Supply Chain Analysis for Rural Sanitation Products and Services in Lao pdr



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Building a latrine


Most (82%) adopter households surveyed in the WSP - Sanitation Consumer Behavior Study reported constructing their own latrine – 12% hired a mason.

Masons reported that it takes two to three workers almost two weeks to build a latrine, costing around 3 million to 4 million LAK (US$375 to US$500) for their labor (Table 27). The superstructure takes the longest, reflecting that masons are used to building substantial structures (reflected in the high cost of latrines above). Lining a pit with bricks requires more labor than using concrete rings, partly because such pits are usually larger, adding to the total cost of the latrine. Overall, labor costs can double the total price of a latrine.



Table 27: Labor required to build the “most commonly built” latrine, as quoted by masons (n=71)

Region – Province

Pit Digging

Pit Lining
(Concrete Rings)


Pit Lining
(Bricks)


Pan & Slab
& Pipe Installation


Super Structure

Total

# of Worker

# of Days

# of Worker

# of Days

# of Worker

# of Days

# of Worker

# of Days

# of Worker

# of Days

Average labor cost

# Days (brick)

# Days (concrete)

Northern

2.0

1.5

2.5

1.3

2.5

2.1

1.5

1.4

2.5

7.1

3,783,333

12.0

11.2

Bokeo

2.0

1.7

2.0

1.0

2.0

2.2

2.0

1.3

2.0

6.0

2,150,000

11.2

10.0

Luangnamtha

2.0

1.3

3.0

1.5

3.0

2.0

1.0

1.5

3.0

8.2

5,416,667

12.9

12.4

Central

2.0

2.5

2.0

1.1

2.0

3.0

2.0

1.7

2.0

5.2

3,397,000

12.4

10.5

Borikhamxay

2.0

2.6

2.0

1.0

2.0

3.4

2.0

2.0

2.0

4.8

4,242,000

12.8

10.4

Savannakhet

2.0

2.4

2.0

1.1

2.0

2.6

2.0

1.4

2.0

5.6

2,552,000

12.0

10.5

Southern

2.0

2.3

2.3

1.0

2.7

2.3

2.0

2.0

2.7

6.0

3,242,611

12.6

11.3

Attapeu

2.0

2.5

3.0

1.0

3.0

2.3

2.0

1.2

3.0

6.7

3,460,000

12.7

11.4

Salavan

2.0

2.1

2.0

1.1

3.0

2.3

2.0

2.3

3.0

4.5

3,090,909

11.1

10.0

Sekong

2.0

2.3

2.0

1.0

2.0

2.3

2.0

2.5

2.0

6.8

3,176,923

13.9

12.5

Total sample

2.0

2.1

2.3

1.1

2.4

2.4

1.9

1.7

2.4

6.1

3,441,214

12.4

11.0

Much of the variation in total labor cost above is from differences in average daily labor costs (). Average costs in the south are lower than the northern and central regions. Within regions there can be wide variation, with Luangnamtha much more expensive than Bokeo and Borikhamxay more expensive than Savannakhet. Hence masons in Luangnamtha estimate constructing a latrine will take two more days than those in Bokeo, yet the total labor cost is 150% higher (Table 278). A similar comparison can be made for Borikhamxay and Savannakhet.

Table 28: Average daily cost per person for latrine construction (n=71)

Region – Province

Average number of masons needed

Average daily labor cost (LAK)

Average daily individual labor cost (LAK)

Northern

2.2

325,448

147,931

Bokeo

2.0

203,150

101,575

Luangnamtha

2.4

427,632

178,180

Central

2.0

296,297

148,149

Borikhamxay

2.0

364,547

182,273

Savannakhet

2.0

225,974

112,987

Southern

2.3

271,830

116,499

Attapeu

2.6

286,740

110,285

Salavan

2.4

293,963

122,485

Sekong

2.0

240,583

120,291

Total sample

2.2

293,616

134,065

Average labor costs in Lao increased by around 65% between 2009 and 2012 (World Bank 2013b). Labor in Lao PDR can be expensive (relative to Cambodia or Myanmar, for example).18
    1. Transport costs


Transport costs and road conditions are a major factor determining sanitation coverage rates for Lao PDR. Rural areas without road access are much less likely to have access to improved sanitation than rural areas with road access (15.8% compared with 38.8% according to the third Multiple Indicator Cluster Survey). Poor roads affect both the demand and the supply for sanitation products and services. Regions with bad roads have less economic development and more poverty; hence fewer people can afford latrines. Also, areas with bad roads do not have access to the supply chain to obtain the necessary materials. Furthermore, road quality can help determine access to credit: banks require collateral (land) and they assess the quality of collateral in part on its proximity to a good road (Access to credit and other finance issues are discussed in Section 9).

Transport cost in the sanitation supply chain take two forms: as explicit prices for the delivery of products, and as an embedded cost in the price of products and services. For example, cement in Phaoudom is more expensive than 70km away in Houay Xai (in certain conditions it can take four hours to travel between the two).

Even when still accessible in wet season, the nature of the road may add to transport costs. That is, in wet season some roads are only passable by smaller trucks. This means smaller average loads, increasing per-unit transport costs. For example, a transport company in Houay Xai charges 7,000 baht (around 1.8 million LAK or US$225) for a nine-tonne load to Phaoudom19, whereas a much smaller truck (around two-tonne load) to Phaoudom costs 3,000 baht (approximately 780,000 LAK or US$98) – roughly double the unit cost.

According to one national transport company, transport costs in Lao PDR are 10% to 30% higher than in Thailand (key informant interview in Vientiane).

Unit transport costs between major centres are lower than local transportation costs (Table 30). This is because roads are better and large transportation companies can ship 35, 40 or 60 tonnes per trip. According to one transport company, transporting large loads of this size between major centers costs around 400 LAK (5 cents) per ton per kilometre where the road conditions are good and the area is not mountainous, and 750 LAK per ton per kilometre where roads are bad and the terrain is mountainous.

Table 29: Transport costs for large loads between major centers



From

To

Cost (LAK per ton)

Vientiane city

Luang Prabang

262,500

Luangnamtha

Sing

24,720

Phaoudom

Paktha

22,500

Vientiane city

Pakse

191,168

Pakse

Salavan (Salavan)

53,560

Pakse

Ta-Oy

157,500

Pakse

Samouy

111,240

Samouy

Ta-Oy

45,000

Pakse

Sekong (Lamarm)

127,500

Lamarm

Kaleum

63,750

Kaleum

Ta-Oy

35,020

Pakse

Dakcheung

195,000

Paksan

Khamkeut

92,700

Paksan

Vienthong

103,000

Paksan

Xaychamphone

133,900

Savannakhet

Xonnabuly

32,960

Savannakhet

Ardsaphone

41,200

Savannakhet

Nong

123,600

Attapeu

Sekong

28,840

Phouvong

Xaysathan

7,416

Sanamsay

Saysetha

32,136

Minimum load 15 tons.

Source: A national freight company

However, distributing from these above towns to smaller towns and villages, particularly those that are more remote or are in mountainous areas, significantly increases transport costs. Compared with 450 LAK per ton per kilometre for large loads on good roads, and 750 for worse roads and mountainous areas, reaching towns with smaller trucks can cost as much as 5,500 LAK per ton per kilometre (see Table 30 below).

      1. Construction materials suppliers


Many (at least 68%20) construction materials suppliers have their own truck and deliver to their customers. This delivery is typically free within a certain range, and for a fee beyond that.

In the Northern region, transportation cost is normally included in the price if destination is within town and not far away (for example, within 15km), while 50,000 LAK to 100,000 LAK (US$6 to US$12) may be added to the order (one truck-load) if farther delivery is needed. Usually delivery, with or without additional cost, is provided only when materials are bought in larger quantities. For smaller orders, buyers collect materials themselves by tractor, motorbike, small truck, etc. A retailer in Phaoudom gives free transport for nearby customers and for a delivery of 16km charges 160,000 LAK (US$20). Another supplier said they would charge 300,000 LAK (US$37.50) for ten tonnes to be transported 15km.

The Central region is similar to the north: for short distances free delivery is provided, however an informal and negotiable cost of 100,000 LAK (US$12.50) may be added for a small truck delivering within the district but not very far away. However, long distances with poor road conditions can significantly add to costs. For example, delivery from Vienthong to Xaychamphone (75 km) in Borikhamxay province will cost 1 million LAK (US$125) for about 4–5 tons.

Suppliers in the Southern region did not mention specific transportation costs. Normally it is automatically incorporated in materials costs. Materials prices do tend to be higher in southern provinces (as discussed above).

Table 30: Examples of local transportation costs

Route

Distance

Price per ton per km (LAK)

Viengthong–Xaychamphone

75km

2,963

Phaoudom–surrounding area

15km

2,000

Houay Xai–Phaoudom – mid-size truck

70km

2,857

Houay Xai–Phaoudom – small truck

70km

5,571


      1. Concrete products


Given their weight and bulk, transport costs can be particularly important for concrete products such as slabs and rings. Many concrete producers will provide delivery over a limited distance (e.g. 10 km) to the buyer’s site, included in the product price. For greater distances, the producer will negotiate the price according to volume and distance.

Despite their size and weight, and hence potential difficulty in transportation (and possibility of cracking or breaking on bad roads), concrete rings are made at the producer’s premises. Concrete producers state that rings are not made on-site at the customer’s location because of the cost and availability of moulds.


      1. Masons


Nearly two-thirds of masons report that they charge a higher fee when they have to travel far for work. Many report charging an additional 20%; others report an additional 700,000 LAK for building a latrine not in their local area.
      1. Costs of transporting latrines


A medium size truck can transport six to seven basic low-cost latrines (such as the PSI/WSP model), excluding superstructure. Smaller trucks (necessary to reach some areas) can transport three to four basic latrines.

To transport seven latrine cores to areas surrounding Phaoudom, for example, would cost 2,857 LAK per latrine per km. This equates to a 17.7% extra cost for delivering one 400,000 LAK latrine a distance of 25km (or 21% if six latrines are delivered per truck instead of seven). However, for areas only accessible by smaller trucks (carrying three or four latrines), the transport cost per latrine almost doubles to around 34%.

If superstructure is also included, transport costs per latrine are significantly higher (because fewer latrines can fit on one truck). Number of latrines per truck then depends on the size and materials of the superstructure. Assuming superstructure materials (such as bricks, door and zinc sheeting) take as much space as the latrine core, then the above transport costs double (but transport costs as a percentage of latrine cost do not double — in fact they decrease where the superstructure costs more than the core).

Hence flat-pack superstructure options can be attractive in that they involve lower unit transportation costs. However these might not appeal to consumers (Cambodia evidence?)

However, transporting prefabricated concrete products such as latrine slabs to remote areas can be difficult due to the possibility of breakage when the road quality is bad. Onsite casting is one option around this. Transporting all the components, as well as moulds, will still involve considerable cost, but it is likely total transport costs will be less.21



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