Viet Nam is a commodity producer and trader par excellence. Such is the immense talent of the people that any commodity that is taken up by traders leads to the country becoming a major if not the lead producer and exporter. This is true for rice, rubber, pepper, coir, cashew and granite. The track record is second to none. Traders in commodities create and develop production by offering ready farm or factory gate prices and are able to help finance the pocess. But traders in commodities tend to stick to commodities. Thus there has been very littlle value addition or agricultural driven growth leading to higher standards of living.
Commodity production is a poor man's activity. Those who produce are price takers and those who trade too have prices dictated to them. Prices can be good as they are at present in nominal terms but have been declining for a long period in real terms. However, some traders are better than others and the traders from Vietnam have a formidable reputation which is richly deserved.
All this is not unique. What is particular is that Vietnam has a land and sea route to China which is rapidly becoming a good market for commodities rather than products. China imports commodities and exports products. Viet nam is a good source for commodities that China needs. Although paid well for this service, suppliers remain well paid servants and that is not a particularly good position for the economy as a whole.
Development is very difficult in that context because investment is directed to the trade in commodities with few willing to take chances with products. Donors often fall into the trap of seeing it in exactly the same way and are scared of promoting products because it is too risky in their eyes. In this sense the doctor catches the patient's disease. Emphasis on promoting private sector initiatives solely rather than empowering the poor serves to impoverish those that they are ostensibly trying to help. The most ready source of private sector inititatives are the traders. There is nothing much that can be done to make the export value chain for these commodities mor efficient.
Fortunately, at least the traders have money to invest. They are not adventurous and are at the service of their buyers. Only a decision by the latter will motivate the traders to invest and that may be forthcoming in the future but the timing is undetermined.
Farmers are the largest real private sector in agriculture and yet they are not trusted as investors.Banks do not like lending to the poor, farmers have little collateral and although everyone claims they want to help farmers, they seldom know how to. Government officials, even those who are members of the Communist Party and are constantly announcing schemes to help farmers, apppear to have little faith in organising farmers. In fact, very little of their strategy appears to be based on farmers and thus is doomed to peripheral creation of industrial pockets using low paid workers while the majority in rural areas are left to their own devices. This is a recipe for conflict.
We did not find a meaningful Agricultural Policy let alone strategy on the part of the Government, only platitudes about helping farmers and the importance of agriculture. A situation not unique to Vietnam but surprising given the politics of the country. This is sad and a great tragedy given the potential for growth. In a centrally controlled economy a very great deal depends on Government policy and actions. Our experience at present is totally negative about this role or how affectively it percolates down to regional level.
In the absence of Governmnet action, things are left to the private sector and in the latter only the traders have the money to make things grow. However, the absence of a positive role by the Government leaves things too much in the hands of the larger traders and not enough help for the smaller often more adventurous traders.
The development strategy is thus non agricultural and not pro poor and yet it is a strategy with a logic that is easy to understand. Land holdings are too small. The Government seeks to attract FDI to establish processing for export which will attract farmers into industrial concentrations and allow land holdings to become larger. Cheap labour is what Vietnam is offering and no Union resistance because it is a Communist state.
Areas Devoted to Primary Crops
Vietnam Agriculture is primarily oriented around rice cultivation, with nearly 7.5 million hectares devoted to the cereal, more than 7 times that to maize, which is the second most important crop area. It is, therefore, a rice based farming system. Cassava comes second to grains with rubber, coffee and cashew the commercial tree crops. Even when other crops offer better returns there is a reluctance to interfere with rice and farmers favour the crop as it provides security. Given small land holdings, however, and rice as the main crop, there is limited scope for diversification.
This results in production of nearly 39 million tons of paddy although care has to be taken due to unreliable statistics. One complication is that Vietnam also acts as a conduit of production in neighbouring countries and it is not always easy to identify origins. According to the published figures, Viet Nam has an average yield rate of over 5.4 tons of paddy per hectare per annum and while that sort of yield rate is attainable, it is not so easily obtained as an average. In recent years 5.4 tons would have led to earnings per ha of around US£ 1,000 per ha but this year it is nearly twice that level.
Trade in primary agricultural products
Import statistics indicate that the main volume imported is soyabean cake, followed by imports to cover deficits in consumption of maize, edible oil and molases. Imports of soyabean cake are disturbing in that they imply a livestock sector based on imported feeds.
The leading quantity exported is naturally milled rice. Cassava has grown in importance and coffee achieved significant proportions. The productivity of rice production is high, above 4 tons per hectare per annum.
Diversification into higher value crops has yielded dividends for Viet Nam with coffee becoming more important as an export earner and cashew nuts making a strong showing. Rubber, pepper, cassava and tea are also contributing to a broader earnings base for exports.
Earnings by the three leading crop exports are given below. While rice exports have increased, we think in part due to including rice from Cambodia and Lao as Viet Namese rice, export values of coffee have increased faster and those of cashew have been impressive.The implication is obvious if not drawn yet, Vietnam has to stop pressing its farmers to produce more rice and has to diversify to higher value crops such as coffee and cocoa. Even coconuts today yield a higher rate of return for farmers than does rice.
Vietnam produces more rice than it consumes. For the past three decades, rice production has been outstripping consumption leaving Viet Nam an increasingly export oriented rice producer. This gap has accelerated in the last two decades.
Vietnam is a leading exporter of milled rice as illustrated below:
led pro poor agricultural diversification is traditionally favoured by Governmnets who seek improvements in the balance of payments. But catering to local market needs is easier to begin with.
Livestock is a ready option but should not be dependent on imported feeds and its impact on crops needs to be taken into account. Worth considering is an emphasis on cocoa under coconuts and that may lead to the sort of success that has been achieved with coffee. High value better quality horticulture is also a good option but requires investment in infrastructure such as cold chains, testing and standards for food safety. This is perhaps easiest near growing urban concentrations to supply supermarkets that are spreading as they have in Singapore, Malaysia and Thailand.
Organic fruit and vegetables are also attract attention by bureaucrats but the market is simply not ready yet.
The production of coconuts in Vietnam, as in most other producing countries is estimated. It is reported on a commune level but unless it is in blocks, it has to be estimated by converting it into 160 palms per ha with an assumed yield rate. Production appears to vary between 0.7-1.3 million tons per annum with a recent tendency towards the higher figure. However, it is all based on assumptions and the assumptions dont become more valid merely if they are taken to be above question as all official statements are.
Clearly, there has been increase in area over the long run, particularly after 1975, but since liberation there has been a marked increase in harvesting. This is not unusual in coconut producing countries where there is often a big gap between production and harvesting. The changes in harvesting are difficult to explain and I would put them down to schanges in data gathering rather than physical developments.
The increased hectares are now reaping benefits in greatly increased production as the plantings come on stream.
Vietnam today produces around 1.1 million tonnes of nuts which to some means that it is 917 million nuts although such exactitude is absurd given the inexactitude of data gathering. We dont attach too much credence to either figure.
|Ben Tre|| ||217,934 ||220,938 ||241,660 ||258,779 ||271,524 |
|Tra Vinh||132,089 ||119,372 ||122,970 ||123,422 ||126,355 |
|Vinh Long||127,383 ||109,689 ||90,840 ||96,284 ||96,064 ||97,243 |
|Binh Dinh||68,540 ||68,762 ||67,221 ||67,245 ||74,451 ||82,140 ||89,682 |
|Tien Giang||42,296 ||41,702 ||66,587 ||69,532 ||69,925 ||71,096 |
|Tay Ninh||37,355 ||36,854 ||36,922 ||37,490 ||40,045 ||49,490 ||47,820 |
|Kien Giang||35,175 ||34,724 ||33,043 |
|Hau Giang||31,261 ||31,550 ||30,743 ||31,685 ||30,938 |
|Phu Yen||28,726 |
|Ca Mau||61,960 ||28,552 ||24,975 ||26,847 |
|Thanh Hoa||27,200 ||25,466 |
|An Giang||44,660 ||43,537 ||27,975 ||25,667 ||25,465 ||21,014 ||21,147 |
|Bac Lieu||18,400 ||18,933 |
|Can Tho||18,221 ||15,092 ||14,807 ||14,140 |
|Quang Ngai||34,470 ||27,534 ||15,657 ||13,651 ||13,936 ||13,550 ||13,619 |
|Long An||34,575 ||33,392 ||21,442 ||17,517 ||14,461 ||11,332 ||13,184 |
|Khanh Hoa||9,099 ||13,055 ||8,114 ||8,517 ||8,481 ||7,048 |
|Binh Thuan||9,592 ||8,044 ||7,859 ||7,704 ||6,940 ||7,093 ||5,596 |
|Dong Nai||2,116 ||3,794 ||3,977 ||3,836 |
|Dong Thap||3,506 ||2,548 ||2,427 |
|Ba Ria Vung Tau||840 ||1,400 ||1,697 ||1,343 |
|Binh Phuoc||982 ||1,473 ||1,095 ||1,164 |
|Dak Lak||866 ||1,089 ||470 ||498 ||674 ||1,196 ||1,085 |
|Da Nang||1 116||765 ||809 ||848 ||860 |
|Nam Dinh||218 ||212 ||287 ||407 ||465 ||567 |
|Ninh Binh||212 ||224 ||237 ||304 ||313 ||337 ||341 |
|Thai Binh||380 ||380 ||380 ||378 ||308 ||336 ||337 |
|Quang Ninh||305 ||293 ||338 ||318 ||329 ||336 |
|Ha Tinh||218 ||229 ||237 ||260 ||277 |
|Quang Binh||264 ||259 ||265 ||284 ||262 ||276 ||273 |
|Dong Nai||41 ||71 ||71 ||74 |
|Ha Nam||83 ||63 ||67 ||55 ||43 ||34 |
|Total||296,220 ||422,094 ||724,669 ||738,377 ||805,391 ||906,559 ||955,362 |
|Ha||53,898 ||61,344 ||96,372 ||105,625 ||107,878 ||127,238 ||130,151 |
|yield per ha in 000||5.50 ||6.88 ||7.52 ||6.99 ||7.47 ||7.12 ||7.34 |
Of this let us say 920 million, in very general terms,
150 million, mostly de-husked are exported to China every year
150 million used for candy
150 million used for desiccated
150 million go to cities
and 230 million are consumed fresh in producing areas.
That leaves 87 million coconuts unaccounted above, some of which may not be harvested, some may go to Thailand and Lao and some are being used for other food products..But the underlying controversial assumption is that 25% of the coconuts produced are actually being consumed in producing regions.
There are two forms of fresh demand. Drinking nuts are very popular and selected palms that yield the best drinking nuts have been and are being planted. Some cliam that they account for as much as 25% of the palm population but this is unlikely. The second demand use is for cooking purposes. Fresh milk is squeezed from gratings and used to flavour dishes. Both, are very good uses for coconuts as they yield high nutrition to the consumers but it is ifficult to estimate it accurately.
Vietnam also has the highest rate of utilisation of husks in any major coconut producing country. How many husks are processed is also open to conjecture but 73,000 tons of coir exported implies that 730 million husks are being used out of a total available of husks from mature coconuts of somewhere between 750-800 million (excluding husks from drinking and desiccated nuts). That implies that nearly all available husks are being used for coir extraction.
There is reported but we have not confirmed production of some activated carbon in Ben Tre. It is a modest amount probably using technology from a second tier source and selling at below average rates,
While it is not unusual for delivery prices in cities in coconut producing countries being 20-25 US cents and above, it is unusual for farm gate prices to reach that level in a major coconut producing country. Over 70% of the coconuts produced are being consumed in Vietnam. Increasing urbanisation and increasing purchase power in the urban centres is causing an increase in demand for coconuts.
The demand from China is the crucial marginal extra that causes greater price volatility and higher prices.Care has to be taken in that increased prices for fresh consumption is going to lead to a restructuring with countries like India facing declining demand for coconut oil and the price hike in edible oils may not last. Some long term increase in coconut prices is inevitable and this renders low value processing unviable for Thailand and Vietnam.
There would appear to be four options, namely: industrial for mattresses and coconut milk; foreign investment; traders to be educated to new possibilities and: cooperatives to be assisted through grants, loans and guarantees. FDI is possible for products such as spray dried milk, industrial for mattreses and perhaps for milk, cooperatives for integrated coconut processing.
A new sector strategy for Vietnam as a whole is required to take into account changing circumstances but a strategy as such would not serve a critical need unless it is accompanied by market education, matching and access to funds. As it is, part of the industry appears to be blundering into new investments such as canned milk which may not be such a good idea and into coir mats and low value geotextiles without adequate market research. Knowledge of market opportunities is weak. In the way of illustration, there is much talk of a Thai investment in coconut milk although Thainalnd specialises in lower value canned milk.