Forest plantation development, poverty and inequality in Laos: A dynamic CGE microsimulation analysis

This article tries to develop a novel approach, a new economic model, in order to assess Lao government policy regarding forestry management.


Somvang Phimmavong


Associate Professor

Faculty of Agriculture & Forestry

National University of Laos

Starting her career as the lecturer at National University of Laos, I published a number of scientific journals and reports over the past two decades. My background is Forestry, and developed micro-macroeconomic modelling framework to assess macroeconomic policy of the plantation

This article tries to develop a novel approach, a new economic model, in order to assess Lao government policy regarding forestry management.

Key Takeaways

    How To Apply Insights

    • For people trying to use the newly created model, they have to first understand and study the mathematics behind it. They have to understand the statistical methods used, the metrics, the values. So, for them, it is important to study the model.
    • The legal framework surrounding the forestry and plantation sectors has been and needs to be significantly improved.
    • The government needs to design policy that supports local smallholders, actors of the forestry sector, and that allows investors to come in more quickly, so that the value creation of the sector can be increased.

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    About this research

        This research received external funding from:

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            Why This Research Matters

            This study is a novel approach to assessing the impact of forestry policies and to help devise plantation development policies. While economic models to assess impact already exist, before this research there had been no assessment of the effectiveness of these models. In this sense, it is a contribution to forestry as a science.

            Findings & Research Conclusions

            The most interesting finding was that the policy we were reviewing had very little impact, because the contribution, in terms of value creation, of forestry to the Lao economy is really small. The forestry sector accounts for a really small part of the economy, and as such, previous policies had very little impact.

            What this means is that there is a lot of potential to increase the value that the sector creates for the economy. The government can do so by incorporating different sub-sectors, adding economic agents to the sector, support smallholders, improve the vocational training provided to them and foster technological innovation (like laminate technologies for instance). This can be done in order to help economic actors in the forestry sector compete with Thailand and Vietnam, from whom Laos imports most of its forestry resources.

            Research's methodology

            This research tested for the global and individual impact of forestry policies in Laos. Input/Output, CG and micro simulation models were used on data provided by the Asian Development Bank.

            Recommendations into review of Lao Forestry Law which as approved by the Lao National assembly 2019. Recommendations into review of Lao Prime Minister’s Decree #96 on Plantation Promotion (A recent revised Prime Minister’s Decree 247, Date: 20/08/2019 on Commercial tree plantation Promotion)


            The data didn’t include the plantation sector, which is an important sub-sector of the forestry sector. Also, due to a lack of data availability, some values were borrowed from Thailand and Vietnam.

            An input-output table and a social accounting matrixAn input-output table and a social accounting matrix provide an important database and data framework in CGE modelling.
            CG modellingCG models test similar things to Input/Output models, but they are more advanced.
            Micro simulation modellingMicro simulation models test for policy effects on individuals. To assess interactions between the macro-economy and micro-economic effects, a macro-micro economic framework was developed by connecting the dynamic Lao CGE model to a microsimulation model (LaoDCGE-MSM model). This technique enables us to assess the plantation impact at the household level or to examine the impact on poverty and inequality.

            Reference this research

            Phimmavong, S., Keenan, J. R. (2020). Forest plantation development, poverty, and inequality in Laos: A dynamic CGE microsimulation analysis. Forest Policy and Economics, 111.

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