Vietnam Agriculture: Restructuring Challenges

 

In 2014, the export value of agricultural, forest and aquatic products rose 11.2 percent year on year to US$30.8 billion and ran a surplus of US$9.5 billion. The best export performers were coffee (32.2 percent), cashew nuts (21.1 percent), pepper (34.1 percent), vegetables (34.9 percent), seafood (18 percent), forest products and woodworks (12.7 percent) and rice.

 

But, the Vietnamese agricultural sector is seeing new difficulties and challenges arising from small production scale, low labour productivity, poor quality management system, and post-harvest preservation system.

 

Agriculture continues to face a contraction in reproduction. World and domestic economic recovery remains slow. Commercial banks are in difficulty because of bad debts while enterprises’ slow access to capital sources causes a reduction in profitability. Slow economic growth causes consumer demand for agricultural products to fall in the midst of rising prices of materials and fuels.

 

Climate change and natural disasters will be more complicated in the future. Landslides, floods, tidal swamps and droughts in some places will occur with more severity and significantly affect the livelihoods of local people. Extreme weather patterns are likely to negatively affect agricultural production. Risks in agricultural production intensify.

 

Pollution and environmental degradation is apparent risks. Vietnam’s agricultural growth has been driven by the abuse of fertilisers, protection chemicals, veterinary medicines and growth stimulants, which cause negative environmental impacts, worsen pollution and weaken natural resources. Environmental pollution will bring about serious consequences that threaten domestic production and competitiveness of Vietnam's agricultural products in the market if it lacks timely preventive measures.

 

Although the overall global consumer demand is slowing as a result of the worldwide economic crisis, high-quality agricultural products with guaranteed safety are always sold well at good prices. In the context of deeper international economic integration, the shift to high quality and added value of agricultural production will bring in more opportunities for Vietnam to cooperate with other businesses and countries to expand the market for its agricultural products. In 2015, AFTA will be brought into full play and the Trans-Pacific Partnership (TPP) Agreement negotiations are also opening up new opportunities.

 

To develop sustainable agriculture, it is necessary to restructure the agricultural sector, with a strong focus on public investment restructuring and public service restructuring in agriculture, to create a favourable environment for the formation of effective and sustainable agricultural value chains based on regional and local comparative advantages.

 

Agricultural production development is based on market demands. For products with existing market advantages, such as rice, Vietnam only needs to boost investment to increase output to a maximum. The Government needs to have policies to support farmers with finance, science, technology, materials, plant protection medicines and stocks.

 

Agricultural planning is driven by the open market and agricultural land is essentially preserved. Vietnam needs to provide favourable conditions for land users to decide how to use their land based on market signs rather than apply fixed methods for specific types of land.

 

It also needs to boost food production, especially in remote areas; pay attention to solutions on nutrition security rather than just focus on food development and carry out employment solutions; invest to develop trade support systems; accelerate the modernisation of irrigation systems, mechanisation, electrification and communications in rural areas; and rationalise arable and livestock farming.

 

The State needs to have financial support policies for farmers to purchase equipment, machines and materials to improve productivity and agricultural development. To enhance the effectiveness of agricultural stimulus programmes, increase productivity and lower agricultural product prices, the Government should support farmers buy machines and materials for production, apply solutions to improve product quality and reduce post-harvest losses.

 

The agricultural sector should also actively expand domestic and foreign agricultural markets and stimulate purchasing power of rural markets.

 

Vietnam must maintain and expand current agricultural export markets while seeking new ones. It will also need to focus on introducing advantageous products of Vietnam such as rice, vegetables and seafood.

 

Up to 93 percent of tax lines will be brought to zero in 2015 and 7 percent will be scrapped by 2018. By 2020, exports to and imports from the US and European markets will be lowered to zero by 2020. Hence, Vietnam’s agricultural products will have many more opportunities to penetrate into major markets and raise their values.

 

Vietnam should actively respond effectively to climate change by building up management capacity, responding to management risks relating to weather and minimising climate change impacts as well as market risks. It needs to improve forecasting systems, early warning systems and integrate them with agricultural advisory services; change farming methods and select varieties suitable for soils and climate; build up research and development capacity to address emerging challenges of climate change process and rising sea levels; promote agricultural insurance market; strengthen the resilience of farmers against risks.

 

Sustainable agricultural development requires a consensus and tremendous effort of the Government, sectors, local authorities and especially farmers and rural communities. Farmers must be placed at the centre of agricultural restructuring and new countryside construction. The Government must have mechanisms and policies to accelerate scientific and technological applications, especially biotechnology and information technology, to agricultural production and management; develop cooperation forms and connectivity between farmers and enterprises, and form large fields and associate production with processing and consumption.