Ironbark Citrus - Case Study
From the Laos Country Starter Pack
Susan Jenkin admits that her company, Ironbark Citrus, “went in blind” to the Lao market.
The Queensland-based farming business was invited by a mining company to set up operations in Laos to provide alternative income for the local community following the closure of one of its mines.
“We said yes, knowing that the mining company could assist us in our engagement with the local community and government, as well as advise us on the administrative and regulatory requirements for setting up a business in Laos,” says Susan.
“We were able to tap into their experience, knowledge, and contacts, which really gave us a head start.”
While the leap of faith worked out for Ironbark – the company now has four citrus nurseries in Laos, supplying trees, horticultural services and training to local farmers – Susan advises other Australian firms to do more research than they did.
“If you don’t have someone to help you out, it’s really important to know a little bit about the administrative and regulatory requirements for setting up a business,” she says.
“The administration in Laos can be quite torturous. Businesses often have to interact with multiple government departments and government processing can take a long time. It is important to be patient, and to follow the processes required.”
Establishing the business in a Special Economic Zone helped Ironbark cut through a lot of red tape. “Any Australian business should look seriously at these zones. When we first contacted a lawyer in Vientiane to set the business up it was going to cost us US$10,000 and take a minimum of eight or nine months, whereas with the Special Economic Zone the cost was US$3000 and the approval time was much quicker.”
But other challenges remain. “Under our model we planned for our farmers to obtain loans from the local banks, but, on further investigation, we found out that that the banks didn’t have a suitable product. As a result, we have had to set up our own revolving fund to finance the farmers. That’s extra money that we’ve had to find,” says Susan.
“Laos has a reputation for high levels of corruption. As in a lot of countries across the region, you are often asked to pay extra to get something done or to get it done faster. It is not always clear whether a fee or charge is legitimate, and there are no practical guides to assist with this. We have been fortunate to have the mining company advise us in this area.”
While Susan speaks a little Lao, she relies heavily on her incountry manager, who is fluent in English. She is planning to provide English lessons for her local staff as well.
She says employing local staff is essential, and rewarding. “Even if your local guys don’t understand running a business, they can always learn - and they do know how things work in their country. I don’t think you can underestimate the value of putting the time and effort into local staff.
“The two nursery guys we first employed knew nothing about nurseries, nothing about budding and grafting, but now they’re fantastic. They learned it all and are now passing their knowledge and skills on to our other workers.”
Susan says Australians can also learn from Lao business culture. “In Australia, businesses have to be very efficient in their use of labour because wages are so high. In Laos we can relax a bit and employ more people than the job would require in Australia, knowing that these workers are all taking money home to their villages, and you’re spreading the benefits around. We are not under as much pressure to be super productive with our wages.”
Susan sees enormous opportunity in Laos in the years to come. “There’s no way Laos is not going to go the way Thailand and Vietnam have. Infrastructure is improving, the middle class is only going to get bigger, there’s going to be more people with disposable income,” she says.
And while she would still advise other companies to learn as much as possible before entering the Lao market, she adds: “Research isn’t going to answer all your questions. Sometimes you just have to learn by jumping in and doing it.”