

NNSPA:

National Nutrition Strategy and Plan of Action

SAC:

School-age children

TWG:

National Technical Working Group

UIC:

Urinary Iodine Concentration

UN:

United Nations

UNICEF:

United Nations Children’s Fund

USD:

United States dollar

VAD:

Vitamin A Deficiency

WHO:

World Health Organization

WFP:

World Food Programme

WRA:

Women of Reproductive Age

Map of Lao People’s Democratic Republic1

1 http://www.lib.utexas.edu/maps/middle_east_and_asia/laos_pol_2003.pdf. The boundaries, names shown and the designations used on this map do not imply official endorsement or acceptance by the World Food Programme.

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Executive summary In Lao People’s Democratic Republic, despite improvements over recent years, poor nutrition indicators persist across the population. According to the Lao child anthropometric survey 2016 stunting is still 35.6 percent in children under five years of age, which has reduced from 44 percent in 2012 (Lao social indicator survey 2012). Also according to the last national micronutrient survey conducted in 2006, 18% of children under five years of age and 23% of women of reproductive age are iron deficient, suggesting other concurrent micronutrient deficiencies may be likely. Food fortification, the addition of essential vitamins and minerals to commonly eaten staple foods to improve nutrient intake, is a successful strategy to address micronutrient deficiencies globally. Lao PDR’s experience in food fortification is namely in mandatory salt iodization; the 2012 Lao Social Indicator Survey found that 97% of households had adequately iodized salt on the day of the survey.

However, given the importance that rice holds in the Laotian diet (an estimated 436 grams per capita per day available), fortification of rice with key vitamins and minerals is a potential opportunity to significantly contribute to nutrient intake. This landscape analysis of the rice supply chain in Lao PDR was conducted in order to provide decision makers a comprehensive understanding of the factors that influence the feasibility and sustainability of rice fortification as a nutrition intervention.

The analysis found that the rice milling industry and its supply chains are fragmented; a disadvantage in Lao PDR since ideally blending fortified rice should occur centrally, at a few central points to reach the largest parts of the population. Lao PDR is a rice-sufficient country, with production of 2.58 million metric tons of milled rice in 2014 and national rice consumption requirements at 1.1 million metric tons. The majority (an estimated 80%) of the rice is consumed on a subsistence basis, limiting the opportunity for commercially fortified rice to reach broad coverage of the population. To service the large subsistence rice-farming population an equally large number of custom mills operate in the country, over an estimated 25,000 mills. There are an estimated 405 larger mills with capacity exceeding 10 metric tons. Supporting rice fortification across a large number of small custom mills is impractical and too-resource intensive to implement, while requiring fortification in only the larger mills will reach the small proportion of the population (estimated 10-20 percent) consuming commercially milled rice.

Social safety net fortification of rice procured and distributed by the Ministry of Education and Sports’ schoolfeeding programme offers an opportunity to improve the nutrient intake of schoolchildren. A supply chain analysis of the procurement system for rice in the school meal programme is necessary to identify where points of rice fortification could occur.

At this time rice fortification in Lao PDR faces limited opportunities for implementation. However, increasing production of rice and food security demands from its growing neighbours in Asia have seen increased attention placed on the rice milling industry to improve efficiencies and modernize to meet export demand.

Eventually export-driven demand could result in increased consolidation of the rice supply chain for domestically consumed rice. As such, the milling industry should be monitored in to assess for future opportunities to introduce rice fortification. In the short-term, activities to enable the regulatory environment to facilitate rice fortification, such as developing an inter-ministry technical working group to develop and coordinate activities on rice fortification (including standards for fortified rice and fortified kernels) will help create an enabling environment for future fortification efforts.

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1.1 Background Mass food fortification, or the addition of essential vitamins and minerals (micronutrients) during food processing to commonly eaten staple foods (also termed ‘vehicles’, e.g. salt, wheat, rice and oil), has proven to be a highly cost-effective strategy to address micronutrient deficiencies. When properly implemented, food fortification programmes have resulted in drastic reductions in iodine deficiency disorders (IDD), neural tube defects, iron deficiency anaemia and vitamin A deficiency.

Rice fortification offers a high potential to decrease micronutrient deficiencies in regions of the world where rice is the main staple, and where other fortified foods are not consumed in adequate enough quantities.

Globally six countries have mandatory legislation for rice fortification2; fortification standards and degree of implementation vary by country3. Social safety net distribution of fortified rice in school feeding programmes or targeted food distribution programmes are underway in several other countries - as of August 2017 these countries in the Asian region with rice fortification activities include Bangladesh, Cambodia, India (states of Odisha and Karnataka), and Malaysia.4 As rice fortification is more complex than salt or wheat fortification, a rice landscape analysis is crucial and ideally undertaken early during programme development. This analysis provides decision-makers with a comprehensive understanding of the factors that influence the feasibility and sustainability of rice fortification as an intervention to improve a population’s micronutrient health. To introduce, implement, and scale up rice fortification programmes, strategic decisions and actions must be taken and implemented within government, the private sector and civil society. This includes determining the most appropriate delivery options, ways to integrate fortification steps into the rice supply chain, and how to adapt or improve relevant policies, and regulatory and institutional frameworks. Such an analysis can also be used to estimate the potential public health benefits and associated costs of the intervention, as well as to engage the global development community and private sectors in developing sustainable supply chains for fortified rice.

1.2 Objectives The aim of this report is to present a landscape analysis for rice fortification for Lao People’s Democratic Republic (PDR). The landscape analysis reviews and summarizes the current nutrition, political and industry landscape as it relates to the rice sector and rice fortification. The objective is to inform decision-making and optimize discussions to introduce rice fortification as one of the nutrition interventions in Lao PDR. Specifically, the study will generate information to assess the feasibility of rice fortification in Lao PDR – with an emphasis on the potential of this public health strategy to improve the micronutrient health of vulnerable populations.

1.3 Suggested use of results of the landscape analysis As the landscape analysis tends to bring together existing information related to rice fortification, its results

depend on availability and reliability of data, availability of and information shared by key-informants and other factors such as e.g. timing and duration of the landscape analysis.

As such, the results of the landscape analysis should be used as a starting point for discussions and building consensus on next steps for rice fortification. These next steps can include the need for additional data collection and analysis, definition of road map, strengthening of strategic partnerships, etc.

2 Costa Rica, Nicaragua, Panama, Papua New Guinea, Philippines, United States of America (US). In the US mandatory legislation is only applied in six states but in effect this has contributed to approximately 70% of the US crop fortified.

3 Food Fortification Initiative. Global Progress. Available at: http://ffinetwork.org/global_progress/index.php 4 Food Fortification Initiative. Rice Fortification Resources. Available at: http://ffinetwork.org/implement/rice.html

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RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

1 Objectives of the landscape analysis and suggested use of its results

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

2 Methodology The information in this report is comprised of desk reviews of existing information and reports, and a field mission that included discussions with various stakeholders, including government ministries of agriculture and forestry, health, industry and commerce, private sector companies, chambers of commerce and associations, United Nations (UN) agencies, donors, and international non governmental organizations (list attached as annex). While stakeholder discussions were guided by an understanding of the information that needed to be collected, a formal survey methodology was not employed.

It should also be noted that the quantitative information presented in this report is largely collected from secondary sources and reports. The quantitative data has been utilised to formulate a general situational analysis, while major trends have also been taken into account.

3 Nutrition situation analysis 3.1 Micronutrient deficiencies in Lao PDR The Lao National Nutrition Strategy and Plan of Action (NNSPA) 2010-2015 noted that, “according to World Health Organization (WHO) standards and the most recent surveys, Lao PDR faces multiple health and nutrition related problems requiring urgent action”.5 While nutrition indicators from national surveys have improved since 2000, more recent surveys from 2012 and 2015 suggest the nutrition situation still has room for improvement (Table 1).

Table 1: Lao PDR Nutrition Indicators, 2000-2015 Indicators

Population

2000a

2006b

2012c

2015d

Underweight (%)

Children 6-59 mos

36.40

31.60

26.60

25.50

Stunted (%)

Children 6-59 mos

42.80

47.60

44.20

35.60

Wasting (%)

Children 6-59 mos

17.50

7.30

5.90

9.60

Vitamin A deficiency (%)

Children 6-59 mos

30.90

45.00

N/A

N/A

Vitamin A supplement coverage (%)

Children 6-59 mos

28.80

18.00

58.8

N/A

Anaemia (%)

Children 6-59 mos

46.20

40.90

41

40f

Women 15-49 yrs

18.80

36.20

36

30f

Children 6-59 mos

N/A

18.40

N/A

N/A

Women 15-49 yrs

N/A

23.20

N/A

N/A

Median UIC (μg/l)

Children 8-12 yrs

155.3

205.4

N/A

103.e

Adequately iodized salt (%)

Household

75

29

79.5

N/A

Iron deficiency (%)

a

2000 National Health Survey (NHS) | Multiple Indicator Cluster Survey (MICS). http://mics.unicef.org/surveys.

b

2006 National Maternal and Child Nutrition Survey (MICS). http://mics.unicef.org/surveys.

c

2012 Lao Social Indicator Survey (LSIS). https://dhsprogram.com/pubs/pdf/FR268/FR268.pdf

d

2015 Laos Child Anthropometry Assessment Survey (LCAAS)

e

2014 School Survey on Iodine

f

Projected trends were estimated using results from previously conducted national surveys including 2011/12 Lao Social Indicator Survey( LSIS).

Abbreviations: UIC: Urinary Iodine Concentration; Definitions: N/A: not applicable; Underweight: below minus two standard deviations from the median weight for height of the NCHS/WHO standard; Stunted: fall below minus two standard deviations from the median height for age of the National Center for Health Statistics (NCHS)/WHO standard; Wasted: fall below minus two standard deviations from the median weight for height of the NCHS/WHO standard; Vitamin A deficiency, serum retinol <0.7 μmol/l; Anaemia, haemoglobin <11 g/dl (for children) or <12 g/dl (for non-pregnant women); Iron deficiency, serum ferritin <12ug/l; Median UIC of 100 μg/l is considered adequate iodine status for school-age children aged 6 years or older.

5 National Nutrition Strategy and Plan of Action 2010-2015. Government of Lao PDR. Available at: www.fao.org/3/a-at539e.pdf

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While there is no national data available, it is presumed that deficiencies in B vitamins such as thiamin, riboflavin, niacin and others are also widespread. Milled rice, the preferred staple food of Lao PDR offers very low levels of these B vitamins because the husk, discarded during milling, is an important source of vitamins. In particular, glutinous rice offers very low levels of thiamin. The clinical form of thiamin deficiency has been consistently documented in Lao PDR 6,7. A case control study found that maternal low diversity score and increased soaking or pouring of excess water when cooking glutinous rice increased odds of beriberi in breastfed infants8. It could be that longer soaking and pouring of excess water during cooking further removes the thiamin that remains in glutinous rice after milling.

3.2 Consumption of staple foods In order for food fortification to be effective, the food that is being fortified needs to be consumed regularly in sufficient quantity and by a large part of the population. Identifying consumption patterns (e.g. quantities, regional and sub-population differences) is an essential step in planning a fortification program. For example, understanding consumed quantities of a food provides guidance for setting nutrient standards in fortification and knowing which regions or sub-populations consume greater or lesser amounts of fortified foods informs monitoring and evaluation efforts.

Of typical staple foods only rice comes up as a possible vehicle as other staple foods are not consumed in sufficient quantity (Table 2). An estimated 100 percent of population consumes rice and availability exceeds 400 grams. With these expected consumption estimates, national rice requirements are approximately 1.08 MMT.9 Starchy tubers are the second highest in terms of coverage (55 percent) and availability (117 g/c/d) but biofortification (introduction of essential micronutrients during plant production) may be a more suitable intervention given that tubers in Lao PDR are not typically consumed as a commercially processed food.

Table 2: Coverage and availability of typical staple foods

a

Staple food

Coverage

Availability, 2013 (g/c/d)c

Rice

100%a

436 g/c/d

Wheat flour

Unknown

5 g/c/d

Maize

4%

42 g/c/d

Starchy tubers

55%

117 g/c/d

Milk

10%a

8 g/c/d

Oil or added fat

14%a

Salt

98.8%

Unknown

Sugar

Unknown

67 g/c/d

a a

5 g/c/d b

WFP Comprehensive Food Security & Vulnerability Analysis (CFSVA) 2007

b

Multiple Indicator Cluster Survey (MICS), 2011/12. UNICEF

c

FAO. Food Balance Sheets 2013. Rounded to the nearest gram. http://www.fao.org/faostat/en/#data/FBS

Coverage: estimate of the population consuming the staple food, definition differs by survey. For CFSVA, estimated percent of households reported consumption the staple food during the seven-day recall period; for MICS, percent of households with salt on the day of the survey.

Availability: g/c/d: grams per capita per day

6 Barennes H, et al. (2015) Beriberi (Thiamine Defi ciency) and High Infant Mortality in Northern Laos. PLoS Negl Trop Dis 9(3): e0003581. https://doi.org/10.1371/journal.pntd.0003581 7 Khounnorath S, et al. Clinically unapparent infantile thiamine defi ciency in Vientiane, Laos. PLoS Negl Trop Dis (2011) 5(2):e969.10.1371/ journal.pntd.0000969 8 Soukaloun D, Kounnavong S, Pengdy B, Boupha B, Durondej S, Olness K, Newton PN, White NJ. Dietary and socio-economic factors associated with beriberi in breastfed Lao infants. Ann Trop Paediatr. 2003 Sep;23(3):181-6.

9 Calculated by 436 grams*365 days*6.8 million people and converting into metric tons.

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RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLEâ&#x20AC;&#x2122;S DEMOCRATIC REPUBLIC

All surveys in Table 1 indicate that the burden of anaemia is a severe public health concern in young children aged 6-59 months and a moderate public health concern in women of reproductive age. Although there is limited data on multiple micronutrient deficiencies, the presence of vitamin A, iron, iodine deficiencies and high level of stunting, suggest there is a high likelihood that other micronutrient deficiencies are also present.

Micronutrient deficiencies play a role in underweight and stunting but also have significant independent impacts.

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

3.3 National Nutrition Policy, National Nutrition Strategy, and National Plan of Action Throughout the next decade, a growing economy in Laos will undoubtedly help reduce high rates of malnutrition. However, studies show the nutrition status of a population responds slowly to economic growth.

A World Bank analysis of malnutrition prevalence and economic growth rates in 79 countries concluded that, “income growth can play an important role in malnutrition reduction, but that it is not enough. Increases in the number and effectiveness of direct nutrition interventions have a crucial role to play if nutrition goals are to be met.”10 In Laos, for example, even as GDP has increased more than fourfold, from about USD 300 to USD 1,300 per year over the past decade, the nutrition status as measured by chronic malnutrition in children remains essentially unchanged (Figure 1) .

Figure 1: Economic growth and child nutrition in Lao PDRa

a

REACH Stocktaking Analysis Lao PDR, June 2009

Consequently, within the National Nutrition Strategy and Plan of Action (2016-2025), the government of Lao PDR has defined objectives, strategies and actions to ensure that as the Lao PDR economy continues to develop, the nutrition status of the population will benefit and reflect these improvements. Among the constraints to progress identified in the NNSPA is the “narrow concept of food security with a disproportionately strong focus on calorie and rice intake; neglecting the importance of dietary diversity as well as an adequate intake of fat, protein and micronutrients”.11 The high reliance of the Laotian diet on glutinous rice is associated with a significant lack of dietary diversity leading to micronutrient deficiencies. Five NNSPA nutrition indicators are related to vitamin and mineral deficiencies (anaemia as a proxy for iron deficiency) and target ambitious improvements: a 37 percent reduction in IDD and a 23-25 percent reduction in anaemia by the year 2020. Target reductions by 2025 are 50 percent or greater.

10 Alderman, H. et al. Reducing Child Malnutrition: How Far Does Income Growth Take Us? Centre for Research in Economic Development and International Trade, University of Nottingham CREDIT Research Paper No 105 11 Lao People’s Democratic Republic. National Nutrition Strategy to 2025 and Plan of Action 2016-2020

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2012 baseline

2015 baseline

2020 prevalence

2025 prevalence

Prevalence (%)

Prevalence (%)

Target (%)

Reduction (%)

Target (%)

Reduction (%)

Anaemia: CU5

41%

40%

30%

25%

20%

50%

Anaemia: WRA

36%

30%

23%

23%

15%

50%

27%

N/A

17%

37%

10%

63%

VAD

45% (2006 MICS)

N/A

10%

N/A

N/A

Iron deficiency

22% (2006 MICS)

N/A

15%

N/A

N/A

Anaemia: pregnant women SAC IDD

a

Lao People’s Democratic Republic. National Nutrition Strategy to 2025 and Plan of Action 2016-2020

CU5: children under 5 years of age; WRA: women of reproductive age; IDD: iodine deficiency disorder; VAD: vitamin A deficiency

Micronutrients and fortification appear as Intervention number 5 and 7 under the 22 named priority interventions in the NNSPA. Under the provision of micronutrients in Intervention 5, Activity 5.1 identifies “develop(ing) and improv(ing) national instruments for the provision of the necessary micronutrients”, referring specifically to vitamin A, zinc, iron, vitamin B1, and deworming tablets and micronutrient powders. Intervention 5 aims to reach 80 percent coverage by 2020 and also names UNICEF and WHO as development partners.

Intervention 7 provides specific objectives and actions for reducing IDD but is vague in relation to other fortified foods. For example, one section reads: “Provide iodized salt, achieving full coverage. Promote the consumption of iodized salt and micronutrient-fortified foods. Procure, deliver, and distribute potassium iodate, basic testing equipment, and the necessary chemicals. Improve monitoring systems. Inspect quality.

Evaluate and declare the eradication of iodine deficiency by 2020.”

Within the NNSPA there are specified objectives and activities that identify the need to address micronutrient deficiencies. However, other than for salt iodization the NNS is vague on how fortification might be utilised to deliver other nutrients, while leaving the door open for “develop(ing) national instruments”.

4 Rice landscape analysis One of the key steps in developing a food fortification programme is choosing a suitable vehicle, or food source. The vehicle should be regularly consumed by a large part of the population, be well suited to the easy and cost-effective addition of micronutrients, and monitored appropriately for quality control. This section will present and discuss data in order to assess suitability of rice as a vehicle for fortification in Lao PDR.

4.1 Production Most of Lao PDR’s rice production comes from the ‘7 Plains12’ or major granaries. Although a net rice importer during most of the 20th century, due to improved producer incentives, increased use of more productive rice varieties, and expansion of irrigated areas, rice production in Lao PDR more than doubled between the early 1990s and 2013.13 More than 70 percent of that production increase occurred in four provinces (Saravan, Savannakhet, Khammouane, and Vientiane Province) and Vientiane Municipality/Capital. The most important rice growing provinces are Savannakhet (220,000 ha production area) and Champasak (100,700 ha). The

12 Savannakhet, Khammuane, Vientiane Province, Saravan, Borikhamxay, Champasack, and Attapeu 13 Eliste, P. et al.World Bank, Food and Agriculture Organization, Ministry of Agriculture and Forestry, Lao PDR. Lao People’s Democratic Republic Rice Policy Study. 2012.

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RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

Table 3: National targets for the reduction in prevalence of anaemia, and VADa

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

major rice deficit provinces are in the mountainous areas in the north of the country (Figure 3). Glutinous rice dominates domestic markets (more than 90 percent of production is in glutinous rice)14 and is the staple of preference for a very large majority of the population, including ethnic minorities.

The total area of rice planted in 2014 was about 891,190 ha, with total production at 4.0 million metric tons (MMT) (2.58 MMT milled rice equivalent) and average yield of 4.6 tons/ha.14 FAO’s estimate is about 33 percent higher than reported by the Department of Agriculture in the same year (Table 4). In 2010/11, some 77 percent of total production was derived from the wet season lowland system.15 Table 4: Rice production, trade,16,17 availability and consumptiona: % Population consuming commercial rice 10-20% up to 80% consumption is from own productiona

Rice production, trade and availability (thousand MT) Production (milled)

Imports

Exports

Balance

1,945

5.6

19.6

Opening: 562 Consumption: 1,449 Closing: 1,044b

(paddy: 3,242)

a

Department of Agriculture, Division of Planning and Cooperation, Plant quarantine division, 2014

b

Ending stock: at household level, estimate

Availability (g/c/d) ~ 200 (also differs from FAO estimates)

14 FAOSTAT Crops. 2014. http://www.fao.org/faostat/en/#data/QC 15 Lao PDR Census of Agriculture 2010/2011. Vientiane, 2014 http://www.fao.org/3/a-at767e.pdf 16 Lao PDR Strategic Action Plan for Development of the Rice Sector: Ensuring Food Security and Enhancing Agriculture 17 Vientiane Times, 17 July 2015: “Last year, Laos only exported 2,560 MT of paddy white rice, 3,210 MT of polished white rice, 7,348 MT of paddy sticky rice, 1,700 MT of polished sticky rice and 95 MT of black rice, while the country maintained a surplus of some 2 MMT of paddy rice.”

16

Wong, Larry CY. Presentation: Foreign Direct Investment in the Mill Sector for Rice Value Chain Development in Lao PDR. At: International Symposium on Frontier Research Themes on Service Sector support for Food Value Chain Development in Developing Countries. 10 April 2013, Renmin University of China, Beijing. a

Smallholder farmers who produce primarily to meet their household consumption needs dominate domestic rice production in Lao DPR. Of all domestically produced rice, up to 80 percent does not enter the commercial rice sector and is instead consumed locally, or as subsistence rice. Farmers practicing rain-fed agriculture customarily store rice produced for household consumption and any surplus in household granaries until the next harvest is determined to be secure and before selling any surplus to local millers. The relatively small number of producers that cultivate irrigated rice during the dry season generally use the harvest initially to cover any family food security shortages, before selling the dry season surplus as a cash crop to local millers.

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RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLEâ&#x20AC;&#x2122;S DEMOCRATIC REPUBLIC

Figure 2: Rice surplus and rice deficit areas in Lao PDRa

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

4.2 Consumption and consumer preferences Compared to its neighbours, Lao PDR has a strong preference for glutinous white rice, with glutinous rice production accounting for 90 percent of total rice production.14 That said, there are more than 3,000 rice varieties and more than 13,000 strains of rice grown in Lao PDR.18 Based on a simplistic distinction between glutinous and non-glutinous rice, the fragmentation of production and consumption shows that of the 150 main varieties being planted – 100 are classified as glutinous rice.

This aligns with the pronounced consumer preferences, particularly among the rural population, for their particular local variety. It also indicates the difficulty for millers to process relevant amounts of a homogenous rice variety for a wider customer group.

As indicated above, average rice consumption in Lao PDR is 436 grams per person per day, which is well within the threshold to qualify as a suitable vehicle. Further analysis might be needed to see whether the different rice varieties consumed can all be fortified using the same fortified kernel (size, shape, colour) as it wouldn’t be cost-effective to use a different fortified kernel for each type of rice.

In addition, the rice is typically soaked for several hours before cooking. This can have negative consequences on micronutrient content as water-soluble vitamins might be washed out. A stability test conducted on Laotian fortified rice after typical soaking demonstrated the vitamins and minerals leak indeed at a higher rate but these losses can be compensated for during the production process.19

4.3 Rice supply chain The rice value chain is as complex as the geography of this large country, with multiple types of actors at all levels and locations. The simplified supply chain: farmers–collectors–agents–millers–processors–retailers– consumers, is not always linear and singular but characterised by short fragments, cross-linkages and interruptions (Figure 3)

18 Songyikhangsuthor, K. et al. Participatory varietal selection: Lessons learned from the Lao upland programme. https://assets.publishing. service.gov.uk/media/57a08d37e5274a27b20016e3/RLPSRconfproceedings16.pdf 19 Stability of NutriRice in regular rice from Laos during washing, soaking over night and steaming in bamboo sieves, a test conducted in the DSM laboratory (Nutrition Improvement Programme, August 2013).

18

At the village or district level, farmers grow, mill, and consume rice for their own household food security, meaning their harvests rarely enter the commercial rice chain. Rice is milled by small processors (custom mills operating on demand on behalf of customers) at the village or district level. According to a 2012 study farmers reported paying 200 LAK/kg or using the milled bran as in-kind payment.

Approximately 10-20 percent of paddy rice is purchased by collectors from farmers and milled at the district level (for commercial trade) or by government contractors (if rice is purchased as institutional provisions for the military or police). Increasingly, rice is also purchased to export as both paddy and milled rice. In 2016 the Ministry of Agriculture and Forestry (MAF) reported exports of 21,000 MT of milled rice, 52,000 MT of paddy rice, and 248,000 MT of paddy rice sold via the border. The MAF projects 400,000 MT of rice will be exported in 2017, with an objective of 1 MMT by 2020.21

4.3.1 Rice milling The rice milling industry in Lao PDR is highly fragmented. Commercial rice milling is concentrated in five provinces and despite the national exportable surplus since 1999/2000, there are great geographical supply/ deficit differences across the country. Improving logistics to ease these differences is an identified objective in national food security strategies and action plans, but such improvements are yet to be accomplished. It is estimated there are more than 35,000 rice mills in Lao PDR, of which approximately 25,900 are custom mills with capacities of less than 2 MT/d.22 The other 8,778 commercial mills are classified by their capacities in three categories: >10 MT/d (405) | 5-10 MT/d (590) | <5 MT/d (7,783) (Table 3). There are very few (<10)

20 Linkham Douangsavanh, Bounthanom Bouahom: Rice Supply Chain Development in Lao PDR, Policy Forum on Enhance Agriculture and Productivity in Lao PDR, 9 Dec 2013 21 Xinhua Net. January 29, 2017. Laos expects to promote rice exports. http://news.xinhuanet.com/english/2017-01/29/c_136019961.htm 22 Ministry of Industry and Commerce records - via Larry C.Y. Wong: Presentation: Foreign Direct Investment in the Mill Sector for Rice Value Chain Development in Lao PDR. At: International Symposium on Frontier Research Themes on Service Sector support for Food Value Chain Development in Developing Countries. 10 April 2013, Renmin University of China, Beijing.

19

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLEâ&#x20AC;&#x2122;S DEMOCRATIC REPUBLIC

Figure 3: Depiction of overall rice supply chain in Laos (2011)20

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLEâ&#x20AC;&#x2122;S DEMOCRATIC REPUBLIC

mills with at least 20 MT/d or greater. Known operators are detailed in Table 4. Quality control and assurance practices at these larger mills are unknown and require further study. However, demands from countries (e.g.

China) to import rice from Lao PDR have already elevated phytosanitary issues for exported rice.23 Table 5: Number of rice mills, locations and their production capacitiesa: Province

Commercial mills

Custom mills

>10 MT/d

5-10 MT/d

<5 MT/d

Total

<2 MT/d

132

169

423

724

1,972

Phongsaly

-

-

43

43

242

Luang Namtha

7

20

111

138

88

Oudomxay

2

28

90

120

248

Bokeo

8

35

175

218

6,676

30

62

90

182

4,805

Huaphanh

2

21

88

111

4,065

Xayaboury

41

32

220

293

1,726

Xiengkhuang

12

13

131

156

439

Vientiane province

30

32

148

210

2,846

Borikhamxay

34

52

2,098

2,184

185

Khammouane

23

25

1,733

1,781

399

Savannakhet

23

52

2,058

2,133

228

Saravan

19

14

285

318

441

Sekong

14

-

-

14

75

Champasak

20

11

88

119

1,070

8

24

2

34

349

405

590

7,783

8,778

25,854

Vientiane capital

Luang Prabang

Attapeu Total

Total (commercial + custom mills): 34,632 Ministry of Industry and Commerce records â&#x20AC;&#x201C; via presentation by Wong, Larry YC: Foreign Direct Investment in the Mill Sector for Rice Value Chain Development in Lao PDR. At: International Symposium on Frontier Research Themes on Service Sector support for Food Value Chain Development in Developing Countries. 10 April 2013, Renmin University of China, Beijing. a

MT/d: metric tons per day

Several of the larger mills, including those locally owned and supported by foreign investment, operate vertically in rice farming, trading, and retailing.

23 Lao PDR raises sanitary measures to boost rice exports. February 19, 2015. http://www.laotradeportal.gov.la/index.php?r=site/display&id=766

20

Company

IDP (Indochina Development Partners) Rice

Lao World Company Sengarthit Development Company

Capacity (MT/d)

4 mills25; ~170, 170, 80, 80a

Retail, exports

100

Predominantly export, some supermarket retail (Tangferes supermarkets)

30-40

Dao Phet Group Viengmany Thoa Ngern Lung Phen Bounma Dao Phet

Six mills: 30-40 10 15-20 15-20 100 150-200

Lao Agro 2000 (Mrs Bouahom Vongsiprasaom)

Three mills: 10, 10, 25

Suthat

Three mills: 2, 4, 10

Kiko Partnership (Mr Sisoawath)

~30

Phonesavanh

~20

Vanida

~20

Siengnoln Pholnjalern Rice Mill Somphone Rice Mill (Mr Somphone Bouttavong)

Markets and known customers

Business volume, 2012 (indicative)

Notes Mills located in Champasak and Savannakhet, built 2014/15; Claimed largest rice miller in country; Will export 20,000 MT of milled, organic rice to China26

6,000 MT export

Located in Savannakhet; Reprocessor of high-grade Jasmine rice

Largest mill in Champasak; 5,000 MT (~1m USD in Branded as Homchampa Rice; targets high-end market Milling 2010) equipment valued ~ 1m USD; 12,500 contract farmers; equipment sourced from Fu Teng Lao Police: 3,000 MT in Located in Vientiane Capital 2012 (bidding for Lao Total: 50,000 Located in Vientiane Province Military) MT Retail Located in Luang Prabang Export (Viet Nam, Located in Vientiane Province Thailand) Located in Savannakhet Located in Vientiane Capital Largest mill in Vientiane Capital; Beer Lao: 2,400 MT/a 1,000 contract farmers; Noodle production: Milling equipment valued ~ 1m 5,000 MT 1,800/a USD; Retail Stockpiles 3,000 MT for government; Beer Lao: 1,200 MT/a EMRIP participant; Noodle production: 3,000 MT 1,200/a 750 contract farmers Retail Located in Savannakhet; Milling equipment valued ~ 3m USD; Government contracts Nestle products distributor in Unknown (TBC) South; Stockpiles paddy and mills per demand/price opportunities.

Located in Khamouane; Unknown Unknown EMRIP participant Located in Khamouane; Unknown Unknown EMRIP participant Traditional retail, some exports (est. 11%20% of business)27

Two mills: 4 &15

Unknown

Unknown

Located in Ko Village, Saravan

~30

AgroAsie (organic rice)

Unknown

Located in Vientiane Capital; Head of Vientiane Rice Millers;

MT/d: metric tons per day; MT/a: metric tons per annum; TBC: To be confirmed; EMRIP: Enhancing Milled Rice Production in Lao PDR. a

Calculated by author based on 300 days/annum projected operations.

24 Wong, Larry YC. Presentation: Foreign Direct Investment in the Mill Sector for Rice Value Chain Development in Lao PDR. At: International Symposium on Frontier Research Themes on Service Sector support for Food Value Chain Development in Developing Countries. 10 April 2013, Renmin University of China, Beijing.

25 DP Sales Department Team. Good news for Farmers. 21 October 2014. http://savan-dic.la/index.php?option=com_content&view=article&id=96:good-news-for-farmers&catid=43:pcds-news&Itemid=58&lang=en 26 Vientiane Times. Rice exports to China still facing challenges, official says. March 22, 2017. http://www.vientianetimes.org.la/FreeContent/FreeConten_Rice.htm 27 Sengarthit Development (Laos) Co., Ltd. http://www.sell147.com/company/Lao-People-39;s-Democratic-Republic/863888.htm

21

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

Table 6: Milled rice production capacities of known large millsa,24

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

The largest commercial milling companies (with at least >30 MT/d) identified above have a combined capacity of about 1,050 MT/day, which if running at 100% utilization, could produce 195,000 MT/a of milled paddy.28 The sales volume of their combined annual milled rice is well below 100,000 MT/a, or only less than 1 percent of the estimated 1.5 MMT of domestic milled rice consumption. This data supports estimates that only 10 percent of all rice produced is being commercially traded.

Average milling utilization (percent of production capacity being used) is unconfirmed, but using the estimates above, the largest rice mills are running at an estimated 50% utilization. Rice milling yield (percent of milled rice obtained from paddy rice) in Laos is unconfirmed but ranges between 50%-70%29 depending on quality of equipment.

4.3.2 Imports For much of the 20th century Lao PDR was a net rice importer due to its susceptibility to extreme climate events and unsuccessful government initiatives to boost production. However, at the national level Lao PDR has been rice sufficient since approximately 2000, although regional rice deficits continue to exist (Figure 2).

FAO reports limited rice imports into Lao PDR – 12 MT in 2013 and an average 10-year between 2003-2013 of 27 MT/a - or less than 1 percent of domestic consumption.30

4.3.3 Exports For Lao PDR, FAO reports zero rice exports between 1961-201330. However, media reports differ, stating that since 2000, Lao PDR has exported 300,000 MT of rice to Vietnam, Thailand, China and others. In January 2017, Prime Minister Thongloun Sisoulith reported an agreement with China to export 20,000 MT of organic rice. However, a constraint on Lao PDR’s export abilities is its limited milling capacity to meet international trade standards. Past orders by a Chinese exporter could not be fulfilled due to the rice not meeting specifications. Due to poor milling and transportation infrastructure, milled rice from Lao PDR is less price-competitive compared to rice from Thailand or Vietnam. According to the Vientiane Times, seven mills are currently being inspected and certified to export to China, whereas a MAF milling survey previously reported that the IDP Rice Mill was the only facility capable of meeting Chinese export specifications.

Using the estimate of 20,000 MT annual average exports (300,000 MT over 15 years) would indicate Lao PDR exported approximately 1 percent of its annual production over this period. Projected exports in 2017 are estimated at 15 percent of total production, using MAF’s projected 400,000 MT exports and 2.58 MMT milled rice production. The export of rice paddy is officially banned but there are reports of such trade occurring through informal channels, especially as Lao paddy rice is cheaper than paddy in neighbouring Viet Nam and Thailand.

4.4 Price, seasonal variability The Government of Lao PDR annually attempts to influence the price paid to producers for their rice crops and set floor prices. During the wet and dry seasons of 2012-2013, the minimum price of glutinous rice bought from farmers was set at 2,500 LAK/kg (USD 0.30) and prices could go up to 3,000 LAK/kg (USD 0.36)31 if they were purchased by rice associations, mills, or other business establishments. Producers buying directly from farmers could seek prices lower than the set 2,500 LAK/kg level on mutual agreement based on the quality of rice.

Provincial industry and commerce officers as well as rice millers have reported that these set prices are an indicative floor price only. Millers are not obligated to purchase at the floor price, but could go for the existing market price. It appears that although millers and farmers take note of the government’s indicative floor price, it has little or no impact on the price paid to producers, and no effect on rice milling costs. A Vientiane rice miller interviewed in December 2015 who purchases rice from the main provinces gave an indication of 3,000 LAK/kg (or 360 USD /MT).

28 100% utilization assumed at running 300 days per year. Average paddy to milled rice yield assumed 62%.

29 Milling yields. Rice Knowledge Bank. International Rice Research. http://www.knowledgebank.irri.org/index.php?option=com_ zoo&view=item&layout=item&itemid=1033 30 FAO Food Balance Sheets. http://www.fao.org/faostat/en/#data/FBS 31 Using 8,335 LAK to 1USD, per OANDA currency converter on 9 May 2017

22

These are high inland transportation costs (similar to Cambodia but much higher than Thailand and Vietnam) and are to be considered a relevant economic factor should production and distribution of fortified rice be considered in Lao PDR. Figure 4: Costs and margins along the rice supply chaina

a

Average farmer margin/MT is 56%; however low yields/ha limit overall profitability.

It is difficult to precisely determine the price increment for fortified rice. One possible entry point for fortification (as for wheat flour and maize flour) typically is at the point of milling. Estimates of incremental cost attributed to rice fortification vary from USD 10-40 per MT for the cost of the fortified kernels alone.32 Based on estimates secured from main suppliers in late 2012, the cost of the fortified kernels ranged from USD 2.00/kg to USD 2.70/kg delivered to major ports in Southeast Asia. This indicates a cost of USD 20-27 per metric ton of fortified rice.33 Transport from Bangkok to Lao and then to fortifying mills may add another 10-15 percent to these costs, suggesting incremental fortified kernel related costs of USD 23-31 (mid-point is USD 27) per metric ton. Based on the average cost of rice this represents an incremental recurring fortificant cost of roughly 5-7 percent.34 The miller profit margin is estimated at USD 133/MT. At an estimated USD 27/MT, purchasing and transporting fortified kernels would erode 20 percent of the millersâ&#x20AC;&#x2122; profit margin and would unlikely be considered commercially sustainable. Estimating the additional USD 27/MT cost to consumers for fortification could add percent (248 LAK/kg) to the retail price of rice, assuming an average 7,518 LAK/kg.35 It is unlikely that an additional 3 percent would be considered an acceptable price increase for consumers; other countries practicing mandatory rice fortification have reported retail price increases of approximately 1 percent.

Reducing the impact of rice fortification on retail prices could be aided by mandatory fortification of the commercially traded rice (i.e. the largest feasible scale-up of fortified rice), improved efficiency along the entire rice value chain, which would allow millers and retailers to maintain margins at the same or lower prices. These include costs savings through reduced wastage, improved transportation infrastructure and increases in milling yields. To support this, policies and programme strategies should also be focused on

32 Personal communication to FFI in 2015-2017 from development partners purchasing fortified kernels and from fortified kernel suppliers.

33 The higher costs obtained from DSM (Nutririce) and lower costs obtained from Swagat Foods in India, (producing for PATHâ&#x20AC;&#x2122;s Ultrarice).

34 Note that at 1% addition, pure rice value of the fortificant premix is $4.41. If this is taken into account, it suggests a lower added cost of 4-5%.

35 Average price of rice from: https://www.numbeo.com/cost-of-living/country_result.jsp?country=Laos; converted from pound to kg and USD to LAK.

23

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLEâ&#x20AC;&#x2122;S DEMOCRATIC REPUBLIC

Although this is comparatively high to the reported market and floor prices, this price includes transportation costs, which were given as 200 LAK/kg from Champasak to Vientiane (or 24 USD/MT), 180 LAK/kg from Savannakhet (22 USD/MT) and 160 LAK/kg from Khammouane (or 19 USD/MT).

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

creating incentives that can either compel or establish an enabling environment where the rice miller is able to invest in supply chain improvements and pass on the incremental cost of fortification to the eventual beneficiary or consumer.

Given the highly fragmented rice milling industry and the lack of a national food control system that fosters quality assurance of fortified food products, rice fortification at large scale in Lao PDR will be challenging in the short and medium term. However, based on the available data, it seems likely that the rice-milling sector will consolidate in the future, accompanied by investments in adequate implementation of international quality control mechanisms. This will facilitate the introduction and scaling up of rice fortification in Lao PDR.

4.5 Key policies affecting the rice value chain in Laos Given the importance of rice for national food security, many rice-producing countries have extensive policies relating to the production, export, and/or import of rice and rice-related products. Prior to the introduction of rice fortification, an environmental scan of key policies and legislation relevant to rice should be conducted in order to understand what political or legislative barriers exist, and what enabling factors can be introduced to assist with the introduction of rice fortification “Government of Lao PDR rice trading and marketing policies are uncertain, changing frequently, and with a low level of dissemination and weak implementation. Post-harvest agricultural extension services are weak.” 36 Millers suffer from limited access to finance, operating capital is considered insufficient, and collateral stipulations are rigid. The moisture content of rice is high but measurements to meet specifications are left to the discretion of rice millers due to the lack of public quality control services. These are obvious impediments.

However, the government of Lao PDR has identified these issues as concerns. The new five-year action plans under the strategies of line ministries37 recognize the weaknesses and project improved policies and coordination mechanisms that should lead to developing exports and improving food security and food safety in the country.

There is concern, however, that political will for these objectives at the highest stakeholder levels is not shared as strongly or as consistently in government institutions at the state and provincial levels.

Laws and regulations on rice standards and food safety, and the implementation of these mechanisms are also yet to be developed. As such, there is no existing legal framework for policies to implement rice fortification, but the work done around salt fortification could serve as a basis for policies that do exist and are not effectively enforced. These weaknesses and deficiencies are recognized and candidly admitted, and are addressed in the new set of strategies and concurrent action plans.

Ease of doing business: In 2015, Laos ranked 134 out of 189 in the World Bank ranking of countries according to their businessconducive environment. This is an improvement from 2014 (139) and in 2009 (167). In comparison: Bangladesh is ranked 174, Myanmar, 167, Cambodia, 127, Sri Lanka, 107, Nepal, 99, Viet Nam, 90, China, 84, Bhutan, 71, and Thailand, 49. The government of Lao PDR has streamlined the processes of opening a rice mill business but unofficial fees remain an obstacle.

The business-enabling environment: The most relevant issues that could effect or influence fortification at the rice milling level are: •

At the mill level, annual lump sum taxes are negotiated with government collectors, leaving room for inconsistency and graft.

•

Tax officers usually estimate the annual revenue and profit of a business to calculate the yearly tax rate; taxes can also be paid using profit/revenue records, but most businesses lack reliable data.

36 Zola, A.M.: Quantitative analysis of glutinous and non-glutinous rice value chains, March 2012 37 Lao PDR Strategic Action Plan for Development of the Rice Sector: Ensuring Food Security and Enhancing Agriculture.

24

Business owners can negotiate to pay lower amounts, leaving room for bribes and inconsistency.

•

Rice mill associations are still in the embryonic stages of development and just learning advocacy skills.

•

Most of the rice mill groups work collaboratively with the Ministry of Industry and Commerce (MoIC) and the MAF at the district and provincial level. There is no corresponding central/focal point in the capital.

Table 7: Summary of policies affecting the rice value chain (after farm gate) and responsible agenciesa

Policies driven by MoIC • Uncertainty of rice related trading and marketing policies • Restrictions on paddy exports • Rice reserve programme • Government-set floor price for rice a

Policies driven by MAF • Promotion of improved rice seed varieties • Post-harvest technology and handling of rice • Irrigated rice production

Policies driven by other government agencies Policy

Agency

Lines of credit to rice millers

Ministry of Finance, Bank of Lao PDR

Government purchases of rice

Ministry of Defence, Provincial governors

Taxation of rice millers and traders

Ministry of Finance, Provincial finance offices

Anthony M. Zola, Glutinous and Non-glutinous Rice Value Chains 2012_Quantitative Analyses

Existence of a regulatory mechanism or an institutional framework for food fortification: There are no government documents that specifically identify rice fortification as a priority nutrition intervention in Lao PDR. As previously noted, while food fortification is on the NNSPA agenda, there is no institutional framework. However, the supplementary provision of micronutrients is the first of 22 priorities of the NNSPA. Food safety policies and priorities are coordinated by the inter-Ministry National Food and Drug Administration Committee, chaired by the Minister or Vice Minister of the Ministry of Health. Committee members include the Ministry of Science and Technology, National Water Resource and Environment Agency, MAF, MoIC, Ministry of Finance, and Ministry of Security. Food and Drug Department and the Food and Drug Quality Control Centre (FDQCC) under the Ministry of Health are the responsible agencies for implementing food analysis and quality assurance of imported and locally produced or manufactured foods in Lao PDR.38 However, a food safety control report for Lao PDR found that “…laboratory facilities for managing food safety and agricultural health are weak and partly deficient… Human resources are weak for the identification, diagnosis, and testing of food and waterborne human health hazards and food contaminations, plant pests and diseases, and animal diseases. The available staff are few and general levels of education and training are low.” If implemented, the monitoring and regulation of fortified rice will have to compete with many other higher priority food safety concerns in the country.

There are no standards for rice fortification in Lao PDR. The responsibility for developing regulations for food imports, additives, inspections, and other codes of practice are jointly under Ministry of Industry and Commerce (MoIC), Science and Technology Agency and Ministry of Health.

38 ASEAN Sustainable Agrifood Systems. Food Safety Control Measures. Country Report for Lao PDR. March 2016. https://www.asean-agrifood.org/download/appendix-ii-country-report-laos/?wpdmdl=6602

25

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

•

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

5. Rice fortification in Lao PDR Rice is the staple food of Lao with an average per capita consumption about 436 g/c/d (159 kg/c/yr),30 representing a significant share of nutrition intake: 436 grams of rice alone accounts for 1,408 calories.30 The micronutrient content of milled white rice (and milled glutinous white rice) is significantly lower compared to wholegrain brown rice due to the loss of the nutrient-rich bran and germ during the milling process (Table 6). Compared to brown rice, milled glutinous rice offers only 16-89 percent and 21-50 percent of essential

minerals and vitamins respectively. As a consequence, Laotians with less dietary diversity, who rely on rice as a major source of nutrient intake, are likely to be deeply deficient in micronutrients and as a result at high risk of a range of related diseases and development disorders.

Table 8: Relative nutrient content of raw brown, white and glutinous Rice per 100 mga

Brown Rice

White Rice

Glutinous Rice

Minerals

Glutinous as % of Brown Rice

Calcium, Ca

Mg

33

9

11

33%

Iron, Fe

Mg

1.8

0.8

1.6

89%

Magnesium, Mg

Mg

143

35

23

16%

Phosphorus, P

Mg

264

108

71

27%

Potassium, K

Mg

268

86

77

29%

Zinc, Zn

Mg

2.02

1.16

1.2

59%

Thiamin

Mg

0.413

0.07

0.18

44%

Niacin

Mg

4.308

1.6

2.145

50%

Vitamin B-6

Mg

0.509

0.145

0.107

21%

Folate, DFE

µg

20

9

7

35%

Vitamins

a

United States Department of Agriculture Nutrient Database. https://ndb.nal.usda.gov/ndb/search/list

There are various approaches to rice fortification. Dusting and coating technologies, for example, have been practiced since the 1940s.39 Unlike wheat and other staple cereals, which are processed into flours, rice is consumed as a grain, meaning the traditional approach of mixing two powders cannot be applied. A number of studies have demonstrated that 40-100 percent of fortificant nutrients may be lost from dusted or coated rice during rinsing or discarding cooking water.40 Given the environment in Laos, where rice is vigorously rinsed as well as soaked for long periods prior to cooking, traditional rice fortification technologies will not be effective.

Extrusion technology addresses these high nutrient losses in rice fortification. This approach involves passing a dough mixture of rice flour (typically from broken rice kernels), vitamin-mineral powder, and water through an extruder to form reconstituted, fortified kernels. The fortified kernels are intended to be virtually indistinguishable from natural rice grains. These fortified kernels are then added to non-fortified rice during milling at rates ranging from 0.5-2 percent (the rate can depend on several factors, including the miller’s capacity to blend at low rates, preferences in the appearance of the blended rice, and desired nutrient content for fortified rice). With the fortificant nutrients “embedded” in the fortified kernel itself, losses during mixing and distribution as well as rinsing and cooking are reduced. Controlled trials have demonstrated extruded rice fortification is acceptable and efficacious in the reduction of iron deficiency and other micronutrient deficiencies.41,42,43 39 Salcedo, J. et al. 1950. Artificial enrichment of white rice as a solution to endemic beriberi; report of field trials in Bataan, Philippines. J Nutr 42, 501-523.

40 Rice Fortification For Developing Countries, OMNI/USAID 1998 41 Hotz C, et al. Efficacy of iron-fortified ULTRA RICE in improving the iron status of women in Mexico. Food and Nutrition Bulletin. 2008; 29:02 42 Angeles-Agdeppa, I. et al. Efficacy of Iron-Fortified Rice in Reducing Anaemia Among Schoolchildren in the Philippines Producer Capacity and Reliability Int. J. Vitam. Nutr. Res., 78 (2), 2008, 74–86 43 Beinner, M et al Iron-Fortified Rice Is As Efficacious As Supplemental Iron Drops. Journal of Nutrition. 2009; 140;49–53.

26

Which nutrients can be delivered through rice?

As with wheat and maize flour, fortifying rice offers an opportunity to deliver a wide range of vitamins and minerals. In order to address documented population deficiencies as well as known nutrient losses during rice milling, published recommendations for fortifying rice at varying consumption levels exist.45 Table 7 presents the recommended levels at Lao PDR’s average consumption levels, which exceeds 300 g/c/d.

While the WHO is reportedly considering global recommendations for rice fortification, currently there are no global consensus guidelines in place. WFP have further adopted de Pee et al. 2014’s recommendations and developed specifications for fortified rice to support procurement for its programmes.

In the case of niacin and thiamin, water-soluble B vitamins with very low content in milled rice, the WHO does not include recommendations.46 This proposal then draws on other national standards, ensuring that levels proposed are feasible, safe and generally considered effective.

Table 9: Proposed fortification levels for rice in Lao PDRa Nutrient

Compound

Fortification level (mg/kg or ppm)

Source for identifying nutrient levels

Iron

Ferric pyrophosphate47

60

WHO recommendations for fortifying maize and wheat floura

Zinc

Zinc oxide

50

WHO recommendations for fortifying maize and wheat floura

Thiamin

Thiamin mononitrate

6.4

Standards from Canada and Australia

Folic acid

Folic acid

1.3

WHO recommendations for fortifying maize and wheat floura

Vitamin B12

Vitamin B12 0.1% WS

0.01

WHO recommendations for fortifying maize and wheat floura

Niacin

Niacinamide

50

Standards from US, Canada, Columbia, South Africa, Bahrain, Saudi Arabia

WHO, FAO, UNICEF, Global Alliance for Improved Nutrition, Nutrition International, & Food Fortification Initiative. Recommendations on wheat and maize flour fort ification. Meeting Report: Interim Consensus Statement. Geneva, World Health Organization, 2009 http://www. who.int/nutrition/publications/micronutrients/wheat_maize_fort.pdf. a

44 Wieringa, F et al. Acceptability of different types of rice fortified with multiple micronutrients in women of reproductive age, working in a garment factory, A comparisons between coated and extruded fortified rice; Sept 2016 45 De Pee, S., 2014. Proposing nutrients and nutrient levels for rice fortification. Ann N Y Acad Sci 1324, 55–66.

46 Riboflavin is not included because its natural colour is yellow; it adds a bright yellow colour to extruded or coated kernels. For best consumer acceptability fortified kernels should not cause any organoleptic changes to the finished fortified rice.

27

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

In addition to extrusion technology, rinse resistant coating technology can also be employed in fortification strategies. This technology applies the nutrients on the outer layer of the rice grain. Through the use of special waxes the nutrients are ‘glued’ to the rice kernel, which protect them from being washed away during extensive soaking. This fortified kernel is blended into the non-fortified rice as explained above (for the extrusion technology). Recent analysis demonstrated that acceptability and stability of the fortified rice using this technology is similar to fortified rice using the extrusion technology.44

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

5.1 Potential delivery options for rice fortification Generally, delivery options of fortified rice can be classified into three categories,47 namely: o

Mandatory fortification: When legislation or food regulations are incorporated, mandating all rice for human consumption to be fortified. This option would ensure the widest reach. However, to be implemented, it requires a consolidated rice industry, considerable political will and leadership, and industry participation to create and enforce the necessary legislation and monitoring system.

o

Voluntary fortification: Fortification is voluntary when the private food industry has an option whether or not to fortify products. Voluntary fortification is a business-oriented approach with fortified food products marketed as “value-added” products often targeted to specific markets or consumers.

The potential for impacting a population’s micronutrient health through voluntary rice fortification is uncertain. This is dependent upon industry uptake and consumer demand and market share of companies. Impact would be dependant upon number of consumers, especially among socioeconomic groups that are most in need of fortification that are reached by products that are fortified.

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Fortification of rice distributed through social safety nets: Rice fortification can also be achieved by fortifying rice distributed through social safety nets, such as school feeding programmes, distributions to the poor or vulnerable groups, food for work programmes, and food aid during emergency situations. Fortifying rice distributed in social safety net programmes reaches the most vulnerable populations, and thus has the potential to make a significant impact on public health.

Social safety net fortification can be implemented together with mandatory or voluntary fortification.

It can also function as a catalyst to drive private sector investment and the introduction of fortified rice through commercial distribution channels.

The complexity of the rice value chain in Lao PDR, including a fragmented milling sector and a low proportion (10-20 percent) of the total rice supply commercially traded reduces the feasibility of introducing mandatory fortification. Fortifying a high number of small rice milling enterprises would require complicated fortified kernel distribution, rigorous quality assurance and control at the mill level, and a well-resourced regulatory system to enforce compliance – all barriers that will be very challenging to overcome considering low existing food safety regulatory capacity in Lao PDR. However, there is a global trend toward increased consolidation in the rice-milling sector and this trend is also occurring in Lao PDR. This is further aided by the Lao PDR government’s initiatives to support economic development in the country. Lao PDR’s growth in rice processing and changes in market reach by industrially milled rice should be monitored to assess future opportunities for mandatory rice fortification.

Voluntary fortification targeting the 10 or more larger mills in the country could be considered and merits further discussions with mill owners to ascertain their appetite for rice fortification. However, there is limited evidence to suggest that voluntary fortification leads to any significant public health improvements when it comes to micronutrient deficiencies. The scenario in Lao PDR is likely similar as the total market share of these larger rice mills is relatively low. However, if rice millers choose to voluntarily fortify rice to provide an added-value product or invest in fortified kernel production for export purposes, there should be government policies and regulations to provide an enabling environment and guidance for the private sector.

There are several targeted delivery options that offer opportunities to create institutional demand of fortified rice and these would also contribute toward creating additional incentives for private sector investment into the domestic production of fortified kernel. Targeted delivery options, particularly those that utilise social safety nets are particularly important because they largely reach the most vulnerable segments of the population who would benefit the most from improved nutrition.

47 Codling, K. et al. Identifying Appropriate Delivery Options for Fortified Rice, Sight and Life, 2014. - http://www.sightandlife.org/fileadmin/data/Magazine/2015/29_1_2015/SAL_WFP_Suppl.pdf

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Fortification of all government procured rice (e.g. for police and military). Entry point: mills that process rice under government contract. These mills have to be identified and inspected to analyse their capacities and technical readiness to upgrade.

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Fortification of food security stocks once the government planned provincial warehouses are built, established and their inventory turnover is controlled. Entry point: as above, provided that paddy will be milled at qualified mills before distribution in times of crisis and every time when inventory needs to be replenished.

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Fortification of school feeding programmes but this requires support from the Ministry of Education and Sports (MOES) and Ministry of Health (MOH). The rice for school meals which are being provided through WFP can be a beginning to introduce fortified rice within communities.

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Entry point: mills identified by aid providers and that acquired the capacities for fortification48

5.2 Fortified kernels supply The milling sector in Lao PDR is in its nascent stages and food processing in general is not highly developed in the country. Given the circumstances, and the lower potential volumes of rice that is fortifiable in the near future in Lao PDR, it would be prudent for the country to consider importation of fortified kernels as opposed to immediate investment in local capacity to produce fortified kernels in-country. Fortified kernels constitute only 1 percent of fortified rice and importation of kernels and blending these with local rice would likely be the most economical solution. Relatively low levels of investment and the simplicity of the blending process does make local blending a feasible option in Lao PDR. ASEAN countries currently with fortified kernel producers are Myanmar, Thailand, and the Philippines.

An important consideration of any blending operation for Lao PDR must ensure there is minimal additional handling and transportation of the rice with which the fortified kernels need to be blended. Transportation costs rapidly become a major contributor to the overall price of rice, especially given the irregular and at times poor transport infrastructure in the country. Analysis in other countries has highlighted the importance of optimal supply chains for fortified kernels, fortified and non-fortified rice in order to minimise costs.

5.3 Consumer awareness & acceptance The acceptability of fortified rice depends on the fortification technology, the type and levels of nutrients added, and consumer preferences. All rice fortification technologies aim to make fortified rice taste, smell, and look the same as non-fortified rice. Several studies comparing fortified rice with non-fortified rice evaluated though various sensory parameters (appearance, colour, texture, odour, taste, and overall acceptability) have demonstrated that fortified rice is virtually indistinguishable from non-fortified rice.

Laotian cooking is famous for ‘sticky rice’ dishes and 85-90 percent of rice consumed is any one of local glutinous rice varieties. In Lao PDR, fortified kernels should then be prepared to resemble and blend with glutinous rice. Avoiding changes in any organoleptic qualities of rice post-fortification is key as Laotian consumers have very strong preferences for their own local varieties.

A laboratory stability test conducted with one of the typical glutinous rice varieties used in Laos, and after application of the typical Laotian soaking practices, revealed that losses of vitamin A and water-soluble B vitamins were higher due to the typical soaking cooking method in Laos. It is possible to anticipate these losses by adding overages to compensate for the expected cooking loss.

48 NOTE: All interventions can only be mandated when relevant regulations have been promulgated and facilities put in place to ensure compliance with food safety and quality standards.

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RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

In Lao PDR, fortification of rice distributed through social safety nets is the most likely opportunity for rice fortification. A few delivery options that should be considered in the overall plan of action include:

RICE LANDSCAPE ANALYSIS - Feasibility of and opportunities for rice fortification in the LAO PEOPLE’S DEMOCRATIC REPUBLIC

6. Recommendations for rice fortification A few suggestions of actions that can initiate the rice fortification in Lao PDR are listed below. These recommendations are suggestions based on observations and stakeholder consultation that resulted from the rice landscape analysis process.

1. Enabling policy environment to support fortification activities 1.1. The government, through the high level leadership of the National Nutrition Committee (NNC) supported by its NNC secretariat, may facilitate development of a food fortification policy/strategy.

This policy could include all staple foods and specialized nutritious foods the government would like to fortify in the near and medium term future. The foods to be included are: rice, wheat, oil, salt, specialized nutritious foods (such as production of nutrient dense bars and import of supplements for complementary feeding).

1.2. NNC to issue a decree that enables the establishment of a National Fortification Technical Working Group (TWG) to facilitate creation of an enabling environment for fortification. The TWG should contain representatives from Ministry of Health, MAF, MoIC, Ministry of Finance, private sector and key development agencies and work closely with the National Food and Drug Administration Committee, the national committee coordinating food safety and regulatory policies in within the country. The TWG under NNC Secretariat should: a) Provide technical and strategic recommendations for food fortification. b) Facilitate advocacy and awareness about food fortification at all levels and initiate partnership with private sector. c) Support development of rice fortification standards and regulatory mechanisms: A standard with specifications for fortified rice must be formulated and promulgated. Examples from other countries (e.g. Bangladesh, Bhutan) can be used for guidance. d) Support development of regulatory framework enabling establishment of supply chain of fortified kernels sourced outside of Lao PDR, imported, and then blended with locally available rice. e) Support development of policy framework to encourage initiation of institutional procurement of fortified rice. NNC to use their mandate to stimulate cooperation from ministries that finance and whose provincial departments manage institutional procurement.

2. Fortification of rice distributed through school feeding programmes School children remain an important target group for healthy nutrition. The school meals programme is implemented in 24 percent of primary schools (2,150) nationwide. Currently they are provided with rice in-kind. There is an opportunity for government policy to mandate the provision of fortified rice in schools.

School feeding programmes with fortified rice would also contribute to raising awareness in the families of these students and enhance opportunities to reach the wider population and create aspiration49 for the voluntary consumption of healthier rice.

In next few years, when the government plans to handover the school meals programme to communities, this initiative can be supported with blending at local rice milling facilities. This could be an entry point for a sustainable, community-private sector partnered solution for blending at small-scale facilities.

49 Consumer acceptance of fortified rice is not a direct function of consumers’ nutritional needs and of their awareness of nutritional health.

The ‘willingness to upgrade’ (WTU) and the ‘willingness to pay’ (WTP) for the upgrade] is a function of perceived demand and aspiration.

Admittedly, influencing consumer consumption patterns at a large scale takes time and money for public campaigns but if the prize is high, no effort should be spared and experience from success cases could lead the way (“Got milk?” https://en.wikipedia.org/wiki/ Got_Milk%3F).

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