For years, smallholder farmers in Laos have faced uncertain and often unfair contract farming arrangements. In January 2025, the Lao government took a major step forward by enacting Decree No. 56/gov on Contract Farming, the first legislation specifically governing contract farming. Drafted by the Ministry of Agriculture and Forestry (MAF) through its Department of Agricultural Extension and Cooperatives (DAEC), and signed into law by the Prime Minister, this landmark decree establishes a comprehensive legal framework designed to protect farmers, regulate investor practices, and bring transparency and fairness to the agricultural sector.
In Laos, smallholder farmers play a central role in agriculture, cultivating crops like tea, sugarcane, cassava, and rubber. Approximately 70% of the Lao labor force is engaged in agriculture, primarily through small-scale farming, and the majority of agricultural producers in Laos are smallholder farmers. Most of them operate on less than one hectare of land, relying on contract farming models such as the “2+3” system, where they contribute land and labor while investors provide inputs and market access.
Despite their vital role in the rural economy, smallholder farmers in Laos often face significant challenges, including insecure land tenure, limited access to credit, and unclear or unfair contracts. These vulnerabilities disproportionately affect women and ethnic minorities, who may lack legal recognition of their land rights or face barriers to participating equally in agricultural agreements.
The new decree: what it means for smallholder farmers
In response to these issues, the 2025 Decree on Contract Farming aims to improve legal clarity for contract farming, protect the rights of both investors and smallholder farmers, to encourage more inclusive and transparent agricultural investment.
For smallholder farmers, the new decree introduces important legal protections aimed at promoting fairness and transparency. The decree mandates that all contract farming agreements be written clearly, signed by both parties, and certified by local authorities. It also requires proper legal documentation for farmland and ensures that contracts include clear terms and dispute resolution mechanisms. By setting enforceable standards, the decree represents a major step forward in safeguarding the rights and livelihoods of smallholder farmers across Laos, while at the same time promoting responsible agricultural investment.
Research and Collaboration
Since its inception in 2014, the Mekong Region Land Governance (MRLG) project has done extensive research on agricultural investment and contract farming in Laos, identifying both the opportunities and risks for smallholders.These studies sought to provide evidence-based recommendations in the crafting of the decree. Operating through the Lao Task force on Responsible Agricultural Investment (RAI Taskforce), now co-chaired by DAEC and the Investment Promotion Department (IPD) of the Ministry of Agriculture and Forestry (MAF), MRLG was able to respond to the emerging political consensus around contract farming legislation, and support government partners through the RAI Taskforce to develop and finalize the draft Decree, which benefitted from multiple rounds of stakeholder consultation at the central and local levels – a notable level of transparency in the Lao legislative process. This landmark reform reflects years of collaborative work with government, development partners, the private sector, and civil society.
What’s next?
Naomi Basik Treanor, Regional RAI Adviser at MRLG, underscores that:
“Like any legislation, the success of the Decree on Contract Farming comes down to implementation and sound enforcement. In its final year, MRLG is supporting the RAI Taskforce in making initial steps towards awareness-raising, including consultations on contract templates that are compliant with the Decree, and a series of provincial-level consultations. But unless farmers and investors alike are aware of, and abide by, the Decree, and local officials take responsibility to enforce its provisions and respond proactively to disputes and grievances, inequities will persist in contract farming.”
