Resettlement Plan

Prepared by Department of Livestock and Fisheries through the Ministry of Agriculture and Forestry of Lao PDR, the Asian Development Bank (ADB) and International Fund for Agriculture Development (IFAD).

Project Number: 47300-002 August 2018 LAO: Northern Smallholder Livestock Commercialization Project

This resettlement plan is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. Your attention is directed to the “terms of use” section of this website. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Lao People’s Democratic Republic

Peace Independence Democracy Unity Prosperity

Ministry of Agriculture and Forestry

Northern Smallholder Livestock Commercialization Project

ADB Loan No. 3198–LAO (SF) and IFAD Loan No. 2000001743

Slaughterhouse Feasibility Study

Phonsavan City, Xieng Khouang Province

Loan Implementation Consultant Report

Vientiane, August 2018

1

Table of Contents

SLAUGHTERHOUSE FEASIBILITY STUDY Page

Sub-Project Summary 3

1. Description and Design 3

2. Context and Rationale 4

3. Cost and Finance Plan 4

4. Implementation Plan and Arrangements 5

5. Intermediate Results, Benefits and Risks 6

Part 1: Technical Evaluation 7

A. Proposed Sub-Project 7

1. Introduction 7

2. Overview of the Proposed Project 10

3. Rationale for the Proposed Project 14

B. Market Analysis 18

1. Determinants of slaughterhouse operation 18

2. Demand Analysis 21

3. Supply Analysis 29

4. Supply-Demand Balance 33

5. Trade 33

6. Competitive Analysis 35

C. Social, Gender and Environmental Safeguards 39

1. Land acquisition and Due Diligence 39

2. Gender Action Plan 40

3. Environmental Impact 44

D. Public Sector and Management Aspects 53

1. Land Title and Ownership 53

2. Management 53

3. Public-Private Partnership (PPP) 53

4. Support by PAFO/DAF0 and PONRE/DONRE 54

5. Regulatory 54

E. Economic and Financial Analysis 58

1. Economic Costs and Benefits 58

2. Financial Analysis 60

Part 2: Concept Design 63

A. Site and Structural Survey 63

1. Introduction 63

2. Scope of Work 63

3. Project Location 63

4. Site Layout 65

5. Site History 69

6. Detailed Building Structure 69

7. Structural Assessment 69

8. Other Facilities Surveyed 69

9. Conclusion 70

B. Building and Process Design 71

1. Basic Design Parameters 71

2. Proposed Site Layout 74

3. Equipment 78

4. Costs and Bill of Quantity 79

2

LIST OF ABBREVIATIONS

ADB - Asian Development Bank

CC - Climate Change

CSA - Climate smart agriculture

DONRE - Department of Natural Resources and Environment

DAEC - Department of Agriculture Extension and Cooperatives

DAFO - District Agriculture and Forestry Office

EA - Executing Agency

FAO - Food and Agriculture Organization

GAP - Gender Action Plan

IA - Implementing Agency

LIC - Loan Implementation Consultants

MAFF - Ministry of Agriculture and Forestry

MOIC - Ministry of Industry and Commerce

NPMO - National Project Management Office

O&M - Operation and maintenance

OIE - Office International des Epizooties – World Animal Health

Organisation

PAFO - Provincial Agriculture and Forestry Office

PPTA - Project Preparation Technical Assistance

PPP - Public-Private Partnership

NOTES

i. In this report “$” refers to US dollars and $1 = Lao Kip 8,200

ii. The Government is the Government of Lao PDR (GoL).

iii. The Fiscal Year (FY) of the government ends 31 December.

iv Ton is intended to be metric ton (tonne) = 1,000 kg.

Acknowledgement We wish to express our thanks to all those who gave their time and assistance to accomplishing this study. These particularly include officials in PAFO, DAFO and other departments of the Provincial Government of Xieng Khouang, livestock farmers, traders and market sellers, the owners of the Phonsavan slaughterhouses and the residents of villages near the proposed site. NSLCP Loan Implementation Consultants Vientiane 13th August 2018

3

Slaughterhouse Feasibility Study, Phonsavan City, Xieng Khouang Province, Lao PDR

Sub-Project Summary

1. Description and Design

1.1. The Northern Smallholder Livestock Commercialization Program (NSLCP) will

support a sub-project to plan, design and build a slaughterhouse for cattle, buffalo and pigs

near Phonsavan City, Xiengkhouang Province, Lao PDR. The slaughterhouse will provide

hygienic and safe (including provision for the welfare of live animals) conditions for the

slaughter of animals to provide meat for wet markets and other outlets in Phonsavan City

and the surrounding area.

1.2. This feasibility study (FS) is prepared with the support of the Loan Implementation

Consultants (LIC) since no study was undertaken during the initial NSLCP design phase

(PPTA). It is based on visits to the site and consultation with relevant stakeholders and

government agencies. In addition, literature on animal welfare (including OIE guidelines)

and other reports have been reviewed. Furthermore, comprehensive study has been made

of the market conditions in which the sub-project will operate, these studies include retail

market surveys and discussions with livestock farmers. Also considered is the competitive

environment with the live animal transit trade through Laos to neighboring countries.

1.3. The proposed site has been examined and a draft IEE prepared. The sub-project

proposes to refurbish and use as a basis an existing structure at the site to save cost. A

structural survey has been undertaken. Additionally, an engineering concept design has

been prepared that include draft site layouts, building and process layouts and a provisional

equipment schedule. Although not required at a feasibility stage, a provisional Bill of

Quantity (BOQ) and detailed design, supply origin, and procurement have been prepared

and form the basis of the cost calculations shown in this report.

1.4. A Land Acquisition and Compensation Due Diligence Report (LACDDR) was

prepared in July 2018 based on Land Acquisition and Compensation (LAC) fieldwork

carried out in July 2018. In this context, information has been provided through 17

coordination, public village and individual meetings, which were attended by 165 (55 female

and 110 male) villagers. The topics of these meetings included an introduction to the

current Project phase, description of the slaughterhouse subproject, entitlement and

eligibility, grievance procedures, as well as requirements for land acquisition. In addition,

environmental impacts and their planned management were presented. The provision of

information will continue during both the detailed design phase and the construction phase

including further public meetings during mobilization of contractor, and others. The sub-

project has been categorized as Level C.

1.5. The overall approach and design is based on the understanding that what is required

is a simple cradle/booth slaughter system which will provided a model which could be

cheaply replicated anywhere in Laos. The proposed sub-project is not defined as an

abattoir and it does not provide for sophisticated meat processing and cold storage.

Nevertheless, at the request of the Government, the design of the facility does incorporate

some additional features beyond the basic needs required. These significantly impact

costs.

4

2. Context and Rationale

2.1. Phonsavan City is a medium-sized town of about 40,000 persons.1 The surrounding

farmland produces cattle and some buffalo; pigs are imported from farms around Vientiane

and from Thailand. This herd provides meat for the City sold in wet markets, of which there

are two main ones.

2.2. A proportion of the meat supply is provided informally from backyard slaughter pads,

which the main volume originates at a slaughterhouse located near the centre of the City,

within a built-up urban area that includes houses. The slaughterhouse is privately owned

and has served the City for over 20 years, apparently without complaint.

2.3. However, various inspections and reports have noted that the conditions at the “old”

slaughterhouse fall well below international standards. The location is environmentally

unacceptable (effluent is discharged into a stream), the urban area is affected by trucks

bringing live animals to the location, there is no lairage and the live animals are kept close

to where they are slaughtered.

2.4. Slaughtering is done one animal at a time using a hammer or axe to stun the beast.

The buildings in which this is done are old and dirty. The working conditions for human

workers are unacceptable. There is no inspection of the live animals nor of the carcasses

or meat taken. While the “hot” fresh meat is taken directly to nearby markets for immediate

sale and consumption on the same day as slaughter (there is no demand for stored, frozen

meat), the possibility of contamination is high, and much of the meat would be deemed

unsafe for human consumption.

2.5. GoL has issued a Prime Minister’s Decree for slaughterhouse standards, and it is

clear from inspection that the existing slaughterhouse in Phonsavan neither meets these

standards, nor is it possible to upgrade it to meet them; the new slaughterhouse is designed

with these standards in mind.2 The sub-project therefore arises from a prior decision by the

Provincial Government to close the existing slaughterhouse. In this case, if a new facility is

not provided, then slaughtering will be done only in very basic “backyard” conditions.

2.6. There is both a legal and prima facie case on public health grounds to provide a new

slaughterhouse that operates to higher standards. No data is available on the specific

impact on the human population of consuming unsafe meat, but there are data that suggest

that digestive tract diseases are common in the local population. An economic argument

could be based on lost labor days and reduced productivity due to sickness that could be

traced to the old slaughterhouse. However, this is beyond the scope of the FS.

2.7. In this case, the rationale for the sub-project is based only on the ex-ante decision to

close the existing slaughterhouse because of its poor condition. In the absence of a

slaughterhouse for a town of Phonsavan’s size, there is a clear need on public health and

environmental grounds to provide a new location and new slaughterhouse to serve the

community.

1 Including visitors 2 Government Decree (Draft) “On killing animal management and meat hygienic inspection” (Eng.

translation). According to Law on Government No 4 dated 8th November 2016 and the Law on

Livestock and Veterinary dated 11th November 2016. The Draft Decree is due to become law shortly.

5

3. Cost and Financing Plan

3.1. The capital expenditure cost, subject to estimation error, is 16 billion Lak (USD 1.9

million).3 This estimate includes all the cost elements some of which have already been

incurred under the NSLCP. The reason for this approach is to make a correct assessment

of the economic and financial viability of the project.

3.2. The entire capital cost of the sub-project is born by the ADB loan for NSLCP. The

original budget was USD680,000 for two slaughterhouses; clearly a mis-estimate. A

revised design and procurement plan has raised this figure to nearly USD 2 million

(excluding contingencies).

3.3. Operating costs from revenue and working capital will be born by the operator. No

subsidy for the facility is proposed or has been discussed. The slaughterhouse is expected

at least to cover its costs including providing a fair return to the operator.

3.4. Financial analysis suggests that at most assumptions about the slaughtering fee (the

main projected source of revenue) the FIRR is less than 12%. Even so an increase in the

slaughtering fee is required. As a stand-alone business the new facility is not attractive from

a commercial perspective; however, as part of a trading operation where live animals are

bought, killed and better quality meat sold for a higher price, the new slaughterhouse could

be viable. In this approach, the facility is seen primarily as a process cost centre, supporting

a business that turns live animals into meat.

4. Implementation Plan and Arrangements

4.1. The implementation schedule for the subproject is dependent upon the time needed

for sub-project approval by the Government and ADB, as well as the length of time it takes

to set up implementation structures and operational accounts. The construction should take

no longer than 6 months. The subproject should be able to start in the first quarter of 2019

providing project implementation commences in the second and third quarters of 2018.

4.2. The executing agency for the sub-project will be the Ministry of Agriculture and

Forestry (MAF) via NSLCP NPMO and PAFO Xiengkhouang. NSLCP NPMO will be

responsible for sub-project coordination and management, including financial management

of accounts, procurement of goods and works, recruitment of consultants, and monitoring

and reporting.

4.3. To ensure inter-agency cooperation at the national and provincial levels, the NSLCP

Technical Steering Committee will establish a dedicated sub-committee for this purpose.

4.4. At the time of this study no arrangements have been made with an operator. It is likely

that the management and operation of the facility will be under some form of Public-Private

Partnership (PPP) arrangements, but these have not been established.

3 Cost estimates at the feasibility and concept design stage are conventionally assumed to have a

30% error factor.

6

Figure 1: Possible Implementation Schedule

5. Intermediate Results, Benefits and Risks

5.1. The proposed sub-project will result in an improvement in animal welfare prior to

slaughter and compliance with OIE guidelines in that regard; it will improve safety in the

work place and result in more equitable employment of women who will be provided

gender-specific washrooms and changing facilities; overall hygiene will be improved and

the quality of the meat produced will be raised ensuring food safety.

5.2. A new facility will be outside the urban area but nevertheless reasonably conveniently

located with respect to the markets. Food safety will be improved by hygienic slaughtering

and proper inspection of the meat. It is expected that the general health of the population

obtaining meat from the facility will improve and the incidence of digestive tract disease

reduced, there may be a consequent improvement in labour productivity.

5.3. Depending on cost recovery and the slaughter fees charged, the new facility may add

to the cost of meat production compared to the existing slaughterhouse. In this case, the

new facility will only be used if the regulations governing animal slaughter are strictly

enforced.

5.4. A second risk is that of the new slaughterhouse passes increased costs back to the

farmer, smallholders will be induced to switch animal sales to the live export trade and

markets in neighboring countries. If the new slaughterhouse is unable to obtain supplies of

live animals then this would reduce the supply of safe, good quality meat to the market and

perhaps encourage the growth of the informal backyard slaughter industry – the opposite

of what is intended by this sub-project.

5.5. No arrangements have been made to manage or operate the facility. There is a risk

that no one may be interested, although it is understood that some groups have expressed

interest in doing so. Equally, a private operator may fail and cease operation especially if

operating the business is not remunerative.

7

Part 1: Technical Evaluation

A. Proposed Sub-Project

1. Introduction

1.1. This Feasibility Study arises from a requirement under the NSLCP’s infrastructure

development program to establish improved slaughtering facilities in main cities,

specifically Luangphrabang and Phonsavan. The former has been postponed due to issues

affecting site selection, so this Study is focused solely on Phonsavan City.

1.2. The project design documents (RRP) deal only briefly with the need for slaughterhouse development. This is a task that was left to the LIC consultants:

“The project will conduct feasibility studies with support from the loan

implementation consultants.4 The indicative financial sustainability analysis

is limited in purpose and scope to assessing if and what stakeholder

resources will be available to fund ongoing costs of the facilities to allow

reasonable expectation of these investments”.5

1.3. The RRP attempted to rationalize the investment in slaughterhouses (the project also

includes Luangphrabang). From the perspective of an economic rationale, it said:

“The enforcement of food safety, health, and environmental regulations for

slaughter slab operations is lacking. Most of the traders carry out the

slaughter of livestock at these slabs. Thus, failure of governance has led to

a market failure to supply, at full recovery of cost from the price paid by the

consumer, butcher’s meat that has been processed according to food safety

and public health standards. Uncertainty has been created for private sector

investment in slaughterhouses, where the perceived risk is of competition

from a cheaper alternative that is able to avoid regulatory enforcement. The

proposed intervention will address the market failure and restore confidence

among private investors in the market for slaughterhouse and butchery

products meeting the proper standards.”6

4 Note that this idea did not transfer into the Terms of Reference for the LIC contract and is not

reflected in the TOR for the Agribusiness or Slaughterhouse specialists. The LIC has taken a lead

in developing the slaughterhouse as a tangible contribution to NSLCP over and above contracted

work. 5 Northern Smallholder Livestock Commercialization Project (RRP LAO 47300), F. Financial

Sustainability Analysis, para 16 6 Op.cit. E. Construction of New Slaughterhouses, para. 15, Economic Justification

8

1.4. The first part of this statement is certainly true, as will be seen from our assessment

of the current situation in Phonsavan. Animal welfare (prior to slaughter), food and worker

safety and other standards are entirely lacking. “Market failure” is an effort to dress the

situation up in economists’ terms; in fact, there is no revealed preference for “safe” meat

as defined by Western standards, so to assert that the market has failed is wrong. Equally

questionable is the statement that the private sector is “uncertain” about investment in this

part of the value chain; in general, there is certainty that such investment is currently not

worthwhile.

1.5. The existing slaughterhouse in Phonsavan has been operated by the private sector

for the last 20 years. The regulations are not enforced at this facility. The failure is of

governance (enforcement of existing regulations), not the market, and that is unlikely to be

corrected by constructing a new facility. The local government authorities in Phonsavan

have consistently ignored existing standards and, despite many reports from international

experts which have drawn this to everyone’s attention, have ignored recommended

interventions that might have improved matters. This situation has changed for the better,

however, with the decision to close the existing slaughterhouse.

1.6. The LIC International Slaughterhouse Specialist has drawn attention to the fact that

the greatest challenge is development of human resources. However, true as it certainly

is, that leaves the question of what agency (private or public) will operate the facility. If it is

the government, why should it be assumed that rules and regulations will be enforced that

the government itself currently ignores? If it is the private sector, then the financial structure

of the operation becomes critical. Who provides the working capital? How are revenues

generated? What level of technology is to be used? None of these elements have so far

been addressed by the authorities. An effort has been made to examine as much of the

data as is available, but without the active involvement of both private and public sectors,

the specifics of the operation remain unknown.

1.7. Regarding financial sustainability, the RRP made this statement:

“Assuming a slaughter fee comparable to the traders’ current slaughter cost,

the proposed slaughterhouse should recover operating costs from service

fees, including a provision for meeting food safety and sanitary standards

for processing butcher’s meat from livestock, depreciation, and periodic

maintenance. Based on the operating cost assumptions, the financial

projections show a working ratio of 0.85; the operation and maintenance

(O&M) cost recovery index is 1.18. When due in 2031, the first periodic

maintenance carries a cost to cash balance ratio of 0.13; the cash balance

is 20% of total assets. These results support a reasonable expectation of

operating cost recovery. The demand for safe food products will lead to an

opportunity to raise fees and create a profitable environment”.7

7 Op.cit. para. 17. Representative slaughterhouses

9

1.8. Several points need to be made about this text:

(i) The assumption that a new slaughterhouse would charge a fee comparable to

current slaughtering costs is questionable. As the text says, a new facility would

have to recover its investment costs and pay for additional direct costs (safety

etc.), so the service charge will inevitably be higher.

(ii) It is unclear what is meant by these ratios or how they are calculated (no data

tables are available).

(iii) Similarly, it is unclear how the results for “cash balance” is arrived at, nor indeed

what this means.

(iv) The statement about operating cost recovery is unclear; does it mean recovery

of direct operating costs, i.e., the cost of processing an animal, or does it include

overhead (general, salary and administrative costs – GS&A)? Since these costs

are unknown, how can this assertion be true?

(v) The final sentence is questionable: there is no strongly expressed demand for

safe food in a Western sense (as will be seen in the section on demand). This

may or may not arise in the future, but in any event with controlled

consumer/retail prices for meat it is unclear how raising fees leads to a

“profitable environment”.

1.9. The rationale of ADB’s RRP, such as it is, can therefore be disregarded. There was

no proposal for the management and operation of the facility, no design for the

slaughterhouses, so no capital expenditure estimated. There was no analysis of operating

costs (that can be found), so the service fee that would need to be charged was unknown

to the project planners. The budget line estimates in the NSLCP documents (i.e. USD

680,000) apparently had no basis in fact, and indeed do not reflect the real costs of

construction; and, of course, no estimates were made for working capital or establishment

and start-up costs.

1.10. This Feasibility Study therefore starts from a blank page. It examines the

requirement for a new slaughterhouse in Phonsavan, given that the old one must close. It

segues into the analysis that is required to show the economic impact and the financial

parameters under with the new facility will operate. Even so, without clear proposals about

the management of the facility no final judgement can be made about overall feasibility.

Any investment may be viable under one set of rules, but not so under another. That said,

for the sake of moving this forward, it is assumed that ownership, at least at the start, will

be by the public sector and that any subsequent arrangement will be on a public-private

partnership (PPP) basis.

10

2. Overview of the Proposed Sub-Project

a. Background

2.1. The project to establish new slaughterhouses is predicated, at least in part, on the

notion that Laos should have modern facilities to demonstrate best practices. This

perspective is based on the experience of the development of the so-called “Hungarian

Abattoir” constructed with development funds and taken over by Lao Fresh Meats.

Construction of the Done Dou abattoir in Vientiane with New Zealand finance over 30 years

ago may have also informed the ideas of the project designers. This latter facility fits

squarely into the category in which the existing Phonsavan slaughterhouse resides, i.e.,

although it is far better equipped and, in its heyday may have been state-of-the-art, it

currently operates well-below the standards its designers and the donor envisaged. Done

Dou is most certainly not a demonstration of how things might be done and is thus a

cautionary example that ideas that another new facility with the same objective might go

the same way. The LFM abattoir, by contrast, is an example of what can be done with the

engagement of private sector management capable of and committed to doing the job

properly.

5.2. When it was first constructed, the LFM abattoir was run by the government.

Predictably it fell into disuse and disrepair because there was no qualified management

and no links with the market.

5.3. However, about four years ago it was taken over by a joint venture between a local

restauranteur and XP Farm, a larger and well-funded enterprise.8 They established Lao

Fresh Meats. The enterprise is vertically integrated, XP Farm provides live animals grown

on its own farms and properly cared for, they are slaughtered in modern and hygienic

conditions and LFM sells the meat in Vientiane in its own retail shop.

Figure 2: “Hungarian” abattoir operated by Lao Fresh Meats

Source: LIC, June 2017

8 Information received in June suggests that XP farm has sold its share in this enterprise, but this remains unverified.

11

5.4. At present, the factory handles about 25 pigs per week and 5 cattle. It has cold

room storage for 40 carcasses, so is operating well under capacity. The reason for this is

said to be “poor sales”. According to the JV partners, the cattle are simply not suited for

western-style dressed meat; the muscle is too small and too tough. One of the partners

said, “the Lao market? I wouldn’t bother”. The business does have an apparently

worthwhile export business based on beef jerky sent to Vietnam.

5.5. LFM have made an impressive effort to invest in modern meat processing for local

sales and even export. However, as suggested by the JV partner (and confirmed by other

sources) the local breed of cattle is too small to provide more than raw material for a

specialty product. Pigs may provide a better business, but even in a large city like Vientiane,

retail sales of high value hams and prosciutto are low volume; this is not how most Lao

consume their meat.

5.6. Furthermore, if the entire cost structure of the business is considered, it is very

unlikely that had LFM constructed the facility themselves that they would earn a return on

capital. The following table provides estimates made by LFM of the real capital investment

required for an abattoir of their standard:

Figure 3: Representative capital costs for a fully equipped modern abattoir

Source: Lao Fresh Meats

5.7. Note that in their calculation, the single largest element in the capex is the building

itself. This is because LFM aim at achieving HACCP status and this requires specialized

building standards. The abattoir is the only one in Laos that would meet the proposed

Decree standards.

5.8. If an investment of this amount were to be made, two things would be needed: (a)

a reliable supply of top-grade animals (not small Yellow Asia breed), (b) market demand

that absorbs large volumes of high-quality, high-priced meat. Currently LFM enjoys neither

of these things. In this case, their operation of the Hungarian Abattoir might well

demonstrate best technical practice, and this is what may have impressed the planners for

NSLCP, but it is unlikely that they understood the business aspects of the enterprise.

12

b. Description of the Proposed Project

5.9. Given the issues that arise when the operation of a fully-equipped abattoir is

considered, a project has been formulated for Phonsavan that tackles immediate and

pressing problems of animal welfare, food and worker safety and impact on the

environment, given the ex-ante decision to close the existing slaughterhouse.9

5.10. The project proposes to build a new slaughterhouse, not an abattoir, at a location 7

Km outside Phonsavan City to replace the existing one which is inappropriately located

near the city centre, and which represents an environmental hazard as well as being unable

to meet modern food standards; as stated before, the decision to close the existing

slaughterhouse is not taken because of the proposed new facility, but rather the new facility

is required because the old slaughterhouse will close.

5.11. As designed, the new facility will be located on a 35,000 m2 industrial site (a former

timber mill) on Route NR7 between Phoukoud District and Phonsavan City. It will save

building costs by using part of the existing structure of the timber mill. The slaughterhouse

will provide simple, low cost but modern equipment (e.g., stunners, winches) and potable

water. It will provide adequate and safe lairage with feed and water for animals awaiting

slaughter, and it will have good access to the main wet markets in the city.

Figure 4: The proposed site at the “Old Taiwanese Timber Mill”

Source: LCG Site Survey

5.12. As first observed, the old timber mill looks unusable for any purpose, let alone food

processing. However, a detailed survey of the structure has revealed that the main building,

hidden by poorly built outbuildings, is very strong, indeed over-built, and generally fit for

purpose providing necessary work on upgrading is undertaken.

9 Note: the existing slaughterhouse is NOT being closed to make way for a new one; the decision is entirely separate and based on public health grounds.

13

5.13. The project will convert the main building into the slaughterhouse, with work

including removal of old broken and wooden structures, re-building and tiling walls,

replacement of the concrete floor and construction of modern, environmentally compliant

drainage and waste disposal systems. Furthermore, other necessary building (offices,

toilets etc.) will be built together with the lairage and animal handling systems. Utilities

(water and electricity from main systems) will be connected and fences and other security

aspects strengthened.

5.14. The process of slaughter as proposed here requires simple equipment. The overall

aim is to control the live animal and stun/kill it as humanely as possible and with proper

safeguards for human workers. The carcass must be off the floor and waste properly

disposed of. Waste water (including urine and feces will be treated with maximum concern

for the environment. All items of equipment must be clean, and there must be a source of

potable water together with showers and other toilet facilities.

5.15. In the approach adopted here (a simple design) there are few major items of

equipment. Indeed, the equipment for slaughtering represents only 17% of the construction

costs (less than USD 200,000). The main equipment items are:10

• Stunners

• Pig de-hairer

• Carcass saws

• Water management and high pressure cleaning system

5.16. These items are readily obtained from various suppliers here in Laos or from

Thailand.

c. Objective of the proposed Project

5.17. The proposed project is an innovative and flexible solution to rapidly fill a gap after

the closure of the existing slaughter facility. It is recognized that the design presented here

is not a complete or long-term answer to the use of livestock in the Province; rather it is an

intermediate or “second-best” solution that can be undertaken quickly and effectively. The

new slaughterhouse will use and demonstrate modern equipment. From a capacity

perspective, the facility will replace and slightly expand the capacity of the old

slaughterhouse and will allow further expansion on what is a large site. Fundamentally, the

objective of the project is to implement a rapid, low-cost replacement of the old facility and

supply the city with meat that has been taken from animals that have been humanely

treated, by workers in safe and hygienic conditions.

d. Intermediate results arising from the Project

5.18. The environmental hazard faced by the residents of Phonsavan City will be

removed by the closure of the existing slaughterhouse and its replacement by the new one.

Of course, the old slaughterhouse should be closed immediately, i.e., its closure is not

contingent on the construction of a new one. However, if the existing slaughterhouse was

10 Subject to confirmation in the detailed design and quotes from suppliers.

14

closed without a replacement, it is likely that additional unofficial slaughter pads would

spring up to fill the demand for meat.

3. Rationale for the Proposed Project

a. Purpose

3.1. The purpose of a modern slaughterhouse serving Phonsavan City is to provide

residents and visitors with meat that is safe to eat. While there are other sources of meat,

including meat slaughtered commercially in an existing facility, none of these satisfy

government food safety standards. Consequently there may be a public health risk arising

out of infection with (among others) Salmonella and Escherichia coli (e.coli) bacteria which

cause digestive tract and other diseases. While not life threatening except in unusual

cases, these diseases are unpleasant and reduce labor productivity.

3.2. The link between food safety and health is understood in Laos and has been

identified in the policy for livestock promulgated by the MAF/DLF. An emphasis on food

security implies that the food to be provided should be nutritious and safe.

b. Condition of the Existing Slaughterhouse

3.3. The Phonsavan City slaughterhouse has been operated by Mr. Phayvanh

Phommaxay for five years after inheriting the business; it has been operated for around 20

years by the same family.11 Mr. Phayvanh understands the slaughtering business and is

aware of the problems he faces. Apparently, he has not had the resources to tackle them

(but he has been able to build a new house on the site in the last two years).

3.4. Initial capital was 200,000,000 Lao Kip (USD 25,000) for infrastructure plus

100,000,000 Lao Kip (USD 12,500) of newly registered capital in 2014. His business model

is to provide slaughtering service to livestock traders; the charge is 45,000 LAK per head

of cattle (7,000 LAK per head paid to DAFO for inspection services), and 35,000 LAK per

head of pig (3,000 LAK per head paid to DAFO). Annual production costs are estimated at

420,000,000 LAK (USD 52,500) for electricity, water supply, fuel woods, transport,

telecommunication, staff’s salary, tax and equipment depreciation. Revenue is reported as

950,400,000 LAK (USD 118,800) per year with a net annual profit of 530,400,000 LAK

(USD 66,300).12

3.5. Problems were officially noted by a team from ACIAR.13 The survey by ACIAR

covered five regional slaughterhouses, and it is fair to say that Phonsavan did not stand

out from the other four; there was not one single aspect of the process, from the health of

11 Different information was received by the social safeguards team, and it could be that the story is more complicated. 12 No accounts were audited. These amounts are as reported by the owner in 2017. 13 ‘Slaughterhouse Surveys in Vientiane And Northern Lao PDR March to September2011,

Description of Slaughter Facilities, Practices, Health Status of Cattle, Buffalo and Pigs and

Identification of Risks to Food Safety, Meat Quality, Worker Safety and Animal Production, Health

and Welfare’, Kate Blaszak, Luzia Rast.

15

the live animals entering to the transport of the meat to the wet markets that met even the

lowest standards of reasonable practice.

3.6. The ACIAR report is detailed, thorough and extensive and may be referenced. It

suffices here to quote the conclusion which applies equally to Phonsavan as to the others:

“The surveys showed that slaughter facilities and slaughter practices were

of such poor standard that they led to many hazards and high scoring risks

particularly in food hygiene (quality, public health) and animal health and

welfare, but also worker OHS and environmental contamination had

many high scoring risks. Practices are conducive to high microbial

contamination of meat products and lack of animal health examination,

disease surveillance, meat inspection and condemnation which not only

pose a risk to disease spread amongst livestock but also to humans. Animal

welfare standards are well below international guidelines with systematic

practices that contravene OIE and FAO guidelines involving frequent

infliction of unnecessary pain and suffering during the pre-slaughter and

slaughter process…..”14

3.7. The NSCLP agribusiness and infrastructure specialists visited the slaughterhouse

in 2017. Here is their report:

“All facilities what we visited did not adhere to any systematic, poor hygienic

slaughtering and processing of animals. There was no inspection and weak

management of resources and staff since the site was open, allowing free

access of people, wild and domestic animals during the day and night when

slaughtering occurred.” 15

3.8. Another visit was made by the LIC International Slaughterhouse Specialist in

October 2017. He made the following observations:16

(i) Stunning. Animals are bludgeoned to death with a hammer. Animal welfare is

becoming an issue worldwide.Alternative equipment to humanely kill animals is

now available relatively cheaply and should be included as part of standard

abattoir equipment.

(ii) Slaughter Floor Hygiene. animals are tied up on slaughter floor contaminating

floor with faeces, animal lairage should also have a cement non-slip floor and be

cleaned daily. The slaughter floor has broken areas which pool water and blood

etc, difficult to clean properly.

(iii) Utilities and Ancillaries. Adequate drainage needs to be in place to channel

waste water away. Only materials which are easily cleaned and impervious to

moisture should be used on the inside of a slaughterhouse. Water must be clean

(potable). There must be sufficient equioment to prevent cross contamnation.

14 Op.cit. Section 8, Conclusions and Recommendations, page 30 15 NLSCP LIC Specialist Field Mission Report 18-21 July 2017 16 Mark Lumsden, International Slaughterhouse Specialist, Field Mission Report

16

The whole slaughterhouse must be constructed with animal welfare and human

welfare taken into account.

3.9. The LIC Specialist concluded as follows:

“The largest and probably most difficult part of this project will be in

training all people involved in the meat supply chain in hygienic

techniques and the use of equipment properly. It will require some form

of regulation to be put in place by Government and to be enforced.

People with adequate qualifications will be needed as Meat Inspectors/

Health Inspectors to try to ensure that products sold in markets are fit for

human consumption.”

3.10. Even the standards of the smallest of slaughterhouses only killing one or two

animals per night can be improved with the addition of some basic equipment and training.

3.11. The structure of the slaughterhouse and its location in the city both present

problems. The buildings are old wooden and part-brick structures around a central yard.

The slaughtering floor is beyond repair. There is inadequate water and drainage.There are

no proper lairage facilities; indeed there is nothing good to be said about the actual building

and basic facilities.

3.12. The location of the slaughterhouse is a little more complicated. It is near the centre

of the city and surrounded by what seems to have become a residential areas with some

quite large houses. No doubt the slaughterhouse was located at the outskirts of the city 20

years ago, but the urban area has grown up around it as the city has expanded. It must be

noted that a tream runs immediately behind the slaughterhouse. A water quality survey has

not been undertaken, but it is certain that effluent is discharged into this stream.

3.13. From a present-day environmental perspective, the slaughterhouse could not be in

a worse location, and this aspect alone justifies closure.

Figure 5: The “Old” Slaughterhouse in Phonsavan City

Source: LIC and Google Earth

17

3.14. However, the location of the slaughterhouse is about 2Km by road to the Suan

Phoukham and NamNgam wet markets. This is a short ride for market traders who wish to

get their meat to the customer as rapidly as possible. Moving the site to a location over

7Km away (and requiring transit through the centre of the city) may be a disincentive for

traders to use the new facility.

18

B. Market Analysis

1. Determinants of slaughterhouse operations

1.1. Cattle, buffalo and pigs have a commercial value to humans principally as a source

of food.17 While in many places both cattle and buffalo (large ruminants) are kept for milk

and dairy products, in Laos all three species of animal are mainly used as a source of

protein – meat.

1.2. To transform a live animal to meat it must be killed. In many cases, particularly in

remote areas, this may be done informally, either literally in a farmer’s yard or at a local

slaughtering pad. These are very rudimentary places of slaughter and more than likely are

a simple clearing perhaps near a water source and with a framework (or even a tree) from

which to hang the carcass. In Laos this is probably the most common location where most

meat is produced. It may be neither hygienic, nor environmentally sound and almost all

official agencies would like to see the practice cease. This is unrealistic in the

circumstances.

Figure 6: Informal “backyard” slaughter-pad

Source: OIE, M. Varas

1.3. Nevertheless, there are important reasons why it should be discouraged in urban

areas, not least because the number of animals being slaughtered is larger than in villages.

A simple slaughterhouse is the answer, and this has been adopted in Phonsavan. Most if

not all the animals for consumption by city dwellers effect their transition from life to meat

via such places, which may be considered as a machine for making meat from living raw

material.

17 In most smallholders farming systems animals are also let as a store of wealth and for their use

as beasts of burden. However, these uses are not of concern in this Study.

19

1.4. As is usual in agribusiness, processing machines (including cold stores or

packhouses or grain mills) are considered cost centres rather than stand-alone businesses.

The money (profit) is not made on the actual operation of the machine, but in the difference

between the price the raw material can be purchased at and the yield of the processed

item; the machine adds value and that value is accrued by the trade in raw material and

end-product (plus by-product credits if any).

1.5. It is important to understand the differences between a slaughterhouse and an

abattoir. This difference may have caused confusion since both, in principle, are for

producing meat from live animals. However, by visiting an abattoir (e.g., the Lao Fresh

Meats facility at Nam Xouang – the “Hungarian Abattoir”) it may be supposed that there is

a requirement for such a facility. This Study is based on the contention that there is not;

what is required in Phonsavan is a slaughterhouse to replace the existing one. Even that

replacement requires a justification.

1.6. With an abattoir, animals are usually purchased by the business, slaughtered and

processed at a cost to the business, and the product sold to wholesale customers. Some

abattoirs undertake “service kills’ for outside clients for a fixed fee per head, but (like the

LFM facility) most may be considered as the “machinery part” of an integrated business

that sources its raw materials and markets various products. Because they are businesses

requiring a return on the investment in the machine, abattoirs usually operate at a higher

output than slaughterhouses and have higher input costs such as staff, electricity,

maintenance, water etc. Abattoirs generally have a lot of expensive equipment both to

purchase and maintain, up and down stands, electric splitting saws, hide pullers etc.

1.7. A slaughterhouse is a basic facility built to a sufficient level, so hygiene can be

maintained; equipment is minimal because there is little if any, value added to the raw

materials except by turning a live animal into a dead carcass. Slaughtering is often carried

out by the owners of the animals who may also the butchers who sell to the wet market.

This is how the current slaughterhouse in Phonsavan operates, the owner supplies the

venue, electricity and water, and the rest is up to the butcher.

Figure 7: Simple Slaughterhouse Process

Source: LIC Consultant, International Slaughterhouse Specialist

20

1.8. An abattoir, therefore, is in the business of producing marketable meat-based

products from live animals (as raw material), converted to fabricated (cut into large pieces)

carcasses (intermediate product – some fabricated meat may be sold to specialty meat

processors) and dressed meat cuts (end products). It operates like any other business with

investors, shareholders and a place as a trader within the value chain (e.g., LFM farms the

live animals, slaughters them, fabricates the carcasses, produces sausages, beef jerky and

prosciutto sold at its retail shop in Vientiane); the machinery of slaughter is at the front-end

of this system and is merely a (necessary) part of it. This is not what is proposed or studied

here, since (as far as is known) there are no investors, and there is no integrated business

envisioned.

1.9. A slaughterhouse is often a publicly-owned service facility. Metaphorically, it is like

a photocopier: the owner of the copy machine has no ownership or even knowledge of the

material being copied and maintains no interest in what it is used for after the customer

removes it. Just as with a photocopier, it is often the customer that operates the machine.

Operated by the owner of the animals, all a slaughterhouse requires is a stunning box (or

boxes) to humanely slaughter animals, an overhead winch to elevate animals, cradles on

wheels to move carcasses and keep them off the floor. Several booths each with a hand/

knife wash with both hot and cold water. Stainless steel bench and racks on which to hang

cuts of meat and offal. The simpler the better. The machine should cover its operating costs

and perhaps make a small profit so there is a toll or service charge per page copied (animal

slaughtered), but it is not considered as a full business – it is a serve-provider to folk that

do have both ends of the trade, the ownership of the raw material (live animals) and the

wherewithal to be able to sell meat. It is this kind of service facility that is considered by this

study.

1.10. It is noted that in Laos, slaughterhouses supply freshly killed meat direct to the wet

markets. A challenge to designing a slaughterhouse to cope with wet market sales is that

many animals must be processed in a reasonably short time frame. Animals are generally

slaughtered in the early hours of the morning and the product taken directly to the wet

market for sale. The process is undertaken by butcher teams, often involving 2-3 people to

carry out the slaughter and breaking the carcass down into manageable portions, generally

quarters for bovines and sides for pigs. Supervision and hygienic control systems, which

are already difficult to implement in most Asian abattoirs during the day, function even less

during the night.

1.11. The hygiene problems of livestock slaughtering in the traditional system arise from

the need to rush, as there are only a few hours between production and consumption of

the meat. This requirement causes slaughterers and meat handlers to short-cut on hygienic

procedures for the sake of reaching the meat market in time.

1.12. One advantage of the “backyard” slaughtering system, compared to a purpose-built

slaughterhouse where many animals are slaughtered, is that small numbers are

slaughtered on demand. The dispersal of the slaughtering process mitigates the spread of

disease because so few animals are killed in one place. There can be 20 individual

backyard operators killing 3 head each a night to meet the markets requirement of 60 head.

21

1.13. Any plan for a slaughterhouse must be able to slaughter 60 head in the same time

frame and offer other advantages, or it will not be used. This is often the experience with

publicly-owned facilities that are located for reasons other than market efficiency, and the

responsiveness cannot be achieved in a conventional modern style abattoir without huge

capital expense.

1.14. It will also be apparent that the success or otherwise of both types of slaughtering

machine depend upon the number of animals that can be processed; the throughput. The

facilities will be built with a rated capacity, a certain maximum number of animals of each

type to be slaughtered per shift and this is reflected in the capital invested in building and

machinery. However, this capacity must be used (like any factory) or else there will be

insufficient revenue to cover fixed costs and pay back the investment.

1.15. For an abattoir, not only must there be a sufficient number of animals (i.e., the units

of input), but also a maximum unit yield (output), the amount of meat and other marketable

products derived by the process. A slaughterhouse depends only on the fee charged per

animal slaughtered, so the yield is more a matter for the owner of the animal since he or

she will retain ownership of the meat. Of course, the yield will affect the owner’s decision

to accept the slaughtering fee (if the yield covers the fee) or to seek another, less costly

way of turning the animal into meat.

2. Demand Analysis

2.1. There have been various efforts to assess demand for meat in Laos.18 None provide

definitive data based on consumer surveys. Nevertheless, there is a wealth of anecdotal

information together with data from neighboring countries; Thailand has a large ethnic Lao

population and reasonably reliable data on meat consumption. In general, it can be said

that better-off Lao people eat meat but are more price sensitive than sensitive to quality.

Poorer Lao eat meat when they can get it or when circumstances lead to the slaughter of

one of their family herd (most rural folk keep animals). However, malnutrition, in the sense

of imbalanced diets heavy in carbohydrates, is a pervasive problem especially in the North.

This may change but is more likely to do so as rural people migrate to the cities.

18 For example, Report of the Agribusiness and Value Chain Specialist. Adam Sendall, July 2014.

22

a. Demographics in the North

2.2. The rural population of the Northern Uplands is ~2 million persons.19 The economy

is relatively diverse and although most households keep a few animals, much of their

activity is devoted to other things. One of the benefit of household (“backyard”) livestock

husbandry is that the animals can be left to themselves or minded by an elderly person or

a child. Changing this situation to a “commercial” approach probably involves changing the

entire family routine and has an impact on the overall farming system. It is unlikely that the

system whereby animals are slaughtered on demand in backyards will change.

Figure 8: Laos, Northern Region, Population by Province

Source: Agricultural Census 2011

2.3. Xieng Khouang Province has a population of 251,334 (2017) spread over an

approximate area of 15,000 square kilometers.20 It is one of the 17 provinces of Lao PDR,

located in the north-central area of the country, on the mountainous Tran-ninh plateau.

Xieng Khouang includes eight districts: Paek, Phaxay, Phoukoot, Kham, Nong Hét, Khoun,

Thathom and Mokmai. The province shares borders with Houaphanh, Luang Prabang,

Vientiane and Bolikhamxay provinces, as well as an international border with Vietnam’s

Nghe An Province; the influence of Vietnam culturally and business-wise is pervasive.

2.4. Phonsavan, the provincial capital, is in Paek (or Pek) District. It has a reported

(official) population of 37,507 persons, and another 74,000 visitors interested in tourist

sites. It is a relatively new city (by most standards just a small town) built in the 1970s to

replace an older settlement. The main economic activity is government administration,

mining companies from China and Australia, tourism and the work of NGOs related to UXO

clearance. Phonsavan is home to various ethnic groups, such as the Phuan, whose

ancestors once founded the kingdom of the same name, the Hmong, the Khmu and Tai

Dam. There is also a minority of Chinese and Vietnamese as well as some international

workers.

19 Some sources say as high as 2.6 million persons. The official Lao population of the North in 2011

was 1.8 million persons for the region. Since then there has been both inward and outward migration

which may have balanced itself. It is assumed the total population is now 2 million persons. Of this

number, 60% are assumed to be rural dwellers; the number of persons may be lower (higher in

urban areas) during much of the year. 20 Tourism Laos 2017

23

2.5. Like most Lao urban areas in the North, Phonsavan is relatively isolated. There is

an airport with regular daily flights (sometimes cancelled by bad weather in the mountains),

but road travel is usually a minimum of 8 hours to the next town. The roads have improved,

but Phonsavan is not especially well-placed as a hub or interchange, except for transit to

North Vietnam; Vinh is 12 hours away and Hanoi about 8 hours by road. However, it is very

unlikely that major goods to and from Hanoi and Vinh would transit Phonsavan. The

quickest route to those cities, e.g., from Vientiane, is via Bolikhamsay on NR8 to Vinh, then

up the coast road (or by boat) to Haiphong and Hanoi. Note also that the North-South

Economic Corridor route runs up the west side of the country and by-passes Xieng

Khouang by some distance.

2.6. An assessment of the development and growth potential for Phonsavan is beyond

the scope of this Study. However, while the city is a pleasant place with a livable climate,

there is no obvious reason to expect a large increase in its population. That would probably

require an explicit effort by government to encourage industry to re-locate, and with the

constraints on travel that might be difficult. The following quote provides some perspective:

“The Northern Region has great potential, but industrial sector (sic) has

not yet evidently developed. At present, there are only some

hydropower dams, small-scale mining and some handicraft and a few

family-run food processing enterprises.”21

Figure 9: Proposed Slaughterhouse site at Phonsavan

Source: Google Earth

21 8th Five-Year National Socio-Economic Development Plan (2016–2020), Ministry of Planning and Investment, June 2016

24

2.7. There may be an assumption that, with NSLCP and an emphasis on livestock

production, there will be an increase in agricultural activity. However, even if this is the

case, it is unlikely to draw people in, and certainly not to the urban areas. These may, on

the contrary, increase their population as people reject agriculture as a way of life.

Agriculture development will not prosper based on extensive farming systems, especially

since the available arable land is limited in these mountainous areas. For agriculture to

develop, the emphasis must be on intensification, which means more output for less labor

and land.

b. Overall demand and consumption of meat in Laos

2.8. Asians, including the Lao, usually eat rice, vegetables and a flavoring of animal

protein. Lao consumers mostly want freshly killed, “hot” meat at a low price. All the edible

parts of the animal are consumed including (perhaps preferred) the offal.

2.9. Consumption of meat in Laos is low by world standards. The Thai might eat a little

more, but the Vietnamese eat double that, and the Chinese nearly 60 Kg/head. There is a

relationship between incomes and the amount of food consumed, but within Asia it is not

as strong as expected. Rich Japanese people eat roughly the same amount of meat as the

much poorer Vietnamese. It should not be expected that national income growth in Laos

(even assuming it is distributed equally) will result in dramatic shifts in diet or cuisine.

2.10. Poverty is a serious issue in Laos. ADB says more than 23% of Lao are below the

poverty line, and that nearly 60% of the working population earn less than $1.90/day. This

places LPDR on a par with Myanmar, far behind Cambodia (14% below the line) and

Thailand (10%). In upland areas, the poverty rate is as high as 43 per cent, compared with

about 28 per cent in the lowlands. Meat demand is elastic with respect to incomes, and so

relatively low incomes in the North suggest a lower level of consumption than elsewhere in

Laos.

2.11. At 26 Kg/person and a population of ~7 million persons in Laos, total demand for

meat of all types (excluding fish) comes to 182,000 tons. The NSLCP designers estimated

265,000 tons growing to 300,000 tons by 2020.

Figure 10: Meat Consumption by Livestock Type in Laos

Source: FAOStat 2013

25

2.12. These data suggest that the average demand for beef (from cattle and buffalo) is

about 3 Kgs of meat per person per year. Livestock targets for 2020 are for a total meat,

fish, and egg consumption of 65 kilograms (kg)/person/year, of this 20% is pork

(13kg/person/year); 14% is poultry (9 kg/person/year); and 6% is beef (4 kg/person/year).

By 2025 the consumption of animal products is expected by the policy-makers to increase

to 70 kg/person/year, with a similar breakdown of different meat consumption. This means

a total increase of 2 Kg of pork, poultry and beef from the current estimated amount of 26

Kg/head for those products. Increases in demand for pork and beef these meats are 1 Kg

and 300 grams respectively. In 2025 the human population could be as high as 10 million

persons, however, a lower figure of 8 million is used.22 Assuming a slight increase in per

capita consumption, this could mean a requirement for 32 million Kg of beef and 112 million

Kg of pork.

c. Demand for meat in Xieng Khouang and Phonsavan City

2.13. If it is assumed that Xieng Khouang Province has a population of about 250,000

persons, and the average per capita meat consumption figures are used (3 Kgs beef and

13Kgs pork), this suggests a total demand by the province of 750,000 Kgs of beef and 3.3

million Kgs of pork. Using a standard yield figure of 70% usable meat per live animals,

these numbers represent about 58,000 pigs and 6,000 cattle.23

2.14. The population of Phonsavan may be taken as 40,000 persons. It is assumed that

per-capita consumption is 5 Kgs beef /annum, and 13Kgs pork. In this case the demand

for lives animals is 9,280 pigs and 1,429 cattle. If these are slaughtered proportionately

throughout the year, then the daily slaughter is approximately 25 pigs and 4 cattle.

However, the existing slaughterhouse in Phonsavan reports processing 50 pigs and 10-12

cattle per day. The discrepancy can probably be explained because the distribution of the

animals slaughtered is not proportional throughout the province, nor is the per capita

consumption. Rural people eat less meat, and certainly do not eat as much pork (which is

largely imported by Phonsavan from the south). City-dwellers in Phonsavan (especially

those of Vietnamese origin) eat more pork than the average, and that the per capita meat

consumption overall is higher. While there is no hard data to support this contention, it does

seem the most likely explanation.

22 The Ministry of Planning and Investment estimated in 2015 the population would climb to 10 million

in 2020. This is much higher than other estimates. 23 The calculation is 70% of 4.6 million kgs of live pigs. The average pig size is 80Kgs, so 4.6 myn

divided by 80 = 58,038 live pigs. Similarly, for cattle with the average live cattle for slaughter weighing

175 Kgs. The number of live cattle is 6,12.

26

Figure 11: Meat demand and live animal requirement Phonsavan City

Source: LIC

2.15. For this Study is suffices to conclude that the existing slaughterhouse does

represent the exact demand requirements for the city. There is no cold storage for meat,

and no demand for meat which has been frozen, so the supply-demand balance seems

clearly and accurately represented by the numbers of animals slaughtered.24

d. Demand for high-quality meat arising from visitors

2.16. Much of the discussion of the need for modern slaughterhouses and abattoirs

centres on the assumed demand by tourists for high quality meat; tourists would reasonably

like to know that their food is processed properly and that it is safe to eat. This is perhaps

truer as the composition of the visitors to Laos changes from the “backpacker” adventurers

of the 1990s to a more sophisticated group that combines relatively well-off tourists and

business visitors. The key question is whether this segment of demand is sufficient to

support the extra cost of processing animals in a modern abattoir rather than in more basic

circumstances.

2.17. The hotel and restaurant sector in Laos has expanded dramatically in the last 20

years; the number of tourists visiting Laos rose from 2.5 million arrivals in 2010 to nearly 5

million in 2015; numbers have fallen off recently and may stabilize at ~4 million. Most of

these persons visit Luangphrabang City and Vientiane.25

2.18. The tourist trade is seasonal, with a peak season from October to February (the

cool season coinciding with holiday periods elsewhere). This means that, for the country,

to the extent that demand depends on visitors asking for high quality meat, there will be

significant changes in the required supply between the two main times of the year. This

would affect the throughput for any abattoir.

24 Assuming the slaughterhouse does operate 365 days per year, and that the numbers reported

are true. The ACIAR Report of 2011 states that 8 to 10 large animals are slaughtered in the City

every day on average 25 Population of LPB Province is in total ~500,000 persons.

27

2.19. Almost all the visitor arrivals are Asian, largely from Thailand, Vietnam and China.

The Chinese eat relatively more pork than beef, which the Thai and Vietnamese are fish

and pork eaters – and like food very similar to the Lao; the idea that the growth driver for

high quality steak founders on the fact that in 2017 visitor arrivals from e.g., the USA were

only 86,000.

2.20. Proponents of the new slaughterhouse may suggest that it becomes a commercial

operation (rather than a public service) and move in to the high-value and processed meat

segments. This possibility cannot be excluded in the future. Nevertheless, at present there

is no data to support strong demand for such products in Phonsavan. Neither is there any

particular reason why they would need to be produced locally. High-value meat is more

likely to be imported and brought to the few city customers (hotels or restaurants) directly.

A local, small-scale processor cannot hope to compete, and indeed the LFM abattoir near

Vientiane struggles to compete with imports. Xieng Khouang has less than 20 hotels of all

kinds and few of international level standard; similarly, most restaurants cater for visitors in

search of adventure and local food. In 2016 the province hosted 74,166 visitors in the year.

Assume the average length of stay is 5 days, so 370,830-person days. Assume on 10% of

those days people eat expensive meat, and that the amount of beef meat consumed is the

average consumed by westerners, about 200 grams. This amounts to only ~740Kgs. Easily

flown in from cheap and reliable foreign sources. This is exactly what is done by the mining

companies. No local, modern abattoir could compete even if the best beef cattle were

available because the demand is so small thus not providing the throughput required.

e. Expansion and growth of Phonsavan City

2.21. At one time the “old” slaughterhouse was properly located outside the main urban

area of the city, not far from what was then the airport (now used for other building including

the Suan Phoukham wet market). Even in 2005, imagery shows that while the city had

surrounded the slaughterhouse, it was still isolated. That is not now the case, large houses

have been built immediately adjacent to the site.26

2.22. The same situation may occur with the new planned facility. The land surrounding

the site of the old timber mill is currently open fields, but it is ideal building land – flat and

above any flood areas. The normal way urban sprawl develops in this region is strip

development along the sides of the road; informal booths and small restaurants get

surrounded by shelters and these are rapidly developed into apartments and shops.

2.23. In the case of the proposed site, there is about half a kilometer of agricultural land

along the NR& separating the village of….. from the timber mill, and another half-Km from

there to the first building of Phonsavan itself, and then another 3Km to the city centre. Given

the alacrity with which small business springs up, there seems every reason to believe that

in the future this too will be a heavily populated area. Although no plans for widening the

NR7 are known, if the road is widened, then this will also encourage urban expansion.

26 At the back of the slaughter-house is still the stream that runs through the city.

28

2.24. Is it likely that Phonsavan will expand? Perhaps. Will the authorities place a cordon

sanitaire around the slaughterhouse? Judging from the existing one, the answer is No.

Figure 12: Possible urban development near the proposed site?

2.25. If the city expands, is it likely to double in size and in what period? No plans or

estimate have seen. If it does the rough rule of thumb is that every extra 10,000 persons

will require meat from an additional 357 cattle and 2,321 pigs. In terms of the demand on

the slaughterhouse operations, this is less than one extra cattle/day and another 7 pigs.

This growth can be catered for easily by the proposed simple design for the new facility.

29

3. Supply Analysis

a. Total numbers of animals

(i) Cattle

3.1. The consumption data suggest that a herd of 2.8 million cattle and buffalo is needed

for Laos to be self-sufficient in beef. The herd is currently estimated at 2.6 million. 27

3.2. Cattle are found throughout Laos, and there have been efforts to expand the herd

in the Centre South where feed/forage is easier to find. Locating the herd’s distribution

within Laos is important, since the gross total of animals cannot be used to make

calculations about the need for, and viability of, slaughterhouses in the North.28

Figure 13: Laos, Distribution of Cattle and Buffalo, 2010/11

Source: Agricultural Census 2010-11

Note: Xienkhouang is officially included in Central,

which makes no geographic or analytical sense, so it is changed.

27 3Kgs beef multiplied by 7 million persons is 21 million Kg of beef. The average animal is ~180

Kgs live weight with a meat off-take of 50 Kgs. A slaughter of 420,000 animals is required. If the off-

take is 15%, then the herd requirement is 2.8 million head. However, the Government policy

assumption is that the off-take is much lower, 2.5%, in which case a very large herd – 17 million

head - is required. This is clearly not sustainable and must be a mistake in the estimate of the off-

take number. Even at 10% (a low figure by smallholder standards worldwide) a herd of >4 million

head would pressure land resources well beyond their capacity. 28 In this instance, more accuracy is required than most numbers used in policy papers to date.

30

Figure 14: Laos, Distribution of Cattle and Buffalo, 2011

Source: Agricultural Census 2011

3.3. The eight (by this categorization) Northern provinces account for 32% of the total

number of large animals in Laos in 2011.29 Four of the provinces, Phongsaly, Luangnamtha,

Bokeo and Oudomxay, are marginal producers of large animals, and are discounted from

the “cattle belt” as a source of commercial supply. Xaiyaburi is a transit route, and so may

not be helpful from a perspective of supplying local slaughterhouses. Huaphanh supplies

most of its commercial cattle to Vietnam.

(ii) Pigs

3.4. Xiengkhouang is not known for its pig industry. The official data suggest there are

about 70,000 head of local breeds of pig. Almost all of these would be for local household

consumption, mainly in rural areas. White pigs are brought up from the South (including

from Thailand). This supply is directly aimed at meeting local urban demand for pork meat

(see below).

29 Xaisomboun was a so-called “Special Zone” up until December 2013 when it became a province.

In 2011 it was included as Vientiane Province figures, so is included in the Central Region.

31

Figure 15: Laos, Distribution Pigs, 2011

Source: Agricultural Census 2011

3.5. The Northern provinces account for 62% of the total number of pigs. However, the

important feature of this chart is to note the prevalence of pig farms to the south in Thailand.

The Lao pig industry is dominated by the Thai industry, and whatever happens to the pig

industry in Thailand materially affects that in Laos, i.e., the “driver” of the Laotian pig

industry from the supply side is the activity of its large neighbor, Thailand.

b. Supply of live animals for slaughter

3.6. There arises a question about whether there is a sufficient supply of live animals

from to justify the investment in a slaughterhouse in the main livestock areas of

Luangphrabang and Xiengkhouang. It must be remembered that an abattoir requires a

high throughput of animals to justify the capital investment. A slaughterhouse is a service

facility, so the number is lower.

(i) Cattle

3.7. Overall, the total herd in the Northern Region can be taken as 800-850,000 head.

However, the number of surplus in each province that might be available for commercial

slaughter is not known. For example, most marketable cattle in Huaphanh will go across

the border to Vietnam. All the cattle and buffalo in Luangphrabang are slaughtered

informally.

3.8. Luangphrabang and Xiengkhouang are the hub of commercial supply for domestic

meat consumption in the North. Their combined large animal population was 13% of the

country-herd. The twin-province herd was 283,000 head, or 38% of the total large animal

population of the Northern provinces.

32

3.9. There is no solid evidence that the herd in Luangphrabang and Xiengkhouang has

grown between 2011 and today, but it probably has. A round number of 370,000 head is

assumed which is in line with the assumed 2011-17 increase for the entire herd. It is NOT

an accurate number, but it suffices to estimate a possible off-take from this herd for

slaughter and for live animal sale to other places (including abroad).

3.10. That said, and although the two provinces are contiguous and connected by a good

all-weather main supply route, the trade in live animals between them is unknown. The

distance is 260 Km by road and takes the best part of a day to travel. In this case, arbitrage

trade between the two main centres is possible, but not likely. However, live animals are

exported to China from Xiengkhouang via Luangnamtha, which is a much greater

distance.30

3.11. The herd size for Xiengkhouang is put at 225,000 head of cattle. Based on a herd

offtake of 15%, the province provides 33,750 head. 31 If this entire number were

slaughtered, with slaughtering occurring 365 days a year, then the total daily slaughter for

Xiengkhouang Province is 92 live cattle and buffalo per day.

3.12. Animals are slaughtered informally in the villages for local consumption. But there

is no data on the number. It seems unlikely that given the physical transport difficulties in

e.g., Xiengkhouang, that cattle are brought in to Phonsavan for slaughter and then meat

transported back to remote areas, although this may happen with nearby villages (another

way to account for the discrepancy in the apparent city demand compared to the numbers

slaughtered in Phonsavan).

(ii) Pigs

3.13. The Thai company, Charoen Phokpand (CP) is the market leader in this area. In

addition to dominating the Thai market, CP has established a production company in LPDR,

CP Laos Ltd. Development of a provincial pig industry for slaughter would not be viable

since (a) the demand is limited to urban consumers and is quite small, (b) the pigs can be

produced in the South and transported at lower cost than they could be produced in

Xiengkhouang since scale economies apply in the large pig farms around Vientiane and in

Thailand, and the cost of feed in and around Phonsavan would be higher than the bulk

production elsewhere. Since the requirement is under 60,000 pigs per year, it would be

surprising if local producers could compete. Equally, the volume is small enough to be

easily supplied by the large commercial farms.

30 We also know that pigs are imported from Thailand for slaughter in Phonsavan and

Luangphrabang, so we cannot be firm about these arrangements without much more investigation. 31 There is ample research evidence to suggest that the total offtake from a dispersed smallholder

herd is between 10 and 15%.

33

4. Supply-Demand Balance

4.1. The analysis undertaken above suggests that the demand in Phonsavan and the

surrounding area for both beef and pork is easily catered for by local live cattle supplied

from a relatively large provincial herd, and that pork supply can be adjusted to whatever

level of demand the market signals; indeed, this is probably the case for both types of meat.

4.2. It can be concluded that there are no market distortions (apart from the controlled

price) and that the supply and demand for meat in Xiengkhouang represents a reasonably

free market: farmers can sell their animals to traders/collectors when they wish to do so,

and the traders may bring them to slaughter exactly as day-to-day market demand dictates.

4.3. Is there latent or suppressed demand for high-quality meat? This seems quite

unlikely. When such meat is required, there is nothing to prevent it being transported in the

small volumes needed from larger producers in the South. Should there be concern about

pork supplies? Certainly not; once again traders with contacts in the large pig farm

(including CP) can adjust the supply to whatever is needed.

4.4. Looking at the North as a whole, from a base of 740,000 head in 2011, the total

number of live animals (cattle and buffalo) in the region might be as high as 850,000 head.

Annual offtake at 15% would be 127,500 head, providing about 18 million Kgs of meat. If

the human population is ~2 million persons, then this is about 9 Kgs of meat per head.

Consumption data suggests this is high by South-east Asian standards. To supply the more

likely regional demand, local slaughter is probably about 70-80,000 head. This leaves

around 50,000 animals for export, a figure that is consistent with other information, for

example live animal movements to China and Vietnam (see below section on Trade).

4.5. Xiengkhouang is at the heart of the cattle Northern industry, and so development

must be focused on what happens to the surplus animals. The question is, if local demand

for meat is less than local supply (it is), then should the surplus animals be raised for live

export, or can they be slaughtered locally for export as meat products? Experience from

Lao Fresh Meats abattoir based on the usage of the local cattle breeds suggests not. Even

when the animals are slaughtered hygienically, there is insufficient good quality meat to

justify a meat processing element in the facility. In the case of pork, what would be the point

of bringing live animals all the way to Phonsavan to slaughter and make sausages when

this would be more easily accomplished in the South closer to the input supply and the

markets?

5. Trade

5.1. The export of cattle meat is difficult to quality conscious foreign markets due to the

prevalence of endemic disease such as foot and mouth (FMD). The well-documented

absence of any semblance of food safety and enforcement of regulations in this sphere

makes it inconceivable that Laos can become a significant exporter of animal products

within 10 years. Of course, there are exceptions, e.g., beef jerky from LFM to Vietnam and

the planned Japanese investment in high quality beef production near Phonsavan, but

these are the exceptions that prove the rule.

34

5.2. Laos imports high-quality beef from Thailand and other origins, especially Australia

and New Zealand (about 20,000 tons annually). Imports of high quality beef (and other

meat) is required by the hotel and restaurant trade and by the mines and other construction

sites. It is said that every morning flight arriving in Luangphrabang and at Wattay Airport is

met by the food and beverage managers receiving their consignments. Efforts to substitute

this trade have so far not been successful, although companies like Lao Fresh Meats try.

5.3. The most striking part of trade is the movement of live animals which presents an

entirely different dimension to the livestock industry. Research by NAFRI shows that Laos

is a transit country for live animals moving from the South (Malaysia and Thailand) through

to Vietnam and China. 32 This trade has been fostered by liberalization under AFTA (Trade

in Goods Agreement – ATIGA) and by a reduction in the transaction costs of moving

animals within Laos.

Figure 16: Animal Movements Through Laos

Source: Dr. Aloun Phonvisay et.al. op.cit.

5.4. It is estimated that 85,000 live animals are exported annually from Laos. However,

the number might be much larger.33

32 “Assessment of Cattle Trade Development in Lao PDR: Study on potential impacts of trade

liberalization under AFTA on cattle trade and its implication for the cattle development policy in Lao

PDR’, Dr. Aloun Phonvisay et.al. 2016 33 Suggested by Dr. Phonvisay in conversation on 27th June 2017

35

5.5. Phonsavan does occupy a place in the export of live cattle to Vietnam or has done

so until recently when the traders claimed the Vietnamese Dong dropped in value against

the Lao Kip (LAK). The result was that Vietnam stopped buying Lao cattle. In this case, the

surplus had to be diverted to China via Luangnamtha. This is somewhat puzzling since the

Dong trades against the LAK at ~2.74. It did drop mid-2017 (July-August 2017) to 2.71 but

recovered to 2.75. Was such a small drop sufficient to cut off the trade, or was there another

reason? Much more needs to be known about what happens the other side of the border

before that question can be answered.

5.6. Live cattle are exported by an association that has been trading for 9 years but

officially recognized as an association in November 2012. Total membership is 30 traders,

but only six persons export live animals. The association employed provincial trade system

known as “Lump sum tax payment” in amount of 6,000,000 LAK per year. The tax is

imposed when member purchases animals from smallholder. They pay 50,000 LAK per

head to PAFO as an “agriculture commodity movement tax”.

5.7. The trade in live animals establishes the alternative market demand. Both the Chinese

and the Vietnamese markets are large, and the Lao supply is small, in which case the

traders in Xiengkhouang are “price-takers” – there is no way in which they can affect the

offered price. The established price for traded live animals thus sets the benchmark for all

other transactions.

5.8. In June 2017 the prices for cattle and buffalo based on “real meat weight” were as

follows:

• China exports: cattle 6,000,000 Lao Kip/60 Kg, buffalo 16,000,000 Lao Kip/230 Kg real meat weight.

• Vietnam exports: Cattle price: 12,000,000 Lao Kip/180 Kg, buffalo price: 13,000,000 Lao Kip/230 Kg real meat.

5.9. These prices suggest a price per Kg of meat “on the hoof” of between 66,666

LAK (Vietnam) and 100,000 LAK (China). This compares with the controlled market

price in the Phonsavan wet markets of 60,000 LAK/Kg of meat that has been butchered.

6. Competitive Analysis

6.1. NSLCP LIC agribusiness specialists have conducted a comprehensive study of the

competitiveness of the Lao economy.34 The main findings are presented here.

6.2. Lao PDR ranks 93 (out of 139 countries) in world rankings of general economic

competitiveness. It is the least competitive of the Mekong Sub-region countries, except

Myanmar which is not ranked. For general economic competitiveness factors affecting the

livestock industry, Laos does worse, ranking 98. The country fails badly in relation to its

legal, technical and educational environment. Laos ranks 139 (out of 190) in the World

Bank’s ‘Doing Business Index’. It is the lowest ranked of countries in Asia and the Pacific.

34 ‘Policy Development - Competitiveness of the Livestock Industry in Laos’, LIC, NPMO, Vientiane, August 2017

36

6.3. A stable political situation, combined with a growing economy and a youthful

demographic profile, does suggest that investment in the livestock value chain could be

viable. However, SWOT analysis shows that, while there are these strengths, and some

opportunities, these are outweighed by weakness in the implementation of government

policy, poor education, lack of technology adoption. Threats arise from larger neighbors

and dependency on regional markets and imports.

6.4. Assessment of the various market forces suggests that Lao livestock producers are

relatively weak in terms of market power compared to buyers at home and abroad. The

strength of foreign partners is overwhelming, especially in the pig industry and in the

purchase of live cattle. Local meat producers cannot compete against imports.

6.5. Formal analysis (PESTEL and SWOT) were combined into the following table:

Figure 17: Competitive Analysis

Source: LIC,

6.6. Porter’s 5-Forces analysis was used, and aspects are relevant to the slaughtering

industry:

a. Entering the market – Unless it is for specialized products (e.g., beef jerky), the

Yellow Asia breed does not support a commercial export industry. The local market

is already dominated by local beef. As for pigs, the Thai giant agribusiness, CP,

would prevent Lao companies from becoming large players.

b. Supplier power – The available (cattle and beef) product is based on the Asia

Yellow breed that does well in Laos. The local cattle/beef has no impact at all on

the supply of high-quality meat. Farmers may have little individual market power,

but traders (aggregators or collectors) do have. They can export live animals or

choose to have them slaughtered in the city slaughterhouse or in the informal

“backyard” system.

37

c. Buyer power – a larger commercial slaughterhouse must take what animals are

provided unless the operators wish to enter the trade (i.e., as livestock farmers

and/or as suppliers of meat).

d. Substitutes – it would be unlikely to find substitutes for local cattle /buffalo in the

local slaughterhouses. Pigs are brought in from local farms or imported from

Thailand. Ironically, the Asia Yellow fits a niche market that values lean, tough beef

presented in roughly cut form at the wet market for immediate consumption.

Growing a “higher-quality” (by some international standard) beef for this market

would be a misjudgment, since it is the consumer who judges quality and value for

money. Imported meat is a different market segment, where there are many

substitutes based on origin and quality, but they substitute for each other, not for

the local beef variety. For pork meat, once again, this a large commodity market,

and the Lao producers must fit into it, determined by forces beyond their control.

e. Rivalry or competition between different agents – Smallholders do not seem to

compete, or at least there does not appear to be any formal mechanism for

competition between primary producers (e.g., auctions). There may be implicit

competition, with one trader going from one household to another to beat the price

down. Traders and collectors certainly compete, although association agreements

may divide the possible supply area up in to individual territories. The participants

are small-scale, and the largest farm found in Laos is probably not more than 200

hectares (excluding the Japanese investment in Xieng Khouang). Overall, the

industry power (if there is any) lies (a) with the traders transiting animals and

possibly buying the occasional local animal, (b) foreign buyers and financers of the

transit trade, (c) in the case of pork, the CP company and probably Chinese

investors, (d) local traders and collectors. That said, smallholders, unless they are

distressed sellers, keep their animals off the market until the price improves, or

simply not to sell. None of this suggest that the cattle market is imbalanced. The

pig/pork market does seem to be unduly influenced by foreign companies.

6.7. Summary: the proposed new slaughterhouse meets competition for raw material

(live cattle) from (a) the transit export trade, (b) from informal “backyard” slaughter pads,

and (c) from the existing slaughterhouse, although it is assumed that the license for this

operation would be withdrawn, it will be shut down and its business transferred to the new

facility.

6.8. As a service provider (simply killing the animals that are brought to it), the new

slaughterhouse does not face direct competition on the carcass and processed meat side

because it is not participating in these markets. Nevertheless, and as intermediate element

in the value chain, the slaughterhouse must charge fees that fit with the expected margins

elsewhere. The main determinant of the cost to slaughter of a live animal is the export

price; it must be worth killing the animal in Phonsavan rather than exporting it. The value

(consumer price) of the meat is determined by order of the government which sets market

prices.

38

6.9. Once again, if the slaughter fees are too high then the market sellers will buy from

slaughter pads. In neither case does the slaughterhouse itself have any influence, it must

set its charges to fit with both the raw material supply and the meat demand segments –

and it must (presumably) cover its operating costs.

6.10. There are two other competitive aspects. First, the assumption that the existing

slaughterhouse will go out of business. The call for its replacement is made by government

officials supported by consultants, including foreign experts with foreign ideas about food

safety.35 One suspects that these are the real impetus behind the sub-project. As far as is

known, no Lao consumer or consumer group, or combination of these and market traders

has cause any outcry or complaint against the slaughterhouse. It provides what to local

people is a normal service at a low cost, one that fits into the overall value chain model

discussed above. Since the slaughterhouse is a private enterprise, provides a useful

service and a livelihood for its owner-operators there is no reason to expect that it will close

voluntarily or indeed that closure will be welcomed by the community. This is especially the

case since the new slaughterhouse will also certainly have to charge higher fees and is

further from the wet market imposing higher additional costs of time and transport. The

slaughterhouse will have to be forcibly closed by the government. This raises questions of

legitimacy and compensation.

6.11. If the government was unable to close the old slaughterhouse, given that it provides

the said valuable and cheap service, it represents serious competition. If the Lao butcher

and consumer cannot see value in slaughtering animals under better conditions and be

willing to pay for that, then no one will use the new slaughterhouse. This needs to be said

very clearly: as far as is known, the Lao consumer requires cheap, fresh meat and cares

less how they get it. A new slaughterhouse will have to charge higher fees to cover

additional food safety operating costs and this will either (a) reduce the value of the animal

to the farmer and/or (b) reduce the marketing margin given the consumer price is fixed (if

it is not, then the consumer will have to pay more). In either case, sellers of live animals,

users of slaughtering facilities and wholesalers and retailers of meat have other options,

none of which include using the new facility. This is precisely the experience of such

projects in other developing countries and may have been one of the reasons that the

slaughterhouse in Luangphrabang was shuttered.36

35 The draft Decree op. cit. will make it necessary to shut the existing slaughterhouse. 36 Re-use as a golf course was another.

39

C. Social, Gender and Environmental Safeguards

1. Land Acquisition and Due Diligence

1.1. According to GoL laws, the community must be notified of the planned development

and have the right to object. This used to be under Decree 192, but that is now replaced

with Decree 084/March 2016, which is much less specific. NSLCP has undertaken

preliminary consultations with local stakeholders (including villagers, residents and

livestock traders and marketers).

1.2. A Land Acquisition and Compensation Due Diligence Report (LACDDR) was

prepared in July 2018 based on Land Acquisition and Compensation (LAC) fieldwork

carried out also in July 2018. In this context, information has been provided through 17

coordination, public village and individual meetings, which were attended by 165 (55 female

and 110 male) villagers. The topics of these meetings included an introduction to the

current Project phase, description of the slaughterhouse subproject, entitlement and

eligibility, grievance procedures, as well as requirements for land acquisition. In addition,

environmental impacts and their planned management were presented. The provision of

information will continue during both the detailed design phase and the construction phase

including further public meetings during mobilization of contractor, and others.

1.3. The feedback from villagers through public meetings or individual discussions

includes their acceptance of this subproject. However, their concerns relate mainly to

environmental items, such as: (i) waste water, (ii) air pollution, and (iii) noise, which must

be addressed in the Environmental Management Plan (EMP). It is noteworthy, that no

adverse social concerns or issues were raised by them, however some villagers mentioned

the expectation that the subproject might offer some work or job opportunities.

1.4. The report indicates no costs for compensation and mitigation measures. The

executing and implementing agencies have given high priority in cooperation with the local

authorities to land requirements. The location for the new subproject infrastructure has

been decided through the provision of governmental unused land including a dismantled

structure apparently owned by the provincial government (under the Department of

Finance).

1.5. Since there is no acquisition of private assets required (land, structures, others),

and no loss of income expected, this subproject is classified as an Asian Development

Bank (ADB) defined Category C Project (project has no involuntary resettlement impacts

and no further action is required). There are no impacts expected from physical or

economic displacement to households in this subproject.

40

2. Gender Action Plan

a. Background

2.1. The NSLCP Project gives much emphasis to women’s participation in livestock

production and commercialization because it is recognized that women are mostly

engaged in livestock production particularly raising pigs and goats which are raised in

backyards or in nearby places near the homes. And with the completion of the project, it

is envisaged that women alongside men will enjoy immense socio-economic benefits not

just along production but also towards engagement in livestock commercialization

following the value chain concept that will redound to a sustained increase in household

income; the project is a response to poverty alleviation/reduction.

2.2. To ensure that women’s needs, concerns and preferences are considered in project

design and implementation, a Gender Action Plan (GAP) was prepared which indicates

gender action targets and activities concerning gender mainstreaming as regards the

design and operation and maintenance (O&M) of the slaughterhouse. Under Output 2 of

the DMF, LVC Infrastructure Strengthened, two GAP targets are identified which are:

• 45% of total participants in consultation meetings are women.

• Separate consultations are held with men and women in the locations and

design of slaughters houses and documented evidence of consultation.

• Ensure that the design of slaughter houses include provisions for adequate

number of separate male and female toilets with adequate lighting and

reliable water supply system facilities.

2.3. To meet the above GAP action targets field activities were conducted by LIC’s Social and

Gender Specialist supported by DLF’s gender focal point staff and the DLF staffs (PIU) of Pek

District where Phonsavan city is located conducted on 3 May, 2018. This aimed to:

• Establish the socio-economic situation of the local population in Phonsavan who are

envisaged to benefit from the O&M of the slaughterhouse;

• Gather the needs, concerns and preferences including positive and negative impacts

and mitigating measures to address the negative impacts of the slaughterhouse.

2.4. Data gathering methodologies employed included i.) latest secondary data on the socio-

economic profile of Xieng Khouang province and Pek District where Phonsavan city accessed

from the provincial department of planning; ii.) focus group discussions comprised of men and

women meat processors, meat retailers, consumers and iii.) a key informant interview of a

male animal trader.

2.5. Participants to the consultations activities included the following:

• 37 participants from Ban Ly village comprised of village authorities’ officials and

and villagers (25 women and 12 men)

• 1 male animal trader from Ban Ly ;

• 12 participants from Ban Na Hoy village comprised of village authorities and

villagers (7 women and 5 men)

41

b. Field Data Gathering Results

(i) Socio-Economic Profile of Xieng Khouang (XK) Province

2.6. The province has a total land area of 15,992 square kilometers and a population

density of 16.35 persons per square kilometer. It comprises 477 villages, 53 kumbans and

7 districts. The total household population is 44,793 where only 757 HHs are considered

poor ; poverty rate is only 2% of total HH population. It appears XK is not a poor province.

The total provincial population is 261.519 where in terms of gender, there are more men

than women at 50.7% (132,585) of total population to women’s population of 49.3%

(128,934). The average household size in XK is 5 persons per household.

2.7. The average annual income per person per year is 1,794 (USD or Kip ?). In terms of

population of ethnic groups (EGs), the Lao-Tai is still the majority EG at 55.20% of total

population followed by the Hmong at 32.37%, Khmu 7.45%, Leui, 3.58% and other EGs

1.40%. A total of 354 primary schools are located in the province but the schools of higher

education are found in Phonsavan city in Pek District. Men have higher literacy rates than

women at 93.4% to women’s 83.5% where these data suggest that both gender population

are capable of attending training and capacity-building provided by the project particularly

technical training on slaughterhouse operation and maintenance and can comprehend

simple technical inputs. Furthermore, gleaning from the data on access to infrastructure

utilities, it appears that there is good access to infrastructure utilties because 41,328 HHs

or 92% of total HHs population (44,793 HHs) are connected to the power grid, another

37,443 HHs or 84% of total HHs have sanitary toilets. However, only 7,364 HHs(3%) of

total HHs have access to clean domestic water. These areas are likely the urban areas like

Phonsavan where there is a local water supply authority providing clean water supply

services. The household meat consumption per year is 314.22 kg per household.

(ii) Socio-Economic Profile of Pek District

2.8. Pek District where Phonsavan city is located has a total land area of 1,400 km2 and a

population density of 17.5 persons per km2 which is higher than the province’s population

density which indicate that the population is thicker being the urban center of the province

where most people congregate. The district has 103 villages and 6 kumbans. The location

of the proposed slaughterhouse is adjacent to Ban Ly and Ban Na Hoy villages. The total

district HH population is 14, 816, and an average HH size of 5 members per HH. Pek has

a total individual population comprising 80,795 persons in which women constitute 39,816

persons or 49.48% of total population The men still slightly outnumber the women at 40,979

male population or 50.52%.

42

2.9. As to population of ethnic groups, the Lao-Tai is the majority EG population at 58.35%

of total population followed by the H’mong at 28.36%, Khmu 8.38%, Leui,2.56% and other

EGs at 2.35%. The project poses no threat or any adverse impacts to the EGs because

there are no cultural landmarks to be affected nor there are negative impacts to their culture

and traditions and their local diets. The EGs are well-integrated with the Lao-Tai population

and their absorptive capacities while still lower than the Lao-Tai are not an issue in terms

of their participation in LPMGs and in the various capacity-building activities under the

project. The EGs are capable of comprehending simple training instructions. Men has

higher literacy rates than women which is 96.3% to women’s 89.3%. Nonetheless, women

can still be tapped as participants to training and other capacity-building interventions. They

too can share their views and opinions during consultation meetings and other related

information dissemination activities.

2.10. As to access to basic services and utilities, educational facilities comprising 25 pre-

primary schools, 77 primarys schools and 22 secondary schools are found in the district.

Moreover, good access of the population are also noted in their connection to the power

grid where out of the total 14,816 HHs, 14,522 HHs or 98% have power connections. About

12,716 HHs (86%) have sanitary toilets but only 4396HHs or only 30% are have access to

good and clean domestic water supply. Most of the HHs are accessing waters likely from

wells and streams.

(iii) FGD Results

2.11. All 50 men and women participants to the FGD expressed their interests to participate

in future consultations regarding O&M of the slaughterhouse because they said that the

slaughterhouse will be beneficial to them in terms of supplying the markets with clean,safe

and hygienically slaughtered animals and there is no need for them to buy meat in markets

slaughtered in makeshift, unclean surroundings in the houses of butchers. Processed meat

from slaughtered animal can now be prepared locally instead of availing these from far

away markets. Animal traders will be conveniently delivering their traded animals to local

slaughterhouse for butchering at less transport costs. Women meat retailers in the markets

are assured of fresh clean meat to sell and the possibility of meat spoilage is low. Animals

to be slaughtered will initially be checked by the local meat inspection units of DLF and

attested for their good quality.

2.12. However, they also perceived some potential negative impacts which are related

with the design, they said that design must consider sanitation aspects like clean water to

ensure that no flies and bad smell will penetrate the facility ; highly trained butchers, neatly

dressed must be recruited to perform the work to ensure that the slices of meat are orderly

and neatly done. There must be waste water pool where dirty water and blood from the

animal carcasses are treated before the water flows into the river. They said that what

should be considered as important requirements are the formulation and strict

implementation of rules, particularly the animal trading certificates at the slaughterhouse ;

also the facility must procure a truck to transport slaughtered animals to the markets,

Additionally, FGD participants want to be regularly informed of the progress in the

construction of the slaughterhouse.

43

Project

Beneficiaries (Value Chain

Actors)

Expectations from the Construction of the Slaughterhouse

Perceived

Socio-Economic Benefits of the Construction of

the Slaughterhouse

Perceived Negative

Impacts of the

Construction of the

Slaughterhouse

Mitigating

Measures to avoid/minimize

negative impacts

Men and women farmers/producers

• Convenience to supply animals to Slaughterhouse

• Clear Place and hygienic

• Reduce the transportation if the Slaughterhouse near by

• Take a short time to wait for the products

• Increased more of diseases

• Have Bad environment because increased of fry, smelly and waste water

• All animal which will bring in Slaughterhouse have to check up by veterinary

• Eliminate the waste

• Construction of the wastewater treatment pool before send water into the river

44

3. Environmental Impact

3.1. A preliminary environmental assessment is as follows:37

3.2. The site is less than ideal from an environmental standpoint. The Xiengkhouang

slaughterhouse site is located close to two waterbodies, a stream used for a variety of

human activities (70m) and groundwater-fed ponds used for fish production, crop

production and livestock (50m).

3.3. DONRE has noted that the facility should be a minimum 30 metres set back from the

road. However, the centre of the main existing building (the old timber mill) at its closest

point to the nearest road shoulder is 42 metres, so this appears satisfactory.38

3.4. Several site options were looked at by PAFO; unfortunately, there is no site-selection

documentation despite the listing of site-selection criteria in Project documents. It would

be good to know where those locations are (or verify how solidly they were looked at) in

case they have features of merit that were deemed unimportant when first considered.

3.5. Environmental risks are mainly associated with nearby surface water and

groundwater and community use of those waters. Solutions could be engineered, however

from an environmental-protection perspective the recommendation is to keep the design of

the slaughterhouse simple. The operation should be run up from a “pilot” scale until any

installed effluent-treatment measures prove themselves and are performing as planned.

Performance monitoring can be used to make refinements to effluent treatment/training

before scaling-up.

3.6. Detailed findings (subject to confirmation by the IEE) are:

a. Air Quality/Atmospheric Conditions

3.7. No air emissions, including smoke or dust, were observed. No odours were detected.

Noise was produced by periodic traffic along the nearby highway and from a rebar or

concrete cutter at a construction site in Ban Li village, to the east of Nam Ngoun and heard

from the SE edge of the Project site.

b. Aquatic Resources

(i) Nam Ngoun

37 A site visit was conducted by the LIC Environmental Specialists (Mr. M. Winsby, International

Environmental Specialist, Ms. T. Souphihalath, National Environmental Specialist) and the LIC Chief

Infrastructure Engineer Mr. Phetsomphone Kittipanh March 3-6 2018. Mr. Khampay Phommavong,

Chief, Provincial Project Implementation Team accompanied the environment specialists during

visits to the slaughterhouse site, meetings with government agencies and community interviews.

The field visit comprised examination of the site of a slaughterhouse and its surrounding

environment; meetings with government agency personnel and interviews of community members

in villages adjacent to the slaughterhouse site. 38 There is some uncertainty about the regulations. It could be that the front boundary of the property

must be 25 or 30 metres from the road centerline. In addition, NR 7 I a two-lane highway. If in the

future the road is widened to four lanes, this would represent a serious issue.

45

3.8. Observations were made 25 meters from the SE edge of the Project Site. This location

is at the top of a steep escarpment, approximately 20m high with Nam Ngoun flowing along

the escarpment foot. The escarpment has likely been formed over time by erosion from

Nam Ngoun and will likely continue to recede to the west and north (where there is a sharp

90-degree bend). At this location there is a short deeply incised gully down the escarpment

to the Nam Ngoun. The gully is in a grove of pine trees and shrubs; several species of bird

could be heard. It was dry when observed (end of dry season) but presence of verdant

grasses and shrubs in and adjacent to the gully bottom suggest a sufficient water supply

possibly from intermittent groundwater.

3.9 Further observations were made at the foot of the escarpment below the point of

observation at the top. The width of the Nam Ngoun at this point is approximately 4m,

depth approximately 15-20cm, and flow roughly estimated to be 0.1-0.2 m3/s. Streambank

debris suggest that the last seasonal flood height was at least 1m above the observed

water level. Substrate is large gravel and cobble under a thin layer of organic sediment.

The above-noted gully at point of entry to the stream was dry and displayed a fan of cobble

and large gravel indicating periodic high-energy flow down the gully. Escarpment material

nearby appears to be mainly fine silts/clays mixed with cobbles and large gravel.

3.10. Riparian vegetation along the right bank is comprised of mainly shrubs to 3-4m

height and some grasses. Along the left bank there is a 2-3m wide fringe of smaller shrubs

(to approx. 1.5 m height) and grasses (to 0.3 m height) between the stream and adjacent

rice fields. No wildlife was observed. Instream biota was periphyton mixed with organic

sediment, appearing collectively as a brown-grey veneer. Only several dipteran larvae were

observed among substrate rocks, likely pollution tolerant species. Bottom conditions are

indicative of organic pollution.

3.11. Rocks were piled to form small barriers/weirs at 30-40m intervals along visible

segments of stream, possibly to aid fish capture. The Nam Ngoun flow downstream of the

highway bridge [~0.2 m3/s], measured on March 5th.

(ii) Fish Ponds to SW of Project site

3.12. Observations were made along the eastern edge of the uppermost pond and at the

upper end of the next pond downstream. The upper pond is approximately 10m wide and

silty, with evidence of substantial livestock presence in flat shoreline areas. Soils in these

areas appear to be silty clays, contributing to the apparent high sediment load. The riparian

vegetation is small trees, including pine, and shrubs; birdlife could be heard at several

locations.

3.13. A short (approx. 20m) small gully on the east side of the upper pond close to the SE

edge of the Project site was examined. The gully is covered by pine and other trees and

shrubs and enters a small embayment on the east side of the pond. The embayment was

dry when observed and appeared to be well-used by livestock. Bottom material was very

wet clay/silt; the wet attribute extends 10m up a narrow vegetation-covered channel along

the base of the gully suggesting a groundwater influence as opposed to capillary draw from

the pond.

46

3.14. A 10-15m long channel connects the upper two ponds. The channel was mainly dry

at the time of observation; water was present in the lowest 5-6 m of the channel. A concrete

water control structure is present at the top of channel where it connects to the uppermost

pond. The water level in Pond 2 is approximately 4 m lower than the water elevation in

Pond 1. The upper end of the lower pond appears to be well-used by livestock.

c. Terrestrial Resources

3.15. The northern boundary of the site runs along the highway. The southern and

western edges of the site abut pastureland that slopes away from the Project site –

pastureland to the south has been recently tilled. A new dirt road has been constructed

along the east edge of the Project site – to the east of the dirt road is a small relatively flat

area that eventually slopes down toward the highway (where the highway veers south

towards Ban Li), and to the SE of the dirt road is the escarpment noted above. Solid waste,

mainly plastic, had been discarded along the road near the SE corner of the Project site; a

recent small fire was also evident.

d. Human Activities and Structures

3.16. The Project site falls within two villages (the boundary runs through the approximate

centre of the Project site, Ban Nahoi to the west and Ban Li to the east.

3.17. The nearest residence to the Project site in Ban Nahoi is a new small home

approximately 170m NW of the NW corner of the Project site. The nearest residence in

Ban Li is located on the west side of Highway 7, 270m to the SE of the SE corner of the

Project boundary.

3.18. The nearest businesses are both located in Ban Li, a small recycling plant 210m

SE of the SE corner of the Project boundary and a Beer Garden and fish pond complex

220m east of the eastern boundary of the Project site.

3.19. The nearest religious site is a temple approximately 1 km SE of the SE corner of

the Project boundary.

e. Discussions with Government agencies

(i) Provincial Agriculture and Forestry Office39

.

3.20. Three general concerns for the slaughterhouse project were identified:

• high cost of technology and need to be able to operate for a long time;

• effects on people living nearby from odour and pollution;

• negative effects of noise from equipment.

3.21. PAFO had no concern no concern for environmental and social issues related to

the timber mill site. No one was living nearby at that time.40

39 Mr. Yong Tealou, Director, PAFO 40 It may be that there are no houses immediately adjacent to the site (though that can change) but nearby villagers do use the water body behind the site.

47

3.22. PAFO will be in communication with DONRE to discuss issues and designs: PAFO

will implement the Project, DONRE will monitor and follow activities; DONRE standards

and regulations must be followed with a focus on quality of waste water before discharge.

(ii) Department of Natural Resources and Environment41

3.23. No previous environmental issues at or near the proposed site. Main concerns were

general in nature:

• Noise

• Air quality

• Water quality

• The site would be better set-back further from the highway - should have

minimum distance from main road of 30m. (this concern is more based on

urban planning than environment and comes from the Urban Planning

District Authority)

3.24. The project must prepare a mitigation plan for DONRE; DONRE will organize a

public meeting for local people and agencies and will collect recommendations and

comments. Based on that DONRE will issue the IEE certificate. Given that the Project site

is at a relatively high elevation, downstream ponds will be a priority.

3.25. Currently not aware of other plans for development around the site.

3.26. For Nam Ngoun: the irrigation section should have information on surface flows;

water is used for bathing, washing clothes, fishing, livestock and agriculture; they do not

have further information on local ecology or uses along the stream.

3.27. For the ponds immediately to the west of the site, the water to them comes from

groundwater seepage from under the highway. The water pond water level is always stable

– they have been in place for 10 years.

3.28. There are no protected areas or species, critical habitat or sensitive ecological

areas in the general area - nothing within at least 5 km of the project area.

f. Liquid waste

3.29. Disposal of wastewater and other liquids (blood, urine, feces) is a main concern and

requires special attention.

3.30. A series of ponds (visible on remote imagery) to the southwest of the project site is

supplied by groundwater that comes from higher elevation areas north of the highway.

People in the village of Ban Nahoi use the series of ponds for fish production, livestock

watering and downstream rice-field water supply. The western edge of the Project site

boundary is approximately 50-60m from the uppermost pond.

41 Mr. Honerfi, Deputy Director; Ms. Phiang Siaphaiy

48

3.31. The slope of the land is from the site to the water, and there could be a run-off of

effluent. A slaughterhouse requires lairage for the animals waiting to be killed located at a

distance from the actual slaughter floor. In the case of the selected site, the obvious point

is the quadrant with its tip on the water body. That is downhill all the way.

3.32. Field elevation-measurements indicate that the water table in March 2018 is

approximately 15 m below the elevation of the project site. This is nearing the end of the

dry season - groundwater recharge is likely from seasonal rains meaning that the elevation

of the water table probably rises to a maximum during September-October, and at that time

the difference between site-level and groundwater-level would be at a minimum (and

something less than 15m).

3.33. The project must ensure that waste-water potential contaminants are kept out of

the groundwater (such as segregating and separate treatment of facility-waste streams as

appropriate and importantly reducing volume of the critical streams).

3.34. Environmental, Health and Safety guidelines are produced by IFC and used by the

broader WB Group and regional development banks such as ADB. Those guidelines

include “meat processing” and “mammalian livestock”. The meat processing guidelines

include slaughterhouses and provide guidance for key issues including wastewater. The

wastewater component should be viewed as an integral part of the facility design/operation

to be included by the facility design team.

3.35. In Laos most of an animal carcass is consumed, the blood is collected and sold

along with other things considered waste in the West; the liquid from the gut is for sale in

markets. Most of waste water generated in the slaughterhouse will be from the cleanup of

the facility at the end of slaughter, the scalding water used to de-hair pigs and washing out

of the lairage daily. The amount of waste water generated, will depend on the number of

animals kept onsite and for how long. If 200 litres per head is allowed for cattle slaughtered

and 50 litres per pig, then this is not a large volume to deal with.

3.36. Another perspective is that waste liquids could be used onsite, to either grow crops

or forage. Other waste products will be the gut content of animals slaughtered and manure

from the lairage both of which are good fertilizers. It is suggested that the waste water is

collected in an underground septic tank and then used to irrigate crops or pasture onsite.

Alternatively, it could be pumped into a tanker (with a spray bar) and transported off site

for use as fertilizer. Another option is a bio-gas generator, however the scale of this project

maybe too small to make that viable.

g. Post-visit follow-up

(i) Site screening pursuant to Technical Criteria in NSLCP documents

3.37. The PAM 2014 provides technical criteria to screen identification and selection of

slaughterhouse locations (and other investment locations) – several criteria apply to

environmental safeguards; the Project EARF 2014 provides additional environmental

guidance/criteria for site selection of the slaughterhouse and other types of Project

investment.

49

3.38. A site screening or selection document using these criteria has not been prepared

in support of the decision to focus on the Xieng Khouang (XK) slaughterhouse site. In the

absence of a site screening/selection document, comments are presented based on an

understanding of how well the XK slaughterhouse site meets the two sets of criteria (PAM

and EARF). Question marks indicate criteria that should be confirmed by other Project

specialists.

Figure 18: Xieng Khouang Slaughterhouse: Site Screening Criteria presented in PAM

2014 and EARF 2014

Siting Criteria Comment

PAM 2014

(i) The site is located close to the wet market and is accessible to meat retailers from the wet market, as the slaughterhouse will supply fresh ‘hot’ meat. Out-of-town centralized slaughterhouses are not appropriate.

The chosen site is 7Km from the main wet market

(ii) The site is owned by the State and there are no on-going disputes regarding ownership.

Ownership is claimed by the Province, but no title deeds or documents have been seen

There is a potential for road-reserve/right-of-way dispute with Ministry of Public Works and Transport

(iii) The site does not have any relocation or environmental issues.

Close to surface water and groundwater – risks dependent on facility-size/effluent-volume and associated waste treatment requirements/costs

[SW corner of site is approximately 50m from groundwater-fed ponds used for fish production, livestock watering and downslope rice-production; SE corner of site is approximately 70m from Nam Ngoun, used for fishing, clothes-washing, bathing, rice-fields, kitchen-gardens]

(iv) The area is large enough to have lairage on site, or additional site is allocated for lairage close-by.

Yes

(v) The site is large enough to allow for future expansion. Yes

(vi) The site will not cause disturbance to local residents (e.g. noise and pollution, environmental health). There is community consultation to confirm agreement with site selection.

Overlaps with criterion (iii); potential disturbances can be avoided/mitigated

50

Preliminary discussions were held with heads and members of the 2 potentially-affected villages: no one stated objection to the proposed slaughterhouse location; concerns brought forward – noise, odour, flies, effluent (including effect on fish ponds, water used on rice fields and stream-fishing), solid waste, livestock diseases

(vii) The site has year-round access to the main road and there is adequate space for large trucks to enter, unload, turn and exit the site.

Yes

(viii) The site has access to main utilities – electricity and water. Yes

(ix) The site does not pose any problems for waste disposal and environmental hygiene measures to be taken.

Municipal or industrial-zone treatment systems not available to receive liquid waste, so all treatment must be part of the project design and cost

(x) All requirements under the EARF, RF, IPF in accordance with ADB’s Safeguard Policy Statement (SPS) to be met.

Yes, with acceptable mitigation/management of effluent discharge

EARF 2014

Considerations for site selection in combination with scale of investment (The EARF notes that the magnitude of environmental impacts will be determined largely by the scale of the investments):

(i) Distance from Urban Development: Slaughterhouses and meat processing facilities should not be located close to dwellings, schools, churches and other public or commercial buildings to limit or eliminate possible nuisance from noise and smell.

Likely future commercial and residential developments should also be taken into account.

Nearest dwelling is a new house, 190m NW of NW corner of site fence [in Ban Nahoi].

Nearest businesses are approximately 200-220m SE of SE corner of site fence [in Ban Li – a beer garden & fish pond enterprise and a small recycling depot]

(ii) Accessibility: The site should be accessible from a permanent road to allow ready transport of both livestock and meat and to minimize traffic impacts.

Yes

(iii) Water Supply: A water supply sufficient for processing and maintaining sanitary conditions is essential. The volume available must comply with appropriate design standards for slaughterhouses and processing facilities. If a town water supply is not available (either because none exists in the area where the slaughterhouse is to be located, or because the requirements for

Yes

Volume is adequate for facility design.

51

the facility exceed the capacity of the existing supply) a separate source must be identified. As constant groundwater sources are rare in the Northern Provinces, this is likely to involve a surface water source and an appropriate treatment system for the facility.

(iv) Waste management and recycling. A system for rapid collection of blood, bone, hide, feathers and any other discarded animal parts is necessary to kill any pathogens and render these items safe for handling and, where appropriate, further processing into products that can be sold or distributed, such as soil additives. Consideration should be given to the use of a biogas digester.

Yes

Biogas digester - Yes

Pre-conditions for slaughterhouses:

(i) Sites will be outside a flood prone zone; Yes

(ii) Sites will be at least 100m away from any temple, monastery or site of cultural significance;

Yes

(iii) Sites will be outside the buffer zone of any protected area; and Yes

(iv) Where possible, sites will be within a designated industrial area

No

This means that effluent must be adequately

managed to satisfy PAM 2014 criteria (iii) and (ix)

(ii) Tentative Identification of Groundwater Features at the proposed Site

3.39. Site-specific data are not available for groundwater; a recent publication on

groundwater in Laos provides insight (Viossanges et. al., 2018). A national-scale map of

groundwater locations in that report shows the province of Xieng Khouang and proposed

XK slaughterhouse location on that map. Consistent with field observations that map

shows the site over a shallow aquifer formed in alluvial material.

3.40. The elevation difference between the top of the aquifer (measured in the field using

a GPS meter at a deep pit 30-40m upslope from the ponds visible in satellite imagery) and

lowest portions of the site near the southern edge of the site is 17m. General descriptive

data for alluvial aquifers in Lao PDR suggest the top of the aquifer could rise 0.2 - 1.0m

with recharge during the rainy season. This potentially would reduce the elevation

difference to 16m at the end of the rainy season, roughly September to November.

Figure 19: Major aquifer units in Xieng Khouang Province

52

Source: Viossanges. M., et. al., 2018.

Note: the Province of Xieng Khouang aquifer map was extracted from

a national-scale map in the source report and then blown-up for

placement and use in this document – as a result mapped aquifer

features are magnified but the map legend is not. The aquifer unit

under our site location is Alluvial.

(iii) Conclusions and Recommendations

3.41. The Xieng Khouang slaughterhouse site is located close to two waterbodies, a

stream used for a variety of human activities (70m) and groundwater-fed ponds used for

fish production, crop production and livestock (50m). Directing effluent to a municipal

system is not an option at the site - all effluent streams must be managed onsite to ensure

pollutants do not enter nearby waterbodies. This can be technically achieved but the

magnitude of environmental risk increases in relation to the size of facility. Over the

operational life of the facility an important concern relates to management-diligence and

staff training for continued operation and maintenance of waste-treatment units.

3.42. Environmental risks can be minimized at this location by keeping the facility design

size to the smallest practicable to achieve operational good-practice and training

objectives. Scale-up to a larger size at the site should proceed only if waste treatment

facilities are shown to function appropriately to protect the nearby waterbodies and

associated human-uses. Environmental components at a minimum-size facility likely would

be correspondingly quite small. In concept these could be treated as a pilot, with

performance results of environmental protection measures used to make refinements for

scale-up to a larger facility at the same site or to identify proven measures for incorporation

into small-scale facility designs replicated at sites elsewhere.

53

D. Public Sector and Management Aspects

1. Land Title and Ownership

1.1. The land acquisition concerns one area of 35,183 m2 (according to UXO clearance

report, which is subject of confirmation through the land certificate PoNRE is currently

preparing). A land acquisition screening has been prepared indicating that there is no loss

of private land. The governmental ownership of land is documented. The former, unused

timber mill structure is dismantled and under government control through the Department

of Finance.

1.2. It is understood that the ownership of the facility will remain in public hands,

however the facility will be operated under a lease and operating agreement by persons

from the private sector. These persons have not been formally identified.

2. Management

2.1. The organization of human resources and their management is a critical success

factor. In addition, physical assets require management (e.g., maintenance) as do financial

resources (budgets, cash flows, payments etc.). Two enterprises, identical in their technical

characteristics may result in quite different outcomes depending on the O&M systems in

place.

2.2. As of today (date of this report), there have been no discussions of substance about

the management or organizational structure of the proposed slaughterhouse. It is reported

following site visits that various groups are “interested” in running the slaughterhouse. One

may include the operators of the existing slaughterhouse.

2.3. This raises the question about the capacity of the management to operate the new

facility according to modern best practices. The International Slaughterhouse Specialist

has raised this matter on several occasions, i.e., why should we believe that the new facility

will be properly operated when there is only one example in Laos (the Hungarian/ LFM

abattoir) that even attempts to operate to adequate standards for animal welfare and food

safety. At the least there will have to be significant technical support and training for the

incoming operators before there can be some confidence in the value of the facility.

3. Public-Private Partnership (PPP)

3.1. As indicated above, ownership of the slaughterhouse will remain with the provincial

government. However, the government itself has no wish or capacity to be the actual

manager of the facility. In this case, the plan seems to be to bring in the private sector either

as an individual or a group/consortium or cooperative. None of the detail of how this is to

be undertaken has been communicated to the consultants.

54

3.2. There is no formal PPP system or legislation in Laos. However, he Lao Government

is developing the framework for PPPs led by the Investment Promotion Department of the

Ministry of Planning and Investment (MPI) with support of the Asian Development Bank

(Governance and Capacity Development in Public Sector Management Program-GRANT-

0309 LAO) and the United Nations Economic and Social Commission for Asia and the

Pacific (ESCAP) secretariat. The initiative focuses on three main areas, namely (i)

institutional capacity building, (ii) policy and legislation framework development, and (iii)

demonstration of model/pilot projects in social sectors, namely education and healthcare.

3.3. To facilitate PPP initiatives, a task force unit called the PPP Unit has been

established within the Department of Investment Promotion (IPD). The task force is

responsible for initiating policy and legislation development and piloting PPPs on education

and healthcare. The task force has worked closely with the government concerned

agencies, ADB, international organizations, civil society and the private sector. At an early

stage of implementation, it is recommended that the NSLCP LIC open discussion with the

task force to gain from their experience.

4. Support by PAFO/DAFO and PONRE/DONRE

4.1. The agencies of the provincial government have been supportive and helpful. The

existing slaughterhouse belongs to Pek District, and DAFO, DCI and DoNRE have tried to

solve in problems about environmental impact from the slaughterhouse. Given the lack of

success, it was decided to close the slaughterhouse and start anew on a fresh site. All the

agencies are in favour of closure, and they will expedite the work needed to build a new

slaughterhouse.

5. Regulatory

5.1. Devolution of slaughter responsibility to provincial authorities reduces national

oversight, standards, food hygiene, worker and animal welfare. For example, the

government owned and operated slaughterhouse at Luangphrabang, which was shut down

in 2004, resulted in small privately-owned slaughter points commencing operation, making

regulation and monitoring practically impossible. In many places the slaughter process has

reverted to completely unhygienic practices. Lack of an adequate monitoring or national

assurance system has led to meat of unknown origin and hygiene and dangerous killing

processes for workers. FAO and OIE guidelines for humane transport and slaughter have

been in place since 2001 and 2006 respectively but animal welfare is of limited or no

interest in Lao PDR.

55

5.2. Nevertheless, there is legal foundation for slaughterhouses and processing. But

practical and effective implementation of these laws has not been established and does

not occur in practice. Various Prime Ministerial decrees for product control, meat hygiene

and animal products sanitary inspection. The existing Livestock Production and Veterinary

Matters Law 2010 (36) states in article 1 that it is designed to assure and regulate food

security, safety, consumer and environmental protection and economic production.

Slaughterhouse owners have the legal responsibility for slaughterhouse construction and

equipment and butcher shops for phytosanitary standards (article 4) but the relevant

standards for slaughterhouses, butcher shops and inspectors are not specified. A business

license is required to own and operate a slaughterhouse, meat processing or distribution

business. In addition, individuals, families or entities intending to conduct such business

must comply with article 25 and technical standards and laws to avoid negative impacts on

consumers, society and the environment. Livestock inspection is required by a Government

inspector, as described in this law, though slaughterhouse inspection is not specifically

noted. Article 4 also defines animal welfare as ‘appropriate use of animal labour,

responsibility for animal health care, provision of water, feed and care and prevention of

abuse’. It is prohibited to ‘torment animal or any other actions, which violate the laws on

livestock production and veterinary matters’ (article 72, clause 9).

5.3. It is worth quoting at length from a very comprehensive report by the OIE in 2011:42

“Apart from the conditions under which slaughter of animals is conducted and

which is not likely to be sufficient to foresee any exports of meat products

anytime soon, the performance of the veterinary meat inspection itself is also

sub-optimal. It is in principle entrusted to provincial, district veterinary

personnel and VVWs at village level. The (national) meat inspection unit of the

NAHC seems to play no role at all in this process, as it lacks the judicial

prerogatives and manpower to be efficient. No data exist on the number of

slaughter facilities, the number of (legal) slaughters, the (estimated) number of

illicit slaughters, nor is there documented evidence of attempts to enforce the

law in this area. ……. Animals may be offloaded and immediately slaughtered,

the carcasses and organs separated without tracking system, and leaving the

abattoir with the necessary papers, but without having been seen, let alone

inspected, by the veterinary services. If undertaken, inspection is merely

documentary, focused on the delivery and compliance of travel documents and

health certificates, issued by the district of origin. Upon completion of dressing

and inspection, a marketing (sales) certificate is delivered (or not), enabling

the trader or butcher to sell his produce on the market or to/in butcheries.

42 PVS Pathway Follow-Up mission (sic) Report, Tool for the evaluation of Performance of Veterinary

Services, Dr. Patrick Bastiaensen, Dr. Akemi Kamakawa, Dr. Mariela Varas. OIE September 2011

56

While it is reasonable to assume that every individual animal slaughtered in a

village has indeed been seen before slaughtered and inspected after

slaughtered, the level of technical know-how of the VVWs involved is unlikely

to be sufficient to avoid major health hazards when they would occur. Even at

district level, the qualifications and operational means of inspection staff are to

be regarded as utterly insufficient, despite their motivation and ethics.

Supervision of these numerous slaughter facilities by provincial and national

authorities is lacking. At best, districts will have a good knowledge of slaughter

facilities within their jurisdiction.….. At provincial level, evidence shows that

inspection is administrative, concise and incomplete, both in terms of ante-

mortem and post-mortem inspection. Again, the absence of appropriate

professional training accounts for the fact that inspection personnel lack the

scientific background needed to understand why certain inspection protocols

are essential, usually a strong motivating factor to perform adequately. Rules

and regulations in force today (but not the new legislation) stipulate that

animals should rest for anything between 6 hours (for pigs) to 12 hours (for

cattle, including buffaloes) before slaughter.43 This is very often not applied, as

observed during visits.

The ability to seize and destroy carcasses and parts thereof (including

organs) is variable. In some cases, ‘seizure’ means that no marketing

certificate is delivered for the meat and/or organs; whether this is sufficient for

a trader not to market the goods on the market (or to process it into soups for

restaurants, as mentioned by some) is doubtful. Most, if not all, abattoirs lack

facilities to destroy infected animals, or parts of slaughtered animals for that

matter.

The stamping system foreseen is these regulations has not been applied,

making it hard to distinguish inspected from non-inspected meat. Although

the regulations prohibit animal owners to approach carcasses or organs

during the slaughter process, visits of several abattoirs has shown this is not

applied. To the contrary, in a lot of abattoirs and slaughter slabs, the owners

are the only ones slaughtering, gutting, dressing and deboning the animals.

Formal legislation on meat inspection and hygiene is still missing as the new

Law on Live stock Production and Veterinary Matters does not seem to cover

meat inspection and hygiene. A much older decree (by-law) on the veterinary

inspection of live animals and products entering the Lao P.D.R. with the

product itself, only deals with the import and transit of animals and animal

43 Ministerial Decree (Prime Minister’s Office) 085/PMO (1993) : Decree on livestock management in Lao P.D.R. Ministerial Decree (Agriculture and Forestry) 004/MAF (1997) : Regulation on livestock management in Lao P.D.R. Ministerial Decree (Agriculture and Forestry) 005/MAF (1997) : Instruction on regulation of livestock management in Lao P.D.R. Ministerial Decree (Agriculture and Forestry) 313/MAF (2000) : Technical standards on livestock management in Lao P.D.R., strengthened by Departmental regulation DLF/0036

57

products (meat, milk, eggs, skins, blood, etc.) but not with inland slaughter /

meat hygiene, nor with processed products such as honey, butter, sausages,

to name but a few. The latter would appear to remain entrusted to the Ministry

of Health.

The existing slaughterhouse in Phonsavan does not employ operating

procedures or standards. Animals do not have individual permanent

identification and no permanent records are kept. Hence the facilities and

processes increase the risk of infectious disease spread to the regions (i.e.

Foot and Mouth Disease, Hemorrhagic Septicemia, Classical Swine Fever,

Porcine Respiratory and Reproductive Syndrome) and microbial and parasitic

contamination of the sites, animals and carcass products. Mitigation of those

risks supervision and focus on critical control points. There is no evidence that

even such concepts are known and understood, let alone implemented.”

58

E. Economic and Financial Analysis

1. Economic Costs and Benefits

1.1. The economic cost-benefit calculation for this sub-project centres primarily around

food safety. To an extent there is also an environmental perspective that suggests that the

existing slaughterhouse is mis-located, probably for reasons that seemed reasonable at

the time but have become outmoded; in any event, the decision to close the existing

slaughterhouse has been taken ex-ante this sub-project. A preferred way of understanding

the benefits of a new slaughterhouse is to look at the positive aspects rather than the

negative.

1.2. We have asserted that most Lao persons place food hygiene not as high on their

list of priorities as elsewhere. This is not to say that the Lao enjoy eating poor quality food,

indeed there is a strong organic movement developing in the country. However, practical

considerations (e.g., lack of refrigeration in many households) have led to a cuisine that

circumvents poor food hygiene by making boiled soup and by eating meat very rapidly after

slaughter. In this way, there seems to be no strong consumer pressure for better food

standards; neither does it appear that the health industry is particularly concerned. In this

sense, on the “demand” side of food safety there seems no strong “pull” for better

standards.

1.3. On the “supply” side, the “push” for improved safety tends to come from

international visitors to Laos and especially the NGOs and other donors, middle-class

Westerners who are, perhaps, over-sensitive to an upset stomach. Donors have sensitized

the Lao government to the issue, and hence there is support for measures that improve the

situation.

1.4. These two sides of the “market” for safe, “quality” food suggest that the price

ordinary Lao folk are willing to pay for safe food is considerably less than that paid by

visitors. This may be seen reflected in the price of food bought by ordinary folk on the street,

and the price paid by tourists in restaurants. Whereas a Lao is happy to eat laarb with semi-

cooked mince-meat that has undoubtedly come from an animal slaughtered the previous

night in shockingly unhygienic circumstance (objectively measured by bacteria and other

pathogens present in the meat), the visitor will prefer to pay ten times the price for imported

meat.

1.5. In this respect, it is unlikely that the citizens of Phonsavan will be willing to pay a

high cost for meat produced at a new slaughterhouse even if it is safer than the old supply.

In addition, the advance made at the new slaughterhouse may well be lost in transport of

the carcass from the new location to the wet market in the back of a pick-up truck (see

photo below, even if this pig meat had been processed in a modern slaughterhouse, lack

of care in handling it safely and hygienically will erode all the benefits). In the market itself,

unless the new slaughterhouse is accompanied by similar changes for the better, what

remains of improved safety will be further compromised. In other words, all the benefits

59

derived from the investment will be overwhelmed by a general food supply system that is

inadequate and which generally people do not care about.

Figure 20: Meat on the move

Photo: courtesy Anthony Bott

1.6. Risk and uncertainty are inherent in analysis of impacts, but the area of food safety

presents difficulties. The standard approach in cost-benefit analysis involves the

assignment of probabilities to possible outcomes, from which expected costs and benefits

can easily be calculated. However, this can only be implemented when it is feasible to

estimate the likelihood of a risk and related outcome, which is not a typical situation in

relation to food safety and less so in Laos faced with the cultural issues mentioned above.

Faced with pure uncertainty (as opposed to risk which seem clear enough), what can be

done to quantify the costs and benefit? For example, in Laos there is little detailed health

data on chronic disease and its costs. We can guess that there is a loss of labour

productivity, but little or no way of quantifying let alone estimating the value of benefits in

increasing it as a direct result of the proposed intervention.

1.7. In this situation, the right approach is to base the decision on the “precautionary

principle”. This arises precisely when there is a known risk with potentially catastrophic

outcomes, but the probability of the event occurring is unknown; even of the probability was

very small, the scale of the possible outcome (e.g., deaths from food poisoning or long-

term damage to the economy from ill-health) means that the intervention should be made.

The principle is used by policy makers to justify discretionary decisions in situations where

there is the possibility of harm from making a certain decision (e.g. deciding to do nothing

about the egregious hazards arising from the slaughterhouses) when solid quantitative data

are lacking. The principle implies that there is a social responsibility to protect the public

from exposure to harm, when investigation has found a plausible risk.

60

1.8. Since the precautionary principle clearly applies in the case of the Phonsavan

slaughter facilities, there is no need to go to further time and cost to construct a specious

economic benefit case. The new slaughterhouse should be built simply because the

absence of any safe slaughtering obviously gives rise to possible catastrophic outcomes in

the general population.

1.9. That said, the question remains whether the general public, as opposed to the

public servants making the decision, will be willing to absorb the extra costs mentioned

above. Absent a strong enforcement programme to shut down unlicensed slaughtering

pads, there is a risk that the facility remains unused, and this is a feature seen elsewhere

(quite recently in the Philippines). Individuals are far less likely to be persuaded by

arguments of precaution against public risk than officials. Much then will depend on the

actual business model adopted by the slaughterhouse.

2. Financial Analysis

2.1. The capital investment costs of the sub-project have been estimated at 16 billion

LAK or USD 1.9 million (excluding contingencies).

Figure 21: Capital Cost Estimates

Source: LIC estimates from Part 2, Figures 18 and 19

2.2. The capital expenditure (capex) rises to LAK 18.3 billion (USD 2.2 million) if a 15%

contingency amount is included. Given that cost estimates at this stage of design are

normally subject to a 30 margin of error (+ and -), it is wise to consider this amount for

budgeting purposes.

2.3. The international specialists (agribusiness and slaughterhouse) have emphasized

the need to keep the design of the slaughterhouse simple. This advice has not been

followed, hence the high costs associated with the current design. If a cheaper design as

previously followed were adopted, then capex would drop to LAK 13 billion (USD 1.6

million).

61

2.4. The investment of this amount of capital has been considered as a cash flow over

a notional period of 25 years. The assumed discount rate is a standard 12%. Revenue is

generated for the slaughterhouse operator solely by a toll fee for killing the animal. In other

words, the revenue equals the number of animals slaughtered per year (assumed as 333

work days per annum) multiplied by the slaughter fee. The fee varies between cattle/buffalo

and pigs to reflect the size of the animals and the likely throughput (more pigs than

cattle/buffalo).

2.5. We have assumed slightly higher numbers of animals than currently slaughtered in

the hope that the new facilities and stricter enforcement of laws will encourage people to

come and use the new facility. In this scenario we have assumed 12 cattle per night and

80 pigs.

2.6. At the current slaughter fee charged by the existing slaughter house the new facility

shows a negative return on capital invested. At the current fee levels no one would be able

to sustain the business unless there was a subsidy received.

2.7. For the IRR to equal zero, the fee would have to be LAK 60,000/cattle and LAK

40,000/pig, still significantly higher than the present rate of LAK 45,000 and 30,000

respectively. This is still a losing proposition.

2.8. For the IRR to rise to the discount rate of 12% the fees would need to increase to

LAK 140,000 and 90,000 respectively. This still seems only marginally attractive as a

business proposition. However, the rise in fees is quite significant. The question is whether

this rise would mean that people would prefer to risk breaking the law and slaughtering

animals in the backyard.

2.9. Indeed, it is only possible to introduce a public-service facility like a slaughterhouse

if very strict enforcement is made to prevent there being an alternative. In the case of Laos,

it is quite uncertain whether this is the case.

2.10. The other option for people to take is not to slaughter their animals, but to sell them

live to traders for export. A calculation of the slaughtering element in the overall cattle trade

suggests that this may not be responsive to an increase in slaughtering fees. For example,

if the market value of live cattle is LAK 4.5 million/head, the value of the beef from the

carcass after slaughter is LAK 7.4 million at current prices, i.e., a margin of LAK 2.9

million/head. In this case, a slaughter fee of say LAK 140,000 represents only 5% of the

margin. Of course, no trader wishes to see his margin reduced, but if he/she can show in

the market that the meat is of better quality and comes via a humane and hygienic

slaughtering system, then the extra cost of slaughtering could be regained.

2.11. Much of the actual outcome of the new facility will depend on (a) management of

the facility, and (b) on the local authority’s capacity to enforce its use and discourage the

alternatives.

2.12. That said, with the fee set at the level they are, cost recovery might be a difficult

issue to negotiate with the potential operators.

62

2.13. We have not undertaken any further sensitivity testing, since at best, from a strict

financial point of view, the facility is a marginally attractive investment. Raising the fee to

get the IRR to 25% would meet with serious opposition. Increasing the throughput of the

animals would require a different approach to marketing, one that is not foreseen. Other

charges (electricity, water etc.) are stable and the project is less sensitive to them in any

event. The fact remains, it is the relatively low level of throughout and constraints on the

slaughtering fee level that make the project as a stand-alone investment questionable from

a strictly commercial perspective. That said, if is it seen (as it should be) as a cost centre

in a trading enterprise, where the returns may be gained on more marketable and higher

priced beef, then the investment might make sense. In this case, the discussion about who

should operate it becomes a critical part in the development of the project; unfortunately

we have no information on this aspect.

63

Part 2: Concept Design

A. Site and Structural Survey

1. Introduction

1.1. Lao Consulting Group Ltd. (LCG) was commissioned to assist Ministry of

Agriculture and Forestry to carry out of Engineering survey and assessment of the

proposed site to assess the status of the existing structure to provide the information on

existing infrastructure for basic information of the project design under the Northern

Smallholder Livestock Commercialization Project. The engineering survey was carried out

over 3 days from 28th. February to 3rd. March.2018.

2. Scope Of Works

2.1. The scope of the Engineering survey includes the review of existing information

provided by the Provincial Department of Livestock and Fisheries and/or other relevant

sectors and a visual inspection of the existing structure and key structural elements. Based

on the visual inspections and the available design information, a structural assessment on

the building’s structural integrity was determined. The comments and recommendations in

this report refer only to the structural robustness of the building.

3. Project Location

3.1. The Project site is located in vicinity of Phonsavanh Town about 7 km northwest of

the city centre. Administratively, it lies within Na Hoi Village, Phonsavanh District, Xieng

Khouang Province.

64

Figure 1: Site Location

3.2. The project site compound is approximately 35,000 m2 and located along NR7

between Phonsavanh and Phoukoud Districts.

Figure 2: Detail of site location

65

4. Site Layout

4.1. The Project site comprises of a fenced compound on a naturally sloping area from

the north to the south side. The area from the north-western end to the buildings have

been backfilled to the same level which is about 3m higher than the south west side of

site.

Figure 3: Existing site layout

4.2. The compound has one main building with several extension and outbuildings

separately around the main structure as show in figure below:

Figure 4: Site Existing Structures

66

4.3. The site has two access gates, both on NR 7. The front of the property has a wall

of reinforced concrete posts and cement blocks with the side and back of the property

protected with concrete posts and barbed wire fencing.

4.4. The overall structure is covers an area of 66 x 44 m by separated into the different

parts as shown in Figure 2 in above: (i) 13.5 x 66 m at 9.5m height (from ground floor to

top of roof pitch) for the main structure; (ii) 11.5 x 52.5 m at 2.45m to 4.85m height (from

bottom to top of roof slope) for extension in north side and (iii) 17 x 57.5 m at 3m to 5.95m

height (from bottom to top of roof slope) for extension in south side.

67

Figure 5: Site photographs

68

69

70

5. Site History

5.1. The existing structure was built in 1993 by a group of investors from Taiwan and

the structure was designed and constructed as a big sawmill and was in service when

construction was completed from 1994 until 1998 when the structure was abandoned by

reason of business negative shareholder equity. The building has remained unoccupied

since 1998. There are no official means to determine the exact construction start or

completion dates of the existing structures or obtain the design/as-built drawings since no

formal building permit application was ever submitted for their construction.

6. Detailed Building Structure

6.1. Details of each individual structure of the site is provided in LCG’s stand-alone

report.

7. Structural Assessment

7.1. The assessment of the structures is made through visual inspections only.

Destructive and non-destructive testing of the materials have not been made at this time.

It is deemed unnecessary since the visual inspections indicate that the key structural

elements in the Main Building are in good condition and have been over-designed for the

new purpose being proposed.

7.2. Structural analysis was carried out on key structural elements using information

gathered from the visual surveys and conservative assumptions of material properties have

been made in the assessment of these structural elements.

8. Other Facilities Surveyed

8.1. Surveys of the site was also carried out on existing drainage system and other

utilities such as water supply and electricity to meet demand that should be necessary for

the new project.

a. Drainage system

8.2. There are four drainage lines observed during the survey. Two lines (interior) are at

the junction between the slabs of the Main Building and the north and south extension and

runs in an east-west direction. One line is along the outside wall of the northern extension

running parallel to the other two drains. The last one runs in a north-south direction and is

the collector drain for the other three drains. The drain just discharges to the open field.

The drains are simple U-shaped channel of varying widths from 35 cm to 55 cm and varying

depths from 40 cm to 120 cm.

71

b. Water Supply and Sanitation system

8.3. There is no information regarding the existing water supply and sanitation system.

Through the visual survey, the existing sanitation system is in the form of a toilet building

(Building J) located outside of the sawmill building with 6 WCs and inground septic tank.\

8.4. There are two water storage tanks, one at ground level, and one elevated tank at 2

m height. It is assumed that the existing water source was a shallow well but there are no

signs of such at the time of the survey.

8.5. There is a Nam Papa distribution main along the NR-7 in front of the property with

sufficient capacity to meet demand of the slaughterhouse (as reported by the Provincial

Department of Livestock and Fisheries – this will need to be checked).

c. Electricity

8.6. Only the electricity to meet demand for the new project was carried out during a site

survey; Poles of Electricité du Laos (EDL) in Xieng Khouang branch were installed along

the NR-7 with capacities 220 V; 380V and 22 kV which will ready to supply the electricity

for the new project of slaughterhouse as reported by the Provincial Department of Livestock

and Fisheries.

d. Road Access

8.7. The proposed site of project location is located at the roadside of NR-7 with

excellent road condition; it is asphalt road with 8m wide carriageway. The distance is

approximately 5 km from the outskirts of Phonsavan town, 7 to the city centre.

9. Conclusion

9.1. Based on the existing structure surveyed and assumptions mentioned above, the

building is structurally adequate for its intended use as a slaughterhouse for the new project

because the existing structure was constructed to a very high standard.

9.2. The structure is over 20 years old but has only been in service for 3-4 years only

after the construction completion. The structural strength loss is minimized if the service of

structure is low, while theoretically concrete strength generally increased with age.

9.3. Assessment of the key structural elements based on conservative assumptions

indicate that the Main Building structure is more than structurally adequate for the new use

as a slaughterhouse.

9.4. Some elements will need replacement to extend the life of the structure. All timber

is recommended for removal since these are high maintenance and generally less hygienic.

72

B. Building and Process Design

1. Basic Design Parameters

1.1. Initial recommendation for a slaughterhouse for bovines designed to meet the

above requirements is that it is built as a “booth” style facility. Individual booths or work

stations will have all the required equipment to enable the butchers to hygienically process

a carcase. Each booth will come with a skinning cradle, winch (either electrically or hand

operated), a hand washing and knife sterilizing sink (preferably with hot water), a hose with

adjustable nozzle, a stainless steel table and a trolley to eviscerate the animal into. This

will allow all animals to be processed without edible parts contacting the floor. All operators

will need to have training in hygienic processing techniques.

1.2. The number of booths required will depend on the number of butchers who will use

it, of course some may be shared between butchers. The benefit of this system is it also

allows each butcher to process his own animals as before, using his own staff. It also brings

the . slaughter to a common area where standards of hygiene and animal welfare can be

imposed and regulated. A facility like this can be built for a relatively low cost compared to

an abattoir, there is also no expensive machinery to buy and maintain.

Figure 6: Differing approaches to slaughtering animals

73

Figure 7: Simplified slaughtering process

Figure 8: Various required equipment

74

75

2. Proposed Site Layout

Figure 9: Master Plan

Figure 10: Simplified Building and Process Flow Diagram

76

Figure 11: Cattle Lairage

Source: LCG, Detailed design, A8-0

Figure 12: Pig Lairage

Source: LCG, Detailed design, A9-0

77

Figure 13: Animal Walkway (Cattle)

Source: LCG, Detailed design, A10-0

Figure 14: Basic Slaughtering Booth Design

78

Figure 15: Finishing Floor Plan

Source: LCG, Detailed design, A5-3.0

Figure 16: Elevation

79

3. Equipment

Figure 17: Possible Equipment Schedule44

44 Illustrative. Subject to revision at detailed design by the International Slaughterhouse Specialist and differing from the revised BOQ. This is the simple set of equipment required.

80

4. Costs and Bill of Quantity (BOQ)

Figure 18: Engineering Cost of Construction Estimate

Source: LCG summarized from BOQ in Figure 20

81

Figure 19: Operational Fixed Asset Estimate

Source: LIC

Estimates are subject to a 30% standard error

82

Figure 20: Revised Bill of Quantity

83

84

85

86

NO FURTHER PAGES