Efficiency Of Economic Linkage Between Enterprises And Farmers In The Southeast Region - The Current Situation And Affecting Factors

The research results show that: 1 Effective linkage between enterprises - farmers in southeast region is only at beginning stage in which the enterprise providing inputs to farmers under

EFFICIENCY OF ECONOMIC LINKAGE BETWEEN

ENTERPRISES AND FARMERS IN THE SOUTHEAST REGION: THE CURRENT SITUATION AND AFFECTING FACTORS

MSc Tien Dung - Luu (PhD Candidate)

Lac Hong University, Vietnam

Abstract

Preferential policies is to encourage and promote linkages between businesses and farmers have launched and implemented from 2002 but the effect is not as expected and potential While the impact of international economic integration requires businesses and farmers as well as other stakeholders in the value chain of agricultural production must be done interconnected in order to improve competitiveness, efficiency social - contribute to the development of sustainable agriculture This study analyzes the current situation of the linkage between enterprises and farmers in the Southeast; the causes of this situation; and based on multivariable regression model which analyzes factors affecting the efficiency cooperation beween businesses - farmers The research results show that: (1) Effective linkage between enterprises - farmers in southeast region is only at beginning stage in which the enterprise providing inputs to farmers under the support of the state while the consumption of output is not available for many reasons, the effective linkage is not commensurate with the potential; (2) There are five factors that indirectly affect the efficiency linkage including (i) Economic efficiency

of farmers, (ii) Environment policy - institutions, (iii) the commitment and reliance between businesses and farmers, (iv) the sharing of benefits and risks, (v) management skills and business capacity of enterprises and 01 factor that directly affect the efficiency linkage is Result linkage

Keywords: Affiliate between enterprises and farmers; Sustainable agricultural

development; Current development and impact factors; Southeast region; Structural Equation Modeling (SEM)

Tóm tắt

Chính sách ưu đãi, khuyến khích đẩy mạnh liên kết giữa doanh nghiệp (DN) và nông dân đã ra đời và thực thi từ năm 2002 nhưng hiệu quả chưa như mong đợi và tiềm năng Trong khi tác động của hội nhập kinh tế quốc tế đòi hỏi các DN và nông dân cũng như các chủ thể khác trong chuỗi giá trị sản xuất nông nghiệp phải thực hiện liên kết với nhau nhằm nâng cao năng lực cạnh tranh, hiệu quả kinh tế - xã hội góp phần phát triển nông nghiệp bền vững Nghiên cứu này phân tích tổng quan thực trạng liên kết DN – nông dân ở vùng Đông Nam Bộ; nguyên nhân của thực trạng này; mô hình kinh tế lượng các yếu tố tác động đến hiệu quả liên kết DN – nông dân Kết quả nghiên cứu cho thấy: (1) Hiệu quả liên kết DN – nông dân vùng Đông Nam bộ mới chỉ dừng lại ở việc DN cung cấp các yếu tố đầu vào cho nông dân dưới sự

hỗ trợ của nhà nước còn việc bao tiêu sản phẩm đầu ra là gần như chưa có do nhiều nguyên nhân, hiệu quả liên kết chưa tương xứng với tiềm năng; (2) Các yếu tố tác động đến hiệu quả liên kết DN và nông dân theo mức độ quan trọng giảm dần bao gồm 05 yếu tố tác động gián tiếp (i) Hiệu quả kinh tế hộ nông dân, (ii) Môi trường chính sách – thể chế, (iii) Sự cam kết và lòng tin giữa doanh nghiệp và nông dân, (iv) Sự chia sẻ lợi ích và rủi ro, (v) Kỹ năng quản lý và năng lực kinh doanh của doanh nghiệp và 01 yếu tố tác động trực tiếp là Kết quả liên kết

Từ khóa: Hiệu quả liên kết doanh nghiệp và nông dân; Phát triển nông nghiệp bền vững; Thực trạng và các yếu tố tác động; Vùng Đông Nam bộ; Mô hình SEM

1 Introduction

The linkage between farmers and enterprises helping businesses to solve the

problem input, economic help farmers solve the problem of output, reduce production costs, lower costs, increase income Contributing to change the thinking of production

of the farmers, eliminating habits, psychological small producers, producing formation thinking style market, the application of science and technology in production, meet the requirements of industrialization and modernization of the country The policy encourages enterprises associated with farmers from 2002 to Decision 80/2002/QD-TTg; Resolution of the Ninth Congress stressed: “It should be replicated collaborative modeling industry and agriculture, state enterprises and farmers.”; Decision of the Prime Minister No.124 /QD-TTg approving the master plan for development of agricultural production by 2020 and vision to 2030 and decision No.62/2013/QD-TTg

on policies to encourage cooperation and development, production linkages associated with the consumption of agricultural products, building big field These policies show that the state cares for agricultural development, as pedestals for the economy in the process of growth and development as well as associated undertakings in agricultural policy plays key role However effective linkages in agriculture southeast region in particular and Vietnam in general is not high, not injected with the potential Southeast region despite the economic structure has tended to shift towards increasing the proportion of industry and services sector while decreasing the proportion of the agricultural sector, but the role of agriculture for growth of the local, regional still very important especially in improving the economic efficiency of enterprises and households

This study focuses on clarifying the current situation and factors affecting the efficiency of economic cooperation in agriculture southeast region on the basis of qualitative and quantitative research methods, based on the primary data was collected from the farmers who engaged in agricultural production linkage on the provinces of the Southeast region Results of the study will help to clarify the current situation as well as the barriers to improving the effectiveness of such linkages with the appropriate policies for speeding up the linkages, improve economic efficiency - social and sustainable agricultural development

2 Rationale and study models

2.1 The basics theory of economic linkages between enterprises and farmers in agricultural production

The concept and the nature of the economic linkages between enterprises and farmers

There are many different views on economic integration Béla Balassa (1961) suggests that economic linkages understood as closely as the institutional cohesion between economic organizations, the economy together Linkages economy is the economic relations between organizations, departments, local authorities and economic units Linkages are both forms of economic organization of production and the management mechanism Tran Duc Thinh (1984) Hoang Kim Giao (1989) as an alternative approach that has characterized the economic linkages and economic

relations but not all economic relations but only the economic relations that take place

in the form of organization of production Yu Ming Men (1993) argued that economic integration is the coordination relations between businesses and other business entities (cited by Ho Que Hau, 2012) Economic linkages are forms or manifestations of coordination between members linkageed not only to perform any economic relations which aims together and more cohesive, go to System to achieve the level inextricably linkageed, stable, permanent, lasting through the agreement, the contract between the parties before and intermediaries are going to merge, combine, merge, forming a new business with larger scale and in which the nature of economic integration is the process

of socialization of production Duong Ba Phuong (1995) Davis W Pearce (1999) said that economic integration is the situation where the different areas of the economy, usually the industrial sector and agricultural activities together an effective way results and interdependence, as an element of the development process This condition is often accompanied by sustained economic growth (cited by Ho Que Hau, 2012) Key Hay, N and Runsten, D (1999) recognized the nature of economic cooperation is an economic institutions (Economic Institution) means any structure or mechanism of social order and regulate behaviour of a set of individuals in a given community, there is a mechanism of rules designed to bring about a certain result

Although there are many different views, but it can see that economic integration is a form of cooperation and coordinate activities of economic units voluntarily undertaken to promote production and business development in favor in the framework of state law The goal is to create economic relationship stability through economic contracts or regulations to conduct operations and production division, exploiting the potential of the units involved in linkage or to together and create a common market, protect benefits for each other

Linkages economy very popular place in the economic sectors including agriculture sector also In agriculture forms of linkage popularity and is the most important linkage between businesses and farmers in coordinating the production and consumption of agricultural products Tran Van Hieu (2004) suggested that the linkage between farmers and enterprises that process together, intrusion, mutual coordination between farmers and businesses in the form of voluntary rural locality economic contracts to promote the intrinsic capacity of actors linkageed ensure reproducible process to expand the breadth and depth, stability improving the lives of farmers and performance of the state-owned enterprises According to Ho Que Hau (2012) suggest that the linkage between enterprises and farmers as part of economic integration in the national economy in which the parties are businesses and farmers, perform a type vertically integrated agro - industrial, to stabilize and improve economic efficiency

Although there are many concepts, different views on economic cooperation in general and economic linkages between businesses and farmers in agricultural production in particular, but according to the approach of this study the nature of the linkage between farmers and businesses primarily as part of the economic linkages that

there appeared an intrusive process, together, collaboration, mutual cooperation between farmers and businesses They come together in the spirit of voluntary to find common ground here is that space in rural areas through forms of economic cooperation in accordance with the policy of the party - the State for the purpose of promoting out the possibility of linkageing actors, the production process to ensure stable and sustainable improve, enhance the quality of life of farmers and produce economic efficiency of enterprises

Results of the linkages implementation between enterprises and farmers

The results of associates are expressed in both quantity and quality aspects: (a) The number of linkages is performed criteria reflect, scale implementation linkage, reflecting the results of the real volume the target linkage in the production, investment, procurement of production, collection and investment between farmers and businesses; (b) perform linkage quality criterion shows the results in terms of quality, strict level, depth, sustainability of the implementation of the linkage between farmers and businesses Criteria for implementing quality linkages are shown in a number of indicators can be calculated within a household, a local (Ho Hau Que, 2012)

Effective cooperation implementation between enterprises and farmers

Results of cooperation implementation haven’t reflected the effective cooperation implementation process between enterprises and farmers To assess the right quality of cooperation implementation we should be based on the criteria of effectiveness, it is the effective economics and effective socio-economic (Ho Que Hau, 2012): (i) economic efficiency criteria is to evaluate cost effective linkage between farmers and enterprises are expressed by the level or growth rate of corporate profits and income of farmers after the linkage compared before executing It is possible expressed through turnover, profits of both enterprises and farmers; (ii) The criteria of economic efficiency - society

is to evaluate the effectiveness of cooperation implementation the between farmers and enterprises It is represented an indirect positive effect results in creating process of implementing linkage and solving economic problems - social

2.2 The economic model of factors affecting the results and effectiveness of economic cooperation between enterprises and farmers

Based on the results of the researchs in the world and Vietnam including Parasuraman

el al (1988), Key and Runsten (1999), Sykuta and Parcell (2003), Ho Que Hau (2012, 2013) combined with the results of a qualitative study, the factors affecting the results

of economic cooperation between enterprises and farmers including (i) economic efficiency of farmer households , (ii) the commitment and reliance, (iii) Sharing of benefits and risks, (iv) management skills and business capacity of the enterprises, (v) the policy environment - institutions, (vi) reasonable purchase price for farmers Results

of economic cooperation affect the effective linkages between enterprises and farmers

in agricultural production Mathematical model and study hypotheses as below (Figure 1)

- According to Ho Que Hau (2013) the economic efficiency of farmer households is the factor affecting directly the results of linkages between farmers and enterprises

Hypothesis H1: In condition of agricultural production in the Southeast region, the

economic efficiency of farmer households impacts positively on the results of linkages

- According to Parasuraman el al (1988), Ho Que Hau (2013) the quality of the business activities in which the reliability of enterprises have great influence on satisfaction of farmers and the results of linkages

Hypothesis H2: In condition of agricultural production in the Southeast region, the

commitment and reliance of farmers - enterprise impact positively on the results of linkages

Figure 1: Reseach model

- According to Sykuta and Parcell (2003), Ho Que Hau (2013) sharing the benefits, decision-making powers and risks, enterprises have invested capital for farmers, enterprise support disaster assistance to farmers, crop failures are the factors that helped bring about the success of the linkages

Hypothesis H3: In condition of agricultural production in the Southeast region, sharing

the benefits and risk impacts positively on the results of linkage

- According to Parasuraman et al (1988), Ho Hau Que (2014) the operation of enterprises linkage with the farmer is actually active production services So the quality

of the business activities in which the credibility of the enterprises, staff quality and attention, understanding of enterprises have a great influence on the satisfaction of farmers

Hypothesis H4: In condition of agricultural production in the Southeast region,

management skills and business capacity of enterprise impact positively on the results

of linkages

- According to Key and Runsten (1999) legal infrastructure is often unreliable in many

developing countries makes enterprises have troubles in using legal action against local farmers to ensure the success of the linkage In order to limit opportunistic behavior affects the results of linkage, we need to build the effective legal system and effective (Bao Trung, 2009)

Hypothesis H5: In condition of agricultural production in the Southeast region, the

policy environment - Institutions impacts positively enterprises and farmers

- According to Ho Que Hau (2013) a reasonable purchase price is the factor affects directly the results of linkage between farmers and enterprises

Hypothesis H6: In condition of agricultural production in the Southeast region, a

reasonable purchase price for farmers impacts positively on the results of linkage

- Ho Que Hau(2012) suggests that to achieve the effective of linkages, we have to have the results of linkage and it is expressed through the quantity and quality of linkages

Hypothesis H7: In condition of agricultural production in the Southeast region, the

results of linkage impacts positively on the effective linkages between enterprises and farmers

3 Study design and measurement scale for study concepts

3.1 Study Design

The study was carried out in two stages: Preliminary study and formal study The preliminary study was carried out through qualitative and preliminary quantitative research methods Qualitative research is conducted by studying documents and interviewing deeply according to non-probability sampling method including staff - directly are in charge of affiliate programs in the agricultural production in: Hoa Binh, Tan An, Thien Tan communes of Vinh Cuu district (Dong Nai Province); Tri Binh commune of Chau Thanh district, Phuoc Chỉ, Tan Binh commune of Trang Bang district (Tay Ninh province); An Nhut commune of Long Dien District (Ba Ria - Vung Tau Province); Phu Rieng commune of Bu Gia Map district (Binh Phuoc province); An Lac commune of Tan Uyen district (Binh Duong Province); Experts from the New Rural Steering Committee of Dong Nai Province, Lac Hong University, the University

of Economics Ho Chi Minh city and University of Economics - Law (national University HCM city) in october, 2014 at different time The study results showed that after thirteen meetings with information saturation point is eight, theoretical framework, research models and the scale of the concept were complete The preliminary quantitative research was conducted with a test survey with a sample of 60 observations

is the extension workers, farmers are directly in charge and participating in affiliate programs for agricultural production, has not participated in the interview before Results of the quality scale’s testing with Cronbach's alpha showed that coefficient for the value equaled 0,868 indicates that the scale had high reliability, met requirements and could be used for formal study Research is done formally through quantitative research methods by sending questionnaires and telephone directly according to

non-probability methods to the farmers in communes such as Hoa Binh, Tan An, Thien Tan communes of Vinh Cuu district (Dong Nai Province); Tri Binh commune of Chau Thanh district, Phuoc Chỉ, Tan Binh commune of Trang Bang district (Tay Ninh province); An Nhut commune of Long Dien District (Ba Ria - Vung Tau Province); Phu Rieng commune of Bu Gia Map district (Binh Phuoc province); An Lac commune of Tan Uyen district (Binh Duong Province) during the period from 10 - 11/2014 at the different time Selecting communes of each district and the province above is dependent

on the level of convenience and where the affiliate program is being implemented After the data is cleared and evaluated the standart distribution will be analyzed by using SPSS and AMOS software to test the quality of the scale, the relevance of the model and study hypotheses of the relations between the independent and dependent variables

in the research model

3.2 Scale measurement for research concepts, tools for collecting data research

The set of measurement scale that was used to measure the definitions of the reseach include 38 observation variables that evaluate 8 factors in the sample of the research which was designed according to the five points Likert scale with 1 - totally disagree with 5-strongly agree Economic efficency for the farmers measured by five observation variables and encrypted from HQKTND1 – HQKTND5; the factors naming the commitment and the reliance measured by five observation variables and encrypted from CK1- CK5; the factor naming the sharing of benefit and the risk was measured by five observation variables and encrypted from CS1 – CS5; the management skill and business capacity of the enterprises measured by four observation variables and encrypted from QLDN1- QLDN4; the environment policy - institutions was measured

by five observation variables and encrypted from MTCS1- MTCS5; the suitable price for the famers measured by four observation variables and encrypted from MGM1- MGM4; the result of the cooperation measured by five observation variables and encrypted from KQLK1- KQLK5; the efficency of the cooperation measured bỵ fivr observation variables and encrypted from HQLK1- HQLK5

The data of the research is the primary data which was directly collected by using questionaire The questionaire include 3 main parts: the first one contains the evaluation

to the efficience of the cooperation between the interprises with the farmers; the second part is investigating the factors that affect the efficency of the cooperation and the last part is the general information about the interviewees

4 The Current Situation and the factors affecting the efficiency of the economic linkage between enterprises and farmers in the Southeast

4.1 Characteristics of the study sample

Datasets are cleaned after 220 samples (table 1) satisfy the conditions of factor analysis

to explore the structure and linear model (Hoyle, 1995; Kline, 1998; Jackson, 2001, 2003; Hair, 2006 & Hair, 2009)

Table 1 Characteristics of the study sample

Variables

Gender

People

Age

The number of years of

schooling (years)

The number of years of farming

experience (years)

The area agricultural land (m2)

Male = 89.54%; Female = 10.46%

Kinh = 99.09%; Others = 0.91%;

Female: 20-39 = 17.39%; 40-49 = 52.17%; over 50 = 30.44% Male: 20-39=14.21%;40-49=43.65%; over 50=42.14% 3-6= 40.92% ;7-9=44.54%; 10-12=14.54%;

10-20 = 15.9%; 21-30 = 44.54%; over 30 years =39.56% 8.0000 – 10.000 =15.45%; 11.000 – 20.000 = 19.09%; 20.000 – 40.000 = 25.45%; over 40.000 = 40.01%

Source: Survey of the research team

4.2 Overview the current situation of the effective linkage between enterprises and farmers

Through the survey, the authors found that there are many forms of linkage between farmers and businesses However, the investment form of the enterprises from the inputs but not consumption of output accounted for 95.9% was the basic linkage form between enterprise - farmer The rate of enterprises warrant output to farmers is only at 4.1%, 1but this figure is only the numbers from the test program of a few businesses or individuals This shows the effectiveness of linkages between “linkage of four partners” accounted for 85.9% is not commensurate with the potential While most of farmers are consign the consumption of agricultural products for traders and in the other hand, many leading agricultural exports also depend on the source of supply of goods by traders This makes the effective business of both farmers and enterprise are not guaranteed a solid, long-term The cause of this situation is given by business requirements, farmers are not able to meet The quality must be follow the standard of the enterprises as well as large supply capacity

Figure 2 Overview of the linkageed situation between businesses and farmers

Source: Survey of the research team

First step, results and effectiveness of linkage between enterprises and farmers in the Southeast region has achieved some success such as the number of farmers contracting with businesses, the rate of debt that the enterprises collected from the farmers, the total area of agricultural land are increasing trend, Howerever, the quantity that the farmers bought to the enterprises seem not available because of not finding the linkage Quantity, revenue and profit of the farmers by the linkage with the enterprises was considered is increase However, it should be noted that this trend mostly comes from state policies through scientific, technical and financial supports

The linkage between farmers and businesses helping the enterprises solve the problem about input, the farmers solve the problem of output, reduce production costs, lower price, increase income, contributing to change the thinking of production farmers, eliminating habits, psychology of small producers, forming the thinking of style market applying science and technology in production, to meet the requirements of industrialization and modernization of the country However effective linkages in agriculture sector of th Southeast region in particular and Vietnam in general is not high and commensurate with the potential Although the policy of state support to encourage and promote linkages but should adhere to the conditions of the market and each local

4.3 Factors affecting the efficiency economic linkage between enterprises and farmers

4.3.1 Inspection the quality of scales and model research

The quality of the first scale tested through Cronbach's alpha coefficient, exploratory

factor analysis (EFA) and confirmatory factor analysis (CFA)

Table 2 Summarizes the results of testing scale

Latent Variables Number

of Observed variance

The reliability ρvc Cronbach’s

Alpha

ρc

The economic efficiency of the famers 5 0.821 0.832 0.505 The commitment and reliance 3 0.824 0.847 0.654 The sharing of benefits and risks 5 0.840 0.858 0.556 Management skills and business

capacity of the enterprises

Environmental policy - Institutions

The reasonable purchase price for the

farmers

5

4

0.823 0.857

0.839 0.864

0.519 0.617

The result of linkage

The efficency of the linkage

5

5

0.813 0.835

0.804 0.837

0.455 0.511

Source: Survey of the research team

Results of analysising explored factor include 08 components/factors including: (1) Economic efficiency of farmers, (2) The commitment and reliance, (3) The sharing

of benefits and risks, (4) management skills and business capacity of the enterprise, (5) Environmental policy - institutions, (6) The reasonable purchase price for farmers, (7) Result of linkage, (8 ) effective linkage Except variables rejected by CK1 and QLDN3 because of correlated variables - total gain credibility should not be eliminated, all remaining variables are the terms and conditions of analysising explored factor

Maximum Likelihood Estimation (MLE) is used for determining goodness of fit of the model The estimation results confirmed that the model is sufficiently compatible with the data relatively indicators such as Chi-square = 1398.623, df = 565, p= 0.000 (<0.05) was still acceptable due to the large sample size, corrected Chi-square (Chi-square/df) reached 2.475, GFI = 0.749, TLI = 0.788, CFI = 0.810 (Chin & Todd, 1995; Segars & Grover, 1993) and RMESA = 0.082 (Taylor, Sharland, Cronin, & Bullard, 1993; Tho and Trang, 2008) PCLOSE indexes are greater than 0.5 (minimum is 0.663) showed that the model qualified reliability, discriminant validity and convergent validity (Anderson & Gerbing, 1988; Segars & Grover, 1993; Steenkamp & Van Trijp, 1991) The correlation coefficient of the concepts (factors) are less than 1 and have statistical significance (Steenkamp & Van Trijp, 1991) The concept of synthesis reliability satisfied (ρc> 50%) and the variance of each factor extracted (ρvc> 50%)

4.3.2 Hypothesis Testing Research