Following the considerable connectivity gains from the construction of the Laos–China Railway, Vientiane must pursue a development strategy that maximises these benefits. The tourism–agriculture nexus offers an approach that, in contrast to its middle-income neighbours’ manufacturing-based export-oriented development models, could address Laos’ ongoing macroeconomic and structural challenges, such as fiscal soundness, external debt and economic diversification.

Effective use of cross-border connectivity, combined with improved domestic connectivity, helps create effective demand for locally produced goods and services, generate income, increase foreign exchange earnings and motivate capacity expansion in the medium term.

The tourism and tourism-related sectors have been the most significant direct and indirect beneficiaries of connectivity improvements since the Laos–China Railway started international passenger services in April 2023. These advantages could be broadened by creating synergies between tourism and agriculture.

The critical first phase is to facilitate farmers’ access to local tourist destinations, enabling them to supply products to satisfy tourists’ ‘imported demand’. Tourists’ testing of locally produced agricultural and livestock products could help improve quality and productivity, resulting in higher added value. Competitive local products could substitute for imports, giving farmers a better chance to develop export markets.

Laos recorded a total of 4.1 million international tourist arrivals in 2024, an increase of almost 1 million from the previous year. In the first quarter of 2025, Laos saw 1.2 million tourist arrivals, marking a 28 per cent increase compared to the same period in 2024. Tourists’ top three countries of origin are Thailand, Vietnam and China, each with over 1 million tourists visiting Laos.

Tourists typically allocate around 25 per cent of their travel budget to food and beverages. In expensive destinations, this percentage can rise to 35 per cent, while in affordable locations, it can drop to 15 per cent.

Connectivity gains from the tourism–agriculture nexus can only materialise in enabling environments for local and foreign business engagement, local community involvement and local labour force participation.

Enabling environments could allow local and foreign businesses to cultivate a new sphere of value creation. Local community involvement could enhance the attractiveness of each local tourist spot, foster community-based tourism and agriculture with local ownership and strengthen the nexus between tourism and agriculture. Local labour force participation yields direct benefits for local people through employment opportunities.

Culinary tourism provides tourists with memorable experiences featuring local cuisine. It is closely linked to agritourism, a form of experiential travel. Activities include participating in epicurean tours, attending food and beverage festivals, taking cooking classes and visiting farms and markets.

Despite the potential connectivity gains for Laos through the tourism–agriculture nexus, this development pathway comes with challenges.

Laos has achieved national food self-sufficiency in most food items despite remaining regional disparities. But the tourism sector still relies on food imports. Weak linkages between tourism and domestic agriculture mean that local farmers benefit less from tourist spending.

Tourism businesses prefer imported goods due to their quality or logistical advantages and bypass local supply chains. Hotels and restaurants allocate a significant portion of their food expenditure to imported food items, such as seafood, meat and many plant-based foods, while purchasing local organic vegetables.

Local business engagement has been limited despite growing opportunities in the tourism sector. Laos’ tourism sector is increasingly overwhelmed by foreign business penetration from China, Thailand and Vietnam in the aftermath of the COVID-19 pandemic. Local business contribution and labour force participation both require capacity development, which is closely linked to individuals’ professional knowledge and skills.

Local capacity development is a prerequisite for meeting growing tourism demand without compromising service quality. Partnerships with foreign stakeholders in the tourism sector for on-the-job vocational training can be a practical approach to capacity development.

In agriculture, sending trainees abroad and accepting advisers can contribute to capacity development. A strengthened quality assurance system for agricultural products — particularly those intended for export — would support farmers’ product development efforts. Improved quality of products broadens their marketing options, enabling both import substitution and the creation of export opportunities.

Marketing and branding strategies can differentiate Laos from alternative destinations and increase visibility to targeted international tourists. They can also fill untapped demand for agricultural products.

Nature and cultural conservation should be guiding principles for the development and promotion of tourism and agriculture. Quality matters more than quantity in sustainable tourism and agricultural development.

Local ownership nurtured by indigenous entrepreneurship in partnerships with foreign stakeholders is another key ingredient to a successful tourism–agriculture nexus. An example is Cofarm Laos, a local startup that offers an innovative agricultural platform connecting urban farmers directly with local restaurants. Cofarm received several notable awards, including the Best Performance Awards at the Social Issue Solving Startup Pitch Event 2024 hosted by the Laos–Japan Institute.

A tourism–agriculture nexus can address Laos’ macroeconomic and structural challenges. Increased tax revenues and foreign exchange earnings contribute to fiscal soundness and facilitate external debt payments. It can help ease Laos’ continued reliance on capital-intensive resources sectors. It will also support Laos’ graduation from Least Developed Country status, scheduled for 2026, and address the potential middle-income trap following this transition.

Source - https://eastasiaforum.org