Lecture 9 Rural Development in Vietnam from macro-policies to practices

CONCLUSION POLICY POLICY POLICY POLICY POLICY POLICY POLICY POLICY POLICY POLICY IMPROVE COMPETITIVENESS OF VIETNAMESE AGRICULTURAL COMMODITIES IMPROVE FARM INCOME COMPRE- HENSIVE [r]

(1)

AGRICULTURAL AND RURAL DEVELOPMENT IN VIETNAM:

FROM MACRO POLICIES TO PRACTICES

Lecture Rural Development Tran Tien Khai

(2)

AGRICULTURE – RURAL -FARMERS

Improvement of farm livelihood in the context of globalization

and economic integration

(3)

Content

1 Introduction

2 Characteristics of Vietnamese agriculture, rural and farmer

3 Issues as joining to WTO

4 Questions for agricultural & rural development

5 Potential solutions to improve farmer livelihood

6 Conclusion

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1 Introduction

• Vietnam has become official member of the World Trade Organization (WTO)

• Agriculture as an important economic sector to the national economy

• Challenges to Vietnam in the context of

globalization and economic integration: how to stabilize and improve farmers income and livelihood

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1 Introduction

Purpose:

Providing a comprehensive view

to the status and potential solutions for agricultural and rural development

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2 Characteristics of three rurals

(Agriculture, Rural and Farmer) in Vietnam

1 Some main characteristics of Vietnamese agriculture

• The nature of economy is agricultural-based economy (20% GDP, 70% population)

• Ensure food self-sufficiency and

competitiveness of some main agricultural commodities

• Slow and reducing growth rate

(7)

• Serve for 70% of national

population; 72% of labor force (2011)

• Nourish 10.106 million agricultural households

• Contribute to 20.6% of national GDP (2011)

• Contribute 16.3% of export value (2011)

38,08

20,36 41,56

Service

Agriculture, forestry, fishery Industry, construction

Role of agriculture in economy

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The Red River Delta Region

The South Central Coastal Region

The Central

Highland Region

The Northeast South Region

The Mekong River Delta

The North Central Coastal Region

North Middle Land & Mountainuos Region

Seven agro-ecological zones

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Four important agro-ecological zones

1 Red River Delta: rice, vegetables, maize, beans, potato, litchi, longan, pigs, fowls

3 Central Highland: coffee, rubber, black pepper, tea

4 Northeast South: rubber, coffee,

black pepper, cashew nut, maize, beans, cassava, banana, sugar cane, pig, cattle,

poultry

2 Mekong River Delta: rice, beans, mango, orange, pomelo, durian, mangosteen, longan, rambutan, dragon fruit, water melon, pineapple, pigs, fowls, fresh water fishes

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Annual growth rates (GDP) by economic sectors (%)

Source: GSO, 2010 96

98 100 102 104 106 108 110 112

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GDP Agriculture

Construction-Industry Services

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Land resource has been fully exploited, agri growth by expanding of production scale and reaches to frontier

Disparity in economic and agro-transformation among economic regions and ecosystems

Low competitiveness of agro-commodities due to low-developed production technologies

Main characteristics of agriculture 2 Characteristics of three rurals

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Land use status

Indicators

2000 2005 Compared Areas (ha) % Areas (ha) %

I

Agricultural Land 20.939.679 100 24.822.560 100 3.882.881 I.1 Cropping land 8.977.500 42,87 9.415.568 37,93 438.068 A Annual crop areas 6.167.093 68,69 6.370.029 67,65 202.936

Of which: Rice land 4.467.770 72,45 4.165.277 65,39 -302.493

B Perennial crop areas 2.810.407 31,31 3.045.539 32,35 235.132 I.2

Forest land 11.575.027 55,28 14.677.409 59,13 3.102.382 A Cultured forest land 4.733.684 40,9 5.434.856 37,03 701.172 B Protection forest land 5.398.181 46,64 7.173.689 48,88 1.775.508 C Special use forest land 1.443.162 12,47 2.068.864 14,1 625.702 I.3 Aquacultural land 367.846 1,76 700.061 2,82 332.215 I.4 Salt production land 18.904 0,09 14.075 0,06 -4.829 I.5 Other agricultural land 402 0 15.447 0,06 15.045

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Household income structure by regions (%)

Agriculture in general

Industries Commerce and services

Others

Whole country 78,6 6,0 11,4 4,0 Red River Delta 73,7 8,8 11,5 6,0 Northeastern region 86,4 2,8 8,2 2,6 Northwestern mountainous region 93,1 0,7 4,9 1,3 North Central 81,4 3,9 8,4 6,3 Central 79,6 5,5 10,5 4,3 Central Highland 92,3 1,3 5,2 1,1

Northeast South 63,5 12,6 20,2 3,7

Mekong River Delta 79,2 5,0 13,7 2,0

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Household income structure by regions (%) By source of income during the previous 12 months

Agriculture

Of which

Industry –

Construction Service Others Cultivation Forestry Fishrery

A

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Main characteristics of agriculture

• High competitiveness: rice, coffee, rubber, cashew nut, pepper, aqua-cultural and sea-food products and wooden products

• Low competitiveness: meat, vegetables and fruits, and maize

• Non competitive: milk and milky products, cotton, oil seeds, sugarcane and sugar, etc

Low competitiveness of agro-commodities due to low-developed production technologies

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Public investment in rural and agricultural infrastructure is not adequate

Low-developed status of agri-business and market information systems

High risk of economic integration: technical

barrier, quality and safety of export goods; low-price imp goods

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Epidemic diseases, natural calamities are not controlled; reducing growth rate & farm income

Agricultural environment degradation and exhaustion due to misuse and over-exploitation

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Main characteristics of Vietnamese rural

Living infrastructure is worse, because of low

investment, Technical facilities for agriculture activities are under-developed

Support services for agriculture are still not developed

Processing industries using agricultural-based raw materials are developed in main productive regions only

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Agriculture is still main income source of rural inhabitant, lacks of non-farm and non-agricultural activities as handicraft, food and agro-product

processing industries

Real income of rural inhabitants remains at low level in comparison to urban areas

Agricultural transformation and urbanization: chance and risk Non-agricultural activities are not well prepared

Main characteristics of Vietnamese rural

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Vietnamese farmers: Poor Why?

Land: too scarce, too small for farmer

household to earn living

Labor: relative surplus; lack of jobs and non-agricultural activities

Skills, education level: relative

low, lack of education fundamentals; lack of scientific

knowledge, economic and farm management

Isolated, non-cooperated

Capital: lack and inefficient use; difficult to access capital market

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The tendency of rural transformation in Vietnam

• Production specialization and accumulation of resource • Structural agriculture transformation towards increasing

animal husbandry, aquaculture and high valued cultures as industrial crops, vegetables and fruits

• Increasing competition in use of production resources (land, labor, capital) among agricultural sectors as

cultivation, husbandry, aquaculture and among agriculture, industry and services

• Formation of contract farming in parallel to the

establishment of agri-business, especially in the Southern region

• Income disparity between household groups is increasing 2 Characteristics of three rurals

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3 Issues of Vietnamese agriculture as joining to WTO

• Able to increase exports of highly competitive commodities

• Expanded imports of low-priced agricultural commodities make farmers more difficult

• Improving the competitiveness of Vietnamese agricultural commodities:

1 Cost price and production efficiency;

2 Application of international sanitary and phytosanitary (SPS) measures and

3 Application of international technical standards to overcome technical barriers to trade (TBT)

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Weaknesses:

1. Low competitiveness of many Vietnamese agricultural commodities

2. Lack of applicable, effective and international-recognized SPS; lack of GAPs and application

3. Lack of information and knowledge on international trade and technical standards and regulations

4. Lack of effective technical standards and

regulations to protect domestic production from unfair imports

3 Issues of Vietnamese agriculture as joining to WTO

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4 Rural development: Resolution No 26-NQ/TW dated Aug 5th 2008 of the

Politburo

• Measures:

1 Modernization of a comprehensive agricultural

economy and development of industry and service in rural areas

• Land use planning

• Re-structure agricultural economy towards processing and market

• Encourage import-substitute agri-commodities • Apply advanced technology

• Build specialized areas for main crop and livestock commodities; ensuring food security

• Comprehensively develop of forestry, fishery and

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Politburo

• Measures:

2 Building rural economic and social infrastructure inline with urban development

• Improve irrigation system (irrigation, water reservoir, dike, water drainage)

• Develop rural road system, waterways, ports

• Develop electricity system, telecommunication system, market centers and wholesale terminals

• Invest concentratively to research and laboratory systems, extension stations, healthcare systems at grass-root level • Project and plan rural settlement areas linking with industrial

service and urban development

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Politburo

• Measures:

3 Improving spiritual and physical living standards of rural inhabitants

• Create employment and ensure job training for farmers; foster labor export

• Narrow gaps between rural and urban • Focus into poverty reduction policy

• Enhance healthcare practices and insurance, reduce birth rate, prioritize education & training for remote rural, improve community linkage

• Build social security system in rural

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Politburo

• Measures:

4 Renovate and establish effective production and service organization in rural

• Encourage vertical linkage and new types of cooperatives • Privatize land use in state-own agri- and forestry plantation • Develop rural enterprises, esp processing ones

5 Push up research, transfer, and application of

sciences and technology to modernize agriculture and industrialized rural

• Increase public expenditure for agri-research; diversify and socialize participation of multi-stakeholders

• Conduct job training for farmers and rural young generation

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Politburo

• Measures:

6 Renovate administrative mechanism and policy to make use of resources to develop quickly rural economy

• Lift up land holding limit; encourage land accumulation • Ensure fair compensation for people in eminent domain

process

• Provide more public capital investment in agriculture

• Encourage financial institutions to increase credit lines, and enterprises to invest to rural and in agriculture

• Ensure international harmonization of laws and regulations; protect domestic market; and fair pricing for

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5 Potential solutions to strengthen rural development

1 Solution packages to liberate and improve efficiency in use of production factors

Increasing land ceiling •Low degree of society’s unanimity

•Concerns about livelihood of poor farmers and landless people

Upgrading technology • Limitation of farm budget to apply

• Difficulty in technology adjustment to meet local conditions

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Raising dominant role of formal credit

• Contradiction between business purpose of banks and public welfare policy

Increasing non-collateral credit lending

Improvement and

simplifying of lending procedures

• Contradiction between business purpose of banks and public welfare policy

• Limited power of banks on collateral

liquidation, especially farmer’ land use right

• Land-valorized collateral is difficult applied due to low-developed land market and

stagnation of agricultural land productivity Diversification of informal

credit

• Need to have appropriate support policies

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Shifting agricultural labor to non-agricultural sector

• Lack of basis and chance to diversify non-agricultural jobs in rural regions

Linking job training program with poverty alleviation and rural development policy

• Need to identify, specify and streaming job training activities into national and local programs of poverty alleviation and rural development

Attracting investment to rural regions

Need to have appropriate support policies Rural regions are not attractive enough for

external investment

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Re-training and improving agricultural and

non-agricultural knowledge and skills to farmers

• Difficult to change approach and realization of agricultural extension program and

policy

• Psychological and legal environment for contract farming are imperfect

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Increasing public investment to

social and technical infrastructure in rural region

National budget is limited

Expanding and developing SMEs, processing industry, industrial park in rural regions

Lack of educated and skilled laborers

Land shifting to non-agricultural uses might cause lack of jobs and

landless increase Support job training and introduction

for rural laborer

Lack of demand of trained non-agricultural jobs

2 Comprehensive rural development

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More policies for rural laborer and poor people

National budget is limited to increase public investment in rural region

Need to have appropriate support policies

Reviving traditional professions and developing new economic activities in rural region

Need to find potential markets for traditional products

Difficult to develop in locals where there is not traditional professions and products

Increasing labor export Labor demand of labor-import countries

Quality of Vietnamese laborer

(35)

Developing

non-agricultural activities

Limitation of non-agricultural job creation in rural

Process of re-distribution of economic spaces is slowly

Industry is concentrated in urban regions

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3 Improve competitiveness of Vietnamese agricultural commodities

Reducing cost price – Increasing production efficiency

Input price increase

Limitation of current production technology leads to difficulty in increase of yields, outputs and quality

Enhancing food quality Low-developed and applied situation of appropriate technology

Low-developed post-harvest technology

Human and capital shortage, low application of appropriate manners in quality control

Monitoring and control of Gov Organizations are weak

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3 Improve competitiveness of Vietnamese agricultural commodities

Applying and satisfying international technical

standards and regulations

Low-developed and applied situation of appropriate technology

Low-developed post-harvest technology Lack of market information

Low-developed agri-business Enforcing training and

extension activities

Human resource shortage and unskilled Production-oriented activities, not market-oriented activities

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3 Improve competitiveness of Vietnamese

agricultural commodities: Production management

Enforcing agricultural transformation

Macro planning and projection is often failed because of not-meeting real market situation Lack of technical infrastructure and skilled labor for new economic sectors

Improving control and management of food safety and quality

Lack of human resource and capital Lack of effective managerial institution

Increasing horizontal and vertical linkages in

production- business activities and enforcing agri-business

Psychological difficulty of farmers and entrepreneurs

Agri-business is not highly developed and specialized

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CONCLUSION POLICY POLICY POLICY POLICY POLICY POLICY POLICY POLICY POLICY POLICY IMPROVE COMPETITIVENESS OF VIETNAMESE AGRICULTURAL COMMODITIES IMPROVE FARM INCOME COMPRE-HENSIVE RURAL DEVELOP-MENT LIBERATE AND IMPROVE

EFFICIENCY IN USE OF PRODUCTION FACTORS

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