Priorities for agricultural restructuring in Vietnam

After 25 years of renewal, Vietnam’s agriculture has recorded remarkable achievements and played an important role in socio-economic development. Agricultural production developed despite market fluctuations, natural disasters and epidemics. Along with continuous growth of agriculture at 3.8%/year, food availability of the country improved tremendously from 445 to 513 kg/person/year during 2000-2010. Basically, Vietnam overcame its acute hunger problem of the post-war period and achieved food self-sufficiency at national level. As agriculture is still the major source of income and employment for 70% of Vietnam’s population, agricultural growth and food security have played the most important role in the successful performance of poverty reduction in Vietnam. Poverty rate reduced sharply from 58.1% in 1992 to 12.6% in 2010, a remarkable reduction rate of more than 2%/year.

Compared to neighboring countries, agricultural product prices in Vietnam, especially food prices, were maintained at low level, leading to low labor costs that helped the country attract foreign investment and made important contribution to economic growth and social stability. In addition, agricultural export grown continuously, and Vietnam became an important player in international and regional markets of commodities, such as rice, rubber, coffee, pepper, cashew nut, wood products, and fisheries products. In 2012, agricultural exports reached the record level of 27.5 billion US dollars. Agriculture was the only sector with a net export surplus that grew steadily, even in the time of economic stagnation. This surplus, in fact, contributed significantly to balancing the national trade deficit.

Following a period of rapid growth, the sector has started to slow down significantly. The growth of agricultural GDP has fallen from 4.5% in 1995-2000 to 3.8% in 2000-2005, 3.4% in 2006-2011 and only 2.7% in 2012. Changes in crop structure took place quite slowly. Production of foods, especially rice, with low value still accounts for 40% of total output. Growth of fruit and vegetable production with high value and potential demand has been restrained by fragmented farm size, quality inconsistency and low hygiene standards. Growth of livestock has been unstable due to constraints in terms of feed availability and disease control. Apart from constraints of diseases and limited access to aquaculture feed, fishery growth has also been unstable with increasing cases of consignment rejections by trading partners due to the presence of harmful substances, product deterioration, mislabeling or other reasons.

After the booming period of economic reform, much of the growth has occurred through an increase in sown areas (including both cultivated areas and crop intensity) and more intensive use of input materials and natural resources with limited technological and institutional innovation since 1995. A comparatively low “quality of growth” is manifested by high levels of post-harvest losses, mixed or uncertain product quality or food safety, low value creation.

Yet, the policy stance focused on food security and supply push of agricultural production. Meanwhile, efforts to make long-term structural changes have been limited in terms of diversification and commercialization towards high value crops with increasing demand (such as livestock and aquaculture together with animal feed, fruits and vegetables, woods and wooden furniture), agro-processing industry, food safety and quality control, trade facilities, agricultural technology and innovations. Therefore, short-term problems occurred more frequently and dominated policy making in agriculture. As a result, policy-makers have paid most of their attention to short-term reaction to rescue the sector from natural disasters, epidemics, supply-demand imbalance and price instability.

The past sources of agricultural growth are unlikely to be replicated in the future. The sector faces growing domestic competition from cities, industry, and services for labor, land, and water. Rising costs are beginning to inhibit the sector’s ability to compete internationally as a “low cost” producer. And, over-intensive use of water and marine resources is not sustainable. Vietnam’s agriculture will need to generate “more from less”. That is, it needs to generate more economic value as well as farmer and consumer welfare using less physical, human, and other resources. And, it needs to begin to compete on the bases of quality, standards compliance, and reliability.

Under this very critical circumstance, the Ministry of Agriculture and Rural Development (MARD) has been proactively preparing the Sectoral Restructuring Proposal, following the vision for the restructuring of the economy as laid out in the Resolution of the 11th Party Congress. MARD was the first ministry submitting the restructuring proposal that was approved by the Prime Minister in Decision No. 899/QD-TTg of June 10, 2013. The major objective of agricultural restructuring is to develop a more vibrant and diversified rural economy with sustainable agricultural growth, high value creation, food safety according to international standard, higher competitiveness and farmer income, and technology-intensive agriculture.

To serve this objective, major restructuring priorities should be considered as follows:

Moving from agricultural commodities with low value and competitiveness toward those with high value and competitiveness

 To protect agricultural land, but allow flexible change of land use between paddy and other crops such as animal feed crops (such as potato, maize, cassava), fruits and vegetables, aquaculture, and other higher-value production activities. To apply sustainable practices of rice production to reduce the overuse of chemicals, save water and apply mechanization in soil preparation and harvesting to enhance consistency of product quality.

 To develop land use planning and stabilize land areas for specialized crops (coffee, rubber, tea, pepper and cashew nut) with high competitiveness and market potentials in appropriate regions. To apply sustainable and intensive farming practices, develop value chain integrations and ensure equal benefit sharing among stakeholders in the value chains.

 To develop specialized production zones of fruits and vegetables with sufficient conditions to monitor food hygiene and safety standards.

 To develop land use planning for livestock production (accompanied by animal feed production). To move livestock production from areas with low population density to specialized areas far away from cities and residential areas. To develop livestock based on specific advantages of each ecological region in two ways: (i) promoting large-scale and intensive production in specialized and industrialized areas with hi-tech applications; (ii) maintaining household livestock production with encouragement to apply technologies and protect biosecurity. To encourage linkages among value chain stakeholders to reduce costs and increase efficiency and value added. To enhance disease prevention and control along with improved veterinary services and biosecurity protection. To promote hygienic production models with high technology and effective management of polluting wastes.

 To increase areas of productive forest land and reduce the areas of protective and special-use forest land. To increase value of forestry production, improve capacity and the effectiveness of environmental and biodiversity protection, respond effectively to impacts of climate change and contribute positively to livelihood improvement of mountainous habitants. To develop intensive forest products with comparative advantages in appropriate regions, establish medium-and large-sized specialized material production areas, meeting the criterion of sustainability and supplying material wood for industrial production.

 To increase investment in infrastructure to support concentrated commercial aquaculture, and investment in aquaculture breeding systems, environmental monitoring and warning systems, and epidemic surveillance systems. To increase investment in projects on fishing harbors, navigation locks and storm shelters for fishing boats and ships. To seek private investment and/or co-management in fishing harbors, landing sites, and associated marketing infrastructure.

 To apply agricultural zoning approaches, supporting more flexible land use management linked to evolving market opportunities rather than using administrative measures.

Moving from agricultural production to further value addition of agricultural value chain

 To move irrigation investment and management services from government budget multifunctionality to support multiple crops, aquaculture, rural water supply, and industry.

 To formulate special favorable policies to support private investment in production of agricultural inputs and agro-processing industry.

 To support infrastructure for private investment in agro-industrial clusters or parks.

 To prioritize government investment in technology innovation in post-harvest and processing segments.

 To increase government investment in infrastructure and human resources for the agricultural market information and forecasting system. To establish research systems and information networks to ensure market-oriented forecasting and regular supply of essential prices, supply and demand information to producers and investors.

 To prioritize public-private partnership investment in agricultural marketing, storage and trade facilities, special-use railways and seaports for agricultural export.

Moving from supply push to quality and food safety control

 To prioritize programs/projects on pest and disease surveillance, prevention and control, and food safety assurance.

 To reduce and remove tariff and domestic technical barriers to trade by regularly engaging in bilateral negotiations (animal health, plant protection, food safety) with trading partners to ensure laws and regulations governing trade comply with WTO obligations and meet Codex, World Organization for Animal Health (OIE) and International Plant Protection Convention (IPPC) standards.

Moving from resource-intensive to technology-intensive agricultural growth

 To increase investment in agricultural science and technology. To prioritize investment for research institutes and collaborating entities.

 To establish clusters of high technology research-training-production centers for different ecological regions in the country.

 To innovate the R&D system in the direction of autonomy and self-responsibility for universities and research institutes, and attract investment from all economic sectors, especially foreign organizations, in R&D activities.

 To strongly decentralize extension activities for farmers’ organizations and enterprises. To focus on increasing the role of farmers’ organizations and industry in articulating research priorities. To improve the system of research monitoring and evaluation.

 To strengthen linkages between research, training and extension activities and the linkages between medium- and short-term weather forecasting and crop advisory services to ensure better crop/varietal choice decision-making, and more efficient utilization of irrigation water.

Moving from fragmented to consolidated land holdings, from agriculture to non-farm employment

 To expand the limits of land use rights transfer for agricultural land with conditions to protect agricultural land. To create favorable conditions for agricultural land transfer and renting procedures. To elaborate provisions that allow only specialized farmers to have the right to transfer agricultural land.

 To apply progressive inheritance taxes based on the number of people inheriting land, in order to discourage further fragmentation of landholdings.

 To encourage land accumulation by supporting cadastral surveys, land certificate issuance, infrastructure investment, land market transactions, including reducing land use right transfer tax.

 To de-concentrate industrial and urban development to rural areas. To develop satellite urban clusters around major cities. To move industrial parks, entertainment facilities (golf courses, botanical gardens, parks and resorts) and public facilities (airports, universities and research institutions) to rural areas and at the same time build associated infrastructure facilities (such as roads, air-routes, railways and seaway systems) to connect to the major cities and markets with high quality services (such as schools, hospitals and supermarkets).

 To develop rural entrepreneurship by providing support in terms of land allocation, infrastructure, credit, technology, trade promotion.

 To formalize rural non-agricultural employment and provide support in terms of vocational training, employment registration, labor market information, insurance and decent housing conditions.-

Source: Vietnam Law and Legal Forum. Date: November 23, 2016