Vietnam's agriculture sector will face many challenges and difficulties when the country begins to realize AFTA commitments in the process of joining the World Trade Organization (WTO) if suitable and reasonable integration planning measures are not developed, a government official said.
These shortcomings include low production levels, low technology content in farm production, low competitiveness and productivity, poor quality, and high production costs.
For a country with 75 per cent of its population living in rural areas, international economic integration is an inevitable way to market farm products abroad. In terms of the ASEAN Free Trade Area (AFTA), Vietnam included 91 per cent of tax lines for farm products in the Common Effective Preferential Treaty, and by January 1, 2006, it will slash import tariffs to between 0-5 per cent.
Vietnam joined the ASEAN-China Early Harvest Program to reduce tariffs imposed on farm produce imports from China. It is also participating in the negotiation process to establish ASEAN-Japan and ASEAN-Republic of Korea Free Trade Areas.
Under the Vietnam-US Bilateral Trade Agreement, Vietnam is committed to slashing import tariffs on more than 200 farm products and abolishing restrictions to imports and exports, as well as rights to distribute important products to US companies three to five years after the BTA came into force.
Agriculture is the toughest area of WTO accession negotiations because many countries not only negotiate issues relating to taxation and non-taxation, but also other issues such as domestic assistance and export subsidies for several farm products in line with agricultural agreements. Vietnam exports mainly raw and semi-processed farm produce, so the export value of these sectors is still relatively low.
The further Vietnam integrates into the world, the more challenges the country faces. The economic development scale of rural areas is still limited which prevents the application of science and technology. The processing and preservation process still lags behind production and development growth. In addition, Vietnam’s processed farm produce will face tough competition domestically when WTO and AFTA commitments on tariff cuts are implemented. Rural and agricultural infrastructure is still poor while storage and transportation charges are higher than those in regional countries.
During the process of trade liberalization, several areas that cannot secure a firm foothold will die out. As a result, parts of the rural population will become unemployed, affecting farmers living in poor communes and those in ethnic-inhabited areas. To deal with these issues, Vietnam should build a complete social welfare system for the rural and agricultural sector such as income insurance, an economic restructuring support fund, and vocational training.
However, trade liberalization is opening up great opportunities for Vietnam to export its farm products. The country is adjusting its legal system in line with international practices and creating an equal investment environment to attract foreign direct investment (FDI) to the agricultural sector. The sector has so far attracted 781 FDI projects with a combined registered capital of US$1.753 billion. These have helped develop the agro-forestry product processing industry, produce high-quality animal and plant breeds and increase the competitiveness of the sector in the world market.
Currently, the agricultural sector is implementing a number of programs, including those to adjust the agricultural structure to develop the advantages of each region, increase the quality and competitive capacity of farm products, develop infrastructure for production and the trading of farm products, amend policies in line with international practices and boost trade promotion. More importantly, the country should pay special attention to personnel training to build a contingent of competent agricultural promotion engineers who can quickly observe and apply technical advances and market information.
Agriculture makes up 22 per cent of Vietnam’s GDP and will still be one of the most important economic sectors in the next decade to ensure food security and socio-economic stability, according to Deputy Minister of Agriculture and Rural Development Diep Kinh Tan.
Between 1990-2004, the country’s agricultural production value posted an annual increase of 4 per cent, with rice output increasing by 4.9 per cent annually, an equivalent to 1.2 million tons a year.
From a country facing chronic rice shortages, Vietnam has become the second largest rice exporter in the world. In addition, it is also the world’s largest pepper exporter and the second largest exporter of coffee and cashew nuts. The proportion of industrial crops, vegetables, fruits and flowers increased from 30.6 per cent in 1999 to 35 per cent in 2000, while that of husbandry in 2002 increased by 4.7 per cent against 1990. Large commodity production areas have been established.
From a self-sufficient state, agricultural production and rural economic development has shifted towards a market-oriented economy to produce export products. Last year, the agricultural sector earned US$4.5 billion from exports, an increase of 60 per cent compared to 2000.
Notably, from a war-torn country, Vietnam has built a self-reliant economy. The living conditions of the majority of rural people have improved significantly, with the poverty rate in rural areas dropping from 60 per cent in 1975 to 10 per cent on the threshold of accession to the World Trade Organization (WTO).
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