We targeted a small rural village called ‘Phonxay village’ which is located in northeastern part of Ngoi district of Luang Prabang province, Lao PDR (Fig. 1). This village is a typical disadvantaged community of an Asian country, under the poverty line. The data and information were collected through direct interviews and questionnaires. We employed five local government officials from the Trade and Industry Office of the Ngoi district of Luang Prabang province who were well known to the local people, and the field survey staffs were trained. All 124 household units in the village were asked to provide all relevant information and data from February 29 to March 18, 2016. The collected data focused on household monetized spending for both food and non-food items as well as the various possible sources of income received by all household members. Relevant data and information, such as the demographic characteristics of the population, household debt, and borrowing (loans) as well as domestic remittances, were also included. This information revealed the households’ major sources of income and expenditures over the past twelve months, which included products bought and sold, home-productions and products given away to other households, and products received from other households within the village. Transaction information for households is an essential component in constructing a VIOT because it corresponds to intermediate input and intermediate demand in the table. The income and expenditure values used herein are based on local market prices (village prices) expressed in nominal terms (2015).
This village was selected by the local government of Luang Prabang province, Lao PDR, in response to our asking which village was the most challenged regarding economic development in the district or province. This village’s inhabitants come from the Khmu ethnic group, which has a unique culture and dialect. The village was forested in the past and has a total area of 560 hectares. It is situated in the northern part of the Ngoi district, Luang Prabang province, and its households are distributed close to each other along the main road, which passes through the village to the Phonthong district of Luang Prabang province and the Laos-Vietnam border (Fig. 1). The village is situated at an altitude between 1000 and 1800 m above sea level. It is separated by approximately 50 km, 70 km, and 200 km from the Laos-Vietnam border market in the Phonthong district, the Ngoi district market and the markets of the capital city of the Luang Prabang province, respectively. The surrounding forests are the major source of food and income generation for this village.
In the 1970s, many households in the study area were both opium producers and consumers (2010 report for the Ngoi district). Several people, in particular, men smoked opium and became addicted. As a result, they faced serious employment, social and health problems. In the early 2000s, the government of Laos enacted strong policies to eliminate the cultivation of the opium poppy. The villagers subsequently transformed their income and economic activities by converting forests into farmland, growing more rice and other field crops, raising domestic animals and selling them, cutting firewood, harvesting timber, and selling various NTFPs.
Sticky rice is the staple food in the village; most households also have a small vegetable garden and grow crops including cotton and sugarcane, but they plant only in small quantities for personal use. Additionally, the villagers raise chickens, ducks, pigs, and goats as well as buffaloes and cows for their own consumption and for plowing the fields. In general, households in the village are largely self-sufficient, growing their own food and making their own tools, and consuming their own products, however, they can trade any surplus for such basic items as soap, kerosene, medicine, and kitchen or household goods that are mainly imported goods. The households cooperate informally, especially in agricultural work, and mutual assistance and labor (money and products) exchange are organized based on exchanges among families across years for transplanting, harvesting, and threshing. The village’s population has been growing, and prime land for agricultural use is now becoming scarce in its immediate vicinity. In addition, wild areas have been degraded, and access to natural resources, such as bamboos and other NTFPs have gradually deteriorated. Bamboo shoots, mushrooms, fruits, medical or culinary roots, and leaves are gathered in the forest according to the season.
After the Lao PDR established its independence in 1975, villagers began to travel to regional population centers in search of work and to earn a daily wage as supplemental income. Domestic trade, social networks, and transportation among the villagers are very limited and small in scale. The Lao government adopted the New Economic Mechanism in 1986, and privately managed general stores and periodic markets began to appear in rural areas that had, previously specialized in subsistence farming. Since then, the products from this village have mostly consisted of rice, domestic animals, and agroforest products such as benzoin, cardamom, stick lac, and other NTFPs. Trade transactions only take place through Lao merchants who act as middlemen between mountainous villages (Khmu traders) and lowland ethnic Lao villages (Lao Loum merchants). These middlemen transport agroforest products and some surplus harvested rice to ethnic Lao merchants in the lowlands or city markets in the Ngoi district, in exchange for iron products such as farming implements and sharp tools including medicines, etc. There was only one trader of agroforest products in the village in the 2000s. However, there are now four local traders who purchase these products and sell them to merchants in Luang Prabang via the Ngoi district and NamBak district; some of these products are also sold to Vietnam, Thailand, and China.
Table 1 shows a summary of the socio-economic characteristics of Phonxay village in 2016. Our survey work showed that the female population accounts for 51% of the total population, while males represent 86% of all household heads in the village. The average household size is 5.8 (including all members in the family). Approximately 25% of all household heads have no formal education. Approximately 8% of all households are landless. Female labor accounts for over half (51%) of the total labor force in the village.
Table 2 presents the sources of household income in Phonxay village. The survey shows that the total annual household income of the village is 1,705,230,000 Kip (approximately US$ 213,145).Footnote 2 The primary source of income is rice, which contributes 778,640,000 Kip or 45.66% of the total annual household income; followed by NTFPs, which contributes 428,010,000 Kip (25.10%); livestock, contributing 330,580,000 Kip (19.39%); and wages and salaries, contributing 99,630,000 Kip (5.84%). The average monthly per capita income in this village is 197,365 Kip,Footnote 3 which is above the Lao national poverty line for rural areas (180,000 Kip/person/month or approximately US$ 22.5/person/month). According to our calculation, the Gini coefficient of the per capita income in this village is 0.6607, which indicates that market income disparity among households is extremely high measured at market prices.
A unique characteristic of this village is that the highest-income households in the village, consisting of four families designated HH121 to HH124, work not only as farmers, but also as traders of products derived from other households. They obtain their profits from the sale of products outside the village at market prices, while other households obtain money from selling wholesale products to these four families at village prices, referred to as the “agreed price”. The price of each product in the village is shown in Table 3. The village prices and agreed prices listed in the table were obtained from the village office based on the agreement between farmers and buyers in the yearly village meeting, and market price data were obtained from the Trade Office of the Ngoi district. The gap between market prices and village prices is a substantial source of profit for the four families, and this is the fundamental structure that causes income inequality in the village.
Table 4 presents household income levels in the targeted village based on the Lao National Poverty and Development Standard (2010–2015). This classification designated 44 households as the poorest group, with an average monthly per capita income of less than 50,000 Kip; 67 households as the poor group, with an average monthly per capita income between 50,001 and 179,999 Kip; nine households as the non-poor group, with an average monthly per capita income of more than 180,000 Kip; and the remaining four of the 124 households in the study village as the rich group, with an average monthly per capita income of over 1,000,000 Kip.
Households that belong to the same income group are assumed to exhibit similar livelihoods with respect to income-generating activities, sources of income, income levels, and market participation. Table 5 identifies the sources of household income in the four groups in the village. The poorest and poor households obtained their incomes from selling NTFPs and from wages and salaries (labor services), whereas the non-poor and rich households primarily received income from livestock and rice production, respectively.
Figure 2 shows the poor and the rich households in the village as of 2016. The households (HHs) numbered 121–124 represent rich households, with a monthly income per capita of a million or more Kip per person. The HHs numbered 112–120 are the non-poor households, with a monthly income per capita of more than 180,000 and less than 1 million Kip. The HHs numbered 45–111 are the poor households, with a monthly income per capita of 50,001–179,999 Kip. Finally, the HHs numbered 1–44 are the poorest households, with a monthly income per capita of less than 50,000 Kip.
Most of the expenditures of individual households were associated with food consumption, especially rice. Table 6 indicates that 35%, 32%, and 27% of the total expenditures in the poorest group, poor group and non-poor group, respectively, were allocated to food and rice, whereas 69% of the total expenditures of the four rich households were allocated to non-food items, such as cars, trucks and motorbikes for their businesses purpose.
In general, total sales should be equal to total purchases in the village product transactions in our VIOT. However, we could not capture all sales because most households were reluctant to provide information about certain sales, which were an important part of the income of each household in the village. Conversely, we were able to obtain relatively complete information on purchases, which represented the main component of household expenditures (Table 7). Therefore, we assumed that the information about the purchases of goods and services for each household was enough and reliable for VIOT construction. Table 8 shows the share of each product in the total production of the village. We found that rice production accounted for 28.25% of the total production in the village, cattle and buffaloes (48.48%) and NTFPs (14.18%).