Small businesses in Lao PDR’s timber sector have struggled in recent years. In 2016, Prime Minister Thongloun Sisoulith issued an order called PMO15 to crack down on illegal logging and related trade.
While PMO15 was well-intentioned, it caused many small sawmills and wood-processing factories to close. In 2018, the Vientiane Times reported that more than 1,000 of 1,178 family-based furniture plants had closed as a result of the order.
PMO15 came amid Lao PDR’s ongoing negotiations with the European Union towards the Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade (FLEGT). The agreement would commit Lao PDR to verifying the legality of its timber product exports to the European Union. But by strengthening controls over the supply chain, the agreement is likely to have big implications for small businesses and the women and men working in them, just as PMO15 did.
Legal requirements prove costly
Conscious of risks and opportunities, RECOFTC set out in 2019 to assess gender equity and social inclusion in small businesses in the context of the voluntary partnership agreement.
“We focused our study on Xayaboury Province,” says Manilay Thiphalansy, Project Officer for RECOFTC’s Voices for Mekong Forests project. Of 111 wood-processing factories there, 57 had closed voluntarily in the wake of PMO15. Another 28 factories were closed by the authorities because they did not meet regulatory standards. Only 26 remained open.
“We found that some officials believe many businesses closed to avoid having to abide by the law,” Thiphalansy says. “But the research suggests that it was actually because these companies lacked the resources needed to comply with the legal requirements and meet the costs of registrations and inspections.”
Gender roles have deep roots
The researchers also found big differences between the wages of men and women, even those doing similar work. In one business, women received 1.5 million Lao kip (US$158) a month on average, but men got 2.8 million Lao kip (US$290). Although many women received less pay than men, the men were often exposed to greater risks of injury because of the jobs they were assigned and a lack of safety training.
“Lots of injuries occur here,” said a production line worker who spoke anonymously. “But no induction training was implemented.”
“Disparities in men’s and women's roles, salaries and safety are rooted in broader cultural and social arrangements,” says Kalpana Giri, senior program officer at RECOFTC. “Forestry work is seen as hard work and men are assumed to be ‘fit to do this hard work’. This affects what roles men and women are given.”
Defining legality so small businesses survive
The Lao legal framework says men and women should have equal pay and equal rights to employment opportunities and safety at work. But there is limited awareness of these rights, particularly among smaller companies. And the labour law is only weakly enforced.
The voluntary partnership agreement could help. That’s because the negotiation process involves developing timber legality definitions and a related assurance system based on selected and revised laws and regulations that apply throughout the supply chain. The V4MF study provided evidence that civil society networks have used to advocate for legal reforms throughout the voluntary partnership agreement negotiation process. The aim is to achieve social goals, such as safeguarding against risks of small companies closing, and improving work conditions.
“We have clear proposals on what indicators are needed and why,” says Giri. “The voluntary partnership agreement needs to safeguard small businesses, which tend to lose out because the existing policy and market discussions favour scale.”
For example, the timber legality definitions require businesses to define the rights and entitlements of male and female employees, including with respect to equal pay, use of personal protective equipment and provision of training.
Giri says that while legal compliance is desirable, a voluntary partnership agreement could still raise new challenges during its implementation.
“As experience with PMO15 shows, there is potential for small businesses to face unforeseen harm,” she says. “If the voluntary partnership agreement is to address gender inequality and social inclusion, it will be certain to impose more demanding standards. While larger companies would be able to meet such requirements, the smaller ones are likely to struggle.”
Incentives, training and monitoring are key
Thiphalansy says the government should provide incentives to mitigate against this risk. Incentives could include tax breaks for companies, particularly smaller ones, that comply with policies and laws. She also says the government should monitor how policies affect workers and businesses and provide training on workplace safety and on how to produce high quality finished products.
“Companies need clear policies that ensure all new staff are trained and understand occupational health and safety so they can ask for protective equipment,” says Thiphalansy. “Companies must also be transparent about wages for different types of work. This could motivate women to take on new roles, not just sanding wood and finishing products.”