Allocating Resources According to Market Mechanisms

Despite being an agricultural export country, Vietnam still faces the obstacle of low commodity competitiveness; therefore, most farmers cannot do well working on their own land. To reorganize production, building a suitable and effective production structure on par with its strength and potential, an operating mechanism for a production chain suitable with the market economy is crucial.

 

Taking Vietnam's rice industry as an example, Dr Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM), proved that there were state-owned enterprises who were distorting the rice market. State intervention through incentives for businesses and giving power to the Vietnam Food Association made it impossible to make Vietnam’s rice sector market-oriented. “If we are satisfied with results achieved in the low-level rice market, then we will never achieve a 'high end' agricultural sector,” commented Dr Tran Dinh Thien, Director of the Vietnam Institute of Economics.

 

Distorted markets, lack of standardised production methods or long-term planning, and lack of motivation in seeking and building sustainable markets, commodities, products, etc were some weaknesses of Vietnam’s agriculture, as assessed by many experts.

 

According to Dr Thien, despite being the region accounting for 80 percent of rice exports, 60 percent of aquatic organism exports and 50 percent of fruit exports of the whole country, agriculture growth was mainly based on intensive exploitation of natural resources, or a growth in width. The consequences of this are seen in disrupted ecology and depletion of natural resources, in turn damaging agricultural products’ quality and limiting access to the premium segment of the global market.

 

This reality was calling for Vietnam’s agriculture to stop focusing solely on production, productivity and output without calculating economic efficiency. The lack of synchronization, interruption and fragmentation, instead of having a comprehensive policy for the development process of agricultural value chains has led to difficulties and limitations in production. Therefore, the mind-set of Vietnam about the agricultural value chain should change, said Dr Cung.

 

Experts recommended that policies concerning agriculture should be scientific and logical, synchronous and always staying one step ahead. According to Ms Vo Thi Thanh Loc, Mekong Delta Development Research Institute, when restructuring production in order to enhance products’ added value and implementing agricultural development programs in accordance with value chain development, policies must closely follow the chain. Besides, it’s important to form high-tech complexes of agriculture - industry - services, working closely with farmers; Encouraging the construction of new style agricultural cooperatives, multifunctional agricultural production models; Investing in marketing products on both domestic and foreign markets.

 

According to Minister Cao Duc Phat, it’s crucial to change the mind-set and improve the State’s role in the market. The allocation of resources also needs to reflect market mechanisms. Localities needed a breakthrough in selecting strategic industries, manufacturing according to value chain on the basis of their potential strengths to create unique and quality products.

 

To change the structure of agriculture and resources according to the market mechanism meant that it was to be constrained by demand and value rather than volume. Therefore, it’s important to develop strategic approaches towards demand, market and added value. Product development must be associated with high technology, production scale and value chain. Businesses should be given proper appreciation to become the backbone and the pioneer of agriculture. Because only businesses could pull farmers into market-oriented production and apply high technology in agricultural production, said Dr Tran Dinh Thien.